Saturday, May 31, 2014

Today's Links

1--No, China Isn't Really Rebalancing, Bloomberg


Beijing is pulling out all the stops to do what Xi and Li have vowed not to do. The People's Bank of China, for example, is asking lenders to approve mortgages faster and seems poised to continue “targeted easing,” including reserve-ratio cuts for some banks and bond purchases. Those are hardly the actions of monetary authority withdrawing excessive liquidity. What's more, economists at Nomura and Standard Chartered are predicting a nationwide reserve-ratio cut next quarter. Barclays thinks the odds of a significant monetary easing in coming weeks, such as “targeted” interest-rate or reserve-ratio reductions, are rising.


2---The Big Hoax Of The Wall Street Hype Machine , Testosterone Pit


The S&P 500 index keeps bumbling from one all-time high to the next as corporations are issuing record amounts of debt to spend record amounts on buying back their own shares: $160 billion in the first quarter alone, according to CapitalIQ. Borrowing money to buy back shares and hyping it ceaselessly as “returning value to the shareholders” is the most effective way to manipulate up the stock, even if revenues are declining quarter after quarter....


for Q1 this year, the S&P 500 companies that have reported earnings so far generated an adjusted ex-bad-items pro-forma earnings growth of 2.1%. After inflation, there isn’t much left.
Nevertheless, analysts are currently estimating earnings growth of 10.1% in Q4 this year, a number they pulled out of thin air. But they’ll be busy over the next few months lowering their numbers to something that the most the companies can actually exceed, to give their stocks the momentum needed to rise to the next new high. Meanwhile, these “forward” EPS estimates, like today’s 15.4 for the S&P 500, are bandied about passionately as rationalization for the gravity-defying large caps that make up the index. Beneath the slick surface, momentum stocks and small-cap stocks are already re-experiencing the vertigo-inducing effects of gravity – the game doesn't work forever.


3---US moves towards sanctions as Venezuela charges coup plot, wsws


4---VA secretary resigns amid push to privatize US veterans’ health care, wsws


Rep. Jeff Miller (Republican of Florida), chairman of the House Veterans Affairs Committee, stated, “We have an opportunity now to transform the way the VA does business.” His committee, which has already moved legislation through the House giving the VA secretary greater authority to fire or demote senior VA executives, says he intends to bring legislation that would allow veterans who have been waiting more than 30 days for an appointment to receive medical care through private doctors and hospitals.


Under the “Veterans Choice Plan” being promoted by Rep. Andy Harris (Republican of Maryland), veterans could either choose to continue receiving care through the VHA or go to a private provider of their choosing. In what amounts to a voucher system, the federal government would cover the cost of insurance premiums and some out-of-pocket costs, depending on a veteran’s priority ranking.
Harris, who will send his plan to the House Veterans’ Affairs Committee within the week, believes it would be “budget neutral” or might even reduce veterans’ health spending. In other words, the VHA would be deprived of funds while money is diverted directly into the pockets of the private insurers and health care industry.


House Minority Leader Nancy Pelosi (Democrat of California), voiced her support Thursday for privatizing more health care services for veterans. “I don’t have any problem with that,” she told reporters in the Capitol. Commenting on Rep. Miller’s plan, she said, “It isn’t a panacea, but I would certainly be open to that because of volume [at the VHA] and because of geography.”


Pelosi said she was not concerned that Republican proposals threatened the dismantling of the VA system in favor of the private health care sector. “I don’t think that’s how they see it,” she said, urging others in Congress to “think in a bigger way” about medical care for veterans.....


These privatization plans are strikingly similar to the proposal by House Budget Committee Chairman Paul Ryan (Republican of Wisconsin) to set up a voucher system for Medicare. His plan, which would provide a stipend for individuals to purchase private insurance, is aimed at gutting and ultimately dismantling the government-run national insurance program for the elderly and disabled.


A number of veterans groups are opposed to moves to privatize veterans’ health care precisely because they threaten funding for the current VHA system and the specialized care the network of hospitals and clinics was designed to provide. Joe Violante, national legislative director for Disabled American Veterans, told Vox.com, “The more money we spend out on the private sector on veterans, the less money there is to care for those that are within the system.”...


The moves to privatize veterans’ health care underscore the hypocrisy of the bipartisan glorification of soldiers and veterans. It also sets a precedent for privatizing Medicare and Medicaid, the federal-state health care program for the poor.


5---Japan's working poor left behind by Abenomics, Reuters


6---America's homeless: The rise of Tent City, USA, CNN


7--Everything put forward by Obama is a repudiation of international law and an endorsement of the policy of aggressive war practiced by the Nazis three-quarters of a century ago., wsws


“The United States will use military force, unilaterally if necessary, when our core interests demand it—when our people are threatened, when our livelihoods are at stake, when the security of our allies is in danger… International opinion matters, but America should never ask permission to protect our people, our homeland, or our way of life.”...
.
When he speaks of “our livelihoods” and “our way of life,” he is referring not to the ever-declining living standards of the American worker, but to the eight-figure compensation packages of American CEOs, whose fortunes are founded on the exploitation of the working populations and resources of the entire planet.
The US president went on to assert the right to launch wars even where no case could be made that there was any threat posed to the US, but rather where there were issues that “stir our conscience...


while touting “America’s support for democracy and human rights” wherever Washington seeks to carry out regime-change, Obama included a specific exception for the Sisi regime in Egypt, which overthrew an elected president, has murdered thousands, jailed tens of thousands and outlawed the country’s largest political party. “In countries like Egypt, we acknowledge that our relationship is anchored in security interests,” he said...


The speech comes in the immediate wake of congressional testimony in which administration officials asserted that the president has unlimited powers to launch wars and carry out drone assassinations, including against American citizens, with no need for either congressional authorization or judicial approval. This only makes explicit what is already Washington’s modus operandi, in which Congress is nothing more than a rubber stamp for the US war machine.


The executive, embodying the power of the military-intelligence apparatus, has the right to do virtually anything. But what rights are left to the American people? Those that remain are being rapidly erased. The last vestiges of democracy must be dispensed with in order to impose conditions of war, inequality and economic austerity opposed by the vast majority of the population.


8---New Allende Overthrow Info Reconfirms US Suppresses Economically-Rebellious Democracies , Truthout


The placement of Pinochet in power led to a brutal reign that resulted in the imprisonment, torture and murder of thousands of Chilean citizens considered Allende supporters.
In addition, Henry Kissinger (in his roles as National Security Advisor and then Secretary of State) oversaw US support for the heinous and barbaric Operation Condor.  This was a US-approved (although Kissinger denies it, of course) backing of military governments in the Southern Cone nations in South America. The result was a murderous purge of anyone suspected of sympathizing with alternative economic systems to capitalism or even of populist governments that were run by the non-ruling elite.

In Argentina, the unimaginable horrors included torturing pregnant women until they gave birth. After a woman delivered, she was killed and her child given up for adoption to a military family.  Argentina also flew regular flights over the the Rio de la Plata during which suspected "subversives" were bound, drugged and then dropped from a high altitude into the water below.

