Friday, May 17, 2013

Turning that smile upside down

The latest economic outlook survey shows a dramatic increase in consumer confidence in the area of durable goods purchases. The number hasn't been this high since before the Bush Crash, and it parallels increased housing starts. What we're seeing is the belief among workers that they'll have a steady income long enough to pay for the new refrigerator that they've been putting off for years.

This doesn't mean that we don't have an ever increasing number of working poor who probably won't be buying anything new. This trend is starting to affect the bottom line of the country's largest private employer. That ubiquitous smiley face at Walmart has been flipped over at corporate headquarters and being used for a dart board. Sales are worse than flat for a company that has existed for growth the same way a cancer cell views its host, and as it turns out with similar results.  

It appears that the practice of Walmart laying waste to the economy of the surrounding communities may have not been a good business model after all. Not only do they pay below subsistence wages, but they relentlessly shut down all their small business competitors, and professionals that served them. Of course they've also been forcing out all the factories that used to make the stuff Walmart imports from China.

Throw in the austerity that Republicans backed by Walmart are imposing on local government and an ever larger slice of their market is simply disappearing. The Dollar stores are doing pretty well, so is the food pantry and the thrift store. The prison is doing pretty good, but it's been privatized and doesn't pay much better than Walmart anymore. Further depressing consumption is the declining birthrate and it would go to zero without the Earned Income Tax Credits that Republicans would love to end.

We need to keep in mind that this wasn't a blunder on their part, for the billionaires it isn't about making money. It's about capturing all of the real wealth, the Walton family alone has more wealth than the bottom 40% of Americans. This isn't anything new, this country was founded on need to get rid of British East India Company, which was truly the Walmart of its day. Until Americans become acquainted with history again there won't be any change. More accurately things will only continue to get worse despite any business cycle upturns like the one we've been seeing. The up's will be smaller, and the downs deeper until there simply is no middle class left.      Twitter @BruceEnberg  Sending me carrier pigeons is okay, but my cat eats the slow ones.

Thursday, May 16, 2013

A new Strain of Rot

New unemployment claims increased sharply last week reversing a multi-week downward trend, but it's still not so high as to cause any real concern, yet. Other economic indicators support the notion that we're not actually losing jobs.

Have you noticed that most Republicans aren't talking about the deficit that much anymore? That's because it's disappearing out from under them like Arctic ice under a Polar bear, and they are forced to cling to any ginned up scandal or half-baked conspiracy theory that comes floating by.

The original Simpson-Bowles plan called for a Federal budget deficit equal to 2.3% of GDP in 2015, largely by starving grandma and achieving magical economic growth rates by cutting taxes on the 'job creators'. Instead Obama chose to keep feeding the 47%, raise taxes on the 'job creators' and maintain most spending as it is. The result of this 'socialist Kenyan' plan is that the deficit is now half of what it was when he took office and is on track to hit 2.1% of GDP by 2015 or two tenths lower than Simpson-Bowles demanded.

Let's not start popping the champagne corks though. We've held the austerians at bay, but the underlying rot is still doing its work on the economy. A new twist on the old Con revolves around the housing market. It's been noticed for several years since the Bush Crash that about 25% of home sales have been for 'cash' meaning investors, and not home owners have been buying them. It turns out that it wasn't small local investors or house flippers buying bargains, but large scale private equity firms that have been squeezing out the little guys. They've buying as many as 40% of houses being sold in some markets.

Remember when Mitt Romney said Obama shouldn't be getting in the way of foreclosures? Let people with money buy up these houses and put them out for rent. Yeah here we come.... Sounds like the evil banker from 'It's A Wonderful Life', doesn't it? Only he was an amateur. What these pirate equity companies are really about is they are bundling these properties together and creating IPOs to sell to investors. Some fund managers that have been approached with these offers are saying that they are making some sketchy claims about the returns on investment.

Sounds exactly like the sort of Ponzi scheme they were running on securitized mortgages that were issued on these same houses before the last crash. And they're pushing hard to move it all before anybody catches on to how bad these investments really are.

Is this enough to collapse the economy again? No, probably not. The problem is this is just one of many crooked schemes Wall Street is running. The Commodity Futures Trading Commission has just backed off from a relatively strict rule on Derivatives that would have required five banks to compete on any derivative being marketed or it couldn't be sold. None of these things should be sold, they used to be illegal for good reason. So we still have 600 trillion dollars (ten times world GDP) of these things in circulation just waiting for the next big screw up to create another banking collapse. And those 'too big to fail' banks from the last crash? They're much bigger and are steadily gobbling up the small banks every day.

Something will trigger a complete collapse in the next couple of years unless something is done. Republicans are successfully blocking the implementation of the modest reforms of Dodd-Frank so we are really worse off than we were before. It all hinges on next year's election, the only good news is the Republicans are being seen as less competent by the voters, the bad news is they still have all the money in world to simply buy elections.  Twitter @BruceEnberg  Facebook Prairie2 News   'Dead Drop' under the third bench in the park.

sun spots

Monday, May 13, 2013

A Final Number, and a non-starter

One thousand, one hundred, twenty seven people is the final toll in Bangladesh making this the sixth worst such 'accident' since the dawn of the industrial age. Of course it wasn't really an accident, it was industrial scale murder, and it's not going to be the last. It was not so much the fault of the local 'owners' that are in police custody, but fault of the people who remain faceless behind corporations that make it clear that this is the way things will be done.

Those faceless people aren't in prison, they won't miss a single seven course meal served on the finest china, and they will sleep comfortably in palaces that princes of old could not dream of. And 1127 is just the 'official' number, we'll never know the real number, perhaps as many as 400 people are still missing, still faceless, and will remain unknown to all but those they left behind. When multi-ton slabs of concrete pancake together... you see the counting isn't precise, although authorities have promised DNA testing, the time available to take samples is limited by the intense heat and limited money. You can only ask so much of the people on the ground who must do the actual work.

The sheer size of this particular tragedy has spurred possible labor reform in Bangladesh. Only 30% of the worker's signatures are required to unionize a factory in Bangladesh, but the roll has always been made available to employers. You can guess what they do with that list. Supposedly the government will no longer make those names public.

Additionally, some higher end retailers and major European companies have signed union agreements backing safety reforms. Big Box US companies have not, and don't hold your breath for that to happen. The truth is that no union can stand against unregulated corporate America. If Bangladesh reforms their textile industry, look for the Big Box companies to simply move to some other god forsaken place that they can exploit.

The $5b it would take to reform the safety practices in Bangladesh would cost ten cents per garment spread over just five years. Paying the workers a living wage would be still more billions. The thing is, spending of this nature isn't money that disappears, your spending is my wages, and back again. It would be good for the economy, but that's not what the billionaires want. They want it all, and a good economy makes it impossible for them to achieve that goal. They would have to share, and that's a non-starter.   Twitter @BruceEnberg   Facebook Prairie2 News

Not getting enough P2?

I haven't been writing as many blogs lately as I've been obsessing over my twitter feed. If you want to follow the collapse of civilization in real time, pick up my feed. I follow a lot of other feeds and will provide links to interesting articles as well as my own blow by blow reports. I will be writing more blogs once I get settled into the new tech. I kind of like twitter, it's like telegrams. I just need to get a paper tape strip printer and have the lines pasted onto quarter sheets of paper....

I do also try to provide Mike with material on a nightly basis, not that he's always in the mood to hear it, but you should tune in just the same. What else are you going to do, watch reality tv?  - P2  Twitter @BruceEnberg   FaceBook Prairie2 News