Friday, February 28, 2014

Today's Links (Monster weekend reading list)

1---Household wealth still down 14 percent since recession (QE made "rich richer"), eurekalert
New study contradicts rosier picture painted by Federal Reserve

COLUMBUS, Ohio – Household wealth for Americans still has not recovered from the recession, despite last summer's optimistic report from the U.S. Federal Reserve, a new study suggests.
Economists at The Ohio State University found that the mean net worth of American households in mid-2013 was still about 14 percent below the pre-recession peak in 2006. Their analysis suggested that middle-aged people took the biggest hit.

In a report last June, the Federal Reserve said that net worth of Americans – which includes the value of homes, stocks and other assets minus debts – had essentially recovered since the recession of 2007 to 2009. In fact, the Fed claimed wealth was the highest it had been in nominal terms since records began in 1945.
But the Fed's analysis included four data issues that gave a significant boost to its optimistic reading of the economy, said Randy Olsen, co-author of the study and a professor of economics at Ohio State.
The four problems with the data: It didn't adjust for inflation or population growth; it included accounts held by foreigners living outside of the United States; and it included wealth held by nonprofits and not just households.

"All four of these issues with the Fed report pointed in the same direction, leading toward a conclusion that was far rosier than what exists in the real world," Olsen said...

Those who suffered the most were people aged 35 to 54, Olsen said. In 2012, they were 27 percent below their peak net worth recorded in 2006.
"What we're seeing in these middle-aged people is very disheartening, because they are in what should be their peak earning years, when they should be accumulating assets before retirement," he said.
"We might be seeing people who have lost their jobs and are forced to spend their assets because they can't find work. Some of them may have given up looking."
Olsen said much of the recovery in net worth that has occurred since the recession can be attributed to the rise in value of financial assets, such as stocks. This tends to help those who are already wealthy, he noted.
This increase has occurred because of the Federal Reserve's policy of quantitative easing, which means the Fed has bought large amounts of longer-term bonds and other financial assets, boosting their prices.

"Without quantitative easing, we probably would show even lower levels of household net worth," Olsen said.
"As much as the Federal Reserve might want people to believe we have recovered from the recession, the bottom line is that we haven't."

2---No Recovery? Blame declining Gov spending " and declining expected rate of house price appreciation", angry bear

the current US recovery has been horrible for two reasons: low government purchases of goods and services (G) and low housing investment. Consumption, fixed non residential investment, and inventory investment have recovered normally. Net exports didn’t fall. - ...

the key graph explaining the slow recovery of housing investment shows the low and declining expected rate of house price appreciation. In addition to their well known house price index Case and Shiller survey the expected rate of increase of housing over the next ten years. The average over the random sample of 2000 is shown in the graph I steal below (via DINA ELBOGHDADY) The dramatic decline in expected medium term house price appreciation is greater than the decline in the mortgage interest rate (about 3% from the business cycle peak to the low point of mortgage interest rates in 2013) so the expected cost of owner occupied housing services is extraordinarily high (meaning it is positive given maintenance and property taxes). The decline is 9% from the peak mania and about 5% from the business cycle peak. This is a sufficient explanation for low housing investment. -

I have long guessed that the issue is declining expectations of house price appreciation, but only now found Case and Shiller’s graph (I should have used the google). -

3---Fourth-quarter growth cut to 2.4 percent, (revised from 3.2%)  Reuters

The U.S. government slashed its estimate for fourth-quarter growth as consumer spending and exports were less robust than initially thought, leaving the economy on a more sustainable path of modest expansion.
Gross domestic product expanded at a 2.4 percent annual rate, the Commerce Department said on Friday. That was down sharply from the 3.2 percent pace reported last month and the 4.1 percent logged in the third quarter.

Economists polled by Reuters had expected growth would be cut to a 2.5 percent pace.
It is not unusual for the government to make sharp revisions to GDP numbers, as it does not have complete data when it makes its initial estimates. In fact, the latest figures will be subject to revisions next month as more information is received.
The revision left GDP just above the economy's potential growth trend, which analysts put somewhere between a 2 percent and 2.3 percent pace.

Consumer spending accounted for a large chunk of the revision after retail sales in November and December came in weaker than assumed.
Consumer spending was cut to a 2.6 percent rate, still the fastest pace since the first quarter of 2012. It had previously been reported to have grown at a 3.3 percent pace.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, contributed 1.73 percentage points to GDP growth, down from the previously reported 2.26 percentage points. As a result, final domestic demand was lowered two-tenths of a percentage point to a 1.2 percent rate.

4---Janet Yellen Nails The Economy's Biggest Problem, The Solution Not So Much, mark gongloff

Like her predecessor Ben Bernanke, Yellen offered a couple of the usual stock explanations for widening inequality: technological change and globalization. But those two trends didn't just abruptly get much worse in 1987, leading to the sudden spike in inequality that is plain to see on the chart above.
Instead, President Ronald Reagan cut income-tax rates on the wealthy in 1986, directly contributing to the mid-80s spike in inequality, according to a 1999 Cleveland Fed study.

Asked what Congress could do to help, Yellen offered more stock solutions: More education and training for workers and kids. Those could help with the issues of technological change and globalization, maybe -- although more education sure hasn't helped raise the incomes of low-wage workers.
Yellen did not mention another approach that could also help with the problem: Rolling back those massive tax cuts for the wealthy that started the whole ball rolling back in the 1980s.

5--NYT Says Homeownership Advocate Doesn't Realize House Prices Are High, CEPR

Actually, house prices are not low. While they have not returned to bubble peaks, they are well above trend levels. This means that people buying into the current market have a substantial risk of losing money on a home. This risk will be especially high if interest rates rise in the years ahead, as is almost universally predicted. 

6---The Robber Barons of the For-Profit College Sector, NYT

7---Federal Budget Deficit Falls to Smallest Level Since 2008, NYT
(Obama opts for budget cuts over jobs)

Closing the books on a fiscal year in which the federal budget deficit fell more sharply than in any year since the end of World War II, the Treasury Department reported on Thursday that the deficit for 2013 dropped to $680 billion, from about $1.1 trillion the previous year.

In nominal terms, that is the smallest deficit since 2008, and signals the end of a five-year stretch beginning with the onset of the recession when the country’s fiscal gap came in at more than $1 trillion each year. As a share of the nation’s economy, the budget deficit fell to about 4.1 percent, from a high of more than 10 percent during the depths of the Great Recession.
The report comes days before the White House is scheduled to release a new budget for the fiscal year beginning Oct. 1 that avoids cuts in spending and focuses on ways to help spur the still-tepid recovery through additional government investment. ...

Over the same period, total government spending barely grew, rising to $3.9 trillion, from $3.8 trillion a year earlier, the Treasury said. (Federal budget outlays — the number most often cited as annual spending — were about $3.5 trillion in both years. The Treasury included a fuller accounting in this analysis, including costs incurred but not paid out.)
“Thanks to the tenacity of the American people and the determination of the private sector we are moving in the right direction,” Treasury Secretary Jacob J. Lew said in the report. “The United States has recovered faster than any other advanced economy, and our deficit today is less than half of what it was when President Obama first took office.”

8---Obama's Fifth Year Job Approval Ratings Among Most Polarized, gallup
Job approval 82% among Democrats, 11% among Republicans

Obama is on course to have the most politically polarized approval ratings of any president, with an average 69-point gap during his presidency, a full eight points higher than was the case with Bush. There have always been party differences in presidential ratings, but these have become more extreme in recent decades, averaging 34 points before Reagan's presidency and 58 points after. This is due more to presidents receiving comparatively lower approval ratings from the opposition party than it is from extremely high support from their own party, though both are factors.

9---U.S. Retail Chains See First Profit Decline Since Recession , Bloomberg

U.S. retailers last quarter suffered their darkest days since the recession.
With results in from 62 of 122 retail chains, the industry has posted its first profit quarterly drop since the economic contraction that ended in 2009, according to Retail Metrics Inc. Revenue also rose at the lowest rate since that year, the research firm found.

The results paint a grim picture of an industry hit hard by the sluggish job recovery and slow wage growth, which have turned U.S. consumers into a nation of penny pinchers. Earnings are expected to drop 6.1 percent on average during the holiday quarter, according to Retail Metrics data. The broader pool of Standard & Poor’s 500 Index companies, meanwhile, are estimated to see profit rise 8.5 percent. ....

Teen retailers were the hardest hit, based on adjusted earnings per share. Their profit is decreasing 37 percent, Retail Metrics found. Electronics chains are down 17 percent, and discounters are dropping 12 percent, the firm said.

10---4 reasons Americans are losing interest in owning a home, yahoo

Americans now view a home as a poor investment. The Case-Shiller-Thompson survey of home buyer expectations shows potential buyers, on average, expect a home to appreciate just 3% per year over the next decade. ...

More young people may prefer renting.

Institutional buyers may be largely responsible for the housing rebound. ...

Americans are spooked about the entire economic outlook. Consumer confidence has been up and down and remains far below where it was before the recession. The portion of Americans who feel the country is on the wrong track is more than 30 points higher than those who feel things are going right. Buying a home generally requires a sense of optimism about your own circumstances and, more broadly, the economy in general. Americans aren’t feeling it.