Many families in Chile still do not know the fate of the "disappeared ones," who were often taken from their homes at night and never heard from again. Estimates of persons tortured and executed during Operation Condor in the Southern Cone countries range up to 50,000 (a firm figure is not available due to the covert nature of the atrocities).
This is only a sampling of the horror that the US unleashed in aiding the suppression of populist democracies in South America in the '70s



The US seems caught in a Japan-style trap, endlessly masking the effect by stealing a little extra growth from the future with artificial stimulus...

The Fed has cut its bond purchases from $85bn to $45bn a month, and is expected to halt quantitative easing altogether by October as it pares back $10bn at each meeting. The taper is clearly chipping away at a key prop of the economy. The stock of narrow M1 money has not grown for four months, and M1 velocity has fallen to an all-time low of 6.3.

John Hathaway, from the Tocqueville Gold Fund, said the Fed may find it cannot extricate itself from QE without aborting the recovery. “The US economy is quite anaemic. There's a good chance that they may have to reverse their course on tapering,” he told CNBC


10---Rob Urie, Counterpunch
urihead5
Graph (5) above: Part of the explanation that the Federal Reserve gives for policies favoring the rise in financial asset prices is the ‘wealth effect,’ the tendency for people to spend more because they feel richer when stock prices rise. While some statistical analyses suggest that this may be true, who benefits from rising stock markets are the people who own stocks. As is illustrated above, the richest twenty-percent of households own almost all of the stock market. Again, as with income distribution, the true concentration of ownership of financial assets is at the very top of the top ten percent


Friday, May 30, 2014

Today's links

1--More Housing Bad News: Household Formation At 30 Year Lows, zero hedge


2---Consumers cut spending for first time in year, marketwatch


Reduction in April follows big spike in March; inflation continues to build


WASHINGTON (MarketWatch) — Consumer spending in the U.S. fell in April — the first decline in a year — as Americans cut back on car purchases and spent less on utilities such as natural gas and electricity as the weather warmed up.
Meanwhile, inflation pressures continued to build last month.
Consumer spending slipped a seasonally adjusted 0.1% last month, the Commerce Department reported Friday. Economists polled by MarketWatch had forecast no change in spending.


3---The Wrath of Abenomics: Sales Collapse, Inflation Soars , Testosterone Pit


Alas, the Ministry of Economics, Trade, and Industry just released a dose of reality. Total retail sales in April plunged 19.8% from March and were down 4.4% year over year. But this includes sales of perishable and small items not suited for frontloading, and convenience-store sales (which rose a smidgen). In stores where people buy durable goods, such as appliances, watches, or cars, sales were awful.


At “large retailers,” sales swooned 25.0% from March and 5.4% year over year. At supermarkets, where people also buy some durable goods, sales fell 3.9% year over year – people even stocked up on non-perishable food and beverages. At department stores, where people buy jewelry, designer clothing, or French purses, sales fell 10.6% year over year. It wasn’t just retail. Sales between businesses – nearly 2.5 times the value of retail sales – plunged 20.4% from March and 3.7% year over year. In short, it was the largest decline in sales since March 2011, when the Great East Japan Earthquake and tsunami that killed over 19,000 people, brought commerce to a near-standstill.


Those sales were in prices that had been inflated by 3%. That tax-hike money doesn’t stay with the seller but is turned over to the government. In actual merchandise sales, the scenario is 3 percentage points worse. So sales at, for example, large retailers on a comparable basis dropped 28%, not 25%.


3---Japan's inflation at highest rate for 23 years, Telegraph


Promising signs for 'Abenomics' after years of deflation while industrial output and household spending fall after sales tax increase


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


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....


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.”


5---On the economy Jared Bernstein


By various measures, the housing market has stumbled.  Both supply (starts, sales of existing homes) and demand (price growth, mortgage applications) are down or decelerated.  Moreover, the stumble looks to me to be intimately related to the pretty sudden and sharp rise in mortgage rates that occurred about a year ago, on the heels of the “taper tantrum,” in tandem with the fact that credit access remains limited.  There’s a regional dimension to this, as some markets remain strong, but that’s a hint too: those regions look to me to be the ones with more income and job growth.


–Which brings me to the next negative: weak wage and income growth for middle and low-income households.  By one measure, real median household income is still down 4% real over the recovery, and has been flat or rising very slowly, as have wages generally, over the past few years.  And a big reason for that is…


Labor market slack: it’s improving and steady payroll job gains are a plus.  But the 6.3% print on the unemployment rate is biased down due to weak labor force participation such that there’s little pressure in the job market that would enforce a more equitable distribution of earnings.


–Which raises another negative: inequality.  I’ve written that it’s hard to find convincing evidence that high and rising income inequality hurts longer-term growth through the predicted consumer demand channel (the idea that in a 70% consumption economy, if most of the growth goes to households with relative low spending propensities, growth should slow).  But that’s in no small part because the bottom 90% offset their stagnant incomes with leveraging and a housing-inspired wealth effect.  Neither of those offsets are particularly operative right now.


–Speaking of leveraging, all the data series I know of on this show two things, but the optimists look at only one of them.  They show that households are deleveraged, i.e., leverage indices are back to pre-recession levels or below


6---Have no fear. Why stocks could be headed higher, Yahoo


"How can the market be strong when you can't sell stuff."?


7--US economy contracted by 1 percent in first three months of 2014, wsws


8---Obama’s West Point speech: A prescription for unending war, wsws


9---Even With Pullback, Russia Holds Huge Financial Sway Over Ukraine , WSJ


10--Snowden unplugged, RT


It’s really disingenuous for the government to invoke and sort of scandalize our memories to sort of exploit the national trauma that we all suffered together and worked so hard to come through to justify programs that have never been shown to keep us safe, but cost us liberties and freedoms that we don’t need to give up and our Constitution says we don’t need to give up,” he said in an excerpt broadcast on air.


11--No house is worth dying for, oc housing


12--Mortgage Rates Slide for Fifth Straight Week, MReport


13--G20 and New World Order, Henry Liu


The unraveling of the global financial network and trading system since the onset of the global financial crisis that began in New York in mid 2007 has continued for more than five years with no end in sight, despite coordinated, extended monetary easing by many central banks of major economies around the world to shore up a seriously impaired neoliberal global financial system that has been disintegrating at the core from its own internal contradictions.

The primary reason for the ineffectiveness of aggressive monetary response to induce economic recovery is that the large quantity of new money created by central banks has been channeled into a global banking system terminally infested with a fatal financial virus in the form of a gigantic debt bubble.

The world's central banks all belong to a powerful ideological fraternity that subscribes to the group-think of bankrupt doctrines of monetarism promoted by the US Federal Reserve.

