Wednesday, May 4, 2016

Today's Links

1--Bill Gross: Fed should 'drop the money from helicopters'


"Helicopter money" is an idea made popular by the American economist Milton Friedman in 1969, when he suggested that dropping money out of helicopters for citizens to pick up was a sure way to restart the economy and effectively fight deflation. ...

Such a move would allow governments to focus on infrastructure, health care, and introduce a "universal basic income" for displaced workers amongst other increasing needs.


Overall, Gross said the renewed QE from the Fed would lead to a less independent central bank, and a more permanent mingling of fiscal and monetary policy that has been in effect for over six years now.

"Chair (Janet) Yellen and others will be disheartened by this change in culture," he said.

Gross said interest rates will stay low for longer, asset prices will continue to be artificially high, and at some point monetary policy will create inflation and markets will be at risk. He also said investors should be content with low single-digit returns


2--It’s Not About Bernie: Why We Can’t Let Our Revolution Die in Philadelphia


To endorse Hillary, even with a more progressive platform, would be the opposite of political revolution and would abandon all the vital energy and momentum we have built over this historic past year....

We simply can’t afford to make this mistake. That’s why I have launched a petition calling on Bernie Sanders to run all the way to November as an independent, and to use his campaign as a launch pad for a new political party of the 99%....


The Clintonian era which began under Bill Clinton in the 1990s was marked by the Democratic Party’s open advocacy and implementation of neoliberalism, as a continuation of the “trickle down” ideas of Ronald Reagan and George H.W. Bush. The Clinton administration passed devastating policies like NAFTA, with its brutal effects on workers and the environment; the 1994 crime bill with its dramatic expansion of incarceration; and the destruction of welfare with its inhuman effects on the poor and particularly single mothers. Such laws were part of an overall agenda of attacks on social services and on the interests of the working class and people of color. Bill and Hillary Clinton were political partners in that process, as they are political partners in Hillary’s election campaign today....


As a U.S. Senator, Clinton voted for the Iraq War, the Patriot Act, the Patriot Act re-authorization, for new “free trade” deals (including the 2008 Panama agreement which helped perfect it as a tax haven), for bank deregulation, the Wall Street bailouts (TARP), the 2006 border fence legislation, and the list goes on. As Secretary of State she was perhaps the administration’s most aggressive proponent for interventions in Libya and Syria that fueled the humanitarian crisis in the region. She acted as a global spokesperson for fracking, and in spite of considerable pressure from Sanders has not backed down from this environmentally devastating practice....


FDR originally ran for the presidency on a message of fiscal austerity, and his tune only changed due to the deepening of the economic crisis and the militant movement of labor activists and socialists that erupted on his watch. In fact, he defended his policies to business people as necessary concessions to mass movements, saying: “I’m the best friend American capitalism ever had.”


3--The Hazards of Financial Engineering


Is the entire stock market engaged in unsustainable financial engineering in an effort to satisfy shareholders? Put another way: We know the market is engaged in large-scale financial engineering in the form of a huge ramp-up of leverage. Is it sustainable?



The virtuous circle of cheap financing for takeovers leading to higher valuations leading to cheap financing works only as long as they keep doing deals. Valeant’s market value is down $78 billion from its peak, about the same in today’s money as the total lost by shareholders of Enron...


But yesterday’s financial engineering often becomes widely accepted. In the case of the engineering behind today’s high stock-market valuations, it goes further: Borrowing to buy back shares is widely welcomed.


The biggest 1,500 nonfinancial companies in the U.S. increased their net debt by $409 billion in the year to the end of March, according to Société Générale, using almost all—$388 billion—to buy their own shares, net of newly issued stock. Companies have become far and away the biggest customer for their own shares....


As corporate profitability slows, the obvious worry is that this debt will lead shareholders to disaster. Total corporate debt is close to the proportion of the economy hit during the debt-fueled bubble that ended in the 2008 collapse of Lehman Brothers.


According to David Kostin, a strategist at Goldman Sachs, the debt and equity of the median U.S. nonfinancial company is worth 11 times operating cash flow, higher than in 2007 and higher than at the peak of the dot-com bubble. ...


So not only do companies have a lot of debt, but shareholders love it. What could possibly go wrong?...

The case for concern is that this borrowed money wasn’t invested into productive projects that would boost earnings in the future and so pay off the debt, but instead was used to buy back shares. Corporate investment has picked up recently, but overall buybacks are being funded from borrowing, as Andrew Lapthorne, a strategist at Société Générale, points out.


This creates three risks. First, rising interest rates for corporate debt would have a much bigger impact on profits and shareholders than usual, and could lead to a wave of defaults, as the energy sector showed.


Second, more caution in the bond market, perhaps caused by recession, could make it hard for companies to roll over debt; again, the energy sector has been a painful demonstration of what happens to highly indebted companies when they lose access to credit.

Third, if companies themselves become more cautious, it could remove the biggest buyer of stocks from the market. Share buybacks have helped support prices and earnings per share even as profits have fallen back to mid-2012 levels.


If companies stop borrowing to finance buybacks, another generation of shareholders will discover the downside of financial engineering.



4--Anticipating another bailout? Fed’s Dudley Says Giving More Firms Access to Discount Window ‘Worth Exploring’ (getting around Dodd Frank)


Federal Reserve Bank of New York President William Dudley said the powers the central bank can use to step in and aid a faltering financial institution are still flawed, more than seven years after the crisis, and that allowing more firms access to the discount window “might be worth exploring.”...


One area he expects the group to focus on heavily, he added, is how those procedures would work in the event a failing firm had several units operating across international borders. In that case, the expectations of the domestic and host countries would need to be properly understood, he said....

(Blanket bailout provision for all?)


Now that the rules have made all major securities firms in the U.S. part of bank holding companies subject to routine capital and safety checks, Mr. Dudley said providing these firms with access to the discount window could be a worthwhile addition. Currently, the Fed’s discount window is only available to depository institutions, and the law hampers the ability of a bank to pass along discount window funding to its securities unit.


“To me, this is a more reasonable proposition now than it was prior to the crisis, when the major dealers weren’t subject to those safeguards,” he said.