11---Housing looks "frothy" says Economist

TWO years after house prices ended their precipitous fall, housing across America is beginning to look frothy again. New data released by Standard & Poor’s on February 25th showed the Case-Shiller index of 20 cities rising in December at the fastest rate for nine years.

12---Home prices fall for 2nd consecutive month, SF Gate

13---Investors and owner-occupants purchase fewer homes , oc housing

14---Institutional Investor Sales Decline, DS News

15--Mortgage applications at lowest level in two decades,( Ivy Zelman) cnbc

16---Housing 'nirvana' around the corner: Star analyst, cnbc

17---US housing starts plunge 16% as cold weather blankets country, cnbc

18--Existing home sales tank. Idiots blame weather, cnbc

Sales of existing and newly built homes were down in December from November; existing home sales were down nearly 9 percent from December 2012, while sales of newly built homes were up 4.5 percent. Reports of lackluster buyer traffic in January don't bode well for those sales numbers either. They will be reported next week.

"The Northeast and the Midwest truly, those weather patterns have impacted the listing market," said Richard Smith, CEO of Realogy, whose brands include Coldwell Banker, Century 21 and Sotheby's International. "So until we see some relief there, you're going to see lower inventory levels, and then one day it's going to spike, and it will be sometime in early spring, of that we're fairly optimistic, but I can't predict that any more than you can."

19---Europe cannot afford to ignore its deflation problem, FT
Remember what happened in Japan? Once its economy settled to a new steady state with negative inflation and zero growth rates during the 1990s, it got stuck in a hole. There is still a dispute over whether fiscal or monetary policy is the more suitable instrument in such a situation. But there is no dispute that a policy mixture that consists of fiscal rigour, excessive monetary tightness and a refusal to deal with the zombie banks is not going to work. The ECB always says Europe is not Japan. Indeed, it is not. Europe’s position is potentially worse

20---Deflation Is Not Benign, Frances Coppola, Forbes

When broad money contracts, the value of money rises relative to goods and services, causing a fall in the general price level. So you can buy more stuff both now and in the future. Consumers rejoice, because their shopping bills shrink. Savers rejoice, because their savings increase in value.
At this point most of you are probably scratching your heads and thinking “I don’t get it. Why is this not benign?”

It’s all because of how money is created. For broad money to be created under our fiat system, someone has to borrow. So for our monetary system to work at all, there must be debt. When the value of money increases because some are paying off their debts (or defaulting on them), the value of debt for the remaining borrowers increases. That includes households, governments and businesses. All of them become MORE INDEBTED relative to their incomes when the value of money rises. This is because although incomes tend to flex with the value of money, the stock of debt does not. Debt is nominal.

If this isn’t clear, let me give you an example. If you have a debt of $1000, and the value of money increases by 5% (outright deflation), you still have to pay $1000. You don’t get a reduction in your nominal debt because the value of money has risen. So your lender benefits from the increased value of money. But you don’t get a pay rise. In fact you may even get a pay cut. After all, from your employer’s point of view, your pay is costing him an extra 5%. The fact that you will have to pass that straight on to your lender doesn’t concern him.

There are a lot of highly indebted people out there, and highly indebted companies and governments, too. Outright deflation would increase their debt burdens, forcing them to cut spending and defer investment decisions. It may even force some of them to default: if defaults are sufficiently widespread, the money supply falls abruptly. When people, businesses and banks are highly indebted, slow deflation can all too easily change to virulent debt deflationary collapse.....

Furthermore, productivity improvements enabling companies to make money while lowering prices do not necessarily follow through into higher real wages, and may result in higher levels of unemployment. This is actually what happened in the Long Depression: yes, there was economic growth, and prosperity for many of those in work, but there was also high unemployment and poverty. The “technological changes cause benign deflation” argument is in my view seriously flawed.

I am unconvinced that the benefits of falling prices ever outweigh the problems they create, even when the money supply is fixed. But of one thing I am certain. In an economy in which the production of money depends on the production of debt, there is no such thing as benign deflation.

21---The problem with Abenomics, JT (Gret article!)

(zero rates and QE cannot counter no demand and vicious austerity)

The moderate inflation we have now comes in part from demand-killing increases in import prices, and from a buying rush bound to result in an equal or greater demand slump when the consumption tax rises in April.
Japan, and now increasingly the other developed economies, face demand deficiency problems much more serious than they realize....

(Keynes to the rescue!)
The only way out of all these dilemmas is for governments to rely on their own increased spending to provide the needed demand — the Keynesian solution. Abe has promised us a ¥5 trillion fiscal stimulus to do that. But that is a mere drop in the bucket, and will in any case be more than neutralized by the planned ¥5 trillion increase in the consumption tax.
Promises of future “fiscal consolidation” (the new word for cutting government spending) will do even more damage...
Will “Abenomics” succeed? Prime Minister Shinzo Abe, claiming economic success, says “numbers do not lie.” But one number does give lie to his claim: Before Abenomics, gross national product per head in Japan stood at $46,000.
Today, thanks to a 30 percent depreciation of the yen, that figure is now around $37,000 per head — the level of Italy and Hong Kong. “Japan is Back,” Abe likes to tell the world. Well, in one sense it really is back — all the way back to the per capita income of the early ’90s.

The recovery we see now is almost entirely due to that massive 30 percent depreciation, which in turn is the result mainly of the large annual ¥3 trillion increase in imports of fossil fuels caused by the Fukushima nuclear disaster. That currency depreciation, in turn, gives the support to exporters, and to domestic producers competing with imports, that sustains the present recovery — which in turn gives the psychological boost this economy needed so badly
22---Washington warns Moscow over Ukraine, RT

German Defense Minister Ursula von der Leyen said it was important “that we prevent a breakup of the Ukraine, and that special forces in the country are strengthened,” Ruptly TV reported.

“NATO stands ready to support democratic development, defense reforms, military cooperation and democratic control over the security sector,” Rasmussen said after the session of the NATO-Ukraine Commission. NATO, which “has a long-standing partnership” with Ukraine is set to continue its engagement and support the country “on the path of democratic and inclusive reforms,” he added. ....

At the same time, the EU-brokered agreement to settle the Ukrainian political crisis which was signed on February 21 and certified by the foreign ministers of Germany, Poland and France “is still not being implemented,” Russia said.

“Militants, who still haven’t surrendered arms and not vacated administrative buildings, announced their intention to ‘bring order’ to all Ukrainian regions,” the Russian ministry said.
The agreement to jointly investigate violence, as well as to form a national unity government “fell into oblivion,” Moscow said. “Instead, as it was announced on [Kiev’s] Maidan ‘a government of winners’ has been established which includes nationalist extremists.”

23---Austerity and fascism arrive in Kiev, wsws

The task of the new government is to implement the “extremely unpopular steps” that Prime Minister Yatsenyuk complained had not been carried out by previous governments. i.e., hikes in energy prices, the closure of large sections of heavy industry and massive social cuts.
The country faces a financial crisis and needs an estimated $35 billion in bailout loans to be able to pay its bills for the next two years. Nearly half of this sum, $15 billion, is owed to western banks.

International Monetary Fund managing director Christine Lagarde said Thursday that the IMF would send a team to Ukraine to assess the economic situation and spell out to the newly installed regime “the policy reforms that could form the basis of a Fund-supported program.” In previous dealings with the Yanukovych government, the IMF already dictated such “reforms,” i.e., extreme austerity measures, including drastic cuts in wages and pensions and an end to gas subsidies, which would send consumer prices soaring.

Since the outbreak of the global financial crisis in 2008, the European Union with US support has installed unelected governments in Greece and Italy to implement austerity and remunerate western banks. Now, for the first time, the same imperialist alliance mobilized extreme nationalist and fascist forces to topple an elected government and install a new pro-western regime.

No less than three posts, including that of deputy prime minister, have been given to the fascist Svoboda party, whose militants played a decisive role in attacking security forces last week and ousting President Viktor Yanukovych.
Svoboda Party deputy Oleksandr Sych was appointed deputy prime minister. In his career as a parliamentary deputy, Sych sought to introduce legislation to ban all abortions, including pregnancies caused by rape. His contribution to Svoboda’s glorification of “Ukrainian family values” was to call upon women to avoid rape by not drinking alcohol and “controversial company.”

Two other Svoboda members have taken over the ecology and agriculture ministries. The new agriculture minister, Oleksandr Myrnyi, is, according to Forbes, in the top five of Svoboda’s highest earners, with an estimated income of Hr 17 million ($1.6 million) in 2012. His main business interests are concentrated in agriculture—a blatant conflict of interests with his new appointment.
Another Svoboda member, Oleh Makhnytsky, heads the strategically important general prosecutor’s office. Appointed a week ago, Makhnytsky issued an international arrest warrant this week for the ousted president Viktor Yanukovych, who is allegedly seeking asylum in Russia.

Another key post is to be occupied by Andriy Parubiy, who was a cofounder of the forerunner of Svoboda, the Social-National Party of Ukraine. Parubiy founded the organization in 1991 together with Oleh Tyahnybok, the current head of Svoboda. Parubiy, who led the right-wing militias that conducted the assaults on Yanukovych’s security forces, has now been appointed head of the National Security Council.

