Thursday, August 14, 2014

Too Big to Fail is dragging its size trillion feet

New unemployment claims rose above 311,000 last week, but the 5 week moving average is still as low as it's been since early 2006. There were 209,000 new jobs in July increasing the record for the number of consecutive months of job growth to 53. The April and May new jobs numbers were both revised upward by 5,000 and 10,000 respectively to 229,000 and 298,000 new jobs.

Job openings in U.S. rose by 94,000 to 4.67 million in June indicating an economy on the rebound, this was further confirmed by a 4% growth in GDP during the second quarter. This included a substantial increase in imports which are subtracted from the GDP. We'd have a much more robust economy without our trillion dollar annual trade deficit thanks to 'free' trade.

Under the Dodd Frank Act the really large financial institutions, also known as the "too big to fail" banks, are required to submit plans that allow for their complete dissolution should they in anyway endanger the United States as they did under the Bush Administration. Those plans were submitted some time back and upon review they were summarily trashed by the Federal Reserve and the Federal Deposit Insurance Corp (FDIC). Their joint conclusion was that the bankruptcy plans submitted by all eleven big banks make "unrealistic or inadequately supported" assumptions and "fail to make, or even to identify, the kinds of changes needed to simplify their corporate structures".

The regulators then gave them a year to make "significant progress". Sounds like the banks are conspiring to drag this out hoping for a change in Administrations. The biggest banks are still making their livings off of Repurchase Agreements or derivatives. These worthless pieces of paper are what crashed the banks last time and regulators under the Bush Administration claimed they had no authority to seize the insolvent "too big to fail" banks as the FDIC did with thousands of smaller banks. If this provision of Dodd Frank were taken seriously, most or all of these "too big to fail" banks would be seized now for failing to comply with the law.

Under Dodd Frank the regulators do have the authority to act if anyone actually has the will to go forward against the richest of the rich. The requirement that the banks themselves create 'living wills' was supposed to make the task manageable, but these banks are really just undead blood suckers, so planning for their own deaths isn't in their nature. They should simply be turned to dust now instead of waiting for them to create another crisis endangering civilization itself.

Banks of this size serve no useful function but instead siphon off trillions of dollars from the economy in a combination of billions for themselves, and from the damage they do to the rest of us with the power they wield in politics, government agencies and the economy.

The largest banks should be run directly by the Treasury Dept, the individual states should have their own banks like North Dakota does, consumer and commercial banks should all be member owned cooperatives commonly know as Credit Unions. Having three types of banks would provide the necessary competition to provide a way to disclose any structural problems.

This would give us even better growth than we had before the New Deal was dismantled by Reagan and his friends as the moneyed elite would have no leverage to undo reforms. That's not to say we wouldn't need to be vigilant, co-ops can be captured by their management. The Soviet Union was run by its management class as was Fascist Italy, and we're very nearly to that point here now. Education is the only effective deterrent, that's why Conservatives are determined to control education at all levels and control the media as well.  

Twitter @BruceEnberg - unless you're too big to fail.


Friday, July 25, 2014

We're not Fair and Balanced, we tell the truth.

New unemployment claims dipped to 284,000 in the past week, and this is the lowest number since the week of February 18 2006. This was about the time that it became apparent that the Bush Depression was going to happen. History tells us that without significant gov't intervention it takes about ten years to recover from a Bank Panic, that's what they used to call these things prior to the New Deal that made bank crashes impossible to happen. Of course Reagan, Bush, Clinton & Bush undid all of those regulations and safeguards with the predictable result.

So now we're seeing the recovery start to pick up speed, but let's be clear, it's not because Obama has been able to do much to fix things. He just hasn't done any new damage and has more or less kept the Republicans in check. Corporate America is another matter, despite record stock prices, record profits, record CEO salaries and trillions in cash on hand they are refusing to invest at pre-crash levels. Just returning to those levels of investment would create 2 million new jobs, but they'll have none of it, and why should they? Things are going swimmingly for the very few at the top and it only stands to get better for them as the US drifts into its place as the largest third world economy.

The Federal Reserve has been trying to force their greedy corporate hands by creating inflation with only modest results. The Fed is basically too timid to take the kind of 'reckless' action that it would take to convince corporate America that they'd better try harder to make money, or watch their personal holdings evaporate to inflation. Or maybe they're really all in on it, or at least enough votes on the Fed Board are complicit to keep them from doing much more than keeping deflation from happening. That was the purpose of holding trillions in cash, we had been certain to a classic deflation spiral that would have allowed the cash hoarders to buy assets for 10 cents on the dollar. A 1000% profit is far better than working for a living.

