Friday, June 3, 2011

The sky is falling! The sky is… Oh! Look a June bug!

The corporate media tore itself away from its fascination with Sarah Palin’s bus and Anthony’s wiener long enough to gleefully declare that Obama’s economic recovery has stalled because he only created 54,000 jobs last month.  First of all, that is 54,000 more jobs than Bush created in an average month. Incredibly the Republican talking point is still that Bush created 5 million jobs when the net number of jobs he created was actually zero. 

Secondly there is the 30,000 teachers that Republican governors fired last month so they could cut taxes on rich people. That would boost the jobs number to 84,000. There was also weakness in manufacturing due to shortages of vital parts from Japan. These job numbers will in fact start to increase as Japan will need to import goods to help with their rebuilding.

Retailers laid off heavily as sales slumped due to high gas prices but that is starting to ease. There also was a large amount of outsourced jobs in the paper and printing business do to Republican policies that are still in effect. 

Normally at this point in a recovery there would be a big upturn in housing starts that would create a lot of jobs this time of year but we still have that foreclosure mess left over from the Bush housing bubble and credit scandal. And of course if you want to create or expand business, credit is almost impossible to get.

Flooding on the Mississippi has slowed exports from New Orleans to less than half of normal also costing jobs. Once the rebuilding from record storm damage in the South and Midwest begins this will also be a boost to jobs as Obama’s FEMA doesn’t just funnel the money to no bid/no work crony contractors.  

Temp hiring was way down which should indicate the kind of real growth that makes for increased wages and in fact there has been a report indicating the wages could be going up. Rising wages would be a boon for the economy as it increases demand for goods and services. 

Slumping retail sales also has America’s largest retailer taking decisive action with Walmart dipping into petty cash to buy back $15 billion of its own stock to boost the price per share. You don’t have cash flow problems when you dodge Federal taxes by off shoring your supply chain and use your overwhelming economic clout to avoid local taxes. It doesn’t hurt if you can pay less for help than the cost of keeping slaves. Slaves would need healthcare and enough to eat as you need to buy new slaves if they die. Walmart gets their serfs from the local countryside for less than it costs the serfs to live and there is an unlimited supply. Oh look a cricket!   www.prairie2.com

Wednesday, June 1, 2011

Dying for Reaganomics

Police and firefighters in Alameda California stood by and watched an elderly man commit suicide in neck deep water. It took an hour. When questioned by reporters the Fire Chief responded that when on duty it would make no difference to him if it were a child in the water. They are constrained by city policy. In other words, in these times not one of them will risk his job to save a life against policy. It’s come to this, following orders is survival and the orders are getting more heartless as we sink into the depths of the fascism.

The City of Alameda has no water rescue equipment or trained personal despite being located on an island. The Coast Guard responded but could not operate their boat in such shallow water. The body was recovered by a passerby who got past the police on the beach.

On Wall Street the further decline of the economy caused the Dow to drop 280 points. It wasn’t blamed on the game of chicken the Republicans in Congress are playing with the debt limit. Senior Republicans continue to reassure their masters on lower Manhattan that they are just kidding about ending the United States by defaulting on the debt. In a bit over ninety days Republicans will be forced to accept the reality they’ve created or Grandma’s social security check will bounce.

The 14th Amendment requires the United States to make good on its debts and requires that no public official shall even suggest otherwise. But the Second on Tenth Amendments are the only ones that Republicans think were ever ratified, the rest don’t count.

As far as the debt goes the thing you must remember is that an economy is a closed system. The Government has no problem borrowing this much money because the money is out there. The rich aren’t taxed enough and they can‘t spend it all. They don’t know what to do with their money, just putting it into the markets would create massive inflation and that doesn‘t really work for them.

They do live like feudal lords and they do buy up middle class wealth but that doesn’t get rid of enough of cash, so they must buy Treasuries. Lots and lots of them. Of course this isn’t a workable system in the long term, but they have their own private beaches with their own private lifeguards behind fences and gates with private guards so what’s the problem?  www.prairie2.com

Tuesday, May 31, 2011

Hey Brother, can you spare a dime?

It’s official, this Depression is worse than the last one. Home prices are seriously sliding down again having dipped 33% since the peak of 2006 and are still falling. In the 1930s home prices only fell 31% at the worst point of that Depression. The only reason the depth of our plight isn’t more apparent is that in 1932 there was no meaningful safety net.

In 1932 the largest single cause of death for Americans was starvation in summer and freezing to death in the winter. It was mostly but not exclusively the elderly that succumbed this way. The very young died too but usually from diseases made epidemic by malnutrition.

