Monday, April 22, 2013

Today's links

1---Spring swoon?, Bloomberg

The deceleration is coming in response to an identifiable cause -- the biggest federal-budget tightening in more than 60 years -- rather than inchoate fears about a break-up among countries that use the euro, a Treasury-debt default or a hard landing for China’s economy. And the U.S. looks better prepared to withstand it, thanks in part to a rebounding housing market...

Economic Drag
The drag on the economy from tax increases and spending cuts will amount to 1.5 percent of gross domestic product this year, the most since 1950, when military outlays were reduced after World War II, said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania.
That estimate includes the effect of $85 billion in automatic across-the-board government budget cuts, known as sequestration, that began on March 1. The Congressional Budget Office has estimated those reductions alone will reduce GDP this year by 0.6 percentage point.

Zandi sees growth easing to an annual pace of 1.5 percent in the second quarter from 3.4 percent in the first before picking up to 3 percent in the final three months of 2013. ...

Economists surveyed by Bloomberg have been forecasting for months that the economy would take a hit from budget belt- tightening. Initially, they foresaw the impact in the first quarter, after payroll taxes were increased by 2 percentage points at the start of the year.
Now, they see the slackening occurring this quarter, after marking up their growth estimates for the first three months of 2013. GDP will climb at an annualized rate of 1.5 percent from April through June, compared with 3 percent in the first quarter, according to the median forecast in a Bloomberg survey of 69 economists from April 5 to April 9. Growth in the second half of 2013 will average 2.4 percent.

No Shock

The federal budget tightening “isn’t a shock,” said Gus Faucher, a senior economist for PNC Financial Services Group Inc. in Pittsburgh. “Businesses are prepared for it and have taken steps, and government employees know there will be furloughs.”

2---Initial Unemployment Claims Back to Being Stuck in the Mud, economic populist



3---Michael T. Klare: Entering a Resource-Shock World: How Resource Scarcity and Climate Change Could Produce a Global Explosion, naked capitalism

Brace yourself. You may not be able to tell yet, but according to global experts and the U.S. intelligence community, the earth is already shifting under you.  Whether you know it or not, you’re on a new planet, a resource-shock world of a sort humanity has never before experienced.

Two nightmare scenarios — a global scarcity of vital resources and the onset of extreme climate change — are already beginning to converge and in the coming decades are likely to produce a tidal wave of unrest, rebellion, competition, and conflict.  Just what this tsunami of disaster will look like may, as yet, be hard to discern, but experts warn of “water wars” over contested river systems, global food riots sparked by soaring prices for life’s basics, mass migrations of climate refugees (with resulting anti-migrant violence), and the breakdown of social order or the collapse of states.  At first, such mayhem is likely to arise largely in Africa, Central Asia, and other areas of the underdeveloped South, but in time all regions of the planet will be affected.
To appreciate the power of this encroaching catastrophe, it’s necessary to examine each of the forces that are

4--More fun with R-R, CEPR

In Carmen Reinhart and Ken Rogoff's (R&R) famous and now largely discredited "Growth in a Time of Debt," New Zealand's -7.6 percent growth (wrongly transcribed as -7.9 percent) in 1951 played an outsized role in their conclusion that high debt led to sharply lower growth. This number carried inordinate weight because R&R had mistakenly left out 4 high debt years for New Zealand in which it had seen healthy growth. Using their country-weighted methodology (each country counts the same, regardless of size or years with high growth) this mistake by itself subtracted 1.5 percentage points from the growth rate of countries in years of high debt.

To make the story better, today I received a tweet that informed that the -7.6 percent growth New Zealand experienced in 1951 was not in any obvious way attributable to its high debt. In fact, the country suffered from a labor dispute that led to a strike/lockout of waterfront workers that lasted 5 months. Perhaps this dispute can be linked to New Zealand's high debt at the time, but the connection is far from obvious. This is the sort of problem you get when using very small samples

5---The Recovery Stalls, naked capitalism

And the econopundits are finally waking up to the fact that the slowdown in the rest of the world will drag on the US. 25% of S&P earnings come from Europe, for instance. From the Wall Street Journal:
Troubles overseas are threatening the U.S. recovery for the fourth year in a row. This time it’s weakening economies abroad, rather than tumbling financial markets, signaling turbulence ahead.
U.S. exports of goods to the European Union are declining outright. Growth in overall U.S. exports has been sputtering for months, after a three-year postrecession surge. And major U.S. companies are reporting increasingly dour overseas outlooks tied to the recession-plagued euro zone and slowing growth in other leading economies such as China.
The renewed fears of a global slowdown come after months of hope that a stronger recovery was finally taking shape.
“Every now and then you see a glimmer, things seem to improve, and then a little bit of bad news comes,” World Bank chief economist Kaushik Basu said...

