Thursday, March 7, 2013

Today's links

“Libenter homines id quod volunt credunt.” --- “People believe what they want to believe.” — Julius Caesar

1---World in Recession, Big Picture


Source: RecessionAlert

My pal Lakshman Achuthan was just on Bloomberg TV, defending his 2013 (and 2012) recession call.

While I respectfully disagree, I understand his point: The current environment is a typical feeble post-credit crisis recover. Indeed, we are in a Fed driven economy, and but for their interventions, we in the USA would very likely already be in a recession. As I have have stated to many times, but for the Fed, equity markets would likely be 20-30% lower (and I may be too optimistic with those numbers).
But the key takeaway, based on the chart above from Recession Alert, is that the rest of the world IS ALREADY IN a recession. Indeed, more than half of the 41 OECD member nations are in economic contractions — and have been since Q4 2012.

Here is the bizarre twist: As I will explain in this weekend’s WaPo column, this hardly matters for equities. In fact, markets correct before official recessions, primarily because contractions typically show up in earnings long before they do in the economic data .

2---We’ve reduced the deficit and hurt the short-term economy, WA Post

3---Citizens in Europe are rejecting austerity policies as deeply misguided, Joe Stiglitz, Guardian

The eurozone needs reform, but devaluation, lower output and rising debt across the continent are nothing but a toxic brew...
 
The European project, as idealistic as it was, was always a top-down endeavour. But it is another matter altogether to encourage technocrats to run countries, seemingly circumventing democratic processes, and foist upon them policies that lead to widespread public misery.
While Europe's leaders shy away from the word, the reality is that much of the EU is in depression.
The loss of output in Italy since the beginning of the crisis is as great as it was in the 1930s. The youth unemployment rate in Greece now exceeds 60%, and the figure for Spain is above 50%.
With the destruction of human capital, Europe's social fabric is tearing, and its future is being thrown into jeopardy.
The economy's doctors say that the patient must stay the course. Political leaders who suggest otherwise are labelled populists. The reality, though, is that the cure is not working, and there is no hope that it will – that is, without being worse than the disease.
It will take 10 years or more to recover the losses incurred in this austerity process.
It is neither populism nor shortsightedness that has led citizens to reject the policies imposed upon them. Rather, it is an understanding that these policies are deeply misguided....

The European project was, and is, a great political idea. It has the potential to promote prosperity and peace. But, rather than enhancing solidarity within Europe, it is sowing seeds of discord within and between countries.
Europe's leaders repeatedly vow to do everything necessary to save the euro. The promise of Mario Draghi, president of the European Central Bank, to do "whatever it takes" has succeeded in creating temporary calm.
But Germany has consistently rejected every policy that would provide a long-term solution....

The EU's economic and monetary union was a means to an end, not an end in itself. The European electorate seems to have recognised that, under current arrangements, the euro is undermining the very purposes for which it was supposedly created. That is the simple truth that Europe's leaders have yet to grasp.

4---Our Fiscal Anorexia, naked capitalism

A few years ago, when the hysteria about the nation’s “deficit” first emerged, President Obama could have calmly pointed out that because the sovereign government issues the nation’s currency and spends it into the private sector, having a sovereign “deficit” is actually a GOOD thing. He could have shown the American people a simple chart and patiently explained that the federal government CAN’T limit its spending to what it collects back in taxes (creating a “balanced budget”) because that would mean no net new Dollars would remain in the private accounts of citizens and businesses—in a real sense, the private economy would begin starving...

To back up that chart, he could have unveiled an even simpler one created by Dr. Stephanie Kelton at the University of Missouri Kansas City—a Teeter-Totter with numbers on it that explains the startlingly simple relationship between sovereign “deficits” and private wealth.

