Friday, July 9, 2010

Exports are not the real problem

President Obama has been bragging that his National Export Initiative was a rousing success in the first quarter of this year and exports were up 17% from a year ago. There is no question that increased exports abroad generate jobs at home. The Senate didn’t pass the badly needed jobs bills, consumer confidence is plunging faster than home sales, we have declining factory orders, continuing layoffs at the state and local level and the weak June jobs numbers so any success is to be touted. At a time when jobs are in short supply," Obama said Wednesday, "building exports is an imperative."

There is a big problem with these export numbers, they are only up compared to early last year when nobody was buying anything. And here is the real rub, imports have increased even faster than exports so the trade deficit is going right through the roof. Businesses continue to sit on over a trillion in retained profits and so have no reason to hire Americans as imports can be had with no investment and they fully expect business to decline. (They are driving it, so they are sure it will happen.)

The only thing that is working in our favor is that China is resisting the rush of trans-national companies to set up shop there. They have decided to build domestic consumption and in that vein they are tolerating strikes by workers against the trans-nationals for higher pay. This doesn’t mean these parasites won’t look for some other country where they can exploit workers but many of these countries are becoming wary of getting into bed with these neo-con companies. The last down turn found many of the labor providing countries with billions of USD in their treasuries and no place to buy rice. (hungry people tend to revolt) This is motivating them to consider the Chinese way of doing things and move away from the neo-cons’s flat earth model.

This is not to say things have turned around for us even though some companies are returning jobs to the US.
wham-o-moves-to-america     It not even clear if Obama is really doing this or is just lucky. His crack down on product dumping by the Chinese a year ago seems to have precipitated this chain of events but it’s hard to know what Obama’s real policy is. You also need to keep in mind that Obama has only a tenuous grasp on power. The admistration is still full of Republican royalists, for every McChrystal that is forced out there are a thousand more embedded in every aspect of government. (We probably should store some rice.)

Thursday, July 8, 2010


China is ruling out the “nuclear option” of dumping upwards of a trillion in US government debt accumulated over the last decade. But the State Administration of Foreign Exchange (SAFE), that is in charge of China’s $2.5 Trillion in reserves, the largest in the world, also called on Washington and other governments to pursue “responsible” economic policies. The statement on Wednesday, one of a series that Safe has issued in recent days in an apparent effort to address criticism about its lack of transparency, also downplayed the chances of China making major further buys of gold bullion, describing the gold market as too “thin“ to allow for major purchases. Of course they buy as much as they can without driving up the price.

SAFE wasn’t saying anything they haven’t said before and their timing may have to do with distracting everyone from the revelation that China has been buying massive amounts of Japanese government bonds since the first of the year. This is credited with artificially driving up the Yen relative to the USD. This hasn’t made the Japanese happy as it screws up their balance of trade and unlike the boobs in charge of the US economy, they don’t like having a foreign government owning their debt.

The fact is that they have a sense of national purpose that we lack in the US. After decades of propaganda, Americans are convinced that they are all rugged individuals that should make it on their own and anybody who can’t should starve in the street. This is why a country that was a bombed out wasteland in 1945 is now a thriving powerhouse and vast swathes of the country who won the war now look as if it was they who had been bombed.

Japan protects its interests and instills a pull together spirit in its people, while the US has done the opposite. Americans all believe they can get rich on the flat earth where patriotism means waving the flag and going shopping on credit. In reality their wealth is evaporating in favor a tiny sliver at the top who now live like 18th century English lords.

Now that the inevitable result of these policies is beginning to drag us under, the rugged individuals are more than willing to throw their neighbors into the street. To a Republican there is no problem creating more homeless people won’t fix.

Wednesday, July 7, 2010

Some travel first class and some just think they are

The White House announced Tuesday night that President Obama intends to use a so-called recess appointment to install three more administrators after 18 months of Republican obstructionism. The seventy or so unfilled appointments mentioned in the press are only the ones who have been approved in committee hearings and are languishing in lieu of a vote on the Senate floor but several hundred have not even had committee hearings. Anybody who complains about how the Federal Government is doing (or not doing) its job needs to be reminded that 99% of the government is still being run by imbedded Republicans.

The appointment drawing the biggest Republican tantrum will put Dr. Donald Berwick in charge of the Centers for Medicare and Medicaid Services. Berwick, 63, is a pediatrician, Harvard University professor and leader of a health care nonprofit organization, the Institute for Healthcare Improvement in Cambridge, Mass., that works to develop and implement concepts for improving patient care. He's drawn support from many quarters, including the American Medical Association.

Berwick was nominated in April but no confirmation hearing had been scheduled. This post has been held open since 2006. President Bush refused to appoint anyone to the post as Republicans are dedicated to destroying Medicare and Medicaid entirely.

The decision to use a recess appointment to skirt the Senate Republicans drew their fire even though the tool had been used frequently by presidents of both political parties but was used far more by Bush. Obama last made a batch of recess appointments in March, and he made two other less prominent appointments Wednesday naming Philip E. Coyle III as associate director for national security and international affairs at the White House Office of Science and Technology Policy. He also named Joshua Gotbaum as director of the Pension Benefit Guaranty Corporation.