5--Whistleblowing Is Not Just Leaking — It’s an Act of Political Resistance


6--Over Half of Americans Now Believe the Voting System Is Rigged


7--Markit and ISM add to the gloom


The report summarized it this way:

The April PMI data suggest there’s no end in sight to the current downturn in manufacturing activity. The survey indicates that factory output is dropping at an annualized rate of approximately 3%, and factory headcounts are being culled at a rate of around 10,000 per month.


Rather than reviving after a disappointingly weak first quarter, the data flow therefore appears to be worsening in the second quarter, raising question marks over whether GDP growth will improve on the near-stalling seen in the first three months of the year.”


 

Tuesday, May 3, 2016

Today's links

Today's Quote: "I think people are realizing monetary policy is at its maximum point ... and growth doesn't look like its accelerating."  Priya Misra, head of global rates strategy at TD Securities in New York


1--The Super Rich Were the First to Bail During the Financial Crisis

2--Tokyo slide keeps mood downbeat

3--The Calm Before the Coming Global Storm, Pepe Escobar


Russia’s largest commodity exchange is actively courting international oil traders to join its emerging futures market. The goals are crystal clear; to disconnect the price-setting mechanism from the Brent oil benchmark and, crucially, to move away from the petrodollar. That also happens to be a key condition imposed by Beijing to the House of Saud for continuing to buy their oil....


No wonder the astonishing spread of Chinese economic power has left assorted Exceptionalists – from neocons to neoliberalcons – totally deranged. Washington has absolutely nothing to offer to nations across Asia, Africa and Latin America – to the whole Global South for that matter. They have all seen how Beijing is not in the market demanding Mob-style compound interest on sovereign debt; “support” for neo-imperial moves by NATO or the UN; one more extra-territorial hub for the US Empire of Bases; or total domination of their central banks.

On the other hand, they have seen what Washington does offer; endless war; the progressive smashing of the nation state; democracy blasted to smithereens; and technocratic governance by the 0.00001%.


4--Is the US already in Recession? Rasmus


Relapses are the consequence of “epic” recessions such as occurred in 2007-09, which are typically characterized by short, shallow recoveries that slip repeatedly into periodic bouts of renewed stagnation.  They are the result of near total reliance on central bank monetary policies that are designed to boost stock, bond and other financial markets — and thus the incomes of rich investors — but which fail to generate a sustained real economic recovery.  Fiscal policies designed to stimulate consumption and good paying jobs are rejected. That almost perfectly describes U.S. economic policy the past eight years.....


Last quarter’s 0.5 percent U.S. GDP may indicate the nation’s economy is even weaker than it appears. The economy of the United States’ recent 0.5 percent growth rate is the latest in a steady declining U.S. GDP growth trend over the past year. In the previous fourth quarter 2015, the US economy grew 1.4 percent, which was down from the preceding quarter’s growth of 2 percent and before that 3.9 percent.  So the U.S. economy appears to be slowing rapidly over the past year.


Over an even longer period of more than eight years, since the previous peak growth in late 2007, the U.S. economy has grown by a cumulative total of only 10.1 percent.  That’s a paltry annual growth of only 1.2 percent a year on average for the past 8+ years.


But even those figures are overestimated. In 2013, the U.S. redefined the way it estimated GDP, adding categories like R&D expenses and other intangibles that artificially boosted U.S. GDP estimates simply by redefining it.  That “economic growth by redefinition” raised GDP by around 0.3 percent annually, and in dollar terms by roughly US$500 billion annually.  So the real U.S. GDP may be actually growing by less than 1 percent on average per year since 2007; and during the most recent quarter, January-March 2016, the economy may not have grown at all, but may have stagnated, collapse, and come to a halt....


Not satisfied with the media-press definition of a recession as two consecutive quarters of negative GDP, US economists at the National Bureau of Economic Research, who are tasked with declaring the beginning and end of a recession, look at various economic indicators — like industrial production, retail sales, exports-import trends, and other sources. A recession may occur in just one quarter; or may require more than two.

Looking at these other indicators for this past January-March 2016 period, the US economy appears even more likely headed for a recession and sooner rather than later....


Business investment is another trouble spot. Investment in business structures fell by -10.7 percent and investment in new equipment by -8.6 percent, the latter the biggest drop since the 2007-09 recession.  Business inventories rose barely, by the smallest amount in two years, continuing a slowing trend of the past nine months.

And what about consumption, which constitutes about two thirds of the total US economy? US consumer spending has been growing at an average monthly rate of only 0.1 percent. Retail sales, the largest element of consumer spending, has fallen every month on average during the quarter.  After having sustained retail sales in previous years, auto sales, a large component of retail sales, declined for the second consecutive quarter during the January-March period.  The outlook for U.S. consumer spending recovery is also not too bright.  A recent Gallup poll reported that 60 percent of those interviewed indicated the U.S. economy was “getting worse.”  Reflecting the poor demand for consumer goods, U.S. consumer prices now hover on the brink of deflation, falling at an average monthly rate of -0.1 percent for the quarter....


Politicians Wearing Rose-Colored Glasses

Despite the facts, U.S. government politicians and Federal Reserve bank officials continue to run around declaring that the U.S. economy is performing well. They like to cite the 200,000 jobs allegedly created in recent months. But a closer examination shows the jobs being created are part time, temp, contract, low paid, no benefit service jobs. Jobs that generate no overall wage increase for the economy and no real income gains for working people.


5--Santelli Exchange: TrimTabs  (Important) Video


Since 2011, $2 trillion in stock buybacks, while market cap is up $11 trillion.. Current buyback slowdown by 50%...Income growth is zero

No new money since 2011 from retail investors. All from companies buying back their own stock

What should investors do?

Cash


6--Aleppo is Arabic for Little Big Horn


According to military spokesperson of the U.S. alliance against the Islamic State, Colonel Warren, the "rebel" occupied parts of Aleppo city are under control of al-Qaeda:

[I]t's primarily al-Nusra who holds Aleppo, and of course, al-Nusra is not part of the cessation of hostilities. So it's complicated.

Two UN Security Council Resolution calls on all UN members to "eradicate" al-Qaeda/al-Nusra. ALL UNSC members agreed to Resolution 2254 which:

Reiterates its call in resolution 2249 (2015) for Member States to prevent and suppress terrorist acts committed specifically by Islamic State in Iraq and the Levant (ISIL, also known as Da’esh), Al-Nusra Front (ANF), and all other individuals, groups, undertakings, and entities associated with Al Qaeda or ISIL [...] and to eradicate the safe haven they have established over significant parts of Syria, and notes that the aforementioned ceasefire will not apply to offensive or defensive actions against these individuals, groups, undertakings and entities,...

