Wednesday, August 29, 2007 by The Nation | Confronting the CEO Pay Gap | by Katrina Vanden Heuvel
The staggering gap between CEOs and workers is, at long last, getting some attention in Campaign ‘08. But there’s still more to be done to tackle the gap. If candidates really want to turn up the heat with some well-documented, explosive facts, I’d advise them to check out the invaluable report released today by the Institute for Policy Studies and United for a Fair Economy.
I’d like to hear Senator Hillary Clinton make a stink about how the top 20 private equity and hedge fund managers pocketed an average of $657.5 million–22,225 times the pay of an average worker. I’d like to see candidates tackle the gross inequities in an economy in which the 20 highest paid figures in the private equity and hedge fund industry collected 3,315 times more in average annual compensation in 2006 than the top 20 officials of the federal government’s executive branch–and that includes Bush and Cheney (when he’ll cop to being part of that branch).
And while they deploy these heart-wrenching stats, I’d like to hear all of the candidates blast Senator Chuck Schumer for betraying the best traditions of the Democratic party by refusing to increase taxes on those fabulously rich hedgers and equity guys.) ...
Thursday, August 30, 2007
CEO pay increase 45%, minimum wage drops 7%, CEO significantly out-earn (3 times+) their European counterparts
CEOs Earn More in A Day than Most Workers in A Year | By Reuters | 29 Aug 2007 | 09:18 AM ET
Top executives at major U.S. businesses last year made as much money in one day of work on the job as the average worker made over the entire year, according to a report released on Wednesday.
Chief executive officers from the nation's biggest businesses averaged nearly $11 million in total compensation, according to the 14th annual CEO compensation survey released jointly by the Institute for Policy Studies based in Washington and United for a Fair Economy, a national organization based in Boston.
At the same time, workers at the bottom rung of the U.S. economy received the first federal minimum wage increase in a decade. But the new wage of $5.85 an hour, after being adjusted for inflation, stands 7 percent below where the minimum wage stood a decade ago.
"CEO pay, over that same decade, has increased by roughly 45 percent," the study found.
On average, CEOs at major American corporations saw $1.3 million in pension gains last year. By contrast, 58.5 percent of American households led by a 45- to 54-year old even had a retirement account in 2004, the most recent year these figures were available.
...
American executives significantly out-earn their European counterparts, the study found. In 2006, the 20 highest-paid European managers made an average of $12.5 million, a third as much as the 20 highest-paid U.S. executives took home last year.
Top executives at major U.S. businesses last year made as much money in one day of work on the job as the average worker made over the entire year, according to a report released on Wednesday.
Chief executive officers from the nation's biggest businesses averaged nearly $11 million in total compensation, according to the 14th annual CEO compensation survey released jointly by the Institute for Policy Studies based in Washington and United for a Fair Economy, a national organization based in Boston.
At the same time, workers at the bottom rung of the U.S. economy received the first federal minimum wage increase in a decade. But the new wage of $5.85 an hour, after being adjusted for inflation, stands 7 percent below where the minimum wage stood a decade ago.
"CEO pay, over that same decade, has increased by roughly 45 percent," the study found.
On average, CEOs at major American corporations saw $1.3 million in pension gains last year. By contrast, 58.5 percent of American households led by a 45- to 54-year old even had a retirement account in 2004, the most recent year these figures were available.
...
American executives significantly out-earn their European counterparts, the study found. In 2006, the 20 highest-paid European managers made an average of $12.5 million, a third as much as the 20 highest-paid U.S. executives took home last year.
Ford and General Motors have threatened to leave Detroit and take their car manufacturing operations overseas ... pensions and healthcare drive costs
Ford and GM say factories in US face axe | Ailing car giants push union to agree pay cuts | James Doran in New York | Sunday August 26, 2007 | The Observer
Ford and General Motors have threatened to leave Detroit and take their car manufacturing operations overseas if unions do not agree to a massive pay cut for hourly paid workers.
The threat to quit the city they call Motown because of its rich automotive heritage would be a crippling blow to Detroit, which is suffering amid a prolonged economic downturn and has been hit by the sub-prime mortgage crisis.
Ford and GM are in the thick of negotiations with the United Auto Workers union, the most powerful labour group in the industry. The car makers maintain they must dramatically reduce manufacturing costs if they are to survive in today's global economy.
Their biggest burden is the current labour cost per vehicle - an estimated $71 (around £35) per man hour. Workers earn about $27 an hour with the remainder made up of overheads such as pensions and healthcare costs for the thousands of retirees on their books. ...
Ford and General Motors have threatened to leave Detroit and take their car manufacturing operations overseas if unions do not agree to a massive pay cut for hourly paid workers.
The threat to quit the city they call Motown because of its rich automotive heritage would be a crippling blow to Detroit, which is suffering amid a prolonged economic downturn and has been hit by the sub-prime mortgage crisis.
Ford and GM are in the thick of negotiations with the United Auto Workers union, the most powerful labour group in the industry. The car makers maintain they must dramatically reduce manufacturing costs if they are to survive in today's global economy.
Their biggest burden is the current labour cost per vehicle - an estimated $71 (around £35) per man hour. Workers earn about $27 an hour with the remainder made up of overheads such as pensions and healthcare costs for the thousands of retirees on their books. ...
Wednesday, August 29, 2007
Wal-Mart Steals Billions From Public Schools ...every 200 employee Wal-Mart store in the U.S. costs federal taxpayers a whopping $420,750 a year
Wal-Mart Steals Billions From Public Schools
Aug 03, 2007 -- Wal-Mart wants you to think you're getting a bargain, but in reality, the store is taking you for the ride of your life and stealing billions from public coffers that should be dedicated to funding our public education system.
The High Cost of Low Prices
* State and local governments have awarded $1 billion in subsidies to Wal-Mart-money that could have been used to fund our struggling public education system or other public services. (Source: NEA.org)
* Taxpayers are forced to contribute billions to health care and public assistance funds every year to cover Wal-Mart employees who are not eligible for the company's insurance plan. California alone spends $86 million each year. (Source: UC Berkeley Study)
* The Walton Family Foundation has donated more than $100 million to private organizations that buy political influence and undermine public education support. (Source: MediaTransparency.org)
Our public education system desperately needs more funding. If Wal-Mart ceased stealing from our public coffers and quit donating money to dismantle public schools, perhaps that funding would be available.
Aug 03, 2007 -- Wal-Mart wants you to think you're getting a bargain, but in reality, the store is taking you for the ride of your life and stealing billions from public coffers that should be dedicated to funding our public education system.
The High Cost of Low Prices
* State and local governments have awarded $1 billion in subsidies to Wal-Mart-money that could have been used to fund our struggling public education system or other public services. (Source: NEA.org)
* Taxpayers are forced to contribute billions to health care and public assistance funds every year to cover Wal-Mart employees who are not eligible for the company's insurance plan. California alone spends $86 million each year. (Source: UC Berkeley Study)
* The Walton Family Foundation has donated more than $100 million to private organizations that buy political influence and undermine public education support. (Source: MediaTransparency.org)
Our public education system desperately needs more funding. If Wal-Mart ceased stealing from our public coffers and quit donating money to dismantle public schools, perhaps that funding would be available.
What a 200 Employee Wal-Mart Store Costs You
| Item | Cost to Taxpayers |
|---|---|
| Low Income Tax Credits/Deductions | $125,000 |
| Child Health Programs (Federal Share) | $108,000 |
| Title 1 | $100,000 |
| Housing Assistance | $42,000 |
| Free/Reduced School Lunches | $36,000 |
| Low Income Energy Assistance | $9,750 |
| Annual Total | $420,750 |
According to a recent Congressional report, every 200 employee Wal-Mart store in the U.S. costs federal taxpayers a whopping $420,750 a year. This does not include the government subsidies given to Wal-Mart or the amount contributed by local/state taxpayers. Wouldn't it be nice if this money could be used to sponsor one school rather than one Wal-Mart store?
...
In fact, the National Education Association (NEA) charges that the late John Walton provided tens of millions of dollars towards the anti-public education movement and sat on the boards of several major pro-voucher organizations.
Don't let Wal-Mart's advertising fool you. This company is stealing tax dollars from the public education system, and their 'donations' hurt more than they help.
median household income last year was still about $1,000 less than in 2000 ...
A Sobering Census Report: Americans’ Meager Income Gains | Published: August 29, 2007
The economic party is winding down and most working Americans never even got near the punch bowl.
The Census Bureau reported yesterday that median household income rose 0.7 percent last year — it’s second annual increase in a row— to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005. This seems like welcome news, but a deeper look at the belated improvement in these numbers — more than five years after the end of the last recession — underscores how the gains from economic growth have failed to benefit most of the population.
The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty — 5 million more than six years before, when the poverty rate fell to 11.3 percent.
And what is perhaps most disturbing is that it appears this is as good as it’s going to get. ...
...
The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains.
The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.
This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.
Over all, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation’s economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.
Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: the only group for which earnings in 2006 exceeded those of 2000 were the households in the top five percent of the earnings distribution. For everybody else, they were lower. ...
The economic party is winding down and most working Americans never even got near the punch bowl.
The Census Bureau reported yesterday that median household income rose 0.7 percent last year — it’s second annual increase in a row— to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005. This seems like welcome news, but a deeper look at the belated improvement in these numbers — more than five years after the end of the last recession — underscores how the gains from economic growth have failed to benefit most of the population.
The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty — 5 million more than six years before, when the poverty rate fell to 11.3 percent.
And what is perhaps most disturbing is that it appears this is as good as it’s going to get. ...
...
The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains.
The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.
This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.
Over all, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation’s economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.
Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: the only group for which earnings in 2006 exceeded those of 2000 were the households in the top five percent of the earnings distribution. For everybody else, they were lower. ...
There is a widely held belief that Republicans are better for business than are Democrats. Let's look at the facts.
Presidential Economics: Myths, Facts | By Robert Weiner and John Larmet | The Milwaukee Journal Sentinel | Wednesday 15 August 2007
...
There is a widely held belief that Republicans are better for business than are Democrats. Let's look at the facts.
The wild stock market ride of recent weeks does not compare to the two worst stock events, the crash of 1929 and the 1987 free fall, which also occurred under Republican administrations. Since 1900, Democratic presidents have produced a 12.3% annual return on the S&P 500, Republicans only 8%. Gross Domestic Product growth since 1930 is 5.4% for Democratic presidents and 1.6% for Republican presidents.
Bush inherited from President Clinton an annual federal budget surplus of $236 billion, the largest in American history. Clinton balanced the budget for the first time since 1969. Budget surpluses were expected to total $5.6 trillion between fiscal year 2002 and 2011.
Despite this, Bush transformed the surpluses into a $1.1 trillion annual deficit in just three years because of the Iraq war and his relentless push for permanent tax cuts for wealthy Americans, a new iteration of Herbert Hoover's equally catastrophic "trickle-down" theory. Bragging about a $239 billion deficit sets such a low standard that Bush can claim horrific failure as a good thing for the country. The Bush administration's annual loss of three-quarters of a trillion dollars is unprecedented.
Bush presided over the loss of 2 million American jobs in his first 2 1/2 years and has net gained 5.6 million in six years, the worst since Hoover. Clinton created 23 million jobs.
It's not rocket science to figure out the difference. Clinton: tax breaks for the middle and lower incomes who actually spend the money, no Iraq war. Bush: disproportionate tax breaks for the wealthy (50% to the wealthiest 1% by 2010), $750 billion for a war monetarily benefiting only a few military contractors and a financial sieve for the country.
