Friday, September 27, 2013

Today's Links

1---Blackstone: We're in an 'epic credit bubble', CNBC

One of the world's largest investment firms believes the financial system is overly leveraged.
"We are in the middle of an epic credit bubble, in my opinion, the likes of which I haven't seen in my career in private equity," Joseph Baratta, The Blackstone Group's global head of private equity, said Thursday night at the Dow Jones Private Equity Analyst Conference in New York City. "The cost of a high yield bond on an absolute coupon basis is as low as it's ever been."

Baratta said Blackstone is "bullish" on the U.S. economy, but the "valuations we have to pay relative to the growth prospects are out of whack right now."
Baratta said the U.S. still has "clear headwinds" and is "range bound" between 1 percent and 3 percent economic growth.

2---HSBC still laundering money for terrorist groups, says whistleblower Everett Stern, Ian Fraser

In the video interview above, former HSBC anti-money laundering compliance officer, Everett Stern, frankly describes the criminal methods used by HSBC to launder money for terrorist groups including Hamas and Hezbollah as well as for drug cartels and other criminals. Although the bank paid a $1.9 billion penalty as part of a record-breaking money laundering settlement with the U.S. authorities in December 2012, Stern claims the London-headquartered bank is still laundering money with impunity and that the much vaunted “anti-money-laundering compliance team” it put in place to assuage US regulators as part of last year’s settlement is “a sham”. Stern, unfazed by HSBC’s legal bullying, adds that people started taking him more seriously


3--Walmart Stock Slides After Report Retailer Is Cutting Orders,  HP

4--Americans Are Shedding Debt, Will They Spend?, WSJ

homeowners still have little equity in their properties, even after the recent rise in house prices. On average, equity as a share of home values stood at 49.8 percent as of June 30, up from a low of 36.7 in early 2009 but still well below the 10-year pre-crisis average of 58.3 percent. According to data provider CoreLogic, 7.1 million homes still had negative equity in the second quarter of 2013, meaning their owners owed more on mortgages than the houses were worth. If those people have been responsible enough to keep paying their mortgages, they'll probably channel any added income toward paying off debts rather than going to the mall.

More broadly, the country's finances leave much to be desired. Total credit to the private sector -- that is, to households and businesses -- stood at 156 percent of gross domestic product as of June 30. Research published by the International Monetary Fund suggests that private credit becomes a drag on economic performance when it exceeds 100 percent of GDP, because the level of debt makes the economy more vulnerable to crises. Interestingly, the U.S. crossed the 100 percent threshold in 1984, the year the government undertook what was then its largest bank bailout ever -- that of the Continental Illinois Bank and Trust Company.

5---Fixed mortgage rates fall to a nine-week low, HW
QE3 continuation caused the drop

6---Pending home sales fall 1.6 percent in August, CNBC

7---Smoke and Mirrors: The Bogus Flow of Funds Q2 Report Shows $3 Trillion in Addtional Net Household Worth Which Doesn't Exist, economic populist

8---Using the Tax Code as a Weapon, economic populist
The ultra-wealthy uses the tax code as a weapon in their class-war against the poor by paying less than their fair share of taxes, when in a progressive tax system, the most wealthy are supposed to pay a greater percentage of their incomes --- because they are more able to contribute more, which benefits the most.

For almost a century, starting with capital gains* in the Revenue Act of 1921 (near the end of the Gilded Age), the top 1% has always received most of the tax breaks; and that's because they have the means and the connections to lobby members of Congress for special tax provisions.
* The top 1% earns most of their wealth with investments in stocks. The top 10% holds about 80 percent of all stock market wealth (The stock markets have over doubled since March 2009). Those who derive income from stocks pays a capital gains tax on realized gains, just as CEOs who earned stock options as "incentive pay". After one year they pay a 23.8 percent tax rate for federal taxes, less than the top marginal rate of 39.6 percent for regular wages --- and this income is not subjected to any Social Security taxes. In 1977 the capital gains tax rate was 40 percent. Changes in the tax law that reduced the federal tax rate on capital gains income is by far the largest contributor to rising income inequality in the United States.

