Monday, May 6, 2013

Today's links

1---The Israeli-Jihadist Alliance, antiwar

Reading “A Clean Break: A New Strategy for Securing the Realm” is like reading a timeline of events in the Middle East for the past ten years. As I wrote in October of 2003, on the occasion of the thirtieth anniversary of the Yom Kippur War – a day when Israel bombed alleged “terrorist camps” in Syria:

“The paper, co-authored by Richard Perle, James Colbert, Charles Fairbanks, Jr., Douglas Feith, Robert Loewenberg, David Wurmser, and Meyrav Wurmser, portrayed Syria as the main enemy of Israel, but maintained the road to Damascus had to first pass through Baghdad:

“‘Israel can shape its strategic environment, in cooperation with Turkey and Jordan, by weakening, containing, and even rolling back Syria. This effort can focus on removing Saddam Hussein from power in Iraq – an important Israeli strategic objective in its own right – as a means of foiling Syria’s regional ambitions. Jordan has challenged Syria’s regional ambitions recently by suggesting the restoration of the Hashemites in Iraq.’”

2--Worsening wealth inequality by race, CNN

White Americans have 22 times more wealth than blacks -- a gap that nearly doubled during the Great Recession.
The median household net worth for whites was $110,729 in 2010, versus $4,995 for blacks, according to recently released Census Bureau figures.
The gap between the races widened considerably during the recent economic downturn, which whites weathered better than blacks, Hispanics and Asians.
The Great Recession has widened the wealth gap, and race is a major factor.
The Great Recession has widened the wealth gap, and race is a major factor.

3--  The best jobs program = allow Medicare eligibility at age 55,  Bondad

4---Treasury decreases debt, Big Picture

we are now in a quarter in which the US Treasury is decreasing its outstanding debt. So, if you include the Fed with the Treasury as combined arms of the federal government, the federal debt in the hands of the public will actually shrink this quarter.

Remember that the Fed, along with other major central banks, was on the sidelines the last time we had any period of paydowns. We wonder whether this development marks a regime change, a paradigm shift that helps explain why Treasury yields in the intermediate term (10-year note) are so low. Do the paydowns add to the downward momentum of yields?

Let’s go a step farther. Bianco points to Treasury officials’ projections for borrowing in 3Q 2013. They estimate that borrowing at $223 billion. That number is much lower than its counterpart in any of the years since the financial crisis triggered the new Fed QE policy. If we assume that the Fed continues its present $85 billion a month QE policy in 3Q, we can argue that the combined actions of the Fed and the Treasury will mean no net impact on the publicly held Treasury supply. Half a year will go by without any net new Treasury debt being placed in the market.

New debt issuance since the financial crisis has been lower than in prior comparative periods. In the combined third-quarter projection and second-quarter realization, we see, as a result of declining net issuance of federal debt with market pressures reduced by hundreds of billions of dollars.

5--"Confirmation bias" in R&R?, Big Picture

Did Reinhart and Rogoff persuade many politicians to forgo stimulus and embrace austerity? I am unsure that their error-laden, cherry-picked data really convinced any one who wasn’t already leaning in that direction. Indeed, the fact that their magnum opus was never peer reviewed tells you much about how serious it was as an academic work. That is much more revealing about the people who championed the paper than it is about the paper itself. We now know it was little more than junk science, but it fit the pre-existing narrative of those who favor smaller government. They adopted it not despite of its flaws, but rather because of them. It said exactly what it was they wanted to hear, so why bother having it peer-reviewed?

If the thinking process of investors is flawed, filled with cognitive errors and biases, imagine what the process is like for ideologues and political types. The bottom line is that, just as investors seek out those articles, research reports and commentary that support their existing portfolios, so too do politicians look for similar writings that confirm their pre-existing notions.

We know that human thinking all too often is a flawed process which quite often resembles little more than James’ “rearranging of their prejudices.” We might as well blame farmers for obesity; they grow lots of different foods, but they do not force anyone eat french fries.

We as a society run into a problem when we confuse confirmation bias with thought — especially in the political arena.

