Monday, April 9, 2012

Today's links

1--Prof Steve Keen: Will there be a Double Dip in the USA? Part Two, Video, you tube

2--Consumers Cut Credit-Card Debt, Add to Auto and Student Loans, WSJ

Excerpt: U.S. credit card debt fell for the second month in a row, a sign consumers could be trying to pare back on some expenses.

Revolving credit, which includes credit-card debt, fell a seasonally adjusted $2.21 billion in February to $798.64 billion, Federal Reserve data showed Friday. That follows a $2.95 billion decrease in January.

Still, overall consumer credit outstanding grew by $8.73 billion to $2.522 trillion. The rise followed big gains in November, December and January as consumers took on debt to buy cars and pay for education. Economists surveyed by Dow Jones Newswires had forecast a $12.00 billion increase.

Nonrevolving credit–which includes car loans and student loans–was up $10.94 billion, to $1.723 trillion.

The consumer-credit report doesn’t include numbers on home mortgages and other real-estate secured loans. But the Fed data offer important clues to behavior by consumers, whose spending helps propel the economy.

Consumer spending in February grew at its fastest pace since July, according to Commerce Department data, and consumer sentiment has been rising steadily in recent months despite high gasoline prices.

Still, income gains have been meager, a sign that Americans may struggle to sustain their recent spending.

3--The Top Short-Term Threat to Humanity: The Fuel Pools of Fukushima, Washington's blog

Excerpt: The Greatest Single Threat to Humanity: Fuel Pool Number 4

We noted days after the Japanese earthquake that the biggest threat was from the spent fuel rods in the fuel pool at Fukushima unit number 4, and not from the reactors themselves. See this and this.

We noted in February:

Scientists say that there is a 70% chance of a magnitude 7.0 earthquake hitting Fukushima this year, and a 98% chance within the next 3 years.

Given that nuclear expert Arnie Gundersen says that an earthquake of 7.0 or larger could cause the entire fuel pool structure collapse, it is urgent that everything humanly possible is done to stabilize the structure housing the fuel pools at reactor number 4.

Tepco is doing some construction at the building … it is a race against time under very difficult circumstances, and hopefully Tepco will win.

As AP points out:

The structural integrity of the damaged Unit 4 reactor building has long been a major concern among experts because a collapse of its spent fuel cooling pool could cause a disaster worse than the three reactor meltdowns.

***

Gundersen (who used to build spent fuel pools) explains that there is no protection surrounding the radioactive fuel in the pools. He warns that – if the fuel pools at reactor 4 collapse due to an earthquake – people should get out of Japan, and residents of the West Coast of America and Canada should shut all of their windows and stay inside for a while.

The fuel pool number 4 is apparently not in great shape, and there have already been countless earthquakes near the Fukushima region since the 9.0 earthquake last March....

The meltdown and unprecedented release of radiation that would ensue is the worst case scenario that then-Prime Minister Kan and other former officials have discussed in the past months. He warned during his speech at the World Economic Forum in Davos that such an accident would force the evacuation of the 35 million people in Tokyo, close half of Japan and compromise the nation’s sovereignty. Such a humanitarian and environmental catastrophe is unimaginable. Hiroshi Tasaka, a nuclear engineer and special adviser to Prime Minister Kan immediately following the crisis, said the crisis “just opened Pandora’s Box.”

The current Japanese government has not yet mentioned the looming disaster, ostensibly to not incite panic in the public. Nevertheless, action must be taken quickly. This website over the last year has published a running commentary from scientists explaining why Reactor 4 must be stabilized immediately, who might be able to accomplish such a task, and why the situation has largely gone unnoticed. We believe an independent, international team of structural engineers and other advisers must be assembled and deployed immediately. Mounting public pressure would force the Japanese government to take action. We hope these resources are helpful in educating the public about the crisis that we face....

Ambassador Murata’s letter says:

It is no exaggeration to say that the fate of Japan and the whole world depends on NO.4 reactor. This is confirmed by most reliable experts like Dr. Arnie Gundersen or Dr. Fumiaki Koide.

Anti-nuclear physician Dr. Helen Caldicott says that if fuel pool 4 collapses, she will evacuate her family from Boston and move them to the Southern Hemisphere. This is an especially dramatic statement given that the West Coast is much more directly in the path of Fukushima radiation than the East Coast.

4--Jobs Growth Is No Excuse to Kill the Recovery, Bloomberg

Excerpt: Today’s disappointing jobs report highlights an important point about the state of the U.S. recovery: It’s not so strong that the country’s politicians couldn’t kill it off.

Almost three years after it hit bottom in mid-2009, the economy has recently been showing signs of entering a virtuous cycle in which rising employment, consumer spending and business activity reinforce one another. Even with March’s relatively meager 120,000-job increase in nonfarm payrolls, the three-month average gain comes to about 212,000. That’s more than enough to make a dent in the unemployment rate, which fell to 8.2 percent in March from 8.3 percent in February.

