Wednesday, January 21, 2015

Today's Links

"The global plutocracy is a cancer on the human race" wsws

1-- Mortgage applications?? Multi year lows, Dr Housing Bubble

Take a look at the bigger picture here:
Source:  MBA
WFC mortgages
mortgage rates
The current daily survey for the 30-year fixed rate mortgage is coming in at 3.62 percent.  That is incredibly low.  Within the 3 percent range, you are basically getting an interest free loan after factoring for inflation.  So why don’t people dive in and buy every house on the market?  There are two main reasons:
-1.  Inventory remains very low
-2.  Household incomes are still weak

2---U.S. 30-Year Yields Fall Toward Record on Relative-Value Demand, Bloomberg

Treasury 30-year bonds rose, pushing yields toward record lows, as speculation that the European Central Bank will start buying bonds and tumbling yields around the world spurred demand for the value of U.S. debt.
Benchmark 10-year note yields declined for the sixth time in seven days while offering about 1.34 percentage points of higher yield than comparable maturity German government securities. A measure of volatility in the Treasury market reached the highest since October.

3--Could a strong dollar destroy world economy?  gulf times
“The BIS warnings confirm what we’ve been saying for a long time: Hell could soon break loose in the emerging markets”. Redeker

Already now, the appreciation of the dollar is one of the strongest rises in past decades. The Dollar Index, which measures the greenback against the world’s major currencies, has been at its highest since Spring 2006. But it’s not the absolute state of the index that is noteworthy: it is the speed of the appreciation.
Since the beginning of July last year, the dollar has gained 13% on the major trade currencies, which for the currency market is huge. Against the currencies of individual emerging markets the greenback’s rally has been even more dramatic. Since the summer last year, appreciation against the ruble is over one-third. It’s 15% against the Ukrainian hryvnia and Brazilian real and 7% against the Turkish lira.
For companies whose debt in is dollars that means that in their own currency their burden of debt keeps rising. And there’s another troubling accounting problem: many emerging economies overwhelmingly take in the dollars they need through the sale of commodities, which are traditionally billed in dollars

In the past, appreciation of the dollar has unleashed crises in emerging economies. It happened in the early 1980s when a strong dollar led the South American countries into major trouble and in the mid-1990s when the Asian tiger countries fell like dominoes.

If the value of the dollar continues to rise, it could lead to a wave of bankruptcies in Russia, Brazil and other emerging economies, which would have a serious impact on Germany and other countries that rely on exports.
Where and why did this potential threat arise? Countries, corporate entities and private households have, globally, become indebted to the tune of $10tn. A growing share of the debt has been incurred within emerging markets.

This debt could also become an existential risk. Most of these liabilities are not in native currencies like the Brazilian real or Russian ruble, but in dollars. In times of relatively stable exchange rates and a strong world economy with robust commodities quotations, this would not be such a serious problem: Dollar revenues on the world markets make it possible for dynamic economies to meet the costs of interest and repayment.

Within emerging economies, borrowing in dollars amounts to $2.6tn. Add to that $3tn in international bank loans, and that makes for a significant sum - approximately equivalent to Japan’s economic power.
The Basel-based Bank for International Settlements (BIS), a kind of central bank to the central banks, warned in its December 2014 Quarterly Review, that the appreciation of the dollar against the backdrop of divergent monetary policies could “have a profound impact on the global economy”.

4--Central bank prophet fears QE warfare pushing world financial system out of control, Pritchard

Former BIS chief economist warns that QE in Europe is doomed to failure and may draw the region into deeper difficulties ...

Beggar-thy-neighbor devaluations are spreading to every region. All the major central banks are stoking asset bubbles deliberately to put off the day of reckoning. This time emerging markets have been drawn into the quagmire as well, corrupted by the leakage from quantitative easing (QE) in the West.
"We are in a world that is dangerously unanchored," said William White, the Swiss-based chairman of the OECD's Review Committee. "We're seeing true currency wars and everybody is doing it, and I have no idea where this is going to end."

5---Is Draghi about to massively misfire? cnbc

So far, the ECB has implemented rate cuts, provided cheap loans to banks and purchased covered bonds and asset backed securities in the hope of stimulating the euro zone economy. However, with consumer prices now falling in the region, the ECB has implied that it is ready to reveal even greater measures to try to boost inflation back to its target levels and provide a fillip for growth in the region.
The ECB's balance sheet currently stands at just over 2 trillion euros ($2.33 trillion) but it has intentions to raise it to 3 trillion euros. A U.S. Federal Reserve-style program of sovereign bond purchases has been touted despite fears over its legitimacy and opposition from Germany...

