Tuesday, January 19, 2016

Today's Links

1--Insane WealthThe 62 Richest People On Earth Now Hold As Much Wealth As The Poorest 3.5 Billion

2--More Jobs or Smaller Deficits: You choose? Dean Baker

The irony of this story is that the weak economy is the result of insufficient demand. And, as economic theory tells us, the remedy for weak demand is more demand. The quickest way to get more demand is to have the government spend money on things like infrastructure, clean energy, education, health care and all sorts of other goodies. That would create jobs today and make the economy stronger in the future. But the politicians in Washington have largely put more spending off the table, because that would raise the budget deficit. ...

This means in the United States and much of the rest of the world we have a weak economy and hundreds of millions of people that are needlessly unemployed, underemployed, or getting low wages because governments don't want to spend money. It's pretty damn stupid, but hey, let's celebrate the decline in the budget deficit and thank the deficit hawks who helped make it possible.

3--China: Canary in the Global Economy Coalmine? Jack Rasmus

China’s real economy that is slowing faster than China official statistics indicate. China’s real economy, measured in GDP, is slowing far more rapidly than the government’s estimated 6.9 percent. Independent sources looking at rail and freight traffic, electricity usage, manufacturing output, and other such indicators, suggest China’s growth rate may in fact average around 5 percent. Some estimates are suggesting as low as 3 percent annual growth today. Its manufacturing sector has contracted every month throughout 2015. Export growth is negative. Industrial production and real investment growth rates are half of what they were in 2014. Prices for industrial goods are deflating and for consumer goods and services rapidly disinflating.

China’s slowing real economy means corporate profit declines and even defaults, which encourages investors to dump and sell stocks; stock and currency translates by various channels into further corporate profits decline. ...Thus these three elements—slowing real economy, stock implosion, and currency devaluation—are now feeding back upon and exacerbating each other. The downward spiral is intensifying....

This China-global interaction is taking place, moreover, on a tinderbox of debt in China, as well as globally. Total global debt, mostly business debt, has increased by no less than US$50 trillion since 2009. China’s total debt represents no less than half of that US$50 trillion, having risen from US$7.4 trillion in 2007 to more than US$30 trillion today. Moreover, even more ominous, about US$2.5 trillion of its US$19 trillion corporate debt represents non-performing business loans in China today.

4--Mega Investment Bank Suddenly Pooh-Poohs QE , Wolf Street

Natixis, a corporate and investment bank and “among the world’s largest asset managers,” ....

The cheap credit that QE made available led to ever greater focus on financial engineering, a total waste of capital in terms of the real economy, while corporate investment, which would have propelled the economy forward, was lacking. These share buybacks led to unprecedented levels of debt and leverage, Natixis now concedes, “thereby reducing financial stability....

When quantitative easing used the wealth effects caused by rising asset prices, it led to bubbles (in bonds in the United States, the United Kingdom, the Eurozone and Japan; in real estate in the United Kingdom and to a lesser extent in the United States and Japan), resulting in the danger of either bubbles bursting, or irreversibility of expansionary monetary policies precisely to prevent bubbles from bursting....

“The problem now is therefore the existence of bubbles,” the report says. And central banks have a “dilemma”; they can:

•Either “normalize monetary policies when the economy improves and cause the bubbles to burst,” with all the mayhem that follows bursting bubbles.
•Or “not normalize monetary policies; the very expansionary monetary policies then become irreversible, as we have seen clearly in Japan.

5--$20 Oil No Longer Seen As Good For The Economy

While low energy prices are thought to provide a boost to the global economy as consumers benefit from lower costs, there are growing signs that the dramatic collapse in oil prices – so sudden and so severe – is actually creating economic headwinds. The oil and gas industry spent $200 billion on drilling, refining, and new equipment in 2013, and the sharp cutback in spending is being felt beyond just the oil patch. Last week Wood Mackenzie estimated that $380 billion worth of oil and gas projects were scrapped by the industry.

In The New York Times on January 16, Paul Krugman explored the issue. Oil and gas companies start to have liquidity problems when oil prices crash by 70 percent in less than two years. The drop off in spending hurts broader industrial activity. Meanwhile, oil-producing countries like Saudi Arabia have to undertake painful austerity....

The effects show up in a variety of ways. A slowdown might be felt in demand for drilling-related materials such as engines, trucks, steel, and rail capacity. But the effects can also be financial. As the FT reports, big banks are feeling the pain. Citigroup reported a 32 percent increase in non-performing corporate loans in the fourth quarter, compared to the same period in 2014. Wells Fargo also reported an increase in charges, largely due to the decline in oil and gas. JP Morgan said it might have to add more money to its reserve base because of its deteriorating energy portfolio.....

With oil showing no sign of rebounding in the near-term, the effects of the collapse only become more pronounced.