If the strengthening trend persists, the U.S., which accounts for about a fifth of the planet’s economic activity, could become an engine of growth just in time to help offset a slowing in the rest of the world. Economists expect the euro area to suffer a recession this year as austerity measures bite. China’s government has lowered its growth target as it seeks to engineer a soft landing.

Still, as the latest employment report demonstrates, the U.S. isn’t out of the woods. We’ve seen false dawns before, and the recovery remains weak. The job growth in March fell far short of expectations, and a decline in the number of people looking for work drove the drop in the unemployment rate. Forecasters surveyed by Bloomberg News expect the economy to grow at an inflation-adjusted rate of just 2.2 percent this year and 2.4 percent in 2013, below what most consider to be its long-term potential. Payroll employment, at about 133 million, remains about 5 million short of its peak in December 2007.

Man-Made Obstacles

More important, the economy faces some daunting man-made obstacles. Under current law, the expiration of Bush-era tax cuts at the end of this year will add about $4 trillion to Americans’ tax bills over 10 years. An additional $1.2 trillion in automatic spending cuts could take effect as a result of last year’s debt-ceiling deal. At the same time, stimulus measures such as payroll-tax breaks and extended unemployment benefits are scheduled to end.

Much larger tax increases and spending cuts will eventually be needed to get the U.S. government’s long-term finances under control. But with the economy already operating well below capacity, and with the Federal Reserve’s ammunition running low, the risks of making such moves now are skewed heavily to the downside. A renewed slump could permanently stunt the economy’s growth as despondent businesses failed to invest in the future and the long-term unemployed dropped out of the labor force permanently.

By contrast, putting off the cuts -- or even engaging in more short-term fiscal stimulus -- could be a great investment. Costs are extremely low: Markets are willing to lend the U.S. government money for 10 years at an interest rate of only 2.2 percent. Meanwhile, the danger of falling into a spiral of self- perpetuating high unemployment makes the benefit of any added job creation particularly large. In a recent paper, economists J. Bradford DeLong of the University of California at Berkeley and Lawrence Summers of Harvard University estimated that in these unusual times, a temporary boost in government spending would actually reduce the U.S. debt burden, because the added tax revenue would outweigh the increase in debt-service costs.

We recognize that a new round of stimulus is a political nonstarter in this election year. At the very least, though, President Barack Obama and Congress should refrain from doing exactly the opposite of what is advisable. If they can muster the responsibility to make a deal before the end of the year that extends the Bush tax breaks in return for a postponement of spending cuts, they would greatly increase the recovery’s chances of survival.

5--Credit Card Borrowing Falls; Car Lending Is on the Rise, NY Times

Excerpt: The increase in borrowing was driven by an $11 billion increase in the category that includes mostly auto and student loans. Borrowing on credit cards fell by $2 billion, after a $3 billion decline in January.

Total consumer borrowing rose to a seasonally adjusted $2.52 trillion. The figure was nearly at prerecession levels and was up from a postrecession low point of $2.39 trillion reached in September 2010. Borrowing had tumbled for more than two years during and immediately after the recession.

Consumer borrowing rose by $18.6 billion in January, after similar gains in December and November. The gains for those three months were the largest in a decade.

A rise in borrowing could suggest that consumers are feeling more confident about the economy. However, few are comfortable enough to step up credit card use. Consumers carried $799 billion in credit card debt in February — 15 percent less than they held in December 2007, the first month of the recession.

6--Bankruptcy costs and America’s household debt crisis, VOX

Excerpt: In 2005, the US Bankruptcy Abuse Prevention and Consumer Protection Act raised the costs to households of filing for bankruptcy by 60%. While the law was designed to prevent abuse by wealthy debtors, this column presents evidence that the higher costs inhibit filings by financially distressed households who cannot afford the fees, adding “insult to injury for households that are already broke”.

Household bankruptcies in America increased steeply between 1980 and the mid-2000s, reaching an annual rate of 1.6 million filings in 2004 – representing 1.4% of all US households. In response to this trend, and because of substantial lobbying by the consumer credit industry, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005. The law was intended to prevent ‘abuse’ of the system by wealthy debtors by imposing a means test, mandatory credit counselling, and other new requirements on bankruptcy filers. These changes increased the costs of filing by 60%, from $921 to $1,477 (GAO 2008).

The Bankruptcy Abuse Act succeeded in reducing the number of bankruptcy filings. However, a number of studies have shown that the average income of filers increased after 2005 (Lawless et al 2008, Lindblad et al 2011), casting doubt over its effectiveness in curtailing abuse by wealthier debtors. The stricter filing requirements were also ill timed; the housing market collapse and economic recession likely increased the number of bankruptcies due to contingencies beyond a household’s control. Many Americans seeking bankruptcy relief as a result of foreclosure or job loss are now forced to pay the steep costs targeted at preventing abuse by the wealthy....

