Saturday, July 20, 2013

Today's links

1--Hurrah, for Venezuela, RT

The Venezuelan Foreign Ministry released a statement on Friday announcing an end to rapprochement negotiations between Washington and Caracas in Guatemala.

“The Bolivarian Republican of Venezuela considers the diplomatic processes initiated in Guatemala over,” the Foreign Ministry said. They took issue with the statements of the US candidate for ambassador to the UN, Samantha Power, who expressed “concern” over Caracas’ management of human right issues on Wednesday before the US Senate Foreign Relations Committee.

She added that if she were elected, she would fight against repression in Cuba and in Venezuela. Venezuela responded with ire, harshly contesting any attempt by the US to interfere in its internal policies. 
"Power says she'll fight repression in Venezuela? What repression? There is repression in the United States, where they kill African-Americans with impunity, and where they hunt the youngster Edward Snowden just for telling the truth," said Venezuelan President Nicolas Maduro following Power's  comments.
“The Bolivarian Republic of Venezuela will never accept meddling in its internal affairs. We reject the fact that a nominee for the post of UN ambassador has interference in Venezuela on her agenda,” said Elias Jaua, the Venezuelan minister of foreign affairs.

The statement went on to say that Caracas wished to build “good relations with the US” based on mutual respect for sovereignty and self-determination. However, Power’s statements contradict the stance outlined by US Foreign Minister John Kerry.

“[Venezuela] has fully demonstrated that it has a solid base in its constitution that guarantees the preservation of the practice and respect for Human Rights,” said Jaua. Furthermore, he said the world continually expresses concern about US rights abuses, referencing Washington’s failure to close Guantanamo and the practice of drone attacks.  ...

US-Venezuelan relations have been under strain since 2010 when both countries withdrew their respective ambassadors. Moreover, tensions have been mounting recently over the case of NSA whistleblower Edward Snowden, whom Venezuela has offered political asylum.

2---US-China dialogue in shambles, wsws

Chinese officials had attempted to appease the US by indicating that Beijing would proceed with a new round of extensive pro-market restructuring, opening up state-dominated sections of the Chinese economy to foreign investors. Biden, who opened the talks, declared: “The next steps that China needs to take for its own economy happen to be in the interests of the United States as well.”...

The US policy towards China has nothing to do with fostering cooperation. The Obama administration’s “pivot to Asia” has been an offensive on all fronts—diplomatic, economic and military—aimed at undermining China and ensuring continued US dominance. The NSA’s extensive cyber spying is part of the US build-up and preparations for war against China.
As the US-China dialogue was proceeding, Russia and China held their largest-ever joint naval exercises in the Sea of Japan, pointedly aimed at the US-Japan alliance. Provocatively, the US held joint air drills with Japan in the same region.

Economic talks involving Treasury Secretary Jack Lew and Chinese Vice Premier Wang Yang also exposed worsening relations. While Lew welcomed China’s new pro-market measures, he quickly turned to a list of US demands for “an economic relationship where our firms and workers operate on a level-playing field ....

In reality, the super-profits of major American corporations are based on a parasitic monopoly of brands and technology that ensures China remains a vast cheap labour platform, supplying goods at low cost to companies such as Apple and Wal-Mart. At the same time, Washington is pressuring Beijing to further open up the Chinese economy to American companies and goods.
Lew declared that China had to move quickly to revalue its yuan against the dollar. Given the slump in the Chinese exports industries, the revaluation would trigger a wave of factory closures and job losses. Wang rejected the demand, warning: “Like the United States, we will never accept views, however presented, that undermine our basic system or national interests.”...

The reality is that the US is no longer in a position to make concessions to potential rivals. Over the past two decades, Washington has waged one war after another in a bid to use military might to offset its economic decline and maintain its global dominance. The bitter exchanges at the latest US-China dialogue are another warning that American imperialism is dragging the world towards conflict and war.  

3---No, to Detroit bankruptcy, wsws

The largest municipal bankruptcy filing in US history paves the way for sharp cuts in pensions and health care benefits of municipal workers, the further slashing of essential services in the already devastated industrial city and the selling off of public assets to pay the banks and large bond holders that hold the city’s debt. What is happening in Detroit will be used as a model for a similar agenda in cities throughout the country and internationally.

Bankruptcy is the outcome of deliberate policies of both parties, at the local, state and national levels, acting on behalf of a small layer of the corporate and financial elite. While handing over trillions to the Wall Street banks, the Obama administration has rejected any measures to bail out Detroit or other threatened state and municipal governments.

