Wednesday, June 22, 2016

Today's Links

1--Brexit—Cameron’s Faustian Bargain

The Brexit vote is therefore a protest vote—against economic conditions and failed monetary and fiscal policies of the UK elite since 2009, gainst too rapid and unregulated immigration and cultural change, and against the loss of representation and sovereignty as un-elected supra-national institutions created by the treaty function outside voters’ control largely to the benefit of pan-European economic elites.
Brexit Does Not Mean Leaving the EU
Should an exit vote occur on the 23rd the more likely scenario is that little will change in the short term.  That is because a vote by the UK electorate does not mean an actual ‘exit’ follows.  An exit requires a vote by the British parliament to leave.  That would activate what is called Article 50 of the EU Treaty, the treaty’s hereto unused ‘exit’ clause.....

Global financial speculators have reaped trillions of dollars in profits and capital gains since 2009. In the US alone, more than $5 trillion has been distributed to investors and wealthy households by corporations in the form of stock buybacks and dividend payouts. Add in the rest of the global economy, and markets for derivatives, foreign exchange, real estate speculation, and the like, and the total is easily more than $15 trillion.  Trillions more remain tied up in financial assets as investors await the Brexit—prepared to quickly cash in the rest if there’s a ‘leave the EU’ vote or to double down in financial speculation if the vote is to ‘remain’.   In the worse scenario, June 23 could augur in a worldwide major correction in financial asset prices, with dire consequences for a global economy already in retreat along a number of economic fronts.

Brexit Is About Growing Opposition to Free Trade
Many UK voters have become ‘euroskeptic’. The EU is a ‘customs treaty’, i.e. a Free Trade zone.  Many UK workers and businesses see little benefit from membership in the EU free trade zone and, in many cases, feel they have experienced significant economic harm from the free trade arrangements. In that growing skepticism of the benefits from free trade—which is what the EU in fact is—they share similar views with a growing number of voters across Europe.  Free trade brings great benefits to corporations, bankers and wealthy investors, but delivers questionable results for workers, small businesses, and domestic producers.  In the media debates and discussions on Brexit this fundamental connection to rising discontent with Free Trade is often overlooked, and not by accident by the media.
But then again, maybe not. Maybe nothing happens....

Immigration is perceived by voters as having had negative impact on UK jobs and wages, especially in the industrial areas of the middle of the country, according to polls.
In addition to economic, immigration and cultural reactions, it has become increasingly apparent to many voters that membership in the EU has meant the loss of representational democracy.

2--Nervous global investors revisit 1930s playbook

A study published by the Centre For Economic Policy Research shows this paltry pace of trade growth is also below the 4.2 percent average for the past 200 years.
Foreign direct investment growth of 2 percent of world output is also at its lowest since the 1990s, while the hangover from the credit crunch has seen annual growth rates in cross-border bank lending grind to a halt from some 10 pct in the decade to 2008....

Morgan Stanley goes on to draw a parallel with the global response to 2008's crash and subsequent world recession.
Waves of monetary and fiscal easing by 2009 underpinned economic activity, but government budgets have again tightened quickly and before inflation expectations or private investment spending and capital expenditure have been restored.
The second world recession in a decade is now seen as a threat, but with a heavier starting debt burden, historically low inflation and interest rates, stalled trade and a worsening demographic profile. That could mean another global government spending stimulus is needed to re-energize private firms.
"The effective solution to prevent relapse into recession would be to reactivate policy stimulus," Morgan Stanley said.
Success in preventing a new recession without the cataclysm of a world war would be a profound lesson learned. Political extremism, isolation and protectionism make the task far harder

3--Some 66 million Americans have ‘zero’ emergency savings

4--Fed Warns of Vulnerabilities Building in Commercial Real Estate

5--Federal Reserve says U.S. stocks have gotten expensive

Even the Federal Reserve is weighing in on valuations in the U.S. stock market.
In its monetary policy report submitted to the Congress ahead of Federal Reserve Chairwoman Janet Yellen’s testimony, the central bank acknowledges that stock values have grown somewhat richer since the beginning of 2016. Here’s how they put it:

“Forward price-to-earnings ratios for equities have increased to a level well above their median of the past three decades. Although equity valuations do not appear to be rich relative to Treasury yields, equity prices are vulnerable to rises in term premiums to more normal levels, especially if a reversion was not motivated by positive news about economic growth.”...

