Thursday, January 24, 2013

Today's links

1--Mali: the fastest blowback yet in this disastrous war on terror, Guardian

When it came to Libya, the blowback was much faster – and Mali took the impact. Nato's intervention in Libya's civil war nearly two years ago escalated the killing and ethnic cleansing, and played the decisive role in the overthrow of the Gaddafi regime. In the ensuing maelstrom, Tuareg people who had fought for Gaddafi went home to Mali and weapons caches flooded over the border.

Within a couple of months this had tipped longstanding demands for self-determination into armed rebellion – and then the takeover of northern Mali by Islamist fighters, some linked to al-Qaida. Foreign secretary William Hague acknowledged this week that Nato's Libyan intervention had "contributed" to Mali's war, but claimed the problem would have been worse without it.....

French intervention in Mali has now produced the fastest blowback yet in the war on terror. The groups that seized the In Imenas gas plant last week – reportedly with weapons supplied to Libya by France and Britain – insisted their action was taken in response to France's operation, Algeria's decision to open its airspace to the French and western looting of the country's natural resources....

All this is anyway about a good deal more than terrorism. Underlying the growing western military involvement in Africa – from the spread of American bases under the US Africa Command to France's resumption of its post-colonial habit of routine armed intervention – is a struggle for resources and strategic control, in the face of China's expanding economic role in the continent. In north and west Africa, that's not just about oil and gas, but also uranium in countries like Niger – and Mali. Terrorism has long since become a catch-all cover for legitimising aggressive war.

The idea that jihadists in Mali, or Somalia for that matter, pose an existential threat to Britain, France, the US or the wider world is utter nonsense. But the opening of a new front in the war on terror in north Africa and the Sahel, accompanied by another murderous drone campaign, is a potential disaster for the region and risks a new blowback beyond it.

The past decade has demonstrated beyond doubt that such interventions don't solve crises, let alone deal with the causes of terrorism, but deepen them and generate new conflicts

2---The Coming Storm:  $2 Trillion in CRE Loan Maturity Presents the Next Fiscal Cliff , Jerry Slusky

While a majority of America is keenly aware of the housing bubble, and at least somewhat familiar with the unraveling of the European Markets, little energy is being focused on what may very well be the nation’s next looming fiscal crisis: the large volume of commercial real estate debt maturing over the next seven years.

According to Trepp, a provider of CMBS analytics and data to the securities and investment management industry, there will be more than $2 trillion of commercial real estate loans maturing by 2017. It’s estimated that half of them are “underwater.” This of course means that fully $1 trillion in commercial real estate loans will mature without a clear refinancing strategy. These loans will not be refinanceable at existing debt levels, due to a decrease in underlying asset value, and today’s lending standards are much tighter than those of the middle 2000s, which further compounds the problem.


3--Stunning Crimes of the Big Banks: Worse than Your Wildest Imagination, washingtons blog

4---Quantitative Easing Benefits the Super-Elite … And Hurts the Little Guy and the American Economy, washingtons blog

The Fed is a perfect vehicle to transform bad assets into good. It is weakly overseen without an independent audit and thus is able to intermediate the transformation of bad, illiquid assets into money (and near money) and then back again into valuable financial assets, all done secretly and anonymously....

Immediately after the 2008 financial meltdown, the Fed laundered more than $2 trillion in worthless assets held on the balance sheets of private banks. According to a watered-down 2011 audit of the Fed by the Government Accountability Office (GAO), there have been $16 trillion in Fed bailouts to banks and corporations around the world since the financial meltdown in 2008. Since that report, Bloomberg has reported on an additional $9 trillion in secret, off-balance-sheet Fed transactions that the central bank refuses to discuss. Now, Ben Bernanke is ginning up assembly-line washing machines at the Fed with QE∞ to spin an opened-ended, $40-billion-monthly cleansing campaign to purchase worthless mortgage backed securities from banks at face value, which could run to an additional $1.3 trillion loan laundering accompanied by downscale resales.....

QE∞ is no mere financial Laundromat; it is a full-service loan laundry and downscale resale facility that not only cleans the banks’ balance sheets but also sterilizes the entire operation to prevent it from producing immediate price inflation. ....

After the Fed buys (at face value) and resells (at pennies on the dollar) the bad mortgage-backed securities with newly minted electronic digits that it places into the banks’ Federal Reserve accounts, it then sterilizes the entire operation to prevent the new money from transmitting the dread inflation virus. The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans". Lawrence Hunter, Forbes
http://www.forbes.com/sites/lawrencehunter/2012/10/29/are-federal-reserve-regulated-banks-laundering-dirty-money/

5---Dr Doom says quantitative easing will create zombie banks, firms and borrowers, Guardian

Nouriel Roubini said at Davos that central bankers risked saddling the economy with debt-burdened QE addicts
 
Nouriel Roubini, the economist dubbed "Dr Doom" for predicting the credit crunch, has sounded a stark warning about the long-term effects of relying on quantitative easing to keep crisis-hit western economies afloat.
At a lively debate in Davos, Roubini, who runs a New York-based consultancy, said central bankers risked saddling the economy with debt-burdened banks, businesses and consumers that should have been allowed to go bust.
"Over time, you get zombie banking, zombie corporates, zombie households, which is damaging in the long term," he said. The phrase "zombie banks" was coined in Japan, to describe insolvent lenders propped up by cheap cash....