Democratic presidents spread the wealth through spending on needed social programs and targeting tax cuts to lower- and middle-income Americans, stimulating the economy more broadly. Republicans pump into defense contractors and high-income Americans, creating a significant detriment to the whole economy with larger deficits and higher interest rates.
Economist John Maynard Keynes was right in 1936: When you "prime the pump" into people programs (like jobs or lower income tax cuts to help Americans buy what they need), you get people results. On the other hand, when you move money from the economy into tax cuts for the rich and a military vacuum, you don't prime the economic pump; you deplete it.
Contrary to opinion, we do not have record high stocks. It would take 14,300 for the Dow Jones industrial average just to match for inflation the 11,750 under Clinton in 2000. We're now around 13,000, meaning, in real terms, a stagnant market with a loss for the past six years.
Democrats empower the buyers, Republicans the sellers. Misdirected tax cuts, plus the Iraq war, have taken the money not just from America's working class but from America's businesses as well. ...
...
There is a widely held belief that Republicans are better for business than are Democrats. Let's look at the facts.
The wild stock market ride of recent weeks does not compare to the two worst stock events, the crash of 1929 and the 1987 free fall, which also occurred under Republican administrations. Since 1900, Democratic presidents have produced a 12.3% annual return on the S&P 500, Republicans only 8%. Gross Domestic Product growth since 1930 is 5.4% for Democratic presidents and 1.6% for Republican presidents.
Bush inherited from President Clinton an annual federal budget surplus of $236 billion, the largest in American history. Clinton balanced the budget for the first time since 1969. Budget surpluses were expected to total $5.6 trillion between fiscal year 2002 and 2011.
Despite this, Bush transformed the surpluses into a $1.1 trillion annual deficit in just three years because of the Iraq war and his relentless push for permanent tax cuts for wealthy Americans, a new iteration of Herbert Hoover's equally catastrophic "trickle-down" theory. Bragging about a $239 billion deficit sets such a low standard that Bush can claim horrific failure as a good thing for the country. The Bush administration's annual loss of three-quarters of a trillion dollars is unprecedented.
Bush presided over the loss of 2 million American jobs in his first 2 1/2 years and has net gained 5.6 million in six years, the worst since Hoover. Clinton created 23 million jobs.
It's not rocket science to figure out the difference. Clinton: tax breaks for the middle and lower incomes who actually spend the money, no Iraq war. Bush: disproportionate tax breaks for the wealthy (50% to the wealthiest 1% by 2010), $750 billion for a war monetarily benefiting only a few military contractors and a financial sieve for the country.
Democratic presidents spread the wealth through spending on needed social programs and targeting tax cuts to lower- and middle-income Americans, stimulating the economy more broadly. Republicans pump into defense contractors and high-income Americans, creating a significant detriment to the whole economy with larger deficits and higher interest rates.
Economist John Maynard Keynes was right in 1936: When you "prime the pump" into people programs (like jobs or lower income tax cuts to help Americans buy what they need), you get people results. On the other hand, when you move money from the economy into tax cuts for the rich and a military vacuum, you don't prime the economic pump; you deplete it.
Contrary to opinion, we do not have record high stocks. It would take 14,300 for the Dow Jones industrial average just to match for inflation the 11,750 under Clinton in 2000. We're now around 13,000, meaning, in real terms, a stagnant market with a loss for the past six years.
Democrats empower the buyers, Republicans the sellers. Misdirected tax cuts, plus the Iraq war, have taken the money not just from America's working class but from America's businesses as well. ...
Credit Derivative Orgy is Behind Liquidity Crisis
Credit Derivative Orgy is Behind Liquidity Crisis | by Martha Rosenberg / August 22nd, 2007
Financial Times warned against them. So did Warren Buffet, Alan Greenspan, Jim Sinclair and the chief economist at Morgan Stanley.
...
Sure banks and financial institutions love the structured investment vehicles — especially collateralized debt obligations (CDOs) — because they let them get loan risk off balance sheet and take on more lending. And they can hold them at cost without recording losses or marking to market–or so accounting rules indicate.
Sure the rich like the cyber-constructs as tax dodges in their Cayman Islands registered hedge funds.
Sure traders love their leverage power — kind of like investor crack — which exceeds any position they could take in the cash markets.
But they are IOUs and don’t represent actual ownership of assets. (See Ponzi capitalism.) And that means they can keep house of card companies alive and looking solvent until they implode. And cause a cascade of implosions as the underlying assets on which the derivatives — and positive balance sheets — are written are found lacking. ....
Financial Times warned against them. So did Warren Buffet, Alan Greenspan, Jim Sinclair and the chief economist at Morgan Stanley.
...
Sure banks and financial institutions love the structured investment vehicles — especially collateralized debt obligations (CDOs) — because they let them get loan risk off balance sheet and take on more lending. And they can hold them at cost without recording losses or marking to market–or so accounting rules indicate.
Sure the rich like the cyber-constructs as tax dodges in their Cayman Islands registered hedge funds.
Sure traders love their leverage power — kind of like investor crack — which exceeds any position they could take in the cash markets.
But they are IOUs and don’t represent actual ownership of assets. (See Ponzi capitalism.) And that means they can keep house of card companies alive and looking solvent until they implode. And cause a cascade of implosions as the underlying assets on which the derivatives — and positive balance sheets — are written are found lacking. ....
“The Poverty Business,” BusinessWeek documented the stampede to lend money to the people who could least afford to pay
Tuesday, August 21, 2007 by The Huffington Post | Smashing Capitalism | by Barbara Ehrenreich
...
... Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.
First they stopped paying their mortgages, a move in which they were joined by many financially stretched middle class folks, though the poor definitely led the way. All right, these were trick mortgages, many of them designed to be unaffordable within two years of signing the contract. There were “NINJA” loans, for example, awarded to people with “no income, no job or assets.” Conservative columnist Niall Fergusen laments the low levels of “economic literacy” that allowed people to be exploited by sub-prime loans. Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?
Then, in a diabolically clever move, the poor - a category which now roughly coincides with the working class — stopped shopping. Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown. H. Lee Scott, CEO of the low-wage Wal-Mart empire, admitted with admirable sensitivity, that “it’s no secret that many customers are running out of money at the end of the month.” ...
...
It gets worse though. While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker’s wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages. Once you worked for your money, but now you were supposed to pay for it. Once you could count on earning enough to save for a home. Now you’ll never earn that much, but, as the lenders were saying — heh, heh — do we have a mortgage for you!
Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May 21st cover story on “The Poverty Business,” BusinessWeek documented the stampede, in the just the last few years, to lend money to the people who could least afford to pay the interest: Buy your dream home! Refinance your house! Take on a car loan even if your credit rating sucks! Financiamos a Todos! Somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were being offered. ...
...
... Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.
First they stopped paying their mortgages, a move in which they were joined by many financially stretched middle class folks, though the poor definitely led the way. All right, these were trick mortgages, many of them designed to be unaffordable within two years of signing the contract. There were “NINJA” loans, for example, awarded to people with “no income, no job or assets.” Conservative columnist Niall Fergusen laments the low levels of “economic literacy” that allowed people to be exploited by sub-prime loans. Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?
Then, in a diabolically clever move, the poor - a category which now roughly coincides with the working class — stopped shopping. Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown. H. Lee Scott, CEO of the low-wage Wal-Mart empire, admitted with admirable sensitivity, that “it’s no secret that many customers are running out of money at the end of the month.” ...
...
It gets worse though. While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker’s wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages. Once you worked for your money, but now you were supposed to pay for it. Once you could count on earning enough to save for a home. Now you’ll never earn that much, but, as the lenders were saying — heh, heh — do we have a mortgage for you!
Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May 21st cover story on “The Poverty Business,” BusinessWeek documented the stampede, in the just the last few years, to lend money to the people who could least afford to pay the interest: Buy your dream home! Refinance your house! Take on a car loan even if your credit rating sucks! Financiamos a Todos! Somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were being offered. ...
Supply-siders ignore the crucial distinction between debt employed as an investment vehicle to enhance competitiveness ... and debt for expenses ....
A debt culture gone awry | By Hamid Varzi
08/21/07 "IHT" -- -- -: August 17, 2007 --- - The U.S. economy, once the envy of the world, is now viewed across the globe with suspicion. America has become shackled by an immovable mountain of debt that endangers its prosperity and threatens to bring the rest of the world economy crashing down with it.
...
This new reality has had unfortunate side effects that go beyond economics. As a banker working in the heart of the Muslim world, I have been amazed by the depth and breadth of anti-Americanism, even among U.S. allies, manifested in reactions ranging from fierce anger to stoic fatalism. Muslims outside the United States interpret America's policies in the Middle East not as an effort to spread democracy but as a blatant neocolonialist attempt to solve its economic problems by force. Arabs and Persians alike argue that America's fiscal irresponsibility has forced the nation to seek solutions through military aggression.
Many believe that America's misguided adventure in Iraq was a desperate attempt to capture both a reliable source of cheap oil and a major export market for the United States.
The United States borrows a whopping $2.5 billion daily from abroad to service its burgeoning debt. In order to continue borrowing at reasonable interest rates America needs to retain credibility with its overseas creditors, especially Far Eastern nations running huge trade surpluses. A cessation of foreign lending would force the Fed to raise interest rates to attract money, precipitating a collapse of the already weak housing market and pushing the economy into recession.
This is why the Chinese, in particular, have threatened to retaliate against proposed U.S. trade sanctions by reducing their $1.3 trillion in dollar holdings.
...
What have Americans gained from their nation's mountain of debt? A crumbling infrastructure, a manufacturing base that has declined 60 percent since World War II, a rise in the wealth gap, the lowest consumer-savings rate since the depths of the Great Depression, 50 million Americans without health insurance, an educational system in decline and a shrinking dollar that makes foreign travel a luxury.
The best cars, the best bridges and highways, the fastest trains and the tallest buildings are all to be found outside America's borders. Supply-siders ignore the crucial distinction between, on the one hand, debt employed as an investment vehicle to enhance competitiveness and, on the other, debt used to pay off current expenses and to create even more debt.
The bottom line is that America is awash in red ink and seeks the wrong solutions to its debt problems. A return to fiscal responsibility would make America far stronger, both domestically and internationally, than would a continuation of current policies that falsely project strength through idle protectionist threats and failed military aggression. ...
08/21/07 "IHT" -- -- -: August 17, 2007 --- - The U.S. economy, once the envy of the world, is now viewed across the globe with suspicion. America has become shackled by an immovable mountain of debt that endangers its prosperity and threatens to bring the rest of the world economy crashing down with it.
...
This new reality has had unfortunate side effects that go beyond economics. As a banker working in the heart of the Muslim world, I have been amazed by the depth and breadth of anti-Americanism, even among U.S. allies, manifested in reactions ranging from fierce anger to stoic fatalism. Muslims outside the United States interpret America's policies in the Middle East not as an effort to spread democracy but as a blatant neocolonialist attempt to solve its economic problems by force. Arabs and Persians alike argue that America's fiscal irresponsibility has forced the nation to seek solutions through military aggression.
Many believe that America's misguided adventure in Iraq was a desperate attempt to capture both a reliable source of cheap oil and a major export market for the United States.
The United States borrows a whopping $2.5 billion daily from abroad to service its burgeoning debt. In order to continue borrowing at reasonable interest rates America needs to retain credibility with its overseas creditors, especially Far Eastern nations running huge trade surpluses. A cessation of foreign lending would force the Fed to raise interest rates to attract money, precipitating a collapse of the already weak housing market and pushing the economy into recession.
This is why the Chinese, in particular, have threatened to retaliate against proposed U.S. trade sanctions by reducing their $1.3 trillion in dollar holdings.
...