Thursday, May 29, 2014

Today's Links

1---Le Pen  would instruct the French Treasury to draft plans for the immediate restoration of the franc, Telegraph


British people will vote to leave the EU unless offered a new dispensation, writes Ambrose Evans-Pritchard...


when I asked Mrs Le Pen what she would do on her first day in office if she ever reached the Elysee Palace, her reply was trenchant. She would instruct the French Treasury to draft plans for the immediate restoration of the franc, that great symbol of emancipation from the English occupation (franc des Anglais).


She vowed to confront Europe's leaders with a stark choice at their first meeting: either to work with France for a "sortie concertee" or coordinated EMU break-up, or resist and let "financial Armageddon" run its course. "The euro ceases to exist the moment that France leaves, and that is our incredible strength. What are they going to do, send in tanks?" she said....


She said there can be no compromise with monetary union, deeming it impossible to remain a self-governing nation within the structures of EMU, and impossible to carry out the reflation policies necessary to defeat the economic slump. "The euro blocks all economic decisions. France is not a country that can accept tutelage from Brussels. We have succumbed to a spirit of slavery," she said.
The EU authorities are now in a near hopeless situation. The logic of EMU is a further erosion of nation states. The "Two Pack", "Six Pack" and "Fiscal Compact" are all coming into force, and national regulators are losing control over their banking systems. The euro will inevitably lurch from crisis to crisis without some form of fiscal union and debt pooling. Yet voters have just let forth a primordial scream against any further transfers of power.
With the exception of Germany, the elections were a broad repudiation of EMU austerity.


"If economic historians learned anything from the Great Depression, it is that adjustment based on austerity and internal devaluation is dangerous. Britain ran large primary surpluses throughout the 1920s, but its debt-to-GDP ratio rose substantially thanks to the deflationary, low-growth environment."
Prof O'Rourke said he has been waiting five years for Europe's leaders to forge the new instruments needed to make the failed experiment work, but it is by now obvious that Germany will not allow fiscal union or shared banking liabilities, and others will not accept a federal political Europe. It therefore pointless to protract the agony.


2---Japan April retail sales tumble after tax hike, Reuters


Japanese retail sales fell in April at their fastest pace in three years due to declining sales of cars and electronics, offering the first indication of how much consumers are trimming their purchases after a sales tax hike took effect on April 1.
The 4.4 percent annual decrease in retail sales was more than the median estimate for a 3.3 percent decline, and marked the biggest drop since a devastating earthquake and tsunami in March 2011.
...
"The one area of concern is durable goods. Sales of these more expensive items may take more time to recover."
The government raised the nationwide sales tax to 8 percent from 5 percent on April 1


3---Fed Chair Bernanke Held 84 Secret Meetings in the Lead Up to the Wall Street Collapse , Wall Street on Parade


But the mystery of these redactions is deepened by the fact that Bernanke has no problem listing meetings with President Obama, specific members of Congress, representatives of the Bank of England, every major CEO of a Wall Street firm, titans of industry like the heads of Ford Motor, IBM, and British Petroleum, quasi lobbyists like the U.S. Chamber of Commerce. Even the Reverend Jesse Jackson of RainbowPUSH Coalition is listed as meeting with Bernanke.


So just who is left whose identify needs to be secreted away for more than five years? One meeting on Tuesday, September 25, 2007 is so secret that both the meeting participant(s) and the location are redacted.


A careful study of where the most heavy concentration of redactions occur suggests two things: (1) Bernanke does not want the public to know that the Fed knew that Citigroup was in severe crisis months before the public became aware and (2) the Fed Chair’s participation in efforts to save Bear Stearns from a bankruptcy filing was more involved than presently known.


As we detailed last week, long before Congress approved and President Bush signed into law the Troubled Asset Relief Program on October 3, 2008, Citigroup had gotten customized relief from the Federal Reserve. For example, on August 20, 2007, the Fed granted Citigroup an exemption that would allow it to funnel up to $25 billion from its FDIC insured depository bank to mortgage-backed securities speculators at its broker-dealer unit.  The Fed notes in this letter that the bank “is well capitalized,” a statement that has been called into serious question in hindsight. (Federal Reserve Exemption to Citigroup to Loan to Its Broker-Dealer, August 20, 2007)


4--US economy shrank at 1% annual pace in 1Q, USA Today


5--Calls for VA Secretary Eric Shinseki to resign intensify following watchdog report, WA Post


6---Glenn Greenwald ;  the NSA has targeted what they call ‘radicalizers’ – people who establish radical views, but who are not, says the document, actual terrorists, AA


Look, sometimes the NSA intercepts communication between people who, regardless of the ambiguity of the word ‘terrorism’, would be regarded as legitimate targets of the NSA, but the problem is the vast majority of what they do isn’t about that.


AA – What is it about?


GG – It’s about putting entire populations under surveillance, targeting people and companies for economic interests, just generally wanting to use surveillance as a means to exert hegemony and domination over the world. The more you know what people in the world are saying and doing, the more power you have over them.


AA – Have you seen evidence of this?


GG – There is already some reporting we’ve done about that – there’s reporting we’ve done where the NSA has targeted what they call ‘radicalizers’ – people who establish radical views, but who are not, says the document, actual terrorists or even associated with terrorist organisations, and some of the documents we’ve uncovered talk about monitoring their online activities to see if there are any sex-chats or visiting pornographic sites and using that as a means to destroy their reputation and discredit them. So that’s targeting people who the government believes have radical ideas and using the surveillance as a means to ruin their lives, which is what the surveillance scandals of the 1960s and 70s were about. There are other documents we’ve reported on where they collect the data on people who visit the Wikileaks website, or ways in which they try and harm the reputations of activists on behalf of Anonymous, but one of the big stories that’s left to be told, which is the one we’re working on most now, is reporting on who it is specifically that the NSA has targeted with the most evasive type of surveillance on US soil, and who these people are, and what are the reasons for it, and that is the story of targeting of dissidents, and activists, and advocates as retaliation for their political views.


7---Kerry blasts Snowden. Readers blast Kerry, zero hedge


Kerry marries his billions, a cauligen-faced Georgetown skirt chaser, selling out America to the Banks and their CIA bagboys every step of the way.


8---Record Exports For A Forgotten Petroleum Power, oil price


Estimates are that Iran shipped 317,000 tonnes of liquefied petroleum gas to Asia during the month.
Here's why those numbers are important. This is the highest export volume seen since sanctions against Iran were lifted in May 2013. Suggesting that global buyers are ramping up purchases here.


That represents a major, and largely forgotten, source of supply returning to the market. Iran had been sanctioned since July 2012. Meaning that the country's petroleum exports had dwindled over the last two years. For some commodities, shipments had dropped to almost nothing.


