Monday, October 17, 2011

Today's links

1--American liberalism attempts to corral Occupy Wall Street movement for Democrats, David Walsh, WSWS

Excerpt: The Occupy Wall Street protest movement, which has spread to many US cities and beyond, has established beyond the shadow of a doubt that the great question facing American and global society is social inequality.
... in contemporary America the super-rich control everything, and that the existing political system—the Democratic Party as well as the Republican—is entirely indifferent or hostile to the needs of the working population, the unemployed, the poor.

Defenders of capitalism and big business politics have been taken aback, and rightly so. But hardly silenced or defeated. Their counter-offensive against the protest movement takes a variety of forms.

The crude attacks of the ultra-right on the protests as “anti-American” will have little impact. Even police batons can only do so much. More dangerous is the embrace of those who claim to support the anti-Wall Street movement, but seek to divert it into support for the Democratic Party or—what comes to the same thing—into the orbit of the trade unions and various forms of gender and racial “identity” politics.

Such an outcome would mean bringing “the ‘Occupy Wall Street’ protests against U.S. economic inequality,” as Reuters is obliged to describe them, under control of well-heeled, establishment forces who have presided over and profited enormously from the very growth of this inequality.

...It is preposterous to suggest that the struggle against social inequality, the struggle of struggles in the US and around the globe, should be subordinated to any other issue. On the contrary, serious fighters against racism, anti-gay bigotry and other social injustices will recognize that the fate of every legitimate democratic cause depends on the success of a great popular uprising against the oppression of Wall Street and the corporations....

... liberal and ex-left circles in the US are hostile to the emergence of a movement directed against social inequality and will do everything in their power to bring that movement into line with the existing political set-up. Exposing this reality is essential to the clarification of the most advanced forces within the youth and the working class. We promise to be unrelenting on this score.

2--You Know Things Are Bad When Doctor Visits Plunge 8% Year-Over Year, Business Insider

Excerpt: A lot fewer people are going to the doctor this year, and no, that's not a good thing.

Here's JP Morgan's John Rex:

Sept ’11 office visit volumes down 8% y/y, while the sequential throughput measure increases 6% from August.... Primary care trends still running weaker... Med utilization still trending lower. At least there’s still some seasonal impact. At this point, we believe it’s well understood that 3Q medical utilization persisted weak, even biasing lower, and perhaps observing none of the typical expected seasonal
recovery in September would have been the much bigger surprise.
People are cutting back on health care due to financial concerns.
77% of Americans delayed visits to the dentist due to cost of care, according to the 2011 Survey of Dental Care Affordability and Accessibility. Another survey taken before the recession found that 25% of Americans threw away prescriptions they couldn't afford to fill -- and that number is probably worse now.

3--Personal Bankruptcy Filings Decline in 2011, Institute Says, Bloomberg

Excerpt: Personal bankruptcies in the U.S. fell in the first half of the year as Americans found other ways to reduce debt, the American Bankruptcy Institute said.

Consumers filed 709,303 bankruptcies through June, 7.9 percent fewer than in the same period a year earlier, Alexandria, Virginia-based ABI said today in a statement.

“The drop in bankruptcies for the first half of the year shows the continued efforts of consumers to reduce their household debt, and the overall pullback in consumer credit,” ABI Executive Director Samuel Gerdano said in the statement.

Filings in June rose 4.3 percent from a month earlier, when personal bankruptcies declined the most since October 2006. Consumers filed 114,803 bankruptcies in May, down from 136,142 a year earlier, the ABI reported last month.

4--Foreclosures in 2011 to break last year's record: RealtyTrac, Housingwire

Excerpt: Lenders filed a record 3.8 million foreclosures in 2010, up 2% from 2009 and an increase of 23% from 2008, according to RealtyTrac. But 2011 could be even worse.

RealtyTrac follows filings across the country that include notices of default, scheduled auctions and REO. The number in 2010 would have been higher were it not for the foreclosure moratoria banks announced in October when employees were found to be signing and filing affidavits improperly in what has become known as the robo-signing scandal.

RealtyTrac CEO James Saccacio said as many 250,000 foreclosures will likely be resubmitted and added to the numbers for 2011.

Daren Blomquist, who edits the RealtyTrac monthly reports, said the record set in 2010 will not last for long.

"We don’t think we’ve peaked yet nationwide," Blomquist told HousingWire. "We’re expecting the 2011 numbers to be slightly higher than 2010, and then start the downward trend toward 'normalcy' in 2012."

