Saturday, January 10, 2015

Today's Links

In the midst of this orgy of democratic hypocrisy, no reference is made to the fact that the American military, in the course of its wars in the Middle East, is responsible for the deaths of at least 15 journalists. In the on-going narrative of “Freedom of Speech Under Attack,” there is no place for any mention of the 2003 air-to-surface missile attack on the offices of Al Jazeera in Baghdad that left three journalists dead and four wounded.


Nor is anything being written or said about the July 2007 murder of two Reuters journalists working in Baghdad, staff photographer Namir Noor-Eldeen and driver Saeed Chmagh. Both men were deliberately targeted by US Apache gunships while on assignment in East Baghdad.
The American and international public was first able to view a video of the cold-blooded murder of the two journalists as well as a group of Iraqis—taken from one of the gunships—as the result of WikiLeaks’ release of classified material that it had obtained from an American soldier, Corporal Bradley Chelsea Manning.
And how has the United States and Europe acted to protect WikiLeaks’ exercise of free speech? Julian Assange, the founder and publisher of WikiLeaks, has been subjected to relentless persecution. Leading political and media figures in the United States and Canada have denounced him as a “terrorist” and demanded his arrest, with some even calling publicly for his murder. Assange is being pursued on fraudulent “rape” charges concocted by American and Swedish intelligence services. He has been compelled to seek sanctuary in the Ecuadorian Embassy in London, which is under constant guard by British police who will seize Assange if he steps out of the embassy. As for Chelsea Manning, she is presently in prison, serving out a 35-year sentence for treason.


That is how the great capitalist “democracies” of North America and Europe have demonstrated their commitment to free speech and the safety of journalists!  "“Free Speech” hypocrisy in the aftermath of the attack on Charlie Hebdo", David North, WSWS


1--Why You Shouldn’t Believe What You Hear About the US Economy, Dean Baker, cp


As usual, just about everything we’ve heard about the economy is wrong. To start, the 5.0 percent growth number must be understood against a darker backdrop: The economy actually shrank at a 2.1 percent annual rate in the first quarter. If we take the first three quarters of the year together, the average growth rate was a more modest 2.5 percent.


The economy is very slowly making up the gap between potential GDP and actual GDP — that is, the value of the goods and services the economy could be producing but isn’t because of a lack of demand. The Congressional Budget Office puts the size of this gap at 3.6 percent of GDP, which comes to more than $600 billion annually, or more than $4,000 per household. This is a lot of money to be throwing in the garbage every year. At the economy’s growth rate through the first three quarters of 2014, we will close this gap in 12 to 36 years.
Compare the 2014 growth number with those from recoveries after previous severe recessions: Growth averaged 5.2 percent from 1976 to 1978, and it averaged 5.4 percent from 1983 to 1985. That so many people are celebrating 2.5 percent growth over three quarters shows a serious lessening of expectations.


2--Welcome to the Hunger Games, Brought to You by Mainstream Economics, NC


3--Free Markets lead to war, NC




Krugman) He went on to argue that the increasing integration (“interdependence”) among countries during the second half of the 19th century made war among countries irrational because it disrupted the benefits accruing from trade. The argument continues with the stunning insight that wars continue to occur because 1) “leaders may not understand the arithmetic” of the cost-benefit calculations for a war (again, a quotation), or 2) politicians seek an external distraction from domestic maladies..


No one should believe the gains-from-trade story. It is based on fanciful nonsense. The reactionary nature of the story results from two blatant misrepresentation of international exchange. First, the Heckscher-Ohlin theory treats international trade as if it were among countries. In a capitalist system trade is always among companies, with households far down the distribution line. Second, it views competition in general and specifically among companies as a benign and harmonious process.


These two misrepresentations allow the pernicious fiction that international trade benefits all of humanity by bringing to each country more efficient allocation of resources and through greater allocative efficiency cheaper commodities for everyone everywhere. In reality, international trade is contest and collusion among great corporations to generate profits. A major part of this profit seeking comes through achieving economic and political power at the national level, by buying elections or buying politicians directly.


A very large portion of cross-border trade occurs not between companies, but within them (“intra-firm trade”). The motivations for this internal corporate trade include avoiding 1) unionization, 2) taxation, and 3) national regulations that prevent destructive environmental practices. Any benefits to the “consumer” are more than wiped out by job losses, elimination of small producers, the race to the bottom in wages and working conditions, and global pollution.