Choosing his words carefully, he could have helped the American people understand that the Clinton era government surpluses actually were a BAD thing because they subtracted trillions of dollars of wealth from the accounts of private citizens—forcing those citizens to BORROW more and more dollars to maintain their lifestyles, unleashing a borrowing spree that was happily accommodated by a deregulated financial industry with ever more clever and dangerous lending products. He could have compassionately commiserated with the millions of American families who lost their homes AND their jobs when this credit bubble burst just before he took office in 2008. He could have apologized for being forced to re-capitalize the U.S. banks that lost it all by defrauding American mortgage holders and then gambling their fraudulent proceeds with exotic bets. He could have declared a fierce determination to unwind the unfairness that was enabling the executives of those same banks to continue raking in personal fortunes, even as their institutions were being bailed out by the sovereign government. Finally, President Obama could have gently and courageously reminded us that our nation had been brought to its knees before by reckless financial titans—in 1929—and that we had, with Franklin Roosevelt’s guidance, learned the REAL lessons of how to recover and build ourselves back to prosperity.

But President Obama didn’t do any of those things. Instead he chose to make what I fear will turn out to be the biggest mistake of his political career: he decided to AGREE with the hysterical delusion that the U.S. sovereign government is broke. He decided to hold up the mirror and say, “Yes, we DO have to reduce our nation’s deficit. Yes, we ARE spending too much creating public goods and services. We ARE going to have to tighten our belts and get a little bit skinnier. But my promise to the American people is that we’re going to starve ourselves a little more slowly—and we’re going to do it in a ‘balanced way’ so the pain is distributed more fairly.”

5---Whistleblower: Wells Fargo Fabricated and Altered Mortgage Documents on a Mass Basis, naked capitalism

Wells Fargo’s own actions say the reverse. It has been doctoring documents in house for over fifteen months for borrowers who are targeted for foreclosure. It was having this sort of work done outside the bank for an unknown period of time prior to that.
A contractor who worked at a Wells Fargo facility in Minnesota reports that the bank engaged in systematic, large scale alteration of mortgage notes and fabrication of related documents in preparation for foreclosure. The procedures the bank used are questionable for a large portion of the mortgages.
A team of roughly 100 temps divided across two shifts would review borrower notes (the IOU) to see whether they met a set of requirements the bank set up. Any that did not pass (and notes in securitized trusts were almost always failed) went to another unit in the same facility. They would later come back to the review team to check if the fixes and fabrications had been done correctly.
....

The whistleblower estimated that 99.5% of the notes that he reviewed that had been securitized failed the bank’s tests, and roughly 10% to 15% of the bank owned mortgages were tagged as “fails”. 

6---The stock market bonanza, wsws

7--Wall Street’s Stock Buyback Boom Continues, slant
    A trial that opened Tuesday in Buenos Aires is the first to consider the totality of crimes carried out under Operation Condor, a coordinated campaign by various US-backed Latin American dictatorships in the 1970s and 1980s to hunt down, torture and murder tens of thousands of opponents of those regimes.
Condor was prosecuted in the name of a crusade against “terrorism.” Its methods in many ways prefigured the systematic and continuing crimes carried out by the US government decades later with its use of “extraordinary rendition,” torture and “targeted killings...

Carolina Varsky, an attorney representing Argentine and Uruguayan victims in the case, told the AFP news agency, “What we now must prove is the existence of an illicit association between the dictatorships of Argentina, Bolivia, Brail, Chile, Paraguay and Uruguay to hunt down and eliminate opponents in any one of these countries, with the support of the United States.”
She said that the evidence would include the testimony of survivors of the continental repression, some 500 of whom are expected to take the witness stand, as well as declassified documents, most of them from Washington.
...

Kissinger’s order amounted to a green light for Letelier’s killing, which was organized by Michael Townley, who had served as an agent of both the CIA and Chile’s DINA intelligence agency, using anti-Castro Cuban operatives to carry out the assassination. Convicted for Letelier’s murder, Townley was jailed for little more than five years and then placed in the federal witness protection program and shielded from prosecution for his role in other Operation Condor murders. He continues to reside in the US under a new identity.

12----The collapse of Detroit: An indictment of American capitalism, wsws

13--Pepe escobar on Chavez legacy, RT

RT: What do you make of the accusations from Caracas of foul play in Chavez's death - is it just a conspiracy theory or are there grounds to make those allegations?