What have Americans gained from their nation's mountain of debt? A crumbling infrastructure, a manufacturing base that has declined 60 percent since World War II, a rise in the wealth gap, the lowest consumer-savings rate since the depths of the Great Depression, 50 million Americans without health insurance, an educational system in decline and a shrinking dollar that makes foreign travel a luxury.
The best cars, the best bridges and highways, the fastest trains and the tallest buildings are all to be found outside America's borders. Supply-siders ignore the crucial distinction between, on the one hand, debt employed as an investment vehicle to enhance competitiveness and, on the other, debt used to pay off current expenses and to create even more debt.
The bottom line is that America is awash in red ink and seeks the wrong solutions to its debt problems. A return to fiscal responsibility would make America far stronger, both domestically and internationally, than would a continuation of current policies that falsely project strength through idle protectionist threats and failed military aggression. ...
Global Alpha quant fund had lost 27 percent of its value this year because its computers failed to anticipate what the firm called "25 percent standar
For Wall Street's Math Brains, Miscalculations | Complex Formulas Used by 'Quant' Funds Didn't Add Up in Market Downturn | By Frank Ahrens | Washington Post Staff Writer | Tuesday, August 21, 2007; Page A01
...
Short for "quantitative equity," a quant fund is a hedge fund that relies on complex and sophisticated mathematical algorithms to search for anomalies and non-obvious patterns in the markets. These glitches, often too small for the human eye, can present opportunities for short- and long-term trades that yield high-profit returns.
...
But the 387-point drop in the Dow Jones industrial average Aug. 9 and the continuing turmoil in the markets, in part attributed to massive sell-offs by the quant funds, have tarnished some of the quants' glimmering intellectual credentials and shown that, when push comes to shove, they can rush toward the exits as fast as a novice investor.
Last week, Goldman Sachs said its Global Alpha quant fund had lost 27 percent of its value this year because its computers failed to anticipate what the firm called "25 percent standard deviation moves" or events so rare Goldman had seen them only twice before in the firm's history. On the same day Goldman revealed the bad news, the firm said it would lead a group of big-money investors, including philanthropist Eli Broad, in pouring $3.6 billion into another Goldman quant fund, aiming to shore up confidence in the quants. ...
...
Short for "quantitative equity," a quant fund is a hedge fund that relies on complex and sophisticated mathematical algorithms to search for anomalies and non-obvious patterns in the markets. These glitches, often too small for the human eye, can present opportunities for short- and long-term trades that yield high-profit returns.
...
But the 387-point drop in the Dow Jones industrial average Aug. 9 and the continuing turmoil in the markets, in part attributed to massive sell-offs by the quant funds, have tarnished some of the quants' glimmering intellectual credentials and shown that, when push comes to shove, they can rush toward the exits as fast as a novice investor.
Last week, Goldman Sachs said its Global Alpha quant fund had lost 27 percent of its value this year because its computers failed to anticipate what the firm called "25 percent standard deviation moves" or events so rare Goldman had seen them only twice before in the firm's history. On the same day Goldman revealed the bad news, the firm said it would lead a group of big-money investors, including philanthropist Eli Broad, in pouring $3.6 billion into another Goldman quant fund, aiming to shore up confidence in the quants. ...
Mortgage passes through many financial hands, rebundled to create greater packages of funny money that exists only in the speculative minds
Ponzi Capitalism | by Frank Scott / August 17th, 2007
Charles Ponzi was criminalized in the 1920s for using people’s money to pay interest to themselves as well as others, all of them being invested in something that did not really exist. Their profit resulted from unprincipled capital accumulation. Just like what the market does when it sells what it calls derivatives now , Ponzi’s investors derived value from other investors, until the number of gullible people declined once the ruling class squelched his small time imitation before their own schemes were seen to be much bolder methods of producing money out of thin air. The credit creation which has supported our consumption binge for many years now is merely an updated, far more vast and dangerous expression of Ponzi’s hustle, carried to global extremes.
Purists can deny that the present shakeup in the home mortgage sector is anything like a Ponzi Scheme, because an actual product exists: a home. But rare is the buyer in America who sees real estate simply as a procedure to acquire shelter. Rather, it has become a money making proposition in which the commodity, and especially the speculative paper that is its tenuous foundation, changes hands often, sees its value fluctuate, and all with no more than religious faith in a steady stream of new investors to buy the paper.
Once a mortgage is taken on by a hopeful future home owner, it passes through many financial hands, bundled and rebundled to create greater packages of funny money that exists only in the speculative minds of manipulators who make some people rich, and most people debtors.
This market division is only a part of the casino credit scheme that has been propping up capitalism in America for the past generation. ...
Charles Ponzi was criminalized in the 1920s for using people’s money to pay interest to themselves as well as others, all of them being invested in something that did not really exist. Their profit resulted from unprincipled capital accumulation. Just like what the market does when it sells what it calls derivatives now , Ponzi’s investors derived value from other investors, until the number of gullible people declined once the ruling class squelched his small time imitation before their own schemes were seen to be much bolder methods of producing money out of thin air. The credit creation which has supported our consumption binge for many years now is merely an updated, far more vast and dangerous expression of Ponzi’s hustle, carried to global extremes.
Purists can deny that the present shakeup in the home mortgage sector is anything like a Ponzi Scheme, because an actual product exists: a home. But rare is the buyer in America who sees real estate simply as a procedure to acquire shelter. Rather, it has become a money making proposition in which the commodity, and especially the speculative paper that is its tenuous foundation, changes hands often, sees its value fluctuate, and all with no more than religious faith in a steady stream of new investors to buy the paper.
Once a mortgage is taken on by a hopeful future home owner, it passes through many financial hands, bundled and rebundled to create greater packages of funny money that exists only in the speculative minds of manipulators who make some people rich, and most people debtors.
This market division is only a part of the casino credit scheme that has been propping up capitalism in America for the past generation. ...
Isn’t there a term for near-30% interest on loans? Something like, “loan sharking”? “Usury”??? Does the mafia even charge this much?
Saturday, August 18, 2007 by CommonDreams | Legalized Loan Sharking: The Sleeper Issue of 2008 | by Marney White
There’s a sure way that a presidential candidate could get the attention of even the most politically apathetic citizen this year: vow to outlaw outrageous interest rates legally being charged to American consumers by credit card and student loan corporations. These rates are causing real and enduring pain to hard-working Americans and their families who find themselves behind the eight-ball.
Like me.
...
Fast-forward three years, and that $5,500 turned into $14,000+ in debt. My student loans, which were approximately $42,000 when all of this started, ballooned to $69,000 from late fees and penalties, after I ran out of hardship deferments (and interest kept accruing, even in deferment).
Trying to figure out how I could have gotten into this situation, I examined my credit card statements more closely. Taking for granted the low interest rates I qualified for before all of this happened, I had never expected what I now saw.
To my utter astonishment, I discovered that I was being charged between 22% and 29.5% on all of my balances. This included one card, Care Credit (owned by G.E. Money Bank - hey, why stop at war profiteering?), which is intended to help people stretch out payments for dental and other medical care. The Old Navy card I opened to buy school clothes for the kids was (quelle surprise!) also parented by G.E. Money Bank. Both cards (and others) were charging me nearly 30% interest. For children’s school clothes and family dental care!
Isn’t there a term for near-30% interest on loans? Something like, “loan sharking”? “Usury”??? Does the mafia even charge this much?
It got worse for me from there. When I was able to make the minimum payments, I noticed that my balances kept hitting the ceiling of my credit limit, as soon as I’d get them a little bit below it, costing me a $35 “over limit fee”, in addition to any $35 “late fees” I might incur. ...
...
... Another gift to corporate finance woven into that “Consumer Protection” Act was the newly-granted right of these companies to raise rates to usurious heights, and add draconian late and over-limit fees. Horrified yet? Wait — there’s more. If you happen to fall behind on one card, the rates for ALL of your cards can now be bumped up to these stratospheric levels! I kid you not, this even happens to people who are NOT in dire straits, and don’t have bad credit, but simply forget about a payment and get caught in these nets!
In an appreciative nod to their contributors at the banks and credit card companies, Republican legislators also tightened bankruptcy laws. So now, you’re really out of luck if you fall on seriously hard times. Oh - and don’t forget that most people who get in this deep do so because of the expenses associated with a catastrophic illness, a divorce, underemployment, or unemployment.
That, I realized, was how my $5,500 had turned to $14,000+, and how my student loans grew from $42,000 to $69,000 faster than Mickey’s broom multiplied in “Fantasia” … all because of a few years of reversal of fortune. ...
There’s a sure way that a presidential candidate could get the attention of even the most politically apathetic citizen this year: vow to outlaw outrageous interest rates legally being charged to American consumers by credit card and student loan corporations. These rates are causing real and enduring pain to hard-working Americans and their families who find themselves behind the eight-ball.
Like me.
...
Fast-forward three years, and that $5,500 turned into $14,000+ in debt. My student loans, which were approximately $42,000 when all of this started, ballooned to $69,000 from late fees and penalties, after I ran out of hardship deferments (and interest kept accruing, even in deferment).
Trying to figure out how I could have gotten into this situation, I examined my credit card statements more closely. Taking for granted the low interest rates I qualified for before all of this happened, I had never expected what I now saw.
To my utter astonishment, I discovered that I was being charged between 22% and 29.5% on all of my balances. This included one card, Care Credit (owned by G.E. Money Bank - hey, why stop at war profiteering?), which is intended to help people stretch out payments for dental and other medical care. The Old Navy card I opened to buy school clothes for the kids was (quelle surprise!) also parented by G.E. Money Bank. Both cards (and others) were charging me nearly 30% interest. For children’s school clothes and family dental care!
Isn’t there a term for near-30% interest on loans? Something like, “loan sharking”? “Usury”??? Does the mafia even charge this much?
It got worse for me from there. When I was able to make the minimum payments, I noticed that my balances kept hitting the ceiling of my credit limit, as soon as I’d get them a little bit below it, costing me a $35 “over limit fee”, in addition to any $35 “late fees” I might incur. ...
...
... Another gift to corporate finance woven into that “Consumer Protection” Act was the newly-granted right of these companies to raise rates to usurious heights, and add draconian late and over-limit fees. Horrified yet? Wait — there’s more. If you happen to fall behind on one card, the rates for ALL of your cards can now be bumped up to these stratospheric levels! I kid you not, this even happens to people who are NOT in dire straits, and don’t have bad credit, but simply forget about a payment and get caught in these nets!
In an appreciative nod to their contributors at the banks and credit card companies, Republican legislators also tightened bankruptcy laws. So now, you’re really out of luck if you fall on seriously hard times. Oh - and don’t forget that most people who get in this deep do so because of the expenses associated with a catastrophic illness, a divorce, underemployment, or unemployment.
That, I realized, was how my $5,500 had turned to $14,000+, and how my student loans grew from $42,000 to $69,000 faster than Mickey’s broom multiplied in “Fantasia” … all because of a few years of reversal of fortune. ...
“Many customers are running out of money at the end of the month,” said H. Lee Scott Jr., the chief executive of Wal-Mart
Run on banks in LA amid crisis; Wal-Mart CEO says customers are 'running out of money' | John Byrne | Published: Friday August 17, 2007
Wal-Mart CEO H. Lee Scott Jr. says customers are "running out of money."
...
Buried in the article was a sobering remark indeed: “Many customers are running out of money at the end of the month,” said H. Lee Scott Jr., the chief executive of Wal-Mart.
Wal-Mart CEO H. Lee Scott Jr. says customers are "running out of money."
...
Buried in the article was a sobering remark indeed: “Many customers are running out of money at the end of the month,” said H. Lee Scott Jr., the chief executive of Wal-Mart.