Trade and the Decline of Democracy
Even more important than these negative economic effects of corporate dominated trade is the detrimental impact on democratic institutions. Far from stimulating accord and cooperation, as Krugman suggests, unregulated international trade undermines democratic institutions, limiting the policy options of governments. Obvious examples are the two-decade-old North American Free Trade Agreement and the proposed Trans-Atlantic Trade and Investment Partnership....


President Franklin D. Roosevelt described in his address to the US Congress in April 1938:
Unhappy events … have re-taught us two simple truths about the liberty of a democratic people.  his first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That in its essence is fascism—ownership of government by an individual, by a group.
Countries integrated into a system of trade may go to war with each other because trade itself contains the source of conflict, aggressive competition among institutions of private power stronger than governments. This may not be rational for “the people” of any of the countries in a conflict. Countries do not have homogenous populations; they are divided into classes and groups. For some groups and classes, armed conflict may bring gains, making the choice for war quite rational even on a cost-benefit calculation.


International trade aggravates the three great crises—of finance, development and the environment — and to those three it adds another, of democracy. Far from a benign process fostering harmony and welfare among nations, commodity and service trade, most of it carried out by powerful private institutions, creates tensions, corruption and conflict. As a general rule, wars kill people and enrich corporations. That, Mr Krugman, explains why not all but most of them continue to occur


4---Have Large Scale Asset Purchases Increased Bank Profits?, PERI


This paper empirically examines the effects of the Federal Reserve’s Large Scale Asset Purchases (LSAP) on bank profits. We use a new dataset on individual LSAP transactions and bank holding company data from the Fed’s FRY-9C regulatory reports to construct a large panel of banks for 2008Q1 to 2009Q4. Our results suggest that banks that sold Mortgage-backed Securities to the Fed (“treatment banks”) experienced economically and statistically significant increases in profitability after controlling for common determinants of bank performance. Banks heavily “exposed” to MBS purchases should also experience increases in profitability through asset appreciation. Our results also provide evidence for this type of spillover effect and suggest that large banks may have been more affected. Although our results suggest that MBS purchases increased bank profits, we find only mixed evidence that these were associated with increased lending. Our findings are thus consistent with the hypothesis that the Federal Reserve undertook these policies, at least in part, to increase the profitability of their main constituency: the large banks


5---Guest post by Tom Adams: Obama homeownership push or mortgage market share battle?


For the average would-be buyer of the average house, the new, lower FHA fee would be worth about $900 a year, equivalent to about a $75 reduction in monthly payment.


If it’s already really cheap to borrow money, is another 0.5% reduction going to make that big a difference? Probably not, because historically low interest rates haven’t been the obstacle to buying a house. I expect the number of net, new home buyers produced as a result of this change will be considerably lower than the Administration is projection (“millions of homeowners,” according to Obama’s statement today).


Rather, would-be homeowners don’t have the income to support buying the houses listed for sale in their markets – which is another way of saying that, for average Americans homes are too expensive for them to afford (or wages are too uncertain for them to want to buy).


Also note that the new lower fee is primarily aimed at new home purchasers. In order for existing FHA borrowers to get the new lower premium they would have to refinance into a new loan, which means they’d have to incur new closing costs. The new closing costs would probably eat up most of the savings for a year or more. Presumably, this would discourage many existing borrowers from refinancing for the lower premium, which helps the FHA by allowing it to retain the old, higher premium on the borrowers who don’t refinance


6--What Radicalized The Charlie Hebdo Terrorists—–Try Abu Ghraib , Ray McGovern


7---Wall Street is bracing for a 20% decline in energy companies’ earnings in the fourth quarter — and that’s the good news.
“This quarter is not going to be the trough of profitability,” said Pavel Molchanov, an analyst with Raymond James. Rather, deeper losses are likely to surface down the road, when companies report first-quarter or second-quarter earnings....


If Brent hits $40 a barrel or below, producers will be shutting in production at levels that would result in “significant reduction of global supply,” they said. U.S. onshore “stripper wells,” or those nearing the end of their life, would be first to be cut.


8---David Morgan: Oil Derivatives Explosion Double 2008 Sub-Prime Crisis, daily news


Precious metals expert David Morgan says the plunge in oil prices is not good news for big Wall Street banks.  Morgan explains, “The amount of debt that is carried by the fracking industry at large is about double what the sub-prime was in the real estate fiasco in 2008.”