Congress could easily intervene with tax policies to stimulate corporate activity, and by re-criminalizing the practice of paying CEOs with stock, basically undoing the Reagan Revolution. Requiring the DOJ to actually enforce the Sherman Antitrust Act from Progressive era of the 19th century as well as the New Deal laws that haven't been undone would do much to stimulate corporate activity. None of that is going to happen as long as there is a Conservative majority on Capitol Hill.

There is some movement among Democrats to start acting like Democrats. A number of liberals in Congress actually understand economics and Progressive policy are starting hold sway with their colleagues. It helps that the Reagan Democrats are facing extinction, the guys with lunch pails and 401(k)s are all retiring only to find that their college educated kids are raising the grand kids in the basement. Change is in the air, and it's got the pungent smell of dirty diapers. Some people are finding the saying, "hold your nose and vote Democratic" has a whole new meaning.

Twitter @BruceEnberg where we're not "Fair and Balanced", we tell the truth.


Thursday, July 3, 2014

Anti Corporation Day

The economy added 288,000 jobs in June according to reports from employers. The numbers for April and May were revised upward by 29,000 total, this indicates the five month positive trend is continuing to strengthen. The household survey conducted by the Census Bureau for the Department of labor showed a two tenths drop in the unemployment rate to 6.1%.

Over at Fox News they took this jobs report so hard that you would have thought Reagan's head had fallen from Mount Rushmore. Shhh... they think he's really up there with the Presidents that actually did something. Their business expert Charles Payne went on about how this would be really bad for the stock market, and he's also the same one that says things like, 'It Gets A Little Comfortable To Be In Poverty'. It seems his only qualification to be a business commentator is that he hates all things democratic, any sort of safety net for workers, and he firmly believes in the 'free market' fairy to solve all problems. 

The average hourly wage was up another six cents in June to $24.42, this is an increase of 2% over this time last year and staying ahead of core inflation. But, when you consider that the minimum wage should really about $22/hour you get to the real reason the American Dream is dead, it's because the average wage is only ten percent above what the floor should be.  For many people there isn't enough to live on, and the majority have little or no disposable income. 

Plus we have the people at the very bottom getting subsidized with government money. Each Walmart store sucks up between one and two million dollars in benefits to its employees because they are simply paid too little to live on. The total workers receive is actually equal to Walmart's annual profits. Walmart is not an incredibly efficient competitor in the retail market as it portrays itself, it's simply powerful and ruthless. 

Since it's the eve of July 4th, let's remember that the Revolutionary War was fought simply to break the monopoly of the British East India Company. It wasn't about the Colonists being mad because they had to pay taxes, they weren't tea baggers. It was because British East India Company had recently been exempted from any taxes & had all the taxes it had ever paid refunded. Talk about your Corporate Welfare. 

The Colonists were also fearful of the increasing harsh treatment that the Walmart of the day was encouraging the British government to engage in, all in the name of corporate profits of course. American ships were labeled as smugglers and the manufacture of goods that the Corporation choose to trade in was prohibited in the colonies. And since most of Parliament and the King were shareholders, they had no interest in hearing the grievances of middle class Americans. Sound familiar? They were all Conservatives after all.

Twitter @BruceEnberg - Happy Anti-Corporation Day!  


I had a right wing troll try to get me to publish a link to an anti-science global-warming-is-a-hoax website. He sent me a comment filled with much flattery and intimating that he too was fighting the good fight. He included a link to what at first blush looks like a green website. I guess it didn't occur to him that I'd actually read any of it since Conservatives aren't big on research. Why do these right wing pricks like Ed have to waste my time?

Friday, June 27, 2014

Who's gouging who, get your score card here

The Federal Reserve has announced that they'll 'taper' bond purchases under QE3 by another $10b to $35b/month. Conservatives actually whine about this driving up the stock market as if that were a bad thing. All the people who bought into Reagan's 401(k) instead of a pension BS probably appreciate the market being saved, even if they didn't really get all of their money back with Wall Street capturing a huge chunk for themselves. That is why we have the big swings, there is simply no way to pay off everybody that thinks that they doubled or tripled their money in the market. And these same Conservatives want you to invest your Social Security in the market too. The Fed is also buying mortgage backed bonds and this appears to be having a positive effect with Housing Starts way up over this time last year.

Fed Chair Janet Yellen has said they'll keep interest rates low for some time even after the economy starts to recover. It may be premature to be talking about any sort of recovery however after the latest revision to the First quarter GDP. It apparently declined 2.9% on an annual basis caused by sagging consumer spending and some really bad export numbers. Since the GDP of the 4th quarter showed a 2.6% growth this downturn is probably just the result of the bad weather, so it won't be a problem unless the numbers that come out in July for the 2nd quarter are also negative.

