Saturday, February 16, 2013

Today's links

1--- Greenspan: Ignore The Economy, "Only The Stock Market Matters", zero hedge

2---Banks on the Counter-Attack in the Food and Finance Debate, naked capitalism

"Gambling on hnger"...
Last September, the World Development Movement estimated that Barclays earned some $785-million from financial speculation on food commodities in 2010 and 2011. And last month a new WDM report estimated that Goldman Sachs’ earnings from food price speculation in 2012 were over $400 million.
These figures were the latest to come out of a prominent NGO campaign against ‘gambling on hunger’ that has captured widespread attention and concern, particularly in Europe, over the past few years. Investment banks have been a primary target of this campaign, given their important role in facilitating large-scale financial investments in agricultural commodity derivatives, which NGOs say is responsible for food price spikes and rising hunger in the world’s poorest countries...

a recent paper by scholars at the London Business School and a 2011 paper by researchers at the New England Complex Systems Institute. Both these studies present sophisticated models that tease out the different factors that have affected commodity price volatility, and both point to financial speculation as a significant force.
3---Surprise UK retail sales drop fuels triple-dip recession fears, Guardian

ONS data shows volume of retail sales fell by 0.6% in January – against economists' expectations of a 0.5% rise
 
Cuts in consumer purchasing power and a bout of arctic weather combined in January to cut high street spending for a fourth month, fanning fears that Britain is teetering on the brink of an unprecedented triple dip recession.

..., evidence that the surge in consumer spending seen last summer at the time of the London Olympics faded in the autumn of 2012 and continued into 2013 rekindled fears of a third leg to the longest and deepest slump Britain has suffered since the 1920s. Jeremy Cook, chief economist at foreign exchange broker World First said: "These are truly horrible figures and alongside the revision lower of December's numbers, points to a retail landscape on its knees. Consumer spending, or the lack thereof, can be summarised by the recent high-profile high street closures with a low-spending Christmas unable to prop up companies that have been forced to cut prices through the year to combat low demand." Rob Wood, economist at Berenberg Bank, said: "The underlying picture is that the economy is bouncing along the bottom, so weather disruptions can easily tip it into negative territory."

4---Awash in liquidity, the global economy remains sluggish, WA Post

There’s plenty of money in the world. That’s the good news.
 
The not-so-good news: The flood of dollars, euros, yen and pounds pumped into the global economy by major central banks in recent years has yet to pay off in the form of job creation, investment and stronger economic growth.

This stagnation follows a historic run in which $5.5 trillion has flowed into the global economy from central banks in the United States, Japan, Britain and the euro zone. “This is a very unique situation, and we cannot exclude that we are overtreating the patient,” said Domenico Lombardi, a former Italian board member of the International Monetary Fund and now an analyst at the Brookings Institution. “There has been huge liquidity pumped into the system, but only a fraction translates” into economic support for businesses and households in those economies.
“Each successive effort at quantitative easing has had diminished returns. There are limits, and we are probably at the threshold” where more central bank action could do more harm than good to the global economy, said Timothy Adams, managing director for the Institute of International Finance, a trade group representing the world’s major financial institutions.
...

Many of the traditional crisis-fighting tools are off limits. Governments already have high levels of debt, making officials hesitant to borrow and spend in hopes of boosting jobs and growth....

The IMF, charged by the G-20 with looking at how policies in different nations affect the global system, has so far remained on the side of the major central banks — agreeing that their policies have been justified by weak domestic conditions and have so far done more good than harm in the world as a whole.
But there’s also a recognition that the results are unimpressive in terms of growth, while pushing the world into uncharted territory.
The IMF has begun an extensive line of research on global liquidity conditions in an effort to better unravel how monetary easing in one nation, for example, affects economic conditions both at home and elsewhere.
“Liquidity” is a concept broader than cash or a nation’s money supply. It includes the overall ability and willingness of financial firms to borrow and lend — something that can be shaped by factors as general as the state of the global economy, and as specific as the rules a central bank sets for loans it makes to financial institutions.

5---The Big Picture



6---NYSE Margin Debt Is Creeping Toward All-Time Highs Right Along With The S&P 500, pragmatic capitalism

Have a look at the chart I formulated below showing NYSE Margin Debt and the S&P 500. The two data sets show a correlation over 85%.

