Friday, September 18, 2009

Made in the Colonies

So far today there have been just two more banks seized by the FDIC bringing the total for the year to 94. These were relatively cheap costing an estimated 850 million tax dollars to insure deposits.
Speaking of failed banks, the Federal Reserve has announced its intention to issue employee pay restrictions to all banks aimed at curtailing the practice of rewarding employees for driving their institutions into the ground. The rules would apply to all banking institutions of all types and sizes and even those who operate without Federal Charter.

This action comes as a bill picks up steam in Congress sponsored by extreme right Republicans and extreme left Democrats to audit the Federal Reserve. Congressman wish to determine where 14 trillion dollars went and to demand answers as to why nothing was done to prevent the current banking collapse. The Fed has sent Congress dire warnings that it has no right to stick its nose into what the Fed has done, is doing or will ever do, for theirs is the righteous power divined by a wrathful god and thou shall avert thine eyes or bring about the end of days for all mankind. They put it into banker speak but that’s what they said and they aren’t kidding.

Meanwhile closer to the real world Congress extended unemployment benefits for another 13 weeks for more than half the states with the worst unemployment numbers. If you live in the rest of the states you can starve. Five states now have unemployment above 12% with Michigan over 15% and if you roughly double these numbers you get more accurate statistics as they would have been reported in FDR’s days and they look like numbers from those days.

The march of jobs out of the country continues unabated with California now having lost 30% of its manufacturing jobs with the departure of Toyota. More than six million jobs have ended in the last two years with no intention on the part of corporate America to bring them back. In fact they are exporting our factories equipment just as fast as they can. They are putting us in a stranglehold of imports that they intend we shall never be able to break free of. In 1776 America was not allowed to make its own manufactured goods of any kind. Not shovel nor shirt. Can you buy anything now that says made in the colonies, I mean made in the USA.

Thursday, September 17, 2009

The last can of food

Initial claims for unemployment dropped by 12,000 last week. Great news, makes a big headline. There is a small problem though, continuing claims went up 129,000. That’s 129,000 more people are on unemployment than last week and this does not include approximately 100,000 whose benefits run out every week for a total of 229,000 jobs lost. And of course none of these numbers reflect the people who aren’t eligible for unemployment.

Factory output was up slightly, another big headline, but this was just a bounce from the lack of inventory. Inventories were cut severely in the spring and an increase in output does not reflect any significant growth and more probably is masking further declines. In fact most increases are in factories with low wages that produce goods for the European markets that are rebounding. Even with that, US industry is operating at less than 70% of capacity despite the wholesale closing of US plants.

As benefits run out, more people are expected to face foreclosure putting more downward pressure on home prices that are expected to decline another 25%. This will put more people underwater and this is expected to exceed 50% of homes by next year putting still more pressure on prices. The eight thousand dollar Federal new home buyer credit is about to expire and if not renewed it will put the entire real-estate business under water.

Credit card defaults continue to increase despite the banks severely reducing or eliminating the credit lines of the majority of their customers. Most people are getting notices with lots of fine print saying that your interest rate is going up slightly but if you read far enough you will probably find that your interest rate is about to go to 30% and you are now on an adjustable rate that has no upper limit.

The truth that is being kept from everybody is this mess didn’t start with sub prime loans or a real-estate bubble. It didn’t start with people living high on credit cards or consuming too much. It wasn’t the unions or high taxes or any of the things on the list of the right-wing blowhards. It was deliberate economic policy pushed by right-wing think tanks. Pushed by the corporate media as "the free market", "we have to compete", "it’s a flat earth", "everything you buy will be cheaper" and on and on. You’ve heard these slogans so much over the past thirty years that you probably believe some of them without realizing it and they are all just "bat squeeze". The latest one is that we can’t change now because we owe China too much money.

Alexander Hamilton and the other people whose pictures you see on your Federal Reserve notes would be shocked that Americans could be that stupid. They fought wars to free us from this sort of nonsense. Especially things like the Federal Reserve and the giant corporations that overwhelm local markets, destroy businesses and drive down wages. The real Tea Party was an attack on the British East India Company that was the Walmart of its day. If the tea baggers today had a clue about their real future, they would be out in front of their local Walmart with torches and pitchforks.

The truth is that the corporations are in charge. You don’t have to look very hard to realize that they don’t hesitate to lie to people, neglect people, abuse people, enslave people, kill people, kill lots of people. The truth is that every week a couple of hundred thousand people start down a path that will end when they use up the last of their canned goods.

Tuesday, September 15, 2009

Sweet and Sour Chicken, Mostly Sour

Retail sales jumped 2.7% in August but 2/3 of that was from cash from clunkers and when you exclude gas station sales the increase was only six tenths of a percent. This increase was mostly from pent-up demand for clothing, electronics and general merchandise with furniture and hardware down sharply. Sales continue to be down more than 5% from a year ago and retail stock prices are down on a gloomy sales forecast.

