Saturday, September 21, 2013

Today's Links

1---(Today's "must read") FIVE YEARS AFTER THE MELTDOWN5 years after financial crash, many losers — and some big winners, LA Times
Corporate America, banks, the super rich and the index investing concept have gained. Savers, low-skilled workers, many homeowners, and stock exchanges have suffered.

But many Americans have refused to budge. The result: $7 trillion sits in bank passbook and money-market accounts earning close to nothing. That sum was $4 trillion five years ago.

James Bianco, head of Bianco Research in Chicago, thinks that the cash hoard points up another casualty of the crash: the willingness to take risks.

People think too much of this stuff is manipulated," Bianco said of markets since 2008. "Their conclusion is 'It's not a fair game.'"
WINNER: Corporate America. Record bank profits are a slice of a much bigger pie — a stunning profit boom at major U.S. corporations.
The government's broadest measure of corporate earnings reached an annualized rate of $2.1 trillion in the second quarter, an all-time high and more than double the rate at the end of 2008.
The dramatic rebound in earnings has occurred despite a slow-growing U.S. economy and continued weakness abroad, particularly in Europe.
Corporations' profit success stems in part from the layoffs and other deep cost-cutting many firms undertook in the 2008-09 recession — and their relative lack of domestic hiring since. And, like the banks, companies have reaped the benefits of the Fed's super-low interest rates by refinancing debt.
The surge in earnings has helped buttress stock prices, which are near record highs...

What the 2008 crash exposed is the deepening predicament faced by low-skilled and unskilled workers everywhere: A slow-growing world economy means many companies can't justify hiring. At the same time, automation continues to replace human labor....

WINNER: The banks. In the second quarter of this year U.S. banks earned a total of $42.2 billion — the biggest industry profit in history, and double the earnings of the same period in 2010.
It's no accident that the banks have prospered mightily since the crash, said Neil Barofsky, who was the watchdog over the U.S. bank bailout program launched in September 2008.
"We turned the entire resources of the nation toward one goal: setting up a situation where the banks could earn their way out of this," said Barofsky, now an attorney at Jenner & Block in New York. The plan was not, he lamented, "about holding institutions accountable" for the debacle...

WINNER: The super-rich. It takes money to make money. And many of the extraordinarily well-off who managed to keep their wealth after the 2008 crash have seen their fortunes balloon once again.
The Fed's low interest rates have driven up two favorite assets of the super-rich: real estate and stocks.
A new report by research firm Wealth-X pegs the number of "ultra-high net worth" individuals — those with at least $30 million in net worth — at a record high of nearly 200,000 worldwide this year, up from 186,000 in 2011.
Their total wealth has surged to $27.8 trillion from $25 trillion two years ago, Wealth-X estimated.
To put the numbers in perspective, those 200,000 people control wealth equivalent to the combined gross domestic products of the U.S., Japan, Brazil and India.
The riches at the very top have helped widen the income-inequality gap here and abroad.
A new study by Emmanuel Saez, an economics professor at UC Berkeley, found that the top 10% of U.S. earners captured 50.4% of total income in 2012, a level higher than any other year since 1917...

U.S. stock trading volume has shrunk dramatically since 2008, in part as many small investors have abandoned equities. That has accelerated the pace of mergers in the trading business, as exchanges partner up with stronger players or consolidate to grab more share of a disappearing market.
NYSE Euronext, parent of the once-iconic New York Stock Exchange, is selling out to commodities trader IntercontinentalExchange. And two large electronic stock trading networks, Bats Global Markets and Direct Edge Holdings, announced merger plans last month.

2---The Fed is the housing market, Dr Housing Bubble

Rents are rising at nearly twice the pace of the overall inflation rate.  This divergence has accelerated since 2012.  The Fed has made a one way bet here.  The Fed is operating under a QE forever scenario.  ....

