Monday, November 18, 2013

Today's Links

1---Nominee to head US Federal Reserve reassures Wall Street in Senate testimony, wsws

There is an attempt to portray Yellen as an advocate of “middle class” workers and unemployed people, based on equating her support for pumping $85 billion a month into the stock and bond markets with job-creation.

There is no substance to such claims. The Fed’s highly expansionary monetary policy has done virtually nothing to promote job-creation, nor is it intended to do so. On the contrary, it has enabled the ruling class to continue to use high unemployment to drive down wages while fostering a further concentration of wealth at the very top.

2---Japan's Banks Find It Hard to Lend Easy Money, WSJ
Dearth of Borrowers Illustrates Difficulty in Japan's Program to Increase Money Supply

Normally, monetary easing filters into the economy through banks, which soak up the cheap cash and then lend it out again—stimulating spending, investment and growth.
But decades of shrinking demand and falling wages have spooked potential borrowers. As borrowing dwindled, financial firms put more money in the safety of low-yielding government bonds. Currently, Japanese banks hold around 142 trillion yen, or about $1.4 trillion, in government bonds—roughly 14% of the market—versus about 2% in the U.S....
Under the plan, the country's central bank has doubled bond purchases, buying the equivalent of 70% of new issues. It is an attempt to literally crowd banks and other investors out of the market and force them to put their money to work in other ways—through loans or investments in real estate, for example—to help stimulate the economy. ...
With demand for loans falling well below the amount of deposits flowing in, "we can't do anything but invest that money in securities, in order to raise profits,'' says Masato Miyanaga, Chugoku's president.
Confirming the precariousness of the recovery, government figures released last week showed economic growth halved in the three months to Sept. 30 compared with the first half of the year, after a slowdown in exports and consumer spending.....
And with demand for loans still weak, much of the money from the Bank of Japan's 8301.TO +2.88% Bank of Japan Japan: Tokyo ¥53500 +1500 +2.88% Nov. 15, 2013 2:35 pm Volume : 700 P/E Ratio 0.09 Market Cap¥52.20 Billion Dividend Yield N/A Rev. per Employee ¥276,985,000 More quote details and news » recent easing is just idling in accounts that private banks keep at the BOJ. Those deposits have soared 113% since March, low returns notwithstanding. Although lending by big banks has increased in recent months, much of that money has gone abroad, funding acquisitions or the purchase of expensive imported fuel, bankers say.
In one sign of strain, funds flowing out from banks in the form of loans have fallen far below the amount of cash flooding in. That loan-deposit gap has been widening at an average pace of 8% each year over the past decade. Loans at Japanese banks amounted to 69% of deposits at the end of October, versus 76% for U.S. banks—even despite the broad credit curb that has lingered since the U.S. financial crisis.
Economy-watchers say galvanizing demand for funds is key for a real, lasting recovery. But more needs to be done, they say....
and "banks are practically giving money away.'' But businesses remain hesitant, he says.
(Here we go again)
After less that two years of modest but positive growth, real estate loans in the US banking system have recently gone into the red again. Lower demand and banks' unease with real estate keep this sector from growing...
Detroit Free Press: - A boom in auto loans continues to support a resurgence in U.S. car buying that has hit its highest sales pace since 2007. The total amount of outstanding auto loans topped $782.9 billion as of Sept. 30, up $103 billion from the same period last year, according to Experian Automotive’s quarterly report.
[Experian] said the availability of credit, combined with consumers’ strong track record of repaying loans, is helping banks justify greater access to loans and helping to boost U.S. automotive sales.

Through October, consumers have purchased 13 million new cars and trucks in the U.S., up 8.4 percent from the same period last year. The auto industry remains on track to sell about 15.5 million new cars and trucks this year - the most since 2007But of course as the auto loan boom replaces the real estate boom of 7 years ago, signs of excessive lending and risk taking by banks are beginning to appear. Just as real estate lending was "safe" back then, auto lending is "safe" now.
Detroit Free Press: - Banks have become increasingly willing to provide loans to sub-prime customers and are allowing consumers to finance over a longer period, with some loans extending as long as eight years.
Indeed, longer dated auto loans are becoming increasingly common.
Montgomery Advertiser: - More new-car buyers are stretching out their loan payments for as many as seven years, and some experts worry that’s another financial time bomb.

