Monday, April 8, 2013

Today's links

1---Yen sinks to four-year low on Japan stimulus, Telegraph

Japan's currency on Monday slipped to its lowest level against the dollar in almost four years, as the country's central bank embarked on its latest aggressive round of stimulus measures.

2---Obama administration pushes banks to make home loans to people with weaker credit, WA Post

3---Underwater: The Netherlands Falls Prey to Economic Crisis, Der Speigel

The Netherlands, Berlin's most important ally in pushing for greater budgetary discipline in Europe, has fallen into an economic crisis itself. The once exemplary economy is suffering from huge debts and a burst real estate bubble, which has stalled growth and endangered jobs....

An Economy on the Brink
More than a decade ago, the Dutch central bank recognized the dangers of this euphoria, but its warnings went unheeded. Only last year did the new government, under conservative-liberal Prime Minister Mark Rutte, amend the generous tax loopholes, which gradually began to expire in January. But now it's almost too late. No nation in the euro zone is as deeply in debt as the Netherlands, where banks have a total of about €650 billion in mortgage loans on their books.
Consumer debt amounts to about 250 percent of available income. By comparison, in 2011 even the Spaniards only reached a debt ratio of 125 percent.

4---The Missing Workforce: It's Worse Than the Post Says, CEPR

I forget to mention, the reason that so many people are just dropping out of the workforce now is the shortening of the period of extended unemployment benefits. As long as people are receiving unemployment insurance they have to be looking for work. When their period of eligibility ends, most people just drop out of the labor force. The period of extended benefits was shortened in most states at the end of 2012. As a result, many people went from being classified as unemployed (no job, but looking for work) to being out of the labor force (no job and not looking for work). This was reflected in a sharp drop in January in both the average and median duration of unemployment spells, since many of the people who had been out of work longest were no longer counted as unemployed.

5---Housing Prices Are on a Tear, Thanks to the Fed, WSJ

The U.S. housing market has broken out of a deep slump, and prices are shooting up faster than anyone thought possible a year ago. For many homeowners, that is a cause for celebration.
But the speed at which prices are rising is prompting murmurs of concern that the Federal Reserve's campaign to reduce interest rates could be giving the housing market a sugar high.
Prices of existing homes rose 10% in February nationally from a year ago. They have been rising during the seasonally slow winter months—and they show signs of jumping further as the spring buying season gets under way. What's going on?...

The impact of low mortgage rates is profound. Before the Fed began buying mortgage-backed securities in late 2008, rates for 30-year fixed mortgages stood at around 6.1%, and a borrower who could qualify for a $1,000 monthly payment could get a $165,000 mortgage. Today, that same borrower, at a 3.5% rate, can borrow as much as $222,000. In other words, the Fed's low-rate campaign has increased purchasing power by a third.

So is this the beginning of another bubble? Not really. For now, home prices on a national basis are still below their long-run average relative to incomes. "The recovery is solid. There are pure fundamentals you can point to," says John Burns, chief executive of a real-estate consulting firm in Irvine, Calif.
But he says the housing market is turning up sharply, "hockey-sticking faster than it otherwise would," because of investors, low inventories and low mortgage rates.

6---Behind the North Korean Crisis, consortium news

All we see is media reporting that singularly ascribes blame to North Korea, which is portrayed as a kind of unquestionable evil, so what the U.S. is doing in response to the supposed provocation seems eminently justified. I think we are in a crisis point.  It doesn’t feel dissimilar to the kind of media rhetoric that surrounded the run-up to the U.S. invasion in Iraq. During that time also, there was a steady drumbeat to war. …

If we were to look at the facts, what do those facts tell us? I will give one example of the inverted logic that is operative, coming out of the media and U.S. administration. In a recent Pentagon press conference, [Defense Secretary] Chuck Hagel was asked whether or not the U.S. sending D2 stealth bombers from Missouri to fly and conduct a sortie over South Korea and drop what the DOD calls inert munitions in a simulated run against North Korea could be understood as provocative. He said no, they can’t be understood as provocative. And it was dutifully reported as such.

