Thursday, October 20, 2011

Today's links

Today's Quote: "When injustice becomes law, resistance becomes duty." Che Guevara

1--Income Gain Distribution 1917-81; 82-2000; 2001-08, The Big Picture

Excerpt: Here is an interesting interactive tool that lets you look at different year ranges based upon societal gains in income, and how they got distributed.

Fascinating to see the shift over the past century:(Terrific graphs)

2--Number of the Week: Millions Cut Off Without Unemployment Extension, WSJ

Excerpt: 2,153,700: The number of jobless people currently receiving unemployment benefits who will lose them by Feb. 11, 2012 if an extension isn’t enacted by Congress by the end of the year.

While Republicans and Democrats continue to spar over the best way to inspire job creation, millions of recipients of unemployment benefits may get caught in the cross-fire.

In 2010, Congress approved an addition of up to 73 weeks of unemployment benefits backed by the federal government to the traditional 26 offered by the states. The duration of benefits varies from state-to-state, as regions with lower local unemployment rates get less than the full 73 weeks. The extension expires at the end of the year and President Barack Obama‘s jobs plan — shot down in the Senate this week — seeks to keep it going through 2012. The proposal doesn’t extend the maximum beyond 99 weeks, but it would allow those unemployed beyond 26 weeks to continue accessing the current program next year.

More than two million people eligible for benefits under the current plan would fall off the unemployment rolls by mid-February if no extension is passed, according to an estimate from the Labor Department.

Without an extension of benefits most people would stop receiving checks after six months. That comes as long-term unemployment is near its record high.

The number of Americans out of work for more than six months rose by 208,000 to 6.2 million in September, the Labor Department said last week. Some 44.6% of all of those who are unemployed have been sidelined for at least six months. Most of those individuals — nearly 4.4 million — have been out of work for a least a year.

In past recessions, unemployment extensions continued until the unemployment rate dropped below 7.5%. That’s a long way from the 9.1% rate recorded for September. Indeed, economists in the latest Wall Street Journal forecasting survey see the rate still elevated at 8.2% in December 2013.

Patience for such extended benefits is waning on Capitol Hill, though. That’s partly because policymakers launched extended benefits early in the downturn and have so far modified, extended and expanded it nine times. But it’s also due to the cost.

The Congressional Budget Office estimates that it would cost around $44 billion to extend benefits through 2012. That makes it a tough sell in a Congress looking to trim deficits.

3--Business Inventories Rise More Than Expected, WSJ

Excerpt: U.S. business inventories increased in August a little more than expected as sales slowed, according to data suggesting continued slow growth of the economy.

Inventories rose by 0.5% to a seasonally adjusted $1.536 trillion, after rising 0.5% in July, the Commerce Department said Friday.

Sales, meanwhile, increased 0.3% to a seasonally adjusted $1.201 trillion, slowing from a 0.7% gain in July.

4--Access to Necessities Falls to Recession Levels, WSJ

Excerpt: Americans’ access to basic necessities is at recession-level lows, according to a poll released by Gallup.

Gallup’s Basic Access Index score fell to 81.4 last month — on par with the 81.5 measured in February and March 2009.

The polling firm’s index looks at 13 basic necessities that includes health, food, shelter and safety from crime. Access to health care and food are down the most since September 2008, the depths of the recession. And more Americans are having trouble paying for food and shelter.

The report notes that the majority of Americans still have access to basic necessities, but there hasn’t been any evident recovery from a recession sparked decline. “Gallup’s global research finds Americans are now struggling more than Chinese to afford food, a reversal from 2008. If the worries about a double-dip recession come to fruition, even more Americans may start having problems meeting their basic needs,” said Elizabeth Mendes of Gallup.

5--Consumer Sentiment on Government Policy at All-Time Low, WSJ

Excerpt: Politicians may have to shoulder some blame for the unexpected drop in early October consumer sentiment.

Economists at J.P. Morgan write that the sentiment index regarding government economic policy fell seven points in October to an all-time low of 47, “one point lower than what was reported after the most intense stage of the debt ceiling debate in Washington.”

The economists say comments released along with the data suggest consumers less happy with the Fed, “though it is unclear if that means consumers think the Fed should be taking more or less action.”

6--France, Germany Divided on Debt-Crisis Solution Before Summit, Bloomberg

Excerpt: France and Germany wrangled over how to tackle Europe’s debt crisis a day before a finance ministers’ meeting in Brussels intended to set a common strategy on dealing with the turmoil.

With a summit of European leaders scheduled for two days later, a disagreement over the European Central Bank’s role in the rescue plan threatens to stymie progress on the banking and economic questions needed to deliver the comprehensive strategy demanded by global policy makers. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt last night failed to resolve differences. “We are still meeting,” he said as he departed.

