2Q GDP Fall Less Than Expected

by Dollars and Sense

...but consumption falls more. And 1Q revised downward. From Bloomberg:

U.S. Economy: Contraction Eases as Recovery Beckons

By Shobhana Chandra

July 31 (Bloomberg) The worst U.S. economic slump since the Great Depression abated in the second quarter as government spending programs started to kick in, while the deepest retrenchment by consumers since 1980 augured a muted recovery.

Gross domestic product shrank at a better-than-forecast 1 percent annual pace after a 6.4 percent drop the prior three months, Commerce Department figures showed today in Washington. A survey of purchasing managers showed separately that business contracted less than estimated this month.

Stabilization in homebuilding and the liquidation of unsold goods sets the stage for gains in GDP starting this quarter, analysts said. At the same time, rising unemployment and weakening income growth threaten to erode household finances; the International Monetary Fund today said policy makers must be ready to employ further stimulus if needed.

"We're heading to a sluggish recovery," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. "We'll get more support from government programs in the second half, but if you want a strong recovery you need a strong consumer, and we are not seeing that."

Stocks and Treasuries gained and the dollar remained lower against the euro after the report. The Standard & Poor's 500 Stock Index rose 0.1 percent to 987.48 in New York, the highest closing level since Nov. 4. Benchmark 10-year note yields fell to 3.48 percent at 4:33 p.m., from 3.61 percent late yesterday, and the dollar dropped 1.3 percent to $1.4257 per euro.

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Labels: bailout, economic indicators, financial crisis, GDP

 

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7/31/2009 04:52:00 PM 0 comments links to this post

 

Sarah Palin Capitalism (Naomi Klein)

by Dollars and Sense

From Alternet: The following was adapted from a speech on May 2, 2009 at The Progressive's 100th anniversary conference and originally printed in The Progressive magazine, August 2009 issue:

We are in a progressive moment, a moment when the ground is shifting beneath our feet, and anything is possible. What we considered unimaginable about what could be said and hoped for a year ago is now possible. At a time like this, it is absolutely critical that we be as clear as we possibly can be about what it is that we want because we might just get it.

So the stakes are high.

I usually talk about the bailout in speeches these days. We all need to understand it because it is a robbery in progress, the greatest heist in monetary history. But today I'd like to take a different approach: What if the bailout actually works, what if the financial sector is saved and the economy returns to the course it was on before the crisis struck? Is that what we want? And what would that world look like?

The answer is that it would look like Sarah Palin. Hear me out, this is not a joke. I don't think we have given sufficient consideration to the meaning of the Palin moment. Think about it: Sarah Palin stepped onto the world stage as Vice Presidential candidate on August 29 at a McCain campaign rally, to much fanfare. Exactly two weeks later, on September 14, Lehman Brothers collapsed, triggering the global financial meltdown.

So in a way, Palin was the last clear expression of capitalism-as-usual before everything went south. That's quite helpful because she showed us-in that plainspoken, down-homey way of hers-the trajectory the U.S. economy was on before its current meltdown. By offering us this glimpse of a future, one narrowly avoided, Palin provides us with an opportunity to ask a core question: Do we want to go there? Do we want to save that pre-crisis system, get it back to where it was last September? Or do we want to use this crisis, and the electoral mandate for serious change delivered by the last election, to radically transform that system? We need to get clear on our answer now because we haven't had the potent combination of a serious crisis and a clear progressive democratic mandate for change since the 1930s. We use this opportunity, or we lose it.

So what was Sarah Palin telling us about capitalism-as-usual before she was so rudely interrupted by the meltdown? Let's first recall that before she came along, the U.S. public, at long last, was starting to come to grips with the urgency of the climate crisis, with the fact that our economic activity is at war with the planet, that radical change is needed immediately. We were actually having that conversation: Polar bears were on the cover of Newsweek magazine. And then in walked Sarah Palin. The core of her message was this: Those environmentalists, those liberals, those do-gooders are all wrong. You don't have to change anything. You don't have to rethink anything. Keep driving your gas-guzzling car, keep going to Wal-Mart and shop all you want. The reason for that is a magical place called Alaska. Just come up here and take all you want. "Americans," she said at the Republican National Convention, "we need to produce more of our own oil and gas. Take it from a gal who knows the North Slope of Alaska, we've got lots of both."

And the crowd at the convention responded by chanting and chanting: "Drill, baby, drill."

Watching that scene on television, with that weird creepy mixture of sex and oil and jingoism, I remember thinking: "Wow, the RNC has turned into a rally in favor of screwing Planet Earth." Literally.

But what Palin was saying is what is built into the very DNA of capitalism: the idea that the world has no limits. She was saying that there is no such thing as consequences, or real-world deficits. Because there will always be another frontier, another Alaska, another bubble. Just move on and discover it. Tomorrow will never come.

Read the rest of the article.

Labels: capitalism, Naomi Klein, Sarah Palin

 

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7/31/2009 09:32:00 AM 2 comments links to this post

 

Crunching the numbers on health care reform

by Dollars and Sense

The latest from the Economic Policy Institute:

During another week of intense debate over the affordability of health care reform, EPI economists analyzed original and publicly available data and found that the proposed House health reform bill would pay dividends for small business and other groups, and that costs incurred by the federal government would help reduce total health spending over time.

In Health Care Reform: Big Benefits for Small Business, EPI's director of health policy research Elise Gould and economist Josh Bivens note that only 35% of businesses employing fewer than 10 workers offer health insurance, and those that do usually pass on a higher share of the cost to workers than do larger businesses. A key problem is that small businesses typically pay more for health insurance because of the way policies are sold. The authors conclude that reforms that would create more competition among insurers and reduce their administrative costs would significantly reduce the cost small businesses incur providing health insurance. An independent analysis by the Lewin Group of EPI's Health Care for America plan -- which closely resembles the House reform bill -- finds businesses with fewer than 10 employees that provide health insurance would save about $3,500 per worker.

In a related piece, Small Business and Health Reform, Gould challenges the assumption that the proposed surcharge on high incomes contained in the House health reform bill would discourage entrepreneurial activity, and cites research from the Joint Tax Committee finding that nearly 96% of taxpayers who report business income would not be affected by the surcharge.

And, in Seeing the Big Picture in Health Reform and Cost Containment, Bivens shows why a federal government investment in health care reform could produce big savings in total health costs over time. Cost analyses that focus strictly on the cost of health reform to the federal government, he argues, are misguided. "Fundamental health reform is worth doing even if it does not pay off in big federal budget savings," Bivens writes. "Health care is an area where the more costs are loaded up on the federal government, the more efficiently care tends to be delivered overall." Politico quoted Bivens explaining why the main focus of health reform needs to be on reducing total health spending over time, since health spending is currently rising faster than gross domestic product.

Labels: Economic Policy Institute, health care reform, small businesses

 

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7/30/2009 01:44:00 PM 0 comments links to this post

 

T. D.C.o.t.E (xiii): Flexibility Fundamentalism

by Dollars and Sense

The Dull Compulsion of the Economic (xiii)

A series of blog postings by D&S collective member Larry Peterson

Flexibility Fundamentalism

Recently The Financial Times featured an analysis of the US labor market entitled End of the Line. The piece was interesting inasmuch as it hinted that the fragility--to put it charitably, indeed--of the US social safety net may foster social tensions that could, in turn, have a negative impact on the flexibility of the US labor market (by leading to greater job protection, etc.). The unquestioned assumption throughout the piece, of course, was that the flexibility of the US labor market has been a good thing, or has had nothing much to do with the county's current economic and financial woes.

In fact, the article refers to two prominent economists, Austan Goolsbee and Robert Reich, for tributes, of varying degrees of enthusiasm, to labor market flexibility. Goolsbee, now an adviser to President Obama, wrote in 2007 that "[W]e may be best poised to take advantage of the coming changes on a global scale precisely because we are so good at adjusting. The world economy may be tough on your industry but look on the bright side: you could be French." And former Secretary of Labor Reich, who should know better, was quoted in the article as saying "The US labor market is extraordinarily flexible, [which] in normal times is a great asset." He then goes on to add the following caveat, though: "When you have an economic downdraft like this, that same flexibility can become a severe detriment."

Goolsbee's crass triumphalism looks ludicrous now, as the FT points out. It notes that France and Germany now have lower unemployment rates than the US (though both started with higher rates before the crisis began). But what does Reich mean by "normal"?

It is now clear that the labor flexibility characteristic of the last few years was, far from being the product of, or reflecting "normal" conditions, made possible by the fostering of not one, but several different anomalies or imbalances. As is well known, median real wages, which had begun to reverse a marked slowdown from the 1970s on by the late 'nineties, were vigorously clawed back after the .com crash, and languished well behind sterling productivity gains until the middle of the next century's first decade, when, again, they began to creep upwards--only to be stopped dead in their tracks by the onset of the financial crisis. The wage contribution to GDP fell sharply as well, and here, as is again well known, real wage gains were captured only by the very, very wealthy. Meanwhile, benefits were falling sharply, especially as healthcare costs (high due to the existence of the dysfunctional US healthcare system, which, while doing little where vital statistics are concerned, contributed to labor market flexibility by making workers more dependent on the boss for healthcare benefits) skyrocketed. The mortgage bubble was enabled by these shortfalls, as a substitute for falling incomes, and as a means to maintain consumption in the face of falling pay packets (not to mention savings).

And the consumption surrounding the housing boom played no small role in ballooning current-account deficits. Investment followed this consumption overseas, with US foreign investment tending to trump domestic investment. And foreign investment in the US increasingly became the province of state investors (who tended to purchase US Treasury and agency--Fannie Mae, Freddie Mac, etc--debt) rather than private ones: by the latter part of the decade, the old adage that the US's current-account deficit was a sign of strength--that foreign investors were expressing thereby a vote of confidence in the competitiveness of the US economy, and of its famously flexible labor markets--was becoming something of a joke, though the fact that so many foreigners had invested instead in the US mortgage market revealed that the joke could well end up being on them. But, back to the original point, productive investment did not respond vigorously to productivity gains in the US in the first decade of the twenty-first century, even with the Bush tax cuts to encourage them, or given the vast amounts of cheap borrowed money that were made available to investors as the Fed put the economy on steroids post 9/11.

Then there were all the wonderful financial innovations that "lowered the cost of capital" and made capital available to relatively untapped consumers for the first time. These put lots of dollars at consumers' disposal, and enabled consumption to top 70% of national product, even as wages were stagnant (or, for some, even fell) and benefits became more expensive, or disappeared (many companies began to cancel 401K and healthcare programs as the decade wore on) altogether, and workers increasingly had to shoulder simultaneous burdens of saving for retirement, financing children's education, and caring for elderly parents. The hugely inflated costs of the latter trio certainly whittled away at the cheapening effects of the dynamic duo of cheap foreign production and easy consumer financing.

Needless to say, practices in the subprime mortgage market topped this distinguished list, but the essential point here is that just about all of these means of maintaining consumer spending were part and parcel of a larger debt bubble, in which financial firms were betting huge amounts of other people's money so they could increase returns on the much smaller sums they put forward (If I take a dollar of mine, and borrow nine of yours, and the investment appreciates by 50%, I get a $5 return, which is pretty good if I've only bet one dollar of my own money--even if I pay a generous rate of interest, or, more likely, high fees). But in reverse, this process becomes pernicious (if I lose 50%, I've lost much more than my $1; and if, being unregulated, I'm not required to hold any reserves, I can go bankrupt after losing my dollar, leaving my creditors holding the bag), and such deleveraging, as Julian Delasantellis has noted, probably has a long way to go before all the rot is purged from the system: "As opposed to today's total government and private-sector debt load of almost $53 trillion, the 20-year period average is down at $43 trillion--that implies another $10 trillion of debt somehow disappearing, being written off, or (the most unlikely case) paid off. In the case of the solely "households and non-profit organizations credit and equity market instruments liability", another $1.2 trillion, in addition to what has already been vaporized, has to be written off as well."

So, getting back to the original point, it's hard to understand how Reich can classify the situation of US labor in the last decade (at least) as anything near "normal." As we have seen, not one, but several clearly unhealthy factors either enabled or redoubled an almost masochistic flexibility the core of which, anyway, Reich seems to want somehow to preserve. And we've only spoken here of aspects of flexibility that strictly concern pay and benefits: when one considers work practices, as well as things like public education policy, healthcare and all the other areas that can be collapsed under the umbrella of productivity-enhancers, I would venture that the cutbacks or simple nonperformance in all these areas, again all-to-often implemented or merely accepted in accordance with the gluttonous demands of flexibility, have become, in ever-expanding ways, seriously counterproductive, despite continuing gains to the bottom line (as we shall see in a moment).

But the situation could get worse for labor, even if legislative or executive means to increase flexibility are avoided, as they most certainly will be, given the severity of the downturn: in the second quarter of 2009, companies were already cutting costs at furious rates to bleed the semblance of profit from the stone of labor cuts and tax breaks. This is reflected in some truly eye-opening productivity-related figures: for instance, as Goldman Sachs economist Andrew Tilton notes, total hours worked fell at about an 8 percent annual rate in the second quarter, Labor Department data shows. Meanwhile, Tilton thinks second-quarter gross domestic product fell at a more modest 1 percent rate. Tilton then goes on: "That's a 7-point gap, and there have only been a few instances in the last 50 years when it has been that wide. It's particularly unusual at a time when the economy is not growing." Reuters then adds: "Indeed, the gap appears to have widened last quarter. In the first quarter, when GDP fell at a 5.5 percent annual rate, the number of hours worked fell at a 9 percent pace."

Indeed, the situation has got so bad that economists are beginning to mix their admiration for US flexibility with fears that it has finally turned overtly pathological (i.e. that it threatens a level of aggregate demand sufficient for any sort of recovery). David Rosenberg of Glushkin Sheff (formerly of Merrill Lynch) claims that there is no evidence that profitability can be maintained on basis of cost cuts alone, and fears that when multiple sectors cut costs, it creates a snowball effect that in turn hurts everyone: "It's one thing when one or two sectors are cutting costs. But when it happens in every sector, this ends up eating into aggregate demand."

So far, the Obama administration has not done much to help workers affected by this sort of bloodletting, and with 1.5 million workers expected to exhaust their unemployment benefits by the end of 2009, one would think the situation could become truly explosive. One would hope that the left would be at the forefront of a vigorous effort to concentrate this casual attitude on the part of the administration; and an end to the mythology surrounding the endless benefits of flexible labor markets might constitute a small contribution to such an effort.

Labels: Austan Goolsbee, financial crisis, Julian delasantellis, labor, labor law, Larry Peterson, Robert Reich, the dull compulsion of the economic

 

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7/29/2009 08:25:00 PM 0 comments links to this post

 

Bearish Roach Losing China Stimulus Optimism

by Dollars and Sense

From The Financial Times:

I've been an optimist on China. But I'm starting to worry
Financial Times
By Stephen Roach
Published: July 29 2009 03:00 | Last updated: July 29 2009 03:00

On the surface, China appears to be leading the world from recession to recovery. After coming to a virtual standstill in late 2008, at least as measured quarter-to-quarter, economic growth accelerated sharply in spring 2009.

A back-of-the envelope calculation suggests China may have accounted for as much as
2 percentage points of annualised growth in inflation-adjusted world output in the second quarter of 2009. With contractions moderating elsewhere, China's rebound may have been enough in and of itself to allow global gross domestic product to eke out a small positive gain for the first time since last summer.

That's the good news. The bad news is that China's recent growth spurt comes at a steep price. Fearful that its recent economic short-fall would deepen, Chinese policymakers have opted for quantity over quality in setting macro-strategy, the centrepiece of which is an enormous surge in infrastructure spending funded by a burst of bank lending.

Sure, developing nations always need more infrastructure. But China has taken this to extremes. Infrastructure expenditure (including Sichuan earthquake reconstruction) accounts for fully 72 per cent of China's recently enacted Rmb4,000bn ($585bn) stimulus. The government urged the banks to step up and fund the package. And they did. In the first six months of 2009, bank loans totalled Rmb7,400bn--three times the pace in the first half of 2008 and the strongest six-month lending surge on record.

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Labels: bailout, banking system, China, Emerging markets, financial crisis, infrastructure

 

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7/29/2009 07:10:00 PM 0 comments links to this post

 

Case-Shiller Home Purchase Index Up

by Dollars and Sense

For the first time in almost three years. This may prompt more purchases in months ahead, as buyers seek to secure rock-bottom prices, and with the Federal $8,000 rebate set to expire in November. But delinquencies and foreclosures are still sky-high, as are unsold inventories, and job losses are expected by many to top 10% soon, and remain north of 8% through 2011. And the findings show important regional and price-level divergences. So, while relatively big news, the future is far from rosy, as even stockmarkets seem to have accepted (for the time being). From The Wall Street Journal:

JULY 29, 2009
Wall Street Journal
Home Prices Rise Across U.S.
Bargain Hunting, Low Rates Drive First Gain in 3 Years; Double Dip Still Possible
By NICK TIMIRAOS and KELLY EVANS

Home prices in major U.S. cities registered the first monthly gain in nearly three years, according to a new report that provided fresh evidence that the severe U.S. housing downturn could be easing.

Standard & Poor's Case-Shiller index, which tracks home prices in 20 metropolitan areas, rose 0.5% for the three-month period ending in May, compared with the three months ending in April. It marked the index's first increase after 34 straight months of decline, and came after a variety of housing indicators has shown glimmers of hope for the past several months.

Home prices remained down about 17% from a year earlier, according to the index. According to S&P/Case-Schiller's seasonally adjusted numbers, which it began reporting only earlier this year, prices in May posted a 0.2% decline.

