Thursday, May 23, 2013

Today's links

1---World shares slump on U.S. stimulus, growth fears, Reuters

World stocks fell and measures of investor risk aversion surged on Thursday on signs the U.S. central bank may soon start scaling back the support measures that have been driving global assets higher.

Unexpected weakness in China's economy further fuelled the sell-off, which sent Japanese shares diving to their biggest one-day fall in two years, while data suggesting the euro zone economy shrank again in the second quarter also hit confidence.

"This is a critical period now for the markets. Investors have to adjust for the fact that the Fed's quantitative easing is not going to support the equity markets for an unlimited period," said Nick Beecroft, senior market analyst at Saxo Capital Markets.

Stocks have soared as a wall of central bank money has coursed around the global financial system seeking returns. The prospect of the world's most important central bank slowly turning the taps off could mark a profound turning point, although its officials have been at pains to stress that no action is likely for months

2---Fed Pours Huge Sums Into Foreign Bank Coffers, Washington's blog

a study of 124 banking crises by the International Monetary Fund found that bailing out banks which are only pretending to be solvent  – like most of the big banksharms the economy.
And what a farce that:
The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts...
  • Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”
  • The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry (this has caused a lot of companies to bite off more than they can chew, destabilizing the acquiring companies

3--Thus spake Bernanke: Low interest rates ripoff savers and create bubbles. You don't say?, Mish-

the Committee is aware that a long period of low interest rates has costs and risks. For example, even as low interest rates have helped create jobs and supported the prices of homes and other assets, savers who rely on interest income from savings accounts or government bonds are receiving very low returns. Another cost, one that we take very seriously, is the possibility that very low interest rates, if maintained too long, could undermine financial stability. For example, investors or portfolio managers dissatisfied with low returns may "reach for yield" by taking on more credit risk, duration risk, or leverage....

 Because only a healthy economy can deliver sustainably high real rates of return to savers and investors, the best way to achieve higher returns in the medium term and beyond is for the Federal Reserve--consistent with its congressional mandate--to provide policy accommodation as needed to foster maximum employment and price stability. Of course, we will do so with due regard for the efficacy and costs of our policy actions and in a way that is responsive to the evolution of the economic outlook.

4---No Arrests on Wall Street, But Over 7,700 Americans Have Been Arrested Protesting Big Banks, The Contributor

5---Four Reasons Housing Recovery Isn’t Yet Boosting Economy, WSJ

6----China Flash PMI Sinks to 7 Month Low, prag cap

7---Markets Rattled Amid Fears of Slowdown in Asia, NYT

China’s slowing momentum has been long in the making and is, to some extent, deliberately engineered by the authorities in Beijing, who are trying to bring about a more gradual but more balanced pace of growth. Still, disappointments over the performance of China’s economy – the second-largest in the world after that of the United States – remain liable to unsettle markets not just in Asia but around the globe.
High hopes that the bold economic policies of Prime Minister Shinzo Abe of Japan will succeed have prompted a huge rally in stocks since November. The Japanese market is still up nearly 40 percent since the start of the year.
Akira Amari, Japan’s economy minister, sought to calm nerves after the market closed Thursday. “The Japanese economy is staging a sound recovery, and there is no need for panic,” he said, according to the Nikkei business daily. The plunge “is not exceedingly large, and stock prices in China, where the shock originated, have not fallen so much either,” he added....
 
Analysts have broadly welcomed Mr. Abe’s efforts to breathe life into the Japanese economy through a three-pronged approach of major fiscal spending, a promise to pursue structural reforms and a monetary policy that has effectively flooded the economy with cheap money through purchases of government bonds, commercial debt and other assets.
      
One result has been a weakening of the yen, whose 17 percent drop against the dollar since the start of this year has helped lift the earnings prospects of many Japanese exporters. Data released in the past few weeks have shown that the economy has begun to pick up speed.
      
Taking many market observers by surprise, however, bond yields have risen in recent days, fanning worries about a rising interest rate burden for the government. The yield on the 10-year Japanese government bond briefly spiked above 1 percent Thursday before dropping back to 0.9 percent. The move spooked investors, helping produce the fall in the stock markets, said Stephen Davies, chief executive of Javelin Wealth Management in Singapore.
      