The recession has caught many households in a rising tide of unemployment and foreclosure, and high bankruptcy fees prevent them from obtaining much-needed relief.

There are many reasons to be troubled by today’s high bankruptcy rates – more than 1.3% of all US households filed in 2011. But we can only fix America’s bankruptcy problem by eliminating excessive consumer credit, not by adding insult to injury for households that are already broke.

7--Jobs Grow 172K Monthly January through March, Trim Tabs

Excerpt: Today, the BLS released its jobs report that showed the U.S. economy added only 120,000 new jobs. Since the consensus estimate was for 200,000 new jobs, itís probably a good thing markets are closed today in observance of the Good Friday holiday.

For months now we have been harping on the fact that the likely reason behind the big BLS job numbers in January and February was huge seasonal adjustments. Seasonal adjustments in January were nearly 2.2 million jobs, almost ten times the BLS January employment estimate and in February, the seasonal adjustment was 1.5 million jobs, more than six times the BLS February estimate. So now we come to March and the BLS seasonal adjustment is nearly half the February adjustment, actually 811,000 to be precise, and lo-and-behold the BLS employment estimate has come down out of the stratosphere to a more reasonable 120,000.

So before I go any further, letís talk about the impact of the payroll tax reduction on our data which we have discussed a previous video. But for those of you that missed that explanation, corporations were supposed to have adjusted their tax withholding schedules to account for the 2% payroll tax reduction by January 31, 2011. But, because the law was passed so late the previous year, a significant number of companies didnít make the change until February 2011. Because we use a year-over-year analysis technique, the delay in implementing the tax change depressed our January 2012 employment estimate, then inflated our February 2012 estimate. Our advice to our clients was to average employment gains over January and February. But because there is a chance that some of that volatility slopped over into early March, we are adding March into our employment average. So we believe its fair to say the average employment gain in January, February and March is 172,000 jobs per month

Whew, thatís a long winded way of saying, yes economic growth is positive, but remains sluggish. In fact, taking a longer view, wage and salary growth in Q1 2012 was an anemic 3.4% y-o-y, nearly unchanged from the 3.5% y-o-y growth rate in Q4 2011. In other words, economic growth has been anemic and mostly sideways since October 2011. In fact, current economic conditions feel eerily similar to the Springs of 2010 and 2011 when economic growth surged then fizzled until the Fedís announced their next round of monetary stimulus.


There is nothing in our economic crystal ball that says conditions are going to change anytime soon. Economic growth is likely to remain sluggish because of high unemployment, weak wage and salary growth barely above inflation, elevated fuel and energy prices, a lackluster housing market, and a European debt crisis that continues to simmer overseas with no end in sight.

Our worry is the markets have been pricing in more rapid economic growth and further rounds of quantitative easing from the Federal Reserve. If the Federal Reserve is serious about no further QEs, which we donít believe for a moment, then we arenít entirely sure what, if anything, is going to keep this market levitating.

8--March jobs report undercuts US recovery claims, WSWS

Excerpt: The labor force participation rate, a more accurate reflection of the jobs crisis, declined to 63.8 percent. Except for January’s 63.7 percent, the March figure was the lowest level since 1983. The share of the population with a job also fell, hitting 58.5 percent in March. This compares to 62.7 percent at the official start of the recession in December 2007 and is the lowest since the mid-1980s. (According to the government, the recession ended in June of 2009.)


Not only are there 12.7 million people counted by the government as unemployed, and nearly 23 million (14.5 percent) counted as underemployed (unemployed, working part-time but wanting a full-time job, or available for work but no longer looking), there is a growing number of long-term unemployed who are not counted in any of the government indices.

Over 40 percent of the unemployed in March—5.3 million people—had been looking for work for 27 weeks or longer. This compares to the previous record rate of long-term joblessness over the past six decades of 26 percent, in June of 1983. The average time out of work for those counted as unemployed was 39.4 weeks, a near record.

The March report also showed a decline in hours worked and workers’ earnings. Average weekly hours worked fell to 34.5 from 34.6, and average weekly earnings fell to $806.96 compared with $807.56 a month earlier.

Average hourly wages for production and non-supervisory workers increased by 3 cents in March, representing a 1.8 percent annualized growth rate over the last year. This is below the rate of inflation and far below pre-recession wage growth rates....

Making clear that the administration has no intention of doing anything to seriously address the jobs crisis, the director of the White House National Economic Council, Gene Sperling, said, “The economy’s on a much better trajectory than it was when the president came to office and we just have to keep at the policies and keep doing the things that are helping the economy recover.”