But most Wall Street economists who discussed the survey focused on the April-to-May rise, saying it represents a significant change in direction. Home prices in 15 of the 20 areas in the survey rose or remained stable.

The results were also consistent with other recent housing data, these economists said. Sales of new and existing homes rose for three consecutive months through June. Housing starts were up in June, and an index of builder sentiment rose in July, though both remained at low levels.

May's uptick came in part as home prices in some areas fell enough for investors and first-time buyers to begin competing for bargains, helping to ease the backlog of unsold homes.

Other likely sales spurs included mortgage rates that fell to 50-year lows, an $8,000 federal-tax credit for first-time homebuyers and the ability of buyers to secure mortgages from the Federal Housing Administration with as little as 3.5% down.

The latest readings don't necessarily herald a full-blown recovery for the housing market or broader economy. Consumer confidence remains near record lows. The U.S. unemployment rate, at 9.5% in June, is expected to hit double digits before year end, making swift growth and an expanding labor force unlikely anytime soon.

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Labels: Case-Shiller Index, economic indicators, financial crisis, housing market

 

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7/29/2009 06:55:00 PM 0 comments links to this post

 

CFTC Reversal on Commodities Speculation

by Dollars and Sense

From The Wall Street Journal, Courtesy of Marxmail:

Wall Street Journal
JULY 28, 2009

Traders Blamed for Oil Spike
CFTC Will Pin '08 Price Surge on Speculators, in a Reversal From Bush

By IANTHE JEANNE DUGAN and ALISTAIR MACDONALD

The Commodity Futures Trading Commission plans to issue a report next
month suggesting speculators played a significant role in driving wild
swings in oil prices--a reversal of an earlier CFTC position that
augurs intensifying scrutiny on investors.

In a contentious report last year, the main U.S. futures-market
regulator pinned oil-price swings primarily on supply and demand. But
that analysis was based on "deeply flawed data," Bart Chilton, one of
four CFTC commissioners, said in an interview Monday.

The CFTC's new review, due to be released in August, adds fuel to a
growing debate over financial investors who bet on the direction of
commodities prices by buying contracts tied to indexes. These
speculators have invested hundreds of billions of dollars in contracts
that were once dominated by producers and consumers who sought to hedge
against oil-market volatility.
(Daily change in the price of oil, in dollars per barrel)

The review also reflects shifting political winds. Under Chairman Gary
Gensler, appointed by President Barack Obama, the CFTC is departing from
the more hands-off approach it took under its previous head, a George W.
Bush appointee. The agency is widely expected to adopt new rules to
limit the amount of investments in commodities by big institutions
betting on their direction purely for financial gain.

The agency didn't make available preliminary figures from the report and
declined to discuss the previous data.

Speculators have been a lightning rod of criticism from politicians
world-wide, who worry that rising oil prices could damp the recovery
potential of their recession-hit economies. Many lawmakers and
regulators say they want to ensure that speculators don't make it more
costly for consumers to access heating oil, food and other essentials.

These decision makers don't present a united front. The U.K.'s Financial
Services Authority has found no evidence that speculators are behind big
oil-price swings, people familiar with the matter said Friday. This
view, made by the overseer of one of the world's biggest financial
markets, contrasts with an opinion piece published in The Wall Street
Journal two weeks ago, by French President Nicolas Sarkozy and U.K.
Prime Minister Gordon Brown, who said governments need to act to curb
"dangerously volatile" oil prices.

In the U.S., the CFTC begins public hearings Tuesday to determine
whether to limit speculative investments in commodities. Congress also
is weighing whether to give the CFTC the authority, under a broader
proposal to revamp financial regulation, to regulate commodities
investments that occur off traditional exchanges. Byron Dorgan, a North
Dakota Democrat, has called on the CFTC to curb "oil speculators looking
for a quick buck at the expense of American consumers."

The debate over speculators underscores the shifting nature of
commodities trading in recent years. Before the mid-1990s, these markets
were dominated by entities that had physical dealings with the
underlying commodity, and "speculators" who often took the opposite
position, providing liquidity to markets.

But a new group of investors has emerged in recent years. Those who want
to bet on commodities prices have increasingly put their money in
indexes that track the value of futures contracts, in which investors
promise to pay a certain amount in the future for oil and other
commodities. As of July 2008, financial investors had about $300 billion
riding on these indexes, roughly four times the level in January 2006,
according to the International Energy Agency, a Paris-based watchdog.

Separately, these investors may buy derivatives, not directly traded on
futures exchanges, that let them make contrary bets to offset their risks.

Crude-oil prices surged in July 2008 to a record $145 a barrel, then
dropped to about $33 in December. Oil now trades at around $68 a barrel.

Proponents of index speculation say these parties have added liquidity
to markets. They blame price gyrations on supply and demand and say
attempts to regulate speculation are foolhardy and could drive investors
to less-regulated venues.

CME Group, the world's largest commodities exchange, said in a statement
that it hasn't seen "any empirical evidence that index funds and
speculators distort prices, as has been widely alleged."
[Crude Measures]

The exchange's chief executive, Craig Donohue, said: "We are deeply
concerned that inappropriate regulation of these markets will cause
market participants to move to dark pools and other unregulated markets,
causing irrevocable harm to the entire U.S. economy." Dark pools are
private markets where large orders are transacted.

Last year, CFTC Chief Economist Jeffrey Harris told a House Agriculture
subcommittee: "The economic data shows that overall commodity price
levels, including agriculture commodity and energy futures prices, are
being driven by powerful fundamental economic forces and the laws of
supply and demand." Mr. Harris didn't return a call to comment.

The acting CFTC chairman at the time, Bush-appointee Walter Lukken, told
the House Agriculture committee that CFTC's economists "did not find
direct evidence that speculation was driving up prices." Mr. Lukken, now
an executive at the New York Stock Exchange, declined to comment.

In preparing its 2008 report, the CFTC sought information from swaps
dealers about their off-exchange derivatives transactions. CFTC
commissioner Mr. Chilton -- who was appointed by Mr. Bush and now awaits
confirmation of his reappointment under Mr. Obama -- said the data the
agency gathered was incomplete, with some players providing partial or
no information.

Mr. Chilton dissented from the 2008 CFTC report, saying the agency's
conclusions didn't go far enough. He expressed doubt about the amount
and type of data received, which he called limited and unreliable. "We
didn't have all the information we should have," he said. "And we gave
it to Congress anyway, and we spun it."
[U.S. supply of crude oil]

The agency began shifting under Mr. Gensler, its new chairman. During
his confirmation process earlier this year, Mr. Gensler said he believed
speculation was partly behind the surge in commodity prices.

Mr. Chilton said the new report will contain a more-thorough analysis of
the investors in contracts tied to oil and other commodities, and reveal
cases in which single traders hold massive market positions. "We now
have multiple sources, and confidence from different sources," he says.
He said he believes the data on trading outside exchanges is also more
reliable.

Meantime, the U.K.'s FSA has been examining whether speculation has
driven big oil price swings in recent months. The FSA is leaning toward
the conclusion that the moves have more to do with uncertainty over the
direction of economic growth than speculation, according to the people
familiar with the matter.

The FSA has no jurisdiction over U.S. markets. But it oversees ICE
Futures Europe, one of the largest global energy exchanges, which is
based in London.

The FSA doesn't believe that limiting the size of trading positions
would be "beneficial" for the market. Still, it concedes it doesn't have
a "full explanation" as to why it the market has moved as it has.
Carolyn Cui and Kara Scannell contributed to this article.

Labels: agribusiness, Commodity Futures Trading Commission, commodity prices, financial crisis, oil, precious metals

 

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7/28/2009 08:34:00 PM 0 comments links to this post

 

New Home Sales Rise Sharply in June

by Dollars and Sense

From The Financial Times:

New US home sales surge in June

By Alan Rappeport in New York
Financial Times
Published: July 27 2009 15:57 | Last updated: July 27 2009 19:24

New house sales in the US jumped by 11 per cent in June, providing some of the strongest evidence yet that the market has bottomed out after being savaged for three years.

There are increasing signs that the combined impact of falling prices and low mortgage rates, along with aggressive government incentives, is driving people back to the market and ­stirring sales.

The monthly rise was the sharpest in nearly nine years, far exceeding economists' expectations, and followed a revised increase of 2.4 per cent in the previous month. House sales rose to an adjusted annual rate of 384,000, the department of commerce said.

"[This is] more evidence that a bottom is forming in the housing market, with new home sales confirming the signal provided by other housing data," said Alan Ruskin, a strategist at RBS Greenwich Capital.

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Labels: economic indicators, financial crisis, housing market

 

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7/27/2009 08:01:00 PM 2 comments links to this post

 

The Looming Disaster of Credit Card Debt

by Dollars and Sense

From The Financial Times:

How the cards are cut

By Patrick Jenkins,Francesco Guerrera and Saskia Scholtes
Financial Times
Published: July 27 2009 03:00 | Last updated: July 27 2009 03:00

Mick Longfellow is teetering on the edge of financial chaos. A dedicated teacher married to an equally hard-working nurse, living in a modest house in Newcastle in the north-east of England, the pair spent the past decade treating themselves to gadgets, gizmos and home upgrades.

They put in new windows. They bought the biggest television and sound system their living room could accommodate. They changed their cars every year or two. With two children to spoil as well, they were living on credit - lots of it. There were store cards, car loans, personal loans and credit cards.

Now, amid the recession, those lenders want their money back. "The bank just closed down our overdraft. That was the killer blow," says Mr Longfellow. But with the family's debts running to 30,000 pounds ($49,200, 34,600 euros), far more than their annual disposable income, repayment is going to take a very long time.

It is a sad blow for the Longfellows. But multiply one family's debts by the millions of people across the world who are in an even worse state, losing jobs and homes, and the scale of the problem is clear. Estimates from the International Monetary Fund say that of US consumer debt totalling $1,914bn (1,166bn pounds, 1,346bn euros), 14 per cent will turn bad. For Europe, it expects 7 per cent of the $2,467bn of consumer debt will be lost, with much of that falling in the UK, the continent's biggest nation of borrowers.

In the US, the carnage is well under way. For nearly two years, banks ranging from giants such as Citigroup to small community lenders have been bleeding as the economic downturn caused "maxed out" consumers to fall behind on their repayments of credit cards, automotive loans, student loans and other once-plentiful forms of credit.

In recent months, what started as a debacle has turned into a nightmare. As unemployment continued to rise and house prices kept falling, the rate of defaults has surpassed historic norms, rendering many of the computer models used by US banks to predict losses useless. In this phase of the crisis, lenders are flying blind.

"We are asking boards of financial institutions to sit down, think about plausible nightmare scenarios and then take measures to deal with them," says Peter Niculescu, a former executive at Fannie Mae, the US mortgage institution, who is now a partner at Capital Market Risk Advisors, a financial consultancy.

Read the rest of the article

Labels: baillout, banking crisis, banking industry, Credit card industry, financial crisis

 

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7/27/2009 07:55:00 PM 0 comments links to this post

 

AP: Senate To Drop Public Option

by Dollars and Sense

Via Huffington Post. Looks like the insurance lobby wins again.

WASHINGTON After weeks of secretive talks, a bipartisan group in the Senate edged closer Monday to a health care compromise that omits a requirement for businesses to offer coverage to their workers and lacks a government insurance option that President Barack Obama favors, according to numerous officials.

Like bills drafted by Democrats, the proposal under discussion by six members on the Senate Finance Committee would bar insurance companies from denying coverage to any applicant. Nor could insurers charge higher premiums on the basis of pre-existing medical conditions.

But it jettisons other core Democratic provisions in a reach for bipartisanship on an issue that has so far produced little.

The effort received a boost during the day from the U.S. Chamber of Commerce, normally a close ally of Republicans. In a letter to committee leaders, the business group called for the panel to "act promptly, preferably before" the Senate's scheduled vacation at the end of next week. In doing so, the business organization dealt a blow to the Senate Republican Leader Mitch McConnell of Kentucky and other GOP lawmakers who have called repeatedly for Democrats to slow down.

Read the rest of the article

Labels: Barack Obama, health care reform, insurance industry

 

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7/27/2009 07:33:00 PM 0 comments links to this post

 

Are Average Taxpayers Freeloaders?

by Dollars and Sense

From Sam Pizzigati, at the online weekly Too Much, which is well worth a visit.

Have Average Taxpayers Become Freeloaders?

Opponents of the proposal for a 5.4 percent health care reform surtax on America's wealthy are getting desperate. They've even turned their fire onto middle-income Americans.

By Sam Pizzigati | July 27, 2009

Friends and fans of privilege have been striking their indignant pose the last two weeks. They're shocked, simply shocked, that House Democratic leaders would dare advance a health care reform plan that sets a 5.4 percent surtax on households making over $1 million a year.

Affluent Americans, flacks for grand fortune are fuming, already pay the bulk of the nation’s income taxes. They'll pay virtually all of it, these critics charge, if the surtax becomes law and Congress lets the George W. Bush tax cuts for the comfortable expire, as scheduled, after 2010.

Amid all this, the most indignant of fortune's defenders now seem to believe, average Americans have become irresponsible freeloaders, ever eager, as conservative columnist Caroline Baum puts it, to "encourage their elected representatives to vote 'yes' on every new benefit that comes down the pike."

Fulminates David Harsanyi, a Denver Post columnist outraged by the health surtax notion: "President Barack Obama once promised to spread the wealth. How about spreading the responsibility, as well? Let the everyday citizen feel the cost of these gazillion-dollar legislative miracles."

In reality, of course, everyday American citizens are pulling their weight and then some. They actually pay a higher share of their incomes in taxes—total taxes, not just federal income tax—than super rich Americans.

Maverick billionaire investor Warren Buffett has been trying to make this point for some time now. He and his fellow billionaires, Buffett notes, pay taxes at a lower overall rate than their receptionists do.

Two years ago, Buffett bet a million dollars to back up that proposition. He challenged any billionaire in the Forbes 400 to prove him wrong. So far not one has.

Those Forbes 400 billionaires and their cheerleaders live in a fantasy land where average folk who work hard enough can always "succeed" and get rich. In our real world, here early in the 21st century, average people work hard and watch the rich get richer.

The latest evidence of this dynamic comes from an enterprising Wall Street Journal analyst who just completed some fascinating crunching of payroll data from Social Security.

"Executives and other highly compensated employees now receive more than one-third of all pay in the U.S.," the Journal's Ellen Schultz observed last week, and that's without counting billions in executive pay "that remains off federal radar screens that measure wages and salaries."

Schultz defines as "highly compensated" any employed American who this year will take home over $106,800. That income figure represents the 2009 Social Security payroll tax ceiling. Any wage or salary income under that figure faces Social Security payroll tax. Any income above doesn't.

Back in 2007, the payroll tax ceiling stood at $97,500. In that year, only 6 percent of Americans collected paychecks over the ceiling. But this affluent 6 percent took in 33 percent of America's total pay.

Five years earlier, in 2002, Americans making more than the federal payroll tax ceiling collected only 28 percent of the nation's pay.

Over the five years than ended in 2007, the Journal's Schultz goes on to add, earnings for the top 6 percent jumped up twice as fast as earnings for the bottom 94 percent.

This growing inequality in the rewards from work has no legitimate justification. Absolutely no evidence exists to indicate that earners currently in the top 6 percent are working more productively than earners in the bottom 94 percent than they did five years ago, or 50 years ago for that matter.

This growing inequality in the rewards from work, on the other hand, does have consequences. Here's one: In 2007, America's top 6 percent collected a whopping $1.1 trillion in earnings not subject to payroll tax. The payroll tax break for high-income earners, the new Wall Street Journal analysis estimates, is now costing the federal Treasury $115 billion a year.

But the Journal's focus on the top 6 percent doesn't tell the full story. America's most affluent 6 percent haven't all been prospering at the same rate. In fact, most top 6 percent income-earners have more in common with those below them than those above.

Between 2000 and 2006, data from economists Emmanuel Saez and Thomas Piketty document, America's top 1 percent saw their incomes increase eight times faster than the next most affluent 4 percent.

These particular Saez-Piketty figures don't count income from capital gains, the profits from the buying and selling of stock and other assets. Capital gains income goes overwhelmingly to the richest Americans—and none of it faces Social Security payroll tax.

Read the rest of the article.

Labels: income inequality, income tax, Sam Pizzigati, wealth inequality

 

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7/27/2009 01:44:00 PM 0 comments links to this post

 

Hondouras Imposes State of Siege in South

by Dollars and Sense

A report from the Nicaragua/Honduras border, via Clifton Ross, an independent journalist who is friends with Margot Pepper, who has written recently for D&S:

Honduras imposes state of siege in south
Thousands of Zelaya supporters stranded en route to meet the president

Honduran national police have clamped a state of siege on the southern department of El Paraiso and blocked roads from Tegucigalpa to the Nicaraguan border. Thousands of Hondurans who caravanned from the capital to the border yesterday to support the return of President Manuel Zelaya are stranded in trucks, cars and buses along the road.

"People could be arrested, imprisoned or shot for being out of their houses, but we have no houses here to return to," said California-based journalist Clifton Ross, who accompanied the caravan and is stranded in El Paraiso. Honduran coup leader Roberto Micheletti imposed the state of siege on the evening of July 24. It is in effect round the clock in the department of El Paraiso, closest to the border. The rest of the country is under curfew from midnight to 4:00 a.m.

Police shot three Zelaya supporters, ran over three more and tear-gassed the crowd several times yesterday, Ross said. They captured, torutured and murdered a 24-year-old from Tegucigalpa. Thousands of supporters had reached the border before the government set up roadblocks, detaining busloads of others who wanted to meet Zelaya.

President Zelaya crossed the border yesterday unarmed and negotiated for a half-hour with an Honduran army colonel. Zelaya was denied entrance, the colonel was arrested for talking to him, and the coup government called the state of siege.