Now the optimists are touting housing and shale gas as the drivers of recovery. Yet we are at risk of seeing a repeat of the pattern of 2010 through 2011, in which growth in the first three months fades, leading to the question as to how much of that growth was an artifact of seasonal adjustments that don’t fit well with an economy in a balance sheet recession. And the high profit levels that stock mavens have celebrated are part of the problem. We’ve never had a recovery where the labor share of GDP growth had been so low.
6---We are Essentially Rewriting Economic History', economists view

There will be a big revision of macroeconomic data in July:
Data shift to lift US economy by 3%, by Robin Harding, FT: The US economy will officially become 3 per cent bigger in July as part of a shake-up that will for the first time see government statistics take into account 21st century components such as film royalties and spending on research and development. ...
In an interview with the Financial Times, Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, said the update is the biggest since computer software was added to the accounts in 1999.
“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” said Mr Moulton.
The changes will affect everything from the measured GDP of different US states to the stability of the inflation measure targeted by the US Federal Reserve. They will force economists to revisit policy debates about everything from corporate profits to the causes of economic growth.

7---Fed Watch: Monetary Policy and Financial Stability, economists view
Tim Duy:
Monetary Policy and Financial Stability, by Tim Duy: I think it is difficult to ignore the role of asset prices in the dynamics of the past two business cycles:
Networth
If the objective of monetary policy is a combination of low inflation and unemployment, I think it is difficult to argue that the Federal Reserve pursued an overly loose policy stance in the periods of the internet and housing bubbles. Indeed, it is arguable that asset price bubbles were integral in fostering low unemployment.
With this in mind, consider this conclusion from Minneapolis Federal Reserve President Narayana Kocherlakota, speaking at the 22nd Annual Hyman P. Minsky conference:
In this way, unusually low real interest rates should be expected to be linked with inflated asset prices, high asset return volatility and heightened merger activity. All of these financial market outcomes are often interpreted as signifying financial market instability. And this observation brings me to a key conclusion. I’ve suggested that it is likely that, for a number of years to come, the FOMC will only achieve its dual mandate of maximum employment and price stability if it keeps real interest rates unusually low. I’ve also argued that when real interest rates are low, we are likely to see financial market outcomes that signify instability. It follows that, for a considerable period of time, the FOMC may only be to achieve its macroeconomic objectives in association with signs of instability in financial markets.
This sounds like Kocherlakota believes that it is not possible for the Federal Reserve to accomplish its dual mandate in the absence of asset bubbles, excessive credit growth, etc. This leads to issue of how should the Federal Reserve deal with such instability 

8---Rotation out of money market funds - where is the cash going?, sober look

9---Chechen Terrorists and the Neocons, Colleen Rowley, antiwar

For instance, see this 2004 article in the UK Guardian, entitled, “The Chechens’ American friends: The Washington neocons’ commitment to the war on terror evaporates in Chechnya, whose cause they have made their own.”
Author John Laughland wrote: “the leading group which pleads the Chechen cause is the American Committee for Peace in Chechnya (ACPC). The list of the self-styled ‘distinguished Americans’ who are its members is a roll call of the most prominent neoconservatives who so enthusiastically support the ‘war on terror.’

“They include Richard Perle, the notorious Pentagon adviser; Elliott Abrams of Iran-Contra fame; Kenneth Adelman, the former US ambassador to the UN who egged on the invasion of Iraq by predicting it would be ‘a cakewalk’; Midge Decter, biographer of Donald Rumsfeld and a director of the rightwing Heritage Foundation; Frank Gaffney of the militarist Centre for Security Policy; Bruce Jackson, former US military intelligence officer and one-time vice-president of Lockheed Martin, now president of the US Committee on Nato; Michael Ledeen of the American Enterprise Institute, a former admirer of Italian fascism and now a leading proponent of regime change in Iran; and R. James Woolsey, the former CIA director who is one of the leading cheerleaders behind George Bush’s plans to re-model the Muslim world along pro-US lines.”
The ACPC later sanitized “Chechnya” to “Caucasus” so it’s rebranded itself as the “American Committee for Peace in the Caucasus...

Shifting Lines
But officials can get confused when their former covert “assets” turn into enemies themselves. That’s what has happened with al-Qaeda-linked jihadists in Libya and Syria, fighters who the U.S. government favored in their efforts to topple the Qaddafi and Assad regimes, respectively. These extremists are prone to turn against their American arms suppliers and handlers once the common enemy is defeated.
The same MO exists with the U.S. and Israel currently collaborating with the Iranian MEK terrorists who have committed assassinations inside Iran. The U.S. government has recently shifted the MEK terrorists from the ranks of “bad” to “good” terrorists as part of a broader campaign to undermine the Iranian government. For details, see “Our (New) Terrorists, the MEK: Have We Seen This Movie Before?”...

