Friday, January 8, 2016

Today's links

1---Riyadh's Nightmare: Saudi Shiites Could 'Secede' and Take All Oil to Iran

"If this section of eastern Saudi Arabia were to break away, the Saudi royals would just be some broke 80-year-olds with nothing left but a lot of beard dye and Viagra prescriptions," Schwarz observed. "As a result, one of the Saudi royal family's deepest fears is that one day Saudi Shiites will secede, with their oil, and ally with Shiite Iran."
2--Putin and Israel

3--El Erian: More corporate welfare, please

El-Erian said it's a good thing the Federal Reserve is starting to normalize monetary policy. "They realize that they can't artificially repress financial volatility."
"What's not a good thing," he continued, "is we're not doing the other things that need to unleash the productive capacity of the economy."
The government needs to improve fundamentals to "validate financial assets," El-Erian said.

He encouraged lawmakers in Washington to start with issues perceived as common ground, such as reforming corporate taxes, reducing debt and fostering public-private cooperation on overhauling antiquated infrastructure.

4--Russia's "Quagmire" In Syria Turns Out To Be A Well Designed Campaign

5--Rebels used Sarin not Assad

6--US, South Korea discuss deploying “strategic weapons”

7--Stock markets continue to plunge amidst growing signs of economic crisis

Both the S&P 500 and the DJIA are off to their worst annual starts in history, with the DJIA down by 5.2 percent in the first four trading days of the year, and the S&P 500 down by 4.9 percent.
The NASDAQ has now officially entered a “correction,” defined as a decline of 10 percent or more from the recent peak, while the DJIA and S&P 500 are down by 9.8 percent and 8.8 percent, respectively.
The continued sell-off points to growing fears of a divergence between global stock market values, which have been rising for nearly six years, and the ongoing slowdown of the world economy.
Economic growth in 2015 is expected to have been the lowest of any year since 2009, and International Monetary Fund Managing Director Christine Lagarde has hinted that 2016 could be even worse.

The fall in economic output has contributed to a steep drop in demand and prices for commodities. The price of Brent crude oil fell by another 2.1 percent Thursday, hitting $33.27 a barrel, down from nearly $65 in May and its lowest level since February 2004.
The global sell-off centered on fears of a further deterioration of China’s economy, amid concerns that the country’s slowing growth could lead to a significant destabilization of its exchange rate regime. The country’s annualized growth rate in the fourth quarter of last year is expected to have been less than 7 percent, down from 14.2 percent in 2007....

 The entire financial system is a house of cards, built on a foundation of free money from the central banks, and premised on the assumption that there will be an unending transfer of wealth from the international working class into corporate coffers and the speculators on Wall Street.

8--Global financial turmoil continues on fears of slower growth

The worsening global economic situation was underscored by a World Bank report issued Wednesday that cut the bank’s growth forecast for the third year in a row. It said larger-than-anticipated contractions in Brazil and Russia, combined with lower growth in the world’s major economies, had caused it to downgrade its growth forecast by 0.4 percentage points to 2.9 percent. While this was up slightly from the downwardly revised estimate of 2.6 percent for 2015, the report presented a gloomy outlook.
The World Bank cut its forecasts for developing countries as a whole by more than 0.5 percentage points and warned that this estimate was made on the basis of a smooth Chinese slowdown, a stabilisation of commodity prices, and only a gradual increase in borrowing costs. “All of these assumptions, however, are subject to substantial downside risks,” it stated.
The bank pointed out that it has now downwardly revised growth in the major developing countries for three years in a row, the first time this has happened since the 1980s, and noted that recoveries in the US and Europe were weaker than expected, while slowing world trade was having an impact.

9--Record 94,610,000 Americans Not in Labor Force; Participation Rate Lowest in 38 Years

10--Trust in Institutions Drops to Level of Great Recession
2015 Edelman Trust Barometer Finds Overly Rapid Pace of Change in Business Innovation

At the same time, the US suffers from a milder form of the fiscal austerity prevailing in Europe. Indeed, some 500,000 fewer people are employed by the public sector in the US than before the crisis. With normal expansion in government employment since 2008, there would have been two million more.

12--archive: Slow Recovery Without Continued Policy Interventions
Testimony Before the Consensus Revenue Hearing, Senate and House Ways and Means Committees in Massachusetts

A number of factors hold back growth. Chief among these factors is slow consumption growth. Consumers do not have sufficient resources to spend more money since they are rebuilding their lost wealth and are focusing on reducing their debt burden. Household deleveraging will likely continue into the second half of this decade, slowing consumption and economic growth. State and local government budget deficits and large trade deficits also contribute to the current slow growth pattern.
The Massachusetts economy performs comparatively better than the rest of the country. Its unemployment rate has stayed below the national average and has fallen faster than has been the case elsewhere. Still, with more than 8 percent of the population out of work, the unemployment rate won’t fall substantially without a stronger recovery in other parts of the country.
A stronger recovery in the near term, though, will depend in large measure on the success of public policy interventions, considering the formidable obstacles to a strong, self-sustaining recovery. The federal government’s initial economic stabilization measures, the American Recovery and Reinvestment Act of 2009 (ARRA) is slowly winding down. It will in all likelihood be replaced by a series of tax and spending measures targeted at boosting personal incomes and consumption under the Middle Class Tax Relief Act of 2010.
What is holding back economic growth? A recovery typically relies on a surge in private business investment to generate enough momentum to boost consumption and job growth. The current recovery has indeed seen a surge in business investment growth. The year-over-year increase in business investment soared to 8.3 percent by September 2010 (see Figure 1). This was the highest year-over-year investment increase since the one-year period that ended in March 2005....
Consumption is the single largest component of the economy. Consumer spending, outside of spending on owner-occupied housing, makes up about 70 percent of the entire economy. Consumption, though, has grown by only 1.9 percent in real terms from June 2009 to September 2010. In comparison, consumption grew on average by 3.5 percent during the 1990s and still by 2.4 percent during the relatively slow growth era of the 2000s—from March 2001 to December 2007. Consumer spending in this recovery has undoubtedly been subpar...

The recovery will remain weak for some time to come, primarily because households are overburdened by debt...

13---Richard koo the struggle between markets and central banks has just begun
Nomura Koo
14--Deficit shrinks by $1 trillion in Obama era

15---Flat wages show the US doesn’t have a labor market

16--The median household is still worse off now than before the recession

17---No inflation
.atlanta fed .07 growth 4 th Q
The still don’t seem to understand it’s only about pricing, not quantity

No fiscal stimulus
Sweet spot no upward pressure on wages means no upward pressure on inflation, no higher rates, more cheap money for Wall Street


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