Wednesday, May 22, 2013

Today's links

1---Bank of Japan vows market steps to curb bond turbulence, Reuters

While the government's aggressive policies have sent stocks soaring to 5-1/2-year highs and the yen tumbling to a 4-1/2-year low against the dollar, turmoil in the Japanese government-bond market in recent weeks has cast a cloud over the effectiveness of the BOJ's easing, a key element of "Abenomics" that is showing early signs of lifting the world's third-largest economy from a two-decade funk....

Indeed, Kuroda played down any economic impact from the bond moves, where the benchmark yield recently had its biggest three-day spike in a decade as investors struggle to cope with the overwhelming impact of the BOJ's radical money expansion...

The purchases, running about 7.5 trillion yen a month, were intended to lower rates across the yield curve. But despite the BOJ buying the equivalent of 70 percent of new government-debt issuance, the policy has caused yields to rise erratically on worries that the purchases are distorting the market and sapping liquidity, according to some analysts.
...
The recent surge in the 10-year JGB yield to a one-year high of 0.92 percent "does not seem to count as a leap in long-term bond yields for Kuroda," she said....

The BOJ unleashed the world's most intense burst of stimulus last month, promising to inject $1.4 trillion into the economy in less than two years to meet its pledge of achieving 2 percent inflation in roughly two years.
Doubts have emerged over whether that time frame is realistic....

Japan's economy expanded at an annualized 3.5 percent in the first quarter, the fastest in a year, offering more evidence that Abe's sweeping stimulus is beginning to work.
But the gains remain tentative. Abenomics got a reality check on Wednesday as April exports grew less than expected and imports surged on expensive energy imports, blowing out the trade deficit to the biggest April gap ever.
A sustained sharp rise in bond yields would hurt corporate capital spending, the soft spot of an otherwise more robust economy, and strain Japan's already tattered finances by boosting the cost of funding its huge debt pile. ($1 = 102.9750 Japanese yen)

2---The Housing Mirage, Time

3--Why Suburban Poverty Is Less Visible and More Insidious, Atlantic

4---So far in 2013, inventory is up 17.7%, cal risk

So far in 2013, inventory is up 17.7%. This is well above the peak percentage increases for 2011 and 2012 and suggests to me that inventory is near the bottom. It now seems likely - at least by this measure - that inventory bottomed early this year (it could still happen early next year). 

It is important to remember that inventory is still very low, and is down 15.1% from the same week last year according to Housing Tracker.  Once inventory starts to increase (more than seasonal), buyer urgency will wane, and I expect price increases to

5---anne said... economists view (comments section)
                                            
We are passing through a profound bull market in stocks, having finished a bull market in bonds, but this bull market in stocks that is being driven by the Federal Reserve or by investor's anticipation of Fed policy is different than any other I have found in that stock market valuations are higher than at any other time during which the Fed has been trying to drive economic growth....

Analyst after analyst has been justifying stock market valuations, with Greg Mankiw of Harvard just telling us that Federal Reserve research shows these are the best stock market valuations of the last 50 years. Well, I know what interest rates are, I know what corporate profits have been, and I know stock market valuation history from the perspective of Robert Shiller and while the stock market may increase in price for years to come valuations are really high unless "it really is different this time" and a model to convincingly explain the difference this time has to be shaped....

I can add that Dean Baker thinks the stock market relatively cheap, Brad DeLong thinks so, Paul Krugman thinks so.... What these bullish analysts are not doing however is explaining why they are turning away from the work of Robert Shiller who has been so right in modeling the market for so long.
I am not interested in market timing analysis, which strikes me as merely foolish, but in why I should think this market better valued than in say 1980 when price earnings ratios were in the 8s and dividends were over 5.5%. Interest rates were lots higher then, but so what?

6---Government Failure vs. Market Failure, jared Bernstein

A good solution for that is to set triggers based on real variables to shut off your stimulus, as the Federal Reserve has done, announcing that wind down will commence (roughly) when unemployment goes below 6.5% or inflation about 2.5%.

What’s the empirical problem?  In fact, policy makers have shut off the stimulus—and far too soon!  The Recovery Act has gone the way of Monty Python’s parrot, as has the payroll tax break.  States have cut back on extended UI benefits and the sequester is taking a further whack at UI, despite historically very high levels of long-term unemployment.