The SEC is finally showing some interest in prosecuting the ratings firms who were instrumental in creating the Bush Crash. They were allowing mortgage companies & banks to sell junk bonds with little or no value by giving them AAA ratings the same as Treasury bonds. There's lots of guessing going on as to why the Feds might prosecute now and didn't have any interest in doing it before. My idle speculation is that the senior Bush people imbedded in the various gov't agencies to gum up the works are retiring and being replaced with people who might actually do their jobs.

Just in case you hadn't noticed, a new study shows that the average wealth of Americans is still 43% less than in 2007, even with the stock market recovery. It's also down 36% from 2003, meaning those glorious Bush years were worse than just a bust.

Even up in the top 5% where net worth averages about $1.4 million, they've seen a 16% decline from 2007. Of course when you get up into really big money as you might guess this isn't necessarily so at all, and their share of the national wealth continues to grow. It doesn't matter to a billionaire how many billions he has, it only matters that he has it all and you pesky peasants don't have anything.

It was all over the news today about how gasoline is going to be $5/gal if the Iraq unpleasantness continues, there are huge shortages don't you know. The reality is quite different, analysts had predicted a 2 million barrel decline in US stockpiles but reports to the government showed stockpiles of oil actually rose by 1.7 million barrels last week. Gasoline supplies climbed by 700,000 barrels and distillates like diesel, jet fuel and such rose by an additional 1.2 million barrels.

Fuel exports are still a big part of the US economy at 1.1 million barrels per day, if gasoline goes up at the pump it will be from old fashioned price gouging. And the Obama Commence Dept just eased the ban on the export of crude oil put in place 40 years ago, this is something you probably won't hear Sarah Palin mention while she's telling you how Obama has halted all oil drilling everywhere, all time forever, also too.

Twitter @BruceEnberg - where we tell you who's gouging who.

Friday, June 13, 2014

It's time end the nonsense

Thursday, June 12, 2014

A spike in the price of garlic

New unemployment claims were up last week but are still close to seven year lows. The number of job opening increased about 9% from March to April and were up 17% compared to April 2013. At 4.5 million this is the largest number of jobs that employers reported that they were recruiting for since 2007. Job opening have held at over 4 million for 3 consecutive months suggesting a general upturn in business.

The number of workers voluntarily quitting their jobs was up 11% over last year and people willing to change jobs suggests that the internal mood at companies is more positive. Of course some of these people may be motivated by their ability to always get insurance under ObamaCare reforms and no longer feel locked in at their current employer.

Russia appears to be moving aggressively to do a good deal of its trading in the Chinese Renminbi and some lesser Asian currencies, basically anything but the USD or the euro. China has been actively positioning itself to have a major world currency by persuading Australia, Britain and others to hold large reserves of Yuan. This makes it unnecessary to use the USD as an intermediate currency for trade with any number of smaller countries.  

Euro zone banks have begun to charge interest on cash deposited by large account holders. US banks have been doing this to some degree on dollars for years but it's only recently that the European Central Bank felt the need to do something about cash hoarding. It's always been the hallmark of the boom and bust cycles of capitalism that the rich begin to hang onto money when they smell the blood in the water of a deflationary collapse. The austerity measures that have been imposed on the debtor countries of southern Europe require significant deflation and this brings potential pennies on the euro buying opportunities down the road.

Andrew Mellon who was Sec of Treasury for three Republican Presidents in the 1920s summarized a deflation collapse as "when assets return to their rightful owners". He meant himself of course, it's difficult to estimate Melon's actual wealth as he was dodging the financial disclosure requirements of his job as well as income taxes, but he was perhaps a trillionaire in today's dollars. The Koch family fortune was made by using the boat load of cash Daddy Koch got from Josef Stalin for strategic oil well technology to buy up assets for 10 cents on the dollar.    

The price of oil is up sharply because of the imminent collapse of the oil companies' puppet government in Baghdad. Oil still has a long way to go to get to the $140/barrel price that Bush achieved during his Presidency. Starting with oil at $18/barrel, a price that analysts thought would be unsustainable once Saddam Hussein was out from under sanctions, Bush did pretty well for his cronies. That "Mission Accomplished" banner Bush got into trouble for was simply displayed at the wrong event. It was switched with the one that went to the country club that said "Go Navy".

It's a Full moon tomorrow on Friday the 13th, this rare event won't happen again for 35 years. If you live near Dick Cheney or any other Neo-Cons you'll want to hang extra wreaths of garlic before sunset.

Twitter @BruceEnberg - it's going to be nothing but garlic bread all next week.