There is simply no basis for Kerry to beg for a ceasefire for "rebel" held areas of Aleppo city when his own military says that these are in the hands of al-Qaeda which the UNSC calls to eradicate. The Russian's have said that much.

So here is what Kerry is left to do: Beg the U.S. allies to move away their "Free Syrian Army" proxy groups from al-Qaeda so al-Qaeda can be eradicated by the Syrian Army and its allies


7--Cessation of hostilities in Aleppo to be announced in coming hours - Lavrov


“Russia is concerned, and not just us alone, about Turkey's shelling of the Syrian territory, continued creation of certain security zones in Syria, not to mention the increasing calls for a ground operation.”

Moscow is convinced “that such calls come from those who are not interested in the real political settlement [of Syrian crisis] and who rely on a military solution.”

“We are convinced that this is the way to a catastrophic situation, and such appeals should be stopped,” Lavrov said.


8--Dozens of casualties in rebel rocket attack on Aleppo hospital - state media (VIDEO

9--Lech Wałęsa: A Stalinist agent in the Solidarity movement


10--The 9/11 cover-up continues

Sunday, May 1, 2016

Today's links

1--What Are The Three Signs Of A "Disorderly" Currency Market: Richard Koo Explains


2--The Cult Of Central Banking Is Dead In The Water

3--Can the mighty greenback bounce back?


Are people worried that central banks are the only thing that keeps stocks propped up and that now even these formerly omnipotent market manipulators can’t do their jobs anymore?

“If things don’t make common sense, sooner or later, they come home to roost.” That’s how John Thornton, who’d retired as president of Goldman Sachs in 2003 and who’s now a prof at Tsinghua University in Beijing, explained it to Yahoo Finance:

“So I feel as though we’re sitting in 2016 with many of the same problems that we’ve had for the last eight or 10 years, they haven’t been addressed very forcefully, we’re living on borrowed time. And sooner or later, that ends in tears.”

4--Japan's Growing Poverty Defies Glib Explanations

5--Listen Carefully for Hints of the Next Global Recession, Shiller


No single narrative seems to have enough compelling force at the moment to engender a downturn as big as the last one. Many people have been borrowing from older narratives of risk and vulnerability while trying to understand the current economy. Oil prices have been slumping, not soaring, but there are significant worries about outsourcing, downsizing and globalization, along with deep concerns about rising inequality, refugee and immigrant flows, and what has been called secular stagnation of the economy. Political candidates on both the left and the right have been spinning charged and sometimes disruptive narratives about these issues.

We don’t know whether any specific event — say, an unexpected spike in oil prices or a decline in the stock market — will help transform any of the current social stories into a truly virulent economic disruption. We don’t know what is coming or when. But history does tell us that human imagination can spontaneously transform discrete events into world-shaking narratives of unexpected color and force. 


6--How to Prepare for the Next Recession


If we want to mitigate hardship and help the economy get back on its feet when that happens, the prudent move would be to strengthen the “automatic stabilizers” in the federal budget — programs like unemployment insurance, the Supplemental Nutrition Assistance Program, or SNAP (food stamps) and Medicaid — that, without the need for congressional action, expand when the economy is weak and contract when the economy is on its way to recovery. Such programs put money in the pockets of those who suffer most during recessions, money that will be quickly spent back into the economy, and they have an efficient administrative infrastructure in place that can be leveraged to disburse funds rapidly when the need strikes.

But as they currently stand, these programs aren’t enough. Consider SNAP. The 2009 Recovery Act temporarily increased the maximum monthly food benefit by about $63 a month for a family of three. In addition to raising consumer demand, this benefit expansion reduced hunger, and it kept nearly a million people out of poverty in 2010


7--Civilian deaths in Syria surge as US-Russian brokered ceasefire unravels


The Pentagon, with full backing from the White House, is moving forward with the so-called US Plan B for Syria.....

the essential cause for the breakdown of the cease-fire and slide back toward all-out civil and proxy war is the uncompromising determination of the US ruling class to overthrow the Assad government, toppling a crucial regional ally of both Russia and Iran and replacing it with an American puppet.
On Monday, the White House announced that at least 250 US special forces soldiers would be deployed to Syria, a decision taken on the heels of the announcement of an additional 200 US ground troops to Iraq.
In testimony to the Senate Armed Services Committee Thursday, US Defense Secretary Ashton Carter made clear that these are only preliminary moves in a much broader war plan...

The most recent escalations were hailed this week by both US Democratic Party presidential candidates Hillary Clinton and Bernie Sanders....

Senator Sanders’ own endorsement of the administration’s policies makes clear that he is not in any sense running as an antiwar candidate, but rather as another imperialist politician.
“The president is talking about having American troops training Muslim troops, and helping supply the military equipment they need. I do support that effort,” Sanders told media this week.
The preparations for an expanded US ground war in Syria, whose full character will likely not be revealed until immediately after the 2016 US elections, are taking place amid US war preparations in Eastern Europe, the South China Sea and throughout Eurasia, that pose the growing threat of a third world war..

8--Was the EU a CIA project?


"the European Union always was an American project."
In fact, the journalist recalled, taking a look back through archival history, one finds that "it was Washington that drove European integration in the late 1940s,", and Washington that "funded it covertly under the Truman, Eisenhower, Kennedy, Johnson, and Nixon administrations."...

Contrary to popular belief among some in Europe that the US may have viewed European integration as a threat, the project was in actually always seen as an "anchor to American regional interests alongside NATO," all the way back to its inception.
Evans-Pritchard recalled that the May 1950 Schuman Declaration, the proposal by French Foreign Minister Robert Schuman to create the European Coal and Steel Community, which "set the tone of Franco-German reconciliation – and would lead by stages to the European Community – was cooked up by the US Secretary of State Dean Acheson at a meeting in Foggy Bottom" (in Washington DC)....

many Britons, and other Europeans, remain unaware of the declassified documents from the US State Department archives "showing that US intelligence funded the European movement secretly for decades, and worked aggressively behind the scenes to push Britain into the project." 
For instance, "one memorandum dated July 26, 1950, reveals a campaign to promote a full-fledged European parliament. It was signed by Gen William J Donovan, head of the American wartime Office of Strategic Services, [the] precursor of the Central Intelligence Agency."