According to the Libération newspaper, Dmitri Yarosh, the leader of the pro-Nazi Right Sector group, is to be Parubiy’s deputy. This means that Svoboda and other ultra-rightists head key posts in the security apparatus and will be responsible for organizing the shock troops to repress future social unrest.
The key post of Finance Ministry in the new regime has been taken by Oleksandr Shlapak , a former deputy head of PrivatBank regarded as a guarantor of the interests of finance capital.

24---GCHQ, NSA collected webcam images from 1.8 million Yahoo users, wsws

The Guardian reported that the webcam material “included large quantity of sexually explicit images,” estimating the quantity of sexually explicit material at between 3 and 11 percent of the images collected. As the GCHQ document put it, “it would appear that a surprising number of people use webcam conversations to show intimate parts of their body to the other person.”

These latest revelations further expose the contempt of the US and British governments for the democratic rights and privacy of the world’s population. Far from narrowly targeted operations directed against terrorists and criminals, these agencies are running mass data collection programs directed against the population as a whole. The state is seeking to accumulate as much information, in whatever form it can use, for the purpose of targeting political organizations and individuals.

25---The Worst Snowden Revelation of Them All, antiwar
(gov smear campaign against everyone)

So let’s be clear about this: individuals, groups, and private companies accused of no crime are having their reputations destroyed, their private lives exposed and their financial affairs disrupted by a government-orchestrated smear campaign extending all across the globe.

If that doesn’t unmask our rulers as the ruthless authoritarians we libertarians always said they were, then I don’t know what will. Behind the mask of "democracy" and "progressivism" lurks the same old ugly face of a J. Edgar Hoover, only updated to look like the dome-headed professorial Cass Sunstein.

26---The ECB receives another disinflationary warning, sober look
The ECB received another warning today: the German CPI rate came in below expectations. The disinflationary pressures are no longer just about the Eurozone periphery.
Moreover, the euro area private loan balances continue to contract and the broad money supply growth remains weak.
Reuters: - "Weak money supply growth is not only condemning the euro zone to stagnant recovery, but it is raising the odds that the single-currency area could easily slip back into recession again," said David Brown at New View Economics.

"The ECB still needs to think outside the box to get the euro zone motoring into the fast-lane," he added. "A change of heart on quantitative easing still beckons ahead."

The ECB, worried that inflation risks getting stuck in a "danger zone" below 1 percent, is considering whether to take fresh policy action next Thursday to support the economy.
Bunds rallied on the news, with the market still anticipating an easing action from the ECB. The 2-year German note yield dropped down below 10bp again.


While the ECB has been counting on improving business confidence in the Eurozone to stabilize the recovery, surveys may end up being misleading. With a great deal of the euro area expansion relying on exports and China's (and other EM nations) growth slowing, sentiment can turn very quickly.

27---Felix Zulauf Warns Of "Another Deflationary Episode" As "The Mother Of All Bubbles" Pops, zero hedge (archive)

28---The IMF's "roundtrip" loans: "85 percent of the funds received (in IMF loans to Ukraine) should be later returned to legal entities of the countries involved in their provision, pravda

The EU has a wealth of experience in providing financial assistance to its members in such a way that this assistance is not seen by these countries," told Pravda.Ru Serbian economist Branko Pavlovic. "In the case of Greece, it was only formally aid to Greece, but in reality funds were allocated to banks owned by legal entities from Germany and France. For example, Romania was allocated 8 billion euros, but Romania did not manage to fulfill the conditions under which it could spend the money, so in reality it only managed to use one billion euros.
Third, when the recipient country manages to get money from the EU, 85 percent of the funds received should be later returned to legal entities of the countries involved in their provision. In fact, funding by the EU is at best a cover for the financing of the economies of the first tier and never leads to the development of the economy of the countries receiving the assistance. Moreover, the economy weakens and debts only increase."
The collapse may occur as early as March if capital flight continues at the same rate," warned the IIF. Therefore Ukraine will be only provided a loan because of a political motivation, and will be much smaller than Ukraine requested and under strict conditions. "The big bailout plan Ukraine is currently seeking will not be implemented through international donors and non-inclusive weak government," told Bloomberg senior economist of IHS Global Insight in London Lilit Gevorgyan
Political conditions include the signing of the Association Agreement with the EU and legitimization of the government. Relevant agreements have been reached between the parties, and the agreement will likely be signed after the presidential elections in Ukraine on May25. The conditions include: reduction of the budget deficit that means devaluation of hryvnia, cuts in  pensions, benefits and salaries to state employees, raising of the retirement age, the removal of subsidies to coal and other underperforming industries, the growth of natural gas prices, and other unpopular measures.

("Are you with us or against us"?)

Those sentiments are directly at odds with the core element of US national and global security strategy in operation since the late 19th Century. Those strategies employ the USA's considerable  instruments of national power to: 1) actively destabilize "elected" governments (Ukraine, Venezuela) through the use of NGO's, intelligence agencies and proxy groups;  2) prop up brutal regimes (Bahrain, Saudi Arabia, Egypt) through a US congressionally approved program, executed by the US military, called Foreign Internal Defense; 3) information operations conducted via the printed press, social media, radio, television and film that seek to shape the cognitive local to global environment in favor of US national interests.; and 4) existentially destroy foreign governments through direct military action in conjunction with the weaponry of finance capitalism to create new markets

All of this is codified in one form or another in US political and military doctrine. Every American president from George Washington to Barack Obama has trumpeted in some fashion what President Obama and President Bush George W, Bush both proclaimed. The former indicated that the US will pursue its own interests no matter what any other nation on the planet thinks, even invoking God's plan to put the care of the global environment in America's hands. The latter put it more simply, "You are either with us or against us." The heads of foreign governments-and their opponents-- are well aware of US strategy, tactics and operations.

Thursday, February 27, 2014

Extra Links

1---The "Institutional Investor" Housing Bubble Just Burst, zero hedge

the January share of institutional investor purchases represented the lowest monthly level since March 2012 — a 22-month low.

Some other RealtyTrac findings:

Metro areas with big drops in institutional investor share from a year ago included Cape Coral-Fort Myers Fla. (down 70 percent), Memphis, Tenn., (down 64 percent), Tucson, Ariz., (down 59 percent), Tampa, Fla., (down 48 percent), and Jacksonville, Fla., (down 21 percent)....

Many have anticipated that the large institutional investors backed by private equity would start winding down their purchases of homes to rent, and the January sales numbers provide early evidence this is happening,” said Daren Blomquist.

2---UK and US Collected Millions of Webcam Images (Many Nude) ... To Smear or Blackmail the Targets?, zero hedge

Shut down the NSA

3---Analysts Warn of ‘Next Generation’ of Subprime Lenders, MReport

4---Abenomics: As growth slows, Bank of Japan “opens spigot” to the rich, wsws

The Japanese economy slowed markedly in the final quarter of 2013, pointing to an unraveling of Prime Minister Shinzo Abe’s much-vaunted “Abenomics.” Statistics released last week revealed that GDP grew by only 0.3 percent (1.2 percent annualised) for the quarter—less than half the expected 0.7 percent. Overall growth for 2013 was just 1.6 percent. The slowdown reflected weakening exports, private consumption and corporate capital spending.

After coming to office in December 2012, Abe proclaimed that his economic policy, dubbed Abenomics, had three “arrows.” The first was an unprecedented monetary easing policy to double Japan’s monetary base over 21 months, from its initiation in April 2013. As with the US “quantitative easing” program, the Bank of Japan (BOJ) pumps 60 to 70 trillion yen ($US585 to $680 billion) annually into the economy, mainly through government bond-buying. The central bank is aiming to achieve 2 percent inflation and end more than a decade of deflation. The second “arrow” involved a modest stimulus spending program.

The final “arrow” consisted of anti-working class “structural reforms.” These are yet to be announced in detail, but the general aim is to further dismantle job security and undermine wages and working conditions while cutting corporate taxes. At the World Economic Forum last month in Davos, Abe indicated that this was in store when he boasted of carrying out pro-market reforms previously thought impossible. A “new dawn [is]... breaking over Japan,” he declared, promising that “companies ... will find Japan among the most business-friendly places in the world.”...

the banks are not using the money to lend to companies. They are hoarding it and diverting it into stock speculation. Bloomberg noted “growing stockpiles of cash” that the banks “aren’t deploying for loans,” citing data showing “financial institutions’ reserves ... almost tripled over the past year.”
As far as the corporate elite is concerned, these expansionary policies are boosting the international competitiveness of Japanese export industries against their global rivals by lowering the yen, and shifting the economic burden onto the working class through inflation.

The yen declined by some 18 percent in 2013, while Tokyo’s benchmark Nikkei index soared 57 percent, its best performance in decades. At the same time, the working class is facing rising prices and falling wages, and will suffer disproportionally from the coming sales tax hike, from 5 to 8 percent starting from April, and 10 percent next year.
Reflecting the BOJ’s inflationary policies, consumer prices were already up last year, for the first time in five years. They rose by 1.6 percent, with fresh food prices soaring by 13.6 percent, and electricity 8.2 percent.

On the other hand, wages fell 0.6 percent in November from a year earlier, the 18th consecutive monthly drop. The Associated Press noted that “Japan’s median household income of 3.8 million yen ($38,700) in 2012 was down from 4.5 million yen in 1997,” and concluded: “Today’s workers are worse off than their parents and their incomes continued to fall in 2013...”
Asked by the Associated Press about Abenomics, retiree Takeshi Onodera commented: “Up to now, it’s all been a minus. I don’t see any signs it’s made a difference. Really, it hasn’t reached us.”