While Not so long ago, remember the days when ads touted 48-month loans. Today the biggest growth is coming in loans lasting up to 84 months — That’s longer than most people are expected to want to keep their new car.

The longest-term new-car loans — 73 to 84 months — have jumped 25.1 percent in the past year and now make up 19.5 percent of total new-car lending, according to Experian Automotive. All other loan-length categories, in fact, have become less popular as buyers shift to longer terms to get lower payments

4---Repo Alert: Fed’s Rosengren Says Banks With Broker-Dealer Units Pose Risks, Bloomberg
(New Dodd Frank regulations won't prevent another crash.)
Global banks with significant investment banking and broker-dealer activities pose significant potential risk to the financial system and should be among the best capitalized large banking organizations,” Rosengren said today in remarks prepared for a speech in Abu Dhabi.

“These concerns are far from theoretical, in that many difficulties in the fall of 2008 stemmed from runs on institutions that were reliant on wholesale funding -- and many of those firms failed or were acquired,” he said in the speech to the Financial Stability Institute of the Bank for International Settlements.

5---Abenomics Payday Still Awaits, WSJ

Rank-and-file workers have yet to see a rise in wages, even as they pay more for food and energy. Consumer confidence in October fell back to the lowest levels since late last year.
Base pay is still falling. Data from the labor ministry shows that base wages were down 0.3% from a year earlier in September. Many workers did get bigger-than-usual summer bonuses, but these are one-off increases that don't give consumers the confidence to spend that comes with a permanent salary increase. Though prices have begun to pick up, they have been driven mostly by higher costs for imported energy and raw materials. More demand is key to ensuring a durable end to deflation.
What's more, to tackle its giant national debt, Japan is set to raise the consumption tax from 5% to 8% in April. This will trigger a temporary surge in demand over the next few months as consumers rush to make major purchases ahead of the increase, but thereafter it will hit spending momentum hard ...
Abenomics is at risk of stalling out unless workers start seeing fatter paychecks. So far, it doesn't look good.
The importance of household incomes was highlighted by Japan's third-quarter gross domestic product growth, which slowed to an annualized rate of 1.9%, compared with 3.8% in the previous quarter.
One key weakness: Household consumption rose just 0.1% from the previous quarter. Despite general euphoria around Prime Minister Shinzo Abe's economic plan, regular folks aren't seeing it in their pay, which, after all, is the ultimate gauge of whether Abenomics will be seen as a success by most Japanese
Japan's corporations may well figure it is in their long-term interest to give workers a raise. If they don't, Mr. Abe's economic project will be a bust. (Like they care?)
Patty Murray and Jay Inslee sell out workers
Commentary: The irrational-exuberance indicators are there for all to see
Unless Congress acts, during the last week of December an estimated 1.3 million people will lose access to an emergency program providing them with additional weeks of jobless benefits. A further 850,000 will be denied benefits in the first quarter of 2014. ...
one of the largest stimulus measures passed during the recession is likely to come to an end, and jobless workers in many states are likely to receive considerably fewer weeks of benefits.
In all, as many as 4.8 million people could be affected by expiring unemployment benefits through 2014, estimated Gene Sperling, President Obama’s top economic adviser.
“Historically, there has not been a time where the unemployment rate has been this high where you have not extended it,” Mr. Sperling said in an interview. “Why would you not extend now, when you’re dealing with the nearly unprecedented levels of long-term unemployment coming off such a historic recession? This would be the wrong time to do it.”
9---Where credit is due, NYT infographic
10--From the archive: Robert Brenner; Overproduction not Financial Collapse is the Heart of the Crisis: the US, East Asia, and the World -japan focus (must, must read)

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