Wednesday, August 24, 2016

Extra Links

1---New Home Sales Surge Most Since 2007, Median Price Down 5.1%, January-to-July Sales at 1963 Level

... new home sales report where July’s headline surged, up a monthly 12.4 percent to a 654,000 annualized rate....New-home sales in July were up 31.3% from a year earlier. The latest figure brings new-home sales back to the level recorded just before the recession began.
But the pace remains well below the peak level of 1.39 million in July 2005. (Still less than half the total of 2005)

2--US Sanctions Fail: The Woman Who Revived Russia’s Markets
(Hmmm. Nice sanctions you got there)

Russian markets are red hot again.
Two years after plunging oil prices and Western economic sanctions fueled an investor exodus, the Micex stock index on Tuesday hit an all-time high. It is up 25% this year in dollar terms, making Russia the sixth-best performer among 23 emerging countries tracked by MSCI Inc. MSCI 0.52 %
The ruble has gained 13% against the dollar this year, ranking third among all emerging currencies. Russia’s local-currency bonds rank third this year in performance out of 15 countries tracked by J.P. Morgan Chase & Co....

Global investors this year have added $1.3 billion to funds that invest in Russian bonds and stocks, according to EPFR Global. The share of foreigners among government bondholders rose to 24.5% as of June 1, its highest level since late 2012, according to the Russian central bank.

3--Hitting the exits-- QE fails to attract investors

While U.S. equity indexes have notched record highs, the Stoxx Europe 600 remains some 17% adrift of its April 2015 record. It is down 6.1% year-to-date and little changed since early February....

In Europe, by contrast, investors are finding it easier to find reasons for worry rather than hope for the future. Political risk hasn’t dented the economy notably—the PMIs in particular have shown no reaction to the Brexit vote—even if such risks still loom large on the radar. Europe’s banking system remains a source of perennial concern too

4--No buyers in forlorn Europe-- Political Risks Loom Large on European Markets

Stocks in Europe are looking pretty cheap—but this time, investors aren’t rushing in.
With lackluster corporate profits, tepid economic growth and a fragile banking system, the market is vulnerable to a range of political risks in the coming months that could derail the region’s feeble recovery, investors say....

Some investors have already lost interest. Outflows from the region’s equities have continued for 28 consecutive weeks, with net redemptions exceeding $90 billion over that period, according to fund-tracker EPFR Global....

Italian bank shares are down nearly 50% this year, while the Euro Stoxx banks index is down roughly 30%.
European stock markets tend to be heavily weighted to the financial sector, which means a sustained recovery without a stabilization of the region’s banks is unlikely.
That comes amid a weak backdrop for European earnings more broadly. The forecast 12-month forward earnings per share for the Stoxx Europe 600 is $19.20, according to FactSet, compared with a forecast of $20.71 a year ago. As of Friday, the forward price-to-earnings ratio of the Stoxx Europe 600 was 15.2, compared with 17.1 for the S&P 500, FactSet said.

5--A credit bazooka?? Next Stop on ECB QE Adventure: $980 Billion Corporate Debt (march 10, 2016)

6--Read it and weep:  Europe’s Bankers Got 95 Percent of Greek Debt Payments

One might think that US$440 billion in loans would have helped Greece recover from the global recession of 2008-09, the second European recession of 2011-13 that followed, and the Europe-wide chronic, stagnant economic growth ever since. But no, the US$440 billion in debt the Troika piled on Greece has actually impoverished Greece even further, condemning it to eight years of economic depression with no end in sight.

To pay for the US$440 billion, in three successive debt agreements the Troika has required Greece to cut government spending on social services, eliminate hundreds of thousands of government jobs, lower wages for public and private sector workers, reduce the minimum wage, cut and eliminate pensions, raise the cost of workers’ health care contributions, and pay higher sales and local property taxes. As part of austerity, the Troika has also required Greece to sell off its government owned utilities, ports, and transport systems at ‘firesale’ (i.e. below) market prices.....

In exchange for the 95 percent paid to the Troika and banker-investor friends, the austerity measures accompanying the Troika loans has meant the following: Greece’s unemployment rate today, in 2016, after eight years is still 24 percent. The youth jobless rate still hovers above 50 percent. Wages have fallen 24 percent for those fortunate enough to still have work.....

last August Greece had to implement the following even more severe austerity measures:
Generate a budget surplus of 3.5 percent of GDP from which to repay Troika debt-i.e. around US$8 billion a year. Raise sales taxes to 24 percent, plus more tax hikes on “a widening tax base” (i.e. higher taxes for lower income households). Introduce what the Troika calls “holistic pension reform”—i.e., cut pensions up to 2.5 percent of GDP, or around US$5 billion a year, and abolish minimum pensions for the lowest paid and the annual supplemental pension grants. Introduce a “wide range” of labor market reforms, including “more flexible” wage bargaining, easier mass layoffs, new limits on worker strikes, and thousands more teacher layoffs as part of “education reform”. Cut health care services and convert 52,000 more jobs to part time. And introduce what the Troika called a more “ambitious” privatization program. And this is just a short list.

Europe’s Bankers Got 95 Percent of Greek Debt Payments....

Neoliberalism is constantly evolving and with it forms of imperialist exploitation as well. It starts as a free trade zone or ‘customs’ union. A single currency is then added, or comes to dominate, within the free trade customs union. A currency union eventually leads to the need for a single banking union within the region. Central bank monetary policy ends up determined by the dominant economy and state. The smaller economy loses control of its currency, banking, and monetary policies. Banking union leads, of necessity, to a form of fiscal union. Smaller member states now lose control not only of their currency and banking systems, but eventually tax and spending as well. They then become ‘economic protectorates’ of the dominant economy and State-such as Greece has now become

7--The Household Debt Bubble (archive)

It is an inescapable truth of the capitalist economy that the uneven, class-based distribution of income is a determining factor of consumption and investment. How much is spent on consumption goods depends on the income of the working class. Workers necessarily spend all or almost all of their income on consumption. Thus for households in the bottom 60 percent of the income distribution in the United States, average personal consumption expenditures equaled or exceeded average pre-tax income in 2003; while the fifth of the population just above them used up five-sixths of their pre-tax income (most of the rest no doubt taken up by taxes) on consumption.1 In contrast, those high up on the income pyramid—the capitalist class and their relatively well-to-do hangers-on—spend a much smaller percentage of their income on personal consumption. The overwhelming proportion of the income of capitalists (which at this level has to be extended to include unrealized capital gains) is devoted to investment.

It follows that increasing inequality in income and wealth can be expected to create the age-old conundrum of capitalism: an accumulation (savings-and-investment) process that depends on keeping wages down while ultimately relying on wage-based consumption to support economic growth and investment. ....

Under these circumstances, in which consumption and ultimately investment are heavily dependent on the spending of those at the bottom of the income stream, one would naturally suppose that a stagnation or decline in real wages would generate crisis-tendencies for the economy by constraining overall consumption expenditures. There is no doubt about the growing squeeze on wage-based incomes. Except for a small rise in the late 1990s, real wages have been sluggish for decades. The typical (median-income) family has sought to compensate for this by increasing its number of jobs and working hours per household.

Nevertheless, the real (inflation-adjusted) income of the typical household fell for five years in a row through 2004. The bottom 95 percent of income recipients experienced decreasing real average household income in 2003–04 (with the top 5 percent, however, making sharp gains). In 2005 real wages fell by 0.8 percent.3
Nevertheless, rather than declining as a result, overall consumption has continued to climb.

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