Sunday, November 11, 2012

Today's links

 

1--- A major shift in the global economy, Nick Beams, World Socialist Web Site

Over the past four years, the US Federal Reserve has sought to boost the finance houses and banks by pumping out endless supplies of ultra-cheap money, increasing the asset holdings of the Fed by around $2.5 trillion. But the adrenalin of financial stimulus is losing its effectiveness.

The policies of the Fed have been replicated by central banks around the world. The financial assets on their balance sheets have increased from around $6 trillion to $18 trillion, equivalent to just under one third of global gross domestic product. As financial journalist Satyajit Das recently noted: “[T]he global economy is addicted to monetary heroin,” with increasing doses “necessary for the patient to even function at all.”

Government debt levels have rapidly increased as private bank debt has been turned into public debt, with the indebtedness of 11 major nations rising from 381 percent of GDP in 2007 to 417 percent in 2012. The program of all capitalist governments is to recover these massive outlays in support of the banks through sweeping austerity programs directed at slashing social spending and impoverishing the working class.

When the crisis erupted, various financial commentators and media pundits claimed that China and other so-called “emerging markets” would be able to “decouple” from the major economies and provide new centres of growth for world capitalism.

And for a brief period, these illusions were sustained by the continuing growth of the Chinese economy, as the government’s spending measures and credit expansion—characterised by Goldman Sachs as the biggest stimulus package in economic history—fueled an investment boom. But the Chinese regime’s measures were predicated on the belief that the country’s export markets—above all in Europe and the US—would recover. That illusion has been well and truly shattered, and the inherent limits of the Chinese stimulus policy are clearly apparent.

According to David Pilling, the China correspondent of the Financial Times, the economic mood in China has “palpably darkened” in recent months. The Chinese growth rate has fallen for the past seven months and is now at its lowest level since 1999.

Such has been the extent of the investment boom, that it has been estimated that half of all China’s physical infrastructure has been built in the past six years. Economic growth based on investment spending comprising some 50 percent of GDP is inherently unsustainable, with some economic commentators openly speaking of the inevitability of a crisis.

The latest figures from the euro zone, an economic bloc comprising 20 percent of global GDP and larger than both the Chinese and US economies, are the clearest expression of global recessionary trends. This week, the European Commission revised its forecast for GDP growth next year down from 1 percent to just 0.1 percent, following an expected contraction of 0.4 percent for this year.

Significantly, the main reason for the downward revision was the downturn in the German economy, which is predicted to grow by only 0.8 percent next year compared to a previous forecast of 1.7 percent. Major sackings have been announced in key sectors of the German economy. Commenting on the figures, European Central Bank President Mario Draghi said that previously Germany had been insulated from the economic problems in the rest of the euro region, but that period was now ending.

Unemployment across Europe is expected to climb to more than 12 percent, meaning the depression-like conditions in Greece and Spain are going to spread across the continent.

As economic growth declines, financial instability throughout the euro zone will increase, posing the threat of a far-reaching global crisis if Greece, Spain or one of a number of other countries defaults on its loans. The problems are not confined to the so-called peripheral countries.

The outlook for German banks remains on “negative watch,” and there are continuing concerns over French banks. A major crisis has been averted so far only by the European Central Bank’s provision of $1 trillion to cash-strapped banks and its commitment to buy the bonds of highly indebted countries. But no amount of ECB cash can cover over the central problem—that major European banks and financial institutions face an insolvency, rather than a liquidity, crisis.

Faced with the ongoing breakdown of the global capitalist economy, the response of the ruling class the world over is to intensify its attacks on the working class. The re-elected Obama administration has made its first item of business the institution of sweeping spending cuts, above all to social security entitlements. In Europe, the austerity programs that have brought depression-like conditions to Spain and Greece are going to be intensified. And in China, the stimulus measures of the past four years have run into the brick wall of the global downturn.

The turn in the world economy poses decisive political challenges to the working class. The first step in meeting them is the recognition that the capitalist system has failed and there is not going to be a return to “normal” conditions.

The “new normal” is a return to the conditions of the Great Depression—war, mass unemployment and dictatorial forms of rule. This poses the necessity for the working class to initiate a political struggle for the overthrow of the historically outmoded profit system and the building of a planned socialist economy.

2--Witnesses reveal details of Kandahar massacre, RT

We are children! We are children!" was one victim's last phrase before being killed in a shooting spree as American Staff Sergeant Robert Bales left sixteen Afghan civilians dead, according to witness testimonies.
Seven Afghan witnesses from the Kandahar province testified over a live video link to the judge at a Washington State military courtroom. They recalled chilling details of the rampage, which claimed the lives of nine children and seven adults at two Afghan villages on March 11, 2012.
The witnesses recounted the identities of those who lived in the villages, listing those killed. The victims' bodies were buried quickly under Islamic tradition, and no forensic evidence was available to show the number killed.
The youngest witness was a thirteen-year-old Sadiquallah. He described being awakened by loud screams that an American had "killed our men." He then went to hide in a storage room with another boy, ditching behind the curtain. A bullet ricocheted off his head, fracturing his skull.
"I was hiding behind the curtains. A bullet hit me," Sadiquallah told the court. He also said the killer had a gun and a light, but he could not identify the man.