4---IMF Doomsday Global Economic Slowdown, economic populist

The IMF released an update on their world economic outlook, which by itself ain't too good, although the IMF view is the world revolves around China.
Global growth increased only slightly from an annualized rate of 2½ percent in the second half of 2012 to 2¾ percent in the first quarter of 2013,
New risks have emerged, including the possibility of a longer growth slowdown in emerging market economies, especially given risks of lower potential growth, slowing credit, and possibly tighter financial conditions if the anticipated unwinding of monetary policy stimulus in the United States leads to sustained capital flow reversals.
Contained within the report is a doomsday warning, if the Federal Reserve screws up their unwinding of quantitative easing, it could bring the economy to it's knees.  Of course Bernanke said that stimulus is still needed after the IMF report came out.
The theme of the update is "growing pains," and the key message is a warning to the U. S. and the Federal Reserve, in particular: Your monetary tightening, if done too quickly, could bring the world economy to its knees. And so far, we don't like what we see.
Of course, the IMF would get in trouble if it actually wrote that. So it says it a little more politely, warning that U.S. policy is creating a new "downside risk to global growth prospects." The IMF is concerned about "possibly tighter financial conditions if the anticipated unwinding of monetary policy stimulus in the United States leads to sustained capital flow reversals."
 5---Drug Kingpin arrest will mean more violence in Mexico, al jazeera

6---Global capitalism and 21st century fascism, al Jazeera

Transnational capital uses its financial power to take control of state finances and to impose further austerity on the working majority, resulting in ever greater social inequality and hardship. The TCC has used its structural power to accelerate the dismantling of what remains of the social wage and welfare states.

And a third is frenzied worldwide financial speculation - turning the global economy into a giant casino. The TCC has unloaded billions of dollars into speculation in the housing market, the food, energy and other global commodities markets, in bond markets worldwide (that is, public budgets and state finances), and into every imaginable "derivative", ranging from hedge funds to swaps, futures markets, collateralised debt obligations, asset pyramiding, and ponzi schemes. The 2008 collapse of the global financial system was merely the straw that broke the camel's back....

the Obama project weakened the popular and left response from below to the crisis, which opened space for the right-wing response to the crisis - for a project of 21st century fascism - to become insurgent. Obama's administration appears in this way as a Weimar republic. Although the social democrats were in power during the Weimar republic of Germany in the 1920s and early 1930s, they did not pursue a leftist response to the crisis, but rather side-lined the militant trade unions, communists and socialists, and progressively pandered to capital and the right before turning over power to the Nazis in 1933.

7---The Keynes ban, naked capitalism

Look at how Keynes was bastardized in the US (which has also had serious knock-on consequences) because an economic text that was faithful to Keynes by Lorie Tarshis was targeted by, among others, William F. Buckley. As we wrote in ECONNED:
A Canadian student of Keynes, Lorie Tarshis, published an economics textbook in 1947, The Elements of Economics, which included his interpretation of Keynes. It also suggested that markets required government support to attain full employment. It was engaging and well written, and sold well initially, but fell off quickly, the victim of an organized campaign by conservative groups to have the textbook removed. The book, and by implication Keynes, was inaccurately charged with calling for government ownership of enterprise. 
Any taint of Communist leanings would damage the career of a budding academic. So aside from his refusal to accept some fundamental elements of Keynes’s construct, [Paul] Samuelson had another reason to distance himself from the General Theory. Samuelson said he was well aware of the “virulence of the attack on Tarshis” and penned his text “carefully and lawyer like” to deflect similar attacks.

8---More Q2 downgrades, cal risk

From Reuters: Morgan Stanley cuts second quarter U.S. GDP forecast to 0.3 percent
Morgan Stanley economist Ted Wieseman, but the softness in June nonetheless prompted him to cut Morgan Stanley’s Q2 GDP estimate to 0.3 percent from 0.4 percent.
From Merrill Lynch:
This week we are marking to market both our growth and inflation forecasts. On the growth side, the story is simple. With most of the data in, our tracking model pegs 2Q GDP growth at just 0.9%. ... Clearly, the fiscal shock and weak global growth are undercutting the recovery. The main reasons for the downward revision in 2Q are weaker inventory accumulation and a wider trade deficit.

This weakness is not a fluke: it reflects weakness in many key growth indicators. ...

