Tuesday, May 27, 2014

Today's links

1--The Financial Times’ attack on Thomas Piketty, wsws

In its attack on Piketty, the Financial Times is speaking for powerful sections of the financial aristocracy that sense the immense social tensions building up in Europe, the United States and internationally. They are well aware that they preside over an economic system that has lost credibility in the eyes of millions of people. Any acknowledgment of the illegitimacy of the vast wealth that has been accumulated by a tiny layer of the population is, from their standpoint, dangerous.

Inequality is not really a serious problem, they insist. To the extent that it exists, it is very likely justified. “There is a gulf of a difference between wealth derived from entrepreneurial skills and inheritance,” the editors write.

What “entrepreneurial skills” are responsible for the wealth of the modern-day aristocracy? For decades, the ruling class—led by the financial institutions in London and on Wall Street—have engaged in a massive orgy of speculation, ripping up entire industries to funnel money into the stock markets. Gigantic fortunes have been amassed through financial manipulation and semi-criminal or outright criminal activities. Since the 2008 crash, central banks have opened the taps to flood the financial system with cash at near-zero interest rates, re-inflating the speculative bubbles that produced the crisis.

The product of these policies is amply demonstrated—by Piketty and, as the author noted in his defense, many other sources as well. Most recently, the British Sunday Times published its annual rich list revealing that the richest 1,000 people in Britain have a combined wealth of £519 billion, an increase of 15.4 percent since last year and twice what it was in 2008. The wealth of these 1,000 individuals is now equivalent to a third of the entire country’s gross domestic product.

The 85 richest people in the world now control as much wealth as the bottom 50 percent. And the world’s 1,645 billionaires, according to Forbes, possess a combined net worth of $6.4 trillion, an increase of $1 trillion over 2013. In the United States, the richest 400 people increased their wealth in 2013 to $2 trillion, up 17 percent from the year before

2--New Ukraine government launches airstrikes, prepares austerity measures, wsws

The IMF loan is contingent upon the enforcement of deep cuts to crucial gas subsidies depended upon by millions of Ukrainians. These cuts will increase energy prices by as much as 425 percent during the next few years.

Other anti-working class measures built into the loan include a currency devaluation and bailouts for the country’s major banks. These deeply unpopular measures were deliberately delayed until after the elections.
The loaned funds will go directly to Ukraine’s most powerful private sector creditors, mainly European banks, and to well-connected sections of Ukrainian capital, while Ukrainian workers will pay the price in the form of wage cutting, privatization of services, mass layoffs and spending cuts.

3---Bank of Japan quietly eyes stimulus exit, Reuters

The Bank of Japan has begun shifting its focus from supporting growth to ways of phasing out its massive stimulus, taking first tentative steps towards a potentially momentous move for the world economy.
Current and former central bankers familiar with internal discussions say an informal debate is under way on how to prepare for an exit from the BOJ's 13-month-old "quantitative and qualitative monetary easing."

But with inflation now past the half-way mark and signs that the economy has weathered last month's sales tax increase, Japanese central bankers are already thinking about the next chapter.

4--Japan Risks Low Growth Even as Easing Spurs Inflation, Bloomberg

Japan’s risk of spurring inflation without boosting the nation’s growth potential is raising the stakes for Prime Minister Shinzo Abe’s next round of economic restructuring measures, due in June.
An economy “with low real growth rates under mild inflation” is possible, should the government fail to deliver, Bank of Japan Deputy Governor Kikuo Iwata said in a speech in Tokyo yesterday.

Investors are looking for lower corporate taxes, labor-market flexibility and progress on a U.S.-led trade pact as Abe prepares for the next phase of the roll-out of the so-called Third Arrow of Abenomics, economic restructuring to boost long-term growth prospects. Iwata’s comments yesterday built on Governor Haruhiko Kuroda’s calls for the government and companies to do more to boost the nation’s outlook...

Abe’s strategy for boosting long-term growth is under scrutiny as the initial jolt fades from monetary stimulus that weakened the yen and sent stocks surging. While the Topix (TPX) index of stocks rose 0.7 percent in morning trading in Tokyo today, it remains down about 8 percent this year, after gaining more than 50 percent in 2013. ...

Japan’s economy grew at the fastest pace since 2011 in the first three months of this year, an annualized 5.9 percent gain, driven by spending that was front-loaded before an April 1 sales-tax increase. Economists project that gross domestic product will fall an annualized 3.4 percent this quarter as consumers pare back their purchasing. The government is aiming for an annual average 2 percent expansion over a decade...

Corporate Tax

As officials debate growth measures, issues include the pace and scale of corporate tax cuts. Japan’s effective rate of about 36 percent is the second-highest in the Group of Seven after the U.S. and compares with levies of about 24 percent in South Korea and 23 percent in the U.K.

5---Bond Market to Fed: Your 4% Rate Forecast Is Way Too High, Bloomberg

Falling yields on longer-term Treasuries historically reflected periods of lackluster growth. Since 1960, they predicted seven of the last eight recessions when 10-year yields fell below 3-month bill rates, data compiled by Bloomberg show. ...

The divergence reflects deepening concern among bond investors that tepid wage growth and a lack of inflation will persist for years to come, and hold back growth as the Fed moves to end its unprecedented monetary stimulus. Lower peak rates will also reduce the likelihood of any selloff in longer-term Treasuries, which have rewarded holders this year with the biggest returns in two decades.
“The market’s pricing in an extraordinarily slow Fed,” Margaret Kerins, the Chicago-based head of fixed-income strategy at Bank of Montreal, one of 22 primary dealers that trade with the central bank, said by telephone on May 20. “Potential growth is a huge determinant of that long-term rate and most people are buying into the idea of lower potential growth.” ...