In fact, "the key CIA front was the American Committee for a United Europe (ACUE), chaired by Donovan. Another document shows that it provided 53.5 percent of the European movement's funds in 1958. The board [of the ACUE] included Walter Bedell Smith and Allen Dulles, CIA directors in the fifties, and a caste of ex-OSS officials who moved in and out of the CIA."
The archives, Evans-Pritchard adds, show that the CIA essentially "treated some of the EU's 'founding fathers' as hired hands," and even "actively prevented them [from] finding alternative funding that would have broken reliance on Washington...

How can any self-respecting Briton, or European for that matter, support a project that was cooked up across the Atlantic for the purpose of maintaining Washington's Cold War hegemony


9--R+6 should complete taking Aleppo City ASAP.



Saturday, April 30, 2016

Today's links

1--Savings Rate Highest Since December 2012 After Personal Spending Disappoints Again


Income up, Spending down.....Savings rises to 5.4%...another sign of weak consumption

2--Oil prices: tripwire for disaster?


Energy could be the tripwire because low oil prices heighten the likelihood of a credit event. It looks a lot like the housing problem in 2007. At that time people said: «Housing never goes down, and if it goes down it’s a buying opportunity. Don’t worry about this stuff, it’s all going to work itself out.» Today, crude oil prices are very important for financial markets. If we get a plunge in crude oil prices then that’s bad, as it means the bankruptcies come, the write downs come, investors run away and losses pile up. And then we’re back looking at financial institutions and asking ourselves: How much of those energy loans do they have? The banks will tell you that they’re not exposed and there’s no problem – just like in 2007, when they claimed that they had no exposure to subprime lending. But that wasn’t quite the way it worked out. So maybe we have to do the whole exercise again that we had to do during the financial crisis and listing out all the write downs of the banks.....

The Bank for International Settlements estimates that there are about 3 trillion dollars worth of energy lending world wide. So we’ve got a market of 3 trillion dollars worth of loans and the primary pricing of that market has fallen apart: the world wide price of oil. And the price doesn’t even need to go down much lower. It just needs to go back down to around $35 and we’re going to start looking at those 3 trillion dollars worth of lending and all of the investments in oil. And if investors see how much it really is, it’s going to be bad.

If the markets are understanding that they got a veto over the Fed then they can do what they want. This runs the risk that stocks take off to overvalued range, go to immense multiples, go bubble because investors don’t believe that this Fed would ever step on the breaks. That is the concern that I have because I am still not a believer that the economy is doing well. Of course, Wall Street’s job is to torture the data to find something positive out of it. But I see negative year-over-year earnings, I see the forecast for the next couple of earnings seasons with negative year-over-year earnings growth, I see sub 1% growth in the US economy and I see low expected inflation. Except for the payroll reports, there is no consistency that things look robust.

3--Why this Economy Feels Even Lousier than the Lousy GDP Print


The meme that 14 million jobs have been created since the Great Recession is constantly held up as proof that the labor market has healed, or has practically healed, even if there are a few soft spots left over – such as the pandemic lousiness of the jobs that have been created.

Turns out, the US population, currently at 323.2 million, has grown by 16.5 million people since the Great Recession. Which is exactly why the unemployment problem has become so intractable: job growth has been less than population growth!...

Per-capita economic growth in the first quarter compared to the prior quarter was negative 0.3%!

4--The Commies were right about Sanders--The demise of Sanders’ “political revolution”


 
In the wake of his losses in five out of six northeastern primaries, Vermont Senator Bernie Sanders has effectively conceded that former Secretary of State Hillary Clinton will be the Democratic nominee. On Wednesday, the Sanders campaign issued layoff notices to several hundred staffers.
In a series of media interviews, Sanders and his top campaign aide Tad Devine indicated that the
candidate would bow to demands from leading Democrats that he stop criticizing the frontrunner for her ties to Wall Street, and instead direct his attacks against the likely Republican nominee, billionaire Donald Trump.

Thus the Sanders campaign ends not with a bang, but a whimper. The candidate has every right, however, to declare “mission accomplished.” His main concern, as the campaign developed, was how to keep his supporters within the Democratic Party. Millions of youth and workers attracted by calls for a “political revolution” and denunciations of the “billionaire class” are now to be dragged to the polls to cast their votes for Clinton, a Wall Street lackey and war criminal...

A Harvard University survey of young adults aged 18 to 29, made public this week, found that 51 percent of those surveyed did not support capitalism, compared to 42 percent who did. One-third of these young adults affirmatively supported socialism, and near-majorities agreed that health care, food and shelter were basic human rights. This is in a society where socialism has been virtually criminalized and both major parties, the media and academia all sing the praises of the profit system.

As the WSWS wrote in February, “Sanders is not the representative of a working class movement. He is rather the temporary beneficiary of a rising tide of popular opposition that is passing through only its initial stages of social and class differentiation.” His entire campaign has been dedicated to preventing this leftward movement from breaking out of the straitjacket of the Democratic Party.....

His “political revolution” turned out to be nothing more than getting out the vote for the Democrats, his “socialism” merely warmed-over liberalism, without the slightest threat of any inroad against capitalist property.
Sanders avoided the overriding issues of war and militarism, on which Clinton was most vulnerable given her role as secretary of state in the Obama administration, responsible for the US-NATO war in Libya, the US-instigated civil war in Syria, and the campaign of drone missile assassinations, among other crimes....

The class character of the Democratic Party is not open to question. It is an integral component of the two-party system, which the American ruling elite employs to manage its affairs of state and to suppress all opposition from below.

Throughout the election campaign, the Socialist Equality Party has explained both the objective significance of the mass support for Sanders and the role of the candidate himself as a vehicle for strengthening the Democratic Party. We have stressed that Sanders was not the leader of a movement from below, but an instrument of the political establishment for containing, misdirecting and ultimately dispersing that movement.

5--Abenomics—-At Last, Dead In The Water

6--What Comes Next——Krugman’s Fiscal Equivalent Of War

7--Chart Of The Day: Japan’s Money Multiplier Has Dropped Like A Stone Since Kuroda Went Wild


8--Chart Of The Day: Constant Dollar New Home Sales Still At 1976 Level

9--Letter Details FBI Plan for Secretive Anti-Radicalization Committees


Saturday, April 23, 2016

1---The "not-so wealthy" effect; Housing bust leads to weaker consumption and slower growth


The U.S. consumer might be the engine of global growth — just not the roaring V12 it used to be.