Japan is vulnerable to rising borrowing costs because of its high public debt, which is twice the size of its economy. Bonds are also the main financial assets held by banks, pension funds and insurance companies, making a surge in debt yields perilous. Given the indebtedness of the Japanese government, there are worries about the impact that this could have if sustained,” Mr. Davies said. “It is too early to say whether it will be sustained, so we should not read too much into one day’s extreme move in the markets.” 
 
 
The dip began on Wednesday afternoon, after Ben S. Bernanke, the Federal Reserve chairman, testified before Congress that the Fed could pull back on its monetary stimulus programs if the economy continues to show progress. Later on, an index of Chinese manufacturing showed that activity actually slowed in May for the first time in months
 
9---Japanese Stocks Fall 7.3% OvernightTokyo Tumble
Source: WSJ
 
 
Federal Reserve Chairman Ben Bernanke thinks Congress is doing quite a lot wrong. He headed to the Hill on Wednesday to present them with an itemized list.

“The expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year,” he said.

The Federal Reserve can offset some bad economic policy coming out of Congress, but not this much bad economic policy coming out of the Congress. “Monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.”

The result, as Neil Irwin writes, was an unusually blunt testimony from the central bank chief. He basically walked up to Congress and said, “You’re the reason the economy isn’t taking off more.”
This is why people need to stop celebrating our rapidly falling deficits. Our deficits aren’t dropping because we’re doing something right. They’re dropping because we’re doing everything wrong.

We’re cutting deficits much too quickly in the next few years — that’s what Bernanke’s testimony is about. We’re letting them rise (albeit modestly) between 2016 and 2023. We’re doing basically nothing about long-term deficits, which is where the problem actually lies. And we’re using policies, like sequestration, that most everyone agrees are bad policy — so we’re cutting spending by cutting the wrong kind of spending.
No wonder Bernanke’s irked.

11---In one chart: we have a demand problem, not a skills problem , EPI

The large increase since 2007 in the unemployment and underemployment rate of young college grads, along with the large increase in the share of employed young college graduates working in jobs that do not require a college degree, underscores that today’s unemployment crisis did not arise because workers lack the right education or skills. Rather, it stems from weak demand for goods and services, which makes it unnecessary for employers to significantly ramp up hiring....

The weak job prospects for these newly-trained, highly-educated workers underscores that today’s unemployment crisis is not due to workers not having the right education or skills, but from weak demand for goods and services, which makes it unnecessary for employers to significantly increase hiring of workers at any level of education


12---Hawkish comment from Bernanke hit stimulus-dependent asset valuations, sober look
 
It took one sentence to send shockwaves through the financial markets. 
Bernanke: - We’re trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook. If we see continued improvement and we have confidence that that is going to be sustained, then we could in -- in the next few meetings -- we could take a step down in our pace of purchases.
US equity and fixed income markets declined sharply in response.
 
13---Far-right Japan Restoration Party defends wartime abuse of “comfort women”, wsws
 
Building on the chauvinist climate created by Japan’s bourgeois “left,” Abe has moved to rehabilitate Japanese imperialism’s bloody record in Asia during World War II. Earlier this year, he suggested he would review a 1993 official apology by then-chief cabinet secretary Yohei Kono on the issue of “comfort women.” Moreover, in a parliamentary discussion last month over another major official statement in 1995 apologising for Japanese colonial rule in Asia, he said that the definition of “aggression” is not internationally established.

At the same time, several ministers of Abe’s cabinet visited the Yasukuni Shrine, where Japan’s war dead, including war criminals, are honoured.
Both the South Korean and Chinese governments issued strong protests against Hashimoto’s comments. US State Department spokeswoman Jen Psaki attacked Hashimoto’s comments as “outrageous and offensive,” as the Japanese “comfort women” policy was “clearly a grave human rights violation of enormous proportions.”