6---The Secret of the Weak Recovery: We Had a F***ing Housing Bubble, CEPR

...we had a housing bubble driving the economy before the collapse and there is nothing to fill the gap created. The bubble led residential construction to soar to more than 6.0 percent of GDP at the peak of the boom in 2005. It is now a bit over 2 percent of GDP implying a loss in annual demand of more than $600 billion. The $8 trillion in housing wealth created by the bubble led the saving rate to fall to almost zero due to the housing wealth effect (people increase annual spending by 5-7 cents for each dollar in housing wealth). With the saving rate hovering near 4 percent, we have lost close to $400 billion in annual consumption demand.

The cumulative loss of annual demand is more than $1 trillion. What did we think would replace this demand? Investment in equipment and software is actually close to its pre-recession level measured as a share of GDP. Furthermore, this component of investment has never been a much larger share of GDP, even in the Internet bubble years. Why would anyone expect it to expand rapidly at a time when many firms still have large amounts of excess capacity? (Structure investment is depressed because there was a bubble in non-residential construction as well, leading to large amounts of excess capacity in most areas of non-residential construction.)

Do we somehow think that consumers will spend at the same rate after they have lost $8 trillion in housing wealth as when they had this wealth? Why? Net exports could fill the gap, but the dollar has to fall. Net exports could fill the gap, but the dollar has to fall. (I repeated that one in case any economists are reading.) The value of the dollar is the main determinant of our trade deficit, if we want a lower deficit then we will need a sharp decline in the dollar, which has not happened.

This only leaves the government sector to fill the gap with deficits, which our Serious People types have demanded that we hold down. So, based on the good old intro econo that tens of millions have been subjected to, we know that this recovery will be slow and weak. We simply lack a component of demand to fill the gap created by the housing bubble.

7----A natural floor on corporate spreads?, sober look
 
US corporate yields hit another record low on Friday. The Merrill Lynch US investment grade corporate bond index yield is now at 2.64%, while high yield is at 5.35% - both are at an all-time low. The spread to treasuries, particularly in investment grade (IG) bonds, is no longer declining
 
8---So, why are we so loyal to a president who is not loyal to us?, guardian
 
9---Barack Obama and the paradox behind his African American support base, Guardian 
 
 Pew survey in January 2010 indicated that the percentage of black Americans who thought blacks were better off than they were five years before had almost doubled since 2007. There were also significant increases in the percentages who believed the standard-of-living gap between whites and blacks was decreasing. No wonder they love the president.
 
There was only one trouble with these assessments. They weren't true. African Americans, as a group, are far worse off now than they were when Obama came to power and the gap between whites and blacks in terms of wealth and income has increased under Obama's tenure. The overall rate of unemployment may be close to where it was when Obama took office, but black unemployment is up 11%. Meanwhile the wealth gap has doubled during this recession with the average white American now having 22 times more wealth than their black counterparts. So too has the educational achievement gap with the rate at which white Americans graduate from high school growing at a far faster clip than black students.
 
"We haven't seen much of the stimulus trickle down to our people here," Mark Allen, a Chicago-based community organiser who used to work alongside Obama, told the Washington Post. "I liked the community organiser Obama better than President Obama … Democrats say Barack has got 90% or whatever of the black vote wrapped up. What they don't tell you is it's 90% of those who actually come out and vote. What if it's 90% of just 30 or 40% who vote?"...
 
Obama] is being consumed as the embodiment of color blindness," Angela Davis, professor of history of consciousness at the University of California, Santa Cruz, told me in late 2007. "It's the notion that we have moved beyond racism by not taking race into account. That's what makes him conceivable as a presidential candidate. He's become the model of diversity in this period … a model of diversity as the difference that makes no difference. The change that brings no change."
 
That is why criticisms of him for "not doing enough for his own people" both miss and devalue the point. The demand to close the racial gaps bequeathed by centuries of discrimination is not a sectional interest but a national one. Demands for equality and racial justice should be made to any president of whatever race or party.
 
Obama should do more for black people – not because he is black but because black people are the citizens suffering most. Black people have every right to make demands on Obama – not because they're black but because they gave him a greater percentage of their votes than any other group, and he owes his presidency to them. Like any president, he should be constantly pressured to put the issue of racial injustice front and centre and if black people aren't going to apply that pressure then nobody else will.
 
