Living without Tickle Me Elmo

One hundred and twenty members of Congress delivered a letter to the Obama Administration requesting that the President formally declare the Peoples Republic of China to be a currency manipulator and apply the appropriate tariffs to imports from China. It had caused a minor stir when Treasury Sec Guithner stated unequivocally in Congressional testimony early last year that China was in fact doing that. It had been China’s practice for more than ten years but nobody from the Clinton or Bush Adm. would say it out loud.

Speculation had heated up that Obama might do something about trade with China after he imposed a 99% tariff on steel pipe in response to their dumping of the product into the US market. This was something Bush had many opportunities to do but never did even once as industry after industry was wiped out. China now has a stranglehold on a most of the vital segments of the US economy as a result of this process. It completely escapes the people who hold up signs accusing Obama of being some sort of foreign infiltrator bent on destroying America is that the destruction has already been done.

The letter from Congress was delivered on the eve of Obama’s second Asia trip. He has only two scheduled stops, one in Australia to address Parliament and a longer one in Indonesia but no stops in Japan, China or India. The accusation that they are manipulating their currency doesn’t make China very happy. They have complained to the multi-national corporations that govern the United States about the insult and they expect corrective action to be taken.

Candidate Obama said repeatedly that our trade deals needed to be revisited but President Obama’s people have been saying “protectionism” was “dangerous” idea. Indeed with many of Obama’s appointees still not confirmed by the Senate after over a year, any crisis needs to be avoided. With most consumer goods coming from China and 80% of pharmaceuticals coming from India and China it would be a disruption most Americans are not equipped to deal with. Indeed what industry the US still has would come to a grinding halt as parts and vital materials ran out. The USD as legal tender would also be problem with any trading partners we had left would be concerned about being paid.

Across the board rationing of consumer goods ended for the last time in the US 65 years ago. Gas shortages in in the seventies resulted in fist fights and shootings. A rush for Tickle Me Elmo dolls can produce a riot. How dangerous will cold, hungry and unmediated Americans be? Especially when most of them think a Kenyan born Nazi/Communist Muslim Liberal is to blame. I guess we will find out. www.prairie2.com

The latest battles from the economic front

US economic diplomacy is not going very well, basically we are war and as usual the US is the bad guy. Tim Geithner, US Treasury secretary, has delivered a blunt warning to the European Commission that plans to clamp down hedge funds and private equity groups that have looting and pillaging across the EU. After what has been done to Greece, Spain, Portugal and Ireland by US firms it isn’t surprising the EU want regulation to keep the pirates out. But this would interfere with the Wall Street banks and this threatens the current bubble economy and the Obama Adm. is annoyed.

Sec. of State Clinton didn’t have any better luck in Brazil on her tour of South America where she tried to line up their vote for a UN Security council resolution against Iran. She was told no thanks, you see Brazil is about a trade war with the US over cotton subsidies. The US is the world’s largest exporter of cotton but that is primarily because the US no longer has any textile industry of its own and Brazil wants to avoid a similar fate.

Brazil won its case at the WTO and is allowed to impose the tariff increases. The US has been subsidizing cotton farmers and providing a loan guarantee program for international buyers of US cotton. US taxpayers were paying to keep cotton cheap and paying foreign companies to buy it. The Brazilians plan to raise duties on cotton products from between 6% and 35% to 100%. Duties on appliances and electronics would go from 20 per cent to 40 per cent and on cars from 35% up to 50%. Brazil could also impose further penalties – known as “cross-retaliation” breaking patents in the pharmaceuticals, technology and media industries. It’s the patents and copyrights that would really affect US companies since we don’t export any manufactured goods.

Chinese investments in US Treasuries are “market investment behavior and we don’t wish to politicize them,” so says Yi Gang, director of the State Administration of Foreign Exchange (Safe) that controls roughly 2.4 trillion in foreign reserves. “We are a responsible investor and in the process of these investments we can definitely achieve a mutually beneficial result.” He went on to say that China is not purchasing large amounts of gold which would drive up the price and the price of gold promptly went down. Of course everything China does in this regard is a state secret so most likely China just wants to acquire gold at the best possible price. They already hold at least 1100 tons and are rumored to be buying another 900 tons. Saying they will continue to buy US bonds also keeps bonds from dropping in value as China quietly sells them. Nobody knows how many China really holds but they are buying and selling constantly all over the world.