"Nothing can get in or out of El Paraiso at this point," Ross said. Zelaya supporters slept in their cars, under trucks or on neighbors' porches as heavy rain fell on and off through the night.

"People here have been fighting for Zelaya's return for a month now. They are incredibly committed and won't back down," he said. He urged people to call Congress and the White House and demand that the U.S. government pressure Micheletti to lift the siege.

White House comment line: 202-456-1111
Congressional switchboard: 202-224-3121

Labels: Clifton Ross, Honduras, Margot Pepper, Rafael Zelaya

 

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7/26/2009 06:22:00 PM 0 comments links to this post

 

Insurance Whistleblower Before Congress

by Dollars and Sense

I am so tired of reading about the horrific details of our lousy healthcare system in the foreign press...

From The Observer:


Whistleblower tells of America's hidden nightmare for its sick poor

When an insurance firm boss saw a field hospital for the poor in Virginia, he knew he had to speak out. Here, he tells Paul Harris of his fears for Obama's bid to bring about radical change

The Observer, Sunday 26 July 2009
Paul Harris

Wendell Potter can remember exactly when he took the first steps on his journey to becoming a whistleblower and turning against one of the most powerful industries in America.

It was July 2007 and Potter, a senior executive at giant US healthcare firm Cigna, was visiting relatives in the poverty-ridden mountain districts of northeast Tennessee. He saw an advert in a local paper for a touring free medical clinic at a fairground just across the state border in Wise County, Virginia.

Potter, who had worked at Cigna for 15 years, decided to check it out. What he saw appalled him. Hundreds of desperate people, most without any medical insurance, descended on the clinic from out of the hills. People queued in long lines to have the most basic medical procedures carried out free of charge. Some had driven more than 200 miles from Georgia. Many were treated in the open air. Potter took pictures of patients lying on trolleys on rain-soaked pavements.

For Potter it was a dreadful realisation that healthcare in America had failed millions of poor, sick people and that he, and the industry he worked for, did not care about the human cost of their relentless search for profits. "It was over-powering. It was just more than I could possibly have imagined could be happening in America," he told the Observer

Potter resigned shortly afterwards. Last month he testified in Congress, becoming one of the few industry executives to admit that what its critics say is true: healthcare insurance firms push up costs, buy politicians and refuse to pay out when many patients actually get sick. In chilling words he told a Senate committee: "I worked as a senior executive at health insurance companies and I saw how they confuse their customers and dump the sick: all so they can satisfy their Wall Street investors."

Read the rest of the article

Labels: health care, health care reform, insurance industry

 

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7/26/2009 02:20:00 PM 0 comments links to this post

 

Not Everything Has to Make a Profit (Bill Maher)

by Dollars and Sense

From HuffPo. My favorite quote: "If conservatives get to call universal health care 'socialized medicine,' I get to call private health care 'soulless vampires making money off human pain.' The problem with President Obama's health care plan isn't socialism, it's capitalism."

New Rule: Not Everything in America Has to Make a Profit

Bill Maher | Posted: July 23, 2009 11:56 PM

How about this for a New Rule: Not everything in America has to make a profit. It used to be that there were some services and institutions so vital to our nation that they were exempt from market pressures. Some things we just didn't do for money. The United States always defined capitalism, but it didn't used to define us. But now it's becoming all that we are.

Did you know, for example, that there was a time when being called a "war profiteer" was a bad thing? But now our war zones are dominated by private contractors and mercenaries who work for corporations. There are more private contractors in Iraq than American troops, and we pay them generous salaries to do jobs the troops used to do for themselves ­-- like laundry. War is not supposed to turn a profit, but our wars have become boondoggles for weapons manufacturers and connected civilian contractors.

Prisons used to be a non-profit business, too. And for good reason --­ who the hell wants to own a prison? By definition you're going to have trouble with the tenants. But now prisons are big business. A company called the Corrections Corporation of America is on the New York Stock Exchange, which is convenient since that's where all the real crime is happening anyway. The CCA and similar corporations actually lobby Congress for stiffer sentencing laws so they can lock more people up and make more money. That's why America has the world;s largest prison population ­-- because actually rehabilitating people would have a negative impact on the bottom line.

Television news is another area that used to be roped off from the profit motive. When Walter Cronkite died last week, it was odd to see news anchor after news anchor talking about how much better the news coverage was back in Cronkite's day. I thought, "Gee, if only you were in a position to do something about it."

But maybe they aren't. Because unlike in Cronkite's day, today's news has to make a profit like all the other divisions in a media conglomerate. That's why it wasn't surprising to see the CBS Evening News broadcast live from the Staples Center for two nights this month, just in case Michael Jackson came back to life and sold Iran nuclear weapons. In Uncle Walter's time, the news division was a loss leader. Making money was the job of The Beverly Hillbillies. And now that we have reporters moving to Alaska to hang out with the Palin family, the news is The Beverly Hillbillies.

And finally, there's health care. It wasn't that long ago that when a kid broke his leg playing stickball, his parents took him to the local Catholic hospital, the nun put a thermometer in his mouth, the doctor slapped some plaster on his ankle and you were done. The bill was $1.50, plus you got to keep the thermometer.

But like everything else that's good and noble in life, some Wall Street wizard decided that hospitals could be big business, so now they're run by some bean counters in a corporate plaza in Charlotte. In the U.S. today, three giant for-profit conglomerates own close to 600 hospitals and other health care facilities. They're not hospitals anymore; they're Jiffy Lubes with bedpans. America's largest hospital chain, HCA, was founded by the family of Bill Frist, who perfectly represents the Republican attitude toward health care: it's not a right, it's a racket. The more people who get sick and need medicine, the higher their profit margins. Which is why they're always pushing the Jell-O.

Because medicine is now for-profit we have things like "recision," where insurance companies hire people to figure out ways to deny you coverage when you get sick, even though you've been paying into your plan for years.

When did the profit motive become the only reason to do anything? When did that become the new patriotism? Ask not what you could do for your country, ask what's in it for Blue Cross/Blue Shield.

If conservatives get to call universal health care "socialized medicine," I get to call private health care "soulless vampires making money off human pain." The problem with President Obama's health care plan isn't socialism, it's capitalism.

And if medicine is for profit, and war, and the news, and the penal system, my question is: what's wrong with firemen? Why don't they charge? They must be commies. Oh my God! That explains the red trucks!

Bill Maher, host of HBO's Real Time with Bill Maher airs live tonight at 10pm


Read the original article.

Labels: Bill Maher, capitalism, health care, Huffington Post, privatization

 

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7/26/2009 12:08:00 PM 0 comments links to this post

 

More on Sales Lagging Profits

by Dollars and Sense

From Bloomberg:

Sales Fail to Keep Pace With Profits as Economy Stays Sluggish

By Peter J. Brennan and Steve Matthews

July 25 (Bloomberg) Sales growth lagged behind profits as companies in the Standard & Poors' 500 Index beat analysts' estimates this week, a signal that economic recovery may be slow.

Second-quarter revenue at Caterpillar Inc. and Freeport- McMoRan Copper & Gold Inc. tumbled more than 30 percent from a year earlier, though earnings topped the average of analysts'predictions. Amazon.com Inc.s profit skidded and sales missed estimates. United Parcel Service Inc.'s sales slid 17 percent. Microsoft Corp. saw annual sales drop for the first time in 23 years as a public company.

"The economy is coming back but it is not going to come roaring back," said Mark Zandi, chief economist at Moody's Economy.com. Companies "are going to be reluctant to add investment and jobs until they get better sales."

Revenue at 143 companies in the S&P 500 reporting this week, many of them bellwethers for the American economy, fell on average 10 percent from a year ago, according to Bloomberg data. Seventy managed to top the analysts' consensus for sales, while 107 did so for earnings per share.

The economy probably declined 1.5 percent in the three months ended June 30, marking the fourth straight drop and the longest such streak since quarterly records started in 1947, according to the median of 66 economists in a Bloomberg survey.

'Shrinking Your Way to Profitability'

"The real theme is the divergence between earnings and revenues," said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. "We know companies are cutting costs at a record pace, and that is helping earnings. But you can't keep on shrinking your way to profitability. Eventually, you do damage to your end users. You have to get revenues up to have a sustainable upturn."

Industrials led the sectors in earnings surprises, with 19 of 23 firms that reported during the week posting profit higher than analysts projected.

Caterpillar, the world's largest maker of bulldozers, reported 72 cents in per-share earnings excluding some costs, more than triple the average estimate of 22 cents. It also raised its full-year forecast, saying stimulus programs are starting to support global demand.

"We had a sharp decline and the recovery is likely to be gradual," said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers LLC, a unit of Prudential Financial Inc., which manages about $542 billion. "Because of rising unemployment and rising household savings rate, the rebound will be anemic or weak."

Consumer Discretionary Surprises

Consumer discretionary companies such as Black & Decker Corp., Ford Motor Co. and Whirlpool Corp. also surprised analysts as 16 out of 18 reported higher than expected EPS.

The other sectors this week reporting a bigger increase in profit than analysts expected included health care, such as Boston Scientific Corp., on higher sales, and financials such as SLM Corp., also known as Sallie Mae.

"Companies did good jobs of managing costs," said Pat Becker Jr., chief investment officer at Portland, Oregon-based Becker Capital Management Inc., which manages $1.8 billion in assets. "You can only pull that string for so long. You eventually need revenue growth."

Sales declined in eight of the 10 S&P 500 sectors, led by a 65 percent fall at steelmakers Nucor Corp. and AK Steel Holding Corp.

UPS, the world's largest package-delivery company, reported a second-quarter drop of 17 percent in sales to $10.8 billion, its biggest quarterly decline since the company went public in 1999. Chief Financial Officer Kurt Kuehn said UPS doesn't "have any confidence" in a near-term pickup in demand.

'Double Dip'

Some economists fear a second economic contraction, what they call a "double dip."

"Expectations of corporate earnings will have to be downgraded again," Nouriel Roubini, the New York University economist who predicted the credit crisis, said in a July 23 research note. "Demand will be weak, most prices will be falling, and companies will therefore have little pricing power and their profit margins will remain squeezed. The expectation that in these conditions profits will rebound strongly is quite far-fetched."

Federal Reserve Chairman Ben S. Bernanke told Congress this week the economy is showing "tentative signs of stabilization," with consumer spending leveling out, though businesses have yet to increase investments.

To contact the reporter on this story: Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net; Steve Matthews in Atlanta at smatthews@bloomberg.net
Last Updated: July 25, 2009 00:01 EDT

Labels: economic indicators, financial crisis, profits

 

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7/25/2009 04:07:00 PM 0 comments links to this post

 

Intel Says Its Human Rights Were Violated

by Dollars and Sense

Taking the concept of corporate personhood to what might be considered its logical extreme, computer chip titan Intel is claiming that the EU has violated its human rights in a recent anti-trust case.

Full story here.

Labels: corporate personhood, human rights, intel

 

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7/23/2009 03:03:00 PM 0 comments links to this post

 

Crisis Is Over: For the Wall Street Bonuses

by Dollars and Sense

In the second quarter, Morgan Stanley lost $1.26 billion. However, it managed to set aside $3.9 billion for bonuses during that time. In fact, despite 3 straight quarters of losses, it has set aside over $6 billion for bonuses. Looks like they're going to need another bailout soon.

From the Washington Post:

NEW YORK, July 22 -- Wall Street's biggest banks are setting aside billions of dollars more to pay their executives and other employees just months after these firms were rescued with a taxpayer bailout, renewing questions about compensation practices in the aftermath of the financial crisis.

The recent outcry over bonuses at bailed-out firms prompted public alarm and promises of reform from financial leaders, who acknowledged that pay and bonuses should not reward risky short-term business decisions -- such as those that contributed to the meltdown -- but instead longer-term financial performance.

But Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

The increase in set-asides for employee pay has raised the ire of Washington, where lawmakers denounced financial leaders for returning to old habits and vowed to enact measures governing executive compensation.

"It strengthens our commitment to getting legislation passed," Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said in an interview Wednesday, adding that a committee vote on a bill to increase oversight of Wall Street pay has been scheduled for Tuesday. "The amounts are troubling."

Goldman Sachs caused a stir last week when it disclosed it had set aside a record $6.6 billion for compensation expenses in the most recent quarter, bringing the total for the first six months of the year to $11.4 billion. If that pace continues for the rest of the year, Goldman's employees will earn an average of about $773,000, more than double the figure last year and even exceeding the $700,000 paid in 2007.

The recent set-asides came as Goldman announced it earned a record $3.4 billion for the second quarter, positioning itself, along with J.P. Morgan Chase, as one of the strongest banks to emerge from the crisis.

But some analysts and investors had especially sharp words for Wall Street rival Morgan Stanley, which reported Wednesday that it had set aside $6 billion so far this year for compensation expenses even as it recorded its third straight quarterly loss. In reporting its second-quarter results, Morgan Stanley said it lost $1.26 billion, after accounting for one-time charges including an $850 million expense related to paying the government back after its bailout. Still, the company set aside $3.9 billion in compensation expenses, representing 72 percent of its revenue for the quarter.

Rest of the story is here.

Labels: Golden Parachutes, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Wall Stree bonuses

 

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7/23/2009 11:34:00 AM 0 comments links to this post

 

Unrest in Disneyland

by Dollars and Sense

From the Orange County Register:

800 demonstrators march on Disney over labor dispute
July 14th, 2009, 6:02 pm
posted by Adam Townsend, Staff Writer


Roughly 800 Disney hotel workers, union organizers, outside demonstrators and members of the Episcopal clergy marched from the Convention Center, shutting down Harbor Boulevard to the Disneyland entrance Tuesday afternoon - another protest rally in the labor dispute between Disney and workers at the three Disneyland hotels that has simmered at a stalemate for a year and a half.

Since the old contract expired Feb. 1, 2008, negotiations have stalled over healthcare issues, and the Orange County branch of the Unite Here hotel union representing the workers has fortified itself for a strike by merging with the Los Angeles chapter - that branch has a strike fund to pull money from if workers vote to stop work and picket the self-described "happiest place on Earth."


Read the rest of the article and check out the slide show.

(Hat tip to LaborNet).

Labels: Disneyland, labor protest, Unite Here

 

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7/23/2009 08:20:00 AM 0 comments links to this post

 

Nice Analysis of Complexities of Online Piracy

by Dollars and Sense

From The Financial Times:

Pirates on parade

By Salamander Davoudi and Tim Bradshaw
Fiancial Times
Published: July 22 2009 03:00 | Last updated: July 22 2009 03:00

In April, when a Swedish court sentenced the founders of Pirate Bay to one-year prison terms for promoting copyright infringement on the world's largest filesharing website, the music and film industries gave a standing ovation. But their triumph was short-lived.

The four men, who "tweeted" vigorously on Twitter during their trial, may not be able to communicate so freely from their prison cells. But their struggle for internet freedoms has developed into a political issue: Sweden's Pirate party , dedicated to the legalisation of file-sharing, won a seat last month in the European parliament.

The war being waged by the entertainment industry against online piracy was further weakened when its powerful ally and champion of internet policing, Nicolas Sarkozy, president of France, had his anti-piracy bill watered down by his country's highest court in April.

Ten years after the launch of Napster, the first online file-sharing service, the music industry is no closer to solving the problems created by digital piracy. As advances in technology make television, film and video games companies more vulnerable to piracy, that decade-long failure to change consumer behaviour threatens to undermine business models across the media industry.

Piracy has helped to create momentum around legal and intellectual challenges to copyright law. "Piracy has gone from being a simple argument about infringement or using something without permission to questioning the very basis of copyright," says Gregor Pryor, a digital media partner at Reed Smith, the international law firm.

Read the rest of the article

Labels: filesharing, intellectual property, internet piracy, media industry, technology

 

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7/22/2009 05:47:00 PM 1 comments links to this post

 

Commercial Property Shoe To Drop?

by Dollars and Sense

From The Financial Times:

US banks warn on commercial property
Financial Times
By Francesco Guerrera and Greg Farrell in New York
Published: July 22 2009 19:21 | Last updated: July 22 2009 19:21

Two of America's biggest banks, Morgan Stanley and Wells Fargo, on Wednesday threw into sharp relief the mounting woes of the US commercial property market when they reported large losses and surging bad loans.

The disappointing second-quarter results for two of the largest lenders and investors in office, retail and industrial property across the US confirmed investors' fears that commercial real estate would be the next front in the financial crisis after the collapse of the housing market.

The failing health of the $6,700bn commercial property market, which accounts for more than 10 per cent of US gross domestic product, could be a significant hurdle on the road to recovery.

Read the rest of the article

Labels: baillout, commercial property, derivatives, financial crisis, Morgan Stanley, mortgage meltdown, Wells Fargo

 

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7/22/2009 05:37:00 PM 0 comments links to this post

 

2Q Profits: Cost and Tax Cuts>Revenue Loss

by Dollars and Sense

From Reuters:

Corporate cost-cuts: early gains soon turn to pain?

Tue Jul 21, 2009 4:43pm EDT
By Nick Carey - Analysis

CHICAGO (Reuters) Much of Corporate America has slashed costs to stay in the black during the recession, but wielding the knife too heavily could also remove the ability to grow in a recovery.

"If you cut into flesh long enough, eventually you find bone," said David Rosenberg, chief economist at Gluskin Sheff in Toronto. "Cost cutting is not a bottomless pit."

Firing people, introducing hiring freezes, halting investments, trimming budgets or even skimping on office supplies are time-tested ways to prove the old adage that a penny saved is a penny earned.

A slew of companies reported better-than-expected first-quarter results because aggressive budget slashing more than made up for falling sales. According to Rosenberg, 40 percent of companies missed their top line expectations in the first quarter.