Reconcile all the facts coming out this month:
-Household incomes adjusting for inflation are back to levels last seen in 1989 (24 years ago – a lost generation)
-50 percent of income generated in 2012 is going to the top 10 percent of earners (highest ever since the early 1900s)
-Rents are rising much faster than overall CPI
-Investors are gobbling up an incredibly large share of all real estate purchases
There has been a serious disconnect going on since the recovery hit and these kind of divergent data points suggest we are in a mania like mode.  Investors are largely chasing yield even on many deals that simply do make sense (i.e., cap rates are simply not panning out in many markets).  The Fed taper is merely a magician’s trick.  The Fed can’t taper to any large degree.  It is an end-game in the mortgage market.  The Fed is the housing market.  The Fed is largely focused on helping member banks so it is no surprise that banks are doing exceptionally well and many financial institutions are the largest real estate buyers in the current market.  For now, the investor trade will continue to play out even if people with common sense realize this is simply one giant shell game and the Fed is on its way to a $4 trillion balance sheet.  Doesn’t seen so farfetched that we are entering a modern age of feudalism.

3--Was this the graph that spooked the Fed? Testosterone Pit



4--Elites’ strange plot to take over the world, salon

Did the plan succeed?

The institutional framework of a world government composed of Western European and American states remains far more potent than we like to imagine, even beyond the security apparatus revealed by Snowden’s documents. For example, in every major free trade agreement since NAFTA, U.S. courts have been subordinated to international tribunals, which operate according to rules laid out either by the World Trade Organization, a division of the World Bank, or by a division of the United Nations known as UNCITRAL (the United Nations Commission on International Trade Law). These tribunals rule on consumer, labor, and environmental questions – not just trade. And they are trans-national, much as the supply chains of Apple, Ford, Toyota, or any other multi-national corporation are, or the technology that Google, Microsoft, or IBM promote all over the world.

There are other deep links. The Basil banking accords seek international harmonization of capital standards. Why? It’s not clear what the benefits are of having global standards for what banks should do. But the global elites push onward, regardless, towards a one world solution. And lest one think this is just theoretical, the Federal Reserve supported the European Central Bank with unlimited swap lines during the financial crisis, lending as much as $500B to the ECB in 2008 and 2009. European and other foreign banks drew liberally from the New York Federal Reserve’s discount window. The Fed became the central banker to the world.

5---US corporate credit growth slowing, sober look

6---Great Graphic: Do Recoveries belong to the Rich?, marc to market

There is a debate among economists about the merits of quantitative easing, by which it is meant the practice of increasing the size of the a central bank's balance sheet

7---Number of people looking for homes "dropped dramatically" in august, CNBC

"We are getting early signals from lock boxes that show a significant change in direction in August," said Lawrence Yun, chief economist for the National Association of Realtors, referring to the small key boxes that hang on the doors of for-sale homes. The number of times they were opened in August dropped dramatically, signaling a big drop in potential buyer traffic...

Yun claimed the jump in August sales was based on fear of rising rates. August numbers are based on closings for contracts that were likely signed in June. June saw the biggest spike in mortgage interest rates.
"That hurried people into making a decision," said Yun. "It was the last hurrah for the next 12 to 18 months."
...
The first-time home buyer market has "collapsed," according to the Realtors, due to tight credit and weak employment, and millions of potential move-up buyers are still plagued by negative and near-negative equity.
It will likely take a few more years and a lot more jobs for those dynamics to improve

8---August Existing Home Sales At Pre-Recession High, ds news

9---Hopeful sellers put more houses on market, NYT

What’s happening is rising housing prices are inspiring many newly optimistic homeowners to put their property on the market, while at the same time reducing the number of “underwater” borrowers who until recently couldn’t sell their homes because they owned more on their mortgage than the home was worth. With more people putting homes on the market and the pace of sales easing due to the regular fall slowdown and rising mortgage rates, there are more homes on the shelf.