That said, the good news is that we don’t think the weakness will be persistent. The consumer looks healthier heading into 2H, and manufacturing is starting to improve thanks to autos. Low inventories in 2Q give capacity to rebuild in 3Q. Thus, we are revising up 3Q GDP growth to 2.0% from 1.5%, and continue to expect 2.5% in 4Q. We are not out of the woods yet, but conditions are improving.
And Mark Zandi of Moody's Analytics last week:
The thing that changed is the GDP number.... That is really coming in much weaker than anyone had expected. Certainly than I had expected earlier in the year. It's tracking slightly positive and it's possible that it could be a negative print in Q2.
9---(Archive) Back to Recession, counterpunch

Nouriel Roubini:
“I’m quite concerned about the US economy. People underestimated how much…the sequester would effect the economy. …fiscal drag of 1.7%….We’re doing the wrong kind of fiscal consolidation. It’s way too frontloaded….will have a drag on consumption…so, US will have subpar growth, below trend..and unemployment will remain high. …The Fed’s QE has already created froth in asset and  credit markets that could lead to another significant bubble …So, you’ll have a big party in asset prices for the next couple years, (while rates stay low) followed by a crash bigger than before.” (Bloomberg)

10---The world's worst sentence?, Economist

The Economist's in-house style guide), are always worth repeating:
1. Never use a metaphor, simile or other figure of speech which you are used to seeing in print
2. Never use a long word where a short one will do
3. If it is possible to cut a word out, always cut it out
4. Never use the passive when you can use the active
5. Never use a foreign phrase, a scientific word, or a jargon word if you can think of an everyday English equivalent; and finally 

11--Banking giants expect more releases of loan loss reserves: Fitch, The Ticker

A majority of the largest financial institutions in the nation posted profitable earnings due to large releases of loan loss reserves during the second quarter of this year, analysts claim.
Going forward, additional modest reserve releases for these mega banks is possible given the current reserve levels as well as positive asset quality trends, Fitch Ratings said.
"We think this indicates a healthy level of pro-cyclicality in the biggest banks earnings, as credit quality for most lending products is likely near a cyclical peak, providing room for ongoing reserve releases and lower provisioning," said Justin Fuller and Bill Warlick, directors for the credit ratings agency.
They added, "So far, releases for the large banks have been concentrated in credit card and mortgage businesses."

Future earnings performance will heavily depend on loan growth and growth in non-interest income.

12---China is in big trouble, NYT

Yet the signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.
Start with the data, unreliable as they may be. What immediately jumps out at you when you compare China with almost any other economy, aside from its rapid growth, is the lopsided balance between consumption and investment. All successful economies devote part of their current income to investment rather than consumption, so as to expand their future ability to consume. China, however, seems to invest only to expand its future ability to invest even more. America, admittedly on the high side, devotes 70 percent of its gross domestic product to consumption; for China, the number is only half that high, while almost half of G.D.P. is invested.  ....
The need for rebalancing has been obvious for years, but China just kept putting off the necessary changes, instead boosting the economy by keeping the currency undervalued and flooding it with cheap credit. (Since someone is going to raise this issue: no, this bears very little resemblance to the Federal Reserve’s policies here.) These measures postponed the day of reckoning, but also ensured that this day would be even harder when it finally came. And now it has arrived.

A European Central Bank-led probe into the health of the region’s banks is likely to uncover a host of non-performing loans that could be the final undoing of Europe’s most vulnerable financial institutions.
Banks across Europe could face capital holes worth billions of euros once the ECB introduces a stricter, Europe-wide definition of non-performing loans through what is in effect an external audit of the sector.
“Banks will not be able to massage these numbers or hide NPLs. They will have to take it very seriously. This is the ECB, after all,” said a senior DCM banker...

The concern now is that NPLs are reaching crisis point in the weaker peripheral banks, and their underlying economies are showing few signs of growth. Last year, NPLs in peripheral banks reached €500bn, according to research from JP Morgan.

15---Mixed Signals For Banks, Investors As Housing Starts Report Shows First Signs Of Sustained Dip, IBT

a series of ominous reports provides more evidence a top could be forming,” said Sarhan....

Today the Commerce Department released data that showed housing starts had fallen by 9.9 percent to 836,000 in June, falling drastically below analysts’ predictions....

since March figures have begun the first sustained retreat, showing a small trend that could shake up potential investors.
This new decline surprised many analysts who expected the figure to reflect the excellent earnings of America’s four big mortgage lenders, who all happened to post earnings before the new figures were announced.
The lion's share of housing-related earnings for large banks occur from the purchase and sale of units, not new construction, so the housing starts decline could just be a blip on a successful quarter -- but could this be a more long-term problem in the making?

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