Saturday, September 24, 2011

Strange happenings in FLA

Typically straw polls don't mean anything but the one in Florida today is interesting as they only allow votes from party activists. Candidates must court votes and can't just bus people in who want a free lunch. Surprisingly they completely rejected Perry and gave even less love to Romney. Mitt has demonstrated in Iowa, where the small population also requires campaigning to be up close and personal, that he is an idiot. The kind of idiot that thinks he's the smart guy in the room and constantly tries to prove it by speaking off the cuff.

Apparently Perry's performance in the Florida debate has sunk his ship as he had campaigned hard for the straw poll. My guess is that Perry doesn't do that well in small groups either.

Herman Cain won convincingly, probably because unlike the other candidates he has some real business experience, and can speak intelligently up to a point. However, like most businessmen he has no idea how an economy works, or anything about public policy. His "solutions" for the country are as far right and stupid as Bachman's, but he doesn't come across as insane (if you don't look too close).

These results should be cause for a party at the White House tonight, or at least a cold beer.

Friday, September 23, 2011

Not part of their Constituency

The index that tracks stocks worldwide has crossed the line into official Bear Market territory yesterday having lost more than 20% since the peak in May. This represents an evaporation of 10 trillion dollars in equity value. The US markets managed to close in black today, but that was only today, overall the losses have been massive, losing 6% just this week.

Stock indexes were invented to serve as a gauge of economic activity since the value of the companies’ stock was assumed to reflect how well things are going, and the stocks in an index are selected on that basis. It doesn’t really work that way anymore as stock trades are not transparent, what with Dark Markets where 60% of all trading happens in secret, high-speed trading that makes money by driving prices up and down and hedge funds who try to drive stocks in a certain direction by any means. But, the markets are still important in that they have captured so much middle class wealth. The decline of stock value, while not reflecting corporate health (they’re rolling in money), does matter as so much of people’s wealth is going up in smoke.

Commodities were way down across the board with gold losing 6% just today, silver lost 18%. This was the worst drop for silver since the bubble burst after the run up in the early 80s.

The G-20 Finance Ministers are warning that time is running out to fix the Euro zone crisis as the collapse of the second largest currency in the world will surely cause another recession, but they are really understating the problem.

The head of the IMF is warning that the US and Europe’s fixation on austerity is dooming the world economy. Normally the IMF prescribes austerity for all ills, but we know that when they do that it’s really about opening the door for corporations to loot and pillage. Apparently they’ve decided they can’t steal the entire planet all at once.

Speaker Boner managed to pass a Continuing Budget Resolution to keep the country running past Tuesday when some agencies begin to run out of money. The bill even included 3.6 billion for disaster relief, but the problem is that the tea baggers insisted on loading it up with offsetting budget cuts unacceptable to the Senate where Democrats are determined to not give into the hostage takers. The vote was 59 to 36 with even a few Senate Republicans siding with Democrats to reject the cuts. A government shut down is the last thing the economy needs at this point.
We can assume Republicans will not pass Obama’s jobs bill, and even if they did, it’s a fraction of what is needed to jump start the economy. The longer that action is delayed the worse the problem gets. Republicans have no problem with that, the people that suffer aren’t part of their constituency.

Thursday, September 22, 2011

Rule 48 is in effect. This is not a DRILL!

The Dow fell 400 points today even after New York Stock Exchange executed a rule designed to keep down the panic. The exchange invoked Rule 48, which limits how much information is released about stock trades by the designated “market makers“. In other words the big guys will trade behind closed doors, and you can just guess what‘s really happening. How this is supposed to calm the markets I‘m not sure, maybe what the suckers don‘t know won‘t hurt them?

The US did do better than the 5% or more drop on the European markets, Asia wasn’t as bad Thursday but they are a day ahead, we’ll see how that’s going in late evening here as the sun rises in Japan. China says things are weak in manufacturing, and China had been the one ray of hope the rest of new “flat earth” was clinging to. Fedex has drastically cut its earnings forecast as people aren’t buying electronics and toys from China. The VIX or Volatility Investor Index, also known as the FEAR index which measures the average investor’s feelings of panic, rose 17 percent to 43.7, well above the normal.

The market falling was metaphor for the subject of  President‘s speech today or maybe the other way around. The president stood in front of an aging bridge that connects Ohio and Kentucky as he put it to Republicans: "Help us put this country back to work. Pass this jobs bill right away." Republicans called his appearance in front of the crumbling, overcrowded, obsolete but vital highway link, a stunt.

Speaker Boner was unable to pass a continuing budget resolution as the tea baggers rejected it supposedly because of a billion dollar amendment that Eric Cantor (normally their favorite) had slipped in the budget to pay for earthquake damage in his district. If Congress can’t pass a bill before they leave on Yom Kippur break, then the Federal Government will grind to a halt on October 1. Speaker Boner is threatening to make the normally three day a week Republicans stay through the weekend.

