Saturday, May 18, 2013

Today's links

1---A Simple Graph That Should Silence Austerians and Gold Bugs Forever, Atlantic

BKZnEL8CcAAcJWy.png_large.png
It's not just that the U.S. had the shallowest recession, or the best recovery, among similar countries in Europe and Japan. It's this. We had the shallowest recession and the best recovery primarily because we (a) control our own currency and (b) used aggressive monetary policy to save the banks and lower interest rates while running high deficits.

2---Too Much Talk About Liquidity, Krugman, NYT

Antonio Fatas is annoyed at Gillian Tett, who talks to the I-see-bubbles crowd and assumes that they have The Truth — namely, that those crazy central banks are flooding the world with liquidity, driving asset prices to crazy levels, and it will all end in terrible grief. Pretty much the same discussion we’ve been having about the armageddon hedgies.
As Fatas says, it’s hard to see what exactly in the data supports this view. Short-term interest rates are near zero because the economy is so depressed, and will stay that way for a long time. Long-term rates are low because people, rightly, expect short-term rates to stay low for a long time. What about stocks? Here’s profits versus the S&P 500:
Does this shout “bubble” to you?

3--Obama's IRS enemies list, naked capitalism

The IRS continues to mislead the public, as Fox News reported that at least 471 tax-exempt organizations, not the 300 admitted to by the IRS, were examined with “extra scrutiny.” Then Treasury Secretary Timothy Geithner must have received a copy of the 2011 Miller memo, because it was written on Department of Treasury stationary and Shulman and Miller reported to him. Therefore, to find out if the IRS has been running a massive enemies list for the White House, Congress must demand that Timothy Geithner testify under oath.

4---The plan to steal deposits, naked capitalism

I wonder as we look to Cypriot savers taking a “haircut”, if we are seeing the shape of what will happen in the next crisis. The essence of a debt for equity swap is that the obligation that goes with debt is taken away. Calling the confiscation of bank deposits equity instead of theft would be a way to prettify the actions of the hyper-usurers. Michel Chossudovsky thinks that Cypress is a dress rehearsal  for things to come. A “savings heist” in European and American banks deemed too big to fail.
“According to the Institute of International Finance (IIF), “hitting depositors” could become the “new normal” of this diabolical project, serving the interests of the global financial conglomerates.
This new normal is endorsed by the IMF and the European Central Bank. According to the IIF which constitutes the banking elites mouthpiece, “Investors would be well advised to see the outcome of Cyprus… as a reflection of how future stresses will be handled.” (quoted in Economic Times, March 27, 2013)
“Financial Cleansing”. Bail-ins in the US and Britain
What is at stake is a process of “financial cleansing” whereby the “too big to fail banks” in Europe and North America (e.g. Citi, JPMorgan Chase, Goldman Sachs, et al ) displace and destroy lesser financial institutions, with a view to eventually taking over the entire “banking landscape”.
The underlying tendency at the national and global levels is towards the centralization and concentration of bank power, while leading to the dramatic slump of the real economy...

There is little doubt that the problems of the crisis have not been addressed. The central issue is that governments no longer govern the financial system, they have instead allowed private actors, traders and banks mostly, to make up their own rules – all under the guise of “financial de-regulation” which is a logical nonsense because money IS rules.
5---ECB to become chief euro bank supervisor: "One bank to rule them all", RT

6---Terrorist Plots, Hatched by the F.B.I., NYT

7---Over 160 Killed in Three Days of Iraqi Sectarian Violence, antiwar
           Scores Killed as Sunni Mosques Bombed

8---Tepid Profits, Roaring StocksMI-BW020A_MKTLE_G_20130516183604
Source: WSJ

9--Depression in the EZ, Atlantic

10---Why No One Is Celebrating CBO's New And Much Lower Deficit Estimate, capital gains

The year-by-year deficit is quickly being replaced by the national debt as the number one fiscal issue. This isn't surprising: the deficit is falling while the debt is rising and the deficit is in billions while the debt is in trillions. The fact that CBO projects the debt will soon be in a range that most economists would call insignificant makes no difference when the multi-trillion dollar debt sounds so scary

11---Fed Watch: 'Dollar Up' and 'Confidence Boom?', Fed Watch

12---5 Questions That Every Market Bull Should Answer" discussing the disconnect between the "have's" and the "have not's" stating, street talk live
"Suppressed wage growth, layoffs, cost-cutting, productivity increases, accounting gimmickry and stock buybacks have been the primary factors in surging profitability. However, these actions are finite in nature and inevitably it will come down to topline revenue growth. However, since consumer incomes have been cannibalized by suppressed wages and interest rates - there is nowhere left to generate further sales gains from in excess of population growth."

This is why the gap between corporate profits and the number of working employees is the highest level on record.  Fewer workers, higher productivity and longer hours for the same pay, or less, equals higher corporate profits.  This is great for executives, primarily the top 10% of wage of earners, who are compensated from rising share prices, bonuses and other performance related compensation.  However, for the "working stiff," there is little reward for their labor.
 

Profits-Employees-040113

 
Among the many significant findings in the study is that Americans born after 1955 carry more debt than have previous generations, and that this age group faces a severe decline in living standards upon retirement.
 
 
The desire to push defaulting homes into shadow inventory and keep them off the market is manifesting itself into new programs. Let’s briefly review, remember when banks didn’t want borrowers to default and when the borrower defaulted, banks had very strict guidelines to get out default and back into the good graces of the bank? Banks didn’t even want to publicize the fact they were having defaults or foreclosures to give appearance of financially soundness of their institution....
 
 Fannie Mae and Freddie Mac is designing this program not to help out the borrower, but really help out the banks. If it was meant to assist the borrower then ALL borrowers regardless of their Loan to Value ratios would be eligible for the program. If the bank has loan to value of less 80% on an a outstanding loan they could foreclose on the recoup their losses. This program is helping banks.
 
 
SoCal home prices are on a tear.  The median priced L.A. County home is now up to $395,000 (up from $310,000 last year).  This is a 27 percent year-over-year gain.  Regardless of market mix, this pace is fully unsustainable.  Good luck trying to time this rollercoaster ride!
Foreclosure resales are now a tiny part of the market making up 12 percent of sales.  Jumbo loans and all cash offers are a big part of the home sale mix and these are going to either investors or higher income households.

 

Corporate profits, FRED

FRED Graph

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