Tuesday, February 19, 2013

Today's links

1--A Scary Reality About Wal-Mart's Customers: They're Broke, Business Insider

Wal-Mart shoppers are the barometer of the U.S. consumer, and these emails reflect common sense about customers," Sozzi told us. "The consumer isn't mentally or physically ready to spend on discretionary inventory and there's no reason to be optimistic."
"The fundamental health of Wal-Mart's customer is concerning," Sozzi said.
The numbers Wal-Mart reported at earnings reveal a troubling trend. Traffic is nearly flat from a year ago, and Sam's Club executives said that customers aren't shopping as much.
The Wal-Mart executives blamed the hike in payroll taxes and a delay in tax returns for why customers aren't shopping, according to Dudley's story.
"When a payroll-tax break expired Dec. 31, Americans began paying 2 percentage points more in Social Security taxes on their first $113,700 in wages," Dudley reported. "For a person making $40,000 a year, that is about $15 a week."

2---Brennan refuses to rule out drone assassinations within the US, wsws

In written responses to questions submitted by the Senate Intelligence Committee, John Brennan, the Obama administration’s nominee for director of the Central Intelligence Agency (CIA), refused to rule out drone assassinations of American citizens on US soil. The committee on Friday released a declassified version of Brennan’s responses

3---Mass strikes and protests shut down Port Said in Egypt, wsws

Mass protests and strikes involving tens of thousands of workers and youth brought the Suez Canal city of Port Said—one of the major industrial cities in Egypt and home to the second busiest port in the Arab World—to a halt on Monday.

Protesters blocked the entrances to the city, while canal workers at the Port Said arsenal, run by the Suez Canal Authority, closed the gates to the shipyard. Nearly 40,000 workers at 29 factories in the industrial free zone went on strike, and schools and government offices were closed....

The New York Times reported nervously that “the protests marked the closest that the chaos in Egypt over the last two years has come to threatening the operations of the Suez Canal, an artery of shipping critical to both international commerce and the battered Egyptian economy.”
Army reinforcements were called in to protect the operations of the port and the Suez Canal and secure vital government buildings

4---Right wing mythology 101, ataxingmatter

5--NYT Finds Economists Without Names to Criticize Japan's Plans for Stimulus and Promote "Free-Trade" Agreement, CEPR

"Economists say Mr. Abe’s policies so far contain few of the deeper-reaching structural reforms that they say are needed to produce sustainable growth by encouraging competition in Japan’s sclerotic economy. They say the most symbolic step would be joining a Pacific-wide free trade pact that would force Japan to open sheltered domestic markets, like farm products."

It would be interesting to know which economists have this view, because some economists, like Paul Krugman, have argued that the main obstacle to Japan's growth is a lack of demand. They have advocated exactly the sort of expansionary fiscal and monetary policy that Abe is now advocating.
It is also worth noting that the Pacific trade agreement mentioned in this piece cannot properly be described as a "free-trade" agreement. Most of its provisions have nothing to do with trade and some involve increased protectionism, like stronger patent and copyright protections.

The piece also referred to, "Japan’s already stifling national debt." It's not clear how it has determined that Japan's debt is "stifling." The interest burden of Japan's debt is roughly 1.0 percent of GDP, roughly two-thirds the current size of the U.S. interest burden and one-third of the burden the U.S. government faced in the early 1990s. The interest rate on long-term Japanese debt is just 1.0 percent. And, it is facing deflation, not inflation.

6---How the Fed is creating another speculative market for housing: Fed balance sheet now over $3 trillion and low interest rates are causing speculation in non-traditional markets., Dr Housing Bubble

The Federal Reserve has made it mission number one to create a low interest rate environment. The PR campaign claimed that this was to help average indebted homeowners but in reality, it had more to do with providing incredible banking leverage and also to support our massive national debt. The Fed’s balance sheet recently crossed the $3 trillion mark. In essence, the Fed became the bad bank without any open vote or congressional debate. That much is obvious but what isn’t certain is where things go from here. The ability of inflation to erode purchasing power is a real problem. Since the recession ended it is clear that profits in the financial sector have soared. Yet household incomes remain stagnant. This is important to understand and Professor Robert Shiller has talked about being cautious about the unbridled optimism now being seen in the housing market. The housing market for the last few years has been supported by massive amounts of investor money. Is the Fed simply creating a different kind of speculative fervor this time around?

