Friday, September 10, 2010

A new Hamilton?

“In today’s world the blather about free trade, free-markets and the joys of competition is nothing but pabulum for the suckers.” given the record so-far, you would not think this quote came from anybody in the Obama Administration. These are in fact the words of Ron Bloom who has been elevated to special advisor to the President on manufacturing policy. With a background as a labor union negotiator his appointment has the rightwing spitting nails.

Still Obama doesn’t have much to show so far, you can‘t deny he did keep Detroit from going the way of most American industry and that was where we first encountered Mr Bloom who became known as the non-czar car czar. (or is he the president of a “stan” country?)

Obama has confronted China over product dumping, something Clinton or Bush never did. This stance has slowed expansion of US manufacturing in China with some production returning to the America but on the whole the trade deficit continues to grow.  Efforts to get China to revalue the Yuan have only resulted in a one percent adjustment when a 40% change is required, still China even saying they will cooperate is a start.

Will Ron Bloom go down in history with the likes of Alexander Hamilton? His policies on manufacturing subsidies and tariffs on imports became the law of the land for nearly 200 years and made America a super power. Will Obama who admires Lincoln re-instate Hamilton’s tariffs that Lincoln took the country to war to preserve.

The attack on Fort Sumpter was simply to seize the Customs House as the south did in all the port cities. The south wanted cheap British manufactured goods in return for its cotton. Today we sell cotton to China and get cheap manufactured goods in return. In the south of 1860 there were a few rich people and the rest were poor whites and black slaves, no middle class.

The southern whites were fed the lie that it was rich Yankees that made them poor and they would all be rich if the Federal tariffs were lifted. In reality all that would have accomplished is the destruction of  America’s manufacturing base and made the entire country poor just as these policies have done for us in this era. Ronald Reagan has succeeded where Jefferson Davis failed to destroy the Union and its middle class.

Thursday, September 9, 2010

8 per 1000 is not enough

Initial unemployment claims dropped to “only” 450,000 and everybody is giddy as this is the third straight weekly drop, but,,, this is a Monday holiday week and that always creates under reporting and it will go back up next week. Continuing claims fell by 2000 and this too was pointed to as fantastic news but using the standard death rate of 8/1000/year applied to 4.5 million people about 700 of this reduction would be from claimants dying. Of course what is really happening is that the number of 99ers falling off the end eligibility is starting to exceed people coming onto the rolls.

The private sector reported adding 54,000 new jobs last month but mostly as temps since real jobs all go to China and India. Total employment dropped by 67,000 with most of the losses coming from the end of temporary Census jobs.  Even with more money from Congress to retain jobs, state and local government are cutting essential service jobs and are continuing the slow decline toward anarchy.

The popularly reported unemployment rate rose 0.1 to 9.6% edging toward the 10% number that Republicans claim will sweep them back into office. More troubling is that the more realistic rate reported by the Bureau of Labor Statistics rose 0.2 to 16.7%.  A good guess of what that number really should be is hard to come by but is certainly over 20%.

In rust belt cities this number can be 50%. Even if new jobs were created at the highest rate we’ve seen since WWII replacing the 8 million jobs lost at the end of the Bush Administration would take many years. No policies have even been proposed that will recover any of these jobs, so let‘s see at 8 deaths per thousand/year, that‘s only 64,000/year; the death rate will need to go up.

The trade deficit declined slightly for July with increased exports of aircraft and manufacturing equipment. They didn’t say if this was new equipment or crated up factories being shipped out of the country. Imports declined slightly but this shouldn’t be seen as good news but a sign that we maybe starting a major decline in the retail sector.

Japan is upset with China buying up Japan’s government bonds as this is driving up the value of the Yen and putting Japan at a competitive disadvantage with exports. China has been selling US debt and not allowing its currency to float more than 1% against the USD despite promising that they would do allow this as the Yuan is overvalued by 40% compared to the USD. This gives Chinese goods an unfair advantage in the US market and makes it difficult to export to China even if they were to allow competition from US goods which they do not.

Oh well, when the Republicans get back in they will work on that insufficient death rate. Prior to Social Security the leading cause of death in cold weather was the elderly freezing to death and in warm weather it was the elderly dying from malnutrition. Those were the good old days of the free market, small government that the Republicans will return us to soon enough.

Wednesday, September 8, 2010

The Republicans talk about jobs

The corporate media was pushing back hard today against President Obama’s announcement that the Bush tax cuts will expire as scheduled with no possibility of extension. You can expect this item to be of great concern to the network news readers who all have incomes much high into the $250,000 plus bracket. They don’t mention this however and make a point of interviewing crotchety old Republican businessmen who make claims about how many jobs they will cut if they have to pay more taxes. This is a false premise of course that I will come back to.

They try to make much of the estimate that this re-imposition  of taxes will affect close to one million small businesses. This is a totally made up number as at least half the people in the top income bracket aren’t businesses in any  real sense, but are partners in law firms and such or have a business on the side and don’t really make their money from “creating” jobs.

Most small businessmen simply don’t take that much money out of their businesses, but re-invest to minimize their taxes or they are being hammered by big business (you know, the real Republicans) and don’t make anything like 250,000 a year anyway. This is of course the false premise the Republicans are using to paint this a job killer. A business only pays income taxes on profit, taxing profit has nothing to do with how many jobs are created. In fact just the opposite is true as a higher top marginal tax rate encourages re-investment to avoid paying the higher tax.