5--Student Loan Debt Climbs, WSJ

Excerpt: Americans have cut back on credit of all kinds, with one notable exception.

According to the Federal Reserve Bank of New York’s quarterly report on debt and credit, U.S. households had $11.42 trillion in debt outstanding in the second quarter. That was down from a peak of $12.5 trillion in the third quarter of 2008, when the financial crisis took hold, and the lowest since the first quarter of 2007. Mortgage debt, home equity loans, credit card debt and auto loans are all down sharply — partly because people are being more careful, but also because many have defaulted.

But student loans are up sharply. There was $550 billion in student debt outstanding in the second quarter, up 25% from $440 billion in the third quarter of 2008. (see chart)

6--Here's a demand: forgive student loan debt, The Guardian

Excerpt: As US student loan debt nears $1tn, it's time for the banks that stole these young people's future to do the right thing...

The Dodd-Frank Wall Street Reform Act fell far short of addressing the practices and behavior that lead to the near-collapse of the world economy. Corporations are sitting on record levels of cash, but are refusing to hire. Personal debt, including mortgages, credit cards and especially student loan debt have reached astronomical levels. All this is true, yet Washington, DC and the bankers on Wall Street seem tone deaf to the needs of the people.

For two and a half years, I have been advocating for a new way of stimulating economic growth from the bottom-up – a "trickle-up" approach to rebuilding the economy that reflects the realities of the 21st century via the campaign Forgiving Student Loan Debt. The argument is simple: relieving middle-class people of their educational debts would enable them to begin spending money in ailing sectors of the economy, start businesses and families and buy homes – that is, to have the "American Dream" that seems more and more out of reach with each passing day.

For the first time in history, total student loan debt recently surpassed total credit card debt in the US: current and former students collectively owe approximately $946bn in student loan debt, with no sign of this accumulation slowing down. In fact, it's projected to exceed $1tn within the year. Student loans have been stripped of nearly all basic consumer protections that every other type of debt enjoys, including bankruptcy protections and statutes of limitations. So, while you can have your business, credit card, mortgage and even your gambling debts discharged or restructured in bankruptcy court, student loan debt is with you for life – and sometimes beyond.

By turning education into a commodity where the students must personally bear the full costs of an educational system that, in fact, benefits all of society, not just the students themselves, we've shifted the ever-increasing burden of skyrocketing tuition costs down the socio-economic ladder onto those who can least afford to shoulder them. Couple that with a job market that's been utterly decimated by the irresponsibility and greed of those at the very top, the underlying reasons for the Occupy Wall Street protests start to come into focus.

If the Federal Reserve can hand out over $16tn in loans, at little to no interest, to the very institutions that caused the financial collapse in the first place, why must average Americans borrow money at upwards of 8% or more just to obtain an education?

How can we expect the housing market ever to improve when those we generally rely upon to purchase homes – college grads and professionals – are buried under tens of thousands of dollars or more in student loan debt, from which there is almost no escape?

If education is "the great equaliser" it's always touted to be, then why have over 432,000 people signed a petition in favor of student loan forgiveness as a means of economic stimulus? In the two and a half years that I've been working on this issue, I have yet to come across a single person who doesn't want to pay back what they actually borrowed (as opposed to three, four or five times the sum they borrowed); but they simply don't have the means to do so.

For more than 30 years, the rich have gotten richer, the poor have gotten poorer and the middle class has been nearly squeezed out of existence. Forgiving student loan debt would not only provide for a sustained economic stimulus over the course of the next 20-30 years by allowing educated Americans to use the money productively – rather than have to spend it on repaying several times the amount they borrowed to obtain a degree that no longer has the same value it once did. That would not only grow the economy, but it would also serve as a reaffirmation that an education is actually worth pursuing.

The American taxpayers bailed out Wall Street for their recklessness. It's time for Wall Street to do right by the American people who did absolutely nothing wrong, but who feel punished every day.

7--The Petition: "We petition the obama administration to:
Forgive Student Loan Debt to Stimulate the Economy and Usher in a New Era of Innovation, Entrepreneurship and Prosperity

Forgiving student loan debt would provide an immediate jolt to the economy by putting hundreds and, in some cases, thousands of extra dollars into the hands of people who WILL spend it - not just once, but each and every month thereafter - freeing them up to invest, buy homes, start businesses and families. This past year, total student loan debt finally surpassed total credit card debt in America, and is on track to exceed $1 TRILLION within the next year. Student loans themselves are responsible for tuition rates that have soared by 439% since 1982 and for saddling entire generations of educated Americans with intractable levels of student loan debt from which there is, seemingly, no escape. Relieve them of this burden and the middle class WILL rebuild this economy from the bottom-up!