French President Nicolas Sarkozy, whose wife was reportedly giving birth to his first daughter, jetted into Frankfurt to meet with officials as they attended an event to honor outgoing ECB President Jean-Claude Trichet. Sarkozy, German Chancellor Angela Merkel and International Monetary Fund Managing Director Christine Lagarde left the event at the Frankfurt Opera House without commenting.

“Even with the current problems in the negotiations, we expect that there will be at the end a compromise,” economists including Juergen Michels at Citigroup Inc. in London said in an e-mailed note. “However, with the participants having still very divergent views, the outcome probably will not be a credible, comprehensive package.”

7--How Have the Bankers Done in the Lesser Depression?, Grasping reality with both hands

Excerpt: Investors in Goldman Sachs have lost more than half their money since 2007: (chart)

Investors in Morgan Stanley have lost more than three-quarters of their money since 2007 (chart)

Investors in Citigroup have lost 93% of their money since 2007 (must see, eyepopping charts)

8--Fulfilling Free Trade's Promise, Economist's View

Excerpt: Richard Green:

For free trade to fulfill its promise, the national government must redistribute income: As a card-carrying economist, I like trade--overall, it potentially enriches countries that engage in it. The problem is the meaning of enrichment.

Trade theory says that trade enlarges the pie that people share. But among the most important contributions to trade theory is the Samuelson-Stolper Theorem, which says that relatively scarce factors of production see their returns fall when trade is introduced. In the context of an economy like the US, this means that low skilled workers see their wages fall in the presence of trade. The trajectory of wages in the US over the past 20 years or so are consistent with the predictions of Samuelson and Stolper.

NAFTA was sold to the US public as something that would make everyone better off. And it principle, it could have done so, had some of the gains to those who benefited from NAFTA been redistributed to those who lost as a result of it. Instead we got the NAFTA but not redistribution. This likely explains the widening disparity of incomes.

9-Things could actually get a lot worse, Economist

Excerpt: NEIL IRWIN has written a piece in the Washington Post today on the case for optimistic pessimism. Things are now so bad, he writes, that they're unlikely to get much worse. There's a narrative within the piece that seems right to me: essentially, that the fundamentals point toward a steady if slow recovery in the absence of another large shock, like a European collapse. Having said that, this seems like a fundamentally flawed view of the economy:

The U.S. economy has been through a lot in the past few months — an unprecedented downgrade of the government’s credit rating, a debt crisis in Europe that threatens to spread across the Atlantic, and a steep decline in financial markets. Yet most economic indicators have pointed to continued, albeit slow, growth.

It isn’t the resilience of the U.S. economy. Rather, it’s a sign of how bad things have already become. Many of the key sectors that usually cause economic contraction, including housing and durable goods such as automobiles, are already at such low levels that they don’t have much more room to fall.

Mr Irwin says that sectors like housing and durable goods production usually cause economic contraction. Now, it's not impossible for a contraction to occur in this fashion. A virus could strike all of America's carpenters dead, leading to a sudden halt in residential investment and a resulting decline in output. That would be a supply-side reduction in economic activity, and it would be a very unusual one indeed. That's not how America usually finds its way into recession.

Instead, America typically finds itself in recession because there is a drop in demand. There are lots of things that might trigger a demand shortfall....

We should keep the Depression foremost in our minds. When systematic policy error results in low demand, it's as likely that the error will be sustained or compounded as it is to be rectified. In such cases, every bottom is ephemeral, and there is no darkness that can't grow darker still.

10--The instability of inequality, Nouriel Roubini

Excerpt: The result is that free markets don’t generate enough final demand. In the US, for example, slashing labour costs has sharply reduced the share of labour income in GDP. With credit exhausted, the effects on aggregate demand of decades of redistribution of income and wealth - from labour to capital, from wages to profits, from poor to rich, and from households to corporate firms - have become severe, owing to the lower marginal propensity of firms/capital owners/rich households to spend.

The problem is not new. Karl Marx oversold socialism, but he was right in claiming that globalisation, unfettered financial capitalism, and redistribution of income and wealth from labour to capital could lead capitalism to self-destruct. As he argued, unregulated capitalism can lead to regular bouts of over-capacity, under-consumption, and the recurrence of destructive financial crises, fuelled by credit bubbles and asset-price booms and busts.

Even before the Great Depression, Europe’s enlightened “bourgeois” classes recognised that, to avoid revolution, workers’ rights needed to be protected, wage and labour conditions improved, and a welfare state created to redistribute wealth and finance public goods - education, health care, and a social safety net. The push towards a modern welfare state accelerated after the Great Depression, when the state took on the responsibility for macroeconomic stabilisation - a role that required the maintenance of a large middle class by widening the provision of public goods through progressive taxation of incomes and wealth and fostering economic opportunity for all.

