Thursday, August 5, 2010

Cutting holes in the safety net


Initial unemployment claims shot up for last week to 479,000 while continuing claims were down slightly but that comes only from still more 99’ers running out of benefits. A survey of economists predicts tomorrow’s jobs report will show a smaller number of jobs were lost in July than in June when another 125,000 Americans were put out of work, but this same survey predicted unemployment claims would be down instead of up sharply. President Obama continues to make speeches on how the economy he inherited was shedding 750,000 jobs a month and now it isn’t, which is true but this steady drip, drip will kill us just the same.

There is no turn around in sight with scheduled layoffs announced by major corporations, charities and local governments up 6% in June to 42,000 and hiring announcements totaled just 8100 jobs down a third from the previous month. These numbers are compiled by private industry and don’t tell the whole story on jobs but simply show the trend of large employers that cooperate with their survey. But, the government numbers aren’t “real” numbers either and are just attempts to estimate what is happening based on the data available.

The Commerce Department has been revising numbers going back three years since the Bush Administration put very little emphasis on accuracy. (or maybe they just lied) Republicans are still saying Bush created millions of jobs. In fact the only jobs he created were another million government employees, something the tea baggers constantly complain that Democrats do. In fact no Democrat since LBJ has increased government but the Republicans sure did.

Food inflation is picking up as the Wall Street banks look for some place to make money. People have got to eat, so why not gouge them. Success is measured by what percentage of people starve, then you know you are maximizing demand. Grain is up, led by a sharp increase in wheat prices following Russia’s halt of grain exports due to the ongoing drought and wild fires. Russia says they have plenty of grain but aren’t about to allow the transnational corporations hoard it..

                                                                              The US is expecting a bumper crop but with so much of it tied up in the futures market the price you pay in the store has little to do with whether the farmers make any money so expect to pay more for food. This will impact the 99’ers who will join the seven million Americans whose only income is food stamps.

The only bright spot is that today the Senate overrode a Republican filibuster to appropriate $10 billion to keep 140,000 teachers and 85,000 police and firefighters on the job. The bill is not nearly as generous as the funding made available under the Stimulus Package that is running out. Other than pure mean-spiritedness the Republicans opposed it to the bitter end because it’s partly paid for by no longer allowing US companies to deduct overseas taxes that they pay when outsourcing US jobs.

However in order to get the token Republican votes to end the filibuster they had to give a $12 billion cut to the food stamp program starting in 2014. The Democrats are playing a dangerous game by putting this cut into law with the assumption they can repeal it before it takes effect.

The Clinton Administration had similarly built in cost of living factors to the Food Stamp program to insure slowly declining benefits in order to pump up his long term budget numbers to get votes. Remember the “ending welfare as we know it” slogan of the Clinton balanced budget.  Once the Republicans got full control they simply did nothing and people went hungry.

While there were modest reforms near the end of Bush’s term with the Democrats back in Congress after 12 years, the program is still subject to administration by the states and the red states apply the rules in the most heartless way possible with the intent of driving people from their states or simply killing them.  When you add to canned goods to your survival pantry, take some of the old ones down to your local food bank.  www.prairie2.com

Wednesday, August 4, 2010

Shopping list: hammer, nails, boards, shotgun shells

The big banks have missed internal targets for trading revenues in bonds, currencies and stocks. This has been happening in the majority of asset classes and across most exchanges and its only getting worse as disappointing corporate earnings reports come out. The problem is there just isn’t much volume being traded and the banks had gotten accustomed to taking a little slice of everything on big volume.

Corporate bond transactions are down 25% in the past month. The “flash crash” in May and the generally bad news about the world economy has driven many investors into Treasuries or they are just sitting on cash. US mutual stock funds have been hemorrhaging money for 12 straight weeks in amounts totaling $41 billion.

The big Wall Street banks are poised to slump badly. They’ve been living on trading profits, making billions to fuel their bonuses and covering even more billions in losses on loans. But July sucked at the trading desk and if August and September aren’t better it going to be “brother can you spare a dime or a trillion?”

The country is no mood for another bailout of Wall Street but just as in the fall of 2008, the turmoil the failure of the holders of 2/3 of all US banking assets would be problematic. Can you say martial law? Okay, the threats Bush made to get the bailout package at that time might be a little extreme but not for certain people. There are a lot of very wealthy people who could be sharing a hot air grate with victims of Bernie Madoff if it ever came time to do a real audit of these banks and they might be inclined to cause trouble to get their way.

In theory the Financial Reform law that was just passed allows for an orderly dismemberment of these zombie banks. Packed in barrels and shipped to a remote Army base for storage (wait, that’s the plot of scary B movie) In reality this whole mess is far scarier than any drive-in movie and could end civilization if it gets out of hand.

The ramifications of such an October surprise are troubling as well. The collapse of Wall Street, a total banking freeze and a stock market under a thousand should guarantee the defeat of every single remaining Republican since they brought us to this point. But, that would require an intelligent and well informed electorate and the townspeople have all had their brains eaten by FOX. Will the rest of get the windows of the farm house boarded up in time?   www.prairie2.com

Tuesday, August 3, 2010

We know how to "turn free enterprise loose"

If you thought the recession has been worse than we were told, you were right. The Commerce Department has revised the GDP figures all the way back to 2007 and all the numbers set new records, the bad kind. There is no question that we haven’t seen numbers like this since the last Republican Great Depression.