Wholesale prices took a big and unexpected jump last month. The standard line from the media is that "this is fueling fears of inflation". In reality it reflects the collapsing dollar as imports are climbing in price even faster than the currency trade indicates. Many companies don’t want to be paid in Dollars and are apparently raising prices to get ahead of the inevitable collapse.

More Americans are below the poverty line now at 16% of the population. In total wealth, the US now lags behind Europe as the wealthiest region in the world but we are still well ahead of Africa, for now. Of course most of our wealth is just on paper. Europe was largely a smoking ruin sixty years ago and the US had most of the world’s manufacturing capacity and all the money.

Now we import $4.50 in manufactured goods for every Dollar exported and even that Dollar is heavily loaded with so called "value added" agriculture products like pig intestines the Chinese use to make pharmaceuticals, cosmetics and the like. The rest of our exports are made up of raw materials and crops much as any third world country. We used to export debt but I doubt anybody is really buying any of that anymore but rather it is a sort of shell game managed by the Fed to keep Armageddon at bay.

China is threatening to retaliate for Obama’s tariffs on steel pipe and tires by raising the tariff on chickens coming from the US. Traditionally you raise the tariff on a similar product, but that’s not possible for China since we don’t make anything. To get the attention of one of your third world trading partners, you raise the tariff on bananas or chickens.

Monday, September 14, 2009

Happy Sept. 14th, President Obama has now kept the nation safe from terrorist attack 3 days further into his Presidency than Bush did. In another anniversary of Bush’s unelected reign, Republican pundits this morning were congratulating the Bush Adm. for its skillful handling of banking collapse of one year ago. They went on about how close we came to all the ATMs not working and presumably the end of civilization. What they really did was just sweep it under the rug and pretend that huge lump wasn’t there.

That lump is still there and it’s getting hungry. So far in September another eight banks have gone under bringing the total this year to 91. These banks cost upwards of two billion to clean up but that doesn’t include about four billion in assets that the FDIC couldn’t sell. Made up of condo projects in the most over built bubble areas they will probably never be worth anything. The FDIC is estimating that banks are carrying at least a trillion in toxic assets on their books as if they were still worth something. They are not counting the home mortgages that are under water but so far making payments, at least until the next interest rate adjustment or wave of layoffs.

Republicans have been going around saying that the Klan rally on the Washington Mall drew a bigger crowd than the Presidential inauguration. According to the space they took up a generous estimate would be 60,000 and that included as many as third Obama supporters. With two million plus who came to see Obama’s swearing in, it would be reasonable estimate that at any given moment there were more than 60,000 people waiting in line at the porta johns to say a symbolic good-bye to Bush.
The problem with using space occupied to estimate the crowd is that it didn’t take into account all the scooters belonging to people who got them free from Medicare. You know the government health insurance they all want to do away with. Of course they could all have two or three scooters for what the government paid for each one. The Republicans long ago put in no bid contractors to supply Medical equipment and have so far blocked any reform.

Obama did something encouraging Friday by raising the tariff on cheap Chinese tires to 39% and this follows a similar move against imports of steel pipe last week. I mentioned this to a Reagan Democrat I met today and it took about five minutes for him to wrap his head around the idea that Obama wasn’t giving anything away.

The deathers will soon be riding scooters with American made tires. Not that they care as long as they keep getting their government checks and benefits.

Sunday, September 13, 2009

Obama mans up on trade

The Obama Adm. stood up to China on Friday and raised the tariff on tires to 39%. This follows a large tariff imposed on steel pipe. It is not likely however that he did this without at least the grudging agreement of Beijing. China could put the US economy in a tailspin anytime they want to and it would not be wise to provoke them. Face is more important than anything else for China’s leaders and Obama will have to show them proper respect when they come to the G20 meeting in Philadelphia and later when he travels to China in November. Before you right-wingers get your pink panties in a wad; Bush never stood up to them on anything and was happy to do a Monica for them anytime.

Two thirds of our trade deficit is with China and it took the biggest jump in ten years last month. Bringing back normal trade (pre-Clinton/Bush) is the only way to have a middle class again. Republicans will fight this tooth and nail because the would prefer a mixed economy of feudalism and plantation slavery. There are more than a few Democrats who say that we live in a Global Economy and that’s just the way it is. You’ve got to be pretty stupid to sincerely believe this. Most are just willfully ignorant as their jobs depend on keeping up the fiction.

China has been plowing ahead full speed with fixed asset investment continuing to grow 30% year on year. They have been reducing the percentage of their economy that depends on trade at a rapid pace. They have been prudently disposing of their USD to buy anything and everything from copper mines to oil fields to zinc deposits anywhere somebody is stupid enough to take Dollars. China has banned the export of its strategic metals all the while the US continues to be strip mined. Last year Beijing handed out several hundred billion to their trading partners to cushion the impact from the collapse of the US economy.

Even if the trade and tariff problem is resolved there still is the matter of the trillions of funny money the Republicans have hung all over the world as well as even more trillions of debt obligations they created to balance the government books and securitized consumer debt that they created to avoid paying a living wage to US workers and prop up the banks. There should be some public hangings but that is too much to hope for.