The opportunistic neocons went on to use Iraqi ex-pat con-artist Ahmed Chalabi to gin up their war on Iraq and were SO surprised to discover him later turning on and spying on them. Years later we get Hillary feigning surprise – almost identical to Guiliani’s! – how could it be that our Libyan rebel "friends" whom we armed for our common goal of "regime change" turn against us so quickly and kill our Ambassador?! What a surprise that opportunism can run in both directions! In fact we have seen this movie so many times now that we all should be prepared for the same ending with Syria and Iran. It doesn’t take much "intelligence" to predict it will also not end well with arming the "Syrian Al-Qaeda linked rebels" or the Mujahideen-e Khalq (MEK) groups we are using to commit assassinations and other covert destabilization in Iran. Former "foreign terrorist organization" MEK just opened an office a block from the White House, celebrated by half of Washington’s neocons, politicians and "security officials" (all with their pockets full of MEK money)! Can you spell OPPORTUNISM?!
You don’t have to observe US foreign policy – and its constant, reckless efforts to achieve "full spectrum dominance" – very long to realize that it’s based on a constant flip flopping between two modes: "whack a mole" military force on the "bad terrorists" and "enemy of my enemy is my friend" arming and opportunistic exploiting of "our good terrorists." And the "bad terrorists" and the "good terrorists" frequently change spots. You’d think the public would get tired of the same plot and walk out, wouldn’t ya?!

Other very likely but terribly unfortunate outcomes of the Boston bombing will most likely be: 1) it will fuel continuation of the Authorization to Use Military Force along with drone assassinations on the "global battlefield" illegal stupidity; 2) surveillance cameras will be installed a thousand times over what they now exist in public places and 3) the FBI will argue that they need to redouble their “pre-emptive” targeting of suspects in their massive database for entrapment schemes. They will likely point to the Boston bombing as justification for continuing those wrongful, counterproductive tactics in order to “prevent” a future attack when the facts lead to precisely the opposite conclusion that should be drawn: that if the FBI, NSA, DHS etc were not wasting so much time collecting irrelevant data on innocents, they might have focused and followed up better on the Russian tip. The task of seeking a needle in the haystack is not helped by adding more hay but no one will dare whisper that.

10---Boston Bombing – Good for Israel?, antiwar
           Top Netanyahu Aide Sees Diplomatic Dividends for Marathon Attack

11---Prosecutable US Crimes against Humanity in Korea, dissident voice

12---(State Dept blowback?) War of words: The new 'Chechen terror', RT

For years the US and its intelligence services have championed the Chechen cause – legitimizing terrorism as righteous resistance. But after news that the two alleged Boston bombers were of Chechen origin, the story took on a new political dimension....

Going back further, Osama Bin Laden and the mujahideen, which came to be known as Al-Qaeda, were described as “freedom fighters” when fighting the Soviet Union, and then magically transformed into “terrorists” once they turned their ire toward the US.  What becomes clear is that the language used by the mainstream media serves the political agenda of US and the Western imperial powers.  However, language is only one facet of this issue, as the relationship between the United States and terrorism in Chechnya is much more than mere words.

US connections

Despite more than a decade of protestations from Moscow, the United States has long supported the cause of Chechen terrorism under the guise of “freedom fighting”.  In an interview with CNBC on Friday April 19th, former New York Mayor and prominent right wing politician Rudolph Giuliani stated, “We’ve been, I’m not going to say sympathetic with them, but we’ve certainly been critical of Putin and how far he’s gone in dealing with Chechnya…I would imagine there are people in Russia who believe that [the US] has been somewhat unrealistic about the Chechens...

13---Macro data plunge, zero hedge

In the last few weeks, US macro data has missed expectant extrapolated hope expectations time after time. The deterioration has been very rapid, starting around the third week of March, and has plunged to the worst levels since the ubiquitous equity rally began in November 2012. Combined with dismal micro- performance (and outlooks) from the likes of IBM, GE, and CAT, is there any doubt that this 'market' is disconnected not just from current reality but that 'priced-in' hopes for a hockey-stick-recovery seem improbable at best and exuberant at worst?



The US equity 'market' vs Bloomberg's US Macro Economic Surprise Index...



14---Existing Home Sales in March: 4.92 million SAAR, 4.7 months of supply, calculated risk

The NAR reports: March Existing-Home Sales Slip Due to Limited Inventory, Prices Maintain Uptrend
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 0.6 percent to a seasonally adjusted annual rate of 4.92 million in March from a downwardly revised 4.95 million in February, but remain 10.3 percent higher than the 4.46 million-unit pace in March 2012....
supply.
Existing Home Sales

.

 This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March 2013 (4.92 million SAAR) were 0.6% lower than last month, and were 10.3% above the March 2012 rate.
 