Especially hard hit are non-regular—part-time and temporary workers—who now account for 37 percent of the Japanese workforce. Not only are they paid about a third of what regular employees make, they are most often not covered by health insurance, pensions or unemployment benefits.
What the Associated Press referred to as the “already Spartan social safety net” is also under attack. Welfare benefits were cut 10 percent last August, with further reductions planned.

The sales tax hike—the first since 1997—will also affect economic growth, with economists predicting a 3.9 percent decline in the quarter from April. The tax rise was urged by the International Monetary Fund (IMF), and pushed through parliament by the previous Democratic Party of Japan government, with support from the now-ruling Liberal Democrats and New Komeito.

The doubling of the sales tax rate will have a major impact on domestic demand, but do little to address the huge public debt, which stands at some 240 percent of GDP. Japan used to be able to balance this through trade surpluses. Since 2012, however, Japan has had record trade deficits. Last year, the deficit swelled to $112 billion, the biggest since comparable data started in 1979.

5---Obama presidency: Only Bush is worse, Pravda

According to another poll conducted by Reuters/Ipsos published in late January, 53 percent of the Americans do not approve of Obama, and only 38 percent evaluated Obama positively. A year ago the numbers were the  opposite. Other polls show the same negative trend. Institute Quinnipiac (ratio - 54 - 40 percent), the Associated Press / institute GfK (ratio - 53 - 45 percent); NBC News / Wall Street Journal (ratio - 51-43 percent)....

Policies for creating jobs in the United States. Gallup poll twice in the last five years found extreme dissatisfaction of the Americans with the fact that jobs were leaving the U.S.
6. Surveillance program on citizens by the secret services. 63 percent of respondents told Gallup that total surveillance caused them extreme concern and potentially blamed it on the president, who nevertheless maintained that he was not aware of the scope of the surveillance activity. Secret services are armed with new technologies, including mobile devices allowing to extract information from mobile phones in real time, gather data about thousands of mobile subscribers at the same time, regardless of whether they are objects of a certain investigation or not," USA Today described the situation in the country

The Consumer Financial Freedom and Washington Accountability Act, sponsored by House Financial Services Committee member Rep. Sean Duffy, R-Wisc., went to the floor of the House Thursday afternoon.

The bill would replace the single Consumer Financial Protection Bureau director with a five-member commission appointed by the president and confirmed by the Senate.
Supporters say this would ensure that a diversity of viewpoints inform the CFPB’s regulatory and enforcement agenda. It would also conform the bureau’s governance to that of other federal agencies charged with consumer or investor protection.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, took the field first, accusing the CFPB of being unaccountable and out of control. Hensarling talked at length about the expenses the CFPB has been racking up.

“The CFPB has unbridled power to impose rules like the QM rule. According to Federal Reserve reports, one-third of blacks and Hispanics would not be able to get a mortgage,” Hensarling said. “This is designed to make the Bureau more accountable and transparent… We know that this is an agency that was designed to be unique, if not perhaps rogue; it is an agency like no other. Arguably it is the single most powerful and least accountable Federal agency in the history of our nation and thus demands rigorous oversight. The American people deserve better.”

Today's Links

1---The Smart Money Quietly Abandons The Housing Market , Testosterone Pit

Many have anticipated that the large institutional investors backed by private equity would start winding down their purchases of homes to rent, and the January sales numbers provide early evidence this is happening,” said RealtyTrac VP Daren Blomquist. “It’s unlikely that this pullback in purchasing is weather-related given that there were increases in the institutional investor share of purchases in colder-weather markets such as Denver and Cincinnati, even while many warmer-weather markets in Florida and Arizona saw substantial decreases in the share of institutional investors from a year ago.”...

now the party appears to be running out of booze. This frantic institutional buying has driven up home prices – in some areas above the levels of the prior bubble. Trying to make money by buying these homes at inflated prices and renting them out into a tough job market where strung-out consumers with declining real wages have trouble making ends meet has become a precarious business model.

In some of the formerly hottest metro areas, purchases by large institutional investors – those having bought at least 10 properties over the past 12 months – plunged in January from a year ago, according to RealtyTrac’s Residential & Foreclosure Sales Report: in Jacksonville, Florida, by 21%; in Tampa, by 48%; in Tucson, 59%; Memphis, 64%; in Cape Coral-Fort Myers, Florida, by 70%!
Institutional purchases hit the skids in over three-quarters of the 101 metro areas that RealtyTrac analyzed, their share dropping to 5.2% overall, from 7.9% in December, and from 8.2% in January 2013. It was the lowest monthly share since March 2012, at the infancy of this whole bonanza.

2---Home prices edge down in big cities, Case-Shiller says, LA Times

Home prices fell slightly across large U.S. cities in December from a month earlier, further evidence that the housing market cooled to close the year, according to a closely watched index.
The S&P/Case-Shiller index of 20 large U.S. metropolitan areas, released Tuesday, declined 0.1% from November, the second straight month-over-month drop. Compared to a year earlier, the index rose 13.4%, a slower one-year pace than in November.
“The strongest part of the recovery in home values may be over,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement.

3---Mortgage applications at lowest level in two decades, warren mosler

Even I didn’t think it would get this bad: 

4---Foreclosures Surging in New York-New Jersey Market, Bloomberg

The number of New York and New Jersey homeowners losing their houses reached a three-year high in 2013. Banks in these states have been slowly working through a backlog of delinquent loans that enabled borrowers to skip mortgage payments for years. Now these properties are poised to empty onto a market where affluent Manhattan suburbs neighbor blighted towns that are struggling most with surging defaults. ....

It is really a delayed reaction in New Jersey and New York,” said Michael Fratantoni, chief economist for the Mortgage Bankers Association in Washington. “Loans that were made pre-crisis have been in this state of suspended animation for a number of years. And now, we are beginning to see the pace of resolution pick up.” ....

The sooner that this inventory that has been pent up gets to the market place the quicker you’re going to see more home price appreciation,” Taylor said. “It gets the overall real estate market healthier quicker.”
Housing inventory remains tight in the U.S., with a 4.6 month supply in December, according to the National Association of Realtors. New Jersey had a 6.6 month supply, the New Jersey Association of Realtors data show. A six-month inventory is considered equilibrium between buyers and sellers

5---How the fed let the world blow up in 2008, atlantic

The world changed on August 9, 2007. That's when French bank BNP Paribas announced that it wouldn't let investors withdraw money from its subprime funds anymore. It couldn't value them, because nobody wanted to buy them. The effect was immediate. Banks stopped trusting, and lending to, each other. They all had their own subprime problems, but none of them knew whose was the worst—or who had insured whom.
You can see this credit crunch in the chart below. It shows the TED spread, the difference between short-term rates on government debt and interbank loans, for 2007 and 2008. Normally, there isn't much of a difference between the two. But during a financial crisis, its blows up: banks charge each other punitively high interest rates, and pile into government bonds they know are safe
(Rosengren notes potential of run on money markets!).
It was everybody at the Fed, except for Rosengren. He was afraid that exactly what did end up happening would happen. That all the financial chaos "would have a significant impact on the real economy," that "individuals and firms will be become risk averse, with reluctance to consume or invest," that "credit spreads are rising, and the cost and availability of financing is becoming more difficult," and that "deleveraging is likely to occur with a vengeance." More than that, he thought the "calculated bet" they took in letting Lehman fail would look particularly bad "if we have a run on the money market funds or if the nongovernment tri-party repo market shuts down." He wanted to cut rates immediately to do what they could to offset the worsening credit crunch. Nobody else did.

6---Did the stimulus work? You decide.  econbrowser
Figure 3: The rate of job loss turned around quickly

7---Red Spreads, Krugman

Uh-oh. Chinese equivalents of the TED spread and other gauges of financial stress in the US have widened sharply. The widening in the TED spread was one of the key reasons I was already very scared in late 2007. If past is prologue, we should be very worried about China now.

8---Institutional investor home buys hit 22-month low, Housingwire

Property investors still busy in select markets...

Institutional investor home sales continue to decline as a portion of all home sales, hitting a 22-month low.
That’s the latest news from RealtyTrac. The company’s January 2014 Residential & Foreclosure Sales Report shows that institutional investors accounted for 5.2% of all housing sales in January, down from 7.9% in December and down from 8.2% in January 2013.
Institutional investors are defined as entities purchasing more than 10 properties in a year.
All-cash sales accounted for 44.4% of all U.S. residential sales in January, the seventh consecutive month where all-cash sales have been above the 35% level. Cash sales are usually investor buyers, be they individuals, mom-and-pop investors, or institutional.

“Many have anticipated that the large institutional investors backed by private equity would start winding down their purchases of homes to rent, and the January sales numbers provide early evidence this is happening,” said Daren Blomquist. “It’s unlikely that this pullback in purchasing is weather-related given that there were increases in the institutional investor share of purchases in colder-weather markets such as Denver and Cincinnati, even while many warmer-weather markets in Florida and Arizona saw substantial decreases in the share of institutional investors from a year ago.”
Leading the decline were Cape Coral-Fort Myers Fla. (down 70%), Memphis, Tenn., (down 64%), Tucson, Ariz., (down 59%), Tampa, Fla., (down 48%), and Jacksonville, Fla., (down 21%).