And as the bulk of results for the most recent quarter hits in the next two weeks, many U.S. companies are expected to do the same again. Some already have.

Perhaps the biggest example so far has been General Electric Co (GE.N), which managed on Friday to report earnings that whizzed past expectations despite a drop in revenue that was more dramatic than Wall Street had predicted. The major reasons: cost cutting and a dip in its tax rate.

Mind you, investors can be smart to the numbers game. They question the quality and sustainability of such results--and despite the earnings beat GE's shares dropped more than 5 percent on Friday.

Read the rest of the article

Labels: economic indicators, financial crisis, profits

 

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7/22/2009 05:23:00 PM 0 comments links to this post

 

Key US Companies Report Strong 2Q Profits

by Dollars and Sense

From The Financial Times, again:

Profits boost for US industry
Financial Times
By Hal Weitzman in Chicago and Michael Mackenzie and Francesco Guerrera in New York

Published: July 21 2009 19:22 | Last updated: July 21 2009 19:22

Corporate America took another step along its long road to recovery on Tuesday as companies from the industrial heartland of Peoria to the technology hubs of Silicon Valley reported stronger-than-expected profits and bullish outlooks.

The wave of positive second-quarter results from Caterpillar, DuPont and Apple, which came a week after several banks beat analysts’ expectations, fuelled investors' hopes for a rebound in the US economy.

Shares in Caterpillar rose nearly 8 per cent on Tuesday after the world's biggest maker of construction equipment un-veiled profits far ahead of Wall Street’s expectations and issued a more optimistic outlook.

Its upbeat comments fuelled hopes that the global industrial economy was recovering. The manufacturer is a bellwether of the US economy but also heavily relies on overseas markets.

Read the rest of the article

Labels: Apple, Caterpillar, DuPont, economic indicators, profits

 

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7/21/2009 06:14:00 PM 0 comments links to this post

 

China To Use Forex Reserves for M and A

by Dollars and Sense

From The Financial Times:

China to deploy forex reserves

By Jamil Anderlini in Beijing
Financial Times
Published: July 21 2009 19:09 | Last updated: July 21 2009 19:09

Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country's premier, said in comments published on Tuesday.

"We should hasten the implementation of our 'going out' strategy and combine the utilisation of foreign exchange reserves with the 'going out' of our enterprises," he told Chinese diplomats late on Monday.

Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.

The "going out" strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.

Qu Hongbin, chief China economist at HSBC, said: "This is the first time we have heard an official articulation of this policy ... to directly support corporations to buy offshore assets."

Read the rest of the article

Labels: China, financial crisis, foreign exchange, Mergers, Monetary Policy

 

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7/21/2009 06:10:00 PM 0 comments links to this post

 

What's Your IQ?

by Dollars and Sense

Inequality Quotient, that is.

Cornell University's Center for the Study of Inequality is offering an online quiz to test your knowledge of current data on wealth, income, and racial inequities in the U.S. When you’re done with their 12 questions, you get a histogram that shows how you fared relative to other quiz-takers.

(Hat tip to Too Much Weekly, a very informative and well-written project of the Council on International and Public Affairs, edited by labor journalist Sam Pizzigati.)

Labels: Center for the Study of Inequality, Inequality, Too Much Weekly

 

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7/21/2009 05:19:00 PM 0 comments links to this post

 

Recession Buster

by Dollars and Sense

Mark Mueller's motto is "God, Guns, Guts, and American Pick-Up Trucks." The owner of Max Motors in Butler, Missouri used to give away handguns with every car purchase, but times are tough for car dealers and he's had to upgrade his promotion. So he's giving away a voucher for an AK-47 to go with your new truck.

If you think this promotion is amazing, you haven't been paying enough attention to the right wing in this country, including the cable news networks. CNN did one of the less reactionary interviews with Mueller, who was so annoyed by the interviewer's "left-wing bias" that he had to ask her: "You don't have a problem with God, do ya? ... You don't think God wants us to defend ourselves?" She was so flustered, she almost said "WWJC" (what would Jesus carry?), before agreeing that God was too powerful to need a gun himself.

Despite the "bias," Mueller says on his website:

Media coverage at Max Motors has been fantastic. We want to thank everyone who has emailed us and commented about our latest promotion. We also want to thank everyone that [sic] has come down to the dealership.

With the dealer's website dominated by coverage of their media coverage, you can almost lose track of their normal sales pitch: "Guaranteed Lowest Price in the Nation!" And in an even bigger font and capital letters: "BIG CITY CAR DEALERS ARE CLOSING THEIR DOORS, BECAUSE EVERYONE IS LINING UP AT OURS!"

You can see all the positive media spin at Max Motors' website, along with enlightening comments from lovers of GGG&AP-UT's ... and find out how to subscribe to their Twitter feed.

Labels: AK-47, guns, right-wing gun nuts, right-wing media

 

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7/21/2009 09:20:00 AM 0 comments links to this post

 

Revisiting Bretton Woods (Literally!)

by Dollars and Sense

Want to taste the same four-course meal that John Maynard Keynes enjoyed?

You can mark the 65th anniversary of the Bretton Woods International Monetary Conference at the place where it all began, as The Mount Washington Resort is celebrating its own place in history next weekend. The upscale hotel in the White Mountains of New Hampshire will "celebrate the historic occasion by offering guests interested in exploring our world economic history [sic]."

Sponsored by New Hampshire's statewide Chamber of Commerce, the weekend is aptly titled "The Gold Standard Package." Rates start at $194.40 per person, double occupancy. Guests will spend Saturday, July 25, listening to the sober analyses of mainstream economists, including the official historian of the IMF. The festivities begin on Saturday morning with a treasure hunt, called the Gold Rush (no, we're not making this up). Here's their description:

There has been gold stashed around The Mount Washington Hotel for 65 years. Start looking -- you have one hour to find the most gold. Meet at the Grandfather Clock.

On Saturday night, you can enjoy a "commemorative dinner ... based on the original menu served at the farewell dinner on July 22, 1944." But be warned: No lobster or escargot -- it was wartime, after all.

All the details are here.

Labels: Bretton Woods agreement, IMF, Mount Washington Hotel, World Bank

 

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7/20/2009 05:01:00 PM 0 comments links to this post

 

Jon Stewart on Goldman Sachs

by Dollars and Sense

I can't figure out how to embed it here, but the folks at Seeking Alpha did--a great segment from Jon Stewart taking on Goldman Sachs, in the vein of Matt Taibbi (whose Rolling Stone article about Goldman Sachs we've reported here). Watch the video here.

Speaking of Matt Taibbi, he was interviewed last week on Here and Now, a program on Boston's WBUR. Right after that was an interview with TARP-watchdog, Harvard Law professor, and bankruptcy expert Elizabeth Warren. Both were great interviews; listen to them here.

Robert Zevin made similar points about Goldman in the talk he wrote for a D&S house party back in May: All that Glitters Is Goldman Sachs.

Labels: Daily Show, Elizabeth Warren, Goldman Sachs, Jon Stewart, Matt Taibbi, Robert Zevin

 

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7/20/2009 07:22:00 AM 0 comments links to this post

 

What Kind of Reporting Do We Deserve?

by Dollars and Sense

A nice plug for D&S over at Counter Economics blog, where the main blogger is an e-subscriber to D&S. He singled out for praise Jerry Friedman's article Bernanke's Bad Teachers, which we just posted to the website.

What Kind of Financial and Economics Reporting Do We Deserve?

The differences between conventional media and the publication Dollars and Sense on the topic of economics and the present economic crisis is stark. From the conventional media the topic of the biases and corruption of our policy shapers such as Bernanke, Geithner and Summers is never brought up. According to the conventional media they are simply "public servants"; Alan Greenspan was one of the top economists when selected to head the Fed (which he never was), and Bernanke is a deep thinking scholar of the depression, who is providing the best lessons from that crisis to this one. What we are not supposed to notice is that all of these economists belong to a country club of the elite and are part of interlocking directorates. The only thing deep about them is the deep corporate welfare and consistently pro-financial industry approach to every single policy decision. As Larry Summers is paid $5 million a year to do a few hours a week of influence peddling for a hedge fund, and the other decision makers are similarly on the take, their first question is always the following:

"How can we further enrich investment banks in particular and the financial industry generally. Secondly, how can we spin it so it sounds good to the average person"

Every article and television debate is centered around the same philosophy. In order for the country to do well, Citibank absolutely must be able to charge 20% interest. Any deviation from this is simply the first step on the "road to socialism." The bias is so deep that during discussions of unfair credit card practices, the typical show moderator will offer "If we restrict what credit cards can charge, then people won't be able to get credit." Are we the only one's who are insulted by the fact that the moderators on these shows seem to work for Citibank? One's financial well being as well as sanity is almost predicated upon not watching and reading the conventional media as it has a perverting effect both on one's knowledge level and values. If Business Week or Fortune Magazine ever had a thought opinion or glancing emotion that was not pro corporate and completely anti worker, environment and sustainability, we would like to know what it was. The financial media landscape is abysmal, but we have an antidote.

Dollars and Sense (D&S) writes from the perspective of a heretical concept in our time; that the economy should actually benefit the people that work in it. D&S actually questions the official story and provides financial and economics reporting within a context of values. Not mindless repetition of catch phrases regarding "free markets," to paper over free rides for the ultra wealthy, but actual values. For most Americans, values are taught to be important, but only in certain settings. There are the values for "us," but then the values for GM, Monsanto and Goldman Sachs, and because they are businesses and must make a profit, they can do things no one would tolerate from us personally. How this double standard of values was developed is the topic of a different article, but Dollars and Sense does not accept the double standard. This is one reason why their coverage and writing is so clean.

Read the rest of the post.

Labels: Ben Bernanke, Counter Economics, Gerald Friedman

 

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7/18/2009 11:23:00 AM 0 comments links to this post

 

UN Calls for Overthrow of Free Market Ideology

by Dollars and Sense

From yesterday's Telegraph..

The United Nations has called for a return to state-led "industrial policy" for poorer countries in what amounts to a rejection of the free-market thinking that has dominated global institutions for the last 30 years.

By Ambrose Evans-Pritchard
Published: 8:04PM BST 16 Jul 2009

Supachai Panitchpakdi, head of the UN Conference on Trade and Development (UNCTAD), said the financial crisis had exposed the deep failings of growth models adopted in Africa, the Pacific, and parts of Asia, usually under pressure from the West.

"Some advanced countries may be seeing an end to the crisis but it's still darkness at the end of tunnel for the least developed, and many of them are going backwards. We're talking about a billion malnourished people," he said in London.

Capital flows to poorer states and export earnings have together collapsed by $2 trillion (£1.22 trillion) since the credit crunch began. "This is an alarming trend, and it's not a result of their own doing," he said.

Mr Supachai said the world had spent some $5 trillion on financial support since the crisis began but almost nothing has reached the most vulnerable countries. "There is very little trickle down," he said.

While Eastern Europe has been rescued by the International Monetary Fund, the world's 49 "least developed countries' (LDCs) are too poor to meet the loan conditions.

UNCTAD said market ideology has distorted the structure of farming in many of these countries over the years and prevented them creating light industries and processing needed to move up the manufacturing ladder. "The market-led reforms since the early 1980s have, to a large extent, failed to correct this deep-seated weakness," said the agency's annual report.

Decrying a "false dichotomy" between the virtues of the free market and the alleged vice of state dirigisme, it said there is much to learn from the calibrated "industrial policies" of Malaysia, Sweden, Taiwan, and Finland.

"Not all decisions made by governments are always rational. Governments are subject to capture by special interests. The same criticisms, however, apply equally to the market," it said.

UNCTAD said the commodity boom of recent few years masked the underlying problems, as well as leaving countries exposed to sudden shocks and debt crises. The claim may raise eyebrows among those in the City who think that a "commodity supercycle" driven by China has transformed the prospects of mineral-rich states, despite the price correction over the last year.

The UN's tilt towards "smart dirigisme" would have caused apoplexy in Washington under the Bush Administration, and will remind some critics of development orthodoxies in the 1960s.

It may receive a less chilly reception from President Barack Obama and his Democratic Congress. As global leadership shifts ineluctably from West to East it is no longer possible in any case to ignore the success of Asia's state-led systems. The ideological baton is passing.

Read the original article.

Labels: economic crisis, Free Market, industrial policy, recession, United Nations

 

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7/17/2009 11:46:00 AM 0 comments links to this post

 

Economy Is Even Worse Than You Think (WSJ)

by Dollars and Sense

From Tuesday's WSJ:

The average length of unemployment is higher than it's been since government began tracking the data in 1948.

By MORTIMER ZUCKERMAN | July 14, 2009

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:
[Commentary] David Klein

—June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

—More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.

—No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.

—The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

—The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

—The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.

—The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.

—The goods producing sector is losing the most jobs -—223,000 in the last report alone.

—The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.

Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.

Read the rest of the article.

Labels: economic crisis, unemployment

 

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7/17/2009 11:40:00 AM 0 comments links to this post

 

Foreclosures Up 15% In 2009

by Dollars and Sense

This is hardly surprising. One out of every five homeowners owe more than their houses are worth. The real unemployment rate is over 16% and climbing. And banks are refusing to refinance sour loans, even with $50 billion from the Obama Administration. You can't unpop a bubble.

From the wires:

The number of U.S. households on the verge of losing their homes soared by nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills.

The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.

The data show that, despite the Obama administration's plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, America's housing woes continue to spread. Experts don't expect foreclosures to peak until the middle of next year.

Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said.

"Despite all the efforts to date, we clearly haven't got a handle on how to address the situation," said Rick Sharga, RealtyTrac's senior vice president for marketing.

More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm's report. That works out to one in every 380 U.S. homes.

It was the fourth-straight month in which more than 300,000 households receiving a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in June, up from about 65,000 a month earlier.

--d.f.

Labels: Daniel Fireside, foreclosures, homeownership, real estate market

 

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7/16/2009 12:14:00 PM 1 comments links to this post

 

What's the Meanest City?

by Dollars and Sense

Los Angeles is #1, according to The National Law Center on Homelessness & Poverty (NLCHP) and the National Coalition for the Homeless (NCH) -- #1 in criminalizing the homeless. The two organizations released a report on Monday analyzing how cities target homeless people, such as laws against sleeping, eating, or sitting in public spaces.

The report, titled "Homes Not Handcuffs," includes information about 273 U.S. cities. It also ranks the top 10 U.S. cities with the worst practices of criminalizing homelessness. Top 10 lists are always easier for the mainstream media to comprehend, so that's been the story for the few media outlets that have covered the report (Reuters reporter Steve Gorman's article is the best we've seen so far; it's also republished on Common Dreams).

The full report explains how the growing numbers of urban homeless have been targeted for criminalization, how their civil rights have been violated in some cases, and detailed summaries of legal cases against some of the most abusive anti-homeless laws.

And in case you want to know, the "Top Ten Meanest Cities" are:
1. Los Angeles, CA
2. St. Petersburg, FL
3. Orlando, FL
4. Atlanta, GA
5. Gainesville, FL
6. Kalamazoo, MI
7. San Francisco, CA
8. Honolulu, HI
9. Bradenton, FL
10. Berkeley, CA

Berkeley???

On June 12, 2007, Berkeley's City Council unanimously passed the "Public Commons for Everyone" initiative to "clear the streets of aggressive and disruptive behavior." This law targets a wide range of behavior, including lying on or blocking the sidewalk, smoking near doorways, having a shopping cart, tying animals to fixed objects, littering, drinking in public, public urination and defecation and shouting in public. ... Osha Neumann, an attorney who defends homeless individuals, told Indybay.org that homeless people are frightened by these measures and many are thinking about leaving town. He also indicated that funding for meals and other services for homeless people have been reduced, and there are not enough shelter beds.

Read the full report.

Labels: homelessness, Homes Not Handcuffs, meanest cities

 

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7/15/2009 02:42:00 PM 0 comments links to this post

 

Beyond the Official Unemployment Rate

by Dollars and Sense

Today's NY Times has a good article about the real level of unemployment. Although the headline, "Part-Time Workers Mask Unemployment Woes," sounds like it could be a story about undiagnosed depression (psychological, not economic), it actually gives a pretty good explanation of why the official unemployment rate doesn't tell the real story.

You can read a much better article about "The Real Unemployment Rate" in the current issue of Dollars & Sense. 

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7/15/2009 02:03:00 PM 0 comments links to this post

 

What Are You Drinking?

by Dollars and Sense

There's a new brand of bottled water, and unlike the others, it's 100% politically correct. But you wouldn't want to drink it. "B'eau-Pal Bottled Water" was launched yesterday in London. In beautifully designed bottles, it is authentic water from Bhopal, India.

B'eau-Pal is the inspired concoction of The Yes Men, a group of culture-jammers who define their work as "Identity Correction -- Impersonating big-time criminals in order to publicly humiliate them. Targets are leaders and big corporations who put profits ahead of everything else."

Here's how The Yes Men describe their new brew: "The unique qualities of our water come from 25 years of slow-leaching toxins at the site of the world's largest industrial accident. To this day, Dow Chemical (who bought Union Carbide) has refused to clean up, and whole new generations have been poisoned."

The Yes Men brought their new product to Dow's UK headquarters yesterday -- but no one was home. It seems Dow's corporate honchos got (toxic) wind of The Yes Men's impending visit, according to their press release:

Twenty Bhopal activists, including Sathyu Sarangi of the Sambhavna Clinic in Bhopal, showed up at Dow headquarters near London to find that the entire building had been vacated.

Guess they all went out for drinks?

Almost 25 years after the Bhopal catastrophe, a new report by the Sambhavna Trust shows that local groundwater, vegetables, and breast milk are contaminated by toxic quantities of nickel, chromium, mercury, lead, and volatile organic compounds. Read more facts about Bhopal's poisoned water from the Bhopal Medical Appeal, or get some quick facts from B'eau-Pal's label.

