Sunday, June 24, 2012

Today's links

1--Vatican hires Fox News journo for image makeover, RT

The Vatican has turned to a Fox News reporter for help to improve its relations with the media amid communications blunders and a leaks scandal. The Holy See hired the Channel’s Rome correspondent for the position of senior communications adviser.

­The TV journalist Greg Burke is also a member of the Opus Dei movement, described by Dan Brown in his “The Da Vinci Code” as a “secretive, powerful and murderous sect whose members whip themselves bloody.” The best-selling book portrays the sect as being at the root of an international Catholic conspiracy. Burk said he didn't know what, if any, role his membership in Opus Dei played.

Burke, Fox's Rome-based correspondent for Europe and the Middle East, will leave the channel and assume the new post of senior communications adviser to the Secretariat of State, the Vatican’s key department responsible for all political and diplomatic functions.

His role will be similar to that of a communications adviser in the White House.

``You're shaping the message, you're molding the message, and you're trying to make sure everyone remains on-message. And that's tough,'' Burke said in a phone interview with the Associated Press.

2--Koo on German bubbles, FT Alphaville
In 2005, I told a senior ECB official that it was unfair to force other countries to rescue Germany by boosting their economies with loose monetary policy without requiring Germany to administer fiscal stimulus, when it was Germany that had become so deeply overextended in the bubble. The official responded that that is what a unified currency means: because Germany could not be granted an exception on fiscal stimulus, the only option was to lift the entire region with monetary policy.

In other words the ECB is at fault for blowing bubbles, helped by the framework of fiscal deficit (dis)allowance....
According to Koo, a balance sheet recession struck the German economy. As Germans increased savings, aggregate demand decreased. With fiscal policy somewhat constrained by the Stability and Growth Pact (not really, but a little), the ECB had to step in (our emphasis)...

Germany’s actual fiscal deficits modestly exceeded that threshold on several occasions, but the resulting fiscal stimulus was far from sufficient to prop up the economy. The ECB therefore took its policy rate down from 4.75% in 2001 to a postwar low of 2% in 2003 in a bid to rescue the eurozone’s largest economy.

But those ultra-low rates still had little impact on Germany, where balance sheet problems were forcing businesses and households to minimize debt. The money supply grew very slowly, and house prices continued to fall. Naturally there was only minimal inflation in wages or prices.

The countries of southern Europe, which had not participated in the IT bubble, enjoyed strong economies and robust private sector demand for funds at the time. The ECB’s 2% policy rate therefore led to sharp growth in the money supply, which in turn fueled economic expansions and housing bubbles.

In short, the ECB’s ultra-low policy rate had little impact in Germany, which was suffering from a balance sheet recession, but it was too low for other countries in the eurozone, resulting in widely divergent rates of inflation....

Anyway, back to Koo (our emphasis):

In other words, there would have been no need for such dramatic easing by the ECB—and hence no reason for the competitiveness gap with the rest of the eurozone to widen to current levels—if Germany had used fiscal stimulus to address its balance sheet recession.

The creators of the Maastricht Treaty made no provision for balance sheet recessions when drawing up the document, and today’s “competitiveness problem” is solely attributable to the Treaty’s 3% cap on fiscal deficits, which placed unreasonable demands on ECB monetary policy during this type of recessions. The countries of southern Europe are not to blame.

3--New Housing Crisis: Not Enough to Buy, CNBC

Sales of existing homes declined in May, according to a new report from the National Association of Realtors, not just because the overall housing market is struggling, but because there are simply not enough homes to buy.

There are currently 2.49 million for sale, a drop of 20 percent from a year ago. To make matters worse, supply is lowest on the low end, where so much of the investor activity has been over the past several years.

This lack of supply has seriously skewed the readings on home prices for the second straight month.

The median price of an existing home, as reported by the Realtors, rose 7.9 percent in May annually, but NAR chief economist Lawrence Yun was quick to point out that this does not mean the average home owner gained that much equity; it is simply a big shift in the type of home that is selling. Sales of homes priced under $100,000 dropped two percent from a year ago, while sales of homes priced between $250,000 and $500,000 shot up nearly 29 percent (though still at low volumes historically). Again, this is due to lack of supply on the low end, specifically distressed homes.

While there are still plenty of delinquent mortgages and homes in the foreclosure process, 5.57 million according to a new report from Lender Processing Services, the big bank servicers are still trying to go back and modify many of these loans. There is also still a huge backlog of foreclosures in judicial states like New Jersey, Florida and New York. Inventories of foreclosed properties in non-judicial states (where you don’t need a judge in the foreclosure process), like Arizona, have dropped to under a three-month supply.

Realtors say they did not see the usual spring bump in supply, as fewer regular homeowners put their homes on the market this year. The big question is, why not? Mortgage rates just hit yet another record low at 3.66 percent on the 30-year fixed, according to Freddie Mac. Home prices are stabilizing, if not gaining. Low supply should be a signal to homeowners that they could possibly get a bidding war. Still, nothing....

