Saturday, March 23, 2013

Today's links

1---The ‘Back to Work’ budget: Analysis of the Congressional Progressive Caucus budget for fiscal year 2014, EPI

2--Slow money--Big money, zero hedge

Screen Shot 2013-03-08 at 12.58.59 PM

 There is another component of M2. It has me baffled. It too is at a record. In this case it's a record low. I'm sure this important. I don't know why it's happening. I don't know what the consequences of this will be. This chart is screaming something:

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 (The Fed is creating reserves, but they are not effecting the real economy)

3---Withdrawals to test bank safety nets, IFR

“The whole affair looks misjudged,” said Nikos Panigirtzoglou, head of flows and liquidity for Europe at JP Morgan. “It is unthinkable for people not to be able to access their money. While bank runs look unlikely outside of Cyprus, some deposit outflows look almost certain.... banks still have access to €920bn of ECB money loaned to them, much of which does not need to be repaid for another two years. The region’s banks have €130bn parked in deposits at the central bank, which could inject even more liquidity if the need arises.

“The risk of bank runs in other euro area countries has clearly risen, but the unique features of the Cypriot situation should limit the read-through,” wrote Citigroup analysts. “Even when bank runs occur, the ECB has the means to substitute for the funding lost from departed deposits.”
Two existing programmes would be likely to be triggered if banks were to need central bank help. Banks are already able to borrow money under the ECB’s scheduled one-week and three-month refinancing operations. Only last week, a total of 76 banks borrowed €119bn for a period of one week.

But use of the refinancing operations depends on banks having sufficient eligible collateral to pledge in exchange for loans. According to JP Morgan, only about 20% of assets at Spanish banks and less than 10% of assets at Italian banks have so far been pledged to the ECB. Greek banks have pledged 30%.

Eurozone banks sit on about €10.9trn of deposits from retail and corporate clients in the region, up from about €8trn in 2007 – more than the entire gross domestic product of the currency bloc. “In extreme situations, even the ECB may not be able – or willing – to provide funding,” said Panigirtzoglou.

4---JPMorgan On The Inevitability Of Europe-Wide Capital Controls, zero hedge

5---The Fed Is Printing Money, But Where Is It Going? They Know But Will Not Say, Jesse

But Bob McTeer knows Banking, and he knows where most of that QE money has been going.
"Asset purchases by the Fed normally lead to a multiple expansion of money since, at the margin, reserve requirements are only about 10 percent of deposits. The roughly $2 trillion of asset growth from before the financial crisis through QE2 was largely offset, however, by an expansion in excess bank reserves of $1.6 trillion. In other words, the banking system has been sterilizing or neutralizing the impact of the asset purchases on the money supply."
And he knows that this is a form of 'trickle down' approach, and is not stimulating the commercial economy. But it is helping to prop up a banking sector that has never really taken its losses by writing down bad debts, cutting salaries and jobs, and downsizing to a more historical size relative to the real economy.
"The good news is this is why we haven’t had an expansion of inflation or a collapse of the dollar. The bad news is that is also why the purchases have not stimulated economic activity more than they have. The effect seems to be limited to the downward pressure placed on interest rates.

The Fed’s asset purchases have been increasing bank reserves. The Fed adds Treasuries and Agency MBS’s to its assets and pays, in effect, by crediting the reserve accounts of the banking system. But that’s where it has been stopping

6---Behind the failed political coup against Australian PM, wsws

The result was an unprecedented redistribution of wealth up the income scale. Australia is today one of the most socially unequal countries in the industrialised world. According to the Reserve Bank, the richest 20 percent owns nearly 67 percent of all wealth, while the poorest 20 percent owns just 0.2 percent. In 1970 less than 3 percent of households were living in poverty. Three decades later, that figure was close to 20 percent. This wholesale assault on the social position of the working class, including the destruction of hundreds of thousands of manufacturing jobs, hard-won working conditions and essential social services has resulted in a deepgoing and widespread alienation within the working class from its old organisations—the Labor Party and the trade unions.