8--Greece’s new army of the homeless, Reuters

Excerpt: As part of ideas to highlight the story that has dominated headlines for the past two years, I wanted to illustrate the emerging problem of homelessness in a country which has seen a rise in the number of homeless by 20-25 percent in the last two years alone – a staggering rise in a country where adult children live with their parents, in some cases until the day they get married, and pensions traditionally go to support young families.

Athens is the country’s largest city with an estimated population of five million and where the homeless problem is much more visible than anywhere else. Even its city center, a top tourist spot, sees dozens of homeless people having made building entrances and shop fronts their new home. Sleeping bags and cardboard boxes piled against walls, a few shopping bags of clothes and food their only belongings.

Homelessness has now permeated all genders, races, ethnic backgrounds and social classes

The large number has forced shelters to restrict people to a few nights stay before making way for new people. Many of those who are getting a hot meal or just a night sleep in the shelters, are still stunned by how fast their lives changed. One of them said he could not believe how quickly it happened, how he went from a homeowner with a job as a chef to a homeless person cooking in such a shelter. “We are all potentially homeless,” he said.

9--More Important than Historical Statistics--Private Debt Decline, Comstock Partners

Excerpt: It is our opinion that the accumulation of debt (usually accompanied by inflation) and the liquidation of debt (usually accompanied by deflation) are the most important statistics we should monitor for the direction of the economy and ultimately the stock market. We believe the private debt decline that has already started will continue, and be led by the consumers who are reigning in their spending habits, saving more, and paying off (or defaulting on) their enormous debt. Although it might seem that deleveraging would be beneficial for our economy, almost certainly any decline from present debt levels will not be "orderly" and consumer demand will contract sharply....

Excerpt:History of Inflations and Deflations or Accumulations and Liquidations of Debt

We do not think that these studies and economic releases are as relevant as what is going on in the inflation vs. deflation battle that has taken place over the past 100 years. This country has gone through only one period of time that is comparable to what is taking place presently. We are talking about how extreme our total debt relative to GDP has reached. Our total debt rose to about 260% of GDP during the Great Depression at its peak before collapsing. The private debt was liquidated during the 1930s as deflation took hold and the country suffered more than at any time since the Civil War. Our government debt started rising sharply, as you would expect, during World War II, and winning that war gave us the will to pay down much of the debt built up during the war. Our culture and way of living stayed pretty tame for many years after the inflation and deflation of the Great Depression. You have to remember that we paid a large portion of our home purchase prices at that time, and didn't have credit cards that we could abuse.

However, starting in the early 1980s and coincidental with the start of "Star Wars" our total debt relative to GDP started growing faster. In the 1990s the growth rate of our debt relative to GDP accelerated as we bought more goods and services than we needed. Many of U.S. consumers felt invulnerable as the stock market delivered record returns as the valuation of dot com stocks rose to 245 times earnings, and the S&P rose to over 32 times earnings (over 50% more than at prior peaks).

The stock market broke in the year 2000 and we believed that the debt build up would finally peak and decline with the stock market as the total debt to GDP reached the same level as the peak in the Great Depression of 260%. We believe that if the powers that were in charge at the time just allowed the free market to work, the debt levels would have declined to levels that could have been manageable as the consumers rebuilt their balance sheets. Instead, they tried to control the decline by lowering Fed Funds to 1% in mid 2003 and started a housing bubble that coincided with another stock market bubble. Actually their interference was responsible for growing the debt at the highest rate in all of U.S.

history. This is when total debt more than doubled by rising from $26 trillion in 2000 to almost $53 trillion in 2008, as both public and private debt skyrocketed. Private non-financial debt rose from $17.5 tn. to 36.4 tn. and public debt (including State and Local) rose from $7.2 tn. to $12.3 tn. As we expected, the public debt continued to grow from 2008 to present, rising to about $17.8 tn. now (this counts Government debt used to replace the Social Security fund that was confiscated, but doesn't count the implied guarantees of our government of institutions like Fannie Mae and Freddie Mac).

The Government Debt rose over $5.5 trillion since 2008, but the Private Debt declined by close to $5 trillion during the same period of time. This is the first time since the Great Depression that private debt declined at all-even a dime. A significant part of Private Debt came from Consumer Debt where the revolving and credit market debt declined about $140 billion (from $2.6 tn. to $2.45 tn. ) and the total household debt declined from $14 tn. to $13.3 tn. The Total Credit Market Debt declined only about $500 bn. and since the Federal Debt has increased by $4.2 trillion since 2009, it is clear that the total Private Debt decreased by close to $5 trillion since the beginning of 2009.....