7---Another Entry on The Currency Wars,  Tim Duy, economists view

 Regarding the never-ending debate on the the currency wars, Greg Ipadds an important point:
..these conventional and unconventional actions work the same way: by lowering the real (inflation-adjusted) interest rate, they stimulate domestic demand and consumption...This pushes the exchange rate down in two ways. First, a lower interest rate reduces a currency’s relative expected return...Second, higher inflation reduces a currency’s real value and thus ought to lead to depreciation. But higher inflation also erodes the competitive benefit of the lower exchange rate, offsetting any positive impact on trade.
If this were the end of the story, the currency warriors would have a point. But it isn’t. The whole point of lowering real interest rates is to stimulate consumption and investment which ordinarily leads to higher, not lower, imports. If this is done in conjunction with looser fiscal policy (as is now the case in Japan), the boost to imports is even stronger. Thus, QE’s impact on its trading partners may be positive or negative..The point is that this is not a zero sum game; QE raises a country’s GDP by more than any improvement in the trade balance.

8---Incomes Flat in Recovery, but Not for the 1%, NYT

Excluding earnings from investment gains, the top 10 percent of earners took 46.5 percent of all income in 2011, the highest proportion since 1917, Mr. Saez said, citing a large body of work on earnings distribution over the last century that he has produced with the economist Thomas Piketty of the Paris School of Economics.....
      
“Let’s declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty,” Mr. Obama said in his address to Congress....

Incomes rose more than 11 percent for the top 1 percent of earners during the economic recovery, but not at all for everybody else, according to new data.

The numbers, produced by Emmanuel Saez, an economist at the University of California, Berkeley, show overall income growing by just 1.7 percent over the period. But there was a wide gap between the top 1 percent, whose earnings rose by 11.2 percent, and the other 99 percent, whose earnings declined by 0.4 percent.
      
Mr. Saez, a winner of the John Bates Clark Medal, an economic laurel considered second only to the Nobel, concluded that “the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s.”
The disparity between top earners and everybody else can be attributed, in part, to differences in how the two groups make their money. The wealthy have benefited from a four-year boom in the stock market, while high rates of unemployment have continued to hold down the income of wage earners.
       
“We have in the middle basically three decades of problems compounded by high unemployment,” said Lawrence Mishel of the Economic Policy Institute, a left-of-center research group in Washington. “That high unemployment we know depresses wage growth throughout the wage scale, but more so for the bottom than the middle and the middle than the top.”
      
In his analysis, Mr. Saez said he saw no reason that the trend would reverse for 2012, which has not yet been analyzed. For that year, the “top 1 percent income will likely surge, due to booming stock prices, as well as retiming of income to avoid the higher 2013 top tax rates,” Mr. Saez wrote, referring to income tax increases for the wealthy that were passed by Congress in January. The incomes of the other “99 percent will likely grow much more modestly,” he said. 
 
 
Jacob Lew, US President Barack Obama’s nominee for treasury secretary and an ex-Citigroup executive who received a million-dollar bonus after the bank got bailed out, breezed through his Senate Finance Committee confirmation hearing Wednesday.
The committee’s support for Lew’s appointment underscores the bipartisan commitment to cut corporate taxes, raise taxes on workers and slash social programs.
 
Lew struck an unapologetically right-wing tone in his prepared remarks Wednesday, reasserting the Obama administration’s commitment to lowering corporate taxes and eliminating deductions that benefit many working-class Americans, referred to as “broadening the base.”
“We must put our nation back on a path of fiscal sustainability,” Lew said in his introductory remarks. “Over the past two years, we have locked in $2.5 trillion in deficit reduction through spending cuts and revenue increases. And we can do even more to shrink the deficit over the next decade through a balanced mix of spending reductions and tax reforms, and sensible reforms to Medicare that will help the program stay sound in the future.”
Lew flaunted his credentials as a vociferous budget cutter and long-time facilitator of bipartisan attacks on social programs. As an advisor to then-Democratic Speaker of the House Tip O’Neill, Lew helped develop the 1993 budget deal that raised regressive payroll taxes and increased the Social Security retirement age by two years, to 67.
“By asking me to take part in the negotiations that led to the historic agreement with President Reagan to save Social Security, [O’Neill] allowed me to gain a deep understanding of what could be accomplished through bipartisan cooperation,” Lew said.
From August 1995 to July 1998, Lew served as Clinton’s deputy director of the Office of Management and Budget (OMB), where he helped work out the Balanced Budget Act of 1997, which included $112 billion in Medicare cuts. “Working across the aisle while serving under President Clinton, I helped negotiate the groundbreaking agreement with Congress to balance the federal budget,” he boasted....

In 2007, Lew invested $56,000 in a Citigroup hedge fund operating out of the Cayman Islands. Obama had previously denounced such investments, which he called an “outrage” and a “tax scam” because they are often used to avoid paying taxes on investments.
Lew was likewise questioned about his role at Citigroup, which paid him a $940,000 bonus shortly after the firm was bailed out by the government. Asked about the bonus, Lew stated unapologetically, “I was compensated for my work.”....