All commodities including gold were down sharply today. The only things selling well were the USD and US Treasury Notes. As their price goes up of course interest yield on bonds goes down, the 3 month T-Bill is yielding 0.0102% and the 10 Yr Note is at 1.71% in trading today. If you bought them back in January and sold them today you made a tidy profit.

The Dow will need to drop another 485 points to qualify as a new Bear Market, that would be a 20% drop since the last high. Friday has started by now in Asia, we’ll see how it goes.

Wednesday, September 21, 2011

Welcome to the Worker's Paradise of Walmart, I am Comrade Greeter

Having committed treason, Ben Bernanke and the Federal Reserve Board do not dare cross into the Republic of Texas where they can expect to be “treated ugly” by the six gun a-tote’n, blue jean crotch adjustin’ Governor Perry. Congressional Republicans issued a letter to Chairman Bernanke expressing their displeasure as well, but withheld the dime novel cowboy threats.

Republicans are desperate to keep anything from being done to benefit the economy as their only hope for the election is to make things as bad as possible, and even if they begin to question this strategy, their billionaire overlords will not tolerate deviation from their plan. The Fed action is not going to have a huge effect, but will drive consumer interest rates lower making more people eligible for home loans and such. The current scheme involves selling 400 billion in short term debt that the Fed holds, and in turn buy that much in long term debt such as the ten year Treasury notes that is the basis for home mortgage rates. Home loans are already going for less than 4%.

The Treasury has been selling new short term debt at auction that is paying little more than zero interest, and ten year notes are paying slightly more than 2%. The S&P 500 fell 3% and this was blamed on the Fed action and their gloomy economic forecast.  The real reason the market fell might have something to do with the downgrading of major zombie banks BoA, Citi and Wells Fargo by Moody’s Ratings.

This Fed switch up of Treasury bonds is referred to as Operation Twist. This because the last time it was tried was in the early 60s when Chubby Checker’s iconic song The Twist was the new dance hit. Too bad that Rock and Roll didn’t last, (Buddy Holly would have been 75 on Sept 7).

The Twist should in fact push stocks higher as the goal is to increase inflation or more accurately keep deflation at bay. Conservatives are screaming “inflation, inflation, a wheel barrow of cash for a loaf of bread. buy gold, buy gold!!!”. By the way, conservatives have gold they will sell you, and gold was down today as were commodities across the board. The USD continues to strengthen which is not a good thing for exports, but we don’t make anything, so it doesn‘t matter that much.

Actual inflation requires wages and prices to be driven up by excess cash in the system. In fact there are trillions of cash in corporate coffers and in the hands of the super rich who are hoarding it in the anticipation of the kind of runaway deflation you get in a major Depression. If you can buy for 10 cents on the dollar you can too become a billionaire robber baron like Fred Koch did. Fred came back from setting up Joe Stalin in the oil business in early 30s with millions in cash from the grateful tyrant, and he turned that into hundreds of millions thanks to deflation. After a later falling out with Joe, Fred started the John Birch society to rid the US of communists and anybody else he didn‘t like.

The current generation of traitors, the Koch brothers who fund the tea baggers and a whole host of similar operations to undermine democracy, would like to turn their billions into trillions and get rid of us socialists once on for all. A socialist to them is anybody who isn’t a billionaire.

Having the entire country owned by giant corporations and controlled by the managerial class is basically how Joe Stalin ran things, he didn’t much care for socialists either, despite the propaganda. Do you see the similarity between “comrade worker” and “Walmart associate”? Both convey similar ideals of fraternity, and have the same reality of slavery.

Tuesday, September 20, 2011

Next Stop, Menlo Park circa 1879

Beijing’s bold move toward world domination of high tech manufacturing is into its third month. With 95% of the entire planet’s rare earth metals held within its borders it has cut off supplies completely. Almost everything we think of as a 21st century necessity requires one or more of these elements. The excuse is that China wants to get a handle on the extremely toxic pollutants that the processing of these metals produces. This might be believable hadn’t shut down 100% of operations, while production is slated to resume in October, there is no guarantee that will happen, or if there will then be an adequate supply to provide for any exports.

This move has driven up prices for some metals by 1200%, and an eleven watt fluorescent bulb you could buy for a couple of bucks is now bringing $16 at the big box store. This is not the first effort on the part of China to do this, they been imposing tariffs and quotas on its rare earth exports for the last several years, curtailing global supplies and forcing prices to rise from eight to  forty times for the various 17 rare earth elements it controls.

China recognized its potential to control the rare earth metals nearly 30 years ago, and has spent liberally to acquire and close competitors worldwide. The US used to be the major producer until George Bush approved the sale of the last of the US facilities.  It takes ten to fifteen years to develop a supply chain for this sort of metal production. One concern is that the metals are always found in ore containing radioactive thorium and require careful handling and processing to avoid contaminating the environment.