From the fourth quarter of 2003 through 2006, amid the real estate bubble, personal consumption expenditures grew at an average annual clip of 3.5 percent. Since the S&P/Case-Shiller Composite 20-City Home Price Index bottomed out in March 2012, however, personal consumption expenditures have increased by just 2.3 percent, on average.


In an economic letter published by the Federal Reserve Bank of Dallas, economists John Duca, Anthony Murphy, and Elizabeth Organ identify one reason why this American muscle car has lost its nitrous oxide.


The researchers found that the wealth effect from real estate — that is, the extent to which home price appreciation juices consumer spending — has been cut in half since the mid-2000s:


Source: Dallas Fed


The housing bubble of the aughts was characterized not only by soaring real estate values, but also households' penchant for using real estate as a piggy bank to finance current consumption.

In the wake of the crisis, access to credit by this channel was curtailed dramatically and the debt overhang served as a notable drag on consumption, to boot.

"In the U.S., increased availability of consumer and mortgage credit, along with rising asset prices, contributed greatly to the consumption boom in the mid-2000s; reversals in these factors exacerbated the bust in consumption during the Great Recession," the authors wrote.

Years removed from the bust, households may still be scarred from its effects and reticent to tap into home equity lines of credit.


2--How Much Are Corporate Buybacks Propping Up Share Prices


The Federal Reserve recently put its interest rate plan on hold, but it will presumably resume at some point in the near future. Benzinga asked Theodore how much of an impact rising interest rates will have on companies that have been repurchasing shares. He explained that companies using debt to fund buybacks will suffer most.
“Because we focus on companies that are generally using growth in free cash flow to finance buybacks, rising interest rates have less of an immediate impact on them,” Theodore said.


3--The promise of more BOJ stimulus weakens yen: Dollar logs largest weekly gain vs. yen since November 2014


Despite the sharp decline, the Japanese currency remains 7.5% higher against the greenback year-to-date.

The yen’s strength has become a headache for Prime Minister Shinzo Abe because a weaker currency was seen as one of his administration’s biggest accomplishments.

But whether or not the BOJ acts might not matter, Foley said.


“Irrespective of the policy decision taken by the BoJ next week, a stronger [dollar] would be very useful in supporting growth and inflation in Japan,” she added.

Investors are turning their attention to the BOJ and a meeting of the Federal Reserve next week in the wake of an uneventful European Central Bank meeting on Thursday. Speculation of more BOJ easing has increased since the Japanese southern island of Kyushu was hit by a powerful earthquake earlier this month.

The Fed and the BOJ will each wrap up their two-day meetings on Wednesday and Thursday, respectively.


4--Imploding Japan; World’s Worst Sinkhole-Government Sports World’s Most Negative-Yielding Debt


no one is buying Japanese debt, other than the Bank of Japan, which buys every JGB (via its “primary dealers”) that the government issues and every JGB that isn’t otherwise bolted down....


The BOJ’s loans to Japanese banks at negative rates aren’t going to increase lending and investment in Japan. Interest rates on loans are already low. The problem is there’s insufficient demand! And there’s insufficient demand because, among other reasons, these policies are strangling demand!....

Japan’s national debt is between 230% and 250% of GDP, depending on who does the counting, compared to debtor-nation USA, at 105%. It has one of the worst credit ratings of any major developed economy; Standard & Poor’s rates it A+, four notches below the top.


The Bank of Japan has been printing about ¥80 trillion ($716 billion) a year for three years – QQE, it calls this – on top of the money it printed in prior years, and uses the proceeds to buy Japanese Government Bonds and other securities. It now holds ¥410 trillion ($3.7 trillion) in total paper. That’s 82% of GDP, versus money-printer-nation USA, at 25% of GDP.....


Japan’s economy has been vacillating between growing a little and shrinking a little for years.

Now it’s shrinking again. It shrank in the October-December quarter, and it’s likely to shrink in the January-March quarter. That would be a technical recession.

Friday, April 22, 2016

Today's Links

" ...fundamentally, it’s very hard to believe in US stocks. Earnings and profit margins are dropping and companies basically are borrowing money to pay dividends and to buy back shares."   Jeffrey Gundlach


“We have had the biggest monetary stimulus that the world must have ever seen, and we still have not solved the problem of weak demand. The idea that monetary stimulus, after six years... is the answer doesn’t seem [right] to me”. Lord (Mervyn) King, the former governor of the Bank of England


"I have not one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result." Albert Edwards, Societe Generale



1--The dollar is the secret driver of the stock market comeback


Schlossberg said that by not raising rates, the Fed is consciously allowing the dollar to weaken, thus giving a competitive advantage to U.S. exporters who benefit from a weaker greenback, in turn strengthening U.S. equities.

The U.S. dollar index has fallen 4 percent this year, while stocks have rallied 4 percent.

"The reason why all of this is happening," Schlossberg said, "is because they really want to make sure that we do not tip over into any kind of a global financial panic."


2--Inequality anyone?


Eight years after the financial crash of 2008, the disastrous reality of life in America is drastically at odds with official proclamations of “economic recovery.” While nominal unemployment has fallen since the depths of the recession, this is largely because millions of Americans have dropped out of the labor force. All the growth in jobs over the past decade has been in the form of contingent, part-time or temporary labor.


Social inequality today is greater than ever before. The top 20 billionaires in the US have as much wealth as the bottom 150 million Americans. The rich not only enjoy untold wealth and privilege, they live longer. The life expectancy gap between the richest and poorest Americans averages almost 15 years for men and 10 years for women.

Young people are burdened by more than $1 trillion in student loan debt, millions of people are being cut off from food stamps, and millions more are seeing their pensions and health care slashed or eliminated.


3--(archive 2015) 


Since the demise of Lehman in 2008, there have been more than 600 rate cuts. Over the same period, central banks have injected more than $12trn (£8trn) into money markets under quantitative easing (QE) programmes. Over $26trn of government bonds are now trading at yields of below 1 per cent, with more than $6trn currently yielding less than 0 per cent. These policies, according to policymakers, have been crucial to the “recovery”.


4--One and done?


