Thursday, May 22, 2014

Today's Links

1--Merrill Lynch, Charles Schwab Accounts Linked To Mexican Drug Cartels: SEC, HP

The U.S. Securities and Exchange Commission is probing Charles Schwab and Merrill Lynch for violations of anti-money laundering rules that require the brokerages to know their customers, the sources said...

The SEC's investigation so far has found Charles Schwab and Merrill did not pay close enough attention to their clients' true identities, and accepted shell companies and individuals with fake addresses as clients, two sources said.
In both cases, some of the accounts, whose ownership the brokerages did not adequately investigate, were eventually linked to drug cartels, they said.

2---Booming Retail Sales Hide A Terrible Problem in America , Testosterone Pit
Retail sales growth per capita has been stagnant for the past 11 years.

Actual, nominal retail sales grew at the robust annual rate of 4.8% after posting the best April performance since 2009. But there’s a problem with that....

April was a very good month in nominal terms. The 4.8% annual growth rate is smack in the middle of the growth rate range of the past two years of 4.8%. That’s nearly 5 times the rate of US population growth.  It’s all good, right?
That’s in total nominal terms. It includes inflation. It is heavily skewed by the spending of the top 10% of households in wealth. It is boosted by growing tourism revenue. It does not represent the average American household.
The problem is that the average, real (inflation adjusted) retail sales per capita, ex-gasoline, is growing far more slowly, and has not even recovered to the 2003 level. 2003, if you recall was at the bottom of a recession. Retail sales growth per capita has been stagnant for the past 11 years. This coincides with the well known data on real US household income which has been in a declining trend since 1998. The worst of that decline, by the way, occurred between 2007 and 2011, a period during which the Fed began offering free money to Wall Street and printing money madly.  And you think that’s a coincidence?...

Real retail sales per capita have mostly been growing in a range of zero to 4% over the past 3 years, averaging around 2.4%, or half the nominal growth rate. ...
While we don’t know the actual spending growth of the bottom 90% of Americans, it’s obviously less than the 2.5% rate that includes the boost from the top 10% and from tourists. Most importantly, it’s less than they were spending 10 years ago

Margin debt – newly created money that is plowed into stocks – is the great accelerator on the way up. It inflates values and increases leverage, and when it spikes, it performs miracles. But it has a terrifying habit: after going into a majestic spike, it reverses abruptly right around the time stocks crash.
Over the last 15 years, margin debt had three spikes and reversals:
The first spike peaked in March 2000 at a record of $278.5 billion, or 2.66% of GDP. By the time it reversed in April, the stale air was hissing out of stocks with epic speed.

The second spike peaked in July 2007 at $381.4 billion, or 2.60% of GDP. In November, stocks began to swoon. No one will ever forget what happened next.
The third spike – the most phenomenal yet – peaked in February 2014 at $465.7 billion, beating the prior record by 22%. It reached 2.73% of GDP, the highest ratio ever! In March, the spike reversed. And in April, it declined again.
And it's forming an increasingly terrifying chart:

Margin debt is down 6.1% from its February peak. $28.6 billion was drained from the stock market in two months, rather than added, as it might have been the case during the spike – a difference of $57 billion. And the dough that was yanked out isn’t piled up on the sidelines either, waiting to be plowed back into stocks. It was used to pay off debt. It simply evaporated.
During those months, the former red-hot darlings have been eviscerated, and thousands of stocks have skidded in sympathy. It’s brutal out there.

4---Here's The Proposed Gas Pipeline That Has Russia-China Relations Stronger Than Ever, BI

5--27 Huge Red Flags For The U.S. Economy, zero hedge

total consumer credit in the United States has increased by 22 percent over the past three years, and 56 percent of all Americans have "subprime credit" at this point.....

U.S. industrial production fell by 0.6 percent in April.  This should not be happening if the economy truly was "recovering".  Manufacturing job openings in the United States have declined for four months in a row.

Existing home sales have fallen for seven of the last eight months and seem to be repeating a pattern that we witnessed back in 2007 prior to the last financial crash.

In the real estate bubble market of Phoenix, sales in April were down 12 percent year over year, and active inventory was up 49 percent year over year.  In other words, there are tons of homes on the market, but sales are going down.
The homeownership rate in the United States has dropped to the lowest level in 19 years.

Trading revenue at big banks all over the western world is way down...

Late Friday, it was JPMorgan who said trading revenues will be down 20 percent this quarter. Now Barclays says trading revenues in the first three months were down 41 percent. The company cited "challenging trading conditions resulting in subdued client activity." Like JPMorgan, Barclays also warned they were seeing no improvement in trading in the second quarter.

5---From Comments: What Kinds of Jobs Have Been Created During the Recovery? economists view

So across each range from humblest low-skill job to doctorate real incomes have fallen.