15---American democracy in shambles, wsws
 
With the imposition of a state of siege in Boston, a historical threshold has been crossed. For the first time ever, a major American city has been placed under the equivalent of martial law. The already frayed veneer of a stable democracy based on constitutional principles is in shreds...

There is no precedent for the massive mobilization of military, police and intelligence forces carried out April 19 in Boston and its environs, which encompass more than 1 million people. Thousands of heavily armed police and National Guard troops occupied the streets, backed up by machine gun-mounted armored vehicles, Humvees and Black Hawk helicopters. As the WSWS noted, the scene resembled the US occupation of Baghdad.

The people were told to remain indoors while police, with automatic weapons drawn, conducted warrantless house-to-house searches. Some of those who strayed out of doors were surrounded by police and ordered to go home. The mass transit system was shut down; passenger train service along the northeastern corridor was halted; businesses, universities and other public facilities were closed.

Boston—the cradle of the American Revolution, one of the most liberal cities in one of the most liberal states in the US, the country’s premier center of higher education—was turned into an armed camp. This staggering mobilization of federal, state and local police power was deployed to track down a 19-year-old youth.
So far, there has been no protest from within the political or media establishment to the lockdown....

The events in Boston have laid bare the modus operandi for the establishment of dictatorial forms of rule in the US. One or another violent act carried out by disoriented or disaffected individuals, perhaps with the help of elements within the state, is declared a terrorist event. A state of siege is imposed suspending democratic rights and establishing military-police control.
So deeply implicated are all of the organs of the state in these plans that little in the outer trappings of political life would have to be changed. It would not be necessary to overthrow the president or shut down Congress. These institutions would readily play their assigned role, and the imposition of a military dictatorship would be sanctioned by the US Supreme Court.

The media would simply continue to do what it normally does—functioning as a de facto arm of the state and providing the necessary pretexts, while whipping up the requisite fear and panic within the public.

The very fact that the entire establishment agrees that democratic norms cannot be maintained in the face of violence by a handful of people testifies to the advanced stage of the breakdown of American democracy.

So disproportionate was the scale of the response to the actual level of the threat that the conclusion cannot be avoided that the Boston bombings were the pretext for, not the cause of, the lockdown. The police-state mobilization was the culmination of more than a decade of intensive planning and the ceaseless buildup of the repressive forces of the state since 9/11, carried out under the cover of the “war on terror.”

The operation is not an expression of strength or confidence on the part of the American ruling class. On the contrary, it reflects the near panic of the corporate-financial elite in the face of mounting social discontent, exacerbated by extreme nervousness over the precarious state of global financial markets. What haunts the ruling class is not the fear of a terrorist attack, but dread of a new financial collapse, with the likely consequence of massive social upheavals...

The media seeks to create an aura of popular support for martial law-type measures. But the initial confusion will give way to mounting disquiet. The abrupt shift in the forms of rule will create opposition in the population, above all in the working class.

16---Unanswered questions in Boston bombings, wsws

“It is a setup,” she added. “He was controlled by FBI for three to five years. They knew what my son was doing. They knew what actions and what sites on the Internet he was going… So how could this happen? How could they, they were controlling his every step, and they are telling today that this is a terrorist act.”

In an interview with the Reuters news agency, the young men’s father, Anzor Tsarnaev, said that the FBI had visited the family’s home in Cambridge, Massachusetts at least five times looking for Tamerlan. He said: “They said there were doing preventive work. They were afraid there might be some explosions on the streets of Boston.”

The father said that he had been present at one FBI interrogation in which agents had told his son, “We know what sites you are on, we know where you are calling, we know everything about you. Everything.” Like the mother, he insisted that his sons had been “framed up.”...

In all but a handful of cases, every major terrorist plot reported in the US over the past decade has been the product of a sting operation organized by the FBI or other police agencies. In almost all of these cases, those arrested and prosecuted for terrorism would never have had either means or even the intention of carrying out such acts without the guiding hand of covert informers and agent provocateurs.
This pattern goes back at least to the 1993 bombing of the World Trade Center, in which a former Egyptian army officer, Emad Salem acting as a paid FBI informant, had actually participated in building the bomb, claiming that the original plan had been to substitute harmless powder for the explosives.

17---Increased tensions at G-20, IMF meetings, wsws

18---Fitch: Recent Price Gains May Not Be Here to Stay, DS News

While some might be rejoicing at the recent rising home prices and rising home sales seen across the nation, Fitch Ratings “still views these gains cautiously.” In fact, the agency predicts price gains will slow and perhaps even reverse over the next year.
Fitch expects a price “trough in the middle of 2014” but suggests inflation will keep prices from falling more than 3.5 percent.

19--Underwater: The Netherlands Falls Prey to Economic Crisis, der Speigel

 

 


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