US government is on a ‘burning platform’ of unsustainable policies.. with fiscal deficits, chronic healthcare underfunding, immigration and military
Learn from the fall of Rome, US warned | By Jeremy Grant in Washington | Published: August 14 2007 00:06 | Last updated: August 14 2007 00:06
The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.
David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.
These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.
Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”. ...
The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.
David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.
These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.
Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”. ...
Tuesday, August 28, 2007
Median wage for men in their 30's: That’s a 12.5% drop over the last 30 years.
Economic “Boom” Proves False As Median US Wage Falls 12.5% | Posted by Bill Bonner on May 31st, 2007
You want to know something important, dear reader? Something that really matters? Well, read on…
We’ve been saying that the boom is a fraud. It is a speculative boom, not an economic boom. It lifts up asset prices and makes rich people think they are richer than ever. But it doesn’t increase real economic output - at least, not in the United States of America - or make average people any better off.
Of course, the leftists have been saying this for years. But who cares what they say. Even when they do spot a real problem, they invariably come up with a solution – more government meddling - that makes it worse.
Still, this is something they’re not wrong about.
An item from yesterday’s news:
According to data from the Pew Charitable Trust’s Economic Mobility project, a generation ago, American men in their 30s had median annual incomes of about US$40,000. Today, men of the same age, make about US$35,000 a year, adjusted for inflation. That’s a 12.5% drop over the last 30 years. ...
You want to know something important, dear reader? Something that really matters? Well, read on…
We’ve been saying that the boom is a fraud. It is a speculative boom, not an economic boom. It lifts up asset prices and makes rich people think they are richer than ever. But it doesn’t increase real economic output - at least, not in the United States of America - or make average people any better off.
Of course, the leftists have been saying this for years. But who cares what they say. Even when they do spot a real problem, they invariably come up with a solution – more government meddling - that makes it worse.
Still, this is something they’re not wrong about.
An item from yesterday’s news:
According to data from the Pew Charitable Trust’s Economic Mobility project, a generation ago, American men in their 30s had median annual incomes of about US$40,000. Today, men of the same age, make about US$35,000 a year, adjusted for inflation. That’s a 12.5% drop over the last 30 years. ...
Monday, August 27, 2007
a child who doesn’t receive adequate health care ... or adequate education ... doesn’t have the same chances in life as children who get both ...
Monday, August 27, 2007 by The New York Times | A Socialist Plot | by Paul Krugman
...
So let’s end this un-American system and make education what it should be - a matter of individual responsibility and private enterprise. Oh, and we shouldn’t have any government mandates that force children to get educated, either. As a Republican presidential candidate might say, the future of America’s education system lies in free-market solutions, not socialist models.
...
The truth is that there’s no difference in principle between saying that every American child is entitled to an education and saying that every American child is entitled to adequate health care. It’s just a matter of historical accident that we think of access to free K-12 education as a basic right, but consider having the government pay children’s medical bills “welfare,” with all the negative connotations that go with that term.
And conservative opposition to giving every child in this country access to health care is, in a fundamental sense, un-American.
Here’s what I mean: The great majority of Americans believe that everyone is entitled to a chance to make the most of his or her life. Even conservatives usually claim to believe that. For example, N. Gregory Mankiw, the former chairman of the Bush Council of Economic Advisers, contrasts the position of liberals, who he says believe in equality of outcomes, with that of conservatives, who he says believe that the goal of policy should be “to give everyone the same shot and not be surprised or concerned when outcomes differ wildly.”
But a child who doesn’t receive adequate health care, like a child who doesn’t receive an adequate education, doesn’t have the same shot - he or she doesn’t have the same chances in life as children who get both these things. ...
...
So let’s end this un-American system and make education what it should be - a matter of individual responsibility and private enterprise. Oh, and we shouldn’t have any government mandates that force children to get educated, either. As a Republican presidential candidate might say, the future of America’s education system lies in free-market solutions, not socialist models.
...
The truth is that there’s no difference in principle between saying that every American child is entitled to an education and saying that every American child is entitled to adequate health care. It’s just a matter of historical accident that we think of access to free K-12 education as a basic right, but consider having the government pay children’s medical bills “welfare,” with all the negative connotations that go with that term.
And conservative opposition to giving every child in this country access to health care is, in a fundamental sense, un-American.
Here’s what I mean: The great majority of Americans believe that everyone is entitled to a chance to make the most of his or her life. Even conservatives usually claim to believe that. For example, N. Gregory Mankiw, the former chairman of the Bush Council of Economic Advisers, contrasts the position of liberals, who he says believe in equality of outcomes, with that of conservatives, who he says believe that the goal of policy should be “to give everyone the same shot and not be surprised or concerned when outcomes differ wildly.”
But a child who doesn’t receive adequate health care, like a child who doesn’t receive an adequate education, doesn’t have the same shot - he or she doesn’t have the same chances in life as children who get both these things. ...
In other words, the US itself has become as vulnerable to its lenders as any other subprime borrower. ... The Fed simply ignored this law.
Monday, August 27, 2007 by CommonDreams.org | How the Bush Administration Is Turning the USA into a Subprime Borrower | by Heather Wokusch
...
Much in the same way that US investors were “steered” into rip-off mortgage loans, the entire country has been “steered” into an economic crisis. The question is how to get out of it.
In the subprime loan scandal, unscrupulous brokers conned home buyers with poor credit histories into deals designed to profit lenders and bleed borrowers. Contract “teasers” hid ballooning monthly payments while a lack of regulation allowed the scam to continue unabated. Millions more Americans now face losing their homes.
...
Bush’s military adventurism, not to mention his administration’s exorbitant tax cuts for the wealthy, gutted the surplus of $128 billion Clinton handed him in 2001 into a deficit of well over $200 billion today. And Bush has simultaneously increased the national debt by over $3 trillion (to roughly $9 trillion), effectively nailing each and every US citizen with a bill for almost $30,000.
...
Just weeks ago, Beijing warned that if the Bush administration pushed for a revaluation of the Chinese currency, then Beijing would sell dollars, thereby threatening the greenback’s reserve currency status. Washington backed down. It had little other option.
In other words, the US itself has become as vulnerable to its lenders as any other subprime borrower.
Overall, the US debt situation looks so dire that the non-partisan Government Accountability Office Comptroller recently warned, “ America is on a path toward an explosion of debt. And that indebtedness threatens our country’s, our children’s, and our grandchildren’s futures. With the looming retirement of the baby boomers, spiraling health care costs, plummeting savings rates, and increasing reliance on foreign lenders, we face unprecedented fiscal risks.”
...
And as Jim Hightower recently noted, a “hands-off regulatory ideology” is complicit: “There are no less than five financial agencies at the federal level that could have protected people, yet the subprime surge was allowed to proceed …. The Federal Reserve Board, for example, has direct authority under the Home Ownership and Equity Protection Act to ‘prohibit acts or practices in connection with mortgage loans that the board finds to be unfair, deceptive or … associated with abusive lending practices, or that are otherwise not in the interest of the borrower.’ The Fed simply ignored this law.” ...
...
Much in the same way that US investors were “steered” into rip-off mortgage loans, the entire country has been “steered” into an economic crisis. The question is how to get out of it.
In the subprime loan scandal, unscrupulous brokers conned home buyers with poor credit histories into deals designed to profit lenders and bleed borrowers. Contract “teasers” hid ballooning monthly payments while a lack of regulation allowed the scam to continue unabated. Millions more Americans now face losing their homes.
...
Bush’s military adventurism, not to mention his administration’s exorbitant tax cuts for the wealthy, gutted the surplus of $128 billion Clinton handed him in 2001 into a deficit of well over $200 billion today. And Bush has simultaneously increased the national debt by over $3 trillion (to roughly $9 trillion), effectively nailing each and every US citizen with a bill for almost $30,000.
...
Just weeks ago, Beijing warned that if the Bush administration pushed for a revaluation of the Chinese currency, then Beijing would sell dollars, thereby threatening the greenback’s reserve currency status. Washington backed down. It had little other option.
In other words, the US itself has become as vulnerable to its lenders as any other subprime borrower.
Overall, the US debt situation looks so dire that the non-partisan Government Accountability Office Comptroller recently warned, “ America is on a path toward an explosion of debt. And that indebtedness threatens our country’s, our children’s, and our grandchildren’s futures. With the looming retirement of the baby boomers, spiraling health care costs, plummeting savings rates, and increasing reliance on foreign lenders, we face unprecedented fiscal risks.”
...
And as Jim Hightower recently noted, a “hands-off regulatory ideology” is complicit: “There are no less than five financial agencies at the federal level that could have protected people, yet the subprime surge was allowed to proceed …. The Federal Reserve Board, for example, has direct authority under the Home Ownership and Equity Protection Act to ‘prohibit acts or practices in connection with mortgage loans that the board finds to be unfair, deceptive or … associated with abusive lending practices, or that are otherwise not in the interest of the borrower.’ The Fed simply ignored this law.” ...
Tuesday, August 21, 2007
Democrats better Republicans on GDP growth, per capita income growth, job creation, unemployment reduction, inflation reduction, and deficit reduction
A Simple Fact: Republicans Can't Manage the Economy | By Robert Weiner and John Larmett . Posted August 20, 2007.
Contrary to the mythology the party has created, GOP presidents are terrible for business.
...
There is a widely held belief that Republicans are better for business than are Democrats. Let's look at the facts. The wild stock market ride of recent weeks does not compare to the two worst stock events, the crash of 1929 and the 1987 free fall, which also occurred under Republican administrations. Since 1900, Democratic presidents have produced a 12.3% annual return on the S&P 500, Republicans only 8%. Gross Domestic Product growth since 1930 is 5.4% for Democratic presidents and 1.6% for Republican presidents.
Bush inherited from President Clinton an annual federal budget surplus of $236 billion, the largest in American history. Clinton balanced the budget for the first time since 1969. Budget surpluses were expected to total $5.6 trillion between fiscal year 2002 and 2011.
Despite this, Bush transformed the surpluses into a $1.1 trillion annual deficit in just three years because of the Iraq war and his relentless push for permanent tax cuts for wealthy Americans, a new iteration of Herbert Hoover's equally catastrophic "trickle-down" theory.
...
Bush presided over the loss of 2 million American jobs in his first 2 1/2 years and has net gained 5.6 million in six years, the worst since Hoover. Clinton created 23 million jobs.
...
Economist John Maynard Keynes was right in 1936: When you "prime the pump" into people programs (like jobs or lower income tax cuts to help Americans buy what they need), you get people results. On the other hand, when you move money from the economy into tax cuts for the rich and a military vacuum, you don't prime the economic pump; you deplete it.
Contrary to opinion, we do not have record high stocks. It would take 14,300 for the Dow Jones industrial average just to match for inflation the 11,750 under Clinton in 2000. We're now around 13,000, meaning, in real terms, a stagnant market with a loss for the past six years. ...
...
In six major criteria - GDP growth, per capita income growth, job creation, unemployment reduction, inflation reduction, and federal deficit reduction - for the ten post-World War II presidencies until Bush, there is a record to track the reality of Democratic versus Republican economic success. ...
Contrary to the mythology the party has created, GOP presidents are terrible for business.
...
There is a widely held belief that Republicans are better for business than are Democrats. Let's look at the facts. The wild stock market ride of recent weeks does not compare to the two worst stock events, the crash of 1929 and the 1987 free fall, which also occurred under Republican administrations. Since 1900, Democratic presidents have produced a 12.3% annual return on the S&P 500, Republicans only 8%. Gross Domestic Product growth since 1930 is 5.4% for Democratic presidents and 1.6% for Republican presidents.
