Thursday, August 15, 2013

Today's Links

1--Abe's "trickle down" tax cut plan, Reuters

Japanese policymakers indicated they favor tax incentives to lift weak business investment rather than a cut in corporate taxes, as the government signaled confidence its stimulus policies had put the economy on the path to escape deflation.

In its most upbeat view on prices in four years, the government said on Thursday that Japan was approaching an end to deflation as a steady pick-up in the economy allowed more companies to pass on rising costs to consumers.
"Recent price developments indicate that deflation is ending," the government said in its economic report for August, offering a brighter view than last month when it said deflationary pressures were easing.

Prime Minister Shinzo Abe wants to keep that momentum alive, but also needs to decide whether to go ahead with a planned doubling of the sales tax rate which is intended to help contain public debt that has exceeded 1,000 trillion yen ($10 trillion)....

Given that only some 30 percent of firms pay corporate taxes, I don't think lowering corporate tax rates would have an immediate impact," Aso told a news conference...

The economy grew an annualized 2.6 percent in April-June to mark the third straight quarter of expansion as a pick-up in exports added to sustained strength in consumption.
...
However, business investment contracted for a sixth straight quarter in April-June, and there are concerns the sales tax hike could stifle the economic pick-up.
...
The government said it was too early to declare a sustained exit from deflation, noting that doing so would require more lasting rises in consumer prices.
Consumer prices rose in June for the first time in more than a year, although that was mostly due to higher electricity bills rather than stronger demand.
The government has described the economy as being in deflation since November 2009

2--Japanese visits to shrine on war anniversary anger China, Reuters

3--The 7 Biggest Economic Lies, Robert Reich

4---Higher rates and deleveraging slow housing, naked capitalism

As Wolf Richter pointed out:
Mortgage applications have been on a brutal decline that started in early May. For the week ending August 9, the Mortgage Bankers Association’s Composite Index dropped 4.7%, with the Refinance Index down 4% and the Purchase Index down 5%. It isn’t a fluke. Mortgage applications have plunged 50% from early May and have hit a level not seen since April 2011.
Average interest rates for 30-year fixed-rate mortgages, at 4.56%, are nearly a full percentage point higher than in early May. These higher rates have been colliding with much higher home prices. Result: a dizzying jump in mortgage payments. Sticker shock for prospective buyers.
So first-time buyers now account for only 29% of total sales; prior to the housing crash, they accounted for up to half. The Fed’s “wealth effect” policies are pushing average Americans out of the housing market. Of course, they don’t have to be homeless. About half of the vacant single-family homes that these private equity firms and REITs have acquired are still vacant – maybe they’d cut some deals on rent.....

Remember that US house prices actually track the refinancing index quite closely so I expect price gains are likely to slow sharply in the not too distant future, slowing consumption as well, although the new construction wave will proceed. Nonetheless, the 30 year bond  is sitting right at the top of its recent range with yields at 3.75%.
5---Cairo Bloodbath--The only thing that matters is the Camp David agreements; and nobody is allowed to antagonize Israel.   RT

It certainly was not a crowd clearing operation – as in the New York Police Department ‘clearing’ Occupy Wall Street. As a Sky journalist tweeted, it was more like “a major military assault largely on unarmed civilians”, using everything from bulldozers to tear gas to snipers.
Thus the scores indiscriminately killed – with crossfire estimates ranging from the low hundreds (the “interim government”) to at least 4,500 (the Muslim Brotherhood), including at least four journalists and the 17-year-old Asmaa, daughter of top Muslim Brotherhood politician Mohamed El Beltagy.   

El Beltagy, before being arrested, said, crucially, “If you do not take to the streets, he [as in General Abdul-Fattah al-Sisi, the leader of the coup that is not a coup who appointed the interim government] will make the country like Syria.”
 
Wrong. Sisi is not Bashar al-Assad. Don’t expect passionate Western calls for “targeted strikes” or a no-fly zone over Egypt. He may be a military dictator killing his own people. But he’s one of “our” bastards...

Hardcore repression rules. Corruption rules. And foreign domination rules (as in Saudi Arabia, who’s now paying most of the bills, alongside the UAE).
Internationally, the big winners are Saudi Arabia (displacing Qatar), Israel (because the Egyptian army is even more docile than the Brotherhood), and – who else – the Pentagon, the Egyptian army’s pimp. Nowhere in the Milky Way this House of Saud/Israel/Pentagon axis can be spun as “good for the Egyptian people”.    
Sheikh Al-Torture is our man   A quick recap is in order. In 2011, the Obama administration never said, “Mubarak must go” until the last minute. Hilary Clinton wanted a “transition” led by CIA asset and spy chief Omar Suleiman – widely known in Tahrir Square as “Sheikh al-Torture

6---Auto lending recovery: It isn't all subprime, NY Fed

Perhaps remembering the prevalence of subprime mortgage lending before the recent crisis, observers have alternately wondered whether the new growth in auto loan balances is attributable entirely to highly creditworthy borrowers or to those on a weaker footing, infusing new risk into the financial system. When we break out originations by borrowers’ Equifax credit scores at the time of origination, we do not see evidence supporting a disproportionate or unusual volume of new loans being issued to riskier borrowers. While originations to borrowers with the lowest credit scores have increased, they are just recently approaching historically “normal” levels and are below those that we saw during the boom years leading up to the crisis. [The Car Allowance Rebate System, the stimulus program commonly known as Cash for Clunkers, took place in the third quarter of 2009 and is annotated in the chart below with the star; the program had a noticeable but modest effect on aggregate originations and the mix of credit scores.] While individuals with lower credit scores are able to originate auto loans, the origination amounts are still below, but approaching, the levels seen in the early- and mid-2000s.

