Wednesday, August 21, 2013

Today's Links

1--Gross tweet; Food for thought, zero hedge

Gross--Pimco: 3 to 4 percent credit growth can’t produce much more than 3-4 percent increases in asset prices. No more QE's? No more bull markets

2---Japan's nuclear crisis deepens, Reuters

Japan's nuclear crisis escalated to its worst level since a massive earthquake and tsunami crippled the Fukushima plant more than two years ago, with the country's nuclear watchdog saying it feared more storage tanks were leaking contaminated water.
The U.N.'s International Atomic Energy Agency (IAEA) said on Wednesday it viewed the situation at Fukushima "seriously" and was ready to help if called upon, while nearby China said it was "shocked" to hear contaminated water was still leaking from the plant, and urged Japan to provide information "in a timely, thorough and accurate way".

3---When “QE Infinity” Turns Into A Pipedream: Hot Money Evaporates, Rout Follows – See Emerging Markets , Testosterone Pit

Printing money and forcing interest rates to near zero, that’s how the Fed and other central banks papered over the Financial Crisis, duct-taped the bursting credit bubble back together, inflated new asset bubbles, and propped up TBTF banks. And in so doing, they accomplished a feat: a worldwide tsunami of hot money.

QE drove yield-seeking investors, whose livelihood was evaporating before their very eyes, to chase down yield wherever they could find it, no matter what the risks, and they found it in emerging markets and in junk, where they joined forces with the hot money. India, Indonesia, Thailand, and of course the BRICS, and other developing countries could suddenly borrow at record low rates from the future – much like developed countries – to goose growth. Companies and consumers ran up debts. Imports ballooned.

It had nefarious consequences. As the Fed was trying to devalue the dollar, other currencies rose. In September 2010, Brazilian Finance Minister Guido Mantega denounced the “international currency war” that the money-printers in Washington and elsewhere were waging against his and other emerging countries where the hot money had washed ashore. “This threatens us because it takes away our competitiveness,” he warned.

But in early May, when the Fed penciled “taper” on the calendar as something to consider, the hot money got antsy, and markets were reacting. That month, interest rates started to soar globally. Junk bonds got slammed, as did the debt of emerging markets, particularly of countries that had splurged on imports and had to fund large current-account deficits.

The selloff doused all sorts of hopes in India and has since contaminated Indonesia, Thailand, and other countries. As Dallas Fed President Richard Fisher explained so eloquently last Friday on Fox: “I think the market has come to realize there is no QE infinity.”

4---The origins of Christianity--An atheist’s guide, The Economist

Ms O’Grady observes that Paul was, in a sense, solving a private problem when he devised a religion for the whole of humanity—the identity problem of a devout and zealous Jew who had a Greek education and was a Roman citizen. Three centuries later, Rome’s masters found that Paul’s answer to his own dilemmas corresponded precisely to the empire’s ideological needs.

Her argument rises to a crescendo in a final chapter about how “Paul created Christ”; or how the apostle devised a serviceable form of world-religion based on his mystical intimations of a divine figure whom he had “met” only in visions. Both ends of her argument—that Paul responded creatively to his personal dilemmas, and that belief in one God held the late Roman empire together—are convincing enough; but in her attempts to trace what happened in the first 300 years of Christian history, many causal links are missing. (See: Nietzsche's "unifying myth")

5---Trans-Pacific Partnership Will Remove What’s Left Of American Democracy, Firedog Lake

6---Egyptian Military Seeks Support for Counter Revolution--The Generals’ Second Act, counterpunch

the Egyptian Federation of Independent Trade Unions (EFITU) just posted the following proposals worth noting in full because of their popular urgency in a country still suffering significant unemployment and vast stretches of poverty:
The President of Republic must reinstate all laid-off workers; Representation of employees in the drafting committee of a Constitution and of the laws relating to social justice; Immediate publication of a law on trade union freedoms; Immediate publication of a law setting minimum and maximum wages, indexed to prices; Implement a law that guarantees pensions for all workers, including the street vendors, fellahin (poor peasants) and fishermen; Publication of a true healthcare law, to replace the current law, which dates back to 1964; Repeal the law criminalizing strikes and demonstrations, as well as those who organize them; End the privatization program and implement the decisions of the Justice Department which mandate the return of privatized firms to the State.”
But such a national broad action campaign has not yet materialized, no doubt weakened by the loss of key EFITU figures like Abu Eita.

Support given to the military by veteran reformers provides baseless prestige to a government engaged in a brutal and unconscionable war against the Muslim Brotherhood – a war that must be opposed on principled grounds of supporting democratic rights for all, not just those with whom we agree.

