Tuesday, May 31, 2016

Today's quote: "“I think the (Obama) administration has been a total disaster. I am going to go back to work and pay a lot more for health care. Hillary Clinton will never get my vote. It is all about profits on the backs of people. It has to stop."

1--Chart Of The Day: After All That Money Printing——Labor Productivity Has Collapsed Everywhere

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2--Opposition grows to CWA effort to shut down Verizon strike

After announcing an “agreement in principle” with Verizon, the Communications Workers of America (CWA) and International Brotherhood of Electrical Workers (IBEW) are moving quickly to shut down the strike by 40,000 telecom workers and rush through a vote. The purported settlement follows nearly two weeks of closed-door talks in Washington, DC between Verizon bosses, the Obama administration and union officials.

The CWA and IBEW are ordering workers back on the job Wednesday, or even Tuesday night, even though there is no real contract. This means that even if the unions succeed in cobbling something together over the next few days, there will be no chance for workers to seriously study and ratify the contract before returning to work. This is a blatant violation of democratic rights and due process...

Throughout the strike the unions have aided and abetted management, seeking to starve workers into submission with insulting strike pay benefits. From the beginning, the CWA and IBEW made it clear they were willing to surrender $200 million in concessions. They made no serious effort to shut down Verizon work locations, bowing to strikebreaking court injunctions limiting picketing.

3--Socialist Alternative, ISO work to channel opposition into the Democratic Party

If Sanders wins the nomination, Sawant makes clear that her group will campaign for the Democratic nominee. If Sanders loses to Clinton, Sawant calls for Sanders to run a “safe state” campaign that encourages workers and youth to vote for Clinton in swing states and for Sanders in the 40 or so states where his candidacy would not hamper Hillary Clinton’s chances of securing the White House for the Democrats.

3--Socialist Alternative, ISO work to channel opposition into the Democratic Party

According to Socialist Alternative and its partners, the American capitalist class and the working class do not have irreconcilable class interests, but rather the financial oligarchy can be persuaded to abandon its class interests under the pressure of the class struggle, and will itself create “workers parties” upon its own initiative.
This is pure sophistry. What they are setting up is not a transition to political independence or “workers parties,” but a political trap.

4--Financial parasitism and the global housing crisis

In 2001 in the US, 41 percent of renters spent 30 percent of their income or more on rent. This rose to 49 percent in 2014. In the same year, 26 percent of the renting population spent more than half of their income on rent. In the UK, a fifth of all young adults now stay in their parents’ home until they are at least 26. In 2015, 31.5 percent of US young people aged 18 to 34 lived at home, up from 27 percent in 2005......

Prices in some areas boggle the mind. San Francisco’s average asking price for a one-bedroom apartment went from $1,258 per month in January 2010 to $4,126 in February 2016. In London, the average home price has doubled since 2009, from about £300,000 ($437,600 USD) to £600,000 ($875,100)....

Historically, rent prices have tended to move with income and inflation. For example, in the United States the median home price adjusted for inflation remained largely flat between 1970 and 1998, fluctuating slightly above and below $160,000. This was a period in which workers’ incomes were also flat. After 1998, however, the housing market skyrocketed, with the median home price rising from about $160,000 in 1998 to $275,000 in 2006, the peak of the finance-driven boom. This jump was driven by all manner of financial speculation, including rampant criminal behavior, which had been let loose by the lowering of interest rates by the US Federal Reserve.

The housing market today is going through a new version of the 2006 housing crisis. However, unlike 2006, this process is global. Nearly every major capitalist government in the world is pursuing a policy of near-zero interest rates, encouraging rampant speculation in both the stock market and the real estate market....

Those who make money off of rents do not add anything to the productive system. While a certain amount of money can go to maintenance and upkeep, vast and increasing sums of money made by real estate are from the pure monopoly status of owning land.
The wealth of these billionaires principally comes from the unsavory fact that in order to keep the global economy afloat, the central banks around the world have pumped the major banks full with cheap credit.
As UBS Global notes in its 2015 Global Real Estate Bubble Index, “Loose monetary policy has prevented a normalization of housing markets and encouraged local bubble risks to grow.” They write that much of the “overvaluation” in the global housing stock comes from a “dependence on low interest rates.”

5--US consumer spending posts biggest gain in more than six years

U.S. consumer spending recorded its biggest increase in more than six years in April and inflation rose steadily, more signs of an acceleration in economic growth that could persuade the Federal Reserve to raise interest rates again as early as June. ....

The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.2 percent last month after edging up 0.1 percent in March. In the 12 months through April the core PCE rose 1.6 percent after a similar increase in March.
The core PCE is the Fed's preferred inflation measure and is running below the U.S. central bank's 2 percent target.