The elevation of Lew to the post of treasury secretary, the government position most closely associated with the bank bailouts, is only the latest signal by the Obama administration that those responsible for the 2008 financial crisis will in be in no way held responsible for their crimes.
Moreover, the appointment of Lew—one of the Democrats most closely associated with entitlement cuts—underscores the Obama administration’s commitment to slashing trillions of dollars from Medicare, Medicaid and Social Security.

10----Greece: Youth unemployment hits 61%, wsws

The use of naked violence to suppress growing discontent goes hand in hand with moves by the Greek state to effectively end the right of workers to withdraw their labour—a right previously protected under the Greek constitution.......

Hardest hit are younger workers, with a staggering 61.7 percent of adults under the age of 24 on the unemployment lines.
Meanwhile, Greece’s private sector union federation, the GSEE, issued a report Thursday projecting that 3.9 million Greeks out of a total population of 11 million will be living below the official poverty line by the end of this year. Greece’s poverty line is set at €7,200 (US$9,700) per year for an individual.
Among those taking to the streets of Athens on Friday were the disabled, dozens of them in wheelchairs, who protested outside of the Finance Ministry against government cuts to their salaries and pensions implemented as part of the government’s austerity programme....

The latest strikes and protests take place ahead of a 24-hour general strike to be held on February 20, called by the GSEE private sector and Adedy public sector trade union federations. This is the latest of many limited and restricted stoppages called by the federations since 2010. Their main aim is to use such events to dissipate mass opposition to the hated measures being imposed by the Greek government on behalf of international finance capital.
Such pro-forma actions, during which well-heeled union bureaucrats issue the occasional criticism of this or that austerity measure, are the means through which the entire edifice of savage attacks on working people has been imposed.
The strike has been called under conditions in which the government has stepped up its use of fascist-era repression to smash any strike that threatens to go beyond the limited remit set by the union bureaucracy and their backers in the various pseudo-left groups. The Greek ruling elite, in violation of basic democratic rights, is imposing a de facto ban on any effective strike action. Last week, martial law via a “Civil Mobilisation Order” was imposed by the government to break a strike by ferry workers. The same measures were used two weeks before to break a strike by Athens subway workers

11---Growing divisions in US: Obama dedicated to advancing the interests of a "tiny aristocracy", wsws

These trends in income share are not merely the product of abstract economic forces. They result from a definite and ruthless class policy pursued first by Bush and escalated under Obama. In response to the collapse of 2008, which was the outcome of financial speculation on an historically unprecedented scale, unlimited funds were made available to the banks by the government and Federal Reserve.
To finance the stock market boom, the Fed has purchased some $2 trillion worth of assets since 2008, essentially printing an equal amount of money to transfer into the financial system. Governments internationally have pursued a parallel policy. The results have been predictable: asset bubbles have been reflated, while the bad debts of the financial aristocracy have been transferred to central banks and government budgets.
The corollary to these measures has been a systematic and ongoing attack on the living standards of the vast majority of the population...

According to data brought together by University of California’s Emmanuel Saez, between 2009 and 2011—the first two years of the “recovery”—average real income per family grew by 1.7 percent. However, Saez notes, “Top 1 percent incomes grew by 11.2 percent while bottom 99 percent incomes shrunk by 0.4 percent. Hence, the top 1 percent captured 121 percent of the income gains in the first two years of the recovery.”
That is to say, the top one percent actually swallowed all of the total income growth during these two years, plus an additional 20 percent. What these figures demonstrate is a massive transfer of wealth, an infusion of funds into the financial markets at the expense of the majority of the population, the working class....

As a consequence, the number of “working poor” in the United States—those living in near poverty despite being employed—has increased sharply. In 2011, 47.5 million people lived in families earning less than 200 percent of the official poverty rate. This is nearly one third (33 percent) of all working families, up from 31 percent in 2010 and 28 percent in 2007.
These figures do not include the unemployed. Despite the official decline in the unemployment rate, due largely to millions of people leaving the labor force, the overall employment-population ratio remains near its post-crisis low.
Behind the thin rhetoric about reigniting a “thriving middle class,” Obama made clear that the administration’s policies in its second term will be subordinated entirely to the interests of big business, beginning with plans to slash hundreds of billions more from health care programs.

The inequality figures say much about the character of American society—a society dominated by a tiny aristocracy. The program of the political establishment as a whole is above all dedicated to ensuring the wealth of this social layer. It is the conflict between this aristocracy and the working class that forms the fundamental social division, not the various forms of identity politics that have become integral components of state ideology.
These social relations are central to understanding the crisis of American democracy. Without any significant opposition from the media or within the political establishment, the Obama administration has asserted the right to assassinate US citizens without any judicial review or due process.
Core democratic principles going back centuries are simply discarded. After initial media coverage of the administration white paper on the extra-judicial killing of US citizens, the issue has largely been dropped.

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