But the new data show us that Iran is back--and as important as ever. Buyers from key markets like China, South Korea and Southeast Asia have all been reportedly stepping up their buying here now that shipping restrictions have been lifted


9---The economy is shrinking, but more people are finding work, VOX


10--Wall Street Threaten to Blow Up Economy If They’re Prosecuted, WA blog


11--Obama West Point speech, Pravda


In their hearts and minds exists everything that was missing from the speech of Barack Nobel Peace Prizewinner Obama: that where Washington treads, terror ensues. Who created the Mujaheddin? Who funded bin Laden? Who helped Saddam Hussein? Who masterminded Operation Condor in Latin America? Who had close relationships with Fascist dictators? Who meddled in Central America for decades? Who broke international law and insulted the UN Charter in Iraq? Who lied? Who claimed that Gaddafi was bombing his own people, then broke UNSC Resolutions 1970 and 1973 (2011) by placing boots on the ground in Libya? Who is aiding terrorists in Syria? Who knew that the Syrian terrorists perpetrated the chemical weapons attacks to try and blame the forces of President Assad? Who has lost the war in Syria? Who tried to grab Russia's Crimea bases, then threw the toys out the pram when Moscow protected them?

That is what Ukraine is about. What the USA is about we can see perfectly clearly in Guantanamo Bay, where human rights abuses are a shining example of where the heart of the United States of America, or rather those who govern it, lies: this torture and concentration camp continues to operate, despite promises by Mr. Nobel Peace Prizewinner that he would close it, it continues to hold people in deplorable conditions without any due legal process, without even accusation in some cases. Yet when US citizens are imprisoned (without torture) abroad, he complains.


15---Housing fade, Lance Roberts

The biggest issue, however, remains household formation. As of the end of last year, for example, the number of American households was not growing at all. This is likely due to record low marriage rates as well as a slew of other factors (lack of employment, wage growth, etc.). Whatever the reason, household formation needs to stabilize before we see stronger results in the US housing market."
Housing, Is It Just The Weather?
Is Housing Set To Lift Off?
Rising Rates Squash Housing Recovery?
Housing Recovery, What Has Been Forgotten?
.
The point here is that while the housing market has recovered from the financial crisis lows, it has primarily been a function of speculation, historically low interest rates and massive amounts of government support. However, it is in this nascent recovery that we should recognize the true state of the average American family.
Without such massive interventions, it is unlikely the housing market would be showing much of a recovery considering the decline in real wages, and household incomes, over the last five years. Furthermore, while there has been much written about the deleveraging of the household balance sheet - the latest quarterly report shows that the only real decline in debt occurred in the mortgage segment


16--Unfazed by Weak Yen, Corporate Japan Boosts Foreign Investment , wsj-


Japanese companies’ ravenous appetite to expand business overseas creates a challenge for Mr. Abe’s growth-enhancing economic policy known as Abenomics. One key aspect of the policy was an effort to weaken the yen to help shore up the bottom line for Japanese exporters. But the latest data show that Japanese manufacturers, while enjoying a profit recovery, accelerated their investment overseas, rather than taking steps to boost exports. The long-term outcome of their increased overseas production is declines in exports from Japan, which weighs on the nation’s economic output.


17---Big Banks Can't Find Trading-Flow Mojo, wsj


Declining volumes aren't the only sign of continued trouble. Falling volatility across asset classes also has driven down revenue; price stability reduces bank profits from market-making activities. Daniel Pinto, head of J.P. Morgan Chase's investment bank, put it succinctly at the conference Tuesday: "If the market doesn't move, it's hard to monetize your flow."
Adding to the gloom, Citi's Mr. Gerspach said the second quarter "feels like the third quarter" of 2013. In that quarter, the bank reported results that missed analyst expectations, largely due to a fixed-income-trading swoon of 26%.


18--Why are bond yields tanking? Yahoo


The risk of deflation


19--The end of QE, sober look


20--Obama defends global US interventionism in West Point speech, wsws


Not only did Obama declare the US the “indispensable nation,” he also proclaimed, “I believe in American exceptionalism with every fiber of my being.” This cringing loyalty oath appeared aimed in part at fending off criticism from the Republican right.....


“America must always lead on the world stage,” the US president told the graduating cadets. “If we don’t, no one else will. The military that you have joined is, and always will be, the backbone of that leadership.” He could not have provided a clearer definition of the word “militarism.”


He continued: “The United States will use military force, unilaterally if necessary, when our core interests demand it—when our people are threatened; when our livelihood is at stake; or when the security of our allies is in danger.” In other words, it will wage war whenever war is considered to be advantageous to the interests of the American capitalist ruling establishment.
“International opinion matters,” he added. “But America should never ask permission to protect our people, our homeland, our way of life.”.....


He also stressed that his talk of “counter-terrorism partnerships” and the training of proxy forces to wage war for US interests in the Middle East, Africa and elsewhere is by no means meant to replace “direct action” by the US itself and, in particular, the continuation of massacres and assassinations by means of drone missile strikes.
Obama has already ordered over 400 of these attacks and by conservative estimates their victims number well over 4,000—most of them civilians—including at least four US citizens.
.....
he declared Syria a “critical focus” of a wider plan for intervention across a broad swath of the Middle East, North Africa and Eurasia. He said he had recently ordered his “national security team to develop a plan for a network of partnerships from South Asia to the Sahel,” the crisis-plagued region of north-central Africa, and was proposing a new $5 billion “Counter-Terrorism Partnerships Fund.”
While in countries such as Yemen, Somalia and Mali, these funds would be used to train and arm repressive forces to carry out counterinsurgency operations in the name of fighting Al Qaeda
terrorism, in Syria they would be used to train and arm an insurgency that consists overwhelmingly of Islamists who, in many cases, are affiliated to Al Qaeda. Obama tried to square the circle by claiming that the funds would also be used to “push back” against “extremists” in Syria.


Nothing could more nakedly expose the fraud of the so-called “war on terror,” which, after so many lies and so many crimes carried out under its mantle, is still portrayed in Obama’s speech as the driving force of US foreign policy.


The now utterly rancid character of this “terrorism” pretext for foreign intervention found expression in Obama’s invocation of America as the “indispensable nation” that is called upon to help, whether when “girls are kidnapped in Nigeria, or masked men occupy a building in Ukraine.”
This equation of the Boko Haram terrorists in Nigeria with popular protests in eastern Ukraine has the immediate purpose of justifying the slaughter being carried out by the right-wing nationalist regime in Kiev—dubbed an “anti-terrorist operation”—with Washington’s full collaboration and support.
The reference to “masked men” occupying buildings in Ukraine is also designed to erase from historical memory the fact that the US was backing precisely such men—thugs of the neo-fascist Svoboda and Right Sector groups—when they violently seized government buildings in Kiev as part a Western-orchestrated coup to overthrow the country’s elected president.


21--The results of last week’s European elections represent a massive rejection of the European Union. Twenty-two years after the Maastricht Treaty and ten years after the incorporation of many Eastern European states, most people see the EU for what it is: the tool of powerful capitalist interests., wsws


Well over half (57 percent) of all registered voters in Europe did not take part in the elections. The disillusionment was particularly high in the Eastern European states that joined the EU over the last 10 years. In Slovakia, only 13 percent of voters went to the polls; in the Czech Republic, Slovenia, Poland and Croatia less than a quarter of voters participated...