What we have is a huge informational landscape in which the average person who listens to these reports can’t make heads or tails of what is happening. What has happened since Kim Jong Un has come into his leadership position in North Korea is that the U.S. has had a policy of regime change.
We tend to think of regime change operations and initiatives as a signature or hallmark policy of the Bush administration. But we have seen under President Barak Obama a persistence of the U.S. policy of getting rid of those powers it finds uncooperative around the world. To clarify what I mean, after Kim Jong Il passed away [in December 2011], the U.S. and South Korea launched the biggest and longest set of war exercises they ever conducted. And for the first time it openly exercised O Plan 5029, which is a U.S. war plan that essentially simulates regime collapse in North Korea. It also envisions U.S. forces occupying North Korea.

What is routine during these war exercises, which are ongoing right now, as we speak, is they simulate nuclear strikes against North Korea. These workings are a combination of simulated computer-assisted activity as well as live fire drills. Last year, the first year of Kim Jong Un’s leadership, a South Korean official was asked about the O Plan 5029 and why he was exercising this regime collapse scenario.  He said the death of Kim Jong Il makes the situation ripe to exercise precisely this kind of war plan.

It’s almost impossible for us in the United States to imagine Mexico and the historic foe of the U.S., Russia, conducting joint exercises that simulate an invasion of the United States and a foreign occupation of the United States.  That is precisely what North Korea has been enduring for several decades.

7---Korean nuke conflict may make Chernobyl look like ‘fairytale’ – Putin, RT

Most of the North Korean statements are conditional, talking about retaliation attack rather than an assault, Tim Beal, an Asia expert who specializes in North Korea, told RT.

“If you attack us with conventional weapons, then since we are weak the only thing we can do is to attack with nuclear weapons,” he explained Pyongyang’s position.

Beal said that North Korea is really concerned with US military drills in the region, fearing the aggression.

“There is a real fear in Pyongyang that one of these days Americans will actually [attack North Korea]. These are exercises because they`ve got purpose,” he asserted.

8---Why has the US broad money supply flat-lined in 2013?, sober look

The US money indicators have been showing something odd in the last few months. While the monetary base (M0) has been rising sharply due to increasing bank reserves (the liability side of the Fed's balance sheet), the broader money supply has stalled.
Some attribute this to limited bank lending driving the so-called velocity of money lower, "trapping" liquidity from entering the broader economy. That would explain the growing monetary base and stagnant M2 and MZM.

But stalled credit growth can not be the explanation - simply because bank lending in the US continues to increase at a fairly constant pace since mid 2011...
The answer has to do with cash balances, particularly in money market funds. The amount of cash in dollar money market funds has declined sharply since the beginning of the year. The retail accounts show a particularly large relative drop.
In preparation for higher federal taxes, both individuals and institutions took capital gains, received special dividends, and pushed incomes into 2012 where possible (see discussion). And these accounts have been deploying this cash from the beginning of the year - with a big chunk of it apparently going to equities. That should explain part of the equities rally we've had this year.

In fact a closer look at the broad money supply trend shows that the growth has been fairly linear except for the late 2012 jump which has dissipated this year. That's why the broad money supply looks flat from the beginning of the year. Here is another example of "unintended consequences" of government policy and policy uncertainty.
Now that the excess liquidity has essentially been used up, what does it say about the stock market rally going forward?
9---It’s hard to explain what Abenomics is, so we drew you a picture, Quartz
10---Japan’s extensive infrastructure casts doubt over targets, Reuters
11---Abenomics and the Japanese Economy, CFR
12---Poverty Spikes In America … While the Government Throws Money at the Super-Elite,  Washingtons Blog
13---Federal Government Workers Report Worse Hiring Situation, gallup
Nongovernment worker hiring situation generally steady
Federal government workers reported a significantly worse hiring situation at their places of employment in the initial month of the federal budget sequester. The sharp drop in the Job Creation Index among federal government workers means that an already weak employment situation for federal workers has gotten worse.

At the same time, nongovernment workers report much more robust hiring activity, and because federal government workers account for a small percentage of all U.S. workers, the national jobs situation still appears to be relatively strong.

Clearly, the future direction of U.S. job creation will be largely tied to the course of nongovernment hiring, but a continued weak federal government hiring situation could hold back U.S. job growth overall. Even if Congress and the president agree on legislation to override the sequester, it is likely that any new budgets passed in the near term will attempt to limit government spending, which in turn means that federal government hiring could remain slow for quite some time.