In the U.S. specifically, the economy grew just 1.4 percent in the fourth quarter and probably only rose 0.3 percent in the first quarter, according to the Atlanta Fed. Job growth continues apace but manufacturing remains in a slump and corporate earnings are tracking for an 8 percent decline in the first quarter, according to S&P Capital IQ.

Importantly, however, stock prices have jumped off the Feb. 11 low and financial conditions overall are easing. Depending on the Wall Street source, conditions are at their loosest since August (Goldman) or at least December (Nomura). The Chicago Fed's National Financial Conditions Index reflects a 17 percent loosening in conditions over the past three months...


Traders currently assign a zero percent chance to an April hike


5--Goldman's crystal ball


"We continue to expect that the strengthening of the U.S. labour market will force the Fed to hike rates three times this year, which will lead to a stronger dollar and a gradual increase in U.S. real rates, pushing gold down," Goldman analysts said in a note.


6--Revolt of the Rich (Today's "must read")  The real reason Dilma Rousseff’s enemies want her impeached


The story of Brazil’s political crisis, and the rapidly changing global perception of it, begins with its national media. The country’s dominant broadcast and print outlets are owned by a tiny handful of Brazil’s richest families, and are steadfastly conservative. For decades, those media outlets have been used to agitate for the Brazilian rich, ensuring that severe wealth inequality (and the political inequality that results) remains firmly in place.


Indeed, most of today’s largest media outlets – that appear respectable to outsiders – supported the 1964 military coup that ushered in two decades of rightwing dictatorship and further enriched the nation’s oligarchs. This key historical event still casts a shadow over the country’s identity and politics. Those corporations – led by the multiple media arms of the Globo organisation – heralded that coup as a noble blow against a corrupt, democratically elected liberal government. Sound

familiar?


For more than a year, those same media outlets have peddled a self-serving narrative: an angry citizenry, driven by fury over government corruption, rising against and demanding the overthrow of Brazil’s first female president, Dilma Rousseff, and her Workers’ party (PT). The world saw endless images of huge crowds of protesters in the streets, always an inspiring sight.


But what most outside Brazil did not see was that the country’s plutocratic media had spent months inciting those protests (while pretending merely to “cover” them). The protesters were not remotely representative of Brazil’s population. They were, instead, disproportionately white and wealthy: the very same people who have opposed the PT and its anti-poverty programmes for two decades.


Slowly, the outside world has begun to see past the pleasing, two-dimensional caricature manufactured by its domestic press, and to recognise who will be empowered once Rousseff is removed. It has now become clear that corruption is not the cause of the effort to oust Brazil’s twice-elected president; rather, corruption is merely the pretext.


Rousseff’s moderately leftwing party first gained the presidency in 2002, when her predecessor, Luiz Inácio Lula da Silva, won a resounding victory. Due largely to his popularity and charisma, and bolstered by Brazil’s booming economic growth under his presidency, the PT has won four straight presidential elections – including Rousseff’s 2010 election victory and then, just 18 months ago, her re-election with 54 million votes.


The country’s elite class and their media organs have failed, over and over, in their efforts to defeat the party at the ballot box. But plutocrats are not known for gently accepting defeat, nor for playing by the rules. What they have been unable to achieve democratically, they are now attempting to achieve anti-democratically: by having a bizarre mix of politicians – evangelical extremists, far-right supporters of a return to military rule, non-ideological backroom operatives – simply remove her from office.


Indeed, those leading the campaign for her impeachment and who are in line to take over – most notably the house speaker Eduardo Cunha – are far more implicated in scandals of personal corruption than she is. Cunha was caught last year with millions of dollars in bribes in secret Swiss bank accounts, after having falsely denied to Congress that he had any foreign bank accounts. Cunha also appears in the Panama Papers, working to stash his ill-gotten millions offshore to avoid detection and tax liability.


It is impossible to convincingly march behind a banner of “anti-corruption” and “democracy” when simultaneously working to install the country’s most corruption-tainted and widely disliked political figures. Words cannot describe the surreality of watching the vote to send Rousseff’s impeachment to the Senate, during which one glaringly corrupt member of Congress after the next stood to address Cunha, proclaiming with a straight face that they were voting to remove Rousseff due to their anger over corruption.


As the Guardian reported: “Yes, voted Paulo Maluf, who is on Interpol’s red list for conspiracy. Yes, voted Nilton Capixaba, who is accused of money laundering. ‘For the love of God, yes!’ declared Silas Camara, who is under investigation for forging documents and misappropriating public funds.”


A New York Times article last week reported that “60% of the 594 members of Brazil’s Congress” – the ones voting to impeach Rousseff – “face serious charges like bribery, electoral fraud, illegal deforestation, kidnapping and homicide”. By contrast, said the article, Rousseff “is something of a rarity among Brazil’s major political figures: she has not been accused of stealing for herself”.


Last Sunday’s televised, raucous spectacle in the lower house received global attention because of some repellent (though revealing) remarks made by impeachment advocates. One of them, prominent rightwing congressman Jair Bolsonaro – widely expected to run for president and who a recent poll shows is the leading candidate among Brazil’s richest – said he was casting his vote in honour of a human-rights-abusing colonel in Brazil’s military dictatorship who was personally responsible for Rousseff’s torture. His son, Eduardo, proudly cast his vote in honour of “the military men of ’64” – the ones who led the coup.


Until now, Brazilians have had their attention exclusively directed towards Rousseff, who is deeply unpopular due to the country’s severe recession. Nobody knows how Brazilians, especially the poor and working classes, will react when they see their newly installed president: the pro-business, corruption-tainted nonentity of a vice-president who, polls show, most Brazilians want impeached.

Most volatile of all, many – including the prosecutors and investigators who have led the corruption probe – fear that the real plan behind Rousseff’s impeachment is to put an end to the ongoing investigation, thus protecting corruption, not punishing it. There is a real risk that once she is impeached, Brazil’s media will no longer be so focused on corruption, public interest will dissipate, and the newly empowered faction in Brasilia will be able to exploit its congressional majorities to cripple that investigation and protect themselves.


7--Japan ambles closer to the cliffedge


In Japan, where the sub-zero rate became effective in February, a survey of senior loan officers showed this week that banks’ profit margins from lending to highly rated companies dropped to the lowest level in almost a decade. The BOJ’s quarterly survey also showed that demand for credit from large, medium and small-sized firms all dropped.