Wednesday, May 28, 2014

Today's Links

1--This is what is keeping bond yields low, cnbc


 the 10-year Treasury yield has been hovering around 2.5 percent, down from around 3.0 percent in January. Bond yields move inversely to prices. In addition, around $85.52 billion has flowed into bond funds so far this year, outpacing the $45.98 billion that flowed into equities over the same period, according to data from Jefferies....


To be sure, some believe the low bond yields have a more traditional macro-economic cause.
"U.S. bond yields are low because growth and inflation are low, not just in absolute sense, but also relative to expectations," JPMorgan said in a note last week. U.S. economic growth expectations rose steadily from May to December of 2013, and then fell back quickly this year, it noted.
The current economic recovery in the U.S. is the weakest since World War II, it noted.


2--Grand Central: BOJ’s Kuroda Awakening to His Limits? , WSJ


Mr. Shirakawa, a stern economist, spoke often about the limits of monetary policy, especially in the context of Japan’s economic problems. “Japan’s deflation can’t be solved by a massive increase in monetary base alone. Those efforts have to be complemented by other structural measures,” Mr. Shirakawa said in an interview with The Wall Street Journal in 2011. Japan was plagued by a slow underlying trend growth rate tied to low productivity and a decline in the working population, Mr. Shirakawa argued. “We have to tackle the root cause of the problem.”


Mr. Kuroda turned to similar themes with Wall Street Journal managing editor Gerard Baker and correspondent Jacob Schlesinger. “Our medium-term potential growth rate is less than 1%,” Mr. Kuroda said. “Unless this growth potential is raised, the end result may be only the 2% inflation target achieved, but real growth is meager.” He called on Mr. Abe to pursue deeper structural changes that go far beyond monetary policy. That included opening the way to more foreign laborers and finding ways to keep women in the workforce.


As BOJ governor, Mr. Kuroda has amped up a number of programs pioneered by Mr. Shirakawa, such as central bank purchases of risky assets such as exchange traded funds, real estate investment trusts and long-term government bonds.


3---Housing Bubble 2 Already Collapsing for the 99% , Testosterone Pit


real-estate broker Redfin has made it official: in 2014 through April, sales of the most expensive 1% of homes have soared 21.1%, while sales in the lower 99% have dropped 7.6%.
And it wasn’t the first year. In 2013, sales of 1%-homes jumped 35.7%, while sales of the other 99% rose 10.1%. And in 2012, sales of 1%-homes rose 17.5%, while the rest of the market inched up a mere 2.9%.
....
In 9 of the 29 markets Redfin tracked, sales of the priciest 1% of homes jumped by over 50%. The top three were all here in the Bay Area – not surprisingly, after the miracles of the worldwide money transfer machine that are IPOs and multi-billion-dollar startup acquisitions [Momentum Stock Fiasco Pricks San Francisco Housing Bubble].
In Oakland, sales of 1%-homes skyrocketed 96.2%, in San Jose 91.2%, and in San Francisco 72.2%. But in all three cities, sales of the 99% are down so far this year! So this isn't exactly a booming housing market but a booming luxury market...


In a number of cities, including in some of the red-hottest housing markets of last summer, sales of homes in the 99% category have plunged. The worst: Los Angeles -11.7%, San Diego -12.3%, Minneapolis - 12.5%, Orange County - 12.7%, Sacramento -15.5%, Phoenix  -15.7%, Las Vegas -16.3%, and Ventura -16.3%.


4--Retail sales slump points to dismal conditions for US workers, wsws


5---RETAIL DEATH RATTLE GROWS LOUDER, Burning Platform


6--Ukraine: A Prize Neither Russia Nor the West Can Afford to Win , Brookings


7--Bad Trend Breaking: Why Retail Results Are Not Better Than Expected, But Worse Than Ever, David Stockman


8---Afghanistan, wsws


 A December 2013 poll by CNN/Opinion Research showed public opposition to the war hitting a new high, with 82 percent of respondents opposing it. This level of opposition is higher than for any other recent conflict, CNN noted, with opposition to the Iraq and Vietnam wars never surpassing 70 percent....


Saying, “We will bring America’s longest war to a responsible end,” Obama announced that the number of US troops would be reduced from the current level of 32,000 to 9,800 by the beginning of 2015. Military analysts say this would allow the US military, working with Afghan forces, to operate six bases and maintain air bases and drone operations in key parts of the country.
By the end of 2015, the president said, the US would still have a force of more than 4,000 troops in the country, mostly concentrated in the capital of Kabul and at Bagram Air Base...


While stating that US forces would no longer be patrolling Afghan “cities, towns, mountains and valleys” after this year, the president said the US was open to “cooperate after 2014” in “training forces and supporting anti-terrorism operations against remnants of Al Qaeda


9---More private insurers to hop on Obamacare gravy train, wsws


A recent study by the American Health Policy Institute (AHPI) projects that the ACA will save US businesses $3.25 trillion through 2025, largely by shifting health insurance costs to workers and their families, through increasing cost-sharing, forcing employees onto the Obamacare and private exchanges, or ending insurance coverage altogether.


The excise tax set to go into effect in 2018 on “lavish” health plans—those with premiums greater than $10,200 for individuals and $27,500 for families—will levy a 40 percent penalty on corporations. As with the other features of Obamacare, companies are expected to dodge the financial impact of this “Cadillac tax” through gutting their health coverage or passing the costs on to workers in the form of decreased wages and other benefit cuts....
 
A number of private insurance companies that have not yet sold policies on the Affordable Care Act (ACA) exchanges plan to do so in the coming year. The reason is simple: the health care overhaul popularly known as Obamacare offers a virtually risk-free opportunity for insurers to increase their profits.


Insurance giants such as UnitedHealth Group and Cigna, as well as smaller companies, plan to enter the Obamacare market in 2015 and beyond. “Insurers continue to see this as a good business opportunity,” Larry Levitt of the Kaiser Family Foundation told the New York Times. “They see it as an attractive market, with enrollment expected to ramp up in the second year.”


The ACA was designed from the start as a pro-corporate piece of legislation, boosting the bottom line of the insurance industry. The law’s core component, the so-called individual mandate, requires those without insurance from a government program such as Medicare or Medicaid to purchase coverage from a private insurer in the Obamacare “marketplace” or pay a penalty.


New changes to the legislation by the Obama administration virtually guarantee the insurance companies that any dent in their profits will be offset by a complex system of government funds. The Department of Health and Human Services (HHS) has assured the private insurers that ACA mechanisms already in place will be made fully available to them, if need be at taxpayer expense


10---The bloodbath in Donetsk, wsws


It is now clear that the election was organized to establish a political basis for the military onslaught in the east. The poll was carried out to provide a fig leaf of legitimacy to a regime installed illegally by means of a coup led by neo-fascist forces in the Svoboda Party and Right Sector militia.