Bush inherited from President Clinton an annual federal budget surplus of $236 billion, the largest in American history. Clinton balanced the budget for the first time since 1969. Budget surpluses were expected to total $5.6 trillion between fiscal year 2002 and 2011.
Despite this, Bush transformed the surpluses into a $1.1 trillion annual deficit in just three years because of the Iraq war and his relentless push for permanent tax cuts for wealthy Americans, a new iteration of Herbert Hoover's equally catastrophic "trickle-down" theory.
...
Bush presided over the loss of 2 million American jobs in his first 2 1/2 years and has net gained 5.6 million in six years, the worst since Hoover. Clinton created 23 million jobs.
...
Economist John Maynard Keynes was right in 1936: When you "prime the pump" into people programs (like jobs or lower income tax cuts to help Americans buy what they need), you get people results. On the other hand, when you move money from the economy into tax cuts for the rich and a military vacuum, you don't prime the economic pump; you deplete it.
Contrary to opinion, we do not have record high stocks. It would take 14,300 for the Dow Jones industrial average just to match for inflation the 11,750 under Clinton in 2000. We're now around 13,000, meaning, in real terms, a stagnant market with a loss for the past six years. ...
...
In six major criteria - GDP growth, per capita income growth, job creation, unemployment reduction, inflation reduction, and federal deficit reduction - for the ten post-World War II presidencies until Bush, there is a record to track the reality of Democratic versus Republican economic success. ...
2005 vs. 2000 ... average income down 1% -- 47% of growth in total incomes concentrated in top 1%, also get 62% of cap/div tax cuts
2005 Incomes, on Average, Still Below 2000 Peak | By DAVID CAY JOHNSTON | Published: August 21, 2007
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.
While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
...
The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.
These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich. ...
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.
While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
...
The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.
These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich. ...
Monday, August 20, 2007
EU ordered an investigation into the conduct of credit-rating agencies ... [who misrated bonds and are paid by the banks / conflict of interest
Trouble Tracks Far and Wide | Probe Is Urged As Slide Deepens From Paris to Tokyo | By Molly Moore | Washington Post Foreign Service | Friday, August 17, 2007; Page D01
...
The European Union's executive arm on Thursday ordered an investigation into the conduct of credit-rating agencies and their failure to respond more quickly to the impact of U.S. loan defaults on financial markets. The inquiry will specifically examine whether the agencies played down the potential for problems because of conflicts of interest, E.U. officials said.
Credit-rating agencies such as Standard & Poor's, Moody's Investors Service and Fitch Ratings are paid by banks to assess the creditworthiness of the securities that the banks issue.
The agencies have been under fire -- in the United States and Europe -- because throughout the housing boom they gave top rating to securities backed by risky mortgages, allowing Wall Street banks to easily sell those securities to investors. Those securities have plunged in value as defaults on subprime mortgages have jumped.
On Thursday, the three major rating agencies sped up their downgrades of mortgage-backed securities. ...
...
The European Union's executive arm on Thursday ordered an investigation into the conduct of credit-rating agencies and their failure to respond more quickly to the impact of U.S. loan defaults on financial markets. The inquiry will specifically examine whether the agencies played down the potential for problems because of conflicts of interest, E.U. officials said.
Credit-rating agencies such as Standard & Poor's, Moody's Investors Service and Fitch Ratings are paid by banks to assess the creditworthiness of the securities that the banks issue.
The agencies have been under fire -- in the United States and Europe -- because throughout the housing boom they gave top rating to securities backed by risky mortgages, allowing Wall Street banks to easily sell those securities to investors. Those securities have plunged in value as defaults on subprime mortgages have jumped.
On Thursday, the three major rating agencies sped up their downgrades of mortgage-backed securities. ...
Saturday, August 18, 2007
not China's fault that American corporations have so little regard for their employees ... citizens that they destroy their economic opportunities
August 17, 2007 | Offshoring and Free Market Ideology | China is not the Problem | By PAUL CRAIG ROBERTS
...
The pressure put on China is misdirected. The exchange rate is not the main cause of the US trade deficit with China. The costs of labor, regulation and harassment are far lower in China, and US corporations have offshored their production to China in order to benefit from these lower costs. When a company shifts its production from the US to a foreign country, it transforms US Fross Domestic Product (GDP) into imports. Every time a US company offshores goods and services, it adds to the US trade deficit.
Clearly, it is a mistake for the US government and economists to think of the imbalance as if it were produced by Chinese companies underselling goods produced by US companies in America. The imbalance is the result of US companies producing their goods in China and selling them in America.
...
It is not China's fault that American corporations have so little regard for their employees and fellow citizens that they destroy their economic opportunities and give them to foreigners instead.
...
The free market economists ignore the fact that a country that offshores its production also offshores its jobs. It becomes dependent on goods and services made in foreign countries, but lacks sufficient export earnings with which to pay for them. A country whose workforce is being reallocated, under pressure of offshoring, to domestic services has nothing to trade for its imports. That is why the US trade deficit has exploded to over $800 billion annually.
...
The enormous and continuing US deficits are wearing out the US dollar as reserve currency. A time will come when the US cannot pay for the imports, on which it has become ever more dependent, by flooding the world with ever more dollars.
Offshoring and free market ideology are turning the US into a third world country. According to the Bureau of Labor Statistics, one-quarter of all new US jobs created between June 2006 and June 2007 were for waitresses and bartenders. Almost all of the net new US jobs in the 21st century have been in domestic services. ...
...
The pressure put on China is misdirected. The exchange rate is not the main cause of the US trade deficit with China. The costs of labor, regulation and harassment are far lower in China, and US corporations have offshored their production to China in order to benefit from these lower costs. When a company shifts its production from the US to a foreign country, it transforms US Fross Domestic Product (GDP) into imports. Every time a US company offshores goods and services, it adds to the US trade deficit.
Clearly, it is a mistake for the US government and economists to think of the imbalance as if it were produced by Chinese companies underselling goods produced by US companies in America. The imbalance is the result of US companies producing their goods in China and selling them in America.
...
It is not China's fault that American corporations have so little regard for their employees and fellow citizens that they destroy their economic opportunities and give them to foreigners instead.
...
The free market economists ignore the fact that a country that offshores its production also offshores its jobs. It becomes dependent on goods and services made in foreign countries, but lacks sufficient export earnings with which to pay for them. A country whose workforce is being reallocated, under pressure of offshoring, to domestic services has nothing to trade for its imports. That is why the US trade deficit has exploded to over $800 billion annually.
...
The enormous and continuing US deficits are wearing out the US dollar as reserve currency. A time will come when the US cannot pay for the imports, on which it has become ever more dependent, by flooding the world with ever more dollars.
Offshoring and free market ideology are turning the US into a third world country. According to the Bureau of Labor Statistics, one-quarter of all new US jobs created between June 2006 and June 2007 were for waitresses and bartenders. Almost all of the net new US jobs in the 21st century have been in domestic services. ...
Wednesday, August 15, 2007
GAO comptroller: U.S. government is on a 'burning platform' of unsustainable policies and practices,
August 15, 2007 | Decline and Fall | U.S. comptroller general: America is Rome | by Justin Raimondo
Is America going the way of Rome? David Walker, the comptroller general of the U.S., has issued a report that basically answers in the affirmative: "The U.S. government is on a 'burning platform' of unsustainable policies and practices," Walker avers, including "fiscal deficits" and "overseas military commitments threatening a crisis if action is not taken soon." If we continue on our present course, Walker warns, we are in for "dramatic" tax hikes, a radical reduction in government "services," and "the large-scale dumping by foreign governments of holdings of U.S. debt." The Chinese certainly concur with that last prediction.
"Sound familiar?" asks Walker. It ought to, he contends, because we are going down the path the ancient Romans took. There are, he says, "striking similarities," including "declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government."
"In my view," says Walker, "it's time to learn from history and take steps to ensure the American Republic is the first to stand the test of time."
The GAO is as close to an objective, nonpartisan agency as the U.S. government – or any government – could create. ...
Is America going the way of Rome? David Walker, the comptroller general of the U.S., has issued a report that basically answers in the affirmative: "The U.S. government is on a 'burning platform' of unsustainable policies and practices," Walker avers, including "fiscal deficits" and "overseas military commitments threatening a crisis if action is not taken soon." If we continue on our present course, Walker warns, we are in for "dramatic" tax hikes, a radical reduction in government "services," and "the large-scale dumping by foreign governments of holdings of U.S. debt." The Chinese certainly concur with that last prediction.
"Sound familiar?" asks Walker. It ought to, he contends, because we are going down the path the ancient Romans took. There are, he says, "striking similarities," including "declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government."
"In my view," says Walker, "it's time to learn from history and take steps to ensure the American Republic is the first to stand the test of time."
The GAO is as close to an objective, nonpartisan agency as the U.S. government – or any government – could create. ...
Tuesday, August 14, 2007
Study: Half of Nation’s Poor Don’t Get Food Stamps
uesday, August 14, 2007 by McClatchy Newspapers | Study: Half of Nation’s Poor Don’t Get Food Stamps | by Rob Hotakainen
WASHINGTON - Half of the nation’s eligible poor aren’t getting the food stamps to which they’re entitled, a study released Tuesday found.
The District of Columbia had the highest participation rate in 2004, at 71.8 percent, while Missouri ranked first among the 50 states in getting food stamps to its low-income residents. Nevada ranked last among states, with 32 percent of its eligible residents getting food stamps.
Overall, 50.2 percent of the nation’s qualified poor received food stamps in 2004, according to the study by the National Priorities Project, a nonprofit and nonpartisan research group that examines the local impact of federal budget policies.
“We’ve got over 35 million people in this country struggling to get enough food to eat, and 50 percent of all low-income people are not receiving the benefit that is intended to alleviate this food insecurity,” said Greg Speeter, the project’s executive director. “While the food-stamp program provides a vital service, clearly too many people are still going without.” ...
...
Under the food-stamp program, a family is eligible for aid if its income is 130 percent of the poverty level. ...
WASHINGTON - Half of the nation’s eligible poor aren’t getting the food stamps to which they’re entitled, a study released Tuesday found.
The District of Columbia had the highest participation rate in 2004, at 71.8 percent, while Missouri ranked first among the 50 states in getting food stamps to its low-income residents. Nevada ranked last among states, with 32 percent of its eligible residents getting food stamps.
Overall, 50.2 percent of the nation’s qualified poor received food stamps in 2004, according to the study by the National Priorities Project, a nonprofit and nonpartisan research group that examines the local impact of federal budget policies.
“We’ve got over 35 million people in this country struggling to get enough food to eat, and 50 percent of all low-income people are not receiving the benefit that is intended to alleviate this food insecurity,” said Greg Speeter, the project’s executive director. “While the food-stamp program provides a vital service, clearly too many people are still going without.” ...
...
Under the food-stamp program, a family is eligible for aid if its income is 130 percent of the poverty level. ...
corporations sell our jobs to the lowest overseas bidders ... credit industry preys on our poor ... health industry => bankruptcy ...
Are You Scared? | By Craig Winters
08/14/07 "ICH" -- -- Multinational corporations sell our jobs to the lowest overseas bidders. The credit industry preys on our poor. The for-profit healthcare system is the leading cause of bankruptcy while hospitals dump indigent patients on skid row. Our country’s infrastructure is breaking down from New Orleans levees to Minnesota bridges even as we are mired in a war that drowns us in debt and advances only the interests of big oil and arms merchants. The Medicare prescription drug law leaves an enormous hole in coverage while it forbids the government from negotiating lower prices on behalf of the people. Bush signed into law a bill making bankruptcy harder and more expensive for people who need relief and now he threatens to veto health insurance for poor children.