“Nobody wants to sell right after prices bottomed, but it’s been 18 months since prices bottomed and more homeowners are feeling as if they’ve waited long enough,” said Jed Kolko, chief economist at Trulia.

Housing inventory has taken wild swings through the housing bust and subsequent recovery, moving from a gluttonous drag on prices in the downturn to today’s depleted stock that has left home buyers bidding up the little left to choose from. Inventory fell rapidly because home builders built little during the recession while hordes of big and small investors snapped up vacant housing and converted them to rentals.

10---Economist Decries New QRM Proposal, ds news (Will they ever learn?)

Robert C. Pozen, a senior fellow in economic studies at the Brookings Institution suggested shared his dire outlook in a recent article in the Wall Street Journal, expressing his concern that without the assurance of a substantial down payment or risk retention from lenders, risky lending will prevail.
“Under the proposed rules for home mortgages, most borrowers would make minimal down payments and most lenders would have no risk of loss,” Pozen said. “This is a good way to create another mortgage crisis.”
Original proposals for the QRM included a 20 percent minimum down payment requirement and a maximum loan-to-value ratio of 36 percent.
...
The CFPB’s new proposal, released August 28, includes no minimum down payment requirement and increases the maximum loan-to-value ratio to 43 percent.

11----The beginning of the end? naked capitalism (archive subprime January 2007)

12---Labor's share declining in US, owenzidar

Unions or offshoring?

13--Why the German elections matter, wsws (more austerity, more war)

Regardless of its composition, the new government will differ greatly from its predecessor. It will not only intensify the ruthless austerity policies Germany is imposing on Europe, it will declare war on the working class within Germany itself. It will also abandon any military restraint and aggressively pursue the interests of German imperialism internationally.

The establishment parties agree on all these issues—from the CDU-CSU and the FDP to the SPD, the Greens and the Left Party. This consensus between the parties was expressed during the campaign by their refusal to raise any of these issues. They agreed to remain silent, well aware of the huge popular opposition to austerity and militarism.

Election posters were emblazoned with meaningless slogans such as “It’s We Who Decide” and “Successful Together.” Political debates discussed the color of Angela Merkel's necklace, a provocative pose struck by SPD candidate Peer Steinbrück, and the pedophiliac misdemeanors of the Greens in the 1980s. None of the parties addressed the social disaster in Greece, raging social inequality in Germany, the continuing crisis of the euro or the threat of war against Syria-...

Calls for authoritarian policies at home combined with an aggressive foreign policy are the response by the ruling class to the deepest crisis of capitalism since the eve of World War II. In the wake of the financial crisis of 2008, the German government has imposed ruthless austerity measures throughout Europe in order to recover the 1.6 trillion euros made available to banks. In so doing, it has produced an unprecedented social disaster.

At the end of last year, one in four Europeans lived at or below the poverty line. That’s 121 million people.

While broad sections of the population are condemned to poverty, the top layers of society have enriched themselves without restraint. The markets are celebrating an orgy of speculation and thereby preparing the next financial debacle. In the week before the election, the German DAX stock index reached an historic high, even though the German economy will grow this year by just 0.3 percent.
The austerity measures have not resolved, but deepened the crisis of capitalism. It is an open secret that Greece and Portugal will need new bailouts immediately after the election, leading to deep holes in the budgets of all European Union countries and even more social cuts.

As was the case eighty years ago, the ruling class is responding to the crisis of its system with preparations for war and dictatorship.

14---Financial markets still need monthly cash injections, wsws

The policies pursued by the Fed and the Obama administration have exacerbated economic inequality in America to an unprecedented degree. While the army of unemployed remains the largest since the Great Depression, corporate America and the financial elite have seen their wealth surpass pre-crash levels.
In the five years since the financial crisis erupted in mid-September 2008, corporate profits are up 40 percent and the S&P 500 index is up 46 percent. The Dow Jones index is up 150 percent since its post-crash low in March 2009.
...
The decision to put off scaling back QE was a tacit acknowledgment that the US and world economy, far from recovering, is weakening. Five years after the Wall Street crash, none of the underlying contradictions that led to the disaster have been addressed, let alone resolved. Instead, the global financial system has become completely dependent on virtually unlimited subsidies by central banks and governments, exacerbating the contradictions that led to the crisis in the first place.
The budget and debt crises resulting from the diversion of trillions in public funds to prop up the banks are used, in turn, to justify a brutal assault on the living standards of the working class and the gutting of social programs upon which working people depend.