Not a single owner operated business will cut jobs to spite Obama for raising taxes and they are by no means compelled to do so since wages are paid from gross income and not from net taxable income. The number of jobs “created” depends entirely on demand for the product or service the business provides and nothing else. The austerity the Republicans are pushing would of course cut demand for products and services that’s why the Republicans don’t want any stimulus money spent as it would have a positive effect.

Since a higher tax rate has no effect on business except to encourage re-investment and therefore growth which will ultimately add jobs, that is if the small business isn’t crushed by some big box store or driven under by imports dumped into the US market at below the cost of production. If either of these things happen the top marginal tax rate is irrelevant since no profit results in no taxes. This is why Republicans love to replace income taxes with user fees, flat taxes and sales taxes that still must be paid by small business regardless of the lack of profit.

The Republicans talk about jobs as if they didn’t preside over eight years of zero net jobs created despite adding a million new Federal employees. Republicans tell you that you can buy stuff cheaper at the super big box store even though each new store eliminates 200 local jobs and small businesses with the rest reduced to starvation wages.

The Republicans talk about jobs even though the eight million jobs they lost in the last two years alone that will never come back under their policies, policies that they campaign on continuing as if we will magically get a different result this time.

Tuesday, September 7, 2010

The Mojo is all back in the sixties or the thirties

The Anglo-Irish bank was likely to be bailed out by the Irish government but that is now in doubt with the cost of Credit Default Swaps on Irish bonds having gone through the roof. This will make it extremely difficult if not impossible for Ireland to finance new debt or to recycle their old debt. This is the inevitable result of following the kind of austerity program conservatives are trying to force through in the US. Austerity kills the economy and debt can’t be repaid, the panic spreads until fascism takes over. Ireland and Greece aren’t the real targets here but just a breach in the wall.

Back in the US, stocks were down sharply today and weighing heavily were Bank of America, Citigroup and JPMorgan Chase who all lost around 2.25%. Credit card company American Express slid more than 4%. The official reason for the decline was the rumor that the European banks are in worse shape than the official report prepared by the European Central Bank but more likely it’s because the UK has signaled it will join in on a EU proposal to more heavily regulate and tax the big banks.

This would include the foreign operations of the big Wall Street banks and it probably isn’t that they’re concerned about the modest taxes being proposed but the increased transparency that would result that worries the banking insiders. You see the roaches don’t like it when you turn the light on and some might not avoid being crushed before they get back under the ice box.

Somebody else at the light switch is Securities and Exchange Commission Chairman Mary Schapiro, she stated in speech before Economic Club of New York that the SEC is taking a hard look at Wall Street practice of “quote stuffing”. This is where some stock traders place an average of 90 buy or sell orders for every trade completed.

These quotes are often cancelled within a fraction of a second and are used to manipulate the market creating the illusion of a price move that doesn‘t exist. The unwary trader can find that he has just bought a stock that is moving the opposite direction from what his own computer said it was. This came to light during the investigation of the flash crash in early May but supposedly this wasn’t the cause of those instantaneous through the floor price drops, no official reason has yet been given.

The SEC is also going to look into Dark Pools where huge volumes of stock change hands without going through the official exchanges but are reported as anonymous over the counter trades. This business used to be known as the “upstairs trade”, this term was historically used in the saloon business, (did you ever wonder why Miss Kitty had all those girls working at the Long Branch?). In the old days reputable exchanges didn’t allow this kind of activity but it’s now becoming common with many large banks as well as the exchanges running their own operations. It conceals who is selling what and for how much. That whole Libertarian, let the markets decide everything dogma falls apart quickly when it comes to the real world of separating the suckers from their money.

President “they talk about me like a dog“ Obama has announced he wants to save the US economy by spending 50 billion on infrastructure upgrades. He sounds as silly as Mike Myers when the newly thawed out Dr Evil wanting “one million dollars” to not destroy the world. The Republicans and Clinton neglected two trillion dollars in infrastructure maintenance over the last thirty years, people have already forgotten that a interstate bridge in a major city collapsed. Two trillion doesn’t include increasing capacity to handle the 50 million new Americans since 1980. It also doesn’t provide anything to build a 21st century infrastructure like China is doing, or do anything about energy production or a new manufacturing base to fix the trade deficit.

Not only has Obama been channeling sixties rock icons but he’s using 1960s numbers. Hey, Doctor Evil, tell Congress we need FIVE TRILLION DOLLARS, you’d be just as likely to get it (the party of No is still running things) but at least it would get it across to the American voter just how “freak’n” messed up the Republicans have made this country. Obama needs to go back in time and get his Mojo back or at least start channeling one of the Roosevelts instead of Jimi Hendrix.

This just in: Obama has just said there will be no compromise to extend the Bush tax cuts. These will expire after ten years because they were passed under reconciliation between the House and Senate requiring only 50 votes plus the VP. The Democrats could pass a massive economic program in September this way but they don’t have their Mojo either, instead they continue to hope their bad poll numbers continue to be slightly better than the Republicans.