7---Percent of subprime auto loans grows in 2Q, BusinessWeek

Experian says 35.2 percent of loans granted in the April-June period went to subprime buyers, or those with a Vantage credit score of 700 or lower. That's slightly higher than the 34.9 percent of loans that went to subprime buyers in the second quarter of 2012.
Repossession rates also fell nearly 15 percent in the second quarter. Less than 1 percent of loan holders had their vehicles repossessed.

Experian said the total balance of outstanding automotive loans grew 10 percent to $751 billion during the period.

8---The report states that “nonprime, subprime and deep-subprime loans account for 35.2 percent of all open vehicle loans in Q2 2013, auto credit express

Outstanding automotive loans grew from more than $682 billion in Q2 2012 to nearly $751 billion in Q2 2013
• Banks increased loan portfolios by $24 billion, credit unions by $18 billion finance companies by $16 billion, and captive finance companies by $11 billion
But if you fall into the higher-risk category you should also be aware that although the report states that “nonprime, subprime and deep-subprime loans account for 35.2 percent of all open vehicle loans in Q2 2013, up from 34.9 percent in Q2 2012″,  higher-risk lenders will typically continue to be diligent in approving loan applications

9---Banks Cannot And Do Not “Lend Out” Reserves”, prag cap

10---More Car Loans Than Mortgages in U.S., WSJ

11--Good news on the economy drives futures lower as investors anticipate September Taper, Bloomberg

The number of applications for unemployment insurance payments declined by 15,000 to 320,000 in the week ended Aug. 10, the fewest since October 2007, from a revised 335,000, a Labor Department report showed today in Washington. The median forecast of 44 economists surveyed by Bloomberg called for 335,000. Another report showed manufacturing in the New York region expanded at a slower-than-expected pace in August.
The consumer-price index increased 0.2 percent after a 0.5 percent gain in June, Labor Department figures showed. The advance matched the median forecast of 82 economists surveyed by Bloomberg. The core measure, which excludes food and fuel, also climbed 0.2 percent from June.

12---Egyptian junta imposes martial law amid bloody crackdown , wsws

The fundamental lessons of Leon Trotsky’s Theory of Permanent Revolution find bloody vindication in the latest slaughter in Cairo. The struggle for democracy can be carried out only in a ruthless struggle against imperialism, all sections of the capitalist class, and their political accomplices in the middle class. The task of fighting for democratic rights falls to the working class, as part of an independent revolutionary struggle for socialism and workers’ power.
Over the two years of mass strikes and protests by workers and youth since the ouster of Mubarak in 2011, the liberal bourgeoisie and sections of the affluent middle class closest to it have shifted openly into the camp of counterrevolution. In the absence of a socialist leadership within the working class, they ultilized the growing strike movement and popular protests against Mursi to their own advantage.....

The bloody massacre and imposition of emergency rule carried out yesterday by Egypt’s military junta testifies to the ruthlessness of efforts of the Egyptian ruling class and its imperialist backers in Washington and Europe to drown the Egyptian revolution in blood.
The army’s ouster of Islamist President Mohamed Mursi on July 3 was a pre-emptive action amidst mass working class protests against the elected government’s reactionary policies. The military coup has since developed into an open attempt to restore the military-backed dictatorship that existed before the Egyptian revolution under the regime of Hosni Mubarak.

Starting early Wednesday morning, security forces backed by helicopters, armored vehicles and snipers assaulted protests and sit-ins by Mursi supporters in cities across Egypt. In the capital, Cairo, the army dispersed two pro-Mursi sit-ins and repeatedly attacked the central protest site, at the Rabaa al-Adawiya Mosque...

These events obey an inexorable political logic: the capitalist ruling class, having been compelled to make concessions in the first upsurge of the revolution, takes the gloves off when the first opportunity arises to deal a blow to the working class.
In this, the Egyptian junta enjoys the support of Washington and its European allies. Washington has repeatedly backed the Egyptian army’s bloody crackdowns since the July 3 overthrow of Mursi, which it declined to call a coup so it could continue giving the Egyptian army $1.3 billion in yearly military aid. Earlier this month, US Secretary of State John Kerry praised the generals’ decision to topple Mursi as “restoring democracy.”

13--Mission Accomplished--euro style: The EU and the attack on European workers’ wages, wsws
15 August 2013
Five years after the Wall Street crash of September 2008, figures compiled by Britain’s House of Commons Library on wage rates in the 27-member European Union show that workers’ living standards have been thrown into sharp reverse.

In Greece, wages have fallen by 11.3 percent since the autumn of 2010. The UK’s Institute for Fiscal Studies has described this decline as “unprecedented.” The austerity drive has pushed millions into poverty and driven up the official unemployment rate to a record high of 27.6 percent. Among those aged 15 to 24, the official rate is a staggering 64.9 percent.

Even so, the country is subject to relentless demands for further cuts. Only last month, the Greek parliament approved a new round of cuts that will slash wages again and wipe out an additional 15,000 public-sector jobs by 2015. Having cut the minimum wage for under-25-year-olds by 32 percent, to just 500 euros a month, Athens is reportedly considering further reductions.
Portugal had the second biggest fall in wages over the same period—8.1 percent. With some 13 billion euros in cuts implemented since 2008, Lisbon is following the Greek path of rising poverty and declining social provision. Reports are spreading of people going without health care due to lack of funds and pharmacies finding themselves unable to replace stock.

Spain and Cyprus—also on the receiving end of the troika’s austerity “medicine”—have seen wage rates decline by 3.3 percent and 3 percent respectively. In Spain, where unemployment is at 27 percent and over 50 percent among youth, the central bank is calling for the minimum wage to be suspended. This is part of a drive to overturn legal protections for workers in line with IMF demands for additional wage cuts of up to 10 percent

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