In fact, the election exposed the government’s extremely narrow base of popular support. There was a near-total boycott in the Russian-speaking industrial heartland in the east and widespread abstention in the south of the country. The leaders of Svoboda and the Right Sector received negligible votes.


The bloodletting in Donetsk and mounting attacks in Luhansk and other rebellious areas are aimed not only at crushing a regional insurgency, but at terrorizing the population as a whole. At the urging of Washington’s CIA and military personnel in Kiev, the regime is seeking to intimidate anyone, in the west as well as the east of Ukraine, who opposes its IMF-dictated policies of austerity, privatization and unlimited plundering by Western banks and corporations.


This economic scorched earth program is to be accompanied by the transformation of Ukraine into an advanced staging area for US-NATO military operations against Russia....


The official statement released by the Obama administration made clear that rapid implementation of the West’s economic agenda will be the basis of Ukraine’s “unity.” The statement stressed “the importance of quickly implementing the reforms necessary for Ukraine to bring the country together and to develop a sustainable economy, attractive investment climate, and transparent and accountable government


11---Fed  Watch, econ view


Last week's speech by New York Federal Reserve President William Dudley noted the reasons monetary policymakers expected the economy to improve this year:
Since the downturn ended in mid-2009, real GDP growth has averaged only 2.2 percent per year despite a very accommodative monetary policy....
By lowering its assessment of how fast the economy can expand and conducting policy accordingly, the Fed runs the risk of locking the U.S. into a slow-growth path, said Tim Duy, a former Treasury Department economist who is now a professor at the University of Oregon in Eugene...
...“They offset fiscal austerity on the downside but then arguably also offset the upside,” Duy said. “They seem to have lost interest in speeding the pace of the recovery 


12---Large real estate investor purchases steeply decline in California, oc housing


For the month, both distressed and non-distressed property sales posted gains. April 2014 distressed property sales gained 13.1% from March, while non-distressed property sales were up 21.8%.
“Despite back-to-back double digit sales gains in both March and April, total sales volume since the January continues to lag sales in 2013,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “In fact, what is surprising to me is that year-to-date sales volumes in 2014 are the lowest since 2008.”


The bottom line for California? Schnapp is pessimistic about the rest of 2014.
While most real estate analysts are forecasting a robust real estate recovery for the rest of 2014, our data suggests anemic sales growth,” said Schnapp. “Elevated negative equity, high prices and low inventory are depressing sales volumes and crowding out potential buyers.”

13--The Big Lebowski” Housing Recovery: Mortgage Purchase Applications Down 15% YoY Despite Credit Easing, confounded interest


14--Is student debt hindering young people from buying homes or is it low incomes? Both mortgage and rental payments consuming a larger portion of income., Dr Housing Bubble




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. 


Monday, May 26, 2014

Today's Links

1---The US and Thailand’s military coup, wsws


On May 20, the US State Department endorsed the army’s imposition of martial law and accepted the word of Army Chief General Prayuth Chan-ocha that it was “not a coup.”
....
The US has since announced a token suspension of $3.5 million in military aid to Thailand, the cutting short of a joint naval exercise underway last week, and the cancellation of a police training program and two high-level exchanges. There is no doubt, however, that behind the scenes the Pentagon’s close collaboration with the military will continue unabated with the resumption of full ties at the earliest possible time....


Last week’s coup follows the same pattern as the military’s ousting of Thaksin in 2006. WikiLeaks cables later revealed that US ambassador Ralph Boyce had been briefed about the military takeover several weeks in advance and had given the nod of approval. Both sides understood there would be cosmetic US aid cuts. However, US funding continued for law enforcement, counterterrorism and non-proliferation programs. Thailand kept its preferential treatment as a major non-NATO ally and the joint Cobra Gold military exercises, one of the world’s largest, went ahead as planned in 2007 under the junta. The Obama administration undoubtedly gave the green light for the latest coup as it did in 2006.


The military’s actions are not aimed primarily against the pro-Thaksin faction of the ruling class, but against the working class and the rural poor. The fear in Thai ruling circles, and also in Washington, is that the protracted factional infighting could open the door for a movement of workers and peasants in conditions of negative economic growth, rising social tensions and corporate demands for austerity


2---US veterans health care scandal used to push for privatization, wsws
 
The Memorial Day holiday is being observed in the US amid a developing scandal involving the Department of Veterans Affairs (VA) and calls to privatize veterans’ health care.


The Obama administration is currently embroiled in a major scandal following revelations that some VA hospitals systematically falsified records to conceal delays in treatment, with dozens of patients dying before they could be seen by a doctor. Hospitals in Arizona, Florida, Colorado, South Carolina, Pennsylvania, and Texas are now under investigation.


In the midst of this scandal, the Obama administration announced Saturday that it would begin allowing more military veterans to obtain treatment at private hospitals. Veterans Affairs Secretary Eric Shinseki announced that the VA is “increasing the care we acquire in the community through non-VA care.”....


Calls for the privatization of the VA make clear that the ongoing scandal will not lead to improvements in health care for veterans, but will instead be exploited to accelerate the political establishment’s ongoing dismantling of the American health care system.
A misnamed “health care reform” has been a major priority of the Obama administration. Judged by its progress so far, the goals of this “reform” include lowering the quality of health care available to the working class, increasing the profitability of the insurance and medical corporations, reducing employer-provided health care, shifting the burden of paying for health care onto the poorest sections of the population, and setting the stage for further cuts to social programs such as Medicare and Medicaid....


The VA scandal has its origins in the revelations earlier this month that approximately 40 patients had died while on a waiting list at a Phoenix, Arizona veterans’ hospital. A whistleblower revealed that the hospital systematically falsified its records to conceal backlogs and delays. When the hospital became the subject of an investigation, a second doctor stepped forward to reveal that medical records were being shredded to conceal the hospital’s misconduct from investigators. (See:  Arizona veterans’ hospital scandal: Forty patients died awaiting treatment)


Another issue is the deliberate underreporting of suicides among military veterans. Approximately 22 veterans commit suicide every day, or close to an average of one suicide every hour. As many as 25 percent of veterans returning from combat are diagnosed with post- traumatic stress disorder (PTSD).
President Obama has refused to fire Veterans Affairs Secretary Eric Shinseki, who has headed the agency for the past six years. Both Shinseki and Obama have made speeches expressing their supposed indignation and outrage. In a May 22 statement, Obama declared, “As commander in chief, I believe that taking care of our veterans and their families is a sacred obligation.” Notwithstanding all of the posturing, it is clear that the scandal presents a significant crisis for the administration.
(neo-liberals: 1) Starve public programs; 2) Run PR campaign; 3) Privatize and profit!!! )


3---Report: US targets poor and working class with mass imprisonment, wsws


4--Euroquake, Reuters


5---When did the Great Financial Crisis begin?” , Fred


How would you answer the question, “When did the Great Financial Crisis begin?” Some date the beginning of the crisis according to the events surrounding the failure of Lehman Brothers in mid-September 2008. But at that point, financial markets had already been in turmoil for more than a year, as certain time series from the summer of 2007 show. So how do you date the crisis?