And check out The Yes Men's new movie, for more confrontations with scary corporate criminals.

Labels: B'eau-Pal, Bhopal, Dow Chemical, The Yes Men, Union Carbide

 

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7/14/2009 03:43:00 PM 0 comments links to this post

 

Blacks See Wages Shrink

by Dollars and Sense

Another very troubling report from the Economic Policy Institute (EPI). In their latest weekly economic snapshot they show that African Americans are the only group of workers who have seen their wages go down during the recession. As noted in our last post (see point 3), the official unemployment rate for African Americans is more than 50 percent higher than the national average (14.7% vs. 9.5%).

From EPI:

African Americans see weekly wage decline

by Algernon Austin

Over the last two years (from the first quarter of 2007 to the first quarter of 2009), black workers 25 to 54 years old experienced a 3.7% decline-a drop of about $23-in their inflation-adjusted median weekly wage (see Chart). No other major racial or ethnic group showed a decline over this period.1



This pattern suggests the continuation of negative wage growth for black workers seen over the last complete business cycle, from 2000 to 2007. Over that cycle, the median weekly wage for African American workers declined 0.6%, while other groups experienced increases, although these increases were generally quite small.2 If these trends continue, blacks will likely lead in the percentage-point increase in poverty caused by the recession.

Notes
1. The wage increases are likely due in part to a "composition" effect. Low-wage workers are disproportionately affected by unemployment, which alone would lead to higher median wages among those who keep their jobs. Additionally, the Hispanic and Asian wage growth may also be affected by their geographic location in stronger local economies. Immigrant workers, who make up a large share of the Hispanic and Asian labor force, tend to be disproportionately located in metropolitan areas with strong economic growth. See David Dyssegaard Kallick, Immigrants and the Economy: Contribution of Immigrant Workers to the Country's 25 Largest Metropolitan Areas, New York: Fiscal Policy Institute, forthcoming.

2. For additional details, see Algernon Austin, Reversal of Fortune: Economic Gains of the 1990s Overturned for African Americans from 2000-07, Washington, D.C.: Economic Policy Institute, 2008; and Algernon Austin and Marie T. Mora, Hispanics and the Economy: Economic Stagnation for Hispanic American Workers, Throughout the 2000s, Washington D.C.: Economic Policy Institute, 2008.

Labels: Black jobless rate, Black wages, Economic Policy Institute, EPI, wage gap

 

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7/13/2009 12:42:00 PM 0 comments links to this post

 

No Economic Bottom Yet

by Dollars and Sense

From the Center for American Progress. PDF with graphs here.

July Economic Snapshot by Christian E. Weller

We are learning the hard way that Wall Street, the economy, and the labor market are three separate things. While Wall Street enjoyed a bright spring, the economy continues to struggle, and job losses still mount.

The economy may be nearing its bottom, but it hasn't reached it yet. Job growth won't resume until the economy has turned the corner for good, no matter what Wall Street hopes for. A strong, sustained economic recovery will take time and public investments in health care, energy independence, public education, and innovation for years to come. These investments will help create and save millions of jobs right now and foster faster productivity growth that can translate into more and better jobs in the future.

1. The U.S. economy shrinks quickly. In the first quarter of 2009, gross domestic product declined at an annual rate of 5.5% after falling by 6.3% in the fourth quarter of 2008.

2. Massive job losses continue. The U.S. economy shed 467,000 jobs in June 2009. The economy has lost 6.5 million jobs since the recession began in December 2007, and 3.4 million jobs-or 52.4% of the total-just in 2009.

3. Unemployment stays high among the most vulnerable. The unemployment rate was 9.5% in June 2009-the highest level since August 1983. The African-American unemployment rate stood at 14.7% in June 2009, the Hispanic unemployment rate was 12.2%, and the unemployment rate for whites was 8.7%. Youth unemployment jumped to 24.0% last month. And the unemployment rate for people without a high school diploma stayed at a high of 15.5%, compared to 9.8% for those with a high school degree and 4.7% for those with a college degree.

4. Unemployed are out of a job for record lengths. The average length of unemployment was 24.5 weeks in June 2009, the median length came to 17.9 weeks, and 29.0% of the unemployed were out of a job for 27 weeks or more. All three of these measures are at their highest levels since the Bureau of Labor Statistics started to collect these data in 1948.

5. After-tax income grows because of public support. After-tax income expanded by an additional $107 billion on an annual basis as compared to before-tax income from February to May 2009. Lower taxes and social benefits combined amounted to $361 billion and more than offset lower wages, less capital income, and less proprietor income from February 2009 to May 2009.

6. Benefits decreased before the crisis. The share of private-sector workers with a pension dropped from 50.3% in 2000 to 45.1% in 2007, and the share of people with employer-provided health insurance dropped from 64.2% in 2000 to 59.3% in 2007.

7. Family wealth disappears at record pace. Total family wealth decreased by $16 trillion in 2009 dollars from June 2007-the last peak of family wealth-to March 2009. This reflects a drop of 24.2% during these 21 months, the fastest decline in any 21-month period since the Federal Reserve started to collect these data in 1952. What's more, total family wealth stood at 467.1% of after-tax income, the lowest level since September 1992.

8. The housing market is still sputtering. New home sales in May 2009 amounted to an annualized, seasonally adjusted rate of 342,000-32.8% lower than a year earlier-despite a year-over-year drop in median new home prices of 3.4%. Existing home sales were 3.6% lower and their median sales price 16.8% less than a year earlier.

9. Mortgage troubles mount. One in eight mortgages is delinquent or in foreclosure. In the fourth quarter of 2008, the share of mortgages that were delinquent was 9.1%, and the share of mortgages that were in foreclosure was 3.9%. The share of new mortgages going into foreclosure stayed at its record high of 1.4%.

10. Families feel the pressure. Credit card defaults rose to 7.5% of all credit card debt by the first quarter of 2009, an increase of 79.2% from the fourth quarter of 2007.

Labels: Center for American Progress, Christian Weller, economic crisis

 

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7/13/2009 12:32:00 PM 0 comments links to this post

 

New Bank Scam: Buy Discount TARP Warrants

by Dollars and Sense

The federal panel investigating the TARP bank bailout has announced that nearly a dozen banks have been buying back government-issued warrants at a steep discount from their face value. Banks that received emergency government funding were required to give the government warrants to purchase the company's stock at a certain price in the future. The banks are now buying back these warrants at only two-thirds of their face value. So far, the transactions have resulted in a loss of $10 million in revenue to taxpayers.

Some on the panel are considering a proposal to mandate the sale of the warrants on the open market to maximize the benefit to taxpayers.

Link to story in the Wall Street Journal.

Labels: baillout, banking industry, banking system, TARP program

 

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7/10/2009 12:39:00 PM 3 comments links to this post

 

Goldman good but not that bad (Julian Delasantellis)

by Dollars and Sense

Julian Delasantellis has a piece at Asia Times Online taking issue with Matt Taibbi's Rolling Stone article about Goldman Sachs. Hat-tip to LP for this.

(Delasantellis is right that Taibbi's understanding of 1929, and Goldman's role in it, comes from Galbraith's The Great Crash (the chapter entitled "In Goldman Sachs We Trust"). But he is wrong not to care who is the best Bond—it is so clearly Connery that it is painful to watch the others, imho.)

For related D&S reading, see this Ask Dr. Dollar column about the supposed "international banking conspiracy," and also Robert Zevin's piece, All that Glitters is Goldman Sachs.

Goldman good but not that bad
By Julian Delasantellis

I've seen every single James Bond movie, a few on their opening morning in the theatres, but as for the eternal debate as to who—Connery, Lazenby, Moore, Dalton, Brosnan or Craig—was the best Bond, I couldn't care less. I watch for the villains.

What a glorious gang they are. Suave, sophisticated, well spoken, all-powerful, all-seeing and all-knowing in their incredibly dastardly and ambitious plots, they seem quite the contrast with actors in today's world, Peter Principle incompetents who couldn't bomb the water even if they fell out of a boat. My favorites are Thunderball's Emilio Largo (Adolfo Celi), a man so evil that he seemed to have an offscreen orchestra follow him around continually playing ominously threatening sounding overtures (also, I liked the part that he was called the "guardian" of Domino, Claudine Auger-yeah, right), and Alex Trevelyan (Sean Bean) of Goldeneye. Putting a rare bit of actual history in the plot lines, Trevelyan's story was that he was a descendent of the so-called Liensk Cossacks, nationalist, anti-communist Russians who fought for Hitler during World War II. This group was betrayed back to Stalin's most untender mercies by the West after the war, and Trevelyan, a former MI-6 agent, still burns for horrible revenge against a British society that gave him its class, manners and refinement in exchange for the murder of his parents.

After September 11, I wondered if we had, in Osama Bin Laden, a real live Bond-type villain, as he had managed to pull off, with not one of his henchmen getting lost or being prevented from getting to the airport by a dead battery or parking enforcement boot, a plot of truly Bond-scale perfidy and ambition. It was only later that we learned, by discovering that all Saudi pilots had to train in the United States to receive their commercial licenses, that all Bin Laden had done was to find a seam in American security big enough to fly jumbo jets through.

Indeed, the belief that shadowy, all-powerful and all-secret conspiracies are forever working behind the scenes to thwart the American people's express will is a fairly common theme in American political and social life. Back before World War I it was the mysterious Colonel House who whispered in President Woodrow Wilson's ear to support the establishment of both the progressive income tax and the Federal Reserve; he is also said to be the one who, in contravention of George Washington's sacred advice to the nation 120 years previously to avoid "foreign entanglements", convinced Wilson to get the United States involved in the war.

Prior to the Japanese attack on Pearl Harbor, it was said that the elite Council of Foreign Relations (CFR), the secretive society for all those Harvard and Yale scion not desirous to give the nation up to the new political reality of the New Deal, "arranged" for the attack by assuring that the US Pacific Fleet's aircraft carriers would be out of their Hawaiian homeport on December 7.

Then, all during the Cold War, and the 20 years of New World Disorder that has followed it, the shadowy underworlds of both the extreme left and right have been continually striking from out of the darkness against the popular will. Taking Middle Europe's Crusades-era fantasies about mysterious Masonic orders to America animated much suspicion about the nation's Boston/Washington power axis in the still mostly uninhabited sunbelt. The conspiracies from the left were drawn more from current events than ancient history, with suspicions about plots ever being hatched by arms contractors, oil companies and multinationals such as Bechtel and ITT; neither right nor left had much use for the CFR.

President George HW Bush's phrase that he intended should describe the post cold war era of peace and prosperity, the "New World Order", became a sort of nefarious conspiracy in and of itself, with NWO's silent black helicopters ever said to be prowling the dark skies of American suburbia by night, just itching to pluck a gun-rights activist out of his bed for eventual deposit at UN concentration camps in Montana.

As a general rule, to be considered for the part of a nefarious worldwide conspirator, you have to be public and known, but not too much public and not that well known. Many conspiracy theorists posit that the strings of the world are being pulled by something called the Bilderberg group, but that sounds more like a fast-food drive through than a perverted cult of the super rich. Similarly, when it is said that the world is ruled by the Masons, care is made to specify that "the Masons" here refers to a super-elite and secret band called the "Secret Rite 33rd degree Masons", not ordinary, everyday Masons like your neighbor, who apparently isn't even powerful enough to return your lawnmower.

Public, but not too public? If that's the central operating criteria to be accused of operating a secret world conspiracy, then it's no wonder that Rolling Stone writer Matt Taibbi chose Goldman Sachs to anoint upon the dark throne of current evil ruling conspiracies. In his long piece in the July 9-23 edition, "The Great American Bubble Machine—how Goldman Sachs has engineered every major market manipulation since the Great Depression." Taibbi says your empty wallet or pitiful ATM receipt slip are just about all Goldman's fault.

Taibbi certainly cannot be accused of burying his lead, for in his second sentence he makes this comparison, probably more fitting to the monsters in the Sigourney Weaver Alien franchise than how you would commonly assume an investment bank would be described.

"The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

After calling John Thain, the former Goldman employee who was Merrill Lynch CEO at the time of its buyout by Bank of America, a pejorative applicable to the exit terminus of the alimentary canal, Taibbi lifts Goldman's magician's curtain just a little bit higher.

"What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain—an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased."

Taibbi proves his point in two ways. First, he seems to have taken a comprehensive census of everybody working in the finance business around the world. Of course, he finds many, many former Goldman alumni in this manner; as the annual visit from the Goldman Sachs recruiter is the most important day in business schools around the world, this should not be that surprising. Among these are Thain, Bush, former Treasury secretary Henry Paulson and Clinton Treasury secretary Robert Rubin, along with Robert Steel from Wachovia, Bush-era White House chief of staff Josh Bolton, New Jersey governor Jon Corzine, Ed Liddy of AIG, Ebay CEO Meg Whitman , and "chattering television—( that orifice word again) Jim Cramer".

It's certainly an impressive list; if you added on a bunch of foreign economic mandarins and central bankers it would be even longer.

But does it mean anything? Taibbi seems to be implying that, for all these officials, employment at Goldman is like being in a mafia family—once you're in you're never out. Once you start doing Goldman's bidding, you will continue to do so forever—you've totally lost your ability to execute your individual desires in favor of those being broadcast to your head from Goldman Sachs' World Headquarters on Broad Street.

Even more surprising is the fact that, for the overwhelming majority of these ex-Goldmans, the view that money is the central operating factor in economic decisions illuminates how they deal with their careers as well as the companies of which they are employed. Goldman could have kept their wayward staff until they took their secrets to the grave, but not when other institutions start offering better deals. That caused the alumni to go out from Goldman and conquer; the alumni are still working hard, hoping that some other future prospective employer will see their work and hire them away once more.

In short, would it be rational for all of the Goldman competitors and other institutions who have hired Goldman alumni away for premium prices to accept a situation where their new employees are still known and accepted to be working to advance Goldman's interests? If the answer to that question is no, much of Taibbi's argument falls away almost immediately.

The second part of Taibbi's argument is to look back on five previous economic calamities, and one possible one in the future, to dig out Goldman's previously hidden secret duplicities.

Taibbi goes back 80 years for his first example of Goldman perfidy, back to the heady days of 1929 before the great Wall Street Crash. Excessive employment of leverage was as much a cause of that crash as it was the current one, but back then, leverage was effected not through exotic debt securities, but through mutual fund like vehicles called "investment trusts".

Most of Taibbi's 1929 analysis comes from John Kenneth Galbraith's masterpiece on the subject, The Great Crash. Taibbi notes that:

Beginning a pattern that would repeat itself over and over again, Goldman got into the investment trust game late, then jumped in with both feet and went hog-wild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90% of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenanndoah Corporation, issuing millions more in shares in that fund—which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman.

Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah—which, of course, was in large part owned by Goldman Trading. The end result (ask yourself if this sounds familiar) wasท a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line. The basic idea isn't hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.

In a chapter from The Great Crash, 1929 titled "In Goldman Sachs We Trust," the famed economist John Kenneth Galbraith held up the Blue Ridge and Shenandoah trusts as classic examples of the insanity of leverage-based investment. The trusts, he wrote, were a major cause of the market's historic crash; in today's dollars, the losses the bank suffered totaled $475 billion. It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity.

But what Taibbi does not mention was that Goldman's investment trusts were hardly the biggest on the street; United Founders and State Street's trusts bested Goldman's. Also, how does one mesh Taibbi's conception of an all-powerful Goldman eternally directing efforts behind the scenes with the fact that the bank lost, in current value, $475 billion during the period, with its stock dropping from $102 to $3?

If that's what's happened to the chiefs, just imagine the world of hurt of the Indians.

Read the rest of the article.

Labels: Arthur MacEwan, Goldman Sachs, James Bond, Julian delasantellis, Matt Taibbi, Robert Zevin

 

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7/10/2009 12:24:00 PM 0 comments links to this post

 

What's Really Draining State Money?

by Dollars and Sense

Great article by Sam Pizzigati on Alternet.

What's Really Draining State Money?

To become less unstable, states are going to have to first become less unequal.

By Sam Pizzigati | Posted July 8, 2009

On July 1 last week, in state capitals across the United States, a new fiscal year began—amid nearly unprecedented fiscal chaos. In California, officials closed summer schools and made plans to pay bills with IOUs. In Arizona, state parks shut down for a day. In Illinois, drug treatment programs, facing a 72 percent funding cutback, were warning they may have to stop accepting new clients.

Overall, so far this year, 23 states have slashed programs for the elderly and disabled, 24 have axed aid to public schools, and 41 have sliced state worker jobs and benefits. And tens of billions in red ink still remain.

How could state budgets possibly spin so wildly out of kilter?

The current state budget crisis reflects, of course, the current recession. With economic activity down sharply, state tax revenues have fallen sharply, too. The already jobless aren't paying state income tax. People worried about losing jobs are spending less. That's lowering state sales tax collections.

But the back story to the current state budget crisis, the worst since the 1930s, goes deeper than the still deepening Great Recession. The recession has indeed shoved states over the fiscal edge. But the recession didn't bring states to that edge. Inequality did. The states with the biggest budget gaps just happen to be, for the most part, the states with the widest gaps between the rich and everybody else.

Why should that be the case? Why should inequality inevitably end up generating chronic budget shortfalls that eventually devastate the programs that average families value?

To get at the answer, we need to go back to a time—the mid 20th century—when states were launching, not cutting, programs to help average families.

Back then, in the 1950s and 1960s, states from New York to California were energetically investing in the infrastructure of modern middle class life. They were building schools for baby boomers, opening brand-new campuses for public colleges and universities, expanding state park systems, widening old roads, and broadening library access.