[ The trick though is that while real median household incomes have fallen across the range of education levels for householders since 2000 through 2012, income concentration has since about 1980 been increasing and increasing in what Paul Krugman called a fractal pattern. Income shares of the top 1% have increased, while income shares of the top .5% have increased faster, and income shares for the top .1% still faster and fastest of all for the top .01%. ]

Since 2001 there has been a dramatic decline in the share of business income going to labor, such that the labor share of business income is currently easily at the lowest recorded since 1948 when such record keeping began. Correspondingly, since 2001 real profits per employee have increased dramatically and are currently at what is easily the highest level ever recorded.
Labor has lost business income share since 2001, while employees have become increasingly profitable.

[ Jobs created during the recovery, jobs created since the beginning of the recession, jobs created since 2001 have been the sorts of jobs that have lowered real household incomes no matter the education level of a householder. So that real household incomes have declined for householders ranging from high school graduates to college graduates and higher from 2000 and from 2007 and from 2009...

September 17, 2013
Households with Householder 25 Years Old and Over by Median Income
Median real incomes for those 25 years old and over from 2000 to 2012 declined from $57,707 to $52,119. *

(Educational attainment of householder)
Median real incomes for those with master's degrees from 2000 to 2012 declined from $104,440 to $92,362.
Median real incomes for those with bachelor's degrees or more from 2000 to 2012 declined from $95,789 to $86,419.
Median real incomes for those with bachelor's degrees alone from 2000 to 2012 declined from $88,821 to $80,549.
Median real incomes for those with community college degrees alone from 2000 to 2012 declined from $67,335 to $57,460.
Median real incomes for those with high school degrees alone from 2000 to 2012 declined from $48,701 to $39,845.

6---Mian and Sufi discover the real reasons for the Great Recession, Atlantic

Mian and Sufi provide a definite “yes” to the question of whether we could have prevented the Great Recession...

The story that emerged in the early days of the Great Recession was that too many people borrowed too much to afford fancy houses. That’s not what Mian and Sufi’s data show. They show that the boom in debt occurred among borrowers that couldn’t qualify for a government-backed mortgage. That the private sector sought them out in the tens of millions to offer loans they were demonstrably unable to repay—without worry because these lenders very quickly diced up those loans and sold them to supposedly savvy institutional investors—created the housing bubble that exploded into the twin crises that led to the Great Recession.......

That private-label mortgage-backed securities were at the core of the housing meltdown is no longer in doubt, but what Mian and Sufi bring to the debate is how an unequal distribution of debt magnified the economic risks—based on their path-breaking microeconomic research—and a new framework for considering who is to blame among policymakers for the still reverberating debacle....

By the time Lehman Brothers failed, the mantra on Capitol Hill had been articulated by former Treasury Secretary Lawrence Summers, who said that any recovery package had to be “timely, targeted, and temporary.” But the stimulus that emerged was not specifically targeted at homeowners in foreclosure. If Mian and Sufi are correct, the biggest failure was—and continues to be—leaving families struggling with mortgages they cannot afford because of the fall in home prices.
The federal government has provided assistance to a paltry 940,000 struggling homeowners through the Homeowners Assistance Mortgage Program, in a nation where 5 million homes have been foreclosed on.....

Thus, the catalyst for Great Recession had begun two years before the dramatic demise of Lehman Brothers. In the second quarter of 2006, the collapse in consumption started with residential investment, which fell by a 17 percent annual rate. Non-residential investment didn’t begin to fall until late in 2008, but by then households had already pared back spending sharply.
This fallout from the collapse of the housing bubble was amplified by the unequal distribution of net wealth. What Mian and Sufi find is that counties with the largest decline in total net worth—were the ones that cut back most on spending when house prices declined. As housing prices began falling in 2006, in counties where net worth had declined most, consumption fell by almost 20 percent, compared to only five percent for the entire U.S. economy....

Mian and Sufi’s research shows that the marginal propensity to consume—an economics term that describes the amount of spending done after receiving an additional dollar—out of housing wealth depends not just on the value of the asset but also the debt burden, settling a near-century-old economic debate between two of the most prominent economists of the 20th century.
In The General Theory of Employment, Interests, and Money, University of Cambridge economist John Maynard Keynes argued in 1936 that the distribution of income mattered for the stability of the macroeconomy. Increased spending, be it from consumers, government, greater exports, or investment, will multiply as it works its way through the economy. If additional income goes into the hands of those with a high marginal propensity to consume then the multiplier for consumption demand will be relatively larger. But if additional income goes into the hands of those with a lower marginal propensity to consume then the multiplier on consumption demand will be relatively weaker....

Now, Mian and Sufi provide a definite “yes” to the question of whether we could have prevented the Great Recession—and the conclusion isn’t pretty. They argue that policymakers could have seriously mitigated the damage, pointing out that debt forgiveness would have been much more effective that the policies implemented because it would have targeted households with the largest marginal propensity to consume. This is a failure on a massive scale and more economists need to follow the lead of Mian and Sufi and look deep into the data to understand what we got wrong.