There is a risk the additional liquidity finds its home in higher-yielding opportunities outside the euro zone," she added, also explaining that "more money doesn't necessarily mean more jobs" if the stimulus doesn't find its way into the pockets of the consumer....

Claus Vistesen, the chief euro zone economist at Pantheon Macroeconomics told CNBC via email that the euro trade has become so crowded that it could suddenly "rip your face off" and push 6 percent higher against the greenback in a matter of days, disappointing consensus.

6--Not your usual oil-price decline effect, FT alpha

This suggests to Yetsenga that there is a common factor affecting all of these commodities: financialisation and the emergence of commodities as a financial asset which benefit whenever cheap dollar funding is available, and fall whenever dollars become expensive.
This, he suggests, is a negative sign for the global economy because it’s the equivalent of a physical supply shock.

7---Flow of Opec petrodollars set to dry up, FT

The flow of Opec petrodollars into global financial markets is set to dry up as the collapse in the oil price delivers a $316bn hit to the cartel’s revenues.
Big oil producers have pumped the windfall they enjoyed from soaring oil prices over the last decade into a huge range of global assets, from US Treasuries and high-grade corporate bonds to equities and real estate....
This is the first time in 20 years that Opec nations will be sucking liquidity out of the market rather than adding to it through investments,” David Spegel, global head of emerging market sovereign and corporate research at BNP Paribas.

8--'The 2003 Dividend Tax Cut Did Nothing to Help the Real Economy', econ view

9--Davos participants not interested in higher oil price – ex-Russian finance minister, RT

10--Delusion and deception in Obama’s State of Union, wsws

Nine million workers are officially unemployed, another six million have dropped out of the labor force, eight million work part-time when they want full-time jobs and 12 million work for temporary employment agencies.
* Real wages have fallen steadily for American workers since 2007, dropping another five cents an hour in December 2014. The real income of the average working-class family is now back to the level of 2000—15 years of stagnation in living standards.
* The US poverty rate has risen from 12.6 percent in 2007 to 14.5 percent in 2013. Nearly half of all Americans and more than half of all US school children are poor or near poor.
* One fifth of American children do not get enough to eat, while the overall rate of food insecurity has jumped from 11 percent in 2007 to 16 percent in 2013. One million Americans will be cut off food stamp benefits this year.

11--Capitalism and the global plutocracy, wsws

In 2013, according to updated figures, the 92 richest multi-billionaires had as much wealth as the bottom 50 percent of society. In 2014, this figure dropped to 80 billionaires. In other words, a group of people who can fit into a double-decker bus control more wealth than 3.5 billion people, equivalent to the combined populations of China, India, the United States and the European Union.
Inequality is growing at such a rapid pace that the richest 1 percent will control more wealth than the bottom 99 percent of society by next year. It is in fact quite possible that, on a global scale, society has never been so unequal through thousands of years of human history as it is today.....

fact, the unending accumulation of wealth by the super-rich is the product of the single-minded policy of the ruling class carried out over decades and escalated since the 2008 financial crisis, itself triggered by the criminal activities of the financial elite. The US government alone has funneled nearly $7 trillion into the financial system, which has been used to prop up over $30 trillion in financial assets. Central banks throughout the world have followed suit.

Global corporations have used the mass unemployment arising from the economic downturn to slash wages and impose speedup on their workers, while governments around the world have utilized the economic crisis as an opportunity to impose deep austerity measures.
Nearly seven years after the collapse of Lehman Brothers, the policies undertaken in the aftermath of the Wall Street crash are leading to a new stage in the global crisis. The Chinese stock market bubble, which minted dozens of new billionaires this year, appears to be collapsing, having suffered its biggest loss since 2008 on Monday. Europe is in deflation, and analysts predict the Russian economy will shrink five percent this year. On Monday, the International Monetary Fund downgraded its estimate for economic growth this year.

The only response the ruling class has to the crisis of its system is to funnel even more cash to the coffers of the rich. “Monetary policy must… stay accommodative,” the IMF declared, “including through other means if policy rates cannot be reduced further,” a veiled reference to money-printing ("quantitative easing") programs....

The global plutocracy is a cancer on the human race

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