Hourly earnings in April also stagnated from the prior month, while increasing 1.9 percent from a year ago, which matches the smallest gain since October 2012.
“The view is her dots are below the median path and her dots matter more,” Gapen said. “That’s one of the explanations we have heard why the market path is below the median.”

Yellen’s Dots

Evidence that a weaker labor market will constrain demand and inflation, which has fallen short of the Fed’s 2 percent goal for 23 months, has caused investors to pour into government bonds. That upended economists’ predictions for a second year of losses as a strengthening economy prompted the Fed to reduce its $85 billion-a-month bond buying program.
Treasuries due in 10 years or more have returned 10.6 percent this year, the most on a year-to-date basis since 1995, data compiled by Bank of America Merrill Lynch show. Yields on 10-year notes, which fell more than a half-percentage point to 2.47 percent on May 15, ended at 2.53 percent last week. The yield was 2.54 percent as of 8:55 a.m. in New York....

“The old normal for the economy is not dead, it is slowly coming back,” he said by telephone on May 20. He says 10-year yields will end the year at 3.5 percent.
Most Wall Street forecasters agree, calling for yields to rise as the economy shakes off the effects of the harsh winter. They foresee yields reaching 3.25 percent by year-end as the economy expands 2.5 percent this year and accelerates 3.1 percent in 2015.

6--Urie on Picketty, counterpunch

7---Greenwald to publish list of U.S. citizens NSA spied on, WT

8---Global income distribution: From the fall of the Berlin Wall to the Great Recession , VOX

9---The US Labor Market is Not Working;” Antonio Fatas “On the Global Front” -

Among OECD economies, the US stands towards the bottom of the table when it comes to employment to population ratio for this cohort (#24 out of 34 countries). -

What is interesting is that most of the countries of the top of the list are countries with a large welfare state and very high taxes (including on labor). So the negative correlation between the welfare state and taxes and the ability to motivate people to work (and create jobs) that some bring back all the time does not seem to be present in the data. -

10--since the end of the Great Recession, one-third of all income increases in this country went to just 16,000 households, 95 percent of it went to the top 1 percent, and the bottom 90 percent’s incomes fell, and they fell by 15 percent, david kay Johnson

11---E.C.B. Plots Strategy for Staving Off Deflation, NYT

12--The euro "done it", Krugman

depression-level slumps didn’t happen in Europe before the coming of the euro. And we know very well what happened: first the creation of the euro encouraged massive capital flows to southern Europe, then the money dried up — and the absence of national currencies meant that the debtor countries had to go through an extremely painful process of deflation. How anyone could deny any role for the currency …

13--Sowing dragon's teeth, Pravda
" if I have to wait a thousand years, I will get my revenge."

One example, stays indelibly engraved on my mind, over twenty years of unending US aggression. Mohammed was just ten years old when he went to overnight with his mother, brothers - including a baby brother just weeks old - and sisters during the 1991 attack on Iraq, to Baghdad's Ameriyah air raid Shelter.
The Shelter, equipped with bunk beds, showers, generator-driven electricity, television, kitchens, was a haven of normality and safety in a city where the electricity and water system had been deliberately destroyed, being "carpet bombed" daily.  

This temporary sanctuary was deliberately targeted by the US who had obtained the plans, identified the weak points, the ventilation shafts. All but fourteen of the several hundred mothers, children and elderly for whom the Shelter was reserved, were incinerated.
Mohammed was just ten when he survived the inferno. He rescued an old man "whose flesh came away in my hands" and a baby. His mother and siblings were incinerated. The attack happened on the anniversary of the start of the fire bombing of Dresden in World War 11.

He was twelve when we met. Quiet, dignified, articulate way beyond his years. His story, as so many victims of US bombs, drones and "surgical strikes" across the globe, would haunt the hardest heart.
Eventually I asked: "How do you feel about those who did this?" His composure cracked, perspiration broke out on his face, neck, and backs of his hands: "When I grow up, I am going to join the (elite) Republican Guard - and if I die and if I have to wait a thousand years, I will come back and get my revenge." In the 2003 invasion, he would have been twenty two.

If he survived the further mass incinerations of "Shock and Awe", he would have undoubtedly joined the resistance and attacked those from a country who had burned his family and friends alive. If he survived that and perhaps left Iraq, he and countless who had suffered so wickedly would surely harbor vengeance in their hearts for Americans any place, anywhere, for all time. As, of course, Afghan and Libya victims, drone victims from Yemen, Somalia, Pakistan....

The searing grief and rage of adults is encapsulated by the vow of a multiply bereaved survivor of just one US atrocity in Iraq: "I have twelve in my family, I have fifty cousins and five thousand in my tribe ..." all of them would be seeking revenge, he intimated. How many times have these emotions been replicated in US targeted countries in the last two plus decades alone? 
In majority Muslim nations, according to Pew Research (3) by 2012 President Obama's popularity ratings had slipped from a woeful 34% to just 15%. Globally, anger over drone strikes and concerns: "about how the U.S. uses its power - in particular its military power - in international affairs" dominated.
"There remains a widespread perception that the U.S. acts unilaterally and does not consider the interests of other countries", the Report noted. 

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