Monday, January 14, 2013

Today's links

1--Japan voters back PM Abe's efforts to spur growth, beat deflation, Reuters

2--We won’t sell our healthcare’: Madrid rallies against privatized medical, RT

3---The inspiring heroism of Aaron Swartz, Guardian

The internet freedom activist committed suicide on Friday at age 26, but his life was driven by courage and passion
The major cabinet selections announced by President Barack Obama point to the reactionary character of the policies he will pursue in his second term. His administration will be committed to slashing public spending on programs like Social Security, Medicare and Medicaid while it escalates imperialist violence in the Middle East, Central Asia, Africa and other parts of the world.

The two most significant nominations of the past ten days have been John Brennan for director of the Central Intelligence Agency and Jacob Lew for secretary of the treasury. Both are top Obama aides—Brennan is deputy national security adviser for counterterrorism, Lew is the president’s chief of staff—and will leave the White House to take up two of the most powerful positions in government.
The concentration of power within an ever-narrower circle of loyalists is the hallmark of a regime that increasingly operates as a law unto itself. In both foreign policy and domestic policy, the Obama administration seeks to expand the sphere of executive action at the expense of the legislature, a process that continues from administration to administration, Democrat and Republican alike, as American democracy continues to erode.

Brennan is the personification of the foreign policy of the Obama administration, which relies more and more on assassination by drone missiles and Special Forces operations. ....

Lew’s assumption of the top role at Treasury cements the return to status quo ante for Wall Street, in the fifth year since the financial crash. Profits, stock prices and CEO pay have all returned to the stratospheric levels that prevailed before the crash—while the jobs and living standards of working people remain at near-Depression levels.

Not a single prominent Wall Street figure has been jailed or even tried for the colossal destruction caused by the crash. Now a former banker has been placed in charge of the US government agency with the principal responsibility for managing federal finances.

Lew is not, however, primarily a Wall Street executive. The bulk of his career has been spent in government, particularly in overseeing the federal budget and spending on social programs. He is identified with cuts in entitlement programs going back to 1983, when he was a junior figure in the office of House Speaker Tip O’Neill, devising cuts in Social Security in talks with the Reagan administration.

5---US Housing 2013; The Hangover, Mark Hanson

 There is absolutely no doubt that the unprecedented 5.25% mid-year 2011 to 3.5% mid-year 2012 Fed induced plunge in mortgage rates had a positive impact on refi volume, consumer cash-flow, house sales, investor housing demand, and a thousand other things...

The overarching problem in resi housing is that it takes massive direct stimulus in order for it to respond. For example, we saw conditions similar to what we are seeing today off the 2009/10 Home Buyer Tax Credit. Now, 6-years after housing rolled over the sector to responding to unprecedented rates stimulus and the Federal / State Gov’t and banks’ national supply suppression efforts vis a’ vi mods, workouts, new laws, and outright delays. This time around the sector only responded after they pushed mortgage rates to levels that made it prohibitive NOT to borrow and buy and inventory to levels not seen in a decade. They literally had to eradicate foreclosures and re-lever millions of bad borrowers into more exotic and toxic loans than from which they defaulted from in the first place through ‘modifications and workouts’ in order to set a stage in which housing would not drop.
So in short, we have a housing market almost exclusively dependent on rates stimulus and supply suppression...

The Bottom Line
The 2012 stimulus and supply deprived housing trade is now in the books. Thinking 2013 can outperform is extremely wishful. In my coverage universe I must rather press our China bounce related bets than anything related to US housing or the US consumer for that matter.

6---Hubris, greater fool

In Toronto, of course, sales were down 19.5% in December from the same month a year earlier, while 2012 as a whole saw just a 4% drop from 2011. But worrisome was the fact sales declined on a year-over-year basis every month since about May. Meanwhile in the last quarter of the year condo deals crashed by 23%.

Prices? Up on the year, but also declining consistently after last Spring’s bidding-war frenzy – now regarded as probably the hormonal top of the market. For example the average 416 detached home topped out at more than $831,000 in April, yet finished the year at $722,393. Sure, prices fluctuate seasonally, but a 13% drop in eight months is more worthy of Cleveland than the Republic of Lamb.

Interestingly, this is consistent with what’s been happening in that other hotbed of housing horniness, Vancouver. Detached houses there also lost about 13% of their value between Easter and Christmas, with declining sales for each month and a 31% hollowing-out as the year ended. Coincidence? Maybe. But sales have also dropped in Montreal, Edmonton, Winnipeg and everywhere else local real estate boards say, “it’s different here!”

It isn’t, of course. The factors that led to this inevitable and foreseeable correction should have been evident to even realtors and economists. New mortgage rules kicked first-timers to the curb by shortening amortizations. Big banks were forced to stop giving away downpayments. And mortgage insurance was withdrawn from million-dollar homes (that alone was enough to kick Vancouver in the gut). So we’ve had an assault on all of those little condos – which are quickly

7---In Praise of Deficits, counterpunch

If we say that the government can run budget surpluses for 15 years, what we are ignoring is that this means the private sector will have to run deficits for 15 years—going into debt that totals trillions of dollars in order to allow the government to retire its debt. Again it is hard to see why households would be better off if they owed more debt, just so that the government would owe them less.....

What happened in the United States was that we had a very flexible and effective system of public transfer payments which rose rapidly in the crisis. Unemployment insurance, early retirement under social security, disability, lower tax collections, and then on top of that, the expansion package, the stimulus package, the Keynesian policy that came into effect very quickly. And these things broke the fall in incomes and preserved living standards to a very substantial degree.

The question is whether the US government can run deficits forever. The answer is emphatically “yes”, although this is very separate from the question of whether it should do so. But one thing that the President (and the deficit-phobic Congress) should bear in mind is this: If you look back to 1776, the federal budget has run a continuous deficit except for 7 short periods. The first 6 of those were followed by depressions—the last time was in 1929 which was followed by the Great Depression.

 The one exception was the Clinton budget surplus, which was followed (so far) only by a recession.
Why is that? By identity, budget surpluses suck income and wealth out of the private sector. This causes private spending to fall, leading to downsizing and unemployment. The only way around that is to run a trade or current account surplus.

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