Wednesday, February 20, 2013

There goes one! STOMP STOMP SQUISH

The stock markets were down sharply today on the release of the last Federal Reserve Board minutes that suggest they are are losing their consensus on the continued printing of more money to plump up the bond markets. The Fed has been pumping out $85 billion a month in the effort to hold deflation at bay. The math on what they're been doing is that this is roughly equal to a quarter of the Federal government's budget. Not that the taxpayer is funding this, the Fed just prints it, or rather they move electrons around in some computers to buy bonds from rich people and institutions so that they can show a profit and reinvest.

The worry isn't over the fact that the Federal Reserve is doing this, the panic is over the idea is they might stop. You can't let go of the tiger's tail until he's really, really tired. A lot of people on the right think we're just annoying the tiger, if we would only let go he'll be a good kitty and lick our hand. Does kitty want sauce with his finger snacks?   

Senator Elizabeth Warren has just started holding her first hearings into the ongoing criminal conspiracy know as Wall Street banking. Needless to say she's not happy with the Obama Administration's lack of prosecutions, although she does acknowledge the lack of resources thanks to the Republicans, feet are being held to the fire just the same.

With the Dow close to 14,000 the average company is valued at more than double its book value, that is what it's assets are really worth if they were sold off. Not so with Wall Street banks, their stock value is far below book value despite their tendency to make huge profits. That is except for the occasional crash of course, but even then they didn't stop making money, at least on paper. That's the rub, it's just paper. A recent analyses of Wells Fargo Bank showed that the vast majority of the assets on their books are securities like derivatives and mortgage-backed securities which aren't really traded on any sort of competitive market. This means the bank is 'forced to estimate' the value of these 'assets'.  If you take the worse case scenario (or what some of us call 'reality'), the big Wall Street banks put the 'bank' in bankrupt.

I haven't heard from the gold bugs lately, they were so dismissive of my suggestion that buying gold was like chasing the end of the rainbow, as in, "don't expect any return on your money". The gold bugs seem to be skittering for the refrigerator now that the lights have come on. George Soros got rid of much of his gold investment in 2011 and is now dumping the remaining instruments like so much ballast from a sinking hot air balloon. The gold market has dropped another $90/ounce in the past week and maybe headed for the cliff.

The USD is suddenly en vogue again as investors must cover margin calls. This is driving down most commodities besides gold. Oil has dropped sharply, but don't expect gasoline to come down until Wall Street has sold a sizable number of derivatives to the actual users of petroleum products. Remember what I said earlier about the Wall Street banks 'assets' being heavily made up of derivatives. Wild price swings is how they get main street to buy them in order to 'buy protection' from bankruptcy, (aye, nice store windows yous got there mister). And speculators also use them to gamble on those same price swings, like any casino, lots of little guys lose big.

According to the right this is like a crazy out of control 'natural phenomena', like another super storm that the right has 'no responsibility' for. Senator Elizabeth Warren knows better, roughly a hundred members of the Progressive Caucus in the Congress know better. Roll back Reaganomics, roll back everything the Republicans have done since 1947. All we need to do is actually make things work for America instead the trans-national billionaires.

Tuesday, February 19, 2013

Do we learn? No, we do the opposite

The big headline on the corporate news this morning was that gasoline is near an all time record high. It is in fact still well short of the price peak from before the Bush crash. They run through a list of possible causes like the rising price of crude oil, but oops, oil isn't anywhere near it's high and is going down. Refinery shutdowns is another, never mind that we export 30% of refinery capacity. China is using more oil, we'll come back to that. And oh yeah, speculators... Do we need to go through that one again?

Wall Street makes a ton of money driving up the price of gasoline, they make money when it goes down too. Wild price swings allow the Wall Street banks to sell derivatives contracts based on the 'futures' price to the tune of hundreds of trillions in order to shave hundreds of billions from the economy without doing anything, or even putting up much money themselves. Did I mention that the Dodd-Frank Act made this illegal? There's been a small problem with enforcement of the Act with Republicans blocking the 'rules' it would take to actually enforce the Act. It's the sort of 'decriminalization' that has been en-vogue ever since Reagan began dismantling the New Deal.

Let's go back to China, the People's Republic now owns outright enough oil production outside its borders to rival the United Arab Emirates and match that of Kuwait. They don't really loan money to the US to fiance the debt like conservatives constantly chant, they spend their USDs buying up real wealth everywhere and anywhere that they can. Not that they're really driving up the price of gas, crude oil is in fact going down. China actually sells most of its foreign oil rather than shipping it back to China, it's just flexing muscle in the markets.

China continues to enjoy a rate of growth year in and year out that the US hasn't seen since the New Deal was fully in effect, China does this pretty much by following FDR's policies. The US instead continues to favor Reaganomics while we decline into third world status. We give a huge slice off the top of our economy to the extremely wealthy in return for them selling our wealth creating capacity to China. Anybody in China that gets caught engaging in the sort of traitorous behavior that is routine business here can expect to be shot and his organs sold. But hey, they're communists, and are kicking our ass at capitalism. We're 'capitalists' that believe in Reaganomics also known as the cult of economic royalty. And we also believe in the creation of poor people, the one thing we're good at.

There are 400 million middle class people in China, more people than we have population. There are more English speakers in China than in the US. They graduate twice as many engineers every year, as the US does. They have thousands of miles of 250 mph high speed rail, and we have... well none. They launch astronauts into space, and we don't. Their economy is about to become the biggest in the world while ours barely holds its own. I get email from conservatives pointing that they steal our technology, they sure do, but mostly they just buy it cheap from US companies. We could learn from China, except they are copying us. We just don't learn from our own experience, we believe the right-wing talking points instead.