In addition, unrestrained attacks on the otherwise compliant Muslim Brotherhood, who have never challenged the economic power of the elite minority, raises legitimate fears that the military is actually testing the waters for future repression against striking workers and a rebellious majority sure to eventually reemerge against lingering poverty.
It is uncertain when that upsurge will arise because this latest government transformation is no doubt the most successful cosmetic facelift yet, buying more time for the old order or “deep state” as it is now commonly referred, to reassert its control.

7---G-Sax:  60 percent of all 2013 home sales are being driven by cash buyers, Dr Housing Bubble

an analysis by non-other than Goldman Sachs shows that 60 percent of all 2013 home sales are being driven by cash buyers.  That is, the middle class is largely being pushed out of this game and has become the minority in this real estate market.  Let us look into the data more carefully.

Cash buyers only a small portion of the market?
I think the myth of cash buyers being a small part of the market fed into the meme that the housing market was “organically” going up on the underlying power of the economy.  In reality, the market has been bubbling up because hot money is voraciously fighting over itself to eat up whatever inventory is available.

8---The Vulnerability of Asian Markets Then (1997) and Now (2013) , WSJ

It was a toxic combination that sparked the Asian financial crisis in 1997.
The bad news is that same combination–of Federal Reserve monetary tightening and Japanese fiscal tightening–is looming once again
Rewind to March 1997. Then, the Fed’s communications policy bore little resemblance to the current era of transparency, so inevitably some investors were taken aback when the central bank raised the discount rate, the rate at which the Fed lends money to commercial banks, to 5.5% from 5.25% after two years of trimming rates. (Remember, this was before fed funds targeting was in vogue.)
One month later, in April 1997, the Japanese government raised a nationwide consumption tax to 5% from 3%. This was seen at the time as a major contributing factor to Japan’s economy falling into a recession in Q41997.

Fast forward to today. The Fed is expected to usher in the beginning of the end of its bond-buying program, put in place after the financial crisis to stimulate growth. Whether the Fed makes a move in September or December will ultimately become a footnote in history. What’s important is that this tapering right now looks inevitable.

Meanwhile, Prime Minister Shinzo Abe is weighing an increase in the same exact consumption tax, to 8% starting April 2014 from the current 5%.
No wonder emerging markets in Asia are freaking out. By any measure, that’s a lot of money that’s going to stop making its way into the financial system. Say bye-bye to the search for yield and those “hot money” flows that propelled those markets higher.
Asian emerging-market currencies are bearing the brunt of the pain. In the four months since April, the Thai baht is down 10% against the dollar, the Indian rupee has fallen by more than 16% and the Indonesian rupiah is down 11.4%.
The question remains: Is this 1997 all over again?

9--Capital Flows Back to U.S. as Markets Slump Across Asia, Bloomberg (repeat)

10--Jobless rate rises in more than half of US states, wsws
By Kate Randall
21 August 2013
The unemployment rate rose in more than half of the 50 US states in July, according to a report released Monday by US Department of Labor’s Bureau of Labor Statistics (BLS). The figures reflect weaker job prospects and sluggish economic growth despite a nationwide drop in the official jobless rate, to 7.4 percent from June’s 7.6 percent.
Nearly five years after the Wall Street crash, the BLS report shows many states continue to experience significant declines in employment as a result of state and local budget cuts as well as the deepening impact of the sequestration order signed by President Obama in March of this year....

A BLS Household Survey shows that of the 963,000 people who reported that they were newly employed over the past six months, 936,000 of them said they were in part-time jobs. According to Labor Department figures, there are currently some 8.2 million workers who are working part-time jobs because they cannot find full-time employment—a record for the US.
These part-time positions are largely concentrated in traditionally low-wage sectors, such as retail, home health care, and temporary staffing agencies. Such low-wage jobs, paying poverty wages of $7.69 to $13.83 per hour, constitute the majority of jobs created in the US since the financial crisis, which officially ended in mid-2009.

The massive growth of low-wage, part-time employment is the result of a deliberate policy on the part of the Obama administration and both big business parties. Corporations, sitting on huge hoards of cash, have seized on the economic crisis to drive down labor costs and boost their bottom lines. The limited numbers of workers companies do hire are predominantly in low-wage, part-time or temporary positions.
Some businesses are also responding to a requirement of the Obama health care law that employers with 50 or more workers provide health insurance to all employees working over 30 hours a week. Despite the fact the Obama administration has granted employers a one-year waiver to comply, until January 2015, some companies are moving forward regardless to cut workers’ hours.

11---Banks Are Falling Short in Planning for the Worst, Fed Says, NYT

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