6--Big banks brace for oil loans to implode, CNN

Now that the oil glut has caused prices to crash below $30 a barrel, turmoil is rippling through the energy industry and souring many of those loans. Dozens of oil companies have gone bankrupt and the ones that haven't are feeling enough financial stress to slash spending and cut tens of thousands of jobs.

Three of America's biggest banks warned last week that oil prices will continue to create headaches on Wall Street -- especially if doomsday scenarios of $20 or even $10 oil play out. ...

More oil companies will die

The oil crash has already caused 42 North American oil companies to file for bankruptcy since the beginning of 2015, according to a list compiled by Houston law firm Haynes and Boone. It's only likely to get worse. Standard & Poor's estimates that 50% of energy junk bonds are "distressed," meaning they are at risk of default.

7--Holiday Sales Disappoint. Lousy Xmas for Retail

During the October to December period, total sales rose 1.8 versus the prior year, according to the department. Total sales for all of 2015 increased 2.1 percent, representing their weakest result since 2009, Reuters said.

“Make no mistake about it, this was a tough holiday season for the industry,” said NRF President Matthew Shay. “Weather, inventory challenges, advances in consumer technology and the deep discounts that started earlier in the season and that have carried into January presented stiff headwinds.”

4Q Atlanta Fed--Down again, now forecasting only .6% GDP growth for Q4

8--The ruling class meets at Davos

Since the 2008 crisis, every economic metric, from output to productive investment and the growth of wages, has consistently fallen behind the predictions of economists. But the global economy has proven exceedingly capable of doing one thing: creating and enriching billionaires.

Last year, Oxfam predicted that by 2016 the richest 1 percent of the world’s population would control more wealth than the bottom 99 percent. But, to the charity’s own surprise, this transition occurred a year earlier than it had expected....

The global financial elite managed to weather the 2008 crash with their fortunes not only intact, but vastly expanded. For more than seven years, they have managed to impose sweeping austerity measures on the world’s population, from Greece to Detroit, and inflict dictatorship on the masses of the Middle East. At the same time, they vastly expanded their own wealth through a record-setting binge of mergers and acquisitions and share buy-backs, financed by free cash from global central banks, and premised on mass layoffs, wage cuts and the destruction of the productive forces.

9--Credit Market Alert

A wave of selling has taken Europe’s corporate-bond market to levels typically seen during recessions, another indication that the turmoil in global markets could spread into the wider economy.

The gap in yields, or spread, between Eurozone high-grade corporate debt and safer government bonds has ballooned to its widest level in nearly three years, according to Barclays bond indexes. Three years ago, the European economy was in recession following the sovereign-debt crisis that had engulfed the continent.

10--Islamic State Coming to the End of the Road, Mercouris

The Russian military intervention means there is no danger of the Syrian government collapsing — as looked possible just a few months ago.

The Syrian army has now been able to go on the offensive, and is advancing on all fronts.

The Islamic State cannot withstand the Syrian army backed by the Russian airforce and Iran and Russia.  However if it fails to hold the territory it has seized its claim to be the Islamic State collapses.

The only way the Islamic State could survive would be if the US and its allies acted to save it.

Its appalling violence and megalomaniac pretensions means that for the US it is however an embarrassment not an asset.  The main thing Its grotesque antics have achieved is to unite world opinion behind the Syrian government and Russia.

Instead of willing the Islamic State's survival, the US would far rather it disappear so it can support the other jihadi terrorist groups — the so-called "moderates" — without embarrassment.

That seals the Islamic State's fate.

11---"Syria regime prepares for ‘biggest military operation’ of war in Aleppo" Rudaw

As fighters in the city dig-in and try to consolidate their positions, those fighting on the regime’s side are cutting off supply lines along seven fronts in a bid to cut-off the eastern part of the city, ahead of the upcoming offensive.

 The Syrian military and its allied militias have once again started offensive operations after Russia intervened late last September on their side and began providing air support. "  Rudaw


Rudaw is a Kurdish news network.

"b" tells us that there are 8,000 R+6 reinforcements newly arrived in the Aleppo area.  Who these troops might be I know not.  Is this the much reported newly created 4th Assault Corps of the Syrian Army or some other group?  And what exactly is the composition of the 4th Assault Corps? 


Russian air and artillery are chewing the "opposition" to bits while the threat of Russian anti-air defenses have effectively grounded the Turkish Air Force.  This has enabled the YPG Kurds to advance across the Euphrates River to threaten the IS' supply line to Turkey and the Syrian Army to re-group and sort out the confusion caused by the long, slow decline it had experienced at the hands of rebels supplied by the US, Turkey and the Gulfies. 

The "grinding" process continues as forces are positioned for the climactic battle we have characterized here as the kesselschlacht . 

If I were in northern Syria as an "opposition" fighter I would either be thinking of "rallying" to the government side or looking over my shoulder at the Turkish border.  pl  



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