The vast majority of Americans, back in the mid 20th century, relished these new and expanded public services. The United States, at mid century, had become a solidly middle class nation, and middle class people—and poor people who aspire to middle class status—need and value public services.

This dominating middle class presence in American life would, unfortunately, prove not particularly enduring. The United States would become, over the 20th century's last quarter, increasingly unequal as Income and wealth began concentrating up ever higher on the economic ladder.

That would be bad news for public services. Rich people, generally speaking, don't need—and don't especially value—these services. The wealthy don't send their kids to public schools. They don't take books out of public libraries. They don't use public transportation. They don't spend time at public parks. Over time, not surprisingly, these wealthy tend to resent paying taxes to support the public services they don't use.

Back in the mid 20th century, this resentment didn't politically matter. In the considerably more equal United States that existed back then, the rich amounted to a marginal slice of the population pie, and the wealth at their disposal didn't amount to all that much. The rich of the 1950s and 1960s simply didn't have the resources necessary to dominate and distort the nation's politics.

Read the rest of the article.

Labels: Alternet, California, Sam Pizzigati, state budget shortfalls

 

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7/09/2009 04:37:00 PM 0 comments links to this post

 

Swiss to Block UBS From Providing Data to U.S.

by Dollars and Sense

From yesterday's New York Times, an article about the U.B.S. tax case. For those of us who are dying to have a peek at the names of the 52,000 rich Americans who are evading taxes by putting their money in the Swiss bank, it looks as if we may have to wait.

The funniest bit of this article is toward the end, where it says that "The Swiss agreed in March to abide by Article 26 of the Organization for Economic Cooperation and Development's tax convention, which requires national tax authorities to exchange information on request if there is probable cause to suspect tax evasion." But in the previous paragraph it had said that "Switzerland distinguishes between tax fraud and tax evasion, and does not consider tax evasion to be a crime." So they are solemnly pledging "to exchange information on request if there is probable cause to suspect tax evasion," but they don't regard tax evasion as a crime. Hmm... —cs

For more on tax havens, see our May/June cover article.

Swiss Vow to Block UBS From Providing Data to U.S.

By DAVID JOLLY
Published: July 8, 2009

PARIS — The Swiss government said Wednesday that it was prepared to seize U.B.S. client data rather than allow the bank to hand it over to the United States to settle a tax case.

U.B.S. has refused a demand from U.S. authorities that it turn over the names of 52,000 American clients, arguing that to do so would be illegal under Swiss banking secrecy laws and would open it to prosecution at home. The U.S. Justice Department in February sued U.B.S., saying it suspected the bank of helping wealthy Americans hide billions of dollars in secret offshore accounts.

"Switzerland makes it perfectly clear that Swiss law prohibits U.B.S. from complying with a possible order by the court in Miami to hand over the client information," the Swiss Department of Justice and Police said Wednesday in a statement on its Web site, a day after it made a filing to the same effect in the U.S. District Court in Miami. Therefore, "all the necessary measures should be taken to prevent U.B.S. from handing over the information on the 52,000 account holders demanded in the U.S. civil proceeding," it added.

The Swiss government will issue an order explicitly prohibiting U.B.S. from handing over client information "if circumstances require," it said.

Serge Steiner, a U.B.S. spokesman in Zurich, said it has always been U.B.S.'s position that divulging the client data would be a breach of Swiss law, and "the issue should be discussed by the two friendly governments.'' The bank, he added, is "always open to an appropriate solution.''

U.B.S., the largest Swiss bank, is under great pressure to reach an agreement. The bank has already paid $780 million and turned over the names of more than 250 clients to avoid prosecution on allegations that it defrauded the Internal Revenue Service. Its soured investments, many on American subprime mortgages, have cost it $53 billion in write-downs, sending it to taxpayers for a bailout. U.B.S. officials were not immediately available for comment Wednesday.

"On the one side you have the U.S. government wanting to get back some missing taxes and on the other you have a bank that is admitting some responsibility," said Nicolas Michellod, an analyst in Zurich with Celent, a financial research firm. "Eventually, I'm sure we'll see U.B.S. paying a fine."

U.B.S. last month raised about $3.5 billion in new capital, and Mr. Michellod suggested the bank might have been provisioning for just such an eventuality.

Doris Leuthard, the Swiss economy minister, said Tuesday in Washington that U.B.S. had made mistakes and would have to "pay a price" to reach a deal.

The dispute, which has strained relations between the United States and Switzerland, takes place amid wider efforts by countries including France, Germany and the United States to increase transparency in tax havens like the Channel and Jersey Islands, Switzerland and Luxembourg.

Switzerland distinguishes between tax fraud and tax evasion, and does not consider tax evasion to be a crime.

The Swiss agreed in March to abide by Article 26 of the Organization for Economic Cooperation and Development's tax convention, which requires national tax authorities to exchange information on request if there is probable cause to suspect tax evasion. But the government has also said that it "has no intention of relinquishing bank secrecy."

In Paris, the O.E.C.D. said Wednesday that one of those countries, Luxembourg, had now "substantially implemented the internationally agreed standard" of transparency in the exchange of tax information. While Luxembourg's work is not finished, Angel Gurría, the organization's secretary general said, "The process is working and I look forward to other countries following the example that Luxembourg has set."

Read the original article.

Labels: OECD, Switzerland, tax evasion, tax fraud, tax havens, UBS

 

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7/09/2009 10:22:00 AM 0 comments links to this post

 

Robert Johnson on 'Taibbi's Scream'

by Dollars and Sense

From http://www.alternet.org/story/141163/taibbi%27s_scream%3A_stop_the_political_system_that_has_let_goldman_sachs_fleece_us_for_90_years/?page=3--more on Matt Taibbi's Rolling Stone article on Goldman Sachs.

Taibbi's Scream: Stop the Political System That Has Let Goldman Sachs Fleece Us for 90 Years

By Rob Johnson, AlterNet. Posted July 8, 2009.

The sordid story of how Goldman Sachs and Co. engineered bubbles in the economy and made a hefty profit.

I hold my hands in front of me to block my line of sight

It seems my eyes are growing tired of staring in the light

The more I see the more I feel the less I want to know

Because if you think to much you'll blow your mind

You might just lose control and scream

—Lyrics to "Scream," by Seven Nations (Kirk McLeod)

In Matt Taibbi's vivid and provocative new article in Rolling Stone, "The Great American Bubble Machine," the man absolutely screams. Evoking the image in Edvard Munch's famous Norwegian painting, Taibbi sounds the alarm to American readers as he explores the sordid story of Goldman Sachs and Co. Tracing 90 years of political and market history, Taibbi colorfully describes the firm headquartered at 85 Broad Street as: "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Such evocative imagery will surely be discounted by some as hysterical or exaggerated, particularly by those whose senses are deadened by the business press or CNBC-style babble. Rather than engage in a dissection of the details, I would like to explore why Taibbi is screaming and ask why he is screaming for all of us in a way we are not seeing elsewhere in the media. In addition to screaming for us, I wonder whether he is also screaming at us. One thing is certain: he is screaming in a way that a healthy press would do in a hysterical time. Goldman Sachs' uncontested success blurring the boundaries between market and state is symbolic of a tremendous malfunction in finance, politics and civil society. That the firm is well-managed by all measures and that some fine, well-meaning individuals work there is beside the point. Taibbi is telling us that the rules are rigged. That we are being abused.

This is a time for vivid outrage.

Taibbi's rage is filling an emotional void. It is a reaction to what is missing after this profound speculative episode that the IMF suggests will cost over $4 trillion in losses on balance sheets and untold trillions in lost output. It is fury over a crisis that is, by any measure, the most profoundly damaging episode since the 1930s (and the Bank for International Settlements Annual Report released this week strongly suggests that the burden on stockholders is far from over).

What is it that leads to screaming? A wonderful passage in John Kenneth Galbraith's A Short History of Financial Euphoria helps explain. Dr. Galbraith seeks to identify the common elements that recur organically in the buildup and aftermath of every financial boom-bust episode:

"The final and common feature of the speculative episode-in stock markets, real estate, art, or junk bonds-is what happens after the inevitable crash. This, invariably, will be a time of anger and recrimination and also of profoundly unsubtle introspection. The anger will fix upon the individuals who were previously most admired for their financial imagination and acuity. Some of them, having been persuaded of their own exemption from confining orthodoxy, will, as noted, have gone beyond the law, and their fall and, occasionally, their incarceration will now be viewed with righteous satisfaction.

There will also be scrutiny of the previously much-praised financial instruments and practices-paper money; implausible securities issues; insider trading; market rigging; more recently, program and index trading that have facilitated and financed the speculation. There will be talk of regulation and reform."

Note the elements: anger, recrimination, introspection, law breaking, incarceration, regulation and reform.

Despite the fact that our news media have been filled with financial stories from Bear Stearns failure in March '08 to the present, the elements listed above seem neglected, muted, or in short supply (Gretchen Morgenson is the exception that proves the rule). This is disturbing, particularly given the scale of losses that the taxpayer has been forced to absorb, along with disappearing funds for future roads, bridges, health care, schools and a tax drag on wealth creation. It is into the void created by the tepid media coverage of this horrid and costly episode that Mr. Taibbi has screamed.

Read the rest of the article.

Labels: Goldman Sachs, Matt Taibbi, Robert Johnson, Rolling Stone

 

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7/08/2009 01:40:00 PM 0 comments links to this post

 

Food Stamps as Stimulus (WSJ)

by Dollars and Sense

From yesterday's Wall Street Journal.

Boost in Food-Stamp Funding Percolates Through Economy

By ROGER THUROW and TIMOTHY W. MARTIN | July 7, 2009

DAVENPORT, Iowa -- The lush red strawberries caught the attention of Rachel Patrick, a mother of five shopping at a farmers market along the Mississippi River here. She selected two cartons and ignited a little-noticed chain reaction that is an important part of President Barack Obama's economic stimulus plan.

Ms. Patrick handed a plastic card loaded with her monthly food-stamp allocation to farmer Ed Kraklio Jr., who swiped it through his electronic reader. Mr. Kraklio now regularly takes in several hundred dollars a month from food-stamp sales, a vital new revenue stream that has allowed him to hire another assistant to help tend a cornucopia of fruits and vegetables. The new worker, in turn, spends her income in nearby stores, restaurants and gas stations.

The president's stimulus plan has been aimed primarily at the top of the economy, pumping money into banks and car companies and state and city governments. But it also has put more money into the hands of the poorest Americans by boosting monthly food-stamp allocations. Starting in April, a family of four on food stamps received an average of $80 extra.

Money from the program -- officially known as the Supplemental Nutrition Assistance Program -- percolates quickly through the economy. The U.S. Department of Agriculture calculates that for every $5 of food-stamp spending, there is $9.20 of total economic activity, as grocers and farmers pay their employees and suppliers, who in turn shop and pay their bills.

Read the rest of the article.

Labels: economic stimulus, food stamps

 

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7/08/2009 12:35:00 PM 0 comments links to this post

 

Goldman Sachs and NYSE Transparency

by Dollars and Sense

More on the brewing Goldman Sachs scandal we posted on a couple of days ago. This is a post from Prison Planet with some details from Matt Taibbi's article in the current issue of Rolling Stone.

Taibbi: NYSE ends transparency to protect Goldman Sachs

Daniel Tencer
Raw Story
Sunday, July 5, 2009

The New York Stock Exchange quietly announced last week that it would end its practice of requiring companies to report all their program trading—a move that helps shield large investment banks, particularly Goldman Sachs, from public scrutiny.

The new rule means the public will no longer be able to tell if large investment banks are manipulating the stock market for their own gain, says Matt Taibbi, the journalist whose Rolling Stone article on Goldman Sachs' role in asset bubbles over the past century has rocked the financial world.

According to previous NYSE rules, any company that carried out program trading—essentially, large computer-automated trades worth more than $1 million—had to report the trades to the NYSE, which then made the information publicly available.

But, under new regulations (PDF) published last week, that requirement has been removed.

"The NYSE announced that it will no longer be releasing its weekly program trading data," Taibbi wrote in a blog posting. "This is quiet obviously a move designed to make it even more impossible to track what’s going on in the NYSE and shield, in particular, Goldman Sachs."

Taibbi argues that the move is designed to protect investment banks from bloggers who are exposing the companies' stock market manipulations. Goldman Sachs is singled out because the investment bank's share of principal NYSE trading has gone from 27 percent at the end of 2008 to fully 50 percent of trades in recent months.

Blogs such as Zero Hedge have been using NYSE data to argue that Goldman Sachs now has an almost unfettered ability to control stock prices.

Responding last week to news of the NYSE's rule change, Zero Hedge argued:

The NYSE has taken action to make sure that nobody will henceforth be able to keep track of the complete dominance that Goldman Sachs exerts over the New York Stock Exchange. This basically ends our weekly Program Trading updates disclosed every Thursday indicating that Goldman has singlehandedly captured all of NYSE's program trading.

Taibbi's article on Goldman Sachs' long history of involvement in asset bubbles and crashes can be found here.

Labels: Goldman Sachs, Matt Taibbi, New York Stock Exchange, Rolling Stone

 

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7/08/2009 12:20:00 PM 1 comments links to this post

 

Laura Tyson: Second Stimulus May Be Needed

by Dollars and Sense

Bloomberg is reporting that Obama administration economic advisor Laura Tyson said in a speech in Singapore that a second stimulus package may be needed. (More on this by Edward Harrison of Credit Writedowns; see the Bloomberg story below.) Given that the original stimulus package assumed that the unemployment rate wouldn't get above 8% (it's now 9.5%, and will surely be in the double digits soon, and for a while), it seems like an understatement when Tyson says that the original stimulus is "a bit too small."

Meanwhile, today's New York Times reports that France's stimulus focused on "shovel-ready" projects, many of which are well underway already. The article has pictures of work being done on the Grand Commune at Versailles. "As it turns out, France's more centralized, state-directed economy—so often criticized in good times for smothering entrepreneurship and holding back growth—is proving remarkably effective at deploying funds quickly and efficiently in bad times."

Here's that Bloomberg article:

Obama Adviser Says U.S. Should Mull Second Stimulus

By Shamim Adam

July 7 (Bloomberg) -- The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was "a bit too small," said Laura Tyson, an outside adviser to President Barack Obama.

The current plan "will have a positive effect, but the real economy is a sicker patient," Tyson said in a speech in Singapore today. The package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration.

Tyson's comments contrast with remarks made two days ago by Vice President Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years.

Obama said last month that a second package isn't needed yet, though he expects the jobless rate will exceed 10 percent this year. When Obama signed the first stimulus bill in February, his chief economic advisers forecast it would help hold the rate below 8 percent.

Unemployment increased to 9.5 percent in June, the highest since August 1983. The world's largest economy has lost about 6.5 million jobs since December 2007.

Worse Than Forecast

"The economy is worse than we forecast on which the stimulus program was based," Tyson, who is a member of Obama's Economic Recovery Advisory board, told the Nomura Equity Forum. "We probably have already 2.5 million more job losses than anticipated."

Republicans, including House Minority Leader John Boehner of Ohio, seized on the latest labor numbers to attack the Obama administration's handling of the economy.

Even Democrats have bemoaned the pace of the package's implementation. House Majority Leader Steny Hoyer, a Maryland Democrat, said on "Fox News Sunday" June 5 that congressional Democrats are "disappointed" stimulus funds weren't distributed faster.

"The money is just really starting to come out in more significant amounts now," Tyson said. "The stimulus is performing close to expectations but not in timing."

Package Affordable

Tyson, 62, later told reporters that the U.S. can afford to pay for a second package, even as the fiscal deficit soars. She said the budget shortfall is "likely to be worse" than the equivalent of 12 percent of gross domestic product that the administration forecast for 2009 and the 8 percent to 9 percent it projected for next year.

The professor at the University of California's Walter A. Haas School of Business downplayed worries from China and other countries with dollar reserves that the U.S. will let inflation soar as the deficit expands.

"The concern is that the U.S. will have to inflate away its debt. I do not think that is a valid concern," she said. "The Federal Reserve is not going to let the U.S. government inflate away its debt."

The U.S. needs to communicate its determination to reduce the annual shortfall once the economy recovers, she said.

While unemployment is worsening, other data have shown the economy is improving. U.S. manufacturing shrank last month at the slowest rate since August, according to the Institute for Supply Management's factory index, and a measure of pending home sales advanced in May for a fourth month.

Tyson said the U.S. should shift away from its dependence on consumption to grow, and promote expansion through investment and exports. The dollar will need to weaken in the longer term to promote export-led growth, she said.

Read the original article.

Labels: fiscal stimulus, France, Laura Tyson, stimulus package, Versailles

 

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7/07/2009 03:19:00 PM 0 comments links to this post

 

Making the White House a Fair Trade Zone

by Dollars and Sense

A coalition of fair trade organizations, vendors, and other supporters has launched a campaign to convince First Lady Michelle Obama to declare the White House a "Fair Trade Home."

They've launched a petition addressed to the First Lady, and they're asking the public to sign it. The petition gives a quick explanation of fair trade, and invites Mrs. Obama to endorse the concept:

... We invite you to extend the Fair Trade movement by making the White House a "Fair Trade Home" and increasing the number of items used by the White House which have been sourced according to Fair Trade principles. By requesting that your staff purchase items like food, body care, and clothing made or sourced under Fair Trade Principles, your family's example would show Americans how their purchasing habits can alleviate poverty, reduce inequality, and create opportunities for people to help themselves.

The campaign's ultimate goal is for the Obamas to host a ceremony at the White House in May 2010 in honor of "World Fair Trade Day."