7---EU Backs Help From Azerbaijan And Turkmenistan To Keep Europe Warm, oil price

Reporting on the possibility of sanctions imposed on Russia by the United States and its European allies, we wrote that in the event that Russian natural gas becomes unavailable as a result of sanctions imposed by the West in retaliation for Moscow's actions in Crimea and Ukraine, “In the immediate future, the only two countries able to provide the amount of gas needed to replace Russia in Europe are Turkmenistan and to a lesser degree, Azerbaijan.”

And as we also noted, Turkmenistan’s gas would need to pass through the Caspian Sea, via the Trans-Caspian pipeline, through Azerbaijan and onto Georgia and Turkey before continuing on to its final destinations.
Less than a week later, the European Union has said it is of the same mind. ...

On May 19, the head of an EU delegation to Azerbaijan told journalists that the implementation of the Trans-Caspian gas pipeline will be a good opportunity to diversify energy supplies to EU countries.
Malena Mard said that, given the high demand for gas, the EU would like to import gas from Turkmenistan. "The EU supports the Trans-Caspian gas pipeline project," Mard said during her visit to Baku.
Negotiations between the European Union and Azerbaijan and Turkmenistan on the Trans-Caspian gas pipeline began in September 2011, long before the crisis in Ukraine. But recent events in the region have renewed the need to speed up the project, as European countries are now eager to diversify their supply sources.

A framework agreement for cooperation on deliveries of Turkmen natural gas to Turkey and further on to Europe was signed between the governments of Turkmenistan and Turkey in July, 2013 after a series of high level talks in the Turkmenistan capital, Ashgabat.

The project will require the laying of some 300 kilometers of pipeline to transport the gas under the Caspian to the shores of Azerbaijan. This is believed to be the best option available to deliver Turkmen resources to European markets. This would also allow European countries to end most of their dependence on Russian gas.

The exact laws affecting the laying of pipelines under the Caspian Sea are still a work in progress. Some countries, such as Turkmenistan, believe that under international law, the consent of the two countries concerned -- itself and Azerbaijan -- would suffice.
For its part, Azerbaijan has said it is ready to allow the pipeline traverse its territory and to offer transit opportunities and infrastructure for the implementation of the project.
Given the two countries’ willingness, and the EU’s approval, the project has a good chance of succeeding

8---Nearly half of US unemployed have given up looking for a job, RT

9--China real estate crash, macrobusiness

10--Obama administration asserts unlimited war powers without Congressional authorization, wsws
  "We don't need no stinking congress"

In testimony before the US Congress on Wednesday, top Obama administration officials asserted that the president has unlimited war powers without even the fig-leaf of Congressional authorization.

11--West promotes election held at gunpoint in Ukraine, wsws

Washington and its Western European allies are promoting Sunday’s election as a means of legitimizing the Western-backed, neo-fascist-led coup which toppled Ukraine’s elected president and installed an illegal regime whose leaders were handpicked by US officials....

Similar and even worse brutality has been meted out by the fascistic elements that form a pillar of the regime against any political groupings deemed left-wing, including the “Borotba” (“Struggle”) group and the Communist Party of Ukraine (KPU), whose members have been killed, beaten, arrested and faced assassination attempts.
For the first time since the dissolution of the Soviet Union in 1991, the election is being held under conditions in which no candidate representing the predominantly Russian-speaking regions of eastern and southern Ukraine is participating.

12---White House hit by scandal over veterans’ health care, wsws

Obama went before television cameras without Shinseki, in what was a transparent attempt to distance himself from the crisis and set the top VA official up as a potential scapegoat as more revelations emerge about poor care and falsification of records

13---Gaddafi did not order the shooting that started the false revolution in Libya. , info clearinghouse

Mustafa Abdul Jalil, Head of the National Transitional Council in Benghazi in 2011, admits:
Gaddafi did not order the shooting that started the false revolution in Libya. Now after the destruction of Libya, Jalil admits to the world on Libyan Channel One that the protestors that were killed in Benghazi that caused the UN and NATO to attack Libya were killed by a group of spies and mercenaries who were not Libyan. He admits that he knew the truth at the time but it was done to take down the Libyan government and break the state. He admits that he was briefed in advance that this was going to happen and that the people of Libya did not recognize the dead protestors because they wore civilian clothes and there was no one who came to their funerals as they had no relatives or friends in Libya.

As we have been saying since February 2011, the so called revolution in Libya was a false flag. The Libyan people by large majority were happy and "safe". Islamic extremist groups were illegal in Libya. Now Libya is controlled by Islamic extremists groups (Al Qaeda, Libyan Islamic Fighting Group (LIFG), The Muslim Brotherhood, Ansar Al Sharia and others). The country is broken, there is no security, thousands have been imprisoned illegally and hundreds tortured to death. There is no government, there are no oil sales, 2 million are still in exile, psychopaths have taken the country and it is now considered a "grey state" - no borders and no government.

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