“This wouldn’t address the underlying structural problem for the banks, which is not a loan supply issue but a demand issue,” Jefferies Group LLC analysts including Mac Salman wrote in a report.


8--A top for stocks?



Since hitting its February low, the S&P 500 has rallied 15 percent and come within 2 percent of its all-time highs. But according to one market watcher, the top could be in for the year, if history is any guide.

Technical analyst John Kosar said that from a seasonal standpoint, Friday marks the end of peak week for stocks in the second quarter.

"Since 1957 we have April being the strongest month of the year for the S&P 500, and on average it has closed 1.5 percent higher on the month since that time," Kosar said Thursday on CNBC's "Futures Now." The S&P 500 is currently up 1.6 percent this month. "That tells me that we've already gone, seasonally, as high as we should," he said


9--Lower rates mean higher asset prices. Duh



Look at this chart that shows the 10-year, risk-free Treasury bond rate. Today, it stands around 1.79%. When adjusted for three-year average inflation rates, it’s much lower:

After years of non-stop QE, its yields had actually fallen to 0% in late 2014, and today it’s still only around 0.4% – practically zero!


Most people don’t understand that all other financial assets are heavily influenced by the 10-Year Treasury bond rate (or similar sovereign bonds in other countries). Higher-risk bonds from AAA corporate to junk are valued as a risk premium for default above the risk-free rate. Lower risk-free rates mean lower bond yields and higher bond values all the way up the junk bond scale.


Loans for mortgages and auto loans, etc. go down in rates, with a risk premium that is very low on government guaranteed mortgages. That pumps up prices of real estate and other highly financed assets, as everyone can buy more for the same monthly payment.


Lower rates mean higher stock values as well. Stocks are basically valued by projecting earnings 10 years out, and then discounting their value to the present by adjusting for the interest on the 10-year, risk-free rate.


At lower long-term rates, companies can borrow at near zero adjusted for inflation, and buy back their own stocks to increase earnings per share – even if earnings are not growing. Or, they can buy out or merge with a company financed by cheap debt… the list goes on.

It’s all about financial engineering – not about productive investment in future assets and employment.


This final bubble since 2009 is a total illusion from QE and financial engineering – not the normal fundamentals of rising demographics, innovation and productivity. And as an illusion, it will disappear much faster than it was created when it finally bursts


10--Manufacturing plunges


Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:



“US factories reported their worst month for just over six-and-a-half years in April, dashing hopes that first quarter weakness will prove temporary.


“Survey measures of output and order book backlogs are down to their lowest since the height of the global financial crisis, prompting employers to cut back on their hiring.


“The survey data are broadly consistent with manufacturing output falling at an annualized rate of over 2% at the start of the second quarter, and factory employment dropping at a rate of 10,000 jobs per month.


“With prior months’ survey data pointing to annualized GDP growth of just 0.7% in the first quarter, the deteriorating performance of manufacturing suggests that growth could weaken closer towards stagnation in the second quarter.


“The survey responses reveal an increase in business uncertainty in relation to both the economic and political outlook during the month, which is weighing on spending and investment decisions and exacerbating already-weak demand both at home and abroad.” 


11--(archive) Moment of truth: Market Rises After Fed Keeps Interest Rates Unchanged


“It probably eases investors’ minds that we’re unlikely to see a rate increases in April, and it probably takes June off the table,” he said.


12--Stocks Rise When the Dollar Falls?


13--The Fed changes its mind about normalization


The chair of the Federal Reserve has dropped the broadest of hints that it has put future US interest rate increases on hold following the plunge in global stock markets since the start of the year.


In testimony before Congress, Janet Yellen admitted that the selloff in shares on Wall Street had affected the growth prospects for the world’s biggest economy and left investors in little doubt that the US central bank had no intention of following last December’s increase in the cost of borrowing with a second increase in March.


“Financial conditions in the US have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar,” she said.


“What you see here is a virtually unchanged path of economic projections and a slightly more accommodative path” for monetary policy, Ms. Yellen told a news conference on Wednesday.  http://www.nytimes.com/2016/03/17/business/economy/fed-interest-rates-meeting.html?ref=business




The Fed’s Statement:      

“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”


14--From Mario Draghi With Love: How ECB Cash Could Boost U.S. Stocks


The European Central Bank may be about to hand billions of euros to American shareholders.

On Thursday, the ECB set unexpectedly generous conditions for buying corporate bonds, part of its effort to refloat the eurozone economy with a deluge of free money.


The relaxed conditions mean the money can easily wash up on U.S. shores. Big American companies have long sold bonds in Europe, and last year these “reverse Yankee” issues hit a record after European interest rates turned negative. Reverse Yankee issuance hit €66 billion ($74.6 billion) in 2015, according to Dealogic. That was a fifth of all euro-denominated bond issuance, says Fitch Ratings. This year, so far, the level is the second highest on record.


Euro-denominated bonds issued by any eurozone-based company will qualify for ECB buying, so long as the company isn’t a bank. All a U.S. company has to do is set up a eurozone subsidiary to issue its debt. Even better, The ECB can buy up to 70% of each bond, and can buy at issue.


If the ECB spends money on U.S. debt, that cash is likely to end up in the hands of shareholders. Large U.S. companies have been rapidly increasing their borrowing and using the money mainly to finance share buybacks, rather than to increase investment.


Handing out money to foreign companies may prove controversial for the ECB, particularly because the central bank will take a financial hit if the bonds aren’t repaid in full.


In an ideal world, ECB President Mario Draghi wouldn’t have to worry about this. The ECB would like European companies to borrow in order to invest, boosting both the real economy today and growth tomorrow. This is the least likely outcome, though. Europe is awash in spare production capacity, and there is no sign that big investments have been on hold awaiting access to bond finance.




Thursday, April 21, 2016

Today's Links

1--Nearly half of Americans would have trouble finding $400 to pay for an emergency


Since 2013, the Federal Reserve Board has conducted a survey to “monitor the financial and economic status of American consumers.” ... The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?...