Fear is clearly a factor, as is negative equity. Between 11 and 12 million borrowers still owe more on their homes than they can sell them for, and many more borrowers in a near negative equity position; that means they can’t get enough equity out of their homes to cover the Realtor fees and the moving costs, nor to put down on a new home. That’s why the market is ripe for first time buyers, but they are not stepping up either, at just 34 percent of purchases. In a normal market, they would make up 45 percent. That, again, is part fear, but largely tight credit.

Mortgages may be cheap, but they are not easy.

The supply situation has gotten so bad in Northern Virginia that the Realtors there launched a new campaign this week titled, “Ask Me,” trying to get potential sellers to contact agents to find out, “Is it the right time for me to sell or buy a home?”

The Northern Virginia Association of Realtors, in the release, claims there is less than 2 months’ supply of available homes for sale in the market, a 37 percent drop from a year ago. Unemployment is trending down, and sellers have been able to get 97 percent of their list price, according to NVAR. The Realtors there are literally begging for more supply.

This supply situation proves just how tenuous and unique the current housing recovery is. It is heavily dependent on investor activity, not real, organic buying, selling and moving up. An investor purchase registers one sale, but a regular sale represents at least two, as the seller will likely buy another home, and so on and so on. Investors are certainly necessary to clear all the distress left over from the housing crash, but until we see not just more sales but more sellers out in the market, the housing recovery will remain in low gear.

4--Foreclosure Spike Is Positive Sign For Housing, CNBC

After months of declines, the foreclosure numbers are going up again.

Foreclosure starts, the first phase of the process, rose 9 percent in May month-to-month, the first increase in over two years, according to a new report from RealtyTrac. Bad news, right? Only if you are the one losing your home.

For the overall housing market, this is exactly what needs to happen to return to health. For hungry investors, it means more opportunity.

There are still millions of delinquent loans which will never "cure," and the sooner they get processed and sold, the better for home prices and home buyer confidence.

As the so-called, "shadow inventory" of distressed properties (seriously delinquent loans and bank owned homes yet unlisted) drops, down to 1.5 million units in the first three months of this year from 1.8 million a year ago, according to a new report from CoreLogic, the real inventory of potential homes for sale can stabilize and become a more dependable reading for buyers.

5--Chinese Data Mask Depth of Slowdown, NY Times

As the Chinese economy continues to sputter, prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of the troubles.

Record-setting mountains of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said.

Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country’s economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.

Indeed, officials in some cities and provinces are also overstating economic output, corporate revenue, corporate profits and tax receipts, the corporate executives and economists said. The officials do so by urging businesses to keep separate sets of books, showing improving business results and tax payments that do not exist. ...Manipulation of official statistics would also provide a clue why some wholesalers of consumer goods and construction materials say sales are now as dismal as in early 2009....

But a survey of Chinese manufacturing purchasing managers, released on Thursday by HSBC and Markit and conducted independently of the government, gave the second-gloomiest reading for their businesses since March 2009. Only November of last year was worse, when many small and medium-size businesses faced a brief but severe credit squeeze.

6--A global slide into depression, WSWS
It is now coming on close to four years since the collapse of Lehman Brothers in the autumn of 2008. The events of the past several months underscore two fundamental features of the crisis that emerged out of the subsequent financial collapse: 1) that it is systemic, not temporary; and 2) that it is global, affecting every country in the world. Globally integrated capitalism has created a globally integrated catastrophe.

This week, a series of economic figures were released confirming this analysis. Hopes from bourgeois commentators that the debt crisis in Europe could be offset by economic growth in Germany, or that weakness in the West as a whole could be counterbalanced by strong production in Asia, are being dashed with each passing day.

In fact, production in both Germany and China is contracting, in large part due to falling exports. According to Thursday’s figures, Germany’s composite purchasing managers index hit a three-year low, falling to 48.5 in June from 49.3 a month before. The HSBC China Manufacturing Purchasing Managers’ Index likewise fell to 48.1 in June, down from 48.4 in May. It was the eighth consecutive month of readings below 50, indicating contraction.

Other major “developing” economies are doing no better. India’s economy grew only 5.3 percent in the first quarter of the year, its lowest growth rate in nine years and down nearly four percentage points from 2011. The Brazilian Central Bank said last week that the country’s economy probably contracted in April compared with a year earlier, the first such yearly decline since late 2009.

In the United States, the center of world capitalism, the Obama administration is seeking to cover over with honeyed words what is clearly a sharp downturn, following a largely nonexistent “recovery.” The Federal Reserve reported this week that all the basic indicators of economic health have slowed since March, but proposed no serious measures in response....

Amidst the perplexity in ruling circles, and in the face of bitter and growing conflicts between the major powers, the bourgeoisie does have a conception of how it will respond to the crisis: with the most ruthless, determined and unending assault on the working class. It has reacted to each phase of the crisis with bank bailouts and ever more savage austerity, in effect orchestrating the largest upward transfer of wealth in modern history. The crisis is expressed in the most bitter class warfare.

What has happened to Greece shows the working class of the world what is being prepared in every country. A quarter of the workforce is unemployed—including more than half of the country’s youth—and Athens Wednesday saw thousands lining up for a distribution of free produce in a scene that evoked the Great Depression of the 1930s...

