Thursday, May 9, 2013

Today's links

Today's quote: The task is not to “occupy” Wall Street. It is to shut it down, redirect the vast resources that are squandered in the operations of this gigantic gambling casino to meeting social needs, and take the banks and corporations out of private hands so they can be run democratically for the benefit of society." Barry Grey, The 15,000 Dow, WSWS

1---Stock Markets Rise, but Half of Americans Don’t Benefit, NYT
Source: Gallup. Selected trends are from surveys conducted closest to April each year. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error is plus or minus 3 percentage points.
In its annual Economy and Finance survey, conducted April 4-14, Gallup found that 52 percent of Americans said they (personally or jointly with a spouse) owned stock outright or as part of a mutual fund or self-directed retirement account. That’s not statistically different from the share last year (53 percent), but is down substantially from pre-recession levels. It’s also the lowest recorded share since Gallup started asking this question in 1998.
I wonder also whether the experience of the financial crisis may frighten Americans away from riskier assets like equities for a while, long after the unemployment rate has returned to more normal levels. Research from Ulrike Malmendier and Stefan Nagel about the so-called “Depression babies” found that people who had experienced low stock market returns throughout their lives are less willing to take on financial risk, are less likely to take part in the stock market and invest a lower fraction of their liquid assets in stocks if they do take part.

There are signs that the appetite for risk is returning among more sophisticated investors and institutions, but that may not extend to the median American, who did not recover as quickly or as fully (if at all) as the finance industry did.

2---Mortgage Apps up 11.5% y-o-y, CNBC

The surge in mortgage applications is a sign that more mortgage-dependent buyers are coming back to the housing market, which for a while had been fueled by all-cash investors. Rising home values and cheap credit are just the incentives these buyers needed. Applications to buy a home are up 11.5 percent in the past year, to a three year high—although they are still well off their pre-crash levels. ...

Even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected," said David Stevens, CEO of the Mortgage Bankers Association at an industry conference this week. "Right now, overlapping regulations keep responsible young families from buying their first home."

3---The Dwindling Deficit, NYT

Bad news for Dr. Evil fans: the days of a ONE TRILLION DOLLAR deficit are over. In fact, the deficit is falling fast.

Some readers may recall the ridicule heaped on the people at the Center on Budget and Policy Priorities when they produced estimates suggesting that any notion of a debt/deficit crisis was all wrong. It’s turning out, however, that they were probably overestimating debt growth. The deficit is fading, and debt as a medium-term (meaning up to 10 years) issue has largely gone away.

This is not good news — or not unambiguously good news, at any rate. A deficit falling to probably less than 5 percent of GDP this year and well below that next year is MUCH TOO LOW for an economy whose private sector is still engaged in a vicious circle of deleveraging.

4--The most important story in global economics nobody is paying attention to, WA Post-

The new endorsement of liberalizing capital controls accompanies a related move, underway since June 2010, to allow the Chinese currency to rise in value relative to the dollar, something long-sought by the U.S. government and a sign that China has been shifting toward policies that put the value of its currency more in line with market fundamentals...

The answer has all kinds of consequences: From a U.S. perspective, that includes the question of whether the dollar will remain the bedrock of the world financial center in the decades ahead, or if the renminbi will become a rival for global trade, particularly within Asia. For China, the stakes are even higher.

But getting those advantages will come at a price. It means pivoting away from an export-led growth strategy that has been wildly successful over the last generation and has benefited from an artificially low yuan. It leaves China with greater risk of volatile capital flows that have created booms and busts, and bursts of inflation, in many other emerging economies over the years.  And most importantly, from the vantage point of the ruling Communist party, it will mean ceding some of the power now held by top party officials to the hard-to-corral whims of markets.