The pre-conditions for the past 22 years of unbroken economic growth were laid by the brutal pro-market “restructuring” of the Hawke-Keating years, which enriched a small affluent layer at the direct expense of millions of ordinary workers, along with the mining boom associated with the rise of China as the world’s largest cheap labour platform. In the last decade alone, Australian exports have expanded from $8.8 billion in 2001-2002 to $77.1 billion in 2011-2012 ....

amid a slowdown in the Chinese economy and economic slump in Europe and the US, the corporate elite is demanding further deep cuts to public spending in the May budget, along with a new “productivity” push aimed at driving up profits. The frustration in ruling circles is that neither the Gillard government nor the Liberal-National opposition are able to carry out these regressive measures within the framework of parliament and parliamentary elections. This points to the fact that the coups of the future will take evermore anti-democratic and authoritarian forms

7---Cyprus to face savage cuts and economic dictatorship, wsws

the legislation provides for the implementation of any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary “for reasons of public order and safety.”
This is a recipe for a de facto financial dictatorship. And this must find its corollary in repressive police measures to quell social and political opposition in the working class.

The focus may now be on Cyprus, but working people across Europe confront similar prospects: an ever escalating and devastating decline in living standards, attacks on basic services, and the creation of mass poverty. In threatening the nuclear option of provoking state bankruptcy and being thrown out of the euro zone, the EU and ECB are putting Greece, Spain, Portugal, Italy and Ireland on notice that their economies, too, will face destruction if there is any let up in the imposition of austerity....

No compromise is possible with the dictates of either the EU or the governments in its member states that act as nothing more than glorified enforcers of the rapacious demands of the super-rich. Whatever promises are made that austerity will restore the economy are lies

8----Detroit Water and Sewerage Workers denounce contract, wsws

The proposed contract includes a pay freeze, permits the scheduling of 10-12 hour shifts, extends the probationary period for new hires from 90 days to one year and imposes higher worker contributions for health care and pensions. There is no job protection for workers who face the threat of privatization and the outsourcing of 81 percent of their jobs....

On the emergency manager’s plans to sell off city assets, Robert said, “I don’t think the water department has to be sold. I think management should be investigated instead. The water department is not broke. They are paying contractors $40-$50 an hour, but they don’t want to pay me $19. How can Mayor Bing have over 100 people making over $100,000 a year and say the city is broke? They should renegotiate the bondholders’ contracts.”
LK, another worker at the Wastewater Treatment Plant said, “There is no way I would vote for this. Why would I want to shoot myself? They want to take 5 percent to fund my own pension. They want to stick seniority to the side.
“I have 4 kids and I am making $12.44 per hour with the pay cut. How do you expect me to survive? That living wage we are supposed to have in Detroit, where is it at? I call Detroit the poster child for the United States.”

9---From Detroit to Cyprus, Banksters in Search of Prey, Black Agenda Report

A rapscallion Black lawyer for the notorious corporate law firm Jones Day delivered the bankers’ ultimatum to Detroit. Emergency financial manager Kevyn Orr, anointed by Michigan’s Republican governor, is a bankruptcy specialist whose mission is to liquidate the assets of the 82 percent Black city, especially the revenue-producing Water and Sewerage Department. Orr’s firm’s clients – which, according to their website, include “more than half of the Fortune 500 companies” – have plenty of experience at liquidating in Detroit. Butch Hollowell, general counsel for the local NAACP, says Wells Fargo has “done more foreclosures in Detroit and the state of Michigan than any other firm,” and is Detroit’s number one property tax scofflaw. Jones Day also represents Bank of America, JP Morgan Chase and CitiGroup.
These are firms that not only got billions in TARP bailouts, but they’re also the same ones that defrauded people into signing these predatory leases which cause the crash of the housing market,” said Hollowell. “Detroit has been hit harder than anyplace in the country on that score” – hugely aggravating the city’s money problems. Financial manager Kevyn Orr’s job is to extract more booty from Detroit for the bankers’ vaults.

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