Going back to mid-1990s, former Fed Chairman Alan Greenspan sounded the alarm on tech stocks too. But his famous “irrational exuberance” comments didn’t pop the tech bubble when he delivered them in 1996. It would take another four years before the air rushed out.
Others have made the case that today’s stocks are a touch rich. According to FactSet, 12-forward non-GAAP price-to-earnings ratio for the S&P 500 is 16.8. That is above its 10-year average of 14.6.
Read: By this measure, U.S. stocks are more expensive than ever
Stocks also are pricey based on another measure. The cyclically-adjusted Shiller PE, which factors price-to-earnings ratios based on average inflation-adjusted earnings from the previous 10 years, is at 26.2, representing its highest level since 2007.

As the Fed alludes in its comments, investors have been driven into stocks because low and negative-interest yielding assets emerging in many parts of the world aren’t offering better options.
But just because stocks are registering as pricey by some measures doesn’t mean that investors should necessarily sell. Stocks can always head higher despite being expensive.

Yellen & Co. aren’t sounding any alarm bells just yet, but the central bank’s comments on stock values is in the spirit of focusing on the stability of financial markets. Inflated valuations can lead to bubbles and that can be a problem.

To be sure, the lack of better-returning assets is partially a problem borne out of the Fed and other central banks, which have been implementing a raft of quantitative easing measures to boost sluggish economies, which have created some distortions in the market, including those negative yielding sovereign bonds

6-- From the "liberal" Nation???

Despite expressing strong anti-Assad sentiments,” a study from the Brookings Institution released last year found, “the bottom line is that Americans remain strongly opposed to American military operations against Assad’s army in Syria, with 72% opposing and 25% supporting such operations.” Those views held across party lines. In a poll released in February, Gallup found that, while a third of Americans want more military involvement, more than half want no escalation of our intervention there.

 The diplomats should not be scorned for their dissent—it is entirely appropriate that they advise top officials of their thinking—and, though the question of leaking the memo to the general public is more complicated, ultimately our democratic process in deciding whether to intervene is strengthened by having more diverse perspectives. None of that, however, means that the dissenting diplomats, Hillary Clinton, or anyone else advocating a broader US war in Syria should escape the hard questions that our nation so often avoids before military adventures. Syria is too dangerous to make that mistake again.

7--Trolling for War with Russia, Pat Buchanan (Today's "must read")

Some 50 State Department officials have signed a memo calling on President Obama to launch air and missile strikes on the Damascus regime of Bashar Assad.
A “judicious use of stand-off and air weapons,” they claim, “would undergird and drive a more focused and hard-nosed U.S.-led diplomatic process.”

In brief, to strengthen the hand of our diplomats and show we mean business, we should start bombing and killing Syrian soldiers.

Yet Syria has not attacked us. And Congress has not declared war on Syria, or authorized an attack. Where do these State hawks think President Obama gets the authority to launch a war on Syria?
Does State consider the Constitution to be purely advisory when it grants Congress the sole power to declare war? Was not waging aggressive war the principal charge against the Nazis at Nuremberg?

8--Why Brexit would be a history-defining, irreversible mistake, Lawrence "chicken little" Summers


9--Putin: Russia will respond to 'aggressive NATO rhetoric'

10--Daesh 'Takeover': What Will Happen to Syria If Washington Overthrows Assad

Should the SAA fall, "the most radical elements would quickly overpower the alleged moderates that the United States perhaps erroneously believes that it is supporting, leading to even more atrocities directed against religious non-conformists and minority groups," he detailed....

"Apparently the 51 'diplomats' who have been unable to practice much diplomacy in the real world somehow believe that bombing the Syrian government can be accomplished with Moscow sitting idly by, too terrified by Washington's show of force to respond," he noted. "It would be a mistake to think that."

11--Existing Home Sales Highest Since Feb 2007 As Prices Hit Record High

12--Deadly heatwave hits US Southwest

At least 17 records were shattered on Sunday, as temperatures reached 120 degrees Fahrenheit in Yuma, Arizona; 118 degrees in Phoenix, Arizona; and 109 degrees in Burbank, California. However, most places reached their peak temperatures on Monday, when many records were also broken: 121 degrees in Palm Springs, California; 112 degrees in Lancaster, California; and 131 degrees in Death Valley, California...

The extreme temperatures in the Southwest are the result of a meteorological phenomenon referred to as a “heat dome.” This phenomenon occurs when a high-pressure system is formed in the upper atmosphere, forcing hot air back down. These heat domes are frequently deadly. In August 2015, a heat dome resulted in temperatures of up to 165 degrees Fahrenheit in parts of the Middle East, killing dozens and sparking protests.

