Monday, August 8, 2016

Today's Links

"Erdogan depends on Western finance and investment which is highly resistant to backing a regime critical of the US, the EU and NATO.  If Erdogan faces economic pressures from the West can he turn elsewhere or will he, in the face of capitalist ‘realities’ retreat and submit". James Petras

1--Poorer than your parents?

The McKinsey study Poorer than Their Parents? offers a new perspective on income inequality over the period 2005-2014.
Based on market income from wages and capital, the study shows 81% of US citizens are worse off now than a decade ago. In France the figure is 63%, Italy 97%, and Sweden 20%.

2--More Than Half of Americans Reportedly Have Less Than $1,000 to Their Name

In a recent survey, 56 percent of Americans said they have less than $1,000 in their checking and savings accounts combined, Forbes reports. Nearly a quarter (24.8 percent) have less than $100 to their name. Meanwhile, 38 percent said they would pay less than their full credit card balance this month, and 11 percent said they would make the minimum payment—meaning they would likely be mired in debt for years and pay more in interest than they originally borrowed. It paints a daunting picture of the average American coming out of the spend-heavy holiday season: steeped in credit card debt, living paycheck-to-paycheck, at serious risk of financial ruin if the slightest thing goes wrong.

3--Yves Smith comment: We’re in a Low-Growth World. How Did We Get Here? New York Times

Hard to understand only if you don’t want to understand it. 40 years of not sharing productivity gains with workers leads to more income in the hands of those with less propensity to spend, which means less demand, which means less growth. As a result, those with the $ don’t invest in the real economy enough out of a combination of having overly high return targets and growth being below potential. Add to that a huge cutback in basic R&D, both gov’t supported and paid by quasi or actual monopolies that took pride in that sort of thing (Bell Labs, Xerox Parc), as well as underinvestment in infrastructure.

4--Earnings beats are concealing bad results

investors shouldn’t be fooled by this season’s “better-than-expected” earnings—they are still pretty bad.With nearly 90% of the S&P 500 companies having reported second-quarter results through Friday morning (437 out of 505), aggregate earnings-per-share for the group are on course to decline 3.5% from a year ago, according to FactSet.

Many Wall Street strategists are pleased, because that is a lot better than expectations of a 5.5% decline on June 30, just before earnings reporting season kicked off. So are investors, as the S&P SPX, -0.11%  and Nasdaq Composite Index COMP, -0.22%  closed in record territory Friday, and the Dow Jones Industrial Average DJIA, -0.13%  closed less than 0.3% away. Read more in Market Snapshot.

It also means S&P 500 earnings will suffer the fifth-straight quarter of year-over-year declines, the longest such streak since the five-quarter stretch from the third quarter of 2008 through the third quarter of 2009, the heart of the Great Recession.

Goldman Sachs strategists turned bearish on U.S. stocks on a three-month view this week, saying they “remain expensive and earnings growth is poor

5--Bond market Ponzi:  Bond Market’s Big Illusion Revealed as U.S. Yields Turn Negative

That truism is now a thing of the past. Last month, yields on U.S. 10-year notes turned negative for Japanese buyers who pay to eliminate currency fluctuations from their returns, something that hasn’t happened since the financial crisis. It’s even worse for euro-based investors, who are locking in sub-zero returns on Treasuries for the first time in history....

The fact that yields on 10-year Treasuries are still way higher than those in Japan or Germany is part of the reason foreigners are having such a hard time actually profiting from the difference. Negative interest rates outside the U.S. have caused a surge in demand for dollars and dollar assets, pushing up the cost to get into and out of the greenback at the same exchange rate to levels rarely seen in the past....

Whatever the strategy, there’s little debate over how important foreign demand is for the $13.4 trillion market for Treasuries.
“We’re at a point now where investors have to start thinking about this,” said Sachin Gupta, a foreign-bond fund manager at Pimco, which oversees $1.51 trillion. “As the cost of hedging rises to such an extent, there’s no extra carry to be had. That itself will slow down the demand -- and, at some point, even reverse the demand -- for Treasuries.” (Uh, oh)

6--Pay up, deadbeat! Ahmadinejad to Obama: You still have time to fix ‘bitter past' & return $2bn to Iran  

The message then gets straight to the point: “On June 9, 2014, a court in America, based on unfounded claims without presenting any reliable documents, issued a sentence based on which about two billion Dollars of the Iranian nation's assets would be seized unlawfully,” the letter reads....