We find it incredible that there was not one quarterly decline in household debt since 1952 (as far back as we could find data) until the third quarter of 2008 from where we've had 12 consecutive quarterly declines. We didn't even have one quarter of decline during the worst recessions since the Great Depression (up until the recent Financial Crises in 2008) in 1973-74 and 1981-82-- NOT ONE!! During the period from the year 2000 to 2008 household debt rose from 68% of GDP to 100% of GDP. But, since the 3rd quarter of 2008 we had 12 consecutive quarterly declines as total household debt declined by almost $1 tn.
Now that the credit binge has ended, we expect consumer demand to continue declining. As the consumer continues to retrench, we expect the household debt to decline below $10 tn. from $13.3 tn. now. With the deprivation of this consumption power which has been the backbone of the U.S. economy for the past 75 years, the economy can be expected to enter a double dip recession.

10--How Far Should Consumers Unwind Debt?, New York Times

Excerpt: In an article today, Tara Siegel Bernard and I examined whether the Fed’s announcement that it would keep credit cheap for two more years would inspire more people to borrow and spend.

Aside from consumer confidence, which is decidedly shaky, a crucial underlying factor holding back borrowing is that families are still paying off debt accumulated during the boom, when credit was easy and people treated their homes like big A.T.M.’s.

According to an analysis from Moody’s Analytics, total household debt peaked in August 2008 at $12.41 trillion and has come down by about $1.2 trillion.

As a proportion of gross domestic product, household debt peaked at 99.5 percent in the first quarter of 2009, and has come down to just under 90 percent.

Economists, who talk about the “deleveraging” process, say that debt still has a way to come down before the economy will return to full health. Just how far it needs to come down, though, is difficult to say.
As recently as 2000, household debt was less than 70 percent of G.D.P., and in 1990 it was around 60 percent.

Kenneth S. Rogoff, a professor of economics at Harvard University and the co-author, with Carmen M. Reinhart, of “This Time Is Different,” a history of financial crises, has repeatedly cautioned that this recovery would take longer than most other recoveries because this recession was caused by a debt-fueled financial crisis.

But even Mr. Rogoff does not have a specific target in mind for how far debt has to decline before households will feel comfortable adding debt again.

It may not have to go as low as it has been in previous decades, he said, because “financial markets deepened and became more sophisticated, and interest rates have been coming down, which allows households to carry higher debt,” Mr. Rogoff said.

He said that studies of financial crises outside the United States have shown that economies generally retrace their steps — in other words, if the ratio of household debt to G.D.P. doubled during the boom that preceded the bust, then the ratio needs to half again in order for the economy to get back to normal consumption patterns.

Whether that would be the case in the United States, Mr. Rogoff said, “I’m hesitant to say.” But, he added, “the overhang of debt really is the major problem for policy makers.” Mr. Rogoff suggests a mix of forgiving some of the housing related debt (perhaps in exchange for homeowners’ giving up gains from future appreciation in their home values) and pursuing a mild inflationary policy.

11--The banks move in, MSNBC

Excerpt: ...a report by an interfaith group in St. Paul, Minn., found that foreclosures had disproportionately affected low income and poor communities in the city, NBC station KARE reported Wednesday.

The group, ISAIAH, found three of St. Paul's low-income neighborhoods saw the biggest drop in housing values in the city over the last five years.
The neighborhoods of Dayton's Bluff and Payne Phalen on the east side, and Thomas Dale — also known as Frogtown — have seen home values drop about 50 percent since 2006. That's almost double the drop in the more affluent Mac-Groveland, Highland and St Anthony Park neighborhoods.

Racial disparities

The report was titled "Widening the Gap: How the Housing Crisis Deepened Racial Disparities in St. Paul and How to Fix it."

Kate Hess Pace, ISAIAH organizer, said low-income and minority neighborhoods were more likely to be targeted for risky subprime mortgages and the instances of foreclosure was more severe in these communities.
"It's actually been widening disparities between people of color and whites in terms of how it's impacted neighborhoods, home value, the amount of vacant homes and generational wealth," Pace said.

"We've got vacant houses that are sitting there," Jill Henricksen, director of the Greater Frogtown Community Development Corporation, added. "They are being broken into. Garbage is being dumped. We are seeing an increase in prostitution. We are seeing an increase in theft. All kinds of things around these properties."

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