Monday, December 30, 2013

Today's links

1---Abe rewards Speculators: Abenomics drives Nikkei to highest yearly gain since 1972, Telegraph
(QE works the same everywhere)

Japan's Nikkei stock index climbs 57pc in 2013, its highest in more than 40 years
Japan's main bourse has posted its steepest annual rise in more than 40 years following 12 months of "Abenomics", the new Japanese premier's suite of measures to catapult the economy out of a decades-long slump.
The Nikkei rose for a ninth consecutive session to close 0.7pc higher on its final trading day of the year, bringing its full-year climb to 57pc, the highest since 1972....

 the Nikkei is still well below the dizzying heights reached in the last days of 1989 before Japan's asset bubble burst, when it ran at nearly 39,000. ...

Legislators have passed a bill that paves the way for an opening up of the electricity sector and Abe is pushing through an attempt to strip away protections for the agricultural sector. But it remains to be seen if deeper reforms are in the offing.
And with a sales tax rise planned for April, there are fears that consumer spending will take a dive and stall a budding recovery.
Tokyo has committed about $54bn in extra spending to blunt the impact of the tax rise, while there is growing speculation the Bank of Japan will step in with another round of monetary easing to prop up growth.

2---House Passes Banker-Backed Bill, American free press

The word on Capitol Hill is that this bill, which the White House claims to oppose, would wipe out Section 716 of Dodd-Frank, “Prohibition Against Federal Government Bailouts of Swaps Entities.”

That section “requires banks to use a non-bank entity for trading commodity, energy and other swaps. In other words, if the legislation becomes law, financial institutions could return to conducting high-risk trading with funds that are backed by the FDIC (i.e. the taxpayer),” pointed out, while adding: “Citigroup was responsible for recommendations made in 70 lines of the 85-line bill,” citing the research of New York Times writers Eric Lipton and Ben Protess. According to these reporters, the bill contains a couple of essential paragraphs copied “word for word” from a draft submitted by Citigroup, which Citigroup had developed “in conjunction with other Wall Street banks,” also noted. Thus, Wall Street institutions, if they get their way, could return to gambling with risky “investments” and make the taxpayer cover

3--- Homeownership Expected to Decline, DS News

This year, home value gains will slow down significantly because of higher mortgage rates, more expensive home prices, and more supply created by fewer underwater homeowners and more new construction,” said Dr. Stan Humphries, Zillow’s chief economist. “For buyers, this is welcome news, especially for those in markets where bidding wars were becoming the norm and bubble-like conditions were starting to emerge.”

Second, the company predicts mortgage rates will reach 5 percent by the end of the year—a level not seen since early 2010—as the economy improves and the Federal Reserve adapts its policies. 

4---Did the predatory lending target the inner city, lower income African American communities?  You bet it did, mandelman matters

Did the predatory lending, however, target the inner city, lower income African American communities?  You bet it did.  In fact, I wrote an article about that abomination last year, titled: “Wells Fargo’s Ghetto Loans and the Mud People.”  And if you haven’t read it, you should.  Everyone should.
Our foreclosure crisis is not a race issue.  And, at the same time, it very clearly is.

while the CRL study correctly points out that, African Americans, Latinos and other ethnic minorities will pay a higher price as a result of the crisis widening, it will be the legacy of disparity in incomes and education that will be the cause.  This effect will not be the result of the crisis discriminating but from the realities of life in America, a nation still trying to recover from the inequity of segregation.
At the same time, I do believe that there have been racial undertones preventing our society from taking faster action to prevent this crisis.  This crisis was initially mischaracterized as being a “sub-prime” crisis, and because there are racial undertones and racial realities associated with the term “sub-prime,” it is also, I believe, unquestionably true that that our nation has done less to address the crisis to-date than we would have had the affected segment of society been seen as predominantly “white”.  And to the extent that’s the case, all involved should be deeply ashamed.

These programs and policies have led to three notable outcomes:
  1. Our banking system didn’t fail, but the toxic assets that were threatening the solvency of our institutions are right where they were in the fall of 2008.
  2. We are much deeper in debt as a result of the massive borrowing and spending associated with “saving” institutions that remain insolvent absent government support.
  3. The money that made the banks appear profitable, combined with no lending and essentially risk-free trading, resulted in a citizenry forced to watch literally hundreds of billions in bonuses handed out to the very individuals that caused the crisis in the first place.
After almost 20 years, Japan should have shown us by now that you can in fact deficit spend for decades without result.  Greece, Spain and others to be named later should show us what happens when the ability to do so runs out....

According to the U.S. Census Department, here’s how the color chart in this country breaks down as of 2000, which we can assume hasn’t changed all that much compared with today in percentage terms.  And please know that I did not write the words below, it’s how the Census describes things.

White alone, non-Hispanic:            199,491,000
Black, or African American:             41,127,000
Hispanic or Latino                        46,944,000

7 percent of white families is: 13,964,370.
11 percent of black or African American families is: 4,523,970
And 17 percent of Hispanic or Latino families is: 7,980,480

Want to know what those numbers show more than anything else?  They show that more than 25 million American families are about to be wiped out, and endure a life changing event because Wall Street’s bankers abused the mortgage securitization process, knowingly creating bonds that appeared to ratings agencies to be “triple A” but weren’t, which was necessary in order to sell them to pension plan investors, because at the same time they distorted and abused the usage of credit default swaps that allowed them to place bets against the defective bonds at 50:1 odds.  Okay, so that’s both an over-simplification and a run-on sentence, but my point is the same.