In April, the US Supreme Court ruled that Iranian assets worth $2 billion must be paid to American families whose relatives were killed in the Beirut and Saudi Arabia military attacks blamed on Iran, which took place in 1983 and 1996, respectively.

Notably, the ruling came despite an apparent easing of tensions between Tehran and the West, and the lifting of most sanctions following a nuclear deal framework agreement.
Iran responded angrily at the time, calling the move a “highway robbery” and “property seizure.” In mid-June, it was revealed that Tehran had filed a lawsuit against Washington to the UN International Court of Justice.

People in Iran hope “that the particular case of property seizure, which fully occurred during your term in office, and actually toward the end of the term, and which is counter to all international legal principles and rules, be quickly fixed by your excellency,” Ahmadinejad wrote.
“I passionately advise you not to let the historical defamation and bitter incident be recorded under your name,” he urged, adding that Iran's “historical distrust” of the US would otherwise deepen.

7--Russia and Turkey 'Will Resolve Syria's Problems' As Bilateral Ties Improve

"The Turkish government understood that the West was behind the unsuccessful military coup that took place on July 15. President Erdogan openly mentioned this," the analyst said. "This is testament to how important Turkey's cooperation with Russia is."

Karakus also mentioned that some countries are not happy about Ankara's rapprochement with Moscow, which took place after President Erdogan apologized for the November 24 incident that had seen a Turkish military jet shoot down a Russian warplane which was on a mission to bomb Daesh positions in Syria...

The West, particularly the United States, is concerned about improving ties between Moscow and Ankara," he said.

This is what makes Erdogan's visit to Russia so important. The meeting, Karakus noted, should be viewed as a "barrier" that will prevent Washington and its allies from carrying out their Greater Middle East initiative. "Russian-Turkish cooperation and joint activities will also help to resolve problems in Syria," he added.

US journalist Mike Whitney shared these sentiments, saying that Turkey's new foreign policy that has aligned the country with Russia, Iran and Syria will undermine Washington's efforts aimed at "[controlling] the flow of energy from Qatar to Europe" and "[redrawing] the map of the Middle East," as well as the country's pivot to Asia.
"That strategy will either be decimated or suffer a severe setback," he wrote for CounterPunch.

8--US Tries to Prevent Eurasia's Integration Led by Russia, China

It appears that the roots of the US foreign strategy go deep into Halford Mackinder's geopolitical paradigm dubbed the "Heartland Theory."

Mackinder (1861 — 1947), the British geographer, academic and politician regarded the Eurasian continent as the "center" of global politics and stated that the power that controls Eurasia ("Heartland") could affect world affairs.

On the other hand, being a Briton, Mackinder expressed concerns about the Russo-German alliance that threatened to undermine the British Empire's geopolitical positions

In his famous essay "The Geographical Pivot of History" written in 1904, Mackinder called attention to the fact that if Eurasia is integrated through a network of railroads, it would significantly rebalance the world's trade and diminish the significance of the UK as a global sea power....

"The Russian railways have a clear run of 6000 miles from Wirballen in the west to Vladivostok in the east… True, that the Trans-Siberian railway is still a single and precarious line of communication, but the century will not be old before all Asia is covered with railways," Mackinder forecasted.

"The spaces within the Russian Empire and Mongolia are so vast, and their potentialities in population, wheat, cotton, fuel, and metals so incalculably great, that it is inevitable that a vast economic world, more or less apart, will there develop inaccessible to oceanic commerce," he warned.
"The full development of her [Russia's] modern railway mobility is merely a matter of time. Nor it is likely that any possible social revolution will alter her essential relations to the great geographical limits of her existence," the British academic prophetically predicted...

"The primordial interest of the United States of which for century we fought wars — the First [World War], the Second, and the Cold War — has been the relationship between Germany and Russia, because united they are the only force that could threaten us, and to make sure that that does not happen," Friedman stressed, much in the vein of Mackinder's geopolitical paradigm.

9--Global economic stagnation fuels financial instability

The chief factor in the ongoing stagnation, both in the US and throughout the world’s major economies, is the fall in investment. In the US, it declined by 9.7 percent in the second quarter, the third straight quarterly decline. In Europe, investment levels are estimated to be running about 25 percent below where they were before the financial crisis of 2008. The impact of the decline is reflected in the paltry growth rate in the euro zone—just 0.3 percent in the second quarter.

