The Watering Hole: Thursday, February 28, 2013 The Suppression of Economic Recovery

Why is Nobel economist Paul Krugman continually ignored?

The Perils of Hoarding Cash

So, I’ve had a mild-mannered dispute with the economist Joe Stiglitz over whether individual income inequality is retarding recovery right now; let me say, however, that I think there’s a very good case that the redistribution of income away from labor to corporate profits is very likely a big factor.

Take a look at the chart on corporate profits as a share of gross domestic product. Corporations are taking a much bigger slice of total income — and are showing little inclination either to redistribute that slice back to investors or to invest it in new equipment, software, etc. Instead, they’re accumulating piles of cash.

If you put money in a bank, the bank might just accumulate excess reserves. If you buy securities from someone else, the seller might put the cash under his mattress, or put it in a bank that just adds it to its reserves, etc. The point is that buying goods and services is one thing, adding directly to aggregate demand; buying assets isn’t at all the same thing, especially when we’re at the zero lower bound.

JPMorgan Chase CEO Jamie Dimon: ‘We Actually Benefit From Downturns’

“This bank is anti-fragile, we actually benefit from downturns,” Dimon bragged to his bank’s investors at a conference on Tuesday.

And it is true! The bank definitely benefited from the last downturn. It got to buy Bear Stearns in a government-backed fire sale, getting itself a brokerage business on the cheap in exchange for shouldering only a few tiresome legal burdens. It also got billions of dollars in government handouts, from $25 billion in TARP funds to billions in savings from low-interest-rate borrowing programs to a permanent subsidy arising from the idea that the government will bail out the bank if it ever gets in trouble.

And now we’re looking at the impending sequestration which in all likelihood will further stall economic recovery.  Do politicians just not care about citizens or are they intentionally trying to keep us down?  What do they gain by keeping us afraid of impending poverty?  Just as they frightened us with the dangers of Obamacare which will actually benefit most they now say spending to stimulate the economy will destroy us with debt.  Do out of work people really believe that the national debt is more harmful to them than not having a job and losing unemployment benefits?

Why Everything Republicans Are Saying About The Sequester Is Wrong

THIS IS OUR OPEN THREAD.  SAY ANYTHING.

The Watering Hole: Wednesday, June 20, 2012: Does it really Matter?

Ok, so for the next few months, if you’re in a “swing” State, you’ll be inundated with SuperPAC commercials designed to get you to vote against your own best interests. We will also be systematically bombarded with messages from the Mainstream Media designed to influence our thinking.

IT’S ALL A SHOW. IT REALLY DOESN’T MATTER.

If the Powers That Be really want Obama out, all they have to do is raise gas prices to about $5.00/gallon. Instead, gas prices are going down, heading into the summer vacation season. That’s not to say they won’t go up between now and the election – but they are an accurate predictor of where our economy will head. So, pay attention to the pump, not the talking heads.

Ok, that’s my $0.0199 cents. And you?

OPEN THREAD
JUST REMEMBER
EVERYTHING I SAID
DOESN’T REALLY MATTER

 

The Watering Hole: Tuesday, September 20th – Outside..

.. the US there’s politics, too.

Germany: Chancellor Merkel’s coalition Government is in hot water. The junior partner FDP, a strictly neoliberal party, has received the fifth and, if you ask me, final blow at last Sunday’s elections in Berlin, when they were down to 1.8% of votes. This bodes ill for the ruling coalition.

German Chancellor Angela Merkel dislikes putting her foot down to solve government disputes. She associates that form of exercising authority with ill-tempered men who use arrogance to make up for their lack of competence. And she thinks people who keep banging their fist on the table end up getting ignored in the long run. (read more)

I beg to differ with some of the article, however. The SPD (Social Democrats) would be ill advised to enter a coalition government in times of really unpleasant decisions about the future of the Euro. They’ll tolerate a minority rule and ask for new elections, is my guess.

Italy: S&P has now downgraded Italy. Italy, is one of the more important economies in Europe, so I expect the stock markets to go down significantly again today. (Update: With markets you never kow. The indices are up right now. Markets always know best. What do I know? 🙄 )

S&P’s downgraded its unsolicited ratings on Italy to A/A-1 from A+/A-1+ and kept its outlook on negative, sending the euro more than half a cent lower against the dollar.

The agency, which put Italy on review for downgrade in May, said that the outlook for growth was worsening and there was little sign that Prime Minister Silvio Berlusconi’s fractious center-right government could respond effectively. (read more)

But Berlusconi is dealing with more pressing problems:

The conversations, wire-tapped as part of a probe into an alleged prostitution ring surrounding Berlusconi, also suggested for the first time that he gave money to the women he allegedly slept with, contradicting his repeated insistence that he never paid for sex, ‘The Daily Telegraph’ reported.

The taped conversations revealed in extraordinary detail how parties involving dozens of young starlets and escort girls were organised for the Italian PM by a 36-year-old middleman, Gianpaolo Tarantini, a convicted cocaine dealer. (read more)

United Kingdom: Blair’s back, or did he ever go away? Cameron is taking advice from Tony Blair? Well here’s an expert. Watch out, you may end up with another war on your hands! The question is, how much are they paying for his consulting prowess? He likes the cash.