About one in four metros saw increases in institutional investor activity, including Atlanta (up 9%), Austin, Texas, (up 162%), Cincinnati (up 83%), and Dallas (up 30%). (Check out HousingWire’s list of the 10 cities with the most investor activity.)
The report also shows that short sales and foreclosure-related sales — including both sales to third party buyers at the public foreclosure auction and sales of bank-owned properties — accounted for a combined 17.5 percent of all U.S. residential sales in January 2014, up from 14.9 percent of all sales in December but down from 18.7 percent a year ago.

“The Denver metro area did not experience the typical winter slowdown that many markets across the country experienced and we continue to be very busy,” said Chad Ochsner, owner of RE/MAX Alliance covering the Denver, Colo., market.  “Our January year-over-year sales counts are up about 7 percent, which is really encouraging.  I think it has a lot to do with improved consumer confidence and low interest rates.”

Short sales accounted for 5.9% of all U.S. residential sales in January, up from 5.4 percent in December but down from 7.4% a year ago.
Sales of bank-owned residential properties accounted for 10.2% of all U.S. residential sales in January, up from 8.5% in December but down from 10.4% a year ago.

9---US household debt - first increase in 4 years, sober look

Most of the gains were student loans

10--Consumer confidence still flagging, sober look

confidence, while still significantly below historical averages, has improved tremendously since the Great Recession. There is however a troubling trend. The improvement in the top income bracket has been way ahead of the lower income survey participants. In fact the gap between households with incomes of $35-$50K per year and those with incomes that are above $50K is at record levels over the past few months.

Source: Wells Fargo

Given that confidence is often linked to income growth (including expectations of future income), this could be a further indication of wage stagnation for employees in the lower wage brackets (see discussion). In the long run this growing income inequality may end up creating headwinds for economic expansion in the US.

11--The Evolving Global Economic Crisis, counterpunch

three significant global economic trends have begun to intensify and converge in recent months: (1) a slowing of the China economy and a parallel growing financial instability in its shadow banking system; (2) a collapse in emerging markets currencies (India, Brazil, Turkey, South Africa, Indonesia, etc.) and their economic slowdown; (3) a continued drift toward deflation in the Eurozone economies, led by growing problems in Italy and economic stagnation now spreading to France, the Eurozone’s second largest economy. The problems in these three critical areas of the global economy, moreover, have begun to feed off of each other.

Despite tens of trillions of dollars injected into the global economy since 2008 by central banks in the US, UK, Europe, and, most recently Japan, real job creating investment is slowing everywhere globally. The massive liquidity (money) injections by central banks have either flowed into global financial markets speculation (stocks, bonds, derivatives, futures, options, foreign exchange, funds and financial instruments of various kinds), hoarded as cash on bank and non-bank corporate balance sheets, hidden away in dozens of offshore tax shelters from Cayman islands to the Seychelles, or invested in emerging markets like China, India, Brazil, Indonesia, Turkey, and elsewhere.

The primary beneficiaries of these central bank money creation policies have been global very high net worth investors, their financial institutions, and global corporations in general. According to a study in 2013 by Capgemini, a global business consultancy, Very High Net Worth Investors increased their investable wealth by $4 trillion in 2012 alone, with projected further asset growth of $4 trillion a year in the coming decade. The primary financial institutions which invest on their behalf, what are called ‘shadow banks’ (i.e. hedge funds, private equity firms, asset management companies, and dozens of other globally unregulated financial institutions) more than doubled their total assets from 2008 to 2013, and now hold more than $71 trillion in investible assets globally....

Slowing will result as well from government policies designed to structurally shift the economy to a more consumption driven focus. That shift to consumption will begin in earnest following the Community Party’s March 2014 meeting. But consumption in China represents only 35% percent of the economy (unlike 70 percent in the U.S.), while China government investment is well over 40 percent of GDP. And it is not likely that consumption can grow faster enough to offset the reduction in investment, at least not initially.

So a long list of imminent major developments and trends in China point to a slowing of growth in that key global economy of almost $10 trillion a year. What happens in China, the second largest economy in the world, has and will continue to have a major negative impact on an already slowing Emerging Markets and a chronically stagnant Eurozone

12---Ukraine’s Autonomous Republic of Crimea takes step towards independence, RT

The parliament of Ukraine’s Autonomous Republic of Crimea has proposed a referendum to determine the region’s future amid the turmoil in the country.
The region’s parliament said the all-Crimean referendum is about “improving the status of autonomy and expanding its powers.”

“According to the underlying principles of democracy, the presidium of the Crimean parliament considers that the only possible way out of the situation on the ground is applying the principles of direct rule of the people. We are confident that only by holding an All-Crimean referendum on the issue of improving the status of the Autonomy and expanding its powers Crimeans will be able to determine the future of the Autonomy on their own and without any external pressure,” Oksana Korniychuk, the press secretary of the head of the parliament, said in a statement on Thursday.
As a result of “the unconstitutional seizure of power in Ukraine by radical nationalists supported by armed gangs,” Crimea’s peace and order is “under threat,” the spokeswoman stressed.

The Wednesday clashes near the parliament’s building in Simferopol, which led to two deaths and about 30 injuries is “a result of rampant political extremism and violence gripping the country,” which could bring Ukraine to “complete chaos, anarchy and economic catastrophe,” Korniychuk said.
The Autonomy’s parliament thus takes “full responsibility for the future of Crimea,” relying on the will of its people, she said

13--Yanukovich says he's still president, asks Russia to ensure his safety, RT

14---FBI failed to disclose its Al-Qaeda mole to 9/11 Commission, RT

15---Facts you need to know about Crimea and why it is in turmoil, RT

The majority of those living in Crimea today are ethnic Russians – almost 1,200,000 or around 58.3 percent of the populations, according to the latest national census conducted back in 2001. Some 24 percent are Ukrainians (around 500,000) and 12 percent are Crimean Tatars. However, in the Crimea’s largest city of Sevastopol, which is considered a separate region of Crimea, there are almost no Crimean Tatars and around 22 percent of Ukrainians, with over 70 percent of the population being Russians...

An absolute majority of the Crimean population (97 percent) use Russian as their main language, according to Kyiv International Institute of Sociology poll. One of the first decisions of the interim Kiev government directly hit Crimea, as it revoked a law that allowed Russian and other minority languages to be recognized as official in multi-cultural regions.

What's happening now?

After the Ukrainian President was ousted and an interim government was established in Kiev, the Russian majority started protesting outside the regional parliament, urging local MPs not to support it. They want the Autonomous Region to return to the constitution of 1992, under which Crimea briefly had its own president and independent foreign policy. ..

Right-wing radicals from Western Ukraine earlier threatened to send the so-called “trains of friendship” full of armed fighters in order to crush any signs of resistance to the revolution they were fighting so hard for.

16---NSA listening in on lawyers conversations with clients, antiwar

17--Obama administration should steer clear of Ukraine, antiwar

NATO, the Western alliance created after World War II ostensibly to deter a Soviet invasion of Western Europe, did not also disband. On the contrary, at U.S. insistence and in violation of promises to Russia’s leaders, the alliance has grown and found new missions, such as intervening militarily against Russia’s ally Serbia and in Afghanistan and Libya.

That would have been bad enough, but former members of the Soviet bloc, as well as former Soviet republics, have been admitted to NATO: Albania, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. Besides that, U.S. officials have talked up two other former Soviet republics, Georgia and — surprise! — Ukraine, as potential members of the alliance.
Moreover, the U.S. government had a hand in the Georgian and Ukrainian “color revolutions,” which brought pro-U.S. politicians to power, at least for a time. The Obama administration is still at it today.

18---IMF to impose slave wages on "liberated" Ukraine, wsws

The dissolution of the Soviet Union in December 1991 was an unexpected gift to the imperialist powers. The October Revolution in 1917 had removed a considerable part of the world’s surface from the sphere of capitalist exploitation. This was regarded as a threat by the international bourgeoisie, even long after the Stalinist bureaucracy betrayed the goal of world socialist revolution and murdered an entire generation of Marxist revolutionaries. In addition, the economic and military strength of the Soviet Union presented an obstacle to US world hegemony.

The dissolution of the Soviet Union and the introduction of the capitalist market created conditions for the social wealth created by generations of workers to be plundered by a handful of oligarchs and international finance. The social gains made in the field of education, health care, culture and infrastructure were smashed and left to decline.
This was not enough, however, for the US and the major European powers. They were intent on ensuring that Russia could never again threaten their global hegemony, as is made clear in the above cited statement of Dick Cheney.

By 2009 the US-dominated NATO military alliance had absorbed into its ranks almost all of the East European countries that had once belonged to the sphere of influence of the Soviet Union. But attempts to incorporate former Soviet republics into NATO failed—with the exception of the three Baltic states Estonia, Latvia and Lithuania—due to resistance from Moscow. Ukraine, with its 46 million inhabitants and its strategic location situated between Russia, Europe, the Black Sea and the Caucasus, invariably was at the centre of these attempts.