Many experts are saying that the current heat wave is being exacerbated by the ongoing effects of climate change. According to National Climatic Data Center meteorologist Jake Crouch, heat domes “are expected to happen more often in the future.” He added that the increase in global temperatures due to man-made global warming is the leading contributing factor

13---Record heat wave fuels wildfire in southern California

14--Seventy-five years since the Nazi invasion of the Soviet Union

Seventy-five years ago today, in the early morning hours of June 22, 1941, Nazi Germany launched Operation Barbarossa, a massive, undeclared invasion of the Soviet Union. Over the course of the operation, some 4 million soldiers of the Axis powers attacked the USSR along an 1,800-mile front, the largest invasion force in the history of warfare.
Operation Barbarossa was, in the words of the German state, a Vernichtungskrieg, a war of annihilation. Its aim was not simply the conquest of territory and seizure of human and natural resources, it was the physical liquidation of the Soviet Union and extirpation of all traces of the 1917 Russian Revolution....

The Generalplan Ost (General Plan East), adopted in 1940, included a “Hunger Plan” that envisioned the deliberate, targeted starvation of 30 million people in western and northwestern Russia—18 percent of the Soviet population.
On the orders of Hitler and the general staff, all basic tenets of international and military law were to be ignored. The so-called Commissar Order issued in advance of the invasion decreed: “In this battle it would be a mistake to show mercy or respect for international law toward such elements… The barbaric, Asiatic fighting methods are originated by the political commissars… Therefore, when they are picked up in battle or resistance, they are, as a matter of principle, to be finished off immediately with a weapon.”

General Erich Hoepner told the 4th Panzer Group that “the struggle must aim at the annihilation of today’s Russia and must therefore be waged with unparalleled harshness… No adherents of the present Russian-Bolshevik system are to be spared.”...

Stalin thereby eliminated virtually the entire military cadre that had emerged from the Revolution and the 1918-1921 Civil War, and been trained and educated under the leadership of Leon Trotsky, co-leader with Lenin of the Russian Revolution and the creator and commander of the Red Army in the early years of the regime. In total, some 30,000 Red Army personnel were executed, including high percentages of division, corps and army commanders

15--The Brexit referendum and the struggle for socialism

The SEP is an implacable opponent of the EU.
The EU is an instrument of the ruling classes of Europe for the imposition of brutal austerity measures—most directly on the workers of Greece, of Spain, Portugal and Ireland, but also on workers in the UK, France and Germany. Our own prime minister, Cameron, has even proclaimed an “Age of Austerity” as his government imposes cuts of £210 billion, (€263 billion), equivalent to over 10 percent of Britain’s GDP, at the cost of the destruction of 20 percent of all public sector jobs, millions more in the private sector and the decimation of vital services.

The EU is second of all an instrument of military aggression. It is a vital ally of NATO in its escalating conflict with Russia and China as the US and European powers seek to control all of the world’s markets and resources—including vital oil and gas riches commanded by the Putin regime in Moscow and the giant production platform manned by billions of super-exploited workers led by President Xi Jinping in Beijing.

Finally, the EU is an instrument for erecting and policing Fortress Europe. It bears responsibility for the horrific treatment of hundreds of thousands fleeing the impact of wars in which the UK, Germany, France, etc., are all complicit—in Libya, Iraq and Syria—including the deaths of thousands drowned in the Mediterranean and the imprisonment, in what are effectively concentration camps, of tens of thousands more....

. A report by the Brookings Institution in the US states:
“Brexit would lead to a global fall in equity prices as investors fear the impact the vote could have on Britain's economy, and could spell the first falling domino of European Union disintegration... It is also not hard to imagine that Scotland might vote to secede from the UK, as it has tried in the past, and that it would impact Northern Ireland which has enjoyed a rare period of relative peace—in addition to setting off other European regional succession movements.”
Not just the break-up of the European Union, but the fracturing and break up of nation states is posed. Angel Gurria, secretary-general of the Organisation for Economic Cooperation and Development, concurs, warning, “Brexit could threaten both the unity of the UK and the unity of the European Union.”...

We side with neither wing of the criminal parasites who have wrecked the lives of millions and who lead the referendum campaign. We insist that the ally of the British workers are the workers of Germany, Europe and internationally.

16--Yellen: Recession Unlikely, but Long-Run Growth Could Be Slow

17--Not Just the 1%: The Upper Middle Class Is Larger and Richer Than Ever

Research shows the number of upper middle class households has more than doubled since 1979

The latest piece of evidence comes from economist Stephen Rose of the Urban Institute, who finds in new research that the upper middle class in the U.S. is larger and richer than it’s ever been. He finds the upper middle class has expanded from about 12% of the population in 1979 to a new record of nearly 30% as of 2014.
“Any discussion of inequality that is limited to the 1% misses a lot of the picture because it ignores the large inequality between the growing upper middle class and the middle and lower middle classes,” said Mr. Rose. The Urban Institute is a nonpartisan policy research group.

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