What the administration and both corporate-controlled political parties are, in fact, doing is using the supposed “recovery” as a pretext for slashing unemployment benefits. This is being done to help big business use mass unemployment to gut the wages, benefits and working conditions of the working class. Last week Georgia became the latest state to reduce the duration of jobless benefits, cutting it from 26 weeks to between 14 and 20 weeks. It joined ten other states that have cut eligibility for jobless pay or the duration of benefits.

In February, the White House and congressional Democrats struck a deal with the Republicans to slash the duration of federal extended unemployment benefits, reducing it from 99 weeks to as low as 63 weeks, depending on the jobless levels of individual states.

The modest increase that has taken place in manufacturing jobs is based almost entirely on the destruction of wages and benefits. US auto companies have carried out some hiring and returned to profitability following the halving of wages and gutting of benefits for newly hired workers imposed, with the support of the United Auto Workers union, by Obama’s Auto Task Force in 2009. This set the stage for a massive assault on wages across the economy, with workers frequently forced to accept new jobs paying half the wages of the jobs they lost.

At the same, with complete cynicism, Obama continues to extend windfalls to business in the name of “job-creation.” On Thursday, the day before the jobs report, Obama signed the so-called JOBS Act at a White House ceremony attended by leading Republican legislators, who joined with the Democrats in passing the measure. The Jump-Start Our Business Startup (JOBS) Act does not create a single job. Instead, it rolls back financial reforms that were enacted following the Enron debacle a decade ago, making it easier for banks and speculators to swindle investors and the public.

Following the sweetheart settlement engineered by the Obama administration in February with five major banks guilty of wholesale mortgage-related fraud, the banks are preparing to sharply increase the rate of home foreclosures. “I would put money on 2012 being a bigger year for foreclosures than 2010,” Mark Seifert, the head of a counseling group in Ohio, told the Washington Post.


9--A Dose Of Socialism Could Save Our States - State Sponsored, Single Payer Healthcare Would Bring In Business & Jobs, Forbes

Excerpt: According to a Gallup Poll out this week, 48 percent of small business owners who were polled said that their concern over healthcare costs is keeping them from hiring new employees.

That can’t be good.

Now, how often do we hear that the answer to the severely stressed financial circumstances of almost every state in the nation is to create a friendly business environment that will lure employers into the state and solve all the budget problems?

While state governments typically attempt to respond to the challenge of attracting business by lowering taxes, offering rebate deals to companies willing to relocate while tossing in some additional unimaginative ‘goodie’ packages that only mildly tempt business and eventually run out of steam, might there not be a better, more enduring carrot to be dangled before the eyes of business, both large and small?

In what strikes me as the greatest combination since chocolate met peanut butter, it makes nothing but dollars and sense for clever state governments to shift to a single-payer state healthcare system as the key driver for attracting business to their struggling domains.

Consider some of the substantial benefits to business in such an approach, as highlighted by the Business Coalition For Single Payer Healthcare:

•Eliminate health care benefits and reduce their labor costs by 10 – 12 %

•Cut workers’ compensation by up to 50%

•Become more competitive with foreign products

•Eliminate health care benefits management costs and related labor negotiations

10--Euro Was Flawed at Birth and Should Break Apart Now, Bloomberg

Excerpt: Artificially Competitive

All these symptoms of the euro’s poor design are linked. Wage suppression in Germany and the Netherlands has created artificial cost competitiveness, boosting exports to, and exacerbating inflation in, Mediterranean Europe. Lower wages in Northern Europe, meanwhile, have ensured weak demand for imports from the South. The resulting trade surpluses enjoyed by Germany and the Netherlands were, and will be, wastefully invested in such assets as U.S. subprime-mortgage paper and Greek government bonds.

In the future, the euro can survive only if these surpluses are given away as unrequited transfers -- more or less what is happening now, in the form of bailouts. With 2012-13 prospects for global growth much weaker than in 2010-11, dependence on the German “export machine” will blight the whole European economy, heightening the malignant effects of the euro.

To prevent a meltdown, the ECB has engaged in unprecedented and dubious practices to expand the euro system’s central-bank balance sheet, accepting junk collateral against the provision of banking liquidity. The risks are increasingly confined to the central bank of the host country, which may make future exits from the euro easier. But liquidity provision will not stop fiscal tightening from deepening recessions in Mediterranean Europe, widening deficits and debt ratios, and threatening banking crises

Most support for deficit countries so far has been indirect, coming via the ECB, the European Financial Stability Facility and the International Monetary Fund, but it’s likely to become more explicit in the future. And the totals are large. Taking care of the virtually worthless debts of Greece and Portugal, and the budget deficits of Italy and Spain over the next four years could amount to a total of 1.25 trillion euros. If Italy and Spain additionally have to be helped to refinance maturing bonds issued in the past, this cost may double. That would threaten the financial position of some of the core euro- area countries -- including downgrades of their credit ratings

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