7--A Keynesian Victory, but Austerity Stands Firm, NYT

Fans of John Maynard Keynes, the renowned early 20th-century economist who developed the theory on how nations could dig themselves out of an economic downturn, have been running victory laps since the collapse last month of the claim by the Harvard economists Carmen M. Reinhart and Kenneth S. Rogoff that economies tend to slow significantly after government debt reaches 90 percent of gross domestic product.
      
Then, as if on cue, the number-crunchers in Brussels announced last week that the economy of the euro area countries — which have been following a decidedly non-Keynesian path — shrank yet again at the beginning of the year. It was the region’s sixth quarterly contraction in a row.
      
The confluence of events provided further evidence of Keynes’s central proposition: when consumers and businesses set out to reduce their debt burden, and private spending and investment stall, it is the government’s job to borrow, spend and pick up the slack.
 
 
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.
lr4

“Welfaring Of America

9---Emergency Meeting: A workers program to answer the crisis in Detroit, wsws

10---Argentina’s General Videla and the “war on terror”, wsws

He was, after all, a pioneer in the “war on terrorism,” writing the textbook on methods of extra-constitutional rule, repression and state violence that have been largely embraced by ruling circles in Washington and elsewhere. Undoubtedly, there are those engaged in this line of work today who see him as something of a visionary.

Three days before his death, the ex-dictator appeared as the principal defendant before an Argentine court hearing charges relating to Operation Condor, a joint endeavor by Latin America’s ruling dictatorships of the 1970s to hunt down and murder one another’s opponents, wherever they might be found.

As in previous trials, Videla claimed a loss of memory about the events of that period, while unconditionally defending the actions taken by his regime and the military as necessary in an “anti-terrorist war.”
Operation Condor involved the combined efforts of military regimes in Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay, with indispensable logistical support and military aid from the Pentagon and the CIA....

All of the Condor regimes were staffed by senior military personnel who had been trained at the Army’s School of the Americas in Panama and other US military facilities, and all of them had US military advisers, received substantial US military aid, and hosted well-staffed CIA stations.
Previously secret State Department documents make it clear that Washington understood Videla’s intentions from the beginning and fully supported them.
...

The repression had definite class and economic aims. The dictatorship managed to cut wages in half within its first year, reducing workers’ share of the national income from 48.5 percent to only 29 percent. Universal health care was abolished in favor of for-profit insurance companies, and other forms of social assistance were eliminated or drastically curtailed. In essence, the junta oversaw a vast transfer of social wealth from Argentine working people to the country’s ruling class, the transnational corporations and international finance capital.

This is not merely a matter of historical interest. Faced with the deepest economic crisis since the Great Depression of the 1930s, the ruling establishments in the US and internationally are attempting to effect a similar transfer of social wealth today. And, under the mantle of a “war on terror”—the same justification given by Videla—the US government, beginning with the Bush administration and accelerating under Obama, has already put in place the legal and institutional framework for Argentine-style repression.

The Obama administration has arrogated to itself the power to subject US citizens to indefinite military detention without charges or trials, i.e., to conduct “disappearances.” A White House that regularly draws up “kill lists” for assassinations and massacres abroad has specified that it can order such killings of American citizens residing within the US itself if it deems them “terrorist” enemies of the state.
Those who look at the horrors of Argentina under Videla’s junta and think, “It can’t happen here,” are only fooling themselves.

11---Hundreds killed in upsurge of terror bombings, sectarian killings in Iraq, wsws

The US-led war in Syria and the related preparation by Washington and its European allies for war with Iran are tearing apart the various factions underlying the regime of Iraqi Prime Minister Nouri al-Maliki.

Washington and its allies are arming ultra-right Islamist fighters tied to Al Qaeda in Iraq, such as the Al Nusra Front, in a war broadly aimed at isolating the Shia regime in Iran and the Shia-led Syrian regime of Syrian President Bashar al-Assad. This policy of confrontation with Iran brings Washington into conflict, however, with the Shia-majority Maliki government that it helped to set up in Iraq.