These same banks leveraged themselves 30 and 40 to one, based on the absurd belief that housing prices would never reverse themselves.  They created toxic mortgage products designed for nothing more than refinancing in a year or two, and then used predatory lending strategies and tactics to take advantage of people of ALL COLORS, of all ethnicities.

5---I worked on the US drone program. The public should know what really goes on, Guardian

6---Obama Signs NDAA, Maintaining Indefinite Detention Provision, truthdig

7---As 2013 draws to a close, capitalist breakdown is intensifying, wsws
(Good summary)

The year has ended with no indication that, more than five years after the deepest financial crisis since the 1930s, the world economy is anywhere nearer to returning to what was once considered “normal” economic growth. Rather than an upturn taking shape, warnings of “secular stagnation”—characterised by permanent low growth, recession, falling investment, ever-lower real wages and persistently high unemployment—are proliferating.

The past 12 months have seen a series of unprecedented monetary policies, most notably the money-printing “quantitative easing” (QE) programs of both the US Federal Reserve and the Bank of Japan, in which trillions of dollars have been provided virtually free of charge to the major banks and financial institutions.

The Fed alone has expanded its balance sheet by more than $1 trillion this year, taking its asset holdings to more than four times what they were at the start of the financial crisis in 2008. The Bank of Japan, in charge of monetary policy in the world’s third largest economy, is committed to doubling the money supply in that country.

Both these programs have been implemented with the claim that they are aimed at stimulating the economy. But the only beneficiaries have been the major banks and financial speculators. While the US economy has grown at an average rate of just 2.3 percent since the recession officially ended in June 2009—compared to a 4.1 percent average for the first four years of other expansions since World War II—the stock market has ended the year at or near record highs. This growth of financial parasitism is reflected in the doubling of the wealth of the world’s global billionaires since 2009.

The flood of money being provided to financial markets as a result of the actions by the Fed and other central banks is laying the foundations for another financial crash even more serious than that of 2008. Bloomberg, for example, has reported that the amount of risky junk-rated loans increased to $693 billion this year, a new record, exceeding the level of $593 billion reached in 2008.

Those predicting an “upturn” in the US economy for 2014 will no doubt point out that the official jobless rate has been falling in the recent period. Such prognoses ignore the fact that most of the new jobs are at significantly lower wage rates—the halving of the wages of new-hires at auto plants under the Obama administration’s 2009 restructuring program set the benchmark in this regard—and that much of the “improvement” is due to increasing numbers of people dropping out of the workforce. Over the past 43 months, more people have left the US labour market than have entered it.

The “quantitative easing” program initiated by the Abe government and the Bank of Japan earlier this year provided an initial boost to the Japanese economy, but the effects are starting to wear off. Last week, the government forecast that real gross domestic product for the fiscal year starting next March would be only 1.4 percent, down from an estimated 2.6 percent for the current year.

It is a measure of the underlying stagnation of the Japanese economy that a report which indicated that real wages had not fallen for the past month, after 17 consecutive monthly declines, was regarded as “good news.”

One of the key indicators of the underlying breakdown of the global capitalist economy is the growing divergence between the accumulation of profits and the level of investment—the central driving force for the expansion of the real economy.

It has been estimated that global corporations are sitting on cash holdings of around $4 trillion—half of which is in the US—because there are so few profitable outlets for new investment. Rather than employing profits to finance expansion of production, companies are increasingly using their cash holdings to finance share buybacks in order to boost equity values, thereby providing financial profits to the hedge funds, banks and investment houses which are the major shareholders of large corporations. This is being accompanied by a major “restructuring”, such as in the global auto industry, leading to the closure of factories and other facilities, some of which have been operating since the early 1950s.

The social effects of “restructuring” are most graphically illustrated in the euro zone, where investment levels are down by as much as 30 percent on pre-2008 levels. Combined with the impact of the austerity programs being implemented by all governments in accordance with the dictates of the banks, the restructuring is bringing social devastation.

A study by the International Red Cross published in October stated that Europe was sinking into a protracted period of poverty, mass unemployment, social exclusion, increased inequality and collective despair as a result of the austerity agenda. “The long-term consequences of this crisis have yet to surface,” the report noted. “The problems caused will be felt for decades even if the economy turns for the better in the near future.”

In the aftermath of the eruption of the global financial crisis, the claim was put forward that China, as well as other “emerging markets”, would be able to decouple from the major economies and provide a new base for global expansion.

That assertion has been well and truly shattered in the past 12 months. An economic conference convened by Chinese authorities earlier this month warned that the world’s second largest economy was facing downward pressure. Chinese industries confronted serious overcapacity and large debts, particularly those held by local governments, threatening financial stability, the conference concluded.

Reactions in the middle of 2013 to the prospects of a “taper” in the Fed’s QE program underscored that, far from decoupling, “emerging markets” are extremely vulnerable to highly volatile capital movements. Turkey, India and Indonesia, to name just some of the most prominent economies, experienced major financial outflows in response to an increase in US interest rates, bringing warnings of a repeat of the Asian financial crisis of 1997–98, only this time on a wider scale, with far-reaching consequences for the stability of the global financial system as a whole.

All of these tendencies are set to deepen in 2014, ruling out the prospect of any recovery in the global economy. The ruling classes have no solution to the crisis other than the impoverishment of the working class and increased repression. The working class the world over must take stock of the situation and use the coming year to develop its own political initiatives based on an international socialist program to confront the ongoing capitalist breakdown

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