In the graph, we plot the spread between Moody’s seasoned Aaa corporate bond yield and Moody’s seasoned Baa corporate bond yield, as well as the spread between the 30-year fixed-rate mortgage average in the United States and the 30-year Treasury constant maturity rate


6---Always Low Wages, More Pollution: Why Barack & Michelle Obama Relentlessly Shill For Wal-Mart, Black Agenda Report


7--Michael Hudson: They should have let the banks fail,


The alternative that has been for the last few hundred years would have been to let the bad debts go under. In other words, you would have done two things. Either you’d let the banks foreclose as they have–but the banks would have taken a loss. The purpose of quantitative easing was to do something that had never been done before in modern history: to make sure that the banks wouldn’t lose and to make sure that the 1 percent behind them didn’t lose. The money was poured into the economy, and instead of writing down the debts, the debts were all left in place.


What I was advocating and Steve Keen was advocating and most other people in our group were advocating was write down the–let Citibank go under, let the banks that have made the bad loans go under. And Bill Black on your show has been telling you about how bad these loans were. Let them go under. The government would have taken over the banks, and nobody would have lost the money.

The secretary of the Treasury, Tim Geithner, just wrote his autobiography last week, pushing the big lie again that the ATM machines would have been closed down. None of the ATM machines would have been closed down. Sheila Bair wrote in her book that there was plenty of money–and even in Citibank and Bank of America, even in these most rotten banks–to bail out all of the insured depositors. But the Fed came in and said, we don’t want the speculators to lose money; the depositors, the homeowners, the economy can be sacrificed in order to help the speculators. And normally it’s the speculators who would have lost, but in this case it was the taxpayer who lost. That was basically the principle at work.

8---RETAIL DEATH RATTLE GROWS LOUDER, Burning Platform (must read)

It was exactly four months ago when I wrote THE RETAIL DEATH RATTLE. Here are a few terse anecdotes from that article:
The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions. The exponential growth model, built upon a never ending flow of consumer credit and an endless supply of cheap fuel, has reached its limit of growth. The titans of Wall Street and their puppets in Washington D.C. have wrung every drop of faux wealth from the dying middle class. There are nothing left but withering carcasses and bleached bones.
The lack of retirement and general savings is reflected in the historically low personal savings rate of a miniscule 3.8%. Before the materialistic frenzy of the last couple decades, rational Americans used to save 10% or more of their personal income. With virtually no savings as they approach their retirement years and an already extremely low savings rate, do retail CEOs really see a spending revival on the horizon?

  • If you thought the savings rate was so low because consumers are flush with cash and so optimistic about their job prospects they are unconcerned about the need to save for a rainy day, you would be wrong. It has been raining for the last 14 years. Real median household income is 7.5% lower today than it was in 2001. Retailers added 2.7 billion square feet of retail space as real household income fell. Sounds rational.

Sunday, May 25, 2014

Today's Links

Today's quote:  "The dramatic upward redistribution of recent decades is the result of specific government policies and downward redistribution could in theory be accomplished in much the same way. This is an important point— upward redistribution has had little to do with ‘market’ forces and ‘correcting’ it would in capitalist economic theory ‘improve’ market outcomes."  Rob Urie, Economic Stagnation and the Stagnation of Economics,  counterpunch




1--Krugman, Following Summers, Endorses Asset Bubbles, naked capitalism (archive)


2---The Obvious Reason QE Doesn't Work, zero hedge


In the BoE's latest quarterly bulletin, they conceded this point, recognizing that QE is indeed tantamount to pushing on a piece of string. The article tries to salvage some central banker dignity by claiming somewhat hopefully that the artificially lower interest rates caused by QE might have stimulated some loan demand.


 However the elasticity or price sensitivity of demand for credit has long been understood to vary at different points in the economic cycle or, as Minsky recognized, people and businesses are not inclined to borrow money during a downturn purely because it is made cheaper to do so. Consumers also need a feeling of job security and confidence in the economy before taking on additional borrowing commitments.


3---World Trade Suddenly Slumps, Testosterone Pit


World trade volume dropped 0.5% in March from February, after it had already dropped 0.7% in February, the CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just reported in its March world trade report. For the first quarter, volume was down 0.8%, after a 1.5% increase in the fourth quarter....


4---Ukraine: A Prize Neither Russia Nor the West Can Afford to Win, Brookings


The Russia attitude is, if the Western coalition wants to use Ukraine against us, let them see how much it will cost.
It is clear to most observers that the West would not be able to defend Ukraine economically from a hostile Russia. Russia is in a position to do far more damage than the West can defend against or repair. It’s always true that it’s easier to undermine a country economically than to build it up. It’s easier to destabilize than stabilize. It is perhaps less evident that the West would have a very hard time stabilizing the Ukrainian economy even if Russia weren’t around to make mischief. The simple fact is that Russia today supports the Ukrainian economy to the tune of at least $5 billion, perhaps as much as $10 billion, each year. ...


The main support comes in form of Russian orders to Ukrainian heavy manufacturing enterprises. This part of Ukrainian industry depends almost entirely on demand from Russia. They wouldn’t be able to sell to anyone else....


If the West were somehow able to wrest full control of Ukraine from Russia, could the United States, the other NATO nations, and the EU replace Russia’s role in eastern Ukraine? The IMF, of course, would never countenance supporting these dinosaurs the way the Russians have. So the support would have to come in the way of cash transfers to compensate for lost jobs. How much are we talking about? The only known parallel for the amount of transfer needed is the case of German reunification. The transfer amounted to 2 trillion euros, or $2.76 trillion, over 20 years. If Ukraine has per capita income equal to one-tenth of Germany’s, then a minimum estimate is $276 billion to buy off the east. (In fact, since the population size of eastern Ukraine is larger than East Germany’s, this is an underestimate.) It is unthinkable that the West would pay this amount. ...


Economically, Russia can afford losing Ukraine. What Russia could not afford is to win Ukraine, that is, to be saddled with not only its current costs of up to $10 billion a year for eastern Ukraine but the much larger amounts that would be needed to support the rest of the country if they were cut off from its western markets.
The key point here is that there can be no viable Ukraine without serious contributions from both Russia and the West. Of all the options for Ukraine’s future, a Ukraine exclusively in the West is the least feasible. A Ukraine fully under Russian control and with severed links to the West is, unfortunately, possible. But it is in no one’s interest — not Russia’s, not the West’s and certainly not Ukraine’s.
...
For those who want to punish Russia and nothing else, that’s the answer: hand over Ukraine to the Russians and let them turn it into Malaya Rossiya. It would suck Russia dry. For anyone who really cares about Ukraine, there is, like it or not, only one option: the one in the middle. (Finland)


5---Barrons Interview Posits Weak US Economy, across the curve (Pomboy)


People will realize that the economy really has not achieved any self-sustaining momentum and that it requires continued stimulus. I liken it to a car on a flat road that has no momentum. When you take your foot off the gas, the car just stops moving. That’s essentially what the Fed is doing.....