Exhibit Number One – The Fed Balance Sheet
One thing that seems to escape those that think this housing market is recovering organically is the gigantic Fed balance sheet. In essence, the Fed and government have become the housing market. When you think of a 30 year fixed rate mortgage at 3.6 percent they become giddy. Would you lend someone your hard earned $500,000 for 30 years at 3.6 percent? No freaking way. And apparently, the financial sector feels the same way:
Fed Balance Sheet

7---Affordable house prices are the best economic stimulus, oc housing


At its peak in 2006, 2007, and 2008, this mania had overallocated as much as $10 trillion to the housing sector, based on the long-term average of housing value to GDP. This misallocation came at the expense of more productive and more sustainable economic opportunities in manufacturing, infrastructure, and technological innovation. The catastrophic losses also were a major factor in the extremely unequal distribution of national wealth, as the middle class lost approximately 40% of its net worth, most of it on overpriced and overleveraged housing.

8---Contrary to media spin, mortgage delinquencies are trending higher, oc housing

Perhaps they can argue that the long term trend is still down, but ever since the mortgage settlement agreement was signed, mortgage delinquencies have been on the rise — and this comes in spite of aggressive attempts to kick the can with loan modifications. Lenders stopped foreclosing, approved more short sales, and initiated millions of loan modifications in a so-far successful attempt at drying up the MLS inventory and forcing prices to bottom


9---The Latin American Exception, antiwar 
How a Washington Global Torture Gulag Was Turned Into the Only Gulag-Free Zone on Earth

First, CIA agents and other U.S. officials set to work “professionalizing” the security forces of individual countries like Guatemala, Colombia, and Uruguay; that is, turning brutal but often clumsy and corrupt local intelligence apparatuses into efficient, “centralized,” still brutal agencies, capable of gathering information, analyzing it, and storing it. Most importantly, they were to coordinate different branches of each country’s security forces — the police, military, and paramilitary squads — to act on that information, often lethally and always ruthlessly.

Second, the U.S. greatly expanded the writ of these far more efficient and effective agencies, making it clear that their portfolio included not just national defense but international offense. They were to be the vanguard of a global war for “freedom” and of an anticommunist reign of terror in the hemisphere. Third, our men in Montevideo, Santiago, Buenos Aires, Asunción, La Paz, Lima, Quito, San Salvador, Guatemala City, and Managua were to help synchronize the workings of individual national security forces.

The result was state terror on a nearly continent-wide scale. In the 1970s and 1980s, Chilean dictator Augusto Pinochet’s Operation Condor, which linked together the intelligence services of Argentina, Brazil, Uruguay, Paraguay, and Chile, was the most infamous of Latin America’s transnational terror consortiums, reaching out to commit mayhem as far away as Washington D.C., Paris, and Rome. The U.S. had earlier helped put in place similar operations elsewhere in the Southern hemisphere, especially in Central America in the 1960s.

By the time the Soviet Union collapsed in 1991, hundreds of thousands of Latin Americans had been tortured, killed, disappeared, or imprisoned without trial, thanks in significant part to U.S. organizational skills and support. Latin America was, by then, Washington’s backyard gulag. Three of the region’s current presidents — Uruguay’s José Mujica, Brazil’s Dilma Rousseff, and Nicaragua’s Daniel Ortega — were victims of this reign of terror.

When the Cold War ended, human rights groups began the herculean task of dismantling the deeply embedded, continent-wide network of intelligence operatives, secret prisons, and torture techniques — and of pushing militaries throughout the region out of governments and back into their barracks...

Brazil’s] position regarding this issue has not changed since 2003 and will likely not change in the foreseeable future,” the cable said. It went on to report that Lula’s government considered the whole system Washington had set up at Guantánamo (and around the world) to be a mockery of international law. “All attempts to discuss this issue” with Brazilian officials, the cable concluded, “were flatly refused or accepted begrudgingly.”
In addition, Brazil refused to cooperate with the Bush administration’s efforts to create a Western Hemisphere-wide version of the Patriot Act. It stonewalled, for example, about agreeing to revise its legal code in a way that would lower the standard of evidence needed to prove conspiracy, while widening the definition of what criminal conspiracy entailed....

Unable to put in place its post-9/11 counterterrorism framework in all of Latin America, the Bush administration retrenched. It attempted instead to build a “perfect machine of perpetual war” in a corridor running from Colombia through Central America to Mexico. The process of militarizing that more limited region, often under the guise of fighting “the drug wars,” has, if anything, escalated in the Obama years. Central America has, in fact, become the only place Southcom — the Pentagon command that covers Central and South America — can operate more or less at will. A look at this other map, put together by the Fellowship of Reconciliation, makes the region look like one big landing strip for U.S. drones and drug-interdiction flights.

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