How can the government ignore such obvious and immediate needs?
The regulatory and general welfare roles of the government have totally succumbed to the unassailable wealth that corporations have amassed over many generations. Blind quest for personal wealth and power now bind government officials (as well as universities, NGOs and think thanks) into an integrated corporate dominated power structure. Corporations use their money and vast resources to control every aspect of our public institutions. More than just campaign contributions and cash bribes, they offer a rich array of incentives to "team players" including private jets, resort vacations, in kind services, indulgence of vices, and obscenely high paying private positions when they leave government. Corporations use their influence over government officials not just to buy their vote or a favorable ruling, but to seduce them into playing the power game, a life-long pursuit of power and wealth at the expense of principles, allegiances, and common decency. Politicians have neither the will nor the capacity to dismantle this system.
So what can desperate citizens do in the face of a captured government? ...
08/14/07 "ICH" -- -- Multinational corporations sell our jobs to the lowest overseas bidders. The credit industry preys on our poor. The for-profit healthcare system is the leading cause of bankruptcy while hospitals dump indigent patients on skid row. Our country’s infrastructure is breaking down from New Orleans levees to Minnesota bridges even as we are mired in a war that drowns us in debt and advances only the interests of big oil and arms merchants. The Medicare prescription drug law leaves an enormous hole in coverage while it forbids the government from negotiating lower prices on behalf of the people. Bush signed into law a bill making bankruptcy harder and more expensive for people who need relief and now he threatens to veto health insurance for poor children.
How can the government ignore such obvious and immediate needs?
The regulatory and general welfare roles of the government have totally succumbed to the unassailable wealth that corporations have amassed over many generations. Blind quest for personal wealth and power now bind government officials (as well as universities, NGOs and think thanks) into an integrated corporate dominated power structure. Corporations use their money and vast resources to control every aspect of our public institutions. More than just campaign contributions and cash bribes, they offer a rich array of incentives to "team players" including private jets, resort vacations, in kind services, indulgence of vices, and obscenely high paying private positions when they leave government. Corporations use their influence over government officials not just to buy their vote or a favorable ruling, but to seduce them into playing the power game, a life-long pursuit of power and wealth at the expense of principles, allegiances, and common decency. Politicians have neither the will nor the capacity to dismantle this system.
So what can desperate citizens do in the face of a captured government? ...
American families were persuaded to take on more debt, refinancing their mortgages and spending some of the proceeds
A day of reckoning for Americans who lived beyond their means | By Joseph Stiglitz
08/12/07 "Taipei Tomes" -- -- The pessimists who have long forecast that the US economy was in for trouble finally seem to be coming into their own. Of course, there is no glee in seeing stock prices tumble as a result of soaring mortgage defaults. But it was largely predictable, as are the likely consequences for both the millions of Americans who will be facing financial distress and the global economy.
The story goes back to the recession of 2001. With the support of former Federal Reserve chairman Alan Greenspan, US President George W. Bush pushed through a tax cut designed to benefit the richest Americans but not to lift the economy out of the recession that followed the collapse of the Internet bubble.
Given that mistake, the Fed had little choice if it was to fulfill its mandate to maintain growth and employment. It had to lower interest rates, which it did in an unprecedented way -- all the way down to 1 percent.
It worked, but in a way fundamentally different from how monetary policy normally works. Usually, low interest rates lead firms to borrow more to invest more, and greater indebtedness is matched by more productive assets.
But given that overinvestment in the 1990s was part of the problem underpinning the recession, lower interest rates did not stimulate much investment. The economy grew, but mainly because American families were persuaded to take on more debt, refinancing their mortgages and spending some of the proceeds. And, as long as housing prices rose as a result of lower interest rates, Americans could ignore their growing indebtedness.
Even this did not stimulate the economy enough. To get more people to borrow more money, credit standards were lowered, fueling growth in so-called "sub-prime" mortgages. Moreover, new products were invented, which lowered upfront payments, making it easier for individuals to take bigger mortgages.
Some mortgages even had negative amortization: payments did not cover the interest due, so every month the debt grew more. Fixed mortgages, with interest rates at 6 percent, were replaced with variable-rate mortgages, whose interest payments were tied to the lower short-term T-bill rates.
What were called "teaser rates" allowed even lower payments for the first few years. They were teasers because they played off the fact that many borrowers were not financially sophisticated and didn't really understand what they were getting into.
And Greenspan egged them to pile on the risk by encouraging these variable-rate mortgages. On Feb. 23, 2004, he pointed out that "many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade." ..
...
Just as the collapse of the real estate bubble was predictable, so are its consequences: housing starts and sales of existing homes are down and housing inventories are up. By some reckonings, more than two-thirds of the increase in output and employment over the past six years has been real estate-related, reflecting both new housing and households borrowing against their homes to support a consumption binge.
The housing bubble induced Americans to live beyond their means -- net savings have been negative for the past couple of years. With this engine of growth turned off, it is hard to see how the US economy would not suffer from a slowdown. A return to fiscal sanity will be good in the long run, but it will reduce aggregate demand in the short run.
There is an old adage about how people's mistakes continue to live long after they are gone. That is certainly true of Greenspan. In Bush's case, we are beginning to bear the consequences even before he has departed. ...
...
Joseph Stiglitz, a Nobel laureate in economics, is professor of economics at Columbia University and was chairman of the Council of Economic Advisers under US president Bill Clinton and a chief economist and senior vice president at the World Bank. Copyright: Project Syndicate
08/12/07 "Taipei Tomes" -- -- The pessimists who have long forecast that the US economy was in for trouble finally seem to be coming into their own. Of course, there is no glee in seeing stock prices tumble as a result of soaring mortgage defaults. But it was largely predictable, as are the likely consequences for both the millions of Americans who will be facing financial distress and the global economy.
The story goes back to the recession of 2001. With the support of former Federal Reserve chairman Alan Greenspan, US President George W. Bush pushed through a tax cut designed to benefit the richest Americans but not to lift the economy out of the recession that followed the collapse of the Internet bubble.
Given that mistake, the Fed had little choice if it was to fulfill its mandate to maintain growth and employment. It had to lower interest rates, which it did in an unprecedented way -- all the way down to 1 percent.
It worked, but in a way fundamentally different from how monetary policy normally works. Usually, low interest rates lead firms to borrow more to invest more, and greater indebtedness is matched by more productive assets.
But given that overinvestment in the 1990s was part of the problem underpinning the recession, lower interest rates did not stimulate much investment. The economy grew, but mainly because American families were persuaded to take on more debt, refinancing their mortgages and spending some of the proceeds. And, as long as housing prices rose as a result of lower interest rates, Americans could ignore their growing indebtedness.
Even this did not stimulate the economy enough. To get more people to borrow more money, credit standards were lowered, fueling growth in so-called "sub-prime" mortgages. Moreover, new products were invented, which lowered upfront payments, making it easier for individuals to take bigger mortgages.
Some mortgages even had negative amortization: payments did not cover the interest due, so every month the debt grew more. Fixed mortgages, with interest rates at 6 percent, were replaced with variable-rate mortgages, whose interest payments were tied to the lower short-term T-bill rates.
What were called "teaser rates" allowed even lower payments for the first few years. They were teasers because they played off the fact that many borrowers were not financially sophisticated and didn't really understand what they were getting into.
And Greenspan egged them to pile on the risk by encouraging these variable-rate mortgages. On Feb. 23, 2004, he pointed out that "many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade." ..
...
Just as the collapse of the real estate bubble was predictable, so are its consequences: housing starts and sales of existing homes are down and housing inventories are up. By some reckonings, more than two-thirds of the increase in output and employment over the past six years has been real estate-related, reflecting both new housing and households borrowing against their homes to support a consumption binge.
The housing bubble induced Americans to live beyond their means -- net savings have been negative for the past couple of years. With this engine of growth turned off, it is hard to see how the US economy would not suffer from a slowdown. A return to fiscal sanity will be good in the long run, but it will reduce aggregate demand in the short run.
There is an old adage about how people's mistakes continue to live long after they are gone. That is certainly true of Greenspan. In Bush's case, we are beginning to bear the consequences even before he has departed. ...
...
Joseph Stiglitz, a Nobel laureate in economics, is professor of economics at Columbia University and was chairman of the Council of Economic Advisers under US president Bill Clinton and a chief economist and senior vice president at the World Bank. Copyright: Project Syndicate
The delusion that the US is “the world’s sole superpower,” whose currency is desirable regardless of its excess supply, reflects American hubris
August 8, 2007 | Uncle Sam, Your Banker Will See You Now ... | In the Hole to China |
By PAUL CRAIG ROBERTS
Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China’s considerable holdings of US dollars and Treasury bonds “contributes a great deal to maintaining the position of the dollar as a reserve currency.”
Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, “the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar.”
If Western financial markets are sufficiently intelligent to comprehend the message, US interest rates will rise regardless of any further action by China. At this point, China does not need to sell a single bond. In an instant, China has made it clear that US interest rates depend on China, not on the Federal Reserve.
The precarious position of the US dollar as reserve currency has been thoroughly ignored and denied. The delusion that the US is “the world’s sole superpower,” whose currency is desirable regardless of its excess supply, reflects American hubris, not reality. This hubris is so extreme that only 6 weeks ago McKinsey Global Institute published a study that concluded that even a doubling of the US current account deficit to $1.6 trillion would pose no problem.
Strategic thinkers, if any remain who have not been purged by neocons, will quickly conclude that China’s power over the value of the dollar and US interest rates also gives China power over US foreign policy. The US was able to attack Afghanistan and Iraq only because China provided the largest part of the financing for Bush’s wars.
If China ceased to buy US Treasuries, Bush’s wars would end. The savings rate of US consumers is essentially zero, and several million are afflicted with mortgages that they cannot afford. With Bush’s budget in deficit and with no room in the US consumer’s budget for a tax increase, Bush’s wars can only be financed by foreigners.
No country on earth, except for Israel, supports the Bush regimes’ desire to attack Iran. ...
By PAUL CRAIG ROBERTS
Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China’s considerable holdings of US dollars and Treasury bonds “contributes a great deal to maintaining the position of the dollar as a reserve currency.”
Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, “the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar.”
If Western financial markets are sufficiently intelligent to comprehend the message, US interest rates will rise regardless of any further action by China. At this point, China does not need to sell a single bond. In an instant, China has made it clear that US interest rates depend on China, not on the Federal Reserve.
The precarious position of the US dollar as reserve currency has been thoroughly ignored and denied. The delusion that the US is “the world’s sole superpower,” whose currency is desirable regardless of its excess supply, reflects American hubris, not reality. This hubris is so extreme that only 6 weeks ago McKinsey Global Institute published a study that concluded that even a doubling of the US current account deficit to $1.6 trillion would pose no problem.
Strategic thinkers, if any remain who have not been purged by neocons, will quickly conclude that China’s power over the value of the dollar and US interest rates also gives China power over US foreign policy. The US was able to attack Afghanistan and Iraq only because China provided the largest part of the financing for Bush’s wars.
If China ceased to buy US Treasuries, Bush’s wars would end. The savings rate of US consumers is essentially zero, and several million are afflicted with mortgages that they cannot afford. With Bush’s budget in deficit and with no room in the US consumer’s budget for a tax increase, Bush’s wars can only be financed by foreigners.
No country on earth, except for Israel, supports the Bush regimes’ desire to attack Iran. ...
The Insolvency Crisis: How we got here, and what to expect
Pol/Econ: The Insolvency Crisis: How we got here, and what to expect | Saturday, 11 August 2007 Written by Garrett Johnson
...
