Wednesday, February 20, 2013

Today's links

1---Ecuador leads the way, counterpunch

austerity comes at a time when new census analysis shows that during the Obama ‘recovery’ only the rich got richer; the poorer got poorer. According to a new analysis by Emanuel Saez. perhaps the leading economist on incomes in the world, from 2007-2009 the “average real income for the bottom 99% . . . fell sharply by 11.6%, . . . by far the largest two year decline since the Great Depression.” And new data covering 2009-2011 indicate that “Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery.”....

The GAO issued a report this week that indicated the last collapse cost the US economy $22 trillion; that is about 1.5 years of total GDP. And, most of that came on the back of homeowners suffering from the housing collapse.

What is the alternative? Countries that are breaking from the Washington Consensus are showing the way. This week an analysis by the Center for Economic and Policy Research of Ecuador found “government’s taking control of the Central Bank, implementation of capital controls, increased taxation of the financial sector, and other regulatory reforms. It concludes that these played a major role in bringing about Ecuador’s strong economic growth, increased government revenue, a substantial decline in poverty and unemployment, and other improvements in economic and social indicators.” Unemployment has fallen to 4.1 percent, the lowest level in 25 years and poverty has been cut 27 percent below its 2006 level.

The report gives us hope finding: “Ecuador’s success shows that a government committed to reform of the financial system, can – with popular support – confront an alliance of powerful, entrenched financial, political, and media interests and win.” By the way, Raphael Correa won re-election on Sunday by a landslide with more than 60% of the vote in a race with 8 candidates. Is there any US politician that wants to get on the side of the people?

2--Billionaires are hiding behind a network of “independent” groups, who manipulate politics on their behalf, info clearinghouse

3---S&P 500 Falls Most Since November as Minutes Show Debate, Bloomberg

The Standard & Poor’s 500 Index slipped 1.2 percent to 1,511.95 at 4 p.m. in New York. The Dow Jones Industrial Average declined 108.13 points, or 0.8 percent, to 13,927.54. About 7.5 billion shares traded hands on U.S. exchanges today, or 22 percent above the three-month average. The VIX, the benchmark gauge of U.S. equity options, jumped the most in 15 months on growing demand for protection from losses.

“It doesn’t take a lot of imagination to think about where the next potential source of weakness or worry is going to be, and that’s going to be when the Fed steps back from their quantitative easing program,” Brian Barish, president of Denver, Colorado-based Cambiar Investors, which manages about $7 billion, said in a phone interview.

Minutes of the Federal Open Market Committee’s Jan. 29-30 meeting released today showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds until there is “substantial” improvement in a U.S. labor market burdened with 7.9 percent unemployment.

4---The FOMC natives get restless sending S&P into nosedive, cal risk

From the FOMC statement:  Several participants emphasized that the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved. For example, one participant argued that purchases should vary incrementally from meeting to meeting in response to incoming information about the economy. A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred. Several others argued that the potential costs of reducing or ending asset purchases too soon were also significant, or that asset purchases should continue until a substantial improvement in the labor market outlook had occurred. A few participants noted examples of past instances in which policymakers had prematurely removed accommodation, with adverse effects on economic growth, employment, and price stability; they also stressed the importance of communicating the Committee's commitment to maintaining a highly accommodative stance of policy as long as warranted by economic conditions. In this regard, a number of participants discussed the possibility of providing monetary accommodation by holding securities for a longer period than envisioned in the Committee's exit principles, either as a supplement to, or a replacement for, asset purchases

5---Your Housing “Recovery” in Charts…., prag cap

hr1 Your Housing Recovery in Charts....
Yipee

6---“The Banker as Ruler.—prag cap

From that invention dates the modern era of the banker as ruler. The whole world after that was his for the taking. By the work of pure scientist the laws of conservation of matter and energy were established, and the new ways of life created which depended upon the contemptuous denial of primitive and puerile aspirations as perpetual motion and the ability ever really to get something for nothing. The whole marvellous civilisation that has sprung from that physical basis has been handed over, lock, stock, and barrel, to those who could not give and have not given the world as much as a bun without first robbing somebody else of it… The skilled creators of wealth [in industry and agriculture] are now become hewers of wood and drawers of water to the creators of debt, who have been doing in secret what they have condemned in public as unsound and immoral finance and have always refused to allow Governments and nations to do openly and above aboard. This without exaggeration is the most gargantuan farce that history has ever staged.