David Cameron is secretly receiving political advice on foreign affairs from Tony Blair – most recently on how to resolve the international deadlock over Palestinian statehood, The Independent has learnt.

Mr Cameron has buried party political loyalties and privately invited the former Labour Prime Minister to Chequers to discuss the impasse, according to Foreign Office sources. (read more)

Hey Tony, there’s a warm cell in The Hague waiting for you (I hope)!

This is our Open Thread. This is my part of the world. What’s up in yours?

The Watering Hole: Tuesday, September 13 – Republican Election Machine

The Debate is over. Nothing new, except for Ron Paul being even more callous than I thought possible. Isn’t he a doctor by profession? Wasn’t there a thing called the hypocratic oath? (ht: peteIngh)

This is our Open Thread. Give us your take on yesterday’s, today’s or tomorrow’s news.

All cartoons are posted with the artists’ express permission to TPZoo.
Matt Davies, CTNews

The Watering Hole: Friday, February 25, 2011

Don’t it Turn My Red States, Blue?

Unions, the Middle Class, the American Economy and the American Dream were dealt a fatal blow under President Clinton. To be sure, the mortal wound was not immediately fatal, nor even noticed. We were too busy investigating cigars and stained dresses. It went through both houses of Congress with over a 90% vote, so a veto was out of the question. And besides, Clinton was balancing the budget and paying off the national debt.

But there it was, festering in the background, leading to factory closures and job losses that never made the national scene: NAFTA. North Atlantic Free Trade Agreement.

With a “Free Trade” Agreement, manufacturing moves to the least regulated environment, taking jobs with it. That is exactly what happened, and continues to happen. In a global economy without any protective tarrifs, American workers compete for wages against the labor pool of third world countries. They lose, and will continue to lose, until the standard of living, and wages, of workers in third world countries equals that of the American Worker. That means the American Worker’s standard of living must necessarily decline, while that of his or her third world counterpart increases.

The rich, on the other hand, increase their holdings no matter what.

The assault on the American Worker begain in earnest theses past few days, in Wisconsin. The only voices getting press time in the national media are those blaming unions for the decline of the middle class. They’re right, but for the wrong reason. Unions created the middle class. Their wage and hour demands didn’t break corporations, nor “force” corporations to ship jobs overseas.

No, it is the fault of Unions that they did not fight the fight they had to, years ago, to see to it that, while any Corporation may set up shop wherever it wants, Unions should have insisted that Corporations pay prevailing U.S. wages and abide by U.S. regulations regarding wages, hours, working conditions, benefits, and environmental protections, unless, of course, local regulations were more stringent.

By not fighting, to the point of national strikes, Unions have allowed their own downfall. The current protestations in Wisconsin notwithstanding, unless people go on a national strike, Unions and unionism will lose.

This is our daily open thread — as always, your thoughts on this, or any other subject, are welcome.

The Watering Hole: May 11, Europhoria is over

picture source:http://info.kopp-verlag.de/fileadmin/user_upload/gerhard_wisnewski/2008-07/inflation.jpg

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The Europhoria in the markets on the 1 trillion safety net for the Euro is already over. Stock Markets from Japan to Europe close in the red and shed some of yesterday’s gains. I am only really surprised that they fell for it in the first place. As a real optimist, who thinks everything will work out just fine in the end, I panicked after the news of the Euro deal broke. WTF were they doing with our money? But, as always, there are people out there in the web, who are so much better, when it comes to putting what matters into words:

Eurointelligence:

The euphoria is evaporating. Market commentators have taken a closer second look at the package, and they start not to like it. In our view the sentiment was best expressed by  what Kevin Gaynor chief markets economist of RBS who called the EU’s strategy “Bailouts rather than integration”. They are not solving the problem, they are throwing money at it. Another appropriate comment came from Marek Belke, the EU head at the IMF, who compared the rescue package to a dose of morphine with the purpose to stabilise the patient.(read more)

And on the futility of it all:

Credit Writedowns says wait for May 19th!

Nouriel Roubini warns in an interview with Der Spiegel, that there is more to come:

Today the markets are very worried about Greece, but that’s only the tip of the iceberg. Increasingly, bond market vigilantes have woken up in places like the UK and Ireland. Even the US and Japan will have problems because of their huge budget deficits. Maybe not this year, but they will eventually. In the US, states like California, Nevada, Arizona, New York and Florida have immense fiscal problems. The growing budget deficits and the huge government debts are really what worry me most. (read whole interview)

And looking away from “irresponsible” spendthrift Europe into your own back yard:

American conservatives, particularly the fiscal variety, tend to hold up the European Union as a model of irresponsible, big-spending economic policy. But consider this: According to E.U. rules, member countries cannot maintain budget deficits above 3 percent of gross domestic product; nor can their total debt rise above 60 percent of GDP. As Veronique de Rugy points out in this issue, the U.S. budget deficit in 2009 was three times the E.U.’s limit, and total debt will zoom past the 60 percent threshold sometime this year. Washington makes Paris look frugal. (read more)

You can find more useful links on this and other subjects at nakedcapitalism, which has turned into one of my favourite sites. Outside TheZoo, that is.