Thus, the rise of the social-welfare state was a response (often of market-oriented liberal democracies) to the threat of popular revolutions, socialism, and communism as the frequency and severity of economic and financial crises increased. Three decades of relative social and economic stability then ensued, from the late 1940’s until the mid-1970’s, a period when inequality fell sharply and median incomes grew rapidly.

Some of the lessons about the need for prudential regulation of the financial system were lost in the Reagan-Thatcher era, when the appetite for massive deregulation was created in part by the flaws in Europe’s social-welfare model. Those flaws were reflected in yawning fiscal deficits, regulatory overkill, and a lack of economic dynamism that led to sclerotic growth then and the eurozone’s sovereign-debt crisis now.

But the laissez-faire Anglo-Saxon model has also now failed miserably. To stabilise market-oriented economies requires a return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of unregulated markets and the continental European model of deficit-driven welfare states. Even an alternative “Asian” growth model - if there really is one - has not prevented a rise in inequality in China, India, and elsewhere.

Any economic model that does not properly address inequality will eventually face a crisis of legitimacy. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, with social and political instability eventually harming long-term economic growth and welfare.

11--Study: FDA allowed oil-tainted seafood onto market, Raw Story

Excerpt: A peer-reviewed study released this week has concluded that the government’s safety testing methodologies for Gulf of Mexico seafood were insufficient to prevent oil-tainted animals from being sold in U.S. supermarkts.

Produced by the Natural Resources Defense Council (NRDC) and published in the journalEnvironmental Health Perspective, the study concludes that the Food and Drug Administration (FDA) used outdated risk assessment techniques when evaluating the safety of gulf seafood in the wake of the worst accidental oil spill in human history.

Ultimately, the FDA was responsible for allowing food with “10,000 times too much contamination” than should be permitted, the study’s authors said, failing to highlight the elevated risk to children and pregnant women....

“The sensory test employed by the FDA detects compounds that are volatile that have an odor; we’re detecting compounds that are low volatility and are very low odor,” Dr. William Sawyer, a toxicologist, told Raw Story in November 2010. “We found not only petroleum in the digestive tracts [of shrimp], but also in the edible portions of fish. We’ve collected shrimp, oysters and finned fish on their way to marketplace — we tested a good number of seafood samples and in 100 percent we found petroleum.”...

“Our findings add to a long list of evidence that FDA is overlooking the risks from chemical contaminants in food,” study co-author Miriam Rotkin-Ellman said in a media advisory. “We must not wait for people to get sick or cancer rates to rise, we need FDA to act now to protect the food supply.”

12--Colored Revolutions: A New Form of Regime Change, Made in the USA, Eva Golinger, Global Research

Excerpt: In 1983, the strategy of overthrowing inconvenient governments and calling it “democracy promotion” was born.

Through the creation of a series of quasi-private “foundations”, such as Albert Einstein Institute (AEI), National Endowment for Democracy (NED), International Republican Institute (IRI), National Democratic Institute (NDI), Freedom House and later the International Center for Non-Violent Conflict (ICNC), Washington began to filter funding and strategic aid to political parties and groups abroad that promoted US agenda in nations with insubordinate governments.

Behind all these “foundations” and “institutes” is the US Agency for Inter- national Development (USAID), the financial branch of the Department of State. Today, USAID has become a critical part of the security, intelligence and defense axis in Washington. In 2009, the Interagency Counterinsurgency Initiative became official doctrine in the US. Now, USAID is the principal entity that promotes the economic and strategic interests of the US across the globe as part of counterinsurgency operations. Its departments dedicated to transition initiatives, reconstruction, conflict management, economic development, governance and democracy are the main venues through which millions of dollars are filtered from Washington to political parties, NGOs, student organizations and movements that promote US agenda worldwide. Wherever a coup d’etat, a colored revolution or a regime change favorable to US interests occurs, USAID and its flow of dollars is there.

How Does a Colored Revolution Work?

The recipe is always the same. Student and youth movements lead the way with a fresh face, attracting others to join in as though it were the fashion, the cool thing to do. There’s always a logo, a color, a marketing strategy. In Serbia, the group OTPOR, which led the overthrow of Slobodan Milosevic, hit the streets with t-shirts, posters and flags boasting a fist in black and white, their symbol of resistance. In Ukraine, the logo remained the same, but the color changed to orange. In Georgia, it was a rose-colored fist, and in Venezuela, instead of the closed fist, the hands are open, in black and white, to add a little variety....

The strategy seeks to debilitate and disorganize the pillars of State power, neutralizing security forces and creating a sensation of chaos and instability. Colonel Robert Helvey, one of the founders of this strategy and a director at AEI, explained that the objective is not to destroy the armed forces and police, but rather “convert them” — convince them to leave the present government and “make them understand that there is a place for them in the government of tomorrow”....The colored revolutions are nothing more than the red, white and blue of US agencies, finding new and innovative ways to try and impose Empire’s agenda.

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