The worst drop in consumer spending took place last year, falling twice as much as previously thought. This was the worst drop seen since 1942, which was the first full year of WWII when the production of all consumer goods was halted completely. FDR didn’t tell everybody to go shopping after his 9/11. Another fact is that the entire four years of the biggest war ever with 12 million Americans in uniform cost roughly a trillion in today’s dollars. Bush’s war has cost more than that, so far.

The Greatest Generation had a different sort of government in Washington, back then making a profit from the War was a crime and people went to prison. There were also no contractors in the war zone funneling money into Swiss bank accounts.

Conservatives trying to kill the stimulus will tell you that the Depression didn’t end until WWII because the New Deal was killing the economy and the War turned free enterprise loose. Of course they say this as if it were a fact and count on nobody remembering what the war was like. There was absolutely no free enterprise during the war with everything either contracted to the government or severely rationed. And war profits were forbidden by law, talk about socialism, there is a reason the Republicans called it Roosevelt’s war. They had wanted to be on the other side where they had invested their money and they weren‘t making any money here.

In short World War II was run like the New Deal on steroids and FDR was able to do things he couldn’t before to stabilize the economy. He set commodity prices across the board, farmers and small business never had it so good, anybody could get a job and every business could get a government contract. FDR engaged in Soviet style central planning and clamped down with unprecedented government regulation on everything.

We could get out of our current Depression with similar War Time measures if we wanted to since that‘s what conservatives want . FDR was also re-elected for a fourth term during the War. He did however live with an unheard of level of security, traveling in armored train cars and he fortified the White House.  FDR maintained strict secrecy surrounding his movements but it probably wasn’t foreign assassins he was really worried about.  www.prairie2.com

Monday, August 2, 2010

Mountain Top Removal

Why does the GDP have Fed Chairman Ben Bernanke wringing his hands or at least he is pretending to be concerned, he can‘t be fired. The GDP for the quarter just ended was up 2.4% and that sounds good since it was up and not down but the devil is in the details. The Gross Domestic Product includes almost everything in the economy where money changes hands but here are the relevant numbers. Consumers represent seventy percent of the economy and their increased consumption upped the total GDP by one percent, okay that’s good but considering where we’ve been it’s not providing much recovery.

Business investment added fully 2% to the GDP but the companies that are buying equipment aren’t hiring, just getting leaner. An increase in inventories added another one percent but that doesn’t represent growth but is a reason to worry as at some point the inventory must be sold down. Exports added 1.25% and that’s a bright spot but not very bright. Increased Government spending added .88% which is your stimulus dollars at work.

That all adds up to a 6.4% growth of GDP which is pretty respectable for any period since the Depression, but wait the GDP number we’re using is only 2.4%, so what gives? Imports are what gives, on a flat earth there are really no such things as imports and exports since trans-national corporations don’t recognize borders or governments. But for us serfs who used to think we were living the American Dream and building wealth this is the telling number. Imports increased so dramatically that it cut the entire GDP of the United States by fully 4%. This is four times the increase in consumption so if you were wondering like the Republicans, “where are the jobs?”, this is where they went.

The trans-national monopoly corporations continue to eliminate jobs and squeeze more work for less pay from every worker. Conservatives say that’s efficiency and that’s a good thing. The GDP tells a different story, the unemployment lines, the pay cuts, the ever rising tide of home foreclosures, the growing number of homeless people all these tell a different story. Small and medium businesses continue to disappear or become debt ridden hollow shells as big business squeezes them out.

When increased worker productivity doesn’t benefit the worker who does the work but only benefit’s a handful of people at the top you cease to have an economy as we have come to think of it in the land of the free. What you have is a feudal society. Even the upper middle class is feeling the pinch and are cutting back sharply on spending as their investments turn south and the wealth they had in their homes disappears. While the top earners experienced half the job losses that the rest of the work force have endured, those out of work aren’t finding jobs easily nor are their children finding those yuppie status jobs their parents did after college.

The flat earth used to be a concept that didn’t apply to the upper middle class but no longer true. The upper middle class have a list of talking points supplied by the millionaires at Fox who work for the billionaires who own the flat earth, these talking points are designed to make them think this is all Obama’s fault. It doesn’t matter that this has been going on since Obama was in junior high school, but it didn’t used to apply to them so that’s the part they blame on Obama.

The conservatives with comfortable incomes and investment portfolios thought they were part of the ruling class and they desperately want to believe the black man in the White House is the one who is taking that away from them. They thought they were getting trickle down and not snake oil. They thought that they each had their own little mountain on the flat earth but the really rich have a mountain top removal program to take care of that. While the guy that still makes 200,000 a year isn’t in the same hole with the rest of us, he’s discovering that his wealth is drying up and he’s only a job loss or a market flash crash away from the edge, and on the flat earth, once you go over the edge, there is no climbing back up.  www.prairie2.com