Sunday, December 29, 2013

Today's Links

1---Academics Who Defend Wall St. Reap Reward, NYT
(Lavish rewards for selling out)

2---Americans Still Pessimistic About Economy, TIME

Almost 70 percent think the economy is in bad shape

3---Many Americans feel economy isn't improving, CNN Money

A new CNN/ORC poll released Friday showed people were pessimistic that the economy was improving. Nearly 70% said the economy is generally in poor shape, and only 32% rated it good.

Two-thirds of respondents said most of the economic news they've heard recently was bad news. More rural than urban dwellers said the economy was in poor shape.
And just over half expected the economy to remain in poor shape a year from now.

By some metrics, the economy has moved ahead this year. The stock market, for example, has surged -- the Nasdaq is up nearly 40% since January. Unemployment is at a five-year low point. Auto sales are at a seven-year high. Gas prices have dropped. And the housing sector, which dragged the U.S. into recession five years ago, is rebounding.

The Federal Reserve sees signs of strength, too. In December the central bank pulled back slightly on the stimulus that has boosted investor confidence this year.
But behind those numbers are the long-term unemployed, the under-employed and those who have dropped out of -- or never even entered -- the workforce. They're not sharing in the surging stock market, and many are about to lose jobless benefits.

Those people aren't buying big-ticket items like furniture or appliances, and some were cutting back on essentials. Thirty-six percent said they were cutting back spending on food or medicine, up from 31% in late 2008, the year the housing market collapsed

4---US broad money supply growth slows , sober look
The US broad money supply expansion has slowed materially in the last few months, with the year-over-year growth now at the lowest level since mid 2011. Except for certain components of M2 such as money market funds, the broad money supply is an indicator of the nation's overall credit expansion. This may, at least in part, explain the relatively low inflation the US has experienced in recent months (see post).

5---We have no federal public debt problem, Mark Weisbrot

....we have no federal public debt problem: net interest payments on the U.S. public debt are currently about 1 percent of GDP. This is about as low as it has been in the post-World-War II period, and is very small by any measure. The fact that our government is still trying to reduce economic growth and employment while we have more than 20 million people unemployed or underemployed is testimony to the unbridled power of the special interests that dominate debate over economic policy in the United States.....

most senior citizens get most of their income from Social Security, and at an average benefit of $1300 a month it isn’t enough. In fact, Senator Elizabeth Warren — a potential Democratic presidential contender for 2016 — has proposed increasing benefits, and that makes a lot more sense. Most of the baby boomers that will retire over the next two decades have very little savings for their retirement, with many having lost a lot of it when the housing bubble burst in 2006-2007. The whole idea that Social Security has any serious financial problems to begin with is an urban legend that has duped millions for decades, including (sadly) many journalists. It’s long past time to retire that nonsense.

The lesser good news is that some of the automatic or “sequestration” cuts in non-military (why does anyone use the euphemism “defense”?) spending for fiscal years 2014 and 2015 have been reduced. This would be expected to add about 250,000 jobs next year as compared to the sequester cuts. Unfortunately this is about cancelled out by the decision to cut off federal Emergency Unemployment Compensation for 1.3 million workers just after Christmas, since the loss of this spending will reduce growth and employment by about an equivalent amount. (Another 3.5 million would lose benefits during 2014.) This is especially mean to the long-term unemployed, since long-term unemployment is currently at twice or more than the level at which federal benefits have been eliminated in any of the previous recessions since 1959. A much richer nation we have today, but not kinder or gentler to the unemployed.

We won’t know until further legislation is passed exactly how the approximately $31 billion in non-military, discretionary spending that has been restored by this budget will be distributed. So we don’t yet know, for example, whether the 57,000 children cut off from the Head Start pre-school programs last year will get a reprieve.

More bad news: no tax loopholes will be closed. Super-rich hedge fund managers will still have income taxed at rates lower than teachers. Billionaires will still be able to avoid paying most estate taxes. And as for corporate welfare payments, the $20 billion dollars that was scheduled to be cut from the military will be restored. Can anyone tell us why our bloated military needs that $20 billion? The sequester cuts would have brought Pentagon spending back to the level of 2007 — still more, in inflation- adjusted terms than it was at the height of the Vietnam War.

6---Global Markets Hit New Highs and Lows, NYT

Ho hum

7---Join the Army and get raped: Reported sexual assaults in US military jumped by 50% in 2013, RT
(US Military is still a boy's club where anything goes. ANYTHING)

Reported sexual assaults in the US military increased by over 50 percent in 2013, new data reveals. The boost punctuates a year filled with damning disclosures of a culture that has failed to protect the enlisted from systemic levels of sexual violence.

Data obtained by AP shows there were more than 5,000 sexual assault reports during the 2013 fiscal year, which ended on Sept. 30. By contrast, there were 3,374 incidents reported in 2012.
Of the total reports in 2013, around 10 percent involved incidents that happened before the victim was officially in the military - up from 4 percent in 2012. The increase in cases has led military officials to suggest there is more confidence among service members in reporting incidents of sexual assault than in the past.

"Given the multiple data points, we assess that this is more reporting," said Col. Alan R. Metzler, deputy director of the Pentagon's sexual assault prevention and response office, according to AP. Metzler said that more victims are stepping up to make official complaints instead of simply seeking medical care while avoiding formal accusations.

Pentagon officials announced in May that sexual assault incidents have increased by 35 percent between 2010 and 2012, bringing the annual total to 26,000 cases of some type of unwanted sexual contact or sexual assault last year. The results came via an anonymous survey.
The Department of Veteran Affairs also found that 85,000 US veterans received medical treatment for sex abuse trauma last year, which indicates that the effects of assault have far-reaching consequences, both financially and emotionally.