By declaring the White House a "Fair Trade Home," Mrs. Obama can encourage households throughout America to continue refining their buying habits toward ethical consumption so that poverty, both in America and around the world, is reduced.

For more information about "Fair Trade the White House," visit their website.

Labels: fair trade, Michelle Obama, White House

 

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7/06/2009 02:44:00 PM 0 comments links to this post

 

More Excess-Capacity Cutting

by Dollars and Sense

A piece in last Tuesday’s Wall Street Journal reiterates the point Roger Bybee made in our May/June issue (“Corporate America’s Counter-Stimulus Strategy”): Companies are shuttering profitable plants and putting workers out on the street despite viable buy-out offers in order to raise the price of a product they are still producing elsewhere by reducing capacity.

DOUGLAS, Ga. — This small town was devastated in February when its largest employer, Pilgrim’s Pride Corp., said it would close a chicken-processing plant as part of the company’s bankruptcy filing.

Since then, city and county officials have been working to find a buyer who could save the plant’s nearly 1,000 jobs and $300,000 in annual county tax revenues. But there’s a problem: Pilgrim’s Pride isn’t eager to sell. The standoff shows how two important imperatives in a recession—creating jobs and cutting excess capacity—can collide.

Pilgrim’s has so far rejected a $32 million bid for the plant from Amick Farms LLC of Batesburg, S.C., company and city officials say. Another chicken company took a look and decided Pilgrim’s asking price was too high, say people familiar with the matter. City officials say the company kept a prospective bidder from touring the plant, making it a challenge to market.

Pilgrim’s says it hasn't been offered a fair price for the plant and is cautious about letting rivals see its manufacturing processes. Company emails and court documents suggest the Pittsburg, Texas-based company also is concerned about adding capacity in an already struggling industry.

In an email to the city of Douglas, Pilgrim’s President and Chief Executive Don Jackson said, “With declining demand for chicken in this terrible economy we need to remove chicken from the market. This would not be accomplished with a sale.” While he said he recognized the “devastating impact” a closing would have on Douglas, “the actions do strengthen the company and help protect the jobs” of the company’s 40,000 U.S. employees and farmers.

...

Many businesses in the U.S. are struggling with excess capacity. From autos to airlines to houses, “there’s a landscape of industries and sectors that are recognizing that they’re going to need to scale down,” says Nancy L. Rose, an economist at the Massachusetts Institute of Technology Department of Economics in Cambridge.

Most big chicken companies have been reducing output. Earlier this year, Tyson Foods Inc. said it cut production about 5% to offset lower demand. Chicken prices have increased since Pilgrim’s closed its plants.

Read the whole piece here.

Labels: chicken processing, excess capacity, Nancy L. Rose, Pilgrim's Pride, Tyson Foods, Wall Street Journal

 

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7/06/2009 09:42:00 AM 0 comments links to this post

 

Goldman Trading Scandal?

by Dollars and Sense

This seems to be an emerging juicy story related to Goldman Sachs and possible theft of its proprietary automatic computer trading codes. Hat-tip to D&S collective member Ben C. for the link to this post on the blog Zero Hedge. It is interesting that some of the details about the guy who supposedly stole the code come from his Linked-In page.

Is A Case Of Quant Trading Sabotage About To Destroy Goldman Sachs?
Posted by Tyler Durden at 5:48 PM | Sunday, July 5, 2009

Major developing story: Matt Goldstein over at Reuters may have just broken a story that could spell doom for if not the entire Goldman Sachs program trading group, then at least those who deal with "low latency (microseconds) event-driven market data processing, strategy, and order submissions." Visions of swirling, gray storm clouds over Goldman's SLP and hi-fi traders begin to form.

Back-up: This week's NYSE Program Trading report was very odd: not only because program trading hit 48.6% of all NYSE trading, a record high at least since the NYSE keep tabs of this data, and a data point which in itself was startling enough to cause some serious red flags as I jaunt from village to village in what little is left of Europe's bison country, but what was shocking was the disappearance of the #1 mainstay of complete trading domination (i.e., Goldman Sachs) from not just the aforementioned #1 spot, but the entire complete list. In other words: Goldman went from 1st to N/A in one week.

Even more odd, this "disappearance" comes hot on the heels of what Zero Hedge reported could be potentially a major change to the way the NYSE provides its weekly program trading report. Of course, Ray over at the NYSE immediately replied to Zero Hedge that all was going to be same as always ... Odd, maybe he meant that all is back to normal except the reporting of Goldman's trades. Either way, it might very well be time for proactive readers to again contact the two employees publicly disclosed by the NYSE as lead-contacts on the issue. Readers will recall that it was these same two who were previously steadfastly assuring anyone who would listen that there would be no change at all in data reporting.

Alas, the just released weekly data proves that either theirs was a material misrepresentation of facts, or Goldman simply suddenly decided to stop transacting with the NYSE, or, what would be even more sinister, Goldman notified the NYSE to scrap all their trading data from the prior week. Why would they do that?

Going back to Matt Goldstein's story. In a nutshell, on Friday, one Sergey Aleynikov was arrested at Newark airport by FBI agents, as he was coming back from a trip to Chicago (maybe visiting his new employer), on what are basically industrial espionage charges. Sergey, or Serge as his Linked-In account identifies him, was VP of equity strategy over at 85 Broad (or maybe 1 New York Plaza, his detailed Bloomberg Bio page has disappeared) had the following responsibilities at Goldman Sachs according to Linked-In:

• Lead development of a distributed real-time co-located high-frequency trading (HFT) platform.The main objective was to engineer a very low latency (microseconds) event-driven market data processing, strategy, and order submission engine. The system was obtaining multicast market data from Nasdaq, Arca/NYSE, CME and running trading algorithms with low latency requirements responsive to changes in market conditions.


• Implemented a real-time monitoring solution for the distributed trading system using a combination of technologies (SNMP, Erlang/OTP, boost, ACE, TibcoRV, real-time distributed replicated database, etc) to monitor load and health of trading processes in the mother-ship and co-located sites so that trading decisions can be prioritized based on congestion and queuing delays.


• Responsible for development of real-time market feed handlers, order processing engines and trading tools at a Quantitative Equity Trading revenue-making HFT desk.

If the allegations are true, it looks like Goldman's hi-fi quant trading desk was thoroughly penetrated by a "spy", and as readers will recall, Serge(y)'s description of his job duties mirrors what Mr. Ed Canaday conveniently provided to Zero Hedge as a description of Goldman's SLP program. (Sources connected with the office of the United States Attorney have confirmed to Zero Hedge that Aleynikov was at one time or another a Goldman employee.").

Read the full post.

Here is the beginning of the original Reuters piece:

A Goldman trading scandal?

Posted by: Matthew Goldstein | July 5th, 2009

Did someone try to steal Goldman Sachs' secret sauce?

While most in the US were celebrating the 4th of July, a Russian immigrant living in New Jersey was being held on federal charges of stealing top-secret computer trading codes from a major New York-based financial institution—that sources say is none other than Goldman Sachs.

The allegations, if true, are big news because the codes the accused man, Sergey Aleynikov, tried to steal is the secret code to unlocking Goldman's automated stocks and commodities trading businesses. Federal authorities allege the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major "financial institution" generate millions of dollars in profits each year.

The platform is one of the things that apparently gives Goldman a leg-up over the competition when it comes to rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and uses top secret mathematical formulas to allow the firm to make highly-profitable automated trades.

The criminal case has the potential to shed a light on the inner workings of an important profit center for Goldman and other Wall Street firms. The federal charges also raise serious questions about the safeguards Wall Street firms deploy to protect their proprietary trading systems.

The criminal case began to unfold on the evening of July 3 when Aleynikov was arrested by FBI agents at Newark Liberty Airport, after returning from Chicago. Aleynikov had just started a job with another firm in Chicago, after leaving the big firm in NY in early June. It appears the financial institution allegedly victimized by Aleynikov had alerted federal authorities that its former employee might be up to no good.

On July 4, Aleynikov was processed on a "theft of trade secrets" charge in a criminal complaint that was filed in federal court in Manhattan. As of this afternoon, he was still being held in federal custody pending posting of bail.

A Goldman spokesman declined to comment on the incident. A spokeswoman for the US Attorney in the Southern District of New York didn't comment. Authorities reportedly took all the computers from Aleynikov's home in New Jersey.

Sabrina Shroff, Aleynikov's lawyer, says the facts will bear out that her client is innocent. She's hoping he will be released from custody soon.

His wife, Elina, says her husband is innocent. Speaking in a phone interview from the couple's New Jersey home, she says her husband worked hard for Goldman Sachs and has been a good citizen–noting he's lived in the US for 19 years. She seems mystified that federal authorities would arrest him on the eve of a holiday.

Read the full article.

Labels: fbi, Goldman Sachs, New York Stock Exchange, quant trading

 

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7/06/2009 09:23:00 AM 2 comments links to this post

 

Hartmarx Victory against Wells Fargo

by Dollars and Sense

From HuffPo; this relates to the article we posted back in December about the Republic Windows & Doors sit-in, and to our May/June article about corporate America's counterstimulus strategy. We'll also be running a story on factory take-overs in our Sept/Oct annual labor issue.

Worker Uprising Against Wells Fargo Spreads After Major Victory To Keep Factories Open

This week, workers at Hartmarx Factory won a major victory against Wells Fargo, as Wells Fargo agreed to keep their factory open. The story of the Hartmarx workers had drawn national attention as they threatened to occupy their factory if Wells Fargo closed it. Their victory yesterday represents a major triumph in the growing trend of factory sit ins that started last December when workers, members of United Electrical, Radio, and Machine Workers (UE) occupied the Republic Windows and Doors factory in Chicago

Last January, Hartmarx, the maker of men's apparel and an employer of nearly 4,000 people, filed for bankruptcy after Wells Fargo refused to extend them a line of credit. Wells Fargo then pushed for the company to be liquidated in order to increase their short term profits. They favored liquidating the factory and laying off the 4,000 workers despite the fact that there were proposals by several groups to purchase the company and keep it running.

The workers, members of SEIU, refused to accept the bank's ruling and decided to do something about it. The workers said they were inspired after having gone to see a speaking tour of members of who had occupied Republic Windows and Doors in Chicago. They then decided that perhaps they should consider threatening to occupy their plant in order to force the bank to keep it open. The workers then voted to sit-in to occupy that plant if Wells Fargo decided to liquidate it and drew national media attention to their story.

As a result of the worker's resolve to fight the company, they received a large degree of political and community support. Over 43 members of Congress signed a letter calling on Treasury Secretary Tim Geithner to investigate Wells Fargo's use of bailout money. Congressman Phil Hare, a former worker at Harmarx, promised to be Wells Fargo's "worst nightmare" if they closed the plant. Finally, State Treasurer Alexi Giannoulias brought Wells Fargo to their knees when he threatened to cut off $8 billion dollars worth of business that the state does with Wells Fargo if they closed the plant

As a result of the union members' activism, community pressure and politicians' threat to take action against Wells Fargo, the union was able to force the bank to accept a bid from another company to keep the plant open. The final decision represents a major victory in the worker sit-in movement against the banks. The victory at Hartmarx confirms the growing trend that I wrote about last week that whenever these banks are challenged through direct action in a visible, public way that they always fold to demands.

Now the fight moves onto a plant across town from Hartmarx in Moline, Illinois. Wells Fargo has cut off credit to Quad City Die Casting factory. Workers at the plant, who are members of the United Electrical, Radio, and Machine Workers (UE), the same union that occupied Republic Windows and Doors last summer, are engaging in direct action against Wells Fargo as they call for Wells Fargo to keep the plant open. So far, Wells Fargo has refused to even sit down with the union and negotiate. The union though has not been dissuaded and promises to continuing fighting the banksters of Wells Fargo.

Last week, UE held protests at over 20 cities throughout the country to protest Wells Fargo. In addition, a delegation from their union visited over 100 congressional offices last week to call for an investigation into how Wells Fargo is using its bailout money. The union charges that after having received $25 billion in bailout money that Wells Fargo has an obligation to look to promote economic recovery by keeping the plant open. Speaking at the protest in Davenport, Iowa, UE Director of Organization Bob Kingsley said, "We can't let this giant bank default on its obligation to the American people and the people of the Quad Cities. Wells Fargo is a roadblock to economic recovery."

Now the question is whether we as the progressive movement will join them in solidarity to support keeping factories open. Please go to UE's website and send a letter to your congressman calling on them to investigate how Wells Fargo has refused to spend its $25 billion in bailout money to support economic recovery. Our resolve as a movement to support the struggle of workers at Quad City Die Casting will determine our ability to support this growing worker uprising to fight banks that have destroyed our economy. Keeping good American manufacturing jobs such as the union jobs at Quad City Die Casting in this country is key to creating a successful economic revival not built on the speculative bubbles of the past. Its time that banks like Wells Fargo get out of the way on the road to economic recovery.

Read the original post.

Labels: factory take-overs, Hartmarx, labor, Republic Windows and Doors, United Electrical Workers, Wells Fargo

 

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7/06/2009 09:14:00 AM 2 comments links to this post

 

Telegraph: Unemployment Time Bomb

by Dollars and Sense

From the Telegraph; by Ambrose Evans-Pritchard. I am so puzzled by his reference to (Irving?) Fisher at the end. I am reading John Kenneth Galbraith's The Great Crash: 1929, and Fisher doesn't come across as someone who would help us understand "Phase I" of the current crisis! (He is famous for saying, just before the 1929 stock market crash, that "Stock prices have reached what looks like a permanently high plateau." But then, Friedman isn't too helpful either, as an article by Jerry Friedman in the current issue of D&S explains. But I know that (Milton) Friedman still has influence (on Bernanke, e.g., as Jerry shows). But Fisher? Hm... If someone can explain A. E.-P.'s remark to me, I would appreciate it. --cs

The unemployment timebomb is quietly ticking

One dog has yet to bark in this long winding crisis. Beyond riots in Athens and a Baltic bust-up, we have not seen evidence of bitter political protest as the slump eats away at the legitimacy of governing elites in North America, Europe, and Japan. It may just be a matter of time.

By Ambrose Evans-Pritchard
Published: 8:45PM BST 04 Jul 2009

One of my odd experiences covering the US in the early 1990s was visiting militia groups that sprang up in Texas, Idaho, and Ohio in the aftermath of recession. These were mostly blue-collar workers—early victims of global "labour arbitrage"—angry enough with Washington to spend weekends in fatigues with M16 rifles. Most backed protest candidate Ross Perot, who won 19pc of the presidential vote in 1992 with talk of shutting trade with Mexico.

The inchoate protest dissipated once recovery fed through to jobs, although one fringe group blew up the Oklahoma City Federal Building in 1995. Unfortunately, there will be no such jobs this time. Capacity use has fallen to record-low levels (68pc in the US, 71 in the eurozone). A deep purge of labour is yet to come.

The shocker last week was not just that the US lost 467,000 jobs in May, but also that time worked fell 6.9pc from a year earlier, dropping to 33 hours a week. "At no time in the 1990 or 2001 recessions did we ever come close to seeing such a detonating jobs figure," said David Rosenberg from Glukin Sheff. "We have lost a record nine million full-time jobs this cycle."

Earnings have fallen at a 1.6pc annual rate over the last three months. Wage deflation is setting in – like Japan. Interestingly, The International Labour Organisation is worried enough to push for a global pact, fearing countries may set off a ruinous spiral by chipping away at wages try to gain beggar-thy-neighbour advantage.

Some of the US pay cuts are disguised. Over 238,000 state workers in California have been working two days less a month without pay since February. Variants of this are happening in 22 states.

The Centre for Labour Market Studies (CLMS) in Boston says US unemployment is now 18.2pc, counting the old-fashioned way. The reason why this does not "feel" like the 1930s is that we tend to compress the chronology of the Depression. It takes time for people to deplete their savings and sink into destitution. Perhaps our greater cushion of wealth today will prevent another Grapes of Wrath, but 20m US homeowners are already in negative equity (zillow.com data). Evictions are running at a terrifying pace.

Some 342,000 homes were foreclosed in April, pushing a small army of children into a network of charity shelters. This compares to 273,000 homes lost in the entire year of 1932. Sheriffs in Michigan and Illinois are quietly refusing to toss families on to the streets, like the non-compliance of Catholic police in the Slump.

Europe is a year or so behind, but catching up fast. Unemployment has reached 18.7pc in Spain (37pc for youths), and 16.3pc in Latvia. Germany has delayed the cliff-edge effect by paying companies to keep furloughed workers through "Kurzarbeit". Germany's "Wise Men" fear that the jobless rate will jump from 3.7m to 5.1m by next year. The OECD expects unemployment to reach 57m in the rich countries by the end of next year.

This is the deadly lag effect. What is so disturbing is that governments have not even begun the spending squeeze that must come to stop their countries spiralling into a debt compound trap.

French president Nicolas Sarkozy, with a good nose for popular moods, says: "We must overhaul everything. We cannot have a system of rentiers and social dumping under globalisation. Either we have justice or we will have violence. It is a chimera to think that this crisis is just a footnote and that we can carry on as before."

The message has not reached Wall Street or the City. If bankers know what is good for them, they will take a teacher's salary for a few years until the storm passes. If they proceed with the bonuses now on the table, even as taxpayers pay for the errors of their caste, they must expect a ferocious backlash.

We are fortunate that the US has a new president enjoying a great reservoir of sympathy, and a clean-broom Congress. Other nations must limp on with carcass governments: Germany's paralysed Left-Right coalition, the burned-out relics of Japan's LDP, and Labour's death march in Britain. Some are taking precautions: Silvio Berlusconi is trying to emasculate Italy's parliament (with little protest) while the Kremlin has activated "anti-crisis" units to nip protest in the bud.