Americans are on thin ice financially. How thin? A 2014 Bankrate survey, echoing the Fed’s data, found that only 38 percent of Americans would cover a $1,000 emergency-room visit or $500 car repair with money they’d saved. Two reports published last year by the Pew Charitable Trusts found, respectively, that 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income, and that of the 56 percent of people who said they’d worried about their finances in the previous year, 71 percent were concerned about having enough money to cover everyday expenses. A similar study conducted by Annamaria Lusardi of George Washington University, Peter Tufano of Oxford, and Daniel Schneider, then of Princeton, asked individuals whether they could “come up with” $2,000 within 30 days for an unanticipated expense. They found that slightly more than one-quarter could not, and another 19 percent could do so only if they pawned possessions or took out payday loans. The conclusion: Nearly half of American adults are “financially fragile” and “living very close to the financial edge.” ...


Median net worth has declined steeply in the past generation—down 85.3 percent from 1983 to 2013 for the bottom income quintile, down 63.5 percent for the second-lowest quintile, and down 25.8 percent for the third, or middle, quintile. According to research funded by the Russell Sage Foundation, the inflation-adjusted net worth of the typical household, one at the median point of wealth distribution, was $87,992 in 2003. By 2013, it had declined to $54,500, a 38 percent drop. And though the bursting of the housing bubble in 2008 certainly contributed to the drop, the decline for the lower quintiles began long before the recession—as early as the mid-1980s, Wolff says....


The personal savings rate peaked at 13.3 percent in 1971 before falling to 2.6 percent in 2005. As of last year, the figure stood at 5.1 percent, and according to McClary, nearly 30 percent of American adults don’t save any of their income for retirement....

Though household incomes rose dramatically from 1967 to 2014 for the top quintile, and more dramatically still for the top 5 percent, incomes in the bottom three quintiles rose much more gradually: only 23.2 percent for the middle quintile, 13.1 percent for the second-lowest quintile, and 17.8 percent for the bottom quintile. That is over a period of 47 years! But even that minor growth is somewhat misleading. The peak years for income in the bottom three quintiles were 1999 and 2000; incomes have declined overall since then—down 6.9 percent for the middle quintile, 10.8 percent for the second-lowest quintile, and 17.1 percent for the lowest quintile. The erosion of wages is something over which none of us has any control.


2--UPDATE: Dollar drifts lower against yen; ECB meeting in the spotlight

3--(archive) Housing sales peaks: Existing Home Sales Set 2005 Record


Sales of existing homes set a record for a fifth straight year in 2005 even though the year ended on a weaker note with three straight monthly declines, sending a strong signal that the nation's housing boom is beginning to cool.


The National Association of Realtors reported that sales of previously owned homes and condominiums dropped by 5.7 percent in December compared to the sales pace in November. It marked the third consecutive monthly decline, something that has not occurred in more than three years.


Even with the sales weakness in the last three months of the year, total sales in 2005 climbed to an all-time high of 7.072 million units, up 4.2 percent from the 6.784 million homes and condominiums sold in 2004.


The median price of a home sold in December was $211,000. For all of 2005, home prices were up 12.7 percent, the biggest increase since a 14.4 percent rise in 1979.



4--Existing home sales hit 5.33 million in March vs. 5.30 million expected


5--Sales of New Homes in U.S. Rebounded in February on Jump in West


Sales increased 2 percent to a 512,000 annualized pace following a 502,000 rate in January that was stronger than previously reported, Commerce Department figures showed Wednesday. Demand is in line with last year’s pace, indicating residential construction will remain a source of support for the economy.


6--The market for new homes is hardly robust, with new-home sales still far from their July 2005 peak of 1.4 million annualized, wsj


7--Canada Does the Global Economy a Favor---But for maximum effect, everyone would need to adopt its formula of more fiscal, less monetary stimulus


Last month, Prime Minister Justin Trudeau’s Liberals introduced a budget that sharply boosts spending on a raft of initiatives from infrastructure to social benefits. Because of that fiscal stimulus, the Bank of Canada has refrained from cutting interest rates, helping send the Canadian dollar sharply higher.


The higher dollar will be a drag on Canada’s trade sector, diluting the budget’s stimulative impact. But Canada’s loss is the world’s gain. In fact, Canada is faithfully executing the formula that finance ministers and central bankers from the top 20 economies agreed to pursue at their just-concluded meetings in Washington: namely, rely less on monetary and more on fiscal policy to rejuvenate growth. The problem is that Canada is virtually alone in being both willing and able.....


The International Monetary Fund, the Organization for Economic Cooperation and Development and the U.S. Treasury Department for the past year have urged any country not drowning in debt to stimulate their economies by borrowing. The IMF this month recommended the G-20 stand ready to implement coordinated stimulus equal to 1% to 1.5% of GDP.

Canada listened. “We were influenced by what we heard from the IMF and OECD and around the table at the G-20,” says Bill Morneau, Canada’s finance minister, in particular the greater potency of fiscal policy when monetary policy is constrained by interest rates near zero....


But just 42% of Canada’s stimulus over the next two years goes toward infrastructure. Most of the rest goes to expanded social transfers such as child benefits, unemployment insurance and old-age pensions. All are permanent obligations and some at the margin may discourage work. Canada, with its pristine balance sheet and manageable pension burden, can easily handle it; not so the U.S., much less Japan.


8--ECB's Draghi: We haven't talked about helicopter money


The central bank said on Thursday that it would start purchasing corporate bonds as part of its quantitative easing program in June.

The purchases will be carried out on the ECB's behalf by the national banks of Belgium, Germany, Spain, France, Italy and Finland, according to a statement issued after Draghi's conference.

The purchases will take place in the primary and secondary markets. To be eligible, instruments must be denominated in euros and have a credit rating of at least BBB- or equivalent; they must also have a remaining maturity of between six months and 30 years at the time of purchase


9---US authorizes intensified air strikes against civilians in Iraq and Syria


This March alone, US warplanes dropped nearly 2,000 bombs on Iraq and Syria, an increase over the 1,700 bombs dropped by US forces during the previous March. Last November, the US-led coalition set a new record for a single month, dropping nearly 3,300 bombs.

Since the beginning of “Operation Inherent Resolve” in August 2014, Iraq and Syria have been pummeled by a combined total of more than 40,000 bombs, the vast majority of them made by American companies and delivered by American planes.


“The gradualistic, painfully slow, incremental efforts of the current administration undercut the principals of modern warfare, and harken back to the approach followed by the Johnson administration,” retired US Air Force general David Deptula, now with the Mitchell Institute for Aerospace Studies, said Tuesday, defending the expanded air strikes in comments to USA Today