Wednesday, February 5, 2014

Today's Links

1--US economy bound to slow, macrobusiness

The problem is that the acceleration in growth experienced through 2013 has not come about from domestic end demand (on which the US typically depends), but rather the accumulation of inventories and, to a lesser extent, a contribution from net exports.
The impact of inventory accrual was most obvious in Q3 when it contributed 1.7ppts to the 4.1% annualised headline. This was followed by a further 0.4ppt contribution in Q4 as stocks were accumulated at an even faster clip into year end. Periods of rapid inventory accumulation are almost always fleeting, with end demand and supply inevitably brought back into line, one way or another....

For households, spending looks at risk of a pull back. Specifically, the change in the contribution from housing and utilities services between Q3 and Q4 was equal to around half of the increase in total consumption’s growth contribution, pointing to a potential (temporary) positive weather effect. Also supportive of this notion was the Q4 turnaround in clothing and footwear sales.

Abstracting from any weather impact, the more pressing concern in the consumer space is the continued decay of households’ financial welfare. Through 2013, consumers increasingly took advantage of the freer availability of consumer credit. The result was strong demand for autos, but only at the expense of consumers’ savings. As at December, the household saving rate stood at 3.9%, down more than a percentage point from September’s 5.1%, once again near its post-GFC lows.

The accrual of debt has not been the only culprit, with a 0.4% decline in real personal disposable income since September also contributing to the fall in the savings rate. For stronger consumption growth to prove sustainable (and support an expansion of firms’ productive capacity), we need to see healthy growth in real disposable incomes which outpaces price rises for life necessities (such as health and housing), something that has remained absent in the post-GFC environment.

2---Giant Sucking Sound? Emerging-Markets Fiasco To Topple European Banks , Testosterone Pit

And these already teetering European Banks are waving mysterious balance sheets whose decomposing “assets” no one is allowed to disclose, and whose sanctity no one is allowed to even doubt ...

Turns out, these illustrious banks are stuck in the credit muck with loans totaling $3.4 trillion to the emerging markets (more than four times the exposure of US banks), according to analysts at Deutsche Bank. And $1.7 trillion of this malodorous debt is on the books of just six (mercifully unnamed) European banks. If a portion of those loans default....

3---The Coming Mortgage Delinquency Disaster, Keith Jurow


For the past four years, I believe that I have been the only real estate analyst who has consistently asserted that this notion of a housing recovery is simply wishful thinking. My charts, graphs, tables and other solid data have been greeted with skepticism.
I am often asked this question: Are all the other pundits and experts simply wrong? Judge for yourself. I simply dig deep to find the answers to questions about housing markets that no one seems to be asking.

The delinquency table I have posted from Black Box Logic has never been seen before. In my view, the table completely confirms what the first table shows about the NYC metro. It also shows that the 21 million modifications and other "solutions" have not solved anything. They have simply kicked the can down the road.

If you read the latest call report filed with the FDIC by "too big to fail" banks, you will see that the first lien portfolio owned by two of them has a delinquency rate of more than 17%. No recovery in their portfolios! Had it not been for mortgage modifications, the delinquency rate would have been considerably higher.

4---The Low-Inflation Policy Trap, Stephen Williamson

5---Everything You Need to Know About the Emerging-Market Currency Collapse, atlantic

6---Workers stumble while ‘Abenomics’ soars--Companies, investors stand to gain most from prime minister's policies, JT

One factor helping Toyota keep pay hikes modest is that it, like many Japanese companies, has two tiers of employees. It can hire temps like Matsui or permanent workers who get more benefits and employment guarantees. Permanent workers know that if they press hard for raises, Toyota can hire more people like Matsui — or shunt jobs overseas.

Nonregular workers like him account for all the jobs created under Abe. Japan now has a record number of people in such positions, about 20 million, or 37 percent of the workforce.
....On Friday, the government reported that consumer prices, including fresh food, rose 1.6 percent in December, the fastest since 2008...

the prime minister says earnings at companies like Toyota, where profit is projected to double to a record ¥1.86 trillion this year....

“This is a litmus test for whether Abenomics works or falls apart,” said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. “How can you get growth to go up without getting money into people’s pockets?”...

7---Smaller deficits in 2014 says report, AP

A new report says the government's budget deficit is set to fall to $514 billion for the current year, down substantially from last year and the lowest by far since President Barack Obama took office five years ago.
The Congressional Budget Office report credits higher tax revenues from the rebounding economy and sharp curbs on agency spending as the chief reason for the deficit's short-term decline.
But CBO sees the long-term deficit picture worsening by about $100 billion a year through the end of the decade because of slower growth in the economy over the coming decade than it had previously predicted.
Last year's deficit registered $680 billion. Obama inherited an economy in crisis and first-ever deficits exceeding $1 trillion.

8--Abenomics Disaster: Japan Regular Wages Fall For 19 Consecutive Months; Real Wages Drop To 16 Year Low, zero hedge

Japan’s base wages adjusted for inflation last year matched a 16-year low in 2009 when the world was gripped by recession, posing a risk to consumer spending as the nation girds for a higher consumption tax....