3---Food stamps surge to 47 million, zero hedge

4--Why is the world economy failing to recover?, Yanis Varoufakis

Since the 1970s, the United States began absorbing a large portion of the Rest of the World’s surplus industrial products. America’s net imports where, naturally, the net exports of surplus countries like Germany, Japan and China; their main source of demand. In turn, the profits earned by the surplus nations’ entrepreneurs were returned, daily to Wall Street, in search of higher payoff. Wall Street would then use this influx of foreign capital for three purposes: (a) to provide credit to American consumers, (b) as direct investment into US corporations and, of course, (c) to buy US Treasury Bills (i.e. to fund the American government deficits).

Central to this Global Surplus Recycling Mechanism, which I have likened to a Global Minotaur, were the two gargantuan deficits of the United States: the trade deficit and the federal government budget deficit. Without them, this book argued, the global circular flow of goods and capital (see diagram below) would not have ‘closed’, destabilising the global economy.

This recycling system broke down because Wall Street took advantage of its central position in it to build colossal pyramids of private money on the back of the net profits flowing into the United States from the Rest of the World. The process of private money minting by Wall Street’s banks, also known as financialisation, added much energy to the recycling scheme, as it oozed oodles of new financial vitality, thus fuelling an ever-accelerating level of demand within the United States, in Europe (whose banks soon jumped onto the private money-minting bandwagon) and Asia. Alas, it also brought about its demise.

5--Here's An Insane Chart Showing Just How Much The Fiscal Cliff Is Being Hyped, BI

6--F
alling homeownership rate and the housing market, sober look

Some readers have been asking how one can reconcile positive signs in the housing market with declining rates of homeownership. Indeed, homeownership is falling at an even faster pace than during the 08-10 period (chart below).

The explanation is that so far a great deal of net demand growth in housing has been in rental units. Households are putting a premium on mobility. This demand for rentals is in fact one of the factors supporting the housing market - for every renter there is a landlord who buys a home
7--17% of FHA loans delinquent in September, bailout coming, OC Housing
 
8--Direct government student loans exceed half a trillion; higher education costs out of control, sober look
 
The report on consumer credit from the Fed today showed another sharp increase in government financed student loans. The balance now exceeds half a trillion dollars, which is in addition to the student loans guaranteed (but not funded) by the federal government. Consumer credit is once again driven by this sector, as credit card balances actually declined.
 
9--Desperate for shelters, New York considers turning jail cells into homes, RT
 
10--Ecuador Says Charges About CIA Interference are Credible, prensa latina
 
11--Report: Mexican Cartel Bought Guns From U.S. Border Patrol, wired
 
12---Obama spells out austerity agenda for second term, WSWS
 
In his first public statement since election night, President Barack Obama said Friday that his main priority in the coming months will be to slash the federal budget deficit, primarily through major cuts in health care and other social programs.

Speaking from the White House, Obama announced plans to hold discussions next week with congressional leaders of both parties and business executives to work out a bipartisan agreement on budget cutting. In addition to austerity measures, the Democrats and Republicans are agreed on implementing a “comprehensive tax reform” that will benefit corporations and the wealthy at the expense of the majority of the population.

In the course of his brief remarks, Obama boasted of spending cuts implemented during his first term in office and pledged, in the name of “strengthening” Medicare and Medicaid, to cut even more from these programs.

“Last year, I worked with Democrats and Republicans to cut a trillion dollars worth of spending,” Obama said. “I intend to work with both parties to do more, and that includes making reforms that will bring down the cost of health care, so we can strengthen programs like Medicaid and Medicare for the long haul.”

To justify these measures, Obama cited the so-called “fiscal cliff”—a series of spending cuts and tax increases put in place by the administration and Congress last year and slated to take effect on January 1 unless a new plan to slash the deficit is enacted before then. The media and the political establishment are seeking to foster a crisis atmosphere over this manufactured deadline in order to push through deeply unpopular measures as quickly as possible, now that the elections are out of the way.

Under current law, on January 1 there will be a simultaneous expiration of all Bush-era tax cuts and the Obama payroll tax holiday, along with an automatic “sequestration” that will begin to cut federal discretionary spending, military as well as civilian, by hundreds of billions of dollars.
Obama said, “At the end of this year we face a series of deadlines that require us to make major decisions about how to pay our deficit down, decisions that will have a huge impact on both the economy and the middle class, both now and in the future.”

13--Color Revolutions: Argentina Next?, global research

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