However, Roubini argued that even if the policy was beneficial today, there could be unintended consequences if central bankers misjudged their "exit strategy". He was critical of the Federal Reserve's recent promise to keep buying bonds until unemployment sinks to 6.5%, for example, saying that policymakers may have misjudged how far the jobless rate can fall without sparking inflation

6---Government Spending is Down in the Obama Era, Mother Jones

The chart below has been making the rounds today, so I thought I'd colorize it and annotate it to drive home its point a little more clearly. Republicans like to say we have a spending problem, not a taxing problem, but the evidence doesn't back that up. Total government spending didn't go up much during the Clinton era, and it's actually declined during the Obama era. In the last two decades, it's only gone up significantly during the Bush era, the same era in which taxes were cut dramatically.

What we have isn't a spending problem. That's under control. What we have is a problem with Republicans not wanting to pay the bills they themselves were largely responsible for running up.

7---Bernanke Seen Pressing On With Stimulus Amid Debate on QE, Bloomberg

Federal Reserve Chairman Ben S. Bernanke and his fellow policy makers will probably forge ahead with their unprecedented bond buying when they meet next week, even as they pick up a debate that began in December on when to end the purchases.

The job market has yet to show the “substantial” gains Bernanke said he wants to see before halting asset purchases. Unemployment has persisted at 7.8 percent or higher since January 2009 while Bernanke held the main interest rate near zero and expanded the Fed’s assets to a record $2.97 trillion. Meanwhile, all 19 Federal Open Market Committee participants see no immediate threat from inflation, now at 1.4 percent.

The Fed chairman can count on the FOMC to endorse the current program to buy $45 billion in Treasury notes and $40 billion in mortgage bonds each month,

There’s a reasonably high bar to stopping the stimulus altogether,” he said. “We would expect that only to happen as the unemployment rate gets close to 7 percent.”
.

Near Zero

In its statement last month, the FOMC said it will keep rates near zero as long as the jobless rate is above 6.5 percent and inflation is forecast to be 2.5 percent or less. Previously policy makers said they would keep interest rates low through at least mid-2015.
The unemployment rate has been at 7.8 percent in three of the last four months.

8---Rising House Prices, Not Stocks, Make People Feel Wealthy, WSJ

To that end, the Federal Reserve is pursing a policy course deliberately aimed at driving up all manner of asset prices in hopes its actions will boost household spending to power better overall growth.

In the paper, the economists update their decade-old work, drawing on a wider and more up-to-date set of data ranging from 1975 to the second quarter of 2012. The broader information changes and clarifies what was once thought about the wealth effect’s influence.
There is “at best weak evidence of a link between stock market wealth and consumption,” the economists wrote. “In contrast, we do find strong evidence that variations in housing market wealth have important effects upon consumption,” they said.

“An increase in real housing wealth comparable to the rise between 2001 and 2005 would, over the four years, push up household spending by a total of about 4.3%,” the paper stated. Meanwhile, “a decrease in real housing wealth comparable to the crash which took place between 2005 and 2009 would lead to a drop of about 3.5%.”
This finding upends the old understanding that housing gains tended to push spending higher by a wider margin that home price declines depressed spending, the economists wrote.
9--No US peace dividend after Afghanistan, by Joseph Stiglitz and Linda Bilmes, Commentary, FT, economists view
... The US has already borrowed $2tn to finance the Afghanistan and Iraq wars – a major component of the $9tn debt accrued since 2001... Today,... it could have been hoped that the ending of the wars would provide a large peace dividend... Instead, the legacy of poor decision-making from the expensive wars in Afghanistan and Iraq will live on in a continued drain on our economy – long after the last troop returns to American soil.

10--Unions in America: 2012 Data, On The Economy

Even as the labor market expanded in 2012, union membership fell again, both in the private and public sectors, according to data released this morning by the BLS.
–Among all workers, 11.3%, or 14.4 million were union members in 2012, compared to 11.8% (14.8 million) in 2011.

–The share of union members in the public sector remains much higher than that of the private sector: in 2012, private sector unionization was 6.6%; the public sector rate was 35.9%.

–Comparing last year’s median weekly earnings for full-time workers reveals a 27% union premium—this has remained relatively constant over the last decade. (The measure, however, is unadjusted for worker characteristics, as discussed below.)

11--France’s economic foundations are cracking, testosteronepit

 Unemployment is rising incessantly. The private sector is comatose. Car sales sank 13.9% in 2012, from a lousy 2011; sales by its native automakers plunged even more. Now home sales are grinding to a halt. And the finger-pointing has already started.

 

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