Inflation will accelerate five times faster than wage gains in the year starting April, according to Bloomberg News surveys. Higher prices, coupled with the sales-tax rise, threaten to erode household spending power.

Having injected monetary and fiscal stimulus into the economy, Abe’s next challenge is make advances in stripping away regulations to encourage business investment.

 “Wages might rise a little bit this year, but it won’t be sustainable unless the government pushes through policies to improve productivity,” said Koya Miyamae, a Tokyo-based economist at SMBC Nikko Securities Inc. “It’s easy to boost prices, but it’s much more difficult to have companies raise wages

9--US Senate votes to slash $8.7 billion in food assistance, wsws

10--Ukraine and the pro-imperialist intellectuals, wsws

The “Open letter on the future of Ukraine” issued by a group of Western academics and foreign policy operatives is a vile defense of the ongoing far-right protests in Ukraine supported by Washington and the European Union (EU). It peddles the old lie, repeated over nearly a quarter century of imperialist wars and interventions in Eastern Europe since the dissolution of the USSR in 1991, that US and EU policy is driven only by a disinterested love of democracy and human rights.

It states, “The future of Ukrainians depends most of all on Ukrainians themselves. They defended democracy and their future 10 years ago, during the Orange Revolution, and they are standing up for those values today. As Europeans grow disenchanted with the idea of a common Europe, people in Ukraine are fighting for that idea and for their country’s place in Europe. Defending Ukraine from the authoritarian temptations of its corrupt leaders is in the interests of the democratic world.”

The identity of the imperialist powers’ local proxies demolishes the open letter’s pretense that the imperialist powers are fighting for democracy. They are relying on a core of a few thousand fascistic thugs from the Right Sector organization and the Svoboda Party to topple the Ukrainian regime in a series of street protests, replace it with a pro-EU government hostile to Moscow, and impose savage austerity measures. Washington and the EU are not fighting for democracy, but organizing a social counterrevolution....

In fact, neither Ukraine nor Russia has threatened to attack the EU. It is Ukraine—with its energy pipeline network, strategic military bases, and heavy industry—that is emerging as a major prize in an aggressive thrust by US and European imperialism to plunder the region and target Russia. While US and European imperialism threaten to attack Moscow’s main Middle East allies, Syria and Iran, they are threatening Russia’s main Eastern European ally, Ukraine, with regime-change or partition.

The drive to impose untrammeled imperialist domination of Eastern Europe, which began after the restoration of capitalism with escalating NATO interventions and wars in Yugoslavia in the 1990s, is at a very advanced stage. It is setting into motion the next campaign, for regime-change and ethnic partition in Russia, where Washington is studying a variety of ethnic groups—from Chechens, to Tatars and Circassians—whose grievances can be mobilized against Moscow....

By aligning themselves with the US-EU drive to dominate Eastern Europe, the signatories of the open letter are embracing what historically have been the aims of German imperialism. Berlin twice invaded Ukraine in the 20th century, in 1918 and 1941. Significantly, imperialism’s proxies in Ukraine today are the political descendants of Ukrainian fascists who helped carry out the Ukrainian Holocaust as allies of the Nazis—whose policy was to depopulate Ukraine and prepare its colonization by German settlers through mass extermination....

The disastrous consequences of the Soviet bureaucracy’s self-destructive policies and the light-minded approach of Mikhail Gorbachev as he moved to dissolve the USSR—believing that the concept of imperialism was a fiction invented by Marxism—are emerging fully into view.

Trotsky warned that the dissolution of the USSR would not only restore capitalism, but also transform Russia into a semi-colonial fiefdom of the imperialist powers: “A capitalist Russia could not now occupy even the third-rate position to which czarist Russia was predestined by the course of the world war. Russian capitalism today would be a dependent, semi-colonial capitalism without any prospects. Russia Number 2 would occupy a position somewhere between Russia Number 1 and India. The Soviet system with its nationalized industry and monopoly of foreign trade, in spite of all its contradictions and difficulties, is a protective system for the economic and cultural independence of the country.”
This is the agenda being laid out by imperialism and its fascist proxies: to return Russia and Ukraine to semi-colonial status through internal subversion, civil war, or external military intervention. Processes are being set into motion that threaten the deaths of millions.

11---The Federal Reserve's Nuclear Option: A One-Way Street to Oblivion, of two minds

We all know the Federal Reserve (and every other central bank) has one last Doomsday weapon to stop a meltdown in the global financial markets: creating trillions of dollars out of thin air and using the cash to buy assets that are in free-fall. This is known as "the nuclear option"--the direct monetizing of stocks, Treasury bonds, commercial real estate mortgages, student loans, corporate bonds, non-U.S. sovereign bonds, subprime auto loans, defaulted bat guano securities, offshore loans denominated in quatloos--you name it: The Fed could print money and buy, buy, buy to create and maintain a bid in bidless markets.

The idea is to stop a cascade of panic by buying assets in quantities large enough to staunch the avalanche of selling. The strategy is based on one key assumption: that no more than a small percentage of the asset class will change hands in any day or week....

The Fed cannot create a bid in bidless markets that lasts beyond its own buying.

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