Dr. Berwick has been criticized by Republicans for a number of comments, including telling an interviewer last year: "The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open. And right now, we are doing it blindly." Republicans have been chanting “death panel, death panel“ even though they have no problem with the rationing done by insurance companies.

Berwick is advocating transparency and accountability in medical decisions. Rich Republicans go to the hospitals that are run by people like Dr Berwick and rank and file Republicans go to hospitals that are designed to maximize profits with no concern for patients. Republicans all think they are traveling first class when most of them are really in steerage, clueless about the iceberg and the lack of life boats.

Tuesday, July 6, 2010

I'll take my ball and go home!

"I really worry about China," CEO Jeffrey Immelt told a business audience in Rome and he went on, "I am not sure that in the end they want any of us to win, or any of us to be successful." Immelt said that China had become hostile to the interests of large multinational companies, to some extent because they have become competitive to firms based on the mainland. He said multinational firms will have to consider moving enterprises out of China to other more friendly nations. He warned that the world’s largest manufacturing company was contemplating better prospects elsewhere in resource-rich countries in the Middle East, Africa, Latin America plus Indonesia and that those nations did not want to be “colonized” by China.

Did Jeff seriously think China was ever his friend? Honor among thieves maybe? GE is a predator without conscious and the notion that he and his kind ever had the interest of anybody but themselves in mind is of course laughable. These other countries that Immelt is threatening to move to don’t want to be “colonized” by GE either so he isn’t going to be welcomed with open arms even if he could make good on his threat to move. In fact the rest of the world is happy to do business with China since China has manufactured goods to sell them, all the US sells is debt.

He went on to attack Obama as well saying that excessive US regulation, in the wake of the global financial crisis, would dampen a "tepid" economic recovery. The CEO of world’s largest manufacturing corporation seemed oblivious to how the US has gotten in the condition that it is in. "We are a pathetic exporter (he would know, he closed the factories) ... we have to become an industrial powerhouse again but you don't do this when government and entrepreneurs are not in synch."

He must be aware that Jack Welch (his predecessor at GE) shipped as many jobs to India and China as he could making himself a billionaire in the process and converting the US into a third world country. You can bet that when China kicks his butt out that he’ll want US taxpayer money to bail him out.

When his little rant got into the Financial Times his office issued the usual quoted out of context and misquoted denials. When this wouldn’t fly they took the really unusual stance of saying that their CEO does not speak for the company and disavowed everything he said about China, not about Obama though. GE isn’t afraid of Obama.

Monday, July 5, 2010

Inflating the bubble some more?

The rumor is that China is going to restructure its sovereign wealth fund, China Investment Corporation (CIC) to remove its bank holdings from its portfolio. About half of the CIC's 200 billion USD is in China's banks and if Beijing were to replace that with cash it would be in a position to buy into US markets in a big way. They are supposedly eying US stocks, bonds and real-estate. The CIC is currently restricted by the US Federal Reserve because of its status as a bank holding company.

If this rumor coming from the bankers in China is true it would pump up the US bubble economy considerably (it would do nothing for the real economy). But that is only if the extra cash coming in can overcome the selling stampede that is currently ongoing in the US markets. The markets would be in free fall except that the big Wall Street banks have unlimited Fed money to throw around to keep things moving their way.

It's not clear what is really going on with the CIC as it is also in the center of a bureaucratic turf war between the People's Bank of China and China's Finance Ministry over who controls the banks in China. It seems odd that China would want to invest in the US having lost half their money the last time they tried it. On the other hand if they are only doing it to settle a feud then they might do something uncharacteristically stupid. I wouldn't want to be one of people who pushes for this after it blows up on them.

Sunday, July 4, 2010

Happy Independence Day!

One quarter of American adults don't know or aren't sure what country we became independent from. Nearly 100% of Americans don't know that the Boston Tea Party wasn't about taxes. It was about being overwhelmed by a trans-national corporation. Yankee sailors had brought back stories of the British East India Company's treatment of British subjects in the colonies where the corporation was in control. The total destruction of the local economies that ultimately led to slavery and starvation to maintain corporate profits, the 1773 equivalent of Wal-Mart.

The Tea Act eliminated corporate taxes and even rebated to the BEIC all the taxes they had ever paid giving them the ability to crush every private business in the colonies. After being turned away in New York and Philadelphia the ships of the BEIC docked in Boston and you know the rest.

British law (members of Parliament were stockholders of or were controlled by the BEIC) prohibited the manufacture of practically everything in the colonies and this is where we find ourselves today. One of the Bill of Rights submitted by Thomas Jefferson was to restrict corporations and prohibit monopolies. It didn't pass but for most of the next century but the states did restrict corporate power.

Today we are being told by the corporate media that austerity is the answer to all our problems. It was austerity that the colonists were fighting when they threw the tea in the harbor. The Yankee sailors had seen austerity in action and wanted none of it in their colonies.