Monday, September 3, 2012

Today's links

1--How Investors Are Skewing Home Price Recovery, Realty Check

2--Fed Moves Toward Open-Ended Bond Purchases to Satisfy Bernanke, Bloomberg

3--58 Percent Of The Jobs Being Created Are Low Paying Jobs, economic collapse

4--Student loan delinquencies soar, sober look

5----Putin orders defense industry modernization recalling pre-WWII advances, RT

6--Paper Criticizes Federal Reserve Approach, Suggests Radical Overhaul of Monetary Policy in the Crisis, Firedog Lake

7--U.S. Companies Brace for an Exit From the Euro by Greece, NY Times

8--Spain loses bank support, IFR

Spain is beginning to lose the support of its banks as last-resort buyers of government debt, with lenders selling out of their holdings at the fastest pace in more than two years in July, ratcheting up pressure on the European Central Bank to step in and put an end to the country’s burgeoning debt crisis.

The sales are a blow to Madrid, which was increasingly reliant on domestic banks to buy its debt after an exodus of foreign investors. Domestic lenders, under political pressure to support the sovereign, used cheap loans from the ECB to buy an extra €87bn of debt between December 2011 and March this year.

But that support has begun to ebb, with Spanish banks selling over €17bn of debt since then, according to ECB data. In July alone, domestic lenders reduced their holdings by €9.3bn, in part to meet an outflow of deposits, signalling that money is now too tight to support the sovereign.
Deposit run

Spanish banks are facing problems of their own. Data released last week showed that customers withdrew €74bn of deposits in July alone – equivalent to 4.7% of total deposits and the biggest monthly outflow since records began. Since June last year, clients have withdrawn €233bn (see chart), or 13% of the total then.

9--Wall Street’s War on the Cities, Michael Hudson, counterpunch

Unlike the U.S. federal government, most states and cities have constitutions that prevent them from running budget deficits. This means that when they cut property taxes, they either must borrow from the wealthy, or cut back employment and public services.

For many years they borrowed, paying tax-exempt interest to wealthy bondholders. But carrying charges on these have mounted to a point where they now look risky as the economy sinks into debt deflation. Cities are defaulting from California to Alabama. They cannot reverse course and restore taxes on property owners without causing more mortgage defaults and abandonments. Something has to give – so cities are scaling back public spending, downsizing their school systems and police forces, and selling off their assets to pay bondholders.

This has become the main cause of America’s rising unemployment, helping drive down consumer demand in a Keynesian nightmare. Less obvious are the devastating cuts occurring in health care, job training and other services, while tuition rates for public colleges and “participation fees” at high schools are soaring. School systems are crumbling like our roads as teachers are jettisoned on a scale not seen since the Great Depression.

Yet Wall Street strategists view this state and local budget squeeze as a godsend. As Rahm Emanuel has put matters, a crisis is too good an opportunity to waste – and the fiscal crisis gives creditors financial leverage to push through anti-labor policies and privatization grabs. The ground is being prepared for a neoliberal “cure”: cutting back pensions and health care, defaulting on pension promises to labor, and selling off the public sector, letting the new proprietors to put up tollbooths on everything from roads to schools. The new term of the moment is “rent extraction.”

10--Socialist sellout Hollande implements neoliberal agenda, WSWS

The French economy is in crisis. Growth is virtually stagnant, and the number of job seekers in August exceeded 3 million. Large corporations such as Peugeot Citroën have announced thousands of layoffs. Economists estimate that the government needs to save between 33-40 billion euros to meet the deficit limit of 3 percent to which Hollande is committed. This is unprecedented in the history of France and means massive cuts in social spending.

The Financial Times demands that Hollande “stop tending the Mr. Normal image and face up to being Mr. Unpopular.”

The Süddeutsche Zeitung calls upon the Socialist Party (PS) president to “subject the country to the type of shock treatment administered once before by the social democrat Gerhard Schröder in Germany.” In order to strengthen the international competitiveness of the French economy, Hollande must “significantly cut wage labor costs, free working hours and the labor market from strict rules, and reduce benefits.”

The significance of such calls is unequivocal. If Hollande does not follow them, the banks plan to visit upon France the same fate as Spain and Italy: financial speculators will descend upon the country and drive up the interest rates on its bonds to the point where the government capitulates to their dictates.

In fact such external pressures are not necessary. Hollande has already made clear that his government is quite prepared to implement the dictates of the financial markets on its own....

The financial markets will not rest until benefits and wages in Europe have reached international standards—i.e. until they have been slashed to the level of China and similar countries. Social-democratic parties are lining up to offer their services in this respect and are virtually indistinguishable from their conservative and free-market opponents. The same goes for the trade unions, which are working closely with the big corporations and their respective governments....

European and international capitalism cannot be reformed. The dictates of the financial markets can only be repulsed by a social revolution. This requires the mobilization of the European working class on the basis of a socialist program.

Bourgeois governments must be replaced by workers’ governments, pledged to expropriate the banks, hedge funds and large corporations, seize large fortunes and organize economic life to fulfill social needs rather than the profit needs of the financial markets. The European Union, a tool of the banks and corporations, must be replaced by the United Socialist States of Europe.

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