PE: This is very complicated because we don’t have proof. It took us years to understand what happened to [Yasser] Arafat. That was in 2004 and only six years later it was discovered that he was poisoned by polonium 210. It could be the same thing with Chavez. It’s possible. Don’t forget, and this is not a conspiracy theory, that the CIA tried to poison Fidel Castro thousand times. Maybe they had a break with Chavez as well – nobody knows. We have to always refer back to the military coup in 2002. This was promoted by Washington, organized by the American Embassy in Caracas with these powerful Venezuelan players involved, who always go back to Miami and New York. So the chavistas had reasons to be slightly paranoid about it. We still don’t know the facts as we still don’t know the facts about Chavez’s cancer. The information was withheld from the public for a few months. And it’s crazy, because Fox News are saying today that bad Cuban medicine killed Hugo Chavez, which is completely stupid. There are 30,000 Cuban doctors helping poor people in Venezuela. This speaks for itself. Can you imagine if these doctors were helping poor people in the US as well, what would Barack Obama say about that?

14---Pentagon Ran Torture Centers in Iraq, Atrocities Revealed, antiwar
    
“The Pentagon sent a US veteran of the ‘dirty wars’ in Central America to oversee sectarian police commando units in Iraq that set up secret detention and torture centres to get information from insurgents,” The Guardian reports. “These units conducted some of the worst acts of torture during the US occupation and accelerated the country’s descent into full-scale civil war.”
After a 15-month investigation, The Guardian and the BBC Arabic has published its findings about the torture and atrocities organized and committed by US officials reporting directly to the highest echelons of the US government, including General David Petraeus.

15---UN Official Hans Blix: Iran Nuke Threat is Overhyped, antiwar

The threat of a nuclear-armed Iran is overhyped, and there is no evidence suggesting that the country has or intends to produce weapons of mass destruction, a UN expert on the Nuclear Non-Proliferation Treaty (NPT) said at a forum in Dubai on Tuesday.

16---Obama promised to close Guantánamo. Instead, he's made it worse, Guardian

Facing deteriorating conditions and the hopelessness of their legal abyss, detainees are starving themselves in protest
 
17---Canada housing crash update, greater fool
 
This week’s numbers are stiff. Aside from the GFC in 2009, sales have not been this low since way back in 2001. The number of deals in February dropped 15% below the same period a year earlier. If you use the raw numbers, instead of the ones TREB cooks, the actual decline was 18%.
Sales of detached houses in 416 tanked 16.9% and in the 905 they fell 15.8%. Condo sales in both the downtown and the burbs crashed 20%, and prices in the core fell about 5%. Sales of houses costing more than $2 million – of which there are an exploding number – withered 32%, and the dollar value declined even further, by 35.5%.

And what of prices in general? The realtor Frankenumber says they’re up 3% year/year, but given the slide in deals being done, it seems a moot point. In all but some traditional, demand areas where supply is tight and enough buyers still clamour to get in, this is a market losing momentum. With sales numbers now falling across the country, asking prices will follow as homeowners figure out selling for less today beats the hell out of a fire sale later, or simply not finding a buyer.

18---February Stock Buybacks Set a Record, Slate

1362671540632
Cardiff Garcia offers this chart from Birinyi Associates showing that one reason stock markets are touching record highs this month is that share buybacks reached a record high back in February.
Basically when a firm makes a profit it can do one of four things with it. One is give money to its shareholders by paying dividends. One is save the cash for a rainy day. One is go out and spend the money on some investments. Last is it can spend the money buying shares in itself, letting some shareholders cash out and leaving the remaining shareholders with a scarcer (and therefore more valuable) asset.
This dynamic is one reason that even though the stock market isn't the real economy, it can be relevant to the real economy. Most business investment is internally financed—option three above. In principle, as share prices rise, option four gets less attractive and option three therefore gets more attractive. That's the theory, at any rate. When stocks are cheap, firms buy shares. When stocks are expensive, they buy capital goods. We'll see if it happens in practice.

19---The corporate buyout surge and economic parasitism, wsws
   This month has seen a surge in corporate mergers and acquisitions on a scale not seen since before the 2008 financial meltdown. Last Thursday, Berkshire Hathaway, led by multi-billionaire Warren Buffett, announced plans to buy H. J. Heinz, the food condiment maker, for $23 billion. The same day, American Airlines and US Airways announced plans for an $11 billion merger


No comments:

Post a Comment