As far back as 1997, former US National Security Advisor Zbigniew Brzezinski wrote that without Ukraine, any attempt by Moscow to rebuild its influence on the territory of the former Soviet Union was doomed to fail. The core thesis of his book The Grand Chessboard is that America’s capacity to exercise global primacy depends on whether America can prevent the emergence of a dominant and antagonistic power on the Eurasian landmass. (See: “The power struggle in Ukraine and America's strategy of domination”)...

took just a few hours for the reactionary social content of the upheaval in Ukraine to become clear. The “European values ” allegedly brought to the country by overthrow of the old regime consist of massive attacks on the already impoverished working class. As a condition for loans the country urgently needs to prevent impending bankruptcy, the IMF is demanding the floating of the exchange rate of the hryvna, a brutal austerity program and a six-fold increase in the price of household gas prices.
The floating of the country’s currency will lead to raging inflation, a corresponding increase in the cost of living, and the destruction of any remaining savings by ordinary Ukrainians. The austerity program will be primarily directed against pensions and social spending and the increase in gas prices will mean that many families cannot heat their homes.
Ukraine is to be reduced to a country where well-trained workers and professionals earn wages far below those currently paid in China. This is of especial interest for Germany, Ukraine’s second largest trading partner (after Russia) and, with a volume of $7.4 billion, the second largest investor in the country.

While for the United States the isolation of Russia stands in the foreground, Germany is interested in the economic benefits of Ukraine, which it has already militarily occupied twice, in 1918 and 1941. It wants to exploit the country as a cheap labor platform and use it to drive down wages in Eastern Europe and Germany even further.
According to statistics compiled by the German Economic Institute, labor costs in Ukraine are at the low end of the international scale. At €2.50 per hour worked, average labor costs (gross wages plus other costs) for workers and clerical employees are already well below those of China (€3.17), Poland (€6.46) and Spain (€21.88). In Germany, an hour of labor costs €35.66, i.e 14 times as much.

19---New leaders in Kiev announce Greek-type austerity measures, wsws

Arseniy Yatsenyuk, whom US officials had identified as their preferred leader prior to the putsch because of his close ties to oligarch Yulya Tymoshenko, was selected as prime minister. (See also: US response to leaked call confirms US/EU regime-change plot in Ukraine)
He declared, “We are to take extremely unpopular steps, as the previous government and previous president were so corrupted that the country is in a desperate financial plight. We are on the brink of disaster and this is the government of political suiciders! So welcome to hell.”
Such remarks underscore that the putsch in Kiev had nothing to do with democracy, as is cynically claimed in Western media outlets; it is a naked bid to implement a dictatorship to defend the financial and strategic interests of Western imperialism.

 its mandate from the imperialist powers is to repay Ukraine’s debts to the major banks and protect Ukrainian oligarchs’ wealth by imposing despised austerity measures upon the population, including deep cuts to state energy subsidies.

US Secretary of State John Kerry issued a thinly veiled threat Thursday night, warning in an interview on NBC News not only against any use of military force by Moscow, but also that imperialism is preparing the same fate for the Putin regime as the one that befell the government of Viktor Yanukovych in Ukraine.
“The rapidity with which it has moved [the coup in Ukraine] should be a message to Russia,” Kerry said. “Russia needs to be very careful in the judgments that it makes going forward here…”

These events highlight not only the utter criminality and recklessness of imperialist policy, but also the disastrous political and geo-strategic impact of the Stalinist bureaucracy’s dissolution of the USSR. The restoration of capitalism in the USSR produced obscene levels of social inequality—Ukraine’s top 50 oligarchs have a net worth of $112.7 billion, or two-thirds of Ukraine’s Gross Domestic Product—and left all the ex-Soviet republics torn by regional and ethnic antagonisms.

20--Is the housing recovery over, DS News

21--The Baby Boomer Housing Bust, Forbes

Tuesday, February 25, 2014

Today's links

1--Summers worried about shadow banking, politico

2---America’s Hottest Housing Market Has Suddenly Cooled Down , WSJ

(WSJ catches up with the news)

Prices could turn negative “if the current situation lasts much longer,” says Mr. Orr. Still, there are very few foreclosures waiting in the wings—completed foreclosures were down by more than 50% from a year earlier in December—any price declines “will be much more orderly,” says Mr. Orr. Traditional sellers are much slower to reduce prices than banks

3---The decision to hold rates at zero, Stephen Williamson

4---China’s raw materials bubble bursts, sober look
Steel, iron ore futures in China tanked on bloated (all-time high) inventories and apparent lending curbs by Chinese banks.

Source: CME

With banks cutting back lending in this sector and the yuan actually declining recently, that gravy train has stopped. Traders are being forced to dump inventory. That is sending prices lower and even pressuring some mills to close.

Lending curbs have also been extended to other sectors related to property development, such as cement. All this points to tighter credit, weaker demand, and slower industrial activity going forward

Exposing troubling ties in the U.S. to overt Nazi and fascist protesters in Ukraine.

7--Archive 2009---Krugman, Stiglitz, Roubini, Taleb, Baker Agree: Nationalize the banks, daily kos

The cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes,” RealtyTrac Vice President Daren Blomquist said in a statement.Higher mortgage rates and swift price gains widened that gap, Blomquist said, attributing the steep price increases to “investors and other cash buyers who are not tethered to the typical affordability constraints.”

11---How the Media Got Played ... again---The US Played Hardball Against Ukraine…and the EU, counterpunch

The Obama administration’s new-found affection for street riots to overthrow unfriendly elected government will get its next road test in Venezuela.  Caracas is starting to look like Kiev.  The conservative youth of the private universities are already on the street looking for trouble and the excuse to exercise righteous violence like their ultranationalist brothers in Ukraine.  If Carl Gibson’s article in Reader Supported News is quoting an authentic document, the USAID, with the help of consultants and Colombia, was already mapping out plans to destabilize the country through economic sabotage in late 2013 and, according to Gibson’s account, incite street confrontation:
“Whenever possible, the violence should cause deaths and injuries. Encourage hunger strikes of numerous days, massive mobilisations, problems in the universities and other sectors of society now identified with government institutions.”
I don’t think there’s any question that opposition leader Leopoldo Lopez is America’s man in Caracas.  Gibson’s article also adds the detail that a Wikileaks cable apparently links Lopez to CANVAS, the US-funded democracy-promotion cum regime-change outfit that Yanukovich banned from Kiev just prior to his downfall.
Venezuela seems to fracture along class lines (not ethnic Russian vs. Ukrainian, or regional/tribal/Cyrenic/Tripolitan like Libya, or confessional Sunni/Shi’ite like Syria) so the task of catapulting a pro-US elite group into power may be bloodier and more prolonged than the adventure in the Ukraine.  But I’m sure the United States has sufficient money and patience for a prolonged struggle, especially when the suffering is a thousand miles away from Washington.
As for the People’s Republic of China, I think the takeaway will be
1) active US political subversion of its enemies is not just one of those myths that target governments console or terrify themselves with
2) don’t let opposition parties form, let alone get on the ballot 2) don’t let anybody in the downtown square and
3) pre-emptively treat any activists with US or Western ties as de facto subversives and counter-revolutionaries.
It is doubtful that heightened PRC vigilance will translate into anything near the democratic liberalization which the West ostensibly craves for China’s benighted citizens.  Instead, the regime will land on dissidents early and like a ton of bricks.
It is rather ironic that Barack Obama, the progressive paragon, took a few hits from the Dick Cheney regime-change crack pipe, and now apparently finds it irresistible.
Maybe he feels that he might as well grab for a few cheap foreign policy wins, damn the consequences, because in two years he’s outta here and President Clinton can deal with the mess.
I imagine that Alfred Nobel’s image on President Obama’s Peace Prize medal is weeping blood tears by now 

Monday, February 24, 2014

Today's Links

1---California enters third year of severe drought, wsws

Presently, over two-thirds of California’s counties are in “extreme” or “exceptional” drought; conditions which on average occur every 20 to 50 years. California’s snow pack is a staggering 12 percent of its average for this time of year, the lowest ever recorded. Usually the state’s 40 largest reservoirs are 64 percent full in February; instead they are just at 39 percent capacity.

2---Western-backed Ukrainian opposition seizes power in fascist-led putsch, wsws
(Another trophy for Obama)

France, Germany and Poland, with the United States operating in the background, had worked hand-in-glove with opposition leaders Vitali Klitschko of the Udar party, Arseniy Yatsenyuk of oligarch Yulia Tymoshenko’s Fatherland Party, and Oleh Tyahnybok of the fascistic Svoboda. As the opposition had relied on fascist thugs to provide the muscle for its street protests, a negotiated settlement with them was impossible.
After signing the deal Friday night, Yanukovych fled the capital Kiev, clearly fearing that if he stayed he would meet the same fate as Muammar Gaddafi, who was murdered at the end of the NATO war in Libya.

An order has been given to arrest former ministers and for state security and the prosecutor’s office to investigate “grave crimes against the Ukrainian people, including those by former state leaders.”
In a further indication of the rightist character of the regime that has been installed, parliament voted that Ukrainian is the only official language, disenfranchising around one fifth of its population, which mainly speaks Russian.
The atmosphere is so poisonous that Ukrainian Chabad Rabbi Moshe Reuven Azman has called on Kiev’s Jews to leave the city and even the country if possible. He cited “constant warnings concerning intentions to attack Jewish institutions.”....