Don’t judge this book by its cover, this is still our open thread. Don’t hold back!

Across The Pond: Elections, Euros, Emotions

source: http://www.towson.edu/polsci/ppp/sp97/eu/EUROPE_9.JPG

This is going to be a long weekend for Angela Merkel. First of all she and her fellow European leaders had to get the Eurozone under some kind of control until Asian stock markets open late tonight, our time.Their solution: Add another € 70 bn to defend the Euro, and the Germans are already supposed to sign the fattest check in history:

EU leaders have agreed a financial defence plan in an attempt to protect the eurozone countries from speculative attacks in the wake of the Greek debt crisis.

The German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, said today that an “intervention unit” designed to preserve financial stability in the 16 eurozone countries would be in place by Monday when the markets reopen. (read more)

The Euro-Crisis can be followed at nakedcapitalism, they have a couple of interesting posts on that.

Secondly, she is facing the voters’ wrath in North Rine Westphalia the biggest of Germany’s states, where state elections will not be going good for her, that much is certain.

The UK has been so immersed in political fever that another highly significant election has gone almost unnoticed. When Germans go to the polls in state elections today, at stake will be not only the future of Angela Merkel’s ruling coalition in Berlin, but also the direction of Europe’s biggest economy. (read more)

THE voters in Düsseldorf’s central square were waiting patiently in the rain for Angela Merkel to appear last Friday when the loudspeakers suddenly announced that she was too busy dealing with Greece’s financial crisis to join them.

Their spirits already dampened, many were clearly in a mood to punish the chancellor for her contribution of more than £19 billion to the Greek bailout. They had gathered to hear Merkel make her pitch for the Christian Democratic Union (CDU) in today’s state election in North Rhine Westphalia, Germany’s industrial powerhouse with a population of 18m. (read more)

A detailed article on the state election can be found at the International section of Der Spiegel.

But it’s not a good day for Gordon Brown either, he has lost his elections already and will lose his post, because even if the Liberal democrats should opt for supporting Labour, I very much doubt they will do it if  Brown’s at the helm.

And opt for Labour they still could, because the Tories are adamant when it comes to electoral reform. Big NO.

Nick Clegg was urged by senior figures in his party last night to back a “traffic light coalition” with Labour, Green and smaller parties amid signs that David Cameron’s proposed deal to the Liberal Democrats has triggered an angry backlash among Tory and Lib Dem MPs.

The Lib Dem and Conservative leaders met last night for “constructive” face-to-face talks to try to reach a deal before markets open tomorrow morning. Earier, after a crucial meeting with his party in Westminster to gauge reaction to a Lib-Con coalition, Mr Clegg addressed a 1,000-strong crowd protesting in favour of electoral reform to insist that proportional representation was still key to the talks. (read more)

I am not really surprised that the “senior bankers” are already putting pressure on the parties:

FEARS of a market slump mounted this weekend after British politicians failed to form a government and senior bankers warned that the eurozone crisis might cause bank lending to seize up. (read more)

This is blatant blackmail. The banks don’t want electoral reform, they like the status quo just fine. Electoral reform would only serve to give the great unwashed more say, and we can’t have that, can we?

And finally, here’s the New Mr Switzerland, what an emotional moment, which I didn’t watch and will never regret not having watched.

Have a good Sunday and especially a Happy Mother’s Day to all the moms out there. I’ll head back now to my boys and spend a little quality time with my family.

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A Greek Tragedy, revisited.

Greece - Ruins

So taxpayers are asked to foot the bill again. European governments have decided on a bailout for Greece, so they can stay in the EMU (European Monetary Union), where they should not have been accepted in the first place.

It was Goldman Sachs, who else, who helped Greece to cook the books in order to make the 3% of GDP debt-threshold the EMU prerequisited for entering the EUROzone. Fully aware of their doings they, at the end of last year started to lay their bets on a default of Greek debts. This sent Greek bonds yields spiralling out of control, the latest was a 18% yield, a percentage Greece cannot afford to pay to borrow money to run their country. And all banks were busily selling Greek bonds to their customers, who in turn very much appreciated a (then) 5% yield to the almost nothing in interest you get on your money from your local bank.

Now what? Will the bonds default and leave the investors out in the cold? Will there be write-offs, so Greece can draw a little breath and get their debt situation sorted?

Fat chance. Deutsche Bank boss Ackermann has already issued one of his famous warnings of impending financial apocalypse if Greece wasn’t bailed out and should default on their debt. So, this knight in shining armour is saving the Eurozone’s economy from armageddon? Or is he helping the investors who bought the bonds from Deutsche Bank and by this saving the Banks reputation, their business and his bonus?

Not only Goldman sucks.

And: Portugal is next.