9---Fed’s George: Amount of Taper Less Important Than Clarity of Approach, WSJ

10---Inflation Remains Far From Fed Target, WSJ

Inflation in August remained far away from the Federal Reserve’s target, a factor that could make central bankers even more hesitant to pare back their support for the economy.
The Fed’s preferred inflation gauge, the price index personal consumption expenditures, advanced 1.2% in August from a year earlier, the Commerce Department said Friday. That was slower than July’s 1.3% annual increase and marks the first time year-over-year inflation eased since April.
Excluding volatile food and energy prices, “core” inflation also advanced just 1.2% from a year earlier. That represents a slight pickup from July’s year-over-year reading.

Inflation sitting so far below the Fed’s 2% target may make it difficult for the Fed to slow its bond purchases from its $85 billion monthly pace. The latest figure is the final one the Fed will have before its next policy meeting starts in late October. Some Fed officials say the Fed should maintain its support for the economy at its current level until inflation picks up.

Inflation remaining at a low pace for years would also complicate an eventual next step — increasing short-term interest rates later this decade. “We should be very reluctant to raise rates if inflation remains persistently below target, and that’s one of the reasons that I think we can be very patient in raising the federal funds rate,” Fed Chairman Ben Bernanke said at a press conference earlier this month.

Fed officials forecast that inflation won’t return to near their 2% target until 2015 or 2016, according to projections released this month. However, 15 of 17 participants on the central bank’s policy committee project the Fed will raise short-term interest rates no later than 2015.

11---Japan: Ending deflation? Don't bet on it, WSJ

When energy and food are excluded from core CPI – giving “core core CPI” – prices fell for the 56th straight month in August. Economists say that getting prices of everyday expenses like rent and karaoke to rise requires stimulating demand from consumers through higher wages – an unlikely prospect with Japanese companies trying to cut costs instead.
The government has pressed companies to raise wages, but politicians acknowledge there’s little they can do.
“We are a democratic country, so we cannot compel companies” to offer raises, Economy Minister Akira Amari said Friday.  But he didn’t seem to think further price rises were a lost cause.
The rise in CPI indicates “the economy is in the process of exiting deflation,” he said after the data release.

12---The Return of Insider Attacks in Afghanistan, antiwar
           Second Strike of the Week Kills One US Soldier

13---Will the Fear Trade Bubble Up?, John Hussman, prag cap

14---QE and the “Epic Credit Bubble”, prag cap

15---The Wall Street Takeover, Part 2, baseline scenario

16---The class issues in the US budget crisis, wsws

The Affordable Care Act lays the groundwork for corporations and local governments to shed their insurance coverage for employees, offloading their workers onto the newly established health care exchanges, where they will be required to purchase private insurance. Today, Obama administration officials are meeting with Detroit’s emergency manager, Kevyn Orr. Along with the gutting of city workers’ pensions, Orr is proposing to eliminate health care benefits for retirees and shift them onto the exchanges or, if they are over 65, onto Medicare.

The Affordable Care Act is essentially a Democratic Party appropriation of health care “vouchers,” which Republicans have championed for decades as a means of undermining employer-provided health coverage and privatizing Medicare, the government-run program for seniors. Under Obama and the Democrats, this reactionary policy is presented as a “progressive” social reform in an attempt to fool the people and provide political cover for the trade unions and liberal and pseudo-left organizations that orbit around the Democratic Party to back it.

The entire budget “debate” takes place amid record corporate profits, soaring inequality, and a booming stock market fueled by $85 billion per month pumped into the financial system by the Federal Reserve.
The fact that under conditions of mass unemployment, growing poverty and falling wages the conflict between various sections of the political establishment is over how quickly to implement measures that will throw millions more into poverty says a great deal about the character of the US political system.

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