15---Spying scandal sends US influence on Latin America into nosedive, RT

Unlike Europeans, who complicitly give a wink and a nudge to the US in the mass surveillance scandal, Latin America is angry. In a drastic move, Brazilian President Dilma Rousseff, a moderate, decided to call off a State visit to Washington. Leftists in the region are now more aggressive and right-wingers have been pressured to speak out. American experts may insist their focus is on Syria, but the backyard is rising in revolt. The National Security Agency (NSA) scandals have made it impossible for regional leaders to keep quiet without looking weak.

Brazil’s snub has the biggest implications. The decision was taken after Ms Rousseff discovered her personal communications were being spied on. Every South American leader called to support her, including Colombia’s Juan Manuel Santos, the only close ally Barack Obama has left in the region. She promised to attack mass surveillance at the United Nations. Boeing is now likely to lose a US$4 billion deal on fighter jets. 

Without the Brazilian buffer, leftists are emboldened. Bolivia’s Evo Morales said he will sue Obama in the international courts for human rights violations after Venezuela’s Nicolas Maduro was blocked for a few hours from flying over Puerto Rico. These two and Ecuador’s Rafael Correa are likely to push more for bringing leaker Edward Snowden to South America. After Hugo Chavez passed away they needed a joint agenda to improve their chemistry.

NSA revelations also made Argentina’s Cristina Kirchner reach out to Brazil to improve their cyber defense. Countries in the region are now paying attention to this project in order to develop their own email systems: specifically designed for those who don’t want Google and Yahoo accounts which allow US intelligence in. That is open retaliation, but much more might happen behind closed doors. American presence is still important; but now that China’s star is rising rapidly as Latin America’s trade partner, the pressure is on the US.

US influence is so low at the moment that even Mexico’s conservative President Enrique Peña Nieto was forced to speak out and demand an investigation. Political pressure gave him no alternative but to condemn the NSA for stealing data on his ministerial picks. Chile’s Sebastián Piñera also had to come out fighting. These leaders aren’t surprised with the surveillance itself, but the reach of it was just too bold.
The times are definitely a-changing. America might be on the way to belonging to all Americans, and that includes Latin Americans as well. 

16---Putin seeks multipolar world with collective decision-making on security policy and preservation of national sovereignty, RT

Sovereignty, self-reliance and integrity of Russia are unconditional, they are the red lines no one is allowed to step over,” Putin emphasized.

Speaking of the possible basis for the new national idea, the president said that the current Russian leadership chose to rely on traditional Christian and moral values, noting that without these millennia-tested ideals people would “inevitably lose their human dignity”.

Multi-polar world remains priority in foreign policy

 In addition, the Russian leader noted that the national revival of Russia was in line with the foreign policy course for a multi-polar world and the prevailing of international law over the rule of brute force.

Putin cautioned against attempts to reanimate the model of a unified and unipolar world, adding that such a system would not need sovereign states, but would need vassals instead. 
Russia is with those who hold that the key decisions must be taken on a collective basis rather than in accordance with plans and interests of certain states or groups of states. International law must work instead of the ‘right of the strong’ and the ‘rule of fists’” Putin told the assembly.
The Russian president again stressed that every country and their people were not exceptional, but they were unique and all had equal rights, including the right to choose their path of development

17---Hundreds of Syria Rebels Pledge Loyalty to al-Qaeda, antiwar (HA!)
           Entire Units Reportedly Ally With Jabhat al-Nusra

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