We are moving into Phase II of the Great Unwinding. It may be time to put away our texts of Keynes, Friedman, and Fisher, so useful for Phase 1, and start studying what happened to society when global unemployment went haywire in 1932.

Read the original article.

Labels: financial crisis, recession, unemployment

 

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7/04/2009 09:35:00 PM 2 comments links to this post

 

Why Private Equity Wants To Buy Banks

by Dollars and Sense

because there's not much else to buy, according to this Financial Times story:

On Wall Street: Banks no longer so lucrative
Financial Times
By Henny Sender

Published: July 3 2009 19:52 | Last updated: July 3 2009 19:52

The planned merger of two Japanese banks is the latest unhappy chapter in the 10-year saga of foreign private equity capital's adventure in Tokyo finance.

The two banks, Shinsei and Aozora fell into the hands of Ripplewood and Chris Flowers and Cerberus Capital Management respectively at what appeared to be close to the end of the country's lost decade. The two purchases came after the Ministry of Finance was unable to find any domestic buyers for the two ailing institutions. Ten years on, the two are still not healthy. Both got into trouble like many of their US peers by straying into investments that promised high yields with seemingly low risk, whether junk bonds that proved worthless for Shinsei or a piece of GMAC in the case of Aozora. It has been easy for both banks to stray from the banking business in Japan in recent years because they lacked a broad base of cheap funding from deposits and they never became the go-to source of loans for corporate Japan.

Now private equity is an eager if frustrated buyer of troubled banks in the US and one of the few sources of fresh equity for a sector that desperately needs capital. US authorities are as paranoid as their Japanese peers of these would be owners' intentions and intend to impose onerous requirements, (which may or may not prove very burdensome) on private equity. At the same time, regulators also intend to impose all sorts of constraint on the banks and limit the degree of leverage all banks are allowed, which will likely lead to lower profitability.

Read the rest of the article

Labels: bailout, banking industry, financial crisis, private equity

 

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7/04/2009 11:05:00 AM 0 comments links to this post

 

If You Didn't Have Enough To Worry About...

by Dollars and Sense

Apparently there's major concern about an El Nino developing in the South Pacific. Such events can wreak havoc on commodity prices, some of which are already gyrating all over the place. Now that the "green shoots' view has been replaced by one that envisions considerably less growth in the near-term future, any serious reduction of supply could provide inflationary pressures in key commodities--even in oil, a (relatively-speaking, anyway) non weather-related one, that is used to hedge macroeconomic bets, like those in the dollar--in the Northern autumn and winter, when rising unemployment is likely to depress demand considerably. This, in turn, would depend on whether or not the dollar as the ultimately safe store of value during global downturns predominates over concerns about exit strategies from increasingly expensive government programs as the economic outlook stagnates or even deteriorates. The fear is that a serious shift towards the latter, especially, could lead to a situation in which oil and food prices rocket even as the dollar declines and unemployment continues its rise. The fact that US (home to a huge share of global planting in key foodstuffs) planters have ramped up in the last few months is a good sign, but...

From The Financial Times:

Commodities fears after El Nino alert

By Javier Blas,Commodities Correspondent
Financial Times
Published: July 1 2009 17:41 | Last updated: July 1 2009 17:41

The emergence of El Nino, a weather phenomenon that could dramatically influence commodities markets as it brings drought conditions to south-east Asia, seems all but certain, Australia's weather office said on Wednesday.

"More evidence of a developing El Nino event has emerged during the past fortnight, and computer forecasts show there's very little chance of the development stalling or reversing," Australia's Bureau of Meteorology said in a report.

A month ago, the bureau said that “the odds of an El Nino were above 50 per cent”. Australian officials on Wednesday said they could declare officially an El Nino event in the next few weeks, promising an update as early as next week.

The recurring climatic event--caused by an increase of the water temperature in the tropical Pacific--has in the past triggered wild gyrations of food prices, particularly wheat, rice and sugar. The event could also disrupt India's annual monsoon.

Commodities traders pay extra attention to Australia's meteorologists as the country is one of the most exposed to El Niño and its weathermen have a good track record in anticipating the emergence of the phenomenon.

Traders and meteorologists said that even if an El Nino emerged, its impact on commodities markets would depend on the weather pattern's strength. The previous two events were weaker, but 1998 saw a strong phenomenon.

So far, analysts and traders are taking comfort from a period of favourable weather, particularly in the northern hemisphere. The weather has also been auspicious in south-east Asia, although India's monsoon has had a poor start.

Sugar prices on Wednesday hit a three-year high, with the front-month contract trading as high as 18.01 cents per pound, on fears that the sugarcane crop in India, the world’s largest consumer of the sweetener, would be hit by a poor monsoon.

El Nino--"Spanish for "the little boy"--has important consequences for weather, including increased rainfall across the southern tip of the US, Peru and Chile, which has caused destructive flooding, and drought in the west Pacific from Australia to Bangladesh.

It has also affected fisheries, as nutrients in eastern Pacific waters drop.

Labels: agriculture, commodity prices, el nino, financial crisis

 

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7/04/2009 10:44:00 AM 0 comments links to this post

 

Rogue Trader Causes Oil Spike

by Dollars and Sense

From The Financial Times:

'Rogue broker' blamed for oil spike

By Javier Blas and Izabella Kaminska in London
Financial Times
Published: July 2 2009 12:07 | Last updated: July 2 2009 20:26

The startling spike in oil prices to their highest level this year on Tuesday was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (7m euros) of losses for his company.

PVM Oil Associates, the world's largest over-the-counter oil brokerage, said on Thursday it had been the "victim of unauthorised trading". The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.

Read the rest of the article

Labels: commodity prices, financial crisis, oil prices

 

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7/03/2009 05:43:00 PM 0 comments links to this post

 

If You Liked CDOs, You'll Love CLOs...

by Dollars and Sense

From the Financial Times:

Night of zombie company looms as debt burden remains large

By Anousha Sakoui
Financial Times
Published: July 2 2009 20:50 | Last updated: July 2 2009 20:50

Third time lucky is a phrase often quoted by bankers who believe it takes several debt restructurings to get a company's balance sheet right.

The phrase is even more relevant today amid growing concerns that debt restructurings are leaving companies saddled with too much debt, even at the end of the process.

Part of the blame has been laid at the feet of capital-constrained banks which have been reluctant to write down the debt because it could create losses that would further weaken their balance sheets.

Debt and bankruptcy specialists warn that trend risks creating a new breed of zombie companies--those which survive simply to repay their debts but cannot move forward because their debts remain so large.

An even greater problem is posed by collateralised loan obligations--complex funds that pooled loans and at the height of the credit bubble were buying up to 60 per cent of leveraged loans.

Read the rest of the article

Labels: bailout, banking system, bankruptcy, collateralized loan obligations, derivatives, financial crisis

 

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7/03/2009 05:36:00 PM 0 comments links to this post

 

7 Banks Fail Today: 52 For the Year So Far

by Dollars and Sense

Seven banks were taken over by the FDIC on Thursday, six of them based in Illinois. A total of 52 banks have failed so far in 2009, an average of 2 each week.

Today's bank failures cost the FDIC over $300 million.

According to a report in February, up to 1,000 banks may fail in the next 3-5 years.

Labels: bad bank, bank closures, FDIC

 

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7/02/2009 10:41:00 PM 0 comments links to this post

 

Roubini on Details in the Payrolls Data

by Dollars and Sense

U.S. Job Report Suggests that Green Shoots are Mostly Yellow Weeds
Nouriel Roubini's Global Economonitor
Nouriel Roubini | Jul 2, 2009

The June employment report suggests that the alleged 'green shoots' are mostly yellow weeds that may eventually turn into brown manure. The employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000. With the current rate of job losses, it is very clear that the unemployment rate could reach 10 percent by later this summer, around August or September, and will be closer to 10.5 percent if not 11 percent by year-end. I expect the unemployment rate is going to peak at around 11 percent at some point in 2010, well above historical standards for even severe recessions.

It's clear that even if the recession were to be over anytime soon--and it's not going to be over before the end of the year--job losses are going to continue for at least another year and a half. Historically, during the last two recessions, job losses continued for at least a year and a half after the recession was over. During the 2001 recession, the recession was over in November 2001, and job losses continued through August 2003 for a cumulative loss of jobs of over 5 million; this time we are already seeing more than 6 million job losses and the recession is not over.


The details of the unemployment report are even worse than the headline. Not only are there large job losses right now, but as a way of sharing the pain, firms are inducing workers to reduce hours and hourly wages. Therefore, when we're looking at the effect of the labor market on labor income, we should consider that the total value of labor income is the product of jobs, hours, and average hourly wages--and that all three elements are falling right now. So the effect on labor income is much more significant than job losses alone.

Read the rest of the post

Labels: bailout, economic indicators, financial crisis, Nouriel Roubini, US employment

 

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7/02/2009 05:49:00 PM 0 comments links to this post

 

Goodbye, Green Shoots

by Dollars and Sense

The FT's John Authers (video clip) on market reaction to today's US payrolls data, which were far worse than expected.

Labels: bailout, economic indicators, employment, financial crisis, John Authers, US employment

 

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7/02/2009 05:41:00 PM 0 comments links to this post

 

Male Worker Jobless Rate In June: 10.6 Percent

by Dollars and Sense

A summary of today's BLS report from Bob Feldman:

The official "seasonally adjusted" unemployment rate for male workers in the United States over 16 years-of-age increased from 10.5 percent to 10.6 percent between May 2009 and June 2009, according to the latest Bureau of Labor Statistics data.

The official "seasonally adjusted" unemployment rate for white male workers increased from 9 percent to 9.2 percent between May 2009 and June 2009.

For all U.S. workers, the "not seasonally adjusted" jobless rate increased from 9.1 percent to 9.7 percent between May 2009 and June 2009.

The official "not seasonally adjusted" jobless rate for Black female workers over 20 years-of-age also increased from 11.1 percent to 11.7 percent between May 2009 and June 2009; and the official "not seasonally adjusted" jobless rate for all Black workers increased from 14.7 percent to 15.3 percent during this same period.

The official "not seasonally adjusted" rate for all Black male workers over 20 years-of age was still 16.1 percent in June 2009.

The official "not seasonally adjusted" jobless rate for Black youth between 16 and 19 years-of-age increased from 40.1 percent to 45 percent between May 2009 and June 2009, while the "not seasonally adjusted" unemployment rate for Hispanic or Latino youth was still 30.1 percent during this same period. The official "not seasonally adjusted" jobless rate for white youth between 16 and 19 years-of-age also increased from 21.1 percent to 25 percent between May 2009 and June 2009.

Between May 2009 and June 2009, the official "not seasonally adjusted" jobless rate for Hispanic or Latina women jumped from 10.5 percent to 11.5 percent, while the "not seasonally adjusted" unemployment rate for Asian-American workers jumped from 6.7 percent to 8.2 percent during this same period. The official "seasonally adjusted" unemployment rate for all Hispanic and Latino workers in the United States in June 2009 was 12.2 percent.

According to the Bureau of Labor Statistics' July 2, 2009 press release:

"Nonfarm payroll employment continued to decline in June (-467,000)... Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction ...

"The number of long-term unemployed (those jobless for 27 weeks or more) increased by 433,000 over the month to 4.4 million. In June, 3 in 10 unemployed persons were jobless for 27 weeks or more...

"Employment in manufacturing fell by 136,000 over the month… Within the durable goods industry, motor vehicles and parts (-27,000), fabricated metal products (-18,000), computer and electronic products (-16,000), and machinery (-14,000) continued to lose jobs in June.

"In June, employment in construction fell by 79,000, with losses spread throughout the industry…Mining employment fell by 8,000 in June...

"Employment in the professional and business services industry declined by 118,000 in June... Within this sector, employment in temporary help services fell by 38,000 in June...

"Retail trade employment edged down in June (-21,000)…Over the month, job losses continued in automobile dealerships (-9,000). Employment continued to fall in wholesale trade (-16,000).

"In June, financial activities employment continued to decline (-27,000)…In June, employment declined in credit intermediation and related activities (-10,000) and in securities, commodity contracts, and investments (-6,000).

"The information industry lost 21,000 jobs over the month…

"Employment in federal government fell by 49,000 in June, largely due to the layoff of workers temporarily hired to prepare for Census 2010..."

--b.f.

Labels: Black jobless rate, Bob Feldman, Bureau of Labor Statistics, Latino jobless rate, real unemployment rate

 

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7/02/2009 12:47:00 PM 0 comments links to this post

 

Delasantellis on Realtors' Latest Lobby Effort

by Dollars and Sense

From his Asia Times column:

Cheating still beats real work
By Julian Delasantellis
Asia Times
July 2d, 2009

A colleague recently relayed a story about her experience as an observer at a faculty/student disciplinary hearing for a pre-law undergraduate charged with cheating.

Apparently, this young man had come around to the belief that, when it came to engaging in conduct that could get him expelled, in for a dime-in for a dollar. Just in the space of a single term, his teachers had found him copying from a test, rifling through the course's graduate assistant notebook looking for a test, and, word for word, punctuation mark by punctuation mark, lifting without attribution a large section of a Wikipedia entry on "jurisprudence" for a research paper.

"How do you answer these charges?" asked the earnest student prosecutor, who, both my colleague and I agreed, can be expected to be next seen on TV in Kevlar helmet, flak jacket, frameless glasses and FBI windbreaker when the government takes down another religious compound in 2017 or so.

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Labels: appraisal management companies, bailout, financial crisis, Julian delasantellis, mortgage meltdown, National Association of Realtors

 

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7/01/2009 07:55:00 PM 1 comments links to this post

 

California to Issue IOUs at Discount?

by Dollars and Sense

The creator of the fine website Across the Curve had the following to say about the situation on California tonight: "I guess it is fair to state that California is bankrupt. If one issues scrip money rather than paying bills in cash that would signal a serious problem. It is a sad sign of the vale of tears through which we have passed these last two years that the fiscal demise of our largest state receives remarkably little notice. In another time and place it would have been a seismic event of major import."

This piece from Breaking Views notes that banks may ask for a discount on state IOUs:

Labels: bailout, banking industry, California, financial crisis

 

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7/01/2009 07:32:00 PM 1 comments links to this post

 

Banker: "This Is a Phenomenal Environment"

by Dollars and Sense

One more from today's FT:

Radical shift in the banking power base

By Patrick Jenkins and Jane Croft
Financial Times
Published: June 30 2009 18:50 | Last updated: June 30 2009 18:50

It is barely nine months since the collapse of Lehman Brothers ushered in one of the worst financial crises since the Great Depression. But for the strongest banks, the second quarter of 2009, which closed on Tuesday, has confirmed the upbeat trends of the first quarter.

While banks such as Citigroup, Merrill Lynch, Royal Bank of Scotland and UBS continue to find life difficult, thriving rivals--JPMorgan, Goldman Sachs, Morgan Stanley, Barclays, Deutsche Bank and Credit Suisse--are talking privately of a record second quarter.

They have benefited from lively markets for commodity and foreign exchange trading, at profit margins that are between two and eight times higher than before the height of the financial crisis last autumn. At the same time, companies have been rushing to issue new debt and equity.

More fundamentally and sustainably there have been clear shifts in market share between the banks--in everything from UK mortgages to US Treasury bill issuance--as aggressive groups have taken advantage of opportunities left by weakened rivals.

BanksOne investment banker says: "There used to be 15 banks competing. Now there are six. This is a phenomenal environment. I’ve never seen anything like this in 20 years in the business."

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Labels: bailout, banking industry, financial crisis

 

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7/01/2009 07:24:00 PM 0 comments links to this post

 

Behind Banks' Credit Card Moves

by Dollars and Sense

Another FT article goes deeper into the increasing danger credit cards are putting banks into, and what they're doing about it. Some scary stuff here.



Record credit card losses force banks into action

By Saskia Scholtes in New York
Financial Times
Published: July 1 2009 03:00 | Last updated: July 1 2009 03:00

Losses on US credit cards hit a record 10.44 per cent in June, squeezing profit margins for credit card securitisations to a 10-year low, according to Fitch Ratings.

Profits from off-balance sheet vehicles backed by credit loans in June fell below the 5 per cent threshold for the first time since November 1998, said Fitch.

Credit card securitisations have built-in triggers that force early repayment when profits fall below zero. Such triggers are designed to protect investors from prolonged exposure to bad credit card loans.

Rising losses on credit cards have in recent months pushed US banks to come to the rescue of the off-balance sheet vehicles they use to transform hundreds of billions of dollars of consumer loans into securities sold to investors.

Banks have also raised interest rates on credit cards to counter rising borrower defaults, late payments and boost profitability, underlining how the deteriorating health of US consumers is opening new fronts in the financial crisis.

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Labels: bailout, banking system, Credit card industry, financial crisis, securitization

 

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7/01/2009 07:18:00 PM 0 comments links to this post

 

Citi Raises Rates on Cardholders

by Dollars and Sense

This is before new regulations come into effect that prevent them from doing this very thing come into effect in a few months. From The Financial Times:

Citi raises card rates on millions

By Francesco Guerrera
Saskia Scholtes
Tom Braithwaite
Financial Times
Published: June 30 2009 23:59 | Last updated: June 30 2009 23:59

Citigroup has sharply increased interest rates on up to 15m US credit card accounts just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks.

People close to the situation said that Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, had upped rates on between 13m and 15m credit cards it co-brands with retailers such as Sears.

Citi's rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection and a week after the bank was attacked by some politicians for raising employees’ salaries.

Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24 per cent--or nearly 3 percentage points--between January and April, according to a Credit Suisse analysis of data from the consultancy Lightspeed Research.

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Labels: bailout, Citibank, Credit card industry, financial crisis, financial regulation

 

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7/01/2009 07:09:00 PM 0 comments links to this post