“In summary, we’re looking at an explosion in potential that is greater than the sub-prime market of 2008 because, number one, oil and energy are the most important sectors out there.”
“Number two, the derivative exposure is at least double what it was in 2008.  Number three, the banking sector is really more fragile and we have less ability to weather the storm.”
Morgan, who is also “a big-picture macroeconomist,” says oil derivatives could take down the system just like mortgage-backed securities back in the last financial meltdown.”...




9---The global economy could be on the verge of a once-in-a-generation transformation, Telegraph


The 35-year boom in asset prices is coming to an end - which will have enormously important consequences


The plunge in the oil price since last summer amounts to a net transfer from oil producers to Western and Asian consumers of approximately $1.5 trillion, a sum equivalent to more than half the UK’s annual economic output. Money which would otherwise have flowed mostly into Western assets – from top-end London property to US and European treasuries – is being switched to disposable incomes instead, where presumably it will be spent. This might seem to contradict the deflationary narrative, but the one follows from the other. Price deflation may be bad for profits, but where it is caused by a positive supply-side shock, it also adds to consumer spending power. The advantage should therefore shift from the one to the other.

Third, reserve accumulation is going into reverse...


Finally, ageing demographics. The post-war baby-boom generation is moving out of work and into retirement, triggering the progressive liquidation of assets accumulated over a lifetime of employment. Those who have fed the asset price boom of the last 35 years are set to start calling in their chips, putting further downward pressure on asset prices


10--The Biggest Economic Story Going Into 2015 Is Not Oil  automatic earth
.. in the wake of the oil tsunami, which is a long way away from having finished washing down our shores, there’s the demise of emerging markets. And I’m not talking Putin, he’ll be fine. It’s the other, smaller, emerging countries that will blow up in spectacular fashion, and then spread their mayhem around. The US dollar will keep rising more or less in and of itself, simply because the Fed has ‘tapered QE’, and much of what happened in global credit markets, especially in emerging markets, was based on cheap and easily available dollars. There’s now $85 billion less of that each month than before the taper took it away in $10 billion monthly increments. The core is simple.

This is not primarily government debt, it’s corporate debt. But it’s still huge, and it has not just kept emerging economies alive since 2008, it’s given them the aura of growth. Which was temporary, and illusionary, all along. Just like in the rest of the world, Japan, EU, US. And, since countries can’t – or won’t – let their major companies fail, down the line it becomes public debt.
One major difference from the last emerging markets blow-up, in the late 20th century, is size: emerging markets today are half the world economy. And we can all imagine what happens when you blow up half the global economy … [..]

This is the lead story as we go into 2015 two weeks from today. Oil will help it along, and complicate as well as deepen the whole thing to a huge degree, but the essence is what it is: the punchbowl that has kept world economies in a zombie state of virtual health and growth has been taken away on the premise of US recovery as Janet Yellen has declared it.
It doesn’t even matter whether this is a preconceived plan or not, as some people allege, it still works the same way. The US gets to be in control, for a while, until it realizes, Wile E. shuffle style, that you shouldn’t do unto others what you don’t want to be done unto you. But by then it’ll be too late. Way too late.

As I wrote just a few days ago in We’re Not In Kansas Anymore , there’s a major reset underway. We’re watching, in real time, the end of the fake reality created by the central banks. And it’s not going to be nice or feel nice. It’s going to hurt, and the lower you are on the ladder, the more painful it will be.


11---Dollar’s Surge Pummels Companies in Emerging Markets, WSJ
From Brazil to Thailand, Firms That Sold Bonds in Dollars Now Face Steep, Even Staggering Costs


12--Grand Central: Could Lower 10-Year Yields Spark A More Aggressive Fed? , WSJ


13--Deflation in the EU, wsws


14--"“Free Speech” hypocrisy in the aftermath of the attack on Charlie Hebdo", David North, WSWS


Once again, the political bankruptcy and essentially reactionary character of terrorism is exposed. It serves the interests of the state, which utilizes the opportunity provided by the terrorists to whip up support for authoritarianism and militarism. In 2003, when the Bush administration invaded Iraq, French popular opposition was so overwhelming that the government led by President Jacques Chirac was compelled to oppose the war, even in the face of massive political pressure from the United States. Now, 12 years later, as President François Hollande is striving to transform France into the United States’ principal ally in the “war on terror,” the attack in Paris plays into his hands.