We are at war and as usual the poor and middle class are bearing the brunt of it. The dead and wounded aren’t so obvious in an economic war but the body count is there just the same and it‘s only getting started. www.prairie2.com

“It’s Morning in America Again”

“It’s Morning in America Again” (Reagan 1984) but it’s coming with a Red Dawn

There were 33 rounds of applause as Chinese Premier Wen Jiabao waded through the 36 page "State of the Union" style report. He said that his government aims to create more than 9 million jobs this year and keep unemployment down to 4.6 percent. It’s not surprising his audience applauds with an eleven percent growth rate for the last quarter while the rest of the world langishs. They believe his predictions aren‘t just “switch grass“ predictions, in his country they shoot traitors.

Wen’s speech opened the annual parliamentary session and he said that, in spite of its impressive economic recovery, China continues to face a "complicated situation" as the government now pushes to rein in lending and boost domestic consumption. He also focused on China's need to become a fairer society and of the government's commitment to improve education and healthcare while narrowing the income gap. There will be economic restructuring he said, because they are too dependent on foreign exports, and that the gap between the rich and the poor has to be reduced by better redistributing the benefits of the economy.

China has been hinting at the possibility of revaluing their currency because of the wild swings of the US dollar but Wen made it clear that wasn’t happening any time soon. He also did not indicate there would be any roll-back of the fiscal stimulus that has been spurring their rebound.

Meanwhile some Hollywood executives who are nostalgic for the Reagan cold war years are remaking the movie Red Dawn, but since Reagan’s evil empire of the Soviets is gone they are turning to the remaining toltalitarian Communist state. Unlike the Russians who were so weak by the 1980’s that a bunch of high school kids could have defeated them, China is poised to eat our lunch.

MGM is spending $75 million, that’s 513 million Yuan to make this new epic in Detroit where the battle cry of “Wolverines” will ring out one last time before the city closes for good. Thanks to collaborators like Mitt Romney who sold it for pennies to China, it isn’t hard to find cities in Michigan that look like they’ve been bombed and have been living under a brutal occupation. The movie people will need to spruce up the houses for the opening scenes that take place before the attack. China doesn’t really need to invade if they want US territory, they can just have the Sheriff serve the papers.

MGM is also doing big budget remake of Robo Cop which had a dark vision of Detroit in grinding poverty under the heel of a huge corporation. Except for the cyborg cop it’s even closer to reality. www.prairie2.com

time to buy the garden seeds or is the green thumb just gangrene

Initial unemployment claims were down 29,000 last week from a recent high of 498,000 the week before but this will turn out to be from the last snow storm and not because of hiring. 350,000 is considered the neutral point where job creation would occur. The elimination of jobs to out sourcing and the ripple of unemployment this sends through the economy continues to exceed jobs created by the stimulus and Census Bureau hiring.

Currently there are 5.8 million on extended benefits as well as 5.5 million on traditional state unemployment programs. But the number of former middle class receiving no help at all is accelerating with 134,000 losing benefits last week alone as their federal extended weeks ran out. This number will grow to more than five million by the end of April if no extension is granted by Congress. This does not include almost a million workers who took Social Security earlier than they wanted to according to the Social Security Adm. in the last Federal budget year. On the other end a growing number say that they can’t afford to retire even though they would like to with 70% of workers over 60 who say they aren‘t retiring giving that as the reason.

The index that measures home sales contracts dropped nearly 10 percent to the lowest level since last April. This came despite a hefty government incentive to buy that will expire next month. It’s now estimated that 20% of homeowners could be justified in walking away from their underwater mortgages. Since they have almost no chance of ever recovering the equity they have already lost and they are wasting their money paying interest on that lost home value. This estimate is based on the assumption that prices stay flat, they could rise but there is better chance that prices will decline still further.

Retail sales were up last month by 3.7% but this does not Wal-Mart who no longer reports sales figures. The increase is attributed largely to spring clothing sales and may not be sustained growth. Even as bad as the employment numbers are, most people still have jobs and money to spend. They don’t have as much to spend however, as labor costs have dropped by six percent in the fourth quarter alone. Average productivity rose by seven percent in the past quarter. Productivity is difficult to measure accurately with almost everything being out sourced so you can’t tell what percentage is being done where. The decline in pay is not hard to measure however and is being reflected throughout the economy. Time to buy the seeds for the garden if you want to eat next winter. www.prairie2.com

Sing along! "spam spam spam spam...."

Senator Bunning who made his career as a major league ball player by throwing the “brush back” pitch continues to throw at the heads of the long term unemployed. While the number affected is not as bad as first feared, this is only because most of the states stepped up and covered the checks with the anticipation that Congress will come through with funds by the end of the week.

Senator Olympia Snow took to the floor today and called for an override of the hold but rest of the millionaire Republicans refused to join in and the matter drags out while tens of thousands suffer. If the money is not appropriated by the weekend then the number affected will begin to skyrocket. At least one million will stop getting funds next week and potentially five million could lose benefits by the end of April if the number weeks of eligibility is not increased again soon.