In late 1997 the hedge fund Long Term Capital Management was Wall Street royalty. With not one, but two Nobel Prize winners in economics on staff, they consistently generated 40%+ returns for their investors. Their mathematical models seemed to have conquered all the mysteries of high finance.
Then they lost $4.8 Billion in 1998 and nearly became insolvent.
...
A large percentage of those new mortgages were 2/28's - a low, two-year "teaser" interest rate, which then resets to a much higher market rate. As those mortgages reset, foreclosure rates spiked.
"Normal foreclosure rate in the United States is anywhere from 300,000 to 500,000 per year. Now the projected rate is 1.7 million," said Jessica Cecere, president of Consumer Credit Counseling Service.
...
This isn't 1998 all over again. We've gone beyond that.
Today we do not have only a liquidity crisis like in 1998; we also have a insolvency/debt crisis among a variety of borrowers that overborrowed excessively during the boom phase...the recent sharp widening in corporate credit spreads is not just a sign of a liquidity crunch; it is a sign that investors are realizing that there are serious credit/solvency problems in some parts of the corporate system.
If you needed any proof that there is a credit crunch in America today, look at what is happening with credit cards.
In a form letter, Capital One told her the interest rate on her credit card was about to almost double—she’d been bumped up from a fixed 8.9 percent rate to a "variable rate that equals the prime rate plus 6.9 percent"—or about 15.8 percent. The letter blamed rising interest rates across the economy for the decision.[...]
...
...
In late 1997 the hedge fund Long Term Capital Management was Wall Street royalty. With not one, but two Nobel Prize winners in economics on staff, they consistently generated 40%+ returns for their investors. Their mathematical models seemed to have conquered all the mysteries of high finance.
Then they lost $4.8 Billion in 1998 and nearly became insolvent.
...
A large percentage of those new mortgages were 2/28's - a low, two-year "teaser" interest rate, which then resets to a much higher market rate. As those mortgages reset, foreclosure rates spiked.
"Normal foreclosure rate in the United States is anywhere from 300,000 to 500,000 per year. Now the projected rate is 1.7 million," said Jessica Cecere, president of Consumer Credit Counseling Service.
...
This isn't 1998 all over again. We've gone beyond that.
Today we do not have only a liquidity crisis like in 1998; we also have a insolvency/debt crisis among a variety of borrowers that overborrowed excessively during the boom phase...the recent sharp widening in corporate credit spreads is not just a sign of a liquidity crunch; it is a sign that investors are realizing that there are serious credit/solvency problems in some parts of the corporate system.
If you needed any proof that there is a credit crunch in America today, look at what is happening with credit cards.
In a form letter, Capital One told her the interest rate on her credit card was about to almost double—she’d been bumped up from a fixed 8.9 percent rate to a "variable rate that equals the prime rate plus 6.9 percent"—or about 15.8 percent. The letter blamed rising interest rates across the economy for the decision.[...]
...
NAFTA: sweatshops.... 34 to 58 percent of decline in manufacturing ... 1,000,000 net mfg jobs lost .... 23-77% reduction in pay ...
The Tail End of Free Trade | A Preliminary Evaluation of the Impact of NAFTA on the Manufacturing Sector | by Jacob Hill / August 10th, 2007
...
One of the most drastic and disturbing results of NAFTA has been a boom in the Mexican maquiladora sector. In the U.S. and the developed world, these manufacturing units would deservedly be known as sweatshops. ... The sweatshop problem has been well known since the inception of NAFTA. In 1995, just a year after the implementation of the free trade agreement, The New York Times reported on the exploitation of Mexican young girls by the maquiladoras. U.S. companies, often working through third parties, pay children as young as 14 years of age wages under 40 cents per hour. Maquiladoras located within walled and barbed wired free trade zones are not only exempt from import taxes, but are also exempt from state and local imposts for up to 10 years. ... As a result, sweatshop workers possess almost no leverage to negotiate improved labor rights. Refusing to work overtime, taking breaks (in spite of the fact that they are required by un-enforced law), illness, visits to the doctor, and pregnancy rests have all been recorded as reasons for job terminations in the maquiladora sector. ...
...
There is no denying the fact that NAFTA has generated an impressive net growth regarding exports from the U.S. Since the pact’s inception, according to the EPI, U.S. outflows to Mexico have increased 114 percent and exports to Canada have risen 60 percent. On the other hand, imports from Mexico to the U.S. have risen by 274 percent, while those from Canada have grown by 90 percent. As a result, the U.S.’s combined $20.6 billion trade deficit to Mexico and Canada in 1993 has ballooned in the post-NAFTA era by 538 percent to $110.6 billion in 2004 (figures provided in inflation-adjusted 1996 dollars by the EPI). This deficit is a signal of a growing U.S. dependence on the health of external economies and has affected several of the nation’s key historic industries. ...
There is a direct correlation between the growth of the U.S.’s trade deficit and the rise in unemployment throughout the U.S. manufacturing sector over the last 13 years. According to international trade and macroeconomics expert Dr. L. Josh Bivins, growing trade deficits are responsible for 34 to 58 percent of the decline in manufacturing unemployment. When one looks at the whole picture, NAFTA is responsible for a 77 percent increase in jobs supported by domestic exports and a 147 percent increase in jobs displaced by imports.
During the first 10 years of NAFTA, 942,459 jobs were created in the U.S. by the agreement, but 1,956,750 jobs have been nullified by it, resulting in an overall net loss of more than 1,000,000 jobs. A report by Public Citizen found that workers in the U.S. who have lost high-wage jobs with benefits in the manufacturing sector have only been able to find “new work in service sector positions that typically pay 23-77 percent less than their previous wages and offer few or no benefits.” Among the hardest hit in the U.S. have been Latino workers. According to the report by the Labor Council for Latin American Advancement, 47 percent of the total number of workers who received federal assistance under a program for workers certified as having lost jobs in 1999 as a direct result of NAFTA, were Latino. ...
...
One of the most drastic and disturbing results of NAFTA has been a boom in the Mexican maquiladora sector. In the U.S. and the developed world, these manufacturing units would deservedly be known as sweatshops. ... The sweatshop problem has been well known since the inception of NAFTA. In 1995, just a year after the implementation of the free trade agreement, The New York Times reported on the exploitation of Mexican young girls by the maquiladoras. U.S. companies, often working through third parties, pay children as young as 14 years of age wages under 40 cents per hour. Maquiladoras located within walled and barbed wired free trade zones are not only exempt from import taxes, but are also exempt from state and local imposts for up to 10 years. ... As a result, sweatshop workers possess almost no leverage to negotiate improved labor rights. Refusing to work overtime, taking breaks (in spite of the fact that they are required by un-enforced law), illness, visits to the doctor, and pregnancy rests have all been recorded as reasons for job terminations in the maquiladora sector. ...
...
There is no denying the fact that NAFTA has generated an impressive net growth regarding exports from the U.S. Since the pact’s inception, according to the EPI, U.S. outflows to Mexico have increased 114 percent and exports to Canada have risen 60 percent. On the other hand, imports from Mexico to the U.S. have risen by 274 percent, while those from Canada have grown by 90 percent. As a result, the U.S.’s combined $20.6 billion trade deficit to Mexico and Canada in 1993 has ballooned in the post-NAFTA era by 538 percent to $110.6 billion in 2004 (figures provided in inflation-adjusted 1996 dollars by the EPI). This deficit is a signal of a growing U.S. dependence on the health of external economies and has affected several of the nation’s key historic industries. ...
There is a direct correlation between the growth of the U.S.’s trade deficit and the rise in unemployment throughout the U.S. manufacturing sector over the last 13 years. According to international trade and macroeconomics expert Dr. L. Josh Bivins, growing trade deficits are responsible for 34 to 58 percent of the decline in manufacturing unemployment. When one looks at the whole picture, NAFTA is responsible for a 77 percent increase in jobs supported by domestic exports and a 147 percent increase in jobs displaced by imports.
During the first 10 years of NAFTA, 942,459 jobs were created in the U.S. by the agreement, but 1,956,750 jobs have been nullified by it, resulting in an overall net loss of more than 1,000,000 jobs. A report by Public Citizen found that workers in the U.S. who have lost high-wage jobs with benefits in the manufacturing sector have only been able to find “new work in service sector positions that typically pay 23-77 percent less than their previous wages and offer few or no benefits.” Among the hardest hit in the U.S. have been Latino workers. According to the report by the Labor Council for Latin American Advancement, 47 percent of the total number of workers who received federal assistance under a program for workers certified as having lost jobs in 1999 as a direct result of NAFTA, were Latino. ...
China’s announcement that China, not the Federal Reserve, controls US interest rates by its decision to purchase, hold, or dump US Treasury bonds ...
China’s “Nuclear Option” is real | By Paul Craig Roberts
08/11/07 "ICH' -- -- Twenty-four hours after I reported China’s announcement that China, not the Federal Reserve, controls US interest rates by its decision to purchase, hold, or dump US Treasury bonds, the news of the announcement appeared in sanitized and unthreatening form in a few US news sources.
The Washington Post found an economics professor at the University of Wisconsin to provide reassurances that it was “not really a credible threat” that China would intervene in currency or bond markets in any way that could hurt the dollar’s value or raise US interest rates, because China would hurt its own pocketbook by such actions.
US Treasury Secretary Henry Paulson, just back from Beijing, where he gave China orders to raise the value of the Chinese yuan “without delay,” dismissed the Chinese announcement as “frankly absurd.”
Both the professor and the Treasury Secretary are greatly mistaken.
First, understand that the announcement was not made by a minister or vice minister of the government. The Chinese government is inclined to have important announcements come from research organizations that work closely with the government. This announcement came from two such organizations. A high official of the Development Research Center, an organization with cabinet rank, let it be known that US financial stability was too dependent on China’s financing of US red ink for the US to be giving China orders. An official at the Chinese Academy of Social Sciences pointed out that the reserve currency status of the US dollar was dependent on China’s good will as America’s lender.
What the two officials said is completely true. It is something that some of us have known for a long time. What is different is that China publicly called attention to Washington’s dependence on China’s good will. By doing so, China signaled that it was not going to be bullied or pushed around. ...
08/11/07 "ICH' -- -- Twenty-four hours after I reported China’s announcement that China, not the Federal Reserve, controls US interest rates by its decision to purchase, hold, or dump US Treasury bonds, the news of the announcement appeared in sanitized and unthreatening form in a few US news sources.
The Washington Post found an economics professor at the University of Wisconsin to provide reassurances that it was “not really a credible threat” that China would intervene in currency or bond markets in any way that could hurt the dollar’s value or raise US interest rates, because China would hurt its own pocketbook by such actions.
US Treasury Secretary Henry Paulson, just back from Beijing, where he gave China orders to raise the value of the Chinese yuan “without delay,” dismissed the Chinese announcement as “frankly absurd.”
Both the professor and the Treasury Secretary are greatly mistaken.
First, understand that the announcement was not made by a minister or vice minister of the government. The Chinese government is inclined to have important announcements come from research organizations that work closely with the government. This announcement came from two such organizations. A high official of the Development Research Center, an organization with cabinet rank, let it be known that US financial stability was too dependent on China’s financing of US red ink for the US to be giving China orders. An official at the Chinese Academy of Social Sciences pointed out that the reserve currency status of the US dollar was dependent on China’s good will as America’s lender.
What the two officials said is completely true. It is something that some of us have known for a long time. What is different is that China publicly called attention to Washington’s dependence on China’s good will. By doing so, China signaled that it was not going to be bullied or pushed around. ...
Friday, August 10, 2007
spares a small band of the country's richest and most powerful financiers $6 billion a year in personal income taxes ...