In these efforts Hollande can rely on the media, which in such circumstances directs all its energies toward the emotional manipulation and political disorientation of the public. The capitalist media, skillfully combining the suppression of information with half-truths and outright lies, devises a narrative that is calculated to appeal not only to the basest instincts of the broad public, but also to its democratic and idealistic sentiments....


In the midst of this orgy of democratic hypocrisy, no reference is made to the fact that the American military, in the course of its wars in the Middle East, is responsible for the deaths of at least 15 journalists. In the on-going narrative of “Freedom of Speech Under Attack,” there is no place for any mention of the 2003 air-to-surface missile attack on the offices of Al Jazeera in Baghdad that left three journalists dead and four wounded.


Nor is anything being written or said about the July 2007 murder of two Reuters journalists working in Baghdad, staff photographer Namir Noor-Eldeen and driver Saeed Chmagh. Both men were deliberately targeted by US Apache gunships while on assignment in East Baghdad.
The American and international public was first able to view a video of the cold-blooded murder of the two journalists as well as a group of Iraqis—taken from one of the gunships—as the result of WikiLeaks’ release of classified material that it had obtained from an American soldier, Corporal Bradley Chelsea Manning.
And how has the United States and Europe acted to protect WikiLeaks’ exercise of free speech? Julian Assange, the founder and publisher of WikiLeaks, has been subjected to relentless persecution...


The World Socialist Web Site, on the basis of long-standing political principles, opposes and unequivocally condemns the terrorist assault on Charlie Hebdo. But we refuse to join in the portrayal of Charlie Hebdo as a martyr to the cause of democracy and free speech, and we warn our readers to be wary of the reactionary agenda that motivates this hypocritical and dishonest campaign.


15--Le Pen at the Elysée Presidential Palace, wsws


Under these conditions, the entire French ruling class has begun to play with Le Pen, much as the German bourgeoisie played with Adolf Hitler before Marshal Paul von Hindenburg handed power to Hitler in 1933. Leading strategists of the French bourgeoisie are coming to view violent conflict with France’s Muslim population as inevitable.


16--French paramilitary police gun down three Islamist gunmen, wsws


An article posted today on the New York Times web site raises numerous questions about how French intelligence and counterterrorism agencies could have failed to identify Charlie Hebdo as a likely target of violence by Islamist terrorists, and the Kouachi brothers and Coulibaly as likely perpetrators of such violence. All three had come to the attention of the police and two of them, Cherif Kouachi and Ahmed Coulibaly, had served prison terms for their involvement in terrorist activities.
The WSWS has already noted the multiple contacts between the Kouachi brothers and the French security services....


The Paris events thus conform to the larger pattern of the “war on terror.” Nearly all of those involved in or linked to terrorist attacks in the major imperialist countries—the 9/11 attacks, the London subway and Madrid train station bombings, and now Paris—turn out to have frequent, unexplained and dubious relations with the security services of these countries.
These atrocious attacks have gone forward, if not with the active instigation and control, certainly with the passive complicity, of the very same agencies that then cite the threat of terrorism as the reason for scrapping democratic rights, massively increasing security budgets, and arrogating vast and unchallengeable powers to the military-intelligence apparatus.


17--Thus Spake Lavrov, saker


Our Western partners promote respect for the rule of law, democracy and minority opinion within countries, while failing to stand up for the same values in international affairs. This leaves Russia as a pioneer in promoting democracy, justice and rule of international law. A new world order can only be polycentric and should reflect the diversity of cultures and civilisations in today’s world. ...


Russia’s comprehensive partnership with China. Important bilateral decisions have been taken, paving the way to an energy alliance between Russia and China. But there’s more to it. We can now even talk about the emerging technology alliance between the two countries. Russia’s tandem with Beijing is a crucial factor for ensuring international stability and at least some balance in international affairs, as well as ensuring the rule of international law....


Russia is about to assume BRICS and SCO presidency. The two organisations will hold their summits in Ufa. These are very promising organisations for the new age. They are not blocks (especially BRICS), but groups where members share the same interests, representing countries from all continents that share common approaches regarding the future of the global economy, finance and politics.

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