14---Obama Drops Stimulus for Benefit Cut to Woo Republicans, Bloomberg

15---US threatens war with North Korea, demands China cut off support, wsws

If war started, they write, given Pyongyang’s military weakness, “North Korea’s inner circle would face a grave decision: how to avoid the terrible fates of such defeated leaders as Saddam Hussein and Muammar al-Gaddafi.” Lieber and Press see two possibilities for Pyongyang’s leaders to avoid murder at the hands of US and South Korean forces: a deal for them to flee to Beijing, or an attempt to deter US military action by using North Korea’s nuclear bombs.

On this basis, they argue for a policy of pressuring Beijing to help Washington organize the demise of the Pyongyang regime and the flight of its leaders to China: “American and South Korean leaders should urge China to develop ‘golden parachute’ plans for the North Korean leadership and their families… In the past, China has been understandably reluctant to hold official talks with the United States about facilitating the demise of an ally. But the prospect of nuclear war next door could induce Beijing to take more direct steps.”

These lines bluntly spell out the nuclear blackmail with which Washington is threatening Beijing: China can either face nuclear war, or acquiesce to regime change in Pyongyang and a shift of Chinese foreign policy more favorable to US imperialism. In seeking to intimidate Beijing, US imperialism is playing for the highest stakes—not only geo-strategic dominance in East Asia, but in the Middle East and the entire world economy

16---Oppose the bankers’ dictatorship in Detroit!, wsws

What is happening to Detroit is a social crime, which will be used as a model throughout the United States. The closing of public schools, cuts to fire and ambulance service and the shutoff of electricity and gas have already produced tragedy. A new round of cuts will eliminate whatever social protections remain and condemn thousands more to an early grave....

A global crisis
What is happening in Detroit is an expression of the crisis of the capitalist system and the decay and parasitism of the American ruling elite. Over the last three decades, the capitalist class has systematically shut down basic industries and shifted investment into the stock market, derivatives and other financial swindling, which produce nothing except massive profits for the super-rich.

In 2008, the speculative bubble on Wall Street came crashing down. The response of first Bush and then Obama was to hand over trillions of dollars to the banks. Not a single banker has gone to jail for their crimes. On the contrary, corporate profits, stock markets and executive pay have fully recovered, and social inequality has grown to its greatest since the Great Depression of the 1930s.
All across the country and around the world, the situation is the same: from the shutdown of public schools in Chicago, Philadelphia and New York, to the slashing of Medicare, Medicaid and Social Security by the Democrats and Republicans in Washington, to the imposition of depression-like conditions in Greece and Cyprus.

In Europe, as in Detroit, the financial elite is resorting to increasingly dictatorial forms of rule to enforce measures overwhelmingly opposed by the population. The savings of workers and middle-class people are threatened with seizure, pensions are robbed, health care and public education systems dismantled and ever more money poured into the bank accounts of the financial aristocracy.

17---Obama’s second term: a new stage in the social counterrevolution, wsws
Only three months into President Barack Obama’s second term, the character of the next four years has been clearly demonstrated in the actions taken so far: an intensification of the social counterrevolution in the United States, the expansion of US militarism, and an unprecedented assault on democratic rights.

The administration’s role as a direct agent of the banks is most clearly expressed in domestic policy. After handing trillions of dollars to the banks, producing soaring stock markets and record profits, the corporate and financial elite is determined to make the working class pay...

The budget comes after Obama signed into law the “sequestration” cuts that include unpaid furloughs (amounting to wage cuts of 20 to 30 percent) for over a million federal workers, cuts to extended unemployment benefits by 11 percent, a freeze in pay for federal workers and across-the-board cuts to social programs that are having devastating consequences for millions of people across the country.

As a result of the sequester cuts, over 600,000 low-income women and children are being cut off from WIC, the Supplemental Nutritional Program for Women, Infants, and Children; 125,000 families are being deprived of federal housing assistance; and 1.2 million students will be affected by cuts to education subsidies.

These federal actions are accompanied by drastic cuts at the state and local levels. Last month, Michigan Governor Rick Snyder appointed an emergency manager to assume virtually unlimited powers over the city of Detroit. The emergency manager, Kevyn Orr, is tasked with ensuring the flow of money to Wall Street bondholders by ripping up workers’ contracts and privatizing the city’s assets. Such actions are viewed as a model for future measures throughout the country.

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