 It is scary to imagine, because if you look at a chart of nominal consumer spending, which is 70% of GDP [gross domestic product], it has continued to decelerate, even in this period of unprecedented monetary accommodation and rampant financial-asset inflation.....


I expect to see Treasury yields trading in a range from 2% to 3%, basically how it’s been for the past several years. You want to sell at 2% and buy at 3%. I wouldn’t be surprised to see rates fall below 2%, as investor perceptions about the economy meet with reality and they realize that the Fed still has a lot of work to do. In the past, the prospect of the Fed pausing the taper would have been a recipe for running to risk assets. But this time, there would be such disappointment that the economy really isn’t up to snuff. We will have had QE1, QE2, and QE3. So how many times is the Fed going to get it wrong before people start to say, “These guys don’t know any better than the rest of us what’s going on, and they certainly don’t have the solution because they’ve done QE three times and it hasn’t helped?”....


Foreigners are buying about $10 billion a month of Treasuries. This compares with deficit financing needs for the U.S. government of roughly $40 billion a month, based on this year’s deficit. So the Fed needs to pick up roughly $30 billion a month in slack. When the Fed slashed its buying to $25 billion, effective this month, it for the first time opened up a demand deficit for Treasuries. If they continue to taper, that gap will expand, and things could get bumpy in the Treasury market. Rates won’t go up five basis points before the Fed would start talking about more QE.


Who is going to buy a 10-year Treasury yielding 2% when inflation in the U.S. is 2%? No profit-oriented domestic investor is going to do that. We were able to rely on foreign central banks to buy our Treasuries, because they were trying to debase their currencies to manage their exports. But that’s not the case anymore. The upshot is that we are out of natural buyers of Treasuries, and that’s where the Fed has been so critical. So unbeknownst to many, the reason why Treasury yields are 2.6% is in part due to the economy, but it is largely due to the fact the Fed has just been sopping up all of the surplus supply that foreigners are leaving behind.


So, what kind of investing makes sense now?
Given my thesis that the Fed is going to have to taper the taper, so to speak, it will become clear that the economy can’t handle a reduction of stimulus. As a result, Treasuries should continue to rally, in part because buying long-dated Treasuries is the mechanism by which the Fed will continue the stimulus. Second, the dollar should take a hit. There is a feeling that the U.S. is the furthest along in the recovery as it unwinds its stimulus, while the central banks in Japan and Europe are just getting started.


6---Wall Street and Multinationals Get Theirs While America Suffers, economic populist


7---Fifty years since Johnson’s “Great Society” speech, wsws


8--Why are bond yields so low?, CNN


9---U.S. Retailers Missing Estimates by Most in 13 Years, Bloomberg


10---Dean Baker on Housing, TARP and Geithner, firedog lake




This massive trade deficit created a fundamental imbalance in the U.S. economy. Geithner either does not understand or opts to ignore the basic economics. A trade deficit creates a gap in demand that must be filled by either large public deficits or large private deficits, meaning that private investment must exceed private saving....


It should have been pretty obvious to anyone involved in economic policymaking that the housing bubble was driving the economy in the years 2002-2006. Residential construction, which had averaged 4.0-4.5 percent of GDP, exceeded 6.0 percent of GDP in 2005. The savings rate out of disposable income had averaged more than 8.0 percent in the years before the wealth effect from the stock bubble drove it down to 4.0 percent by 2000. While the saving rate rose following the stock crash, the wealth effect from the housing bubble drove saving rates even lower than had the stock bubble, with the rate averaging just 3.0 percent from 2005-2007.


The simple arithmetic showed that the bubble adding as much as 5 percentage points of GDP ($850 billion a year in today’s economy) to demand. With housing likely to fall below its historic norm due to the overbuilding from the bubble years, a collapse in house prices was certain to create a huge hole in demand.
What could Geithner and his colleagues at the Fed possibly think would fill this gap?  That’s a serious question with a very short list of potential answers. Demand comes from consumption, residential investment, non-residential investment, government, and net exports. With drops in the first two being the source of the problem, we are left with the last three categories.....


TARP and the Fed Commercial Paper Lending Facility
The next excursion in deception is the discussion of the debate over the passage of the TARP in the weeks following the collapse of Lehman. Geithner chronicles the political debate against the backdrop of what was happening in financial markets and the Fed’s actions. In the case of the latter, Geithner notes that Federal Reserve Board Chair Ben Bernanke announced the creation of the Commercial Paper Funding Facility in October and that it began operations by the end of the month (page 229). The key fact that Geithner leaves out of the discussion is that Bernanke’s announcement took place the weekend after the House approved the TARP on a very close vote, after previously rejecting it.


This is important because the most compelling argument that there was an urgency to pass the TARP was the claim the commercial paper market was shutting down. Major companies like Boeing and Verizon rely on borrowing in the commercial paper market to finance their ongoing operations. If these companies could not get the funding needed to meet their payrolls and pay their suppliers we would literally be looking at a complete economic collapse.


If Congress recognized that the Fed actually had the power to support the commercial paper market without the TARP then it might have felt less urgency to rush to approve the bill. This would have allowed room for more debate and perhaps more conditions – like a requirement that TARP beneficiaries write-down principle on underwater mortgages. But the threats from the Paulson, Bernanke, Geithner team that the alternative to TARP was the end of the world prevented a more level-headed discussion.


11--LDP touts moves to bolster ‘Abenomics’, JT


Corporate tax cuts, stronger corporate governance and closing the tax gap between one- and two-income households are among the Liberal Democratic Party’s recommendations for inclusion in Prime Minister Shinzo Abe’s economic growth strategy, due by the end of next month.
The LDP, which met Tuesday to discuss the recommendations, will submit its draft to Abe later this month, a source close to the matter said.

The Cabinet is likely to approve this year’s growth strategy on June 27 after reviewing the recommendations from the LDP and other government councils.
The LDP draft outlines “seven pillars,” including improving the governance of companies, reforming public funding, utilizing foreign labor, promoting entrepreneurship and more women in the workforce, and revitalizing local economies


12--Fed's experimental reverse repo program ramps up , sober look 
Growth in US reserve balances (funds that banks hold at the Federal Reserve) has stalled recently. Part of the reason for the slower growth is of course the Fed's taper. Yet the Fed's balance sheet is still increasing, albeit at a slower rate. Which means that bank reserves should be growing as well, unless of course some reserves have been "drained".



There are a couple of ways the Fed can drain the reserves: sell securities or take in deposits/borrow. It turns out that the Fed is doing the latter by borrowing overnight via reverse repo (RRP). The newly established Overnight Fixed-Rate Reverse Repurchase Agreement program that the Fed has been testing (discussed here) has become quite popular.