Friday, April 15, 2011

Republicans to the rescue, emergency legislation introduced

Initial unemployment claims jumped up 26,000 for last week to back up well over 400,000 indicating either job losses or the continued churning of the workforce in favor lower paid workers. Only 45% of adult Americans have
jobs which is the lowest its been since Reagan began his war on the middle class.

The average of 1.1 wage earners in a family in those days of olde when mothers stayed home with the baby had gradually climbed to 1.8 people in a family working. Now it’s often Dad who doesn’t have a job as 58,000 factories disappeared just during the Bush Administration. They only count factories with more than 25 employees, small businesses disappearing aren’t counted or the number would be really scary.

The Consumer Price Index is up sharply while core inflation continues to be weak. Translation: gas and food are shooting up toward record levels while the things we can’t afford anymore are not increasing fast enough to indicate any economic recovery. This includes wages that are officially flat but are probably going down if you don’t count the managerial class.

A bit of historical fact (right wingers cover your ears): The Soviet Union was called “socialist” but everything was organized into giant monopolistic corporations controlled by the managerial class who lived in luxury just like American corporate executives. The had a democracy but elections were a joke with the winners picked by the managerial class ( “it doesn’t matter who votes but who counts the votes” - That was either Stalin or Diebold, I can’t keep them straight)

The Obama Administration in persons of the FDIC, the Futures Commodity Trading Commission,  the Federal Reserve and the SEC have begun issuing rules that when implemented in a few months could for practical purposes halt most of the speculation in derivatives. These rules would require substantial collateral be posted in order buy and sell derivatives that are now often sold with little or nothing backing them. Derivatives are like commodity futures contracts but involve no actual commodities. Oil companies, airlines and farmers would be exempted to some degree if they own or buy actual commodities.

Banks, hedge funds and other parasites would need to put up cash or suitable collateral to guarantee losses. In theory this should knock 20 to 40% off the price of gas for example. The devil is in the details of course but they must be doing something right because the Republicans in the House have introduced emergency legislation to force a halt to all regulation until the end of 2012.

Goldman Sachs has been advising clients to sell their futures contracts and this was driving down oil for a few days but the trend has started going up again. This reversal was based on the reports that the Saudis who had promised to pump more oil to replace absent Libyan crude were lying and production hasn’t increased.

Not that they really needed to pump more oil as there are record supplies on hand already. There are also record amounts invested in the derivatives market estimated to exceed 600 trillion USD at any given time. The total economic activity of the entire planet is no more than 60 trillion USD per year. That’s everything sold, every wage paid, all economic activity everywhere from Wall Street to the darkest slum in India.

Of course nobody knows for sure how many derivatives there are since this activity is all done on dark markets, like heron trafficking only more deadly. You only get some idea what’s going on by the amount of money moving around or when it crashes the world economy like it did in 2008. (it wasn’t really poor people not paying their mortgages)


David D said...

You're right about Reagan's policies being the forefather of the grand plan to dismantle the middle class.

The Republicans have it right; to kill the middle class in this country you must first strangle the economy by draining it of all the good paying jobs and wrapping it in a financial straight jacket.

What is important to recall is that part of the this plan included the bankrupting of the U.S. Government, by creating runaway deficits, accelerating the death spiral of the American Middle Class.

By all accounts, the so-called financial reform bill that was passed by Congress was nothing more than political "window dressing" that served notice that it was still business as usual for the Wall Street thugs, their real constituents.

So news that the derivatives market is swimming in a flotsam of toxic, "monopoly" paper comes as no surprise.

We have another impending financial cataclysm looming. Things are indeed going according to plan.