7---Several Officials Say Fed Should Be Ready to Vary Pace of Asset Purchases, WSJ

Federal Reserve officials expressed growing unease with the central bank’s easy-money policies at its latest policy meeting and some suggested the Fed might need to pull them back before the job market is fully back to normal.
Minutes released Wednesday of the Fed’s Jan. 29-30 policy meeting showed that officials worried the central bank’s easy-money policies could lead to instability in financial markets and might be hard to pull back in the future. The Fed plans to evaluate how the programs are doing at its next meeting March 19 and 20.

Several officials said that the Fed should be prepared to vary the pace of its asset purchases, depending on how the economy performs and its analysis of the costs and benefits of the program, according to the minutes. Some Fed officials suggested the Fed may need to alter its stated course to continue the bond-buying programs until the job market improves “substantially,” a threshold it hasn’t defined.
“A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred,” the minutes stated.
The minutes don’t identify participants by name, or specify how many officials expressed a particular view beyond terms such as “a few” or “several.”
...

Two Fed officials–Cleveland Fed President Sandra Pianalto and St. Louis Fed President James Bullard–have said in recent speeches that the Fed may want to scale back its bond-buying based on changing conditions, though they gave different reasons. Optimistic about the economic outlook for this year and next, Mr. Bullard said the Fed may want to slow its bond-buying pace if those forecasts prove right.
Ms. Pianalto, on the other hand, expressed concern that some financial firms may be taking on too much risk. The minutes showed that some other Fed officials are concerned that the Fed’s easy-money policies may be encouraging excessive risk-taking in certain corners of the credit markets. While most officials said the Fed’s bond-buying programs had successfully helped stimulate economic activity, several “expressed concern about the potential for excessive risk-taking and adverse consequences for financial stability,” the minutes stated.

Kansas City Fed President Esther George dissented at the January meeting, citing concerns about financial stability.
The minutes also suggest that Fed officials may be rethinking their exit strategy. “[A] number of participants discussed the possibility of providing monetary accommodation by holding securities for a longer period than envisioned in the Committee’s exit principles, either as a supplement to, or a replacement for, asset purchases,” the minutes stated.

8---JPMorgan Leads U.S. Banks Lending Least Deposits in 5 Years, Bloomberg

The biggest U.S. banks including JPMorgan Chase & Co. and Citigroup Inc. are lending the smallest portion of their deposits in five years as cash floods in from savers and a slow economy damps demand from borrowers

The average loan-to-deposit ratio for the top eight commercial banks fell to 84 percent in the fourth quarter from 87 percent a year earlier and 101 percent in 2007, according to data compiled by Credit Suisse Group AG. Lending as a proportion of deposits dropped at five of the banks and was unchanged at two, the data show.

Consumers and companies are reluctant to take on risk until they see more signs that business is improving, even as the Federal Reserve maintains near-record low interest rates designed to fuel growth. Putting more of the unused money to work could boost profit and help turn around the U.S. economy, whose 0.1 percent annualized drop in the fourth quarter was its worst showing since 2009.
“You’ve got to see sustainable economic activity before lending picks up,” said Paul Miller, an analyst who follows the industry at FBR Capital Markets Corp. Until then, banks will be stuck with idle cash, Miller said. “There’s no place for them to put it.”

Bankers are also holding back as regulators and investors pressure them to curtail risks that fueled the 2008 global credit crisis. They’re facing a barrage of new federal rules and capital requirements that require them to hold more funds in reserve and evaluate borrowers more stringently, amid concern that loans made at current rates may turn into losers when more normal levels return. ("We can't lend if there are rules! Waaaah!")

9---The Spending Crunch Is Official: "We Are Confident There Is An Issue With The Consumer" , zero hedge




 

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