The European powers and Washington were the driving forces behind this putsch, aiming to break Ukraine from Russia’s sphere of influence. They have gone very far towards fulfilling longstanding geostrategic ambitions—firstly those of Germany, which has repeatedly sought to bring Ukraine under its control, and then of the US, which has sought to weaken and isolate Russia ever since the Soviet Union collapsed in 1991.

3---Philip Pilkington: Keynes’ Liquidity Preference Trumps Debt Deflation in 1931 and 2008
naked capitalism

4---Citi allowed to self-police operations, HW

Citi bank is one of several big financial institutions that will be allowed to self-police.
The Federal Reserve Board announced that Citi has been approved to exit parallel, international standard Basel III reporting for U.S. regulatory capital purposes, effective for the second quarter of 2014.

One of the stipulations for this approval is that Citi will be required to increase its estimated risk-weighted assets associated with operational risk to $288 billion from the $232 billion reported as of Dec. 31, 2013, the company said in a statement.
Other firms, such as Goldman Sachs (GS) and JP Morgan (JPM) were also reportedly granted such freedom.

5---Risks of Abenomics "stalling out" , sober look

Take energy and food — which is also probably under upward pressure in part due to yen depreciation — out of CPI and it is only up 0.7% y/y as food prices themselves are up 2.2%. Most of the CPI effects of the Bank of Japan’s efforts to depreciate the yen remain confined to a relative price shock to food and energy that crowds out spending power elsewhere in the economy on future second-round effects in the absence of a pickup in wage growth or credit access. ....
This coming Thursday Japan's Ministry of Public Management will be releasing the January CPI figures. The report will be closely watched to determine the progress of "Abenomics", as the nation tries to work its way out of the persistent long-term deflationary environment.

6--Existing-home sales slowest in more than a year, marketwatch

7---The Madness of Abenomics In One (Crazy) Chart , Testosterone Pit

8--Russia takes gold, Pravda

It was Fatherland Defenders Day yesterday in Russia and a great day to remember. The 2014 Sochi Olympics were a great success for Russia and a crown for the men who fought and served Russia in the past. We were number one with 13 GOLD, 11 SILVER and 9 BRONZE MEDALS. It was an even greater triumph considering that Russia no longer has countries from the former Soviet Union and Old Russia.....

Dr. Paul Craig Roberts who worked under President Reagan. You can download the audio interview here. "Roberts says that there is no question about U.S. involvement in Ukraine." He went on to say"
"I mean what in the world do you think Washington cares about democracy in Ukraine? They don't even have any in the United States! We have a police state that spies on everybody, the whole world. The media is a propaganda ministry. It's worse than it ever was in the Soviet Union. People have no idea of what's going on and what they're told about the Ukraine is a fabrication."

RT's Gayane Chichikyan reminded us of an old Russian saying, "The dogs bark but the caravan moves on so let them bark."

...Too-big-to-fail is at the heart of the financial crisis. The U.S. financial system is fragile...
maturity mismatch and illiquidity inherent in banking imply that bank panics are possible. ....

Indeed, large financial institutions like Bear Stearns and Lehman Brothers could take on some of the characteristics of banks - e.g. maturity mismatch - while falling outside the regulatory umbrella that covers banks. As well, the failure and resolution of a large financial institution is a potential nightmare. The possibility of systemic disruption (which we saw in the financial crisis with the Lehman failure and the subsequent problems at AIG) from a large financial institution is what leads to the too-big-to-fail moral hazard problem. That is, a too-big-to-fail financial institution understands that it is too-big-to-fail, and therefore takes on too much risk, relative to what is socially optimal. This high level of risk could be reflected, for example, in a high-aggregate-risk asset portfolio, or in a maturity mismatch between assets an liabilities.
Lacker states:
Lehman Brothers filed for bankruptcy on September 15, 2008. One day later, the insurance company American International Group (AIG) received a large credit extension from the New York Fed. At that point, regulators had resolved six large failing financial firms in five different ways. Some positions in the capital structure were rescued in one firm's resolution but not rescued in another's. Each had been handled on an ad hoc basis, without comment on how similar cases might be handled in the future. Market conditions following Lehman and AIG cried out for a general policy statement providing guidance on future interventions.....

Lacker points out
The thesis that financial market instability is inherent, rather than induced by poor policies, must also confront the fact that instances of instability are quite unevenly distributed across different countries and different regulatory regimes, as exemplified by the contrasting experiences of the United States and Canada. Over the past 180 years, the United States has experienced 14 major banking crises, compared with just two mild illiquidity episodes in Canada over the same period. If financial fragility were an inherent feature of financial markets, financial panics would be ubiquitous, but that's not what we see. 

10--Russian General: We are at war, global research

In an interview published Feb. 5 by, Gen. Leonid Ivashov, the former foreign relations head of the Russian Ministry of Defense and current president of the Academy of Geopolitical Studies, issued a sharp warning about the nature of the strategic crisis unfolding in Ukraine:
“Apparently they [officials of the European Union and U.S. Secretary of State John Kerry] have dedicated themselves, and continue to do so, to deeply and thoroughly studying the doctrine of Dr. Goebbels. . . They present everything backwards from reality. It is one of the formulas which Nazi propaganda employed most successfully: . . . They accuse the party that is defending itself, of aggression. What is happening in Ukraine and Syria is is a project of the West, a new type of war: in both places you see a clear anti-Russian approach, and as is well known, wars today begin with psychological and information warfare operations. . . Kerry and Obama are encouraging in Kiev what they harshly repress in their country. European leaders break up unauthorized demonstrations with hoses, throwing demonstrators in jail, while in the Ukrainian case they do the exact opposite, and on top of that they threaten Russia. Logically, this is part of information warfare.
“Keep in mind that, under the cover of information commotion, U.S. ships are entering the Black Sea, that is, near Ukraine. They are sending marines, and they have also begun to deploy more tanks in Europe. . . We see that on the heels of the disinformation operation a land-sea, and possibly air operation is being prepared.
“They haven’t even taught [opposition leaders] Klitchko, Yatsenyuk and Tyahnybok to run a government efficiently. The main thing is for them to take power, and destroy the Ukrainian state.”
Currently in the Ukraine, there is a parliament in Kiev and a parliament in Kharkov.  The parliament stripped Yanukovych of his powers and impeached him but he says they dont have the powers to do that and refuses to step down.  The latest reports have the President in Donetsk.  There is actually no single person in charge over there. It’s chaos.  Everything about the ‘rebellion’ reeks of western puppetry and fascism.  Everything about the Yanukovych supporters of course reeks of Russia.  The Crimea is having massive protests right now in the streets because they want to join in union with Russia.  And Russia has stated it is prepared tosend in troops to protect ethnic Russiansof which there is 7-8 million of in Ukraine.  Things are very fluid and changing hourly.

11--Fomenting revolution the American way: Fake NGO-sponsored coups, global research 

Otpor! was so successful that it was ushered into Ukraine to help manufacture regime change there in 2004, using the template applied originally in Serbia with $65 million in cash from the U.S. government.

“We trained them in how to set up an organization, how to open local chapters, how to create a ‘brand,’ how to create a logo, symbols, and key messages,” an Otpor! activist told U.S.-funded media outlet Radio Free Europe-Radio Liberty. “We trained them in how to identify the key weaknesses in society and what people’s most pressing problems were—what might be a motivating factor for people, and above all young people, to go to the ballot box and in this way shape their own destiny.”
The overthrow of Milošević was accompanied by U.S.-funding for the creation of a robust media apparatus in Serbia, and Popovic’s wife worked at one of the U.S.-funded radio and TV outlets as a journalist and anchor B92 from 2004-2009.

“By helping Radio B92 and linking it with a network of radio stations (ANEM), international assistance undermined the regime’s direct and indirect control over news and information,” a January 2004 policy paper released by USAID explained. “In Serbia, independent media supported by USAID and other international donors facilitated the regime change.”
Critics point out that what happened in Eastern Europe was regime change, not revolution in any real sense of the term.

“[They] were not revolutions at all; actually, they were little more than intra-elite power transfers,’” Portland State University Professor of Urban Studies and Planning, Gerald Sussman, explained in his book, “Branded Democracy: U.S. Regime Change in Post-Soviet Eastern Europe.”
“Modern tactics of electioneering were employed to cast regime change as populist, which took advantage of the unstable and vulnerable situations in those regions following the breakup of the Soviet Union,” he wrote.

12--Paul Craig Roberts on Ukraine coup, global research

Having interfered in Ukraine’s internal affairs and lost control, Washington is now issuing ultimatums to Russia not to interfere in Ukraine. Does the idiot Susan Rice, Obama’s neoconservative National Security Advisor, think Putin is going to pay any attention to her ultimatums or to any instruction from a government so militarily incompetent that it was unable to successfully occupy Baghdad after 8 years or to defeat a few thousand lightly armed Taliban after 12 years?  In only took a few hours for Russian troops to destroy the American and Israeli trained and armed Georgian army that Washington sent to invade South Ossetia.