Today one in six Americans receive food stamps and it’s one in four of children. You would be seeing people starving in the streets on an even greater scale than 1932 if not for Uncle “Sugar” as the right wingers put it. Fully half of Americans receive some sort of aid from the government if you include earned income tax credits. The right wing says this is unsustainable, we must eliminate these handouts so that people will pull themselves up by their bootstraps. No food stamps or WIC for babies, no unemployment for the lazy bums, no Medicaid for all the freeloaders (65% of nursing home care is paid by Medicaid) eliminate teachers pensions and cut government workers pay, that will fix everything they say.

The truth is (right-wingers cover your ears) the truth is that Republicans have turned government assistance programs into a corporate subsidy to guarantee a cheap supply of labor. The minimum wage is barely half what it should be to match 1938 standards, but food stamps and free medical care for kids keep people working for those wages. The low wages at the bottom also help drag down wages across the board especially when coupled with 20% unemployment which is comparable with Depression levels.

If Republicans are successful with still more cutbacks these numbers will only get worse as the large portion of the economy only exists on government aid and all of the jobs this spending creates would disappear adding to the mass of starving people.

The easy conclusion to jump to is that at some point the people will rebel against this. Certainly they will but they’ve already tried democracy, what makes you think they’ll make that “mistake” again. The reason some European countries all fell into fascism in the twenties and thirties was that the people had no collective memory of democracy and fell for the first guy who told them what they wanted to hear.

Our collective memory of democracy has been all but erased. Ronald Reagan was able to sell his appeal for the good old days on the notion that “government isn’t the solution, it’s the problem”. Democracy requires government but the Tea Baggers think “real” democracy is the “market place” or in other words they believe in the benevolent corporation. Major public building and even schools display the corporate logos of their “kind” benefactors.

Nobody questions why these corporations don’t pay any taxes but yet the little guy pays ever more taxes and receive ever less in wages from these benevolent corporate overlords. The oil industry says 40% of what you pay for gas goes to Wall Street, that’s a pretty stiff tax. That’s why they have trillions and John Boner says “we’re broke”. We’re not broke, just ignorant by design.  www.prairie2.com

Monday, May 30, 2011

Are your dancing shoes fire proof?

Americans all know that depressions start when the stock market collapses. Add that bit of popular wisdom to the long list of failures of our education system. Depressions used to be called bank panics because they are caused by banks and now days by bank like institutions. The current Depression started in 2008 and nothing has been done so far to stop it.

The ongoing policy of the Federal Reserve is to pump trillions and trillions into the system to stay ahead of the grim reaper of deflation. Lately they’ve  been trying to jump start the economy by pumping still more money into the financial system in order to actually create inflation. In an economy based entirely on monetary policy the only way to stimulate big business is to force them to think about doing something productive to make money by causing their existing money go away through inflation.

This appears to have been a dismal failure. Corporations have taken advantage of all the loose money and extremely low interest not to do anything productive, but to amass huge war chests. The two trillion in cash they have on hand (that they haven’t been spending) is really money they had borrowed from issuing corporate bonds, they aren‘t really in very good shape. The amount of money in these junk bonds continues to skyrocket as institutional investors load up on these “investments” instead of going into the stock market. Bonds seem safer than the potential of a Black Monday flash crash of the DOW.

The interest these bonds pay is incredibly low from tenths of a percent for “investment” grade bonds up to 2 or 3% for outright “junk” bonds. At some point the secondary market is going to have to deal with trillions of dollars in bonds that don’t pay enough to cover normal inflation. Institutional traders find themselves trapped, a popular phrase is “you have to keep dancing while the music keeps playing”. Fund managers need to show a competitive return and this means buying junk bonds then holding their breath while dancing and smiling for the investors.

At some point this pile of paper in the middle of the dance floor will start to smoke, there will be a rush for the door and not everybody can get out. This wouldn’t be such a big deal except for the shear size of the conflagration. It will spread to the adjoining dance halls as the losses build and the panic will spread.  Credit will freeze up, business will start cutting losses, then cutting staff, dumping inventory, prices begin to fall and it all reinforces itself spreading out of control.

Remember nothing has been done fix the fire code violations of 2008, in fact everything is worse than it was then. The too big to fail banks are even bigger and less stable. Is this an absolute prediction how things will play out? No, there other dance halls with the exits blocked just waiting to ignite first all up and down that sleazy part of town know as Wall Street.

The rumor was that Obama would do a recess appointment of Elizabeth Warren to head the new agency to crack down on the companies that own these financial fire traps. The Republican response was to keep Congress technically in session over the holiday to make sure this didn’t happen. (the Senate can’t recess for more than 3 days without permission from the House) The Republicans get a big cut off the operation of these fire traps and they aren’t the ones who will get burned.  www.prairie2.com