Republican Rep. Dean Heller of Nevada said in public what all conservatives believe but most don’t voice in that they believe no unemployment should be paid, period. He is positing that we are creating a new class of “hobos” who don’t want a job. Indeed we have created a new class of chronically unemployed but the seven million welders, machinists, lathe operators, engineers, draftsman and other middle class workers who used to build things in America want to work. Unemployment is only a fraction of what they used to make so this two year “vacation” is getting old and it’s not like there are any “fries with that?” jobs to be had. Nevada where the growth is service jobs was centered has a 13% unemployment rate and whole subdivisions reverting to desert, so Rep. Heller probably would rather only employed voters heard his remarks.

Reports are that the worst affected areas in Chile immediately experienced wide spread “looting” (that’s what the corporate media calls scrounging for food). Being a long time neo-con paradise the people of Chile are on average quite poor and don’t expect any relief from their government.

Even in Hawaii the population bided their time while the tsunami wave crossed the Pacific by lining up for gasoline and creating a run on the super markets. The stores controlled purchases of some things, most notably they restricted how many cans of Spam people could buy. Long a traditional favorite because it will keep between ship arrivals to the islands, it is served everywhere, even at fast food restaurants and on sushi. How is your stock of canned goods? www.prairie2.com

Mt Fuji rises above the flat earth

Initial jobless claim jumped again this week and the corporate media acts as if there is some mystery on why this is happening. It’s not rocket science. Take Whirlpool; after taking a 19 million dollar grant from the Dept. of Energy under the Economic Recovery Act; they will be sending another 1100 union jobs to Mexico.

Besides eliminating these jobs, the jobs of all sorts of people in the area will also disappear. Parts manufactures, machine shops and companies that provide a variety of industrial services will have to cut back if not close. This then ripples through the community closing everything from the local accountant to barber shop to the lawyer; anybody the Wal-Mart hasn’t put out of business already. Even Wal-mart will lose business but they can just fire some people; all they need is a stock boy, a door greeter and checker. Give the old guy at the door some roller skates and he can do all three jobs.

Then of course the city and county lose out too. You can bet they gave tax incentives to get the plant and will get to keep the infrastructure costs but not the jobs. Normally a economic hit like this would create more government jobs like social services, police and prisons; but there is no money for that anymore so that will be cut too despite the increased need.

This goes on every day all across America and all we hear about is Tiger Woods losing his corporate sponsors (they have much too high of morals to put up with him). The corporate media did let us hear Mr. Toyoda apologize for building cars with defects. No US executive would ever apologize before Congress. No mention though of why he is closing a large plant in California. It didn’t even occur to any Congressmen to ask him about it.

Toyota will build more cars in Japan because you see Japan has a government that doesn’t accept that the earth is flat. Too bad we can’t get one of those here. www.prairie2.com

Home is where you keep your canned goods

The number of new home sales dropped again in January to number not seen in more than 50 years. The population today is 2/3 bigger than 1960 and much older since families are smaller. It’s true a bigger percentage of families do own their homes today but that is a trend that is rapidly reversing.

The millennium generation (turning 18 since 1999) has been hit harder by unemployment than any other group and 20 percent have moved back home with their parents. The good news is they are the only demographic in which the majority describes themselves as liberal and there are more Democrats in this group than their elders.

Home sales were actually up in the western half of the Midwest and unemployment is relatively low. This is portrayed by the press as the conservative values of these states and their not having participated in the real-estate bubble. The reality is that these states have lost their manufacturing jobs too, but have more raw materials and food products to export to China. There are few new jobs outside of oil and gas drilling that pay a living wage. Most are the type that don’t require a verifiable green card.

Home foreclosures continue to climb as provisions written into the bank bailout by the Bush Crime Family give huge incentives to banks to foreclose as they are compensated by the government at a higher rate than if the loan were paid off. Walk away’s are becoming so common that in many markets it doesn’t affect the consumer’s credit rating that much. Rental units advertise openly to these people and many home owners are “trading up” for a better house for less money by turning in the keys and taking over a foreclosed loan. Do not attempt this without legal advise, in some states the lender can come back years later and extract the deficiency from you, which can be most of the home's value.

Trading one loan for another cheaper one may seem like a shrewd move but in a year or two things will likely be even worse. It doesn’t do the economy any good to operate on that assumption, but you need to look out for yourself. A plan that avoids debt entirely is always the best way to weather bad times and we haven’t seen the really bad times yet. www.prairie2.com