Wall Street's Lucrative Tax Break Is Under Fire By Jeffrey H. Birnbaum and Lori Montgomery The Washington Post Friday 03 August 2007
The most controversial tax break on Wall Street, known simply as the Carry, is not authorized by any law and was never approved by Congress.
Instead, it grew quietly over several decades, hinted at but never directly addressed in obscure court cases and arcane regulations issued by the Internal Revenue Service.
Unchallenged by lawmakers, it swelled into a benefit that, by one back-of-the-envelope estimate, spares a small band of the country's richest and most powerful financiers $6 billion a year in personal income taxes.
The astonishing cost of this tax break to the federal government has riveted attention on Wall Street's titans of the moment, the extraordinarily wealthy managers of private-equity firms and hedge funds. Until now, they have gone largely unexamined by Washington. But at a time of rising income inequality and with Congress engaged in a desperate hunt for cash to expand aid to a disgruntled middle class, the Wall Street money men have become an appealing target for Democratic lawmakers and presidential candidates, who say the financiers are woefully undertaxed.
At the heart of the dispute is the way the fund manager's profits are taxed. Known as carried interest, or the Carry, those profits are taxed as capital gains, for which the rate is usually 15 percent. That is less than half the 35 percent rate paid on regular income. ...
The most controversial tax break on Wall Street, known simply as the Carry, is not authorized by any law and was never approved by Congress.
Instead, it grew quietly over several decades, hinted at but never directly addressed in obscure court cases and arcane regulations issued by the Internal Revenue Service.
Unchallenged by lawmakers, it swelled into a benefit that, by one back-of-the-envelope estimate, spares a small band of the country's richest and most powerful financiers $6 billion a year in personal income taxes.
The astonishing cost of this tax break to the federal government has riveted attention on Wall Street's titans of the moment, the extraordinarily wealthy managers of private-equity firms and hedge funds. Until now, they have gone largely unexamined by Washington. But at a time of rising income inequality and with Congress engaged in a desperate hunt for cash to expand aid to a disgruntled middle class, the Wall Street money men have become an appealing target for Democratic lawmakers and presidential candidates, who say the financiers are woefully undertaxed.
At the heart of the dispute is the way the fund manager's profits are taxed. Known as carried interest, or the Carry, those profits are taxed as capital gains, for which the rate is usually 15 percent. That is less than half the 35 percent rate paid on regular income. ...
The hedge fund tax loophole is a crystal-clear example of unjustified privilege. .. quirk in the law ...
Friday, August 03, 2007 A Test for Democrats By PAUL KRUGMAN
...
The hedge fund tax loophole is a crystal-clear example of unjustified privilege. Because of a quirk in the law, the people who run these funds don’t pay taxes like ordinary mortals.
For example, the salaries that pension fund employees receive for managing other peoples’ money are taxed as ordinary income, at rates up to 35 percent. But if that money is invested with a hedge fund — and 40 percent of the money in hedge funds comes from public, corporate and union pension plans — the fees the hedge fund manager receives for his services are mainly taxed as capital gains, with a maximum rate of 15 percent.
The arguments usually made on behalf of this unique privilege make no sense. We’re told that the tax rate on hedge fund managers has to be kept low to encourage risk-taking. But the managers aren’t risking their own money. The only risk they face is the uncertainty of their fees — and as any waitress who depends on tips or salesman who depends on commissions can tell you, most people with uncertain incomes don’t get any special tax breaks.
We’re also told that management fees would rise, reducing returns to investors, if the privileged status of fund managers is eliminated — as if someone with a $100-million-a-year hedge fund job would walk away if his take-home pay fell from $85 million to $65 million.
...
...
The hedge fund tax loophole is a crystal-clear example of unjustified privilege. Because of a quirk in the law, the people who run these funds don’t pay taxes like ordinary mortals.
For example, the salaries that pension fund employees receive for managing other peoples’ money are taxed as ordinary income, at rates up to 35 percent. But if that money is invested with a hedge fund — and 40 percent of the money in hedge funds comes from public, corporate and union pension plans — the fees the hedge fund manager receives for his services are mainly taxed as capital gains, with a maximum rate of 15 percent.
The arguments usually made on behalf of this unique privilege make no sense. We’re told that the tax rate on hedge fund managers has to be kept low to encourage risk-taking. But the managers aren’t risking their own money. The only risk they face is the uncertainty of their fees — and as any waitress who depends on tips or salesman who depends on commissions can tell you, most people with uncertain incomes don’t get any special tax breaks.
We’re also told that management fees would rise, reducing returns to investors, if the privileged status of fund managers is eliminated — as if someone with a $100-million-a-year hedge fund job would walk away if his take-home pay fell from $85 million to $65 million.
...
Over the last several years, America’s imbalances in trade and other global transactions have worsened dramatically, requiring billiions in borrowing
A Weak Dollar and the Fed Published: August 8, 2007
Despite the Federal Reserve’s stay-the-course message yesterday, investors are betting on at least one interest-rate cut by January, intended to quell turmoil in the markets and to juice the slow economy. But with the dollar also weak — recently hitting its lowest point in 15 years against an index of other major currencies — the Fed may be reluctant to oblige.
A declining dollar is a source of inflationary pressure because it can boost the cost of imports. So if the Fed tried to rev up the economy with a rate cut at the same time the dollar is falling, it could end up provoking even more inflation. That would be a drag on economic growth rather than a boost. In an extreme case, it could result in a toxic combination of weak growth and high prices that is a central banker’s nightmare.
How did the Fed lose room to maneuver? The answer is rooted in the Bush administration’s misguided economic policies.
Over the last several years, America’s imbalances in trade and other global transactions have worsened dramatically, requiring the United States to borrow billions of dollars a day from abroad just to balance its books....
Despite the Federal Reserve’s stay-the-course message yesterday, investors are betting on at least one interest-rate cut by January, intended to quell turmoil in the markets and to juice the slow economy. But with the dollar also weak — recently hitting its lowest point in 15 years against an index of other major currencies — the Fed may be reluctant to oblige.
A declining dollar is a source of inflationary pressure because it can boost the cost of imports. So if the Fed tried to rev up the economy with a rate cut at the same time the dollar is falling, it could end up provoking even more inflation. That would be a drag on economic growth rather than a boost. In an extreme case, it could result in a toxic combination of weak growth and high prices that is a central banker’s nightmare.
How did the Fed lose room to maneuver? The answer is rooted in the Bush administration’s misguided economic policies.
Over the last several years, America’s imbalances in trade and other global transactions have worsened dramatically, requiring the United States to borrow billions of dollars a day from abroad just to balance its books....
Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress
China threatens 'nuclear option' of dollar sales By Ambrose Evans-Pritchard Last Updated: 9:54am BST 08/08/2007
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.
"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.
He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.
"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.
"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily. ...
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.
"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.
He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.
"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.
"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily. ...
Tuesday, August 7, 2007
Cheneys paid an effective tax rate of 23.4 percent ... less than Buffet's secretary ....
Bush economics: 'Only the little people pay taxes' | ROBYN BLUMNER | Article Last Updated: 08/06/2007 12:02:45 AM MDT
...
Some of the biggest stories of the past few weeks have been about the great tax dodges by the financial kings of the hedge fund and private equity world. Investment managers making upwards of a $1 billion a year are paying lower tax rates than the people who teach their children or deliver their mail.
Warren Buffett, the world's third-richest man, blasted the U.S. tax system earlier this summer because he pays a lower rate of taxes than his secretary. Buffett said, without trying to avoid taxes, that he paid 17.7 percent on the $46 million he made in 2006 while his secretary who made $60,000 was taxed at 30 percent.
Unseemly? Immoral? Outrageous? You bet! This imbalance is a consequence of decades of tax reforms that have benefited those at the top, with a marked acceleration under President Bush. ...
...
Piketty and Saez looked across all major forms of wealth and income taxes, including payroll, estate, income and corporate taxes. In 1960, they say that the top 0.01 percent of earners paid 71 percent of their income in federal taxes. In 2005, the same 0.01 percent, or those making more than $18 million annually, paid only about 35 percent.
Taxes for America's wealthiest are at historic lows, according to the economists. Meanwhile, the average federal tax rate for the middle class has remained roughly constant or ticked up a few percentage points, depending on where in the middle one falls.
Flattening the income tax, reducing if not eliminating capital gains, estate and corporate taxes - all in the service of the rich - have been long-standing Republican priorities. Bush purposely allowed his tax cuts to exacerbate the Alternative Minimum Tax problem for the middle class in order to give bigger breaks to those at the very top.
According to Citizens for Tax Justice, Vice President Dick Cheney and his wife saved $111,000 in taxes last year thanks to the breaks he and the president stewarded through Congress. The Cheneys paid an effective tax rate of 23.4 percent on $1.8 million in income in 2006. Also less than Warren Buffett's secretary. ...
...
Some of the biggest stories of the past few weeks have been about the great tax dodges by the financial kings of the hedge fund and private equity world. Investment managers making upwards of a $1 billion a year are paying lower tax rates than the people who teach their children or deliver their mail.
Warren Buffett, the world's third-richest man, blasted the U.S. tax system earlier this summer because he pays a lower rate of taxes than his secretary. Buffett said, without trying to avoid taxes, that he paid 17.7 percent on the $46 million he made in 2006 while his secretary who made $60,000 was taxed at 30 percent.
Unseemly? Immoral? Outrageous? You bet! This imbalance is a consequence of decades of tax reforms that have benefited those at the top, with a marked acceleration under President Bush. ...
...
Piketty and Saez looked across all major forms of wealth and income taxes, including payroll, estate, income and corporate taxes. In 1960, they say that the top 0.01 percent of earners paid 71 percent of their income in federal taxes. In 2005, the same 0.01 percent, or those making more than $18 million annually, paid only about 35 percent.
Taxes for America's wealthiest are at historic lows, according to the economists. Meanwhile, the average federal tax rate for the middle class has remained roughly constant or ticked up a few percentage points, depending on where in the middle one falls.
Flattening the income tax, reducing if not eliminating capital gains, estate and corporate taxes - all in the service of the rich - have been long-standing Republican priorities. Bush purposely allowed his tax cuts to exacerbate the Alternative Minimum Tax problem for the middle class in order to give bigger breaks to those at the very top.
According to Citizens for Tax Justice, Vice President Dick Cheney and his wife saved $111,000 in taxes last year thanks to the breaks he and the president stewarded through Congress. The Cheneys paid an effective tax rate of 23.4 percent on $1.8 million in income in 2006. Also less than Warren Buffett's secretary. ...
Commerce Department revised its growth data last month ... the economy grew much slower over the last three years than we had previously thought
Economy Goes From Bad to Worse | By Dean Baker | t r u t h o u t | Columnist | Monday 06 August 2007
...
The Commerce Department revised its growth data last month. It now shows the economy grew much slower over the last three years than we had previously thought. In particular, the new data implies productivity has been growing at just a 1.5 percent annual rate over the last three years. This is the same rate the economy experienced during the long productivity slowdown from 1973 to 1995. It is a full percentage point below the 2.5 percent growth rate from 1995 to 2004.
...
The fact productivity growth has now slowed is a very bad sign. It means the economy is not doing well by any measure. The argument for conservative economic policy was always that by giving people more incentive to work and invest, productivity would grow more rapidly, and that this would benefit everyone in the long run. It turns out, even with the massive upward redistribution of income over the last quarter century, productivity is now growing at its slowest pace in the post-war period. In short, we are not seeing much growth and the growth we are seeing is going to those at the top.
...
... We should all want higher, more rapid productivity growth. But this does mean the policy of redistributing income upwards has been a clear failure, insofar as its goal was to increase economic growth ...
...