The decline in investment over the past eight years is an expression of an ongoing downturn in the rate of profit. While the average rate of profit remains positive, enabling major corporations to accumulate cash, these firms fear that further investment will not bring a positive return. Consequently, instead of using their cash balances for productive investment, they have been deploying them in financial operations, such as mergers and share buy-backs.

While such activities can benefit the bottom line of the individual firm, they signify the growth of parasitism from the standpoint of the economy as a whole.

These activities have been aided and abetted by the low interest rate and quantitative easing policies of the world’s major central banks. But these actions are creating the conditions for another financial disaster....

(The Fear Trade-- There is now $12 trillion worth of sovereign debt trading at negative yields,) The intervention of the central banks has created an historically unprecedented situation in global bond markets. There is now $12 trillion worth of sovereign debt trading at negative yields, meaning that the price of these bonds has risen so sharply, driven by the search of big investors for a “safe haven,” that an investor holding them to their maturity would actually incur a loss. The situation is so precariously balanced that any unexpected movement in financial markets, even a relatively small one, has the potential to have far-reaching consequences. Coming in the midst of worsening conditions in the real economy, the Bank of England decision can only add to this underlying instability....

Last week’s decision by the Bank of England (BOE) to undertake what it called “an exceptional package of measures” to counter the impact of the UK vote to quit the European Union, coupled with poor US growth figures, underscores the worsening situation for the global economy.
The BOE moves, which included a reduction in the benchmark interest rate to a record-low 0.25 percent and the pumping of an additional £170 billion ($223 billion) into the financial system, were taken in response to its own estimate that UK growth in 2017 will be only 0.8 percent, a drastic downgrade from its previous forecast of 2.3 percent.

The cutting of the growth estimate reflected not just the impact of the Brexit decision, but also the worsening outlook for the world economy as a whole.
The downward revision was preceded by data from the US which showed that the world’s largest economy grew at an annualised rate only 1.2 percent in the second quarter, following an expansion rate of only 0.8 percent in the first. The second quarter figure was well below predictions of a rise of 2.5 percent.

The grim figures for the first two quarters meant that average US growth was only 1 percent in the first half of 2016, compared to a rate of around 2 percent since the beginning of the supposed “recovery” from the 2007–2009 recession. Taking a longer term view, the stagnation in the US economy is the worst for any period since the Great Depression of the 1930s. Over the two terms of the Obama administration, growth has been only 15.5 percent, compared to the recovery from the recession of the late 1950s which saw the economy expand by 52 percent in the years 1961 to 1969.

10---Assange: US & Saudi Arabia orchestrated the failed coup in Turkey

11-- Class Dismissed: Identity Politics to the Front of the Line

The transition from postwar liberalism to neoliberalism began in the mid-1970s. The warning signs soon became unmistakable. Around 1975 union membership and power began a steep decline at the same time as the wage-productivity gap began rapidly to widen. With wages falling ever-farther behind productivity increases, inequality inexorably widened. With collective bargaining on the skids, the median wage began what was to become an unheard of forty-one year decline, with no end in sight. Inequality is now at a historic high and wages have never been lower since the Great Depression. It’s a different world from what many of us grew up in during the ‘40s, ‘50s, ‘60s and the first half of the ‘70s. But you’d never know it talking politics with e.g. the Democratic faithful....

a faltering economy, a traditional kiss of death for presidential candidates, does not seem to have punished the Party. Obama was reelected in 2012 when the unemployment rate averaged 9 percent. Since an anemic recovery with rising unemployment was no obstacle to electoral success, the Democrats are convinced that need not address economic issues nor direct attention to the business interests which finance them. They need only address what they take to be their decisive constituencies. Enter identity politics as the predominant way of political thinking....

The majority of Americans have experienced, often brutally, the ongoing immiseration, the increasing material insecurity, imposed by neoliberal capitalism. And many are aware that these matters are almost entirely absent from mainstream discourse, and from the current electoral campaign. Neoliberalization requires the abolition of class issues from political debate. But with the decline of postwar liberalism, the retrenchment of social programs and the decline of union power, the class divide is now as conspicuous as it has been in the past 120 years. And it is growing. All this has been backgrounded in contemporary political discussion


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