Friday, June 17, 2016

Today's links

1--120 Degrees! Western Wildfires Explode With Triple-Digit Heat Wave on the Way

2--Recovery? Rates were higher during the Great Depression!

Rates of 0.25% and the word “recovery” do not belong together. The Fed is currently maintaining rates at levels usually reserved for dealing with Crises, NOT recoveries. Heck, the Fed kept rates higher than current levels during the recession following the TECH BUST

3--The Looming Crash Of 2016: Stocks Have Already Slumped In 6 Of The World’s 8 Largest Economies

4--Members  Of European Parliament Beg Draghi To Unleash Helicopter Money

Fabio De Masi, a German lawmaker from the Die Linke party is pushing the ECB to consider alternative policy options because QE combined with austerity "will only inflate asset bubbles as nobody invests despite ultra-low interest rates", adding "we hence need to spend directly into the economy. Funding public investment via EIB would be my preferred option but helicopter money to low income households would definitely work."....

From the FT
“You recently cited the potential legal obstacles to the deployment of helicopter money,” the MEPs say in the letter, which will be sent to Mr Draghi on Friday. “However, several eminent economists have already outlined how helicopter money could be distributed directly by the ECB, without going through government accounts and remaining in compliance with the EU Treaties.”
5--Housing bubble or housing prosperity?

I believe today’s housing market represents housing prosperity. While it’s true that the powers-that-be reflated the old housing bubble with interest rate stimulus, this only represents a bubble if house prices crash. As long as mortgage rates remain low, the likelihood of a severe price crash like 2007-2012 is highly unlikely. Further, I don’t believe mortgage interest rates will be allowed to rise because of the disruptive effect such a rate hike would have on housing. So no, this is not a bubble.

6--Banks reeling as bubble-era HELOC delinquencies double in one year

When mortgage mania was at its peak in 2005, millions of homeowners tapped the equity in their homes through home equity lines of credit.
It’s now time to pay the piper.

HELOCs come with 10-year grace periods, so 2015 marked 10 years after the frothiest borrowings. In March, delinquencies were up 87% compared to a year ago among 2005 second lien HELOCs – those that stand behind a mortgage on the property – data provider Black Knight said Monday.

7--San Francisco’s Housing Mania May Finally Have Reached Its Limit

San Francisco no longer ranks on a list compiled by brokerage Redfin of the 20 hottest U.S. housing markets. Denver, Seattle and Portland, Oregon, are now taking the lead, according to a June 9 report that tracks listed homes expected to sell within two weeks. The California city surpasses those markets in the percent of homes sold above the list price and the average sale-to-list price ratio

8--Hillary's Huge Libya Disaster

Before the revolution, Libya was a secure, prospering, secular Islamic country and a critical ally providing intelligence on terrorist activity post–September 11, 2001. Qaddafi was no longer a threat to the United States. Yet Secretary of State Hillary Clinton strongly advocated and succeeded in convincing the administration to support the Libyan rebels with a no-fly zone, intended to prevent a possible humanitarian disaster that turned quickly into all-out war...

Despite valid ceasefire opportunities to prevent “bloodshed in Benghazi” at the onset of hostilities, Secretary Clinton intervened and quickly pushed her foreign policy in support of a revolution led by the Muslim Brotherhood and known terrorists in the Libyan Islamic Fighting Group. One of the Libyan Rebel Brigade commanders, Ahmed Abu Khattala, would later be involved in the terrorist attack in Benghazi on September 11, 2012. Articulating her indifference to the chaos brought by war, Secretary Clinton stated on May 18, 2013, to the House Oversight Committee and the American public, “Was it because of a protest or was it because of guys out for a walk one night and decided they’d go kill some Americans? What difference, at this point, does it make?”

9--Putin calls for integration of Eurasian business

10--True Reason for Kerry's Warning to Russia, Assad Over Syria Truce

11--The return of “secular stagnation”

While she did not use the term herself, Yellen’s remarks point to the emergence of what former Treasury Secretary Lawrence Summers and others have referred to as “secular stagnation.” This term was first by coined by economist Alvin Hansen in 1938 to describe a structural condition in the capitalist economy where, no matter how low interest rates go, there is no growth because the level of demand, particularly investment, is not in a cyclical downturn but permanently insufficient to ensure economic expansion.