The Maliki government has refused to back demands for Assad’s ouster and has forged close ties with Iran. Washington has accused Iraq of tolerating Iranian shipments of weapons to Syria through Iraqi airspace; some Iraqi Shia militias are reportedly fighting on the side of Syrian President Bashar al-Assad’s regime.

The escalating tensions reflect the reactionary character of the regime US imperialism set up in Iraq, in a war that cost over a million lives and was fought based on US plans for a sectarian-based “partition” of Iraq. This allowed Washington and its allies to pursue a strategy of divide and rule inside Iraq, and oversee the looting of its oil.

12---Sibel Edmunds; Al Qaida, Heroin, CIA etc, counterpunch

In a recent  book Classified Woman, Sibel Edmonds, a former translator for the FBI, describes how the Pentagon, CIA and State Department maintained intimate ties to al-Qaeda militants as late as 2001. Her memoir, Classified Woman: The Sibel Edmonds Story, published last year, charged senior government officials with negligence, corruption and collaboration with al Qaeda in illegal arms smuggling and drugs trafficking in Central Asia.

In interviews with this author in early March, Edmonds claimed that Ayman al-Zawahiri, current head of al Qaeda and Osama bin Laden’s deputy at the time, had innumerable, regular meetings at the U.S. embassy in Baku, Azerbaijan, with U.S. military and intelligence officials between 1997 and 2001, as part of an operation known as ‘Gladio B’. Al-Zawahiri, she charged, as well as various members of the bin Laden family and other mujahideen, were transported on NATO planes to various parts of Central Asia and the Balkans to participate in Pentagon-backed destabilisation operations.

According to two Sunday Times journalists speaking on condition of anonymity, this and related revelations had been confirmed by senior Pentagon and MI6 officials as part of a four-part investigative series that were supposed to run in 2008. The Sunday Times journalists described how the story was inexplicably dropped under the pressure of undisclosed “interest groups”, which, they suggest, were associated with the U.S. State Department....

Other intelligence experts agree that Edmonds had stumbled upon a criminal conspiracy at the heart of the American judicial system. In her memoirs, she recounts that FBI Special Agent Gilbert Graham, who also worked in the Washington field office on counter-intelligence operations, told her over a coffee how he “ran background checks on federal judges” in the “early nineties for the bureau… If we came up with shit – skeletons in their closets – the Justice Department kept it in their pantry to be used against them in the future or to get them to do what they want in certain cases – cases like yours.”A redacted version of Graham’s classified protected disclosure to the Justice Department regarding these allegations, released in 2007, refers to the FBI’s “abuse of authority” by conducting illegal wiretapping to obtain information on U.S. public officials....

Al-Qaeda: Enemy or Asset?
In her interview, Edmonds  insisted that after its initial exposé, the Times‘ investigation had gone beyond such previous revelations, and was preparing to disclose her most startling accusations. Among these, Edmonds described how the CIA and the Pentagon had been running a series of covert operations supporting Islamist militant networks linked to Osama bin Laden right up to 9/11, in Central Asia, the Balkans and the Caucasus.

While it is widely recognised that the CIA sponsored bin Laden’s networks in Afghanistan during the Cold War, U.S. government officials deny any such ties existed. Others claim these ties were real, but were severed after the Soviet Union collapsed in 1989.

But according to Edmonds, this narrative is false. “Not just bin Laden, but several senior ‘bin Ladens’ were transported by U.S. intelligence back and forth to the region in the late 1990s through to 2001″, she told this author, “including Ayman al-Zawahiri” – Osama bin Laden’s right-hand-man who has taken over as al-Qaeda’s top leader.

“In the late 1990s, all the way up to 9/11, al-Zawahiri and other mujahideen operatives were meeting regularly with senior U.S. officials in the U.S. embassy in Baku to plan the Pentagon’s Balkan operations with the mujahideen,” said Edmonds. “We had support for these operations from Pakistan and Saudi Arabia, but the U.S. oversaw and directed them. They were being run from a secret section of the Pentagon with its own office”.

13--Wages vs exec pay, Big Picture

Caterpillar’s Doug Oberhelman: Manufacturing’s MouthpieceChart
Source: Businessweek

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