8---They Win, We Lose: Taliban back in the saddle in Afghanistan by 2017 - leaked intel report, RT

Stupidest statement of the year award: "Whether it’s a worse or better stalemate depends on the rate at which Congress defunds the war,” Stephen Biddle, a defense policy expert at the Council on Foreign Relations

Any success the US and its allies have enjoyed in Afghanistan in the past three years will be dramatically reduced by 2017, even if a US military presence remains in the country, according to a US intelligence report.
The National Intelligence Estimate calculates that the Taliban and other regional players, including Al-Qaeda, will begin to assert themselves as the United States winds down military operations in the war-torn country, the Washington Post reported, quoting officials familiar with the classified report.
The estimate includes analysis from the country’s 16 intelligence services.

The situation will deteriorate even more rapidly in the event that Washington and Kabul fail to sign a security agreement that allows a US-led military contingent on Afghan territory beyond 2014, an agreement that also promises to free up billions of dollars in financial aid to Afghanistan.

"In the absence of a continuing presence and continuing financial support," the intelligence estimate "suggests the situation would deteriorate very rapidly," the newspaper quoted one US official familiar with the report as saying. ...

By no means has the surge defeated the Taliban,” the official said, but it did help to “reverse the Taliban’s momentum and give the government more of an edge. I think we achieved that.”
Afghan President Hamid Karzai has kept Washington waiting on the Bilateral Security Agreement that would allow a US-led contingency, including some 15,000 American troops, to remain in the country beyond 2014. The reason is clear: Karzai, under Afghan public opinion pressure, is reluctant to grant immunity for any US troops left on the ground in Afghanistan, following the declared 2014 pullout date. ....

The Afghan people have witnessed too much indiscriminate killing of innocent citizens to give license for more such behavior. On the American holiday of Thanksgiving, for example, a US drone attack left one child dead and two women injured as NATO forces claimed they were trying to kill a lone "known militant" in Helmand Province.
Meanwhile, analysts fear that Kabul’s grip on power is likely to become increasingly irrelevant as it loses “purchase” over various regions of the country, another official said.
The White House refused to comment on the NIE’s report. A senior administration official said intelligence assessments are “only one tool in our policy analysis toolbox.”

One of the intelligence community’s principal duties is to warn about potential upsides and downsides to US policy, and we frequently use their assessments to identify vulnerabilities and take steps to correct them,” the statement said. “We will be weighing inputs from the [intelligence services] alongside those of the military, our diplomats and development experts as we look at the consequential decisions ahead of us, including making a decision on whether to leave troops in Afghanistan after the end of 2014.” ...

Whether it’s a worse or better stalemate depends on the rate at which Congress defunds the war,” he said.
At the moment Washington still has 63,000 troops on the ground. Earlier in December, an Associated Press-GfK poll found that 57 percent of Americans say going to war in Afghanistan as response to the September-11 terrorist attacks was probably the “wrong thing to do.” A minority of US citizens is in favor of the current withdrawal plan, with 53 percent saying the process is taking too long and 34 percent responding that the troop withdrawal is about right.

9---Three things to ponder over Christmas, Lance Roberts

(PCE-personal consumption expenditures)
Chart Of The Day via Zero Hedge
Tyler Durden at Zerohedge posted a terrific chart that really sums up 2013 and sets the stage as we ponder the outcome of 2014.


The next chart clearly shows the high degree of correlation between PCE and the economy.
PCE-GDP-YOYChg-121213The reason that I bring these particular points up is because there are exceedingly high hopes that the consumer is ready to "take off" in the months ahead fostering the support needed for the predictions of a strong economy.  However, is that really the case and can the holiday shopping season give us any clues?
The October 2010 core CPI of 0.61% was the lowest ever recorded, and two months later the core PCE of 0.95% was an all-time low.
11---Eurozone 'sleepwalking into a decades-long deflation trap’, Telegraph

12---Japan's deflation era is not yet a thing of the past, Telegraph

There are still risks from a consumption tax increase and foreign investment pushing up the yen. Shinzo Abe will take no chances

Is deflation in Japan a thing of the past? The financial markets certainly think so.

Tokyo's Nikkei Dow has just topped the 16,000 level for the first time in six years following a 50% increase since the start of the year.

That's an impressive performance, even though the Nikkei has still lost more than half its value since its peak at the end of the 1990s. But two lost decades and innumerable policy errors later, there is now hope that the anti-deflationary package dubbed "Abenomics" has finally done the trick.

It is a bit early to claim final victory. The main reason the headline consumer price index was 1.2% higher in November than a year earlier was that the yen has fallen by 40% since late 2011, raising the cost of imports.

While a weaker currency was a central aim of Abenomics, it is noteworthy that core inflation – which strips out movements in food and energy prices and is much less sensitive to the level of the yen – rose by 0.6% in the year to November. That suggests the economy could easily slide back into deflation.

There are two significant risks looming in 2014. The bigger of the two is the planned increase in consumption tax in April, which is deemed necessary to tackle a budget deficit in excess of 200% of national output. In the short run, consumer spending will be strong as households race to get their purchases in before the tax hike, but there is the chance the economy could "hit the wall" in the spring.

The second threat comes from the global economy. In the past, any slowdown in the rest of the world has tended to result in investment flowing into the yen, pushing up the value of the Japanese currency, thus reducing import prices and adding to deflationary pressure. At present, this looks unlikely but events since the financial crisis began in the summer or 2007 have taught policy makers to expect the unexpected.

What all this means is that Shinzo Abe's government will be taking no chances in the months ahead. There will be additional quantitative easing in an attempt to keep the yen low and extra spending on public works to ensure that growth does not slacken and that inflation continues to rise towards its 2% target.

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