Yellen’s reference to “aging societies” as an explanation for what she clearly recognises as a shift in the global economy, recalls nothing so much as the explanation of the classical bourgeois economist of the early nineteenth century, David Ricardo, who, when confronted with the tendency of the rate of profit to fall, ascribed it to the declining fertility of land and the fall in productivity in agriculture. As Marx pithily remarked, horrified by this prospect which called into question the historical viability of the capitalist economy, Ricardo took flight to the sphere of organic chemistry. Likewise Yellen, when confronted with persistent economic trends, seeks refuge in demographics....

The year 1914 is forever etched in history as the year of the outbreak of World War I. But it was economically significant as well. It marked a downturn in profit and growth rates that, despite all efforts to overcome it, continued through the 1920s and 1930s, resulting in the Great Depression.

These underlying processes produced a contraction in the world economy which led inexorably to the outbreak of World War II as the major capitalist powers engaged in an intensifying struggle for contracting markets and profits, first by use of economic nationalist methods—increased tariffs and the formation of currency blocs—and then by military means.

Today’s world is marked by the return of these conditions: the stagnation of the world economy, glutted markets in a series of commodities and industrial products, persistently low levels of investment, the driving force of economic growth, currency conflicts and intensifying financial crisis, to name but a few examples.

And they are inevitably leading in the same direction as in earlier decades: a world war for the division and re-division of the world economy, with potential nuclear consequences and the destruction of civilisation itself

12--Fears of UK exit from the EU fuel global panic

In an article published Wednesday and entitled “Is Brexit good for America? Nope,” the Brookings Institution, a Washington think tank with close ties to the ruling Democratic Party, warned in a dire assessment, “The UK leaving the European Union would mean substantial upheaval for global markets, financial firms, and businesses that would likely leave London… Already, markets are nervous, U.S. and global stocks are slumping, and money is pouring into safe haven sovereign debt: the yield on the 10-year U.S. Treasury note is approaching record lows, while Germany’s 10-year note broke a new record low—a negative yield!”

Beyond the economic turbulence that would accompany a vote by the population of Europe’s second largest economy to exit the EU, there are major geostrategic implications. The UK is a nuclear power and the closest ally of the United States in the US-led NATO military alliance.
The Brookings Institution noted, “The United Kingdom has traditionally been in between continental Europe and America, not only in geography but also in policy.”

It concluded, “America spent enormous resources during the 20th Century engaging when continental Europeans fought each other, always aligned with Great Britain, in support of our ‘special relationship.’ If Britain leaves, it raises the chances of another crisis in Europe which could spread to our shores. It is simply not in our interests to watch the UK walk away from the EU.”
A vote to leave will intensify centrifugal tendencies already threatening to tear the European Union apart. The ruling elite internationally fears a Leave vote could prompt a devastating economic chain reaction under conditions of massive and growing hostility to the European Union.

A recent poll by the US-based Pew Research Center found that only 38 percent of the population of France had a favourable view of the EU, down from 69 percent in 2004. This is even lower than the level of support in the UK. Just 44 per cent of Britons felt positively about the EU, down from 54 percent in 2004. Only 47 percent of the Spanish population holds a favourable view of the EU, down from 80 percent in 2007

13--Democrats take the lead in attack on democratic rights

14--Jerry White speaks on the next stage of the US presidential elections

15--Analysis: U.S. Risks Japanese-Style Growth Slump---Low bond yields suggest markets see entrenched economic problems that will be tough to overcome

She usually blames the low neutral rate on “headwinds” such as the aftereffects of the 2008 financial crisis that would fade with time. But Wednesday, she cited “long-lasting or persistent” factors, such as aging societies and a global slump in productivity growth. (Got that? So the problem is NOT the Fed or its ridiculous policies. The problem is aging populations, secular stagnation or some other lame excuse.)

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