6--Risky Reprise of Debt Binge Stars U.S. Companies Not Consumers

Enticed by record-low interest rates, companies increased total debt by $2.81 trillion over the past five years to a record $6.64 trillion. In 2015 alone, liabilities jumped by $850 billion, 50 times the increase in cash by S&P’s reckoning.
For the most part, companies aren’t pouring all that money into capital expenditures to increase the efficiency and capacity of their operations. Instead, much of it has been used to finance share buybacks, dividend boosts and acquisitions....

Since 2009, S&P 500 companies have spent more than $2 trillion to repurchase shares, helping sustain a rally where stock prices almost tripled. Mergers and acquisitions worldwide, meanwhile, jumped about 28 percent last year to a record $3.52 trillion, according to data compiled by Bloomberg.

Weak Demand

“If you put yourself in the seat of someone responsible for management of a company, they see weak demand,” Federal Reserve Governor Jerome Powell said in a May 26 appearance at the Peterson Institute for International Economics in Washington. “They can cut costs and they can buy back their stock and they can make their numbers that way for a period of time.”
Now, both buybacks and takeovers are starting to tail off as companies increasingly feel the pinch from sagging profits...

(struggling capex--Last week’s news that so-called core capital goods bookings fell for the third straight month in April. The seasonally-adjusted total of $62.4 billion for non-defense orders excluding aircraft was the lowest in five years, prompting Neil Dutta of Renaissance Macro Research to label business investment “pathetic.”)...

Like households, corporations are using the money for short-term purposes rather to prepare themselves for the future. They’re basing their bets on rosy expectations that may not pan out. And it’s the bottom 99 percent that are most at risk should credit conditions tighten.

Corporate 1%

While corporations as a whole possess a record $1.84 trillion of cash and liquid investments, it’s heavily concentrated among a small number of companies, mainly in the technology sector, according to a study this month by S&P Global Ratings analysts Andrew Chang and David C. Tesher.

6--Refinancing is Dead: A Generation of Hard Times Will Continue Until Secular Real Wages Improve

The post from nearly 10 years ago was entitled, Are Hard Times Near? The great decline in interest rates is ending.” The theory is right in the title. Since the 1970s, real average hourly earnings had declined. Average Americans coped by spouses entering the workforce, by borrowing against appreciating assets, and by refinancing as interest rates declined.

By 1995 the spousal avenue peaked. Borrowing against stock prices ended in 2000. Borrowing against home equity ended in 2006. When interest rates failed to make new lows, the consumer was tapped out, and began to curtail purchases. A recession began – and its effects have lingered and lingered. Hard Times were indeed near...

Ten year treasuries made a 60 year+ low in 2013 at 1.50%. Even if treasuries, and mortgage rates tied to them, make a new low, the floor is somewhere north of 0%. That -1.5% decline in a mortgage payment on a $250,000 house would be $3750 a year, or a little over $300 a month. That’s the most extreme case. Even if interest rates make new lows, households that refinance are likely to see more on the order of $100 or $200 per month of freed up cash — not enough to power much consumer spending...

Currently nominal wage growth is running at about 2.5% YoY. Real wages have been boosted in the last 2 years by collapsing gas prices. Once that is over, what happens next? Even 2% YoY inflation eats up nearly all of consumers’ wage growth. A 3% YoY inflation rate means real wages decline.
So the bottom line is, we are already in a period – a period that I expect to last an entire generation – where real gains by average Americans won’t be available from financing gimmicks, but must come from real, actual wage growth. At the moment I see little economic or political impetus to make that happen, even though average Americans understand via their wallets the issue all too well. Eventually it will happen, but I believe between now and then is another recession, one that I fear is likely to be worse than the 2008-09 recession because it is likely to include a spasm of wage-price deflation

7--Economic Scars Help Explain Bizarre 2016 Race   ---Polling suggests the recession scared and scarred the electorate in ways not understood until now

those numbers mask a sense of eroding confidence born of stagnant or declining wages and job insecurity. Just 23% said they expected their income to be higher in the coming year.  Almost half of adults said they couldn’t cover an emergency expense costing $400, or would have to cover it by selling something or borrowing money.
A Pew Research Center study offers a similar picture. At the beginning of this year, 70% of Americans were dissatisfied with the state of the economy, up from 61% at the beginning of 2007, before crisis struck....

Yet the Wall Street Journal/NBC News poll has found that Americans’ view of the path the country is on actually has turned darker as the economic recovery has unfolded. At the beginning of 2009, while the financial crisis was in full swing but tempered by the optimism that accompanied the coming inauguration of Barack Obama, 59% of Americans surveyed thought the country was off on the wrong track.

Two years into the recovery, views actually began to darken, at least as measured by this “wrong track” reading. By the middle of 2011, 67% said the country was off on the wrong track. By late 2013, that number had reached 78%. It has since moderated a bit, but last month stood at 70%.

8--Venezuela: Pro-Govt Supporters Being Killed in Record Numbers

9--5 Key Facts About the Leftist FARC Who Survived CIA Attacks

10--The False Promise of Negative Interest Rates, Skidelsky

11--Negative Rates Fail to Spur Investment for Corporate Europe

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