Friday, April 5, 2013

But you can't swim across the ocean

The survey of employers done by the Bureau of Labor Statistics estimates that 88,000 private sector  jobs were added in March. Other than 12,000 Postal workers let go, no government job cuts showed up in the report. This is bad news, the economy took a serious hit without the sequester having any measurable effect so far. The only bright spot is that the January and February numbers were revised upward by 29,000 and 32,000 respectively to 148,000 and 268,000. Some blame the end of the 2% FICA tax holiday, but retail sales are actually up, even as 24,000 retail jobs were cut.

The corporate media claims to have White House sources telling them that Obama will propose cuts to Social Security and Medicare in his budget when it goes to Congress. On Medicare the 'cuts' involve making wealthy recipients pay higher premiums. Hmmm, how is that a cut? It's not really, but  it sure makes a good headline. For Social Security it appears that he will suggest reforms to the CPI used to determine benefits, which is something that actually needs to be done. If Obama goes with the 'chained CPI' that was proposed earlier, that would be bad.

Likely what is really going on here is that Obama is baiting the Republicans yet again. They constantly scream for cuts, but the bulk of Republican office holders (except for the crazy tea baggers) wouldn't do it in a million years. If Republicans refuse, this opens them up for being primaried by the tea baggers. Democrats can run against the cuts and remind older voters where these programs came from to begin with.

News from 'The Currency War' (tm), that's trademark rightwing blowhards who are sure the USD is near collapse. The Bank of Japan has reversed a decades old policy and is going to start printing Yen in a big way with the intention of doubling their money supply. They're going to buy up available bonds in the same way that the Federal Reserve has been doing with the USD denominated Treasury and mortgage bonds. The official reason is to move interest rates lower and hit a target goal of 2% inflation, just as the Fed is doing. The business page speculation is that they're just trying to devalue the Yen to compete the Germany's exports priced in the weak Euro.

The reality is that there is already an awful lot of Yen in circulation, but speculators still keep buying into Yen priced investments and getting a pretty good return. This does make the Yen overvalued, it is bad for exports and their economy is slowing. Basically the BOJ is trying to control the situation for the same reason the Fed is trying to do it here. What we really have is a problem of cash hoarding because of low or even non-existent taxes on the rich worldwide. If nothing is done to interrupt this kind of cycle you will eventually tip over into a deflationary spiral that's impossible to stop, just like the early 30s in the US.  Printing even more cash forces these people to actually do something with their money or watch inflation make it disappear. In theory this can work, but it's not a fool proof plan, nor does it fix the problem of all the rich people with hot money.

The European Central Bank is still obsessing with austerity as the cure for everything as if they were the proverbial lemmings heading for the cliff, even as more and more people are screaming 'stop'! The problem in Europe is that while they have a single currency they don't all share in the pain. In the US, Congress makes huge transfer payments to the Southern states that if left to their own resources would make the current situation in Greece look like paradise. Europe has to either start behaving like they have a Federal government, or end the Euro. They don't seem willing to do either, just as they aren't willing to admit austerity was a disaster.

Remember how you used to hear constantly from the right how the US was becoming Greece and that California was proof of that? Now that the Republican Party has been eliminated from state government the Democrats are running a budget surplus, funny how that works. California can even start building projects and do all the things that have been blocked by 40 years of Republican obstruction. It could become an example for the rest of the US economy. That is if we can do something about our own 'austerity lemmings'. and twitter @BruceEnberg