The timing of the latest price increase is playing into the hands of Michelle Bachman who is making much of the “liberal” green agenda, even though the mandate for more efficient light bulbs was passed by Republicans and signed by Bush. This was another one of those laws written word for word by lobbyists on behalf of industry, the sort of “deregulation” Republicans love.

China did promise when joining the W.T.O. in 2001 that it would not restrict exports except for a handful of obscure materials. Rare earths were not among the exceptions. China is consolidating metal production into four state run companies in the name of pollution control so even if the US and the EU are successful in bringing a case with the WTO this winter, China will probably not be forced to comply in any meaningful way.

Companies have already been relocating to China from the US and Europe for the past decade in order to secure their supply and this will put even more pressure on the holdouts or they will be forced out of the business. Hedge funds and speculators made a lot of money over the summer hoarding neodymium and europium in Shanghai warehouses and are currently the only supply available.

So any talk of bringing the jobs back from China has to be tempered with the realization that thanks to the Republicans and corporate Democrats this is nearly impossible. If China were to resist at all, and they would have every reason to, we would effectively be in the position of needing to start the industrial age over again from scratch.

Any smart talk from right wingers about China being afraid of our military needs to be considered in the light that our high tech killing toys are all dependent on Chinese parts. Similarly the idea that they need our money has to be balanced against the fact that they are creating almost all of the new wealth, and the USD is only worth something because China still accepts it. At some point that will stop.

The unrest that Mayor Bloomberg is worried about would happen very suddenly in the this event. At the peak of the last Depression FDR reassured the nation by saying, “All we have to fear is fear itself”. America is in so much worse shape now than it was then that that phrase is inadequate. Bachman wants to bring back the Edison light bulb, she might get her wish. We’ll be lucky if that’s all the further back in history we go.

Monday, September 19, 2011

Give'm Hell Barry

The “angry black man” is back and he brings class warfare, lock the gates of the plantation house. This is the not so subtle undertone coming from Republicans who want white people to see Obama’s modest tax increases as “wealth redistribution to the undeserving brown people”. This message is not selling so well this time with even 57% of Republicans supporting the Buffett Rule requiring people making over a million dollars to pay as much tax as their secretaries do. Of course Obama’s proposal wouldn’t really do that, but we’ll come back to that later.

Obama made a smart move in restricting the increase to people making over “one million dollars” (this could be called the Dr. Evil tax). Rolling back the Bush Tax cuts for the rich didn’t really sell because a too high percentage of Americans erroneously thought that it would apply to them. One advantage of the lingering economic malaise is that a lower percentage, now only 20% of Americans believe they might become millionaires themselves one day.

The percentage of Republicans that believe they could be millionaires is much higher with about half believing they too could be rich, this is even high among those who depend on Social Security to pay the bills. In fact their chances of moving to the millionaire class is about 0.9%, and their odds of success aren’t really that good as almost all millionaires in this statistic are born that way. Your chances of becoming a billionaire are considerably less than getting hit by lighting. (1 in 6250 chance of a lightning strike in your lifetime)  Your chances of winning the lottery are about one in 275,000,000 which makes your chances of being born a millionaire much higher.

Obama’s proposal would raise taxes dramatically for the super rich who have been paying only 15% maximum on Capital Gains, Dividends and Interest Income with no Fica taxes. Though their first million would remain at only 15% with $894,000 of that exempt from Fica, and everything over a million exempt from Fica as well . Almost half of Americans earn too little to pay any income tax, something many Republican candidates have pledged to change. They would do this by raising their taxes, not their income as they also pledge to cut the minimum wage to be competitive with China . They don’t mention that Fica brings in almost as much money to the government as the income tax does and the rich don’t pay any of that to speak of.

The rich of course pay a very small portion of their income for Sales tax, property tax, gas taxes, fees for government services and the like. All of these regressive taxes (those are the ones aimed at the poor and middle class) have doubled, tripled or quadrupled over the past 30 years, and incredibly are always blamed on Democrats even as the rich Republicans see all the benefit.

But they are the “job creators”! You may have noticed that after thirty years of these policies that there are no jobs being created. Instead they’ve been crating up factories and selling them to China, since the Capital Gains tax is only 15%, this practice has been very profitable for “businessmen” like Mitt Romney. In just the past ten years this has been the fate of 55,000 American factories.

The hard cold truth is that Obama’s plan does nothing to fix any of these “class warfare” problems. The rich will continue to get richer by stealing the wealth of those in the bottom 99%. The rich will continue to concentrate more power with the ultimate goal of a feudal system where only the few at the top own anything or control their own lives. The Obama plan simply halts the current crisis, which is in itself a good thing. The long term is up to the rest of us.

Sunday, September 18, 2011