“The turbulence in world financial markets is the expression of not merely a conjunctural downturn, but rather a profound systemic disorder which is already destabilizing international politics.”

7--Obama’s jobs program: A laundry list of corporate handouts, WSWS

Three of Obama’s five proposals are simply tax handouts for businesses. One would create a ten percent income tax credit for companies that “create new jobs” in 2012, and the second would expand the current tax subsidy for “investments in clean energy manufacturing.”

Under the guise of helping homeowners facing foreclosures, Obama is proposing to “cut red tape in the mortgage market,” meaning further deregulation of the mortgage industry. This under conditions in which home prices continue to plummet, and hundreds of thousands of families are on the brink of foreclosure.

Only one of his proposals is not a hand-out to corporations. As such, it is predictably trivial: He called for a program that would put 20,000 military veterans to work on an environmental conservation program over five years and provide an “online training program” in “the fundamentals of small business ownership” for 10,000 veterans....

Far from seeing unemployment as a social evil, the administration, together with the corporations it represents, has used mass unemployment to drive down wages, slash benefits, and impose workplace speedups.

As a result, corporate profits are at their highest levels in history, while the labor force participation rate is down to its lowest level since the 1980s.

The ruling class has responded to the economic crisis with a ruthless and unprecedented attack on the social position of the working class. The Obama administration, working with the trade unions and their supporters, has been the spearhead of this attack.

Obama’s speech is a quintessential expression of the sclerotic and unrepresentative nature of the American political system. Amid mass unemployment and growing poverty, both Romney and Obama sing the praises of the profit system and propose no policies that are not direct handouts to major corporations and the super-rich.

8--Obama's economic “vision”, WSWS

Thus, he declared that programs “we can’t afford” had to be cut. His vision, he stressed, “despite what you hear from my opponent,” had “never been a vision about how government creates jobs”—meaning no government jobs or public works programs. The vision did, however, include “a federal government that is leaner and more efficient,” i.e., thousands of federal worker layoffs and cuts in pay and benefits.

Obama boasted of signing a law to cut the deficit by $2 trillion and “reduce our yearly domestic spending to its lowest level as a share of the economy in nearly 60 years.” What was America like 60 years ago? No Medicare, no Medicaid, no food stamps, no federal aid to education, no interstate highway system.

Obama’s vision turns out to be a nightmare scenario of social retrogression that amounts to a social counterrevolution.....

Obama, in particular, seems always to proceed from the assumption that the American people are infinitely gullible and suffer from collective amnesia. He relies as well on his well-placed confidence in the liberals and assorted “left” organizations around the Democratic Party to go along with the fraud.

However, the scale and pervasiveness of lying in the current election campaign, remarkable even by the degraded standards of American politics, cannot simply be attributed to the subjective, personal characteristics of individual politicians. It is more fundamentally an expression of the vast and unbridgeable chasm that has opened up between the entire political system and the overwhelming majority of the American people. Under conditions of the deepest economic crisis since the Great Depression, the capitalist two-party system is impervious to the needs and desires of the people and incapable of offering any policies to address their economic distress.

The completely sclerotic and corrupt character of the political system, staffed from top to bottom by bribed toadies of the corporate-financial aristocracy, reflects vast changes in the social and economic structure of the United States that have taken place since the last great breakdown of American and world capitalism in 1929.

In the Depression of the 1930s, Franklin D. Roosevelt, a representative of the American ruling class and unswerving defender of capitalism, presented himself as the protector of the common man and launched verbal attacks on the “economic royalists” of Wall Street far sharper than anything Obama would dare to utter. But Roosevelt was able to back up his rhetoric with significant social reforms, such as Social Security, unemployment insurance, public works programs and the Tennessee Valley Authority. While these were carefully designed not to threaten the basic interests of the capitalist class, they did improve the lot of millions of people.

Today, no such reforms are on offer, fundamentally because of the vast economic decline of American capitalism in the intervening decades. From the industrial workshop of the world and the rising global economic power, the United States has deteriorated to the status of the world’s biggest debtor, with a shrunken industrial base and an economy based largely on financial speculation and parasitism. The most important social expression of this decline has been a colossal growth of social inequality, making the US the most unequal industrialized country in the world.

The decay of America’s industrial base and its increasing turn to financial speculation and manipulation have also produced critical changes in the ruling class itself, leading to the supremacy of a financial elite which derives its vast and ever growing wealth not from the production of useful goods, but from quasi-criminal speculative activities that are divorced from and detrimental to real production.

9---Smells like Pope: His Holiness commissions custom-made perfume, RT
Pope Benedict XVI has commissioned a signature scent just for him. His Holiness’ custom-made eau de cologne will convey his love to nature, peace and tranquillity.

Famed Italian perfume maker Silvana Casoli preferred to keep the complete list of ingredients secret to prevent unauthorized copying of the Pope’s scent.

His Holiness, the Head of the Roman Catholic Church will be the only person to wear this fragrance. "I would not ever repeat the same perfume for another customer," Casoli told the Guardian newspaper.


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