Friday, June 11, 2010

Putting the right people in prison saves money (no pun intended)

The DOW plunged early today but closed up at the end despite a really bad report on retail sales. A modest gain in sales for the month of May had been predicted but a sharp drop occurred instead. The standard excuse of bad weather seemed to satisfy the market but falling wages were among the real culprits driving down the economy.

Consumers are also heavily burdened with debt and the credit card companies took advantage of Congress allowing them time to jack the interest rates to 30% on existing balances before the practice was outlawed. This now illegal act is sucking billions out of the economy and is adding to the Wall Street bonuses. Usury used to be illegal in all states but the activist judges appointed by Ronald Reagan changed that. (states rights you know, just like slavery)

Here’s a tip, when a conservative uses the word “de-regulation”, point out that what he really means is “de-criminalization”. Most of the practices that have brought us to the brink of the abyss used to be illegal and some of it still is, but no one has enforced the law for thirty years.

When the drill baby, drill crowd says if we de-regulate the oil industry and then everything will be great; what they mean is that the happenings in the Gulf would be de-criminalized. Just like it is in Nigeria where this kind of disaster happens all the time and it costs BP nothing. Great if you own stock in BP and not beach front property in a third world country like Nigeria or the US. The coast of Nigeria used to have an ecology much like Louisiana and now we will match them again.

The crushing poverty and rampant crime the Nigerians enjoy in their libertarian paradise is well within our reach as we march toward a totally corporate America. One good thing has come inadvertently from the decline of state finances. States are now quietly closing all the youth prisons the Republicans built during their law and order heyday in the 1990’s.

Locking up the kids for long terms into adulthood made a lot of money political cronies. It did nothing for the crime rate as a high percentage of the ones who spent their teens and early twenties in prison went on to become hardened criminals. Much cheaper community based programs have in only a couple of years driven down arrest rates to where these monuments to conservative philosophy now stand empty and are being closed. If conservative activities were re-criminalized then the prison guard jobs would not be lost.

Thursday, June 10, 2010

The Knife's edge is self sharpening

The DOW was up almost 3% today on strength of the “great” jobs report that showed a very small drop in new unemployment claims and a large drop in the number of people receiving benefits. A Labor Dept. spokesman actually had no comment when a reporter asked if these people had simply run out of benefits. (well duh, of course that is what happened)

The market loves it when people lose jobs (it means wages are being driven down) and they were really jazzed by the 40 billion US trade deficit for April. A big part of the trade deficit comes from the trans-national companies that make up the DOW dodging US taxes by trading across the border with themselves. (the bigger the deficit the bigger the tax free profits)

Some members of Congress took the dramatically larger trade deficit as further proof that China needs to pay some penalty for manipulating its currency. China has been hinting for several months that it would revalue the Yuan but there is always some excuse not to and you can hardly blame them. The neo-cons had assumed they would eat China’s lunch but the Dragon has a taste for arrogant westerners.

The economic crystal ball gazers (the ones that predicted the last crash) are starting predict the end is near. They can’t quite agree on what shape the down turn will take. Some are predicting sudden hyper-inflation and a 6000 dollar an ounce future for gold with a fifteen year recovery timeline. The other scenario is massive deflation from a credit freeze up like ‘08 with spiraling defaults that just don’t stop and a race to the bottom of prices across the board.

You can probably flip a coin about which way it will go and you may even get some of each. The unprepared and the vulnerable will suffer either way. Inflation is the preferred method for most people as it allows ridiculous amounts of debt to be mitigated without shutting down the economy but savings evaporate. Deflation favors people with cash who get a huge boost in buying power but it can bring an economy to its knees as investments evaporate from the widespread defaults.

We have walked way out on the knife’s edge. The British are in even worse trouble as their pensions are heavily invested in BP which is currently the fourth largest company in the world. (a big deal for a country that small) BP will survive in some form but probably not their stockholders. America will survive in some form but not all Americans will.

Monday, June 7, 2010

Always the lowest pay, always

There was the usual economic news today, the Euro went to new lows against the USD and this pushed down all the commodities priced in dollars except gold which is close to a new high. Attacks against the debt of Portugal have picked up with another downgrade of their credit rating and there are indications from the rating agencies that there will be more downgrades. These downgrades have nothing to do with the real situation on the ground but rather an anticipation that Portugal will have a hard time issuing new debt in the bond market to replace expiring debt… largely because their credit rating has been downgraded which cuts the number of investment funds that can buy bonds. Supply and demand sets the price in the “free” market; of course capitalists long ago caught on to controlling the supply and the demand to their advantage.

Hungry is close to slipping into the same debt abyss and the feeling that this contagion is spreading is driving down paper of all sorts and boosting gold.
Even US Treasuries fell sharply as they are being seen as not immune with the last bond auction not being well attended and more large sales are scheduled for this week. Japan is also issuing a record amount of debt for the new year that began in April and this only adds to the rumor mill that we are all drowning in debt.

We are drowning, but not from debt, debt is just the flotsam and jetsam left from the sinking of the US economy. Thirty years of selling off America instead of manufacturing things to sell has long ago gotten to the point where all they have to sell is debt. Securitized debt of all kinds from sub-prime mortgages and credit card debt to junk bonds was created and used to build up a quadrillion dollars of derivatives. If the rest of the world didn’t feel dependent on using USD as reserve currency then we would all be in the dumpster already. This attack by Wall Street on the Euro is all that is keeping things going since USD are still considered spend able for now, but the rich are all filling their personal vaults with gold.

The FDIC spent 300 million closing banks on Friday as they do almost every Friday. Most weeks these are banks in the heartland where the real-estate bubble is not a factor. It’s failed commercial loans that are dragging these banks under, most of it can be traced back to the Wal-Mart plague. When they come into a town they will take out 200 small businesses in a forty mile radius and drive down wages. They drive down property values and erode the tax base and often get tax exemptions from the town they land in. They use competition between towns to get what they want since everybody knows all the other towns are really screwed. Every store they open gives them more leverage to force factory production to move China and the small factories in these towns close too. At some point the Wal-Mart’s will close as well and the Waltons will continue to live comfortably on their feudal estates.

There’s a new class of people, the “99 weekers”, their unemployment is gone and Congress is not going to pass an extension for more weeks, they haven‘t even funded the extensions for less than 99 weeks. To add insult to injury, the rat bastard corporations all have policies against hiring somebody from this class as they see them as somehow as “damaged”. We need to see these corporations as “damaged” and recreate an economy that works for all of us and not just the 1/10 of one percent at the top and no one else.