But in fact precisely the opposite has been happening. With Obama in the White House African Americans representatives have been backpedalling. Black politicians, too, have held their fire.
"With 14% unemployment, if we had a white president we'd be marching around the White House," said the chairman of the Congressional Black Caucus (CBC), Emmanuel Cleaver. "The president knows we are going to act in deference to him in a way we wouldn't to someone white." That's pathetic and counterproductive. These are the very people who are now showing up with empty hands and trying to galvanize the black community to go to the polls.
 
10--Wealth Gap Among Races Has Widened Since Recession, NYT
 
11---The Chutzpah Caucus, NY Times
 
 At this point the economic case for austerity ... has collapsed. ... Yet calls for a reversal of the destructive turn toward austerity are still having a hard time getting through. Partly that reflects ... widespread, deep-seated cynicism about the ability of democratic governments, once engaged in stimulus, to change course in the future.
 
12---Congressional influence as a determinant of subprime lending, VOX
 
13---The Israeli strikes on Syria, wsws
 
Again, Washington is moving to launch a war in pursuit of its imperialist interests, showing utter contempt for the overwhelming popular opposition to such a war both in the United States and the Middle East. Polls show that 62 percent of Americans are opposed to further arms for the Islamist opposition; similar and even greater majorities in Middle Eastern countries oppose the US proxy war
.
The Israeli strikes also put paid to the lies of supporters of the Syrian opposition, such as Gilbert Achcar of the pseudo-left United Secretariat, who recently dismissed criticism of imperialist involvement in the Syrian war as a “kind of conspiracy theory.” Since it supported the 2011 NATO war in Libya to remove Colonel Muammar Gaddafi, the pseudo-left fraternity has stepped up its activity as propagandists for imperialist wars for regime-change, waged in alliance with right-wing sectarian elements and reactionary regional powers.

Syria has been in Washington’s crosshairs for more than a decade, due to its ties to Iran and forces like Hezbollah. With the current war, the United States seeks to set up a protectorate in Syria that will be completely subservient to US policy.

There is virtually no popular support for a new Middle East war in the United States, where the same ruling elite that is waging war abroad is engaged in a ruthless assault on the working class at home

14--Obama in Mexico, wsws

Following six years in which US personnel were intimately integrated at all levels into Mexican police and military operations, the new Mexican administration has moved to revamp its security structure in order to centralize its relationship with the US through the Interior Ministry.

In January, the Peña Nieto government announced the creation of the National Intelligence Center ( Centro Nacional de Inteligencia, CNI ) as a new domestic intelligence agency which has cut across the operations of the CIA, FBI and DEA, which had free run of the country under the preceding administration of President Felipe Calderón in a “war on drugs” that has cost the lives of some 70,000 Mexicans in recent years.

As part of the transition, Mexico removed US intelligence agents from the so-called Binational Offices of Intelligence that had been set up in Mexico City and Escobedo in the border state of Nuevo León. Obama’s public response thus far is to downplay this change to see how it will play out..

Despite the focus, at least publicly, on economic issues, the Central American meeting also addressed US military involvement in the region. Obama wanted to throw his personal weight behind increasing US military penetration of regional armed forces.

In the case of Panama, the US Southern Command has developed operations in two provinces dubbed “Open Horizons.” In a complementary operation, the US is sending 500 military personnel to construct a camp in the Darien Gap region, where the Pan American Highway peters out before it reaches the Colombian border.

The operation is called “Red Horse.” It will include military exercises in June, with an eye to possible future operations against Colombia’s Revolutionary Armed Forces (FARC) guerrillas.

15--Today's quote; Cornel West, New Republic

“I was thinking maybe he(Obama) has some progressive populist instincts that could become more manifest after the cautious policies of being a senator and working with [Sen. Joe] Lieberman as his mentor.  But it became very clear when I looked at the neoliberal economic team. The first announcement of Summers and Geithner I went ballistic. I said, ‘Oh, my God, I have really been misled at a very deep level.’ And the same is true for Dennis Ross and the other neo-imperial elites. I said, ‘I have been thoroughly misled, all this populist language is just a façade. I was under the impression that he might bring in the voices of brother Joseph Stiglitz and brother Paul Krugman. I figured, OK, given the structure of constraints of the capitalist democratic procedure that’s probably the best he could do. But at least he would have some voices concerned about working people, dealing with issues of jobs and downsizing and banks, some semblance of democratic accountability for Wall Street oligarchs and corporate plutocrats who are just running amuck. I was completely wrong.”

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