Underlying Washington’s protests is unease over the visible connection between US pressure on Japan to re-arm and aggressively pursue a pro-US military policy, and the explosion of the most noxious, fascistic sentiments in the Japanese ruling class. In the short term, Washington is concerned that this might harm South Korean-Japanese relations and cut across US efforts to build a trilateral US-Japanese-South Korean alliance against China.

More broadly, however, the imperialist bourgeoisies on both sides of the Pacific are concerned that such open endorsement of imperialist crimes as Hashimoto’s might provoke opposition in the working class.
Amid the public fury in Japan, the LDP is seeking to distance itself from Hashimoto. Abe insisted that his government “has a different position” than Hashimoto’s, adding: “I feel both great sadness and the deepest regret for the pain and suffering experienced at that time by the comfort women.”

14---Witness tied to Boston bombing suspect killed by FBI, wsws

Far more plausible than the official story is the likelihood that US intelligence agencies, including the FBI, were using, or planned to use, Tamerlan Tsarnaev to further their operations with Islamist separatist forces in the North Caucasus, with whom they have been working for many years. These operations include Washington’s machinations in Russia and the former Soviet republics, as well as its use of Chechen Islamist terrorists in its neo-colonial wars in the Middle East, including the current US proxy war in Syria.

15---Behind Syria peace talks proposal, US prepares regional war, wsws

In advancing its militarist agenda, Washington has stepped up a propaganda campaign charging that Iran is likewise responsible for the reverses suffered by the anti-Assad forces in Syria. A senior State Department official told the Washington Post that Iranian forces are fighting in Syria, repeating totally unsubstantiated allegations by the “rebels” as fact.

As the Post pointed out, “The US official’s allegation was a tacit acknowledgment that the two-year Syrian conflict has become a regional war and a de facto US proxy fight with Iran.”
The Post ’s columnist David Ignatius noted that while there is public talk of a peace conference in Geneva by next month, “the battling on the ground is so intense, and the demand for additional weapons [from the opposition] so vocal, that a skeptical person should ask whether the Geneva talks will take place at all.”

Washington’s ostensible agreement with Moscow on peace talks is merely another tactic to advance its strategic aims in the region, which have been prosecuted through the wars in Iraq, Afghanistan, Libya and now Syria. Behind the crocodile tears about Syrian civilian casualties, its objective remains the same as that which underlay the eruption of American militarism 12 years ago: the assertion by military means of hegemonic control over strategic energy reserves coveted by its rivals, particularly in China and Russia.

As the evolution of the proxy war in Syria demonstrates, this predatory US intervention points directly toward a far wider and catastrophic conflagration that threatens not only war against Iran, but confrontation with Russia and China as well.

16---Poll Shows Overwhelming Opposition to US Attacking Syria, antiwar

17---What is the U.S. REALLY doing in Syria?, FP

For Washington, this war has become a golden opportunity to inflict a strategic defeat on Iran and its various local allies and thus shift the regional balance of power in a pro-American direction.

18---Invasion of Iraq was textbook example of aggression’, Noam Chomsky, RT

 I did mention the Magna Carta, which is 800 years old, but there is also something else which is about 70 years. It’s called the Nurnberg tribunal, which is part of foundation of modern international law. It defines aggression as the supreme international crime, differing from other war crimes, and it encompasses all of the evil it follows. The US and British invasion of Iraq was a textbook example of aggression, no questions about it. Which means that we were responsible for all the evil that follows like the bombings. Serious conflict arose, it spread all over the region. In fact the region is being torn to shreds by this conflict. That’s part of the evil that follows.

19---Amnesty report blasts US for Gitmo, drone strikes, ‘absence of accountability’, RT

20--Appraisers now complicit in efforts to reflate the housing bubble, ochousing


21--Existing-Home Sales, Prices Jump to Multiyear Highs, DS News

Existing-home sales rose 0.6 percent in April to an annual sales rate of 4.97 million, the highest level since November 2009, the National Association of Realtors reported Wednesday. Economists had expected a 1.6 percent increase to 5.0 million from March’s original report of 4.92 million sales. March sales were adjusted upward to 4.94 million.



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