Where does Obama find morons like Susan Rice and Victoria Nuland? These two belong in a kindergarten for mentally handicapped children, not in the government of a superpower where their ignorance and arrogance can start World War 3.
Ukraine is far more important to Russia than it is to the US or EU. If the situation in Ukraine spirals out of control and right-wing extremists seize control, Russian intervention is certain. The arrogant and stupid Obama regime has carelessly and recklessly created a direct strategic threat to the existence of Russia. 

 According to the Moscow Times, this is what a senior Russian official has to say: “If Ukraine breaks apart, it will trigger a war.”  Ukraine “will lose Crimera first,” because Russia “will go in just as we did in Georgia.”  Another Russian official said: “ We will not allow Europe and the US to take Ukraine from us. The states of the former Soviet Union, we are one family. They think Russia is still as weak as in the early 1990s but we are not.”

The Ukrainian right-wing is in a stronger position than Washington’s paid Ukrainian puppets, essentially weak and irrelevant persons who sold out their country for Washington’s money. The Right Sector is organized. It is armed. It is indigenous. It is not dependent on money funneled in from Washington and EU financed NGOs. It has an ideology, and it is focused. The Right Sector doesn’t have to pay its protesters to take to the streets like Washington had to do.

13---"If Ukraine breaks apart, it will trigger a war, Moscow times

Russia has warned the West that it is willing to fight a war over Crimea, a Ukrainian region where 60 percent of the population is ethnically Russian and where Russia's Black Sea fleet is stationed.
"If Ukraine breaks apart, it will trigger a war," a senior government official told the Financial Times on Thursday. "They will lose Crimea first [because] we will go in and protect [it], just as we did in Georgia."

14---US-backed coup  "empowers the openly neo-Nazi movements", ...  Tea With Neo-Nazis: The Violent Nationalism in Ukraine, Arutz Sheva

do you know how many violent racist movements in Ukraine are operating today? Sixteen more in additional to the Freedom party plus seven more of an extreme-radical character, making it twenty three in total. Do you know that together with 10,44% of the seats in the current Ukrainian parliament occupied by Freedom party, those 23 more parties would cover at least 20% of the population of that huge country of 45,5 million?”
“Yes, it is very serious” – my friend suddenly sounded alarmed, "it should be taken into serious consideration, of course”.
I continued: “Do you know that these big Ukrainian radical movements are working in close co-operation with and have very close ties to the infamous Hungarian Fascist Jobbik party?” 

Neo-Nazis as ‘Freedom Fighters’
Little more than a year ago, in Autumn 2012, the ultra-right nationalist, fervently and openly anti-Semitic Freedom party received over 10% of the seats in the Ukrainian parliament and now has a solid 37 seats in the 450-member governing body. Just over a year since the legitimisation of that party, which initially proudly called itself a National-Socialist party, the protests in Ukraine have turned into bloody riots and are very close to civil war.

Since the very beginning, a heavily racist element has been present in the rhetoric of the protests. Why did nobody in the West react adequately to these non-stop proclamations of hatred and calls for violence? Why did nobody speak about it in plain language, not once?
If any of the MPs of almost any of the Western countries – except Hungary, obviously - would allow him or herself to imitate a pale shadow of the speeches which were repeatedly heard from the podium of the Ukrainian parliament, the speeches produced by the Freedom party MPs, that Western parliamentarian would find him or herself in jail instantly.  
And to make the customary Ukrainian surrealism entirely bleak, today the Freedom party leader has become one of the three most visible, officially recognized leaders of the Ukrainian opposition. To accept it is the same as signing a decree that “from today on, we are once again living happily in a barbarian age"......

In 2012, the Anti-Defamation League officially listed the Ukrainian Freedom party as a neo-Nazi party. How it is possible in the civilised and post WWII world that this party is accepted as part of an official opposition and a partner in the negotiations attended by anyone who is not Nazi or a neo-Nazi ideology supporter? European and Western leaders do owe us the answer to that simple question.

The Right Sector of Armed Debauchers  

People who are following the situation in Ukraine, know that the notorious Freedom party looks almost like church choir boys in comparison with 23 more ultra-right radical organizations in Ukraine, several of them recently united into the Right Sector Alliance comprised of highly aggressive militants. The current reality is that those thousands of militants are well equipped with weapons and ammunition and are determined to run the war, according to their leader’s repeated statements. It is those people who have happily taken responsibility for multiple acts of arson, increasing daily terror and limitless violence. It is those people who beat severely a newly appointed official in Volyn, put him on his knees, hand-cuffed him publicly in the city square, and brought his family to stand in front of him. Those people call themselves fighters for freedom. Is this the definition of freedom with which the European leaders are happy?

These are not ‘separate accidental cases’ as we are hearing in some official comments. This is the position and practice of the absolutely real, serious, large, well organized and well prepared sector of the Ukrainian protesters, and this truth shall be realised and acted upon without delay.
There is no secret concerning the real political agenda and programs of ultra-nationalist parties in Ukraine – there is nothing close to European values and goals there. One just should open existing documents and hear what the representatives of those parties proclaim daily. They are sharply anti-European, and highly racist. They have nothing to do with the values and practices of the civilized world. Why are the European leaders embracing such forces so indiscriminately?..

The Threat to Ukranian Jewry
Ukrainian Jewry is facing a real and serious threat, and it is simply chilling to write about it on the eve of commemorating the 70th anniversary of the destruction of Hungarian Jewry. The Hungarian government is putting the commemoration on the back burner, expectedly, but unacceptably.
Twenty five years ago, in 1989, there were almost a half a million Jews in Ukraine. In just over a decade, 80% of them left the country. This fact alone tells a lot about the country’s attitude and atmosphere vis a vis Jews. Ten years later, that number had diminished by a third. Now, less than 70,000 Jews are citizens of Ukraine, according to official statistics.  ...

early elections.
To empower the openly neo-Nazi movements in Europe by ignoring the threat they pose is an utterly risky business. People should not have to pay a terrible price – again – for the meekness and indifference of their leaders. As Ukraine today has become the tragic show-case for all of  Europe with regards to breeding and allowing race-hatred to become a violent and uncontrollable force, it is impertive to handle the situation there in accordance with existing international law and norms of civilisation.

Never again, you said?

15---Three-quarters of the nation’s troubled loans were made in 2007 or earlier, oc housing

if you look at the delinquency rates at the major banks, a different picture emerges.

Does the graph above look like delinquencies are anywhere near pre-recession levels?

Three-quarters of the nation’s troubled loans were made in 2007 or earlier, and delinquency rates for loans made after that point are around historical norms, according to the Mortgage Bankers Association. “The legacy of very high foreclosure rates is a problem of older loans,” said Michael Fratantoni, the MBA’s chief economist.
That means that three-quarters of the delinquent mortgage squatters have been living for nothing for as long as seven years.
Foreclosures are down partly because the economy and unemployment rate have improved.
Not really. While it’s true that the economy has improved slightly, and the unemployment rate has improved — though mostly from discouraged workers leaving the workforce — the improvement in foreclosures is not due to people going back to work, making up the missed payments, and curing their mortgages. That’s what is implied, but that isn’t what’s happening.

15--Readers comments economist's view

said in reply to anne...
Real home prices in the United States over long periods of time have simply tracked inflation. The real home price index was 100 in 1890 and 106.73 at the close of 1996. The housing bubble brought the home price index to 198.01 by the beginning of 2006, while the deflation of the bubble brought the index to 114.04 at the beginning of 2012.
We currently have the home price index at 134.47, a level that had never been found before 2001 and that is importantly higher than the long term average level. Unless home prices from here can be considered to be permanently above long term levels, we should not expect any meaningful increase from here in the real price index.

NDD said...
Since I am the person with whom Bill McBride has the $100 charitable bet about the direction of housing in 2014 (my bet is that YoY housing permits, starts, or sales will be at least -100,000) YoY, allow me to point you to my data, which is quite straightforward, and based on the behavior of interest rates vs. housing for the last 70 years:
As far as I am concerned, the recent weakness is exactly what I've been expecting, based strictly on a 1% increase in interest rates. The real questions from here on are, how deep and how long? How deep I've pretty well already answered. How long depends on the course of interest rates from here on. If interest rates steady, so will housing later in the year. For an increase, we need a further decline in rates from their December peak, or in unicorn land a significant increase in real median income. Prices will plateau and probably come back down some after the slowdown is more entrenched.

Charlie Baker said...
Real Median Household income is over $4000 below its level in 2000 (!), down 7.5%:
In fact, it's lower now than it was at any point between 1996 and 2008:
Yet real house prices, per the Case-Shiller data, are up over 9% from 2000, and 18% up from the post-recession lows. Factor in the uptick in interest rates, and the decline in institutional buyers, and voila: flat housing sector growth.
Per NDD earlier, I would argue that the real median income unicorn is a slightly bigger factor than the interest rate. Doesn't matter what the interest rate is if you can't make the down payment, and all the EZ mortgage scams are not coming back, at least not those of the 2006 vintage. Most of the economic improvement of the last few years is going to people who already own a house (or three).

Presently, over two-thirds of California’s counties are in “extreme” or “exceptional” drought; conditions which on average occur every 20 to 50 years. California’s snow pack is a staggering 12 percent of its average for this time of year, the lowest ever recorded. Usually the state’s 40 largest reservoirs are 64 percent full in February; instead they are just at 39 percent capacity.