5---Are Flagging Productivity Gains a Sign of a Played-Out Economy?, naked capitalism

Bloomberg reported that productivity gains in the US are tepid, and that’s a sign of economic weakness:
Four years into an expansion, the productivity of American workers has slowed and some economists say there are few signs it will soon rebound.
Employee output per hour grew at an average 0.7 percent annual rate over the past 12 quarters, which economists at JPMorgan Chase & Co. say is a pace so slow it’s rarely seen outside of recessions. Gains since the recovery began in June 2009 have averaged 1.5 percent, the weakest of the nine postwar expansions that lasted as long, according to IHS Global Insight.
This is more significant than readers might realize. The two sources of growth are demographic growth (more people) and productivity gains

6---Economists See Deficit Emphasis as Impeding Recovery, NYT

The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists. ....

Fiscal tightening is hurting,” Ian Shepherdson, chief economist of Pantheon Macroeconomic Advisors, wrote to clients recently. The investment bank Jefferies wrote of “ongoing fiscal mismanagement” in its midyear report on Tuesday, and noted that while the recovery and expansion would be four years old next month, reduced government spending “has detracted from growth in five of past seven quarters.”

7---USA--Wars everywhere, firedog lake

But, Linda J. Bilmes and Michael D. Intriligator, ask in a recent paper, “How many wars is the US fighting today?”
Today US military operations are involved in scores of countries across all the five continents. The US military is the worlds largest landlord, with significant military facilities in nations around the world, and with a significant presence in Bahrain, Djibouti,Turkey, Qatar, Saudi Arabia, Kuwait, Iraq, Afghanistan, Kosovo, and Kyrgyzstan, in addition to long-established bases in Germany, Japan, South Korea, Italy, and the UK.1 Some of these are vast, such as the Al Udeid Air Force Base in Qatar, the forward headquarters of the United States Central Command, which has recently been expanded to accommodate up to 10,000 troops and 120 aircraft.
Citing a page at US Central Command’s (CENTCOM) website, they highlight the “areas of responsibility” publicly lists:
The US Central Command (CENTCOM) is active in 20 countries across the Middle Eastern region, and is actively ramping-up military training, counterterrorism programs, logistical support, and funding to the military in various nations. At this point, the US has some kind of military presence in Afghanistan, Bahrain, Egypt, Iran, Iraq, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia, Syria, Tajikistan, Turkmenistan, U.A.E., Uzbekistan, and Yemen.
US Africa Command (AFRICOM), according to the paper, “supports military-to-military relationships with 54 African nations.”

Altogether, that makes 74 nations where the US is fighting or “helping” some force in some proxy struggle that has been deemed beneficial by the nation’s masters of war.

Beyond that, there are Special Operations forces in countries. Jeremy Scahill in Dirty Wars: The World is a Battlefield, writes, “By mid-2010, the Obama administration had increased the presence of Special Operations forces from sixty countries to seventy-five countries. SOCOM had about 4,000 people deployed around the world in countries besides Iraq and Afghanistan.”

The forces were deployed, as the Washington Post reported, to “go beyond unilateral strikes” and train “local counterterrorism forces” and engage in “joint operations with them.” Plans for both “preemptive” and “retaliator strikes” existed in “numerous places around the world, meant to be put into action when a plot” was identified or “after an attack linked to a specific group.”

Scahill also reports, based on his own “well-placed special operations sources”:
…[A]mong the countries where [Joint Special Operations Command] teams had been deployed under the Obama administration were: Iran, Georgia, Ukraine, Bolivia, Paraguay, Ecuador, Peru, Yemen, Pakistan (including in Baluchistan) and the Philippines. These teams also at times deployed in Turkey, Belgium, France and Spain. JSOC was also supporting US Drug Enforcement Agency operations in Colombia and Mexico…(It gets worse)

8---Core PCE measure gives the Fed green light to proceed with its program, sober look 

The two major US core inflation indices have diverged. The explanation for this divergence has to do with the difference in relative importance of housing in the indices. And recent increases in the cost of shelter accentuated these differences.
DB: - Shelter prices have been rising at an annual rate of 2.2% in the PCE, well above the overall level of inflation measured by the index. But housing accounts for a much greater share of the core CPI index – around 42% – relative to the 15% share of the core PCE index. The weight effect of housing alone explains around 50 basis points of the annualized inflation differential between the core index, virtually the entire excess amount of observed CPI inflation. The weighting effect of housing prices in core inflation is exaggerated by factor that has little to do with housing. The relative importance of “core” components of CPI inflation has dropped by about 2 percentage points since 2010, while remaining steady in PCE inflation. This has the effect of increasing the relative importance of housing prices in core CPI.
Core CPI vs PCE compared to line fit

9---The 15,000 Dow, wsws
On Tuesday, Wall Street celebrated a new milestone. The Dow Jones Industrial Average crashed through the 15,000 plateau, setting yet another record in a dizzying climb that has seen the benchmark index rise by almost 15 percent since the beginning of the year.
It took just two months after recovering all of its losses from the financial crash of September 2008 for the Dow to breach the 15,000 barrier. It rose 1,000 points from the 14,000 level in just 66 days.
The Standard & Poor’s 500 stock index also hit a new record Tuesday, having gained 199 points since January. The Nasdaq Composite index closed at its highest point since November of 2000. The manic rise in US stocks is part of a global phenomenon. The FTSE All-World equity index on Tuesday rose to its highest level since June 2008.

The current explosion of stock prices expresses two essential tendencies. First, the disconnect between the process of wealth accumulation by the corporate-financial elite and the creation of real value through the production of goods has reached unprecedented heights. A financial aristocracy is concentrating ever more obscene levels of personal wealth in its hands entirely on the basis of financial speculation and manipulation, while the real economy continues to stagnate and decline.
The stock and bond markets are themselves mechanisms for economic parasitism and the further transfer of social wealth from the bottom to the top. 

Second, the fundamental drive of capitalism, as Marx explained 146 years ago, to pile up wealth at one pole of society and poverty, misery and degradation at the other, is operating almost without restraint. The current stock bonanza reflects an explosive intensification of class tensions.

In the midst of the worst economic crisis since the Great Depression of the 1930s, the Dow has gained over 8,500 points, surging nearly 130 percent since it bottomed at 6,547 on March 9, 2009. That period of three years and two months has been an unmitigated disaster for the bulk of humanity, including the broad mass of working people in the United States.

The social disaster has worsened this year even as stock markets in the US and around the world continued their manic rise. Economic growth and job creation in the US have slowed from their already anemic pace, condemning millions of workers and youth to permanent unemployment or sweatshop jobs at poverty-level wages.

Unemployment in Europe, already at postwar record highs, continues to rise to levels unseen since the 1930s. With the economy of much of the continent contracting, unemployment in Greece and Spain is officially at 27 percent, and youth unemployment is nearing 60 percent. Economic growth is slowing in China and most other so-called “developing” economies, as governments turn to austerity measures and exports are hit by the deepening slump in the West.

The staggering growth of social inequality—with poverty, homelessness, hunger and desperation taking an ever greater toll among the masses of people, while corporate profits, CEO pay and the stock portfolios of the rich soar ever higher—is the result of brutal class war policies being carried out by governments around the world....

This time, it is not individual corporations or banks that face collapse, or even individual sovereign states, but the central banks that have been printing worthless dollars, pounds, euros and yen to underwrite the plundering of society by the ruling elites. In the process, they have undermined the world currency system, setting off a chain reaction of currency and trade wars that can lead only to a further collapse of the real economy.

Working class opposition and anger have grown more intense. The past five years of depression for the masses and super-profits for the corporate elite have not been lived in vain. There is a growing sense that the entire system is economically unviable, intrinsically unjust, and morally indefensible, i.e., that capitalism has failed and must be replaced.

The task is not to “occupy” Wall Street. It is to shut it down, redirect the vast resources that are squandered in the operations of this gigantic gambling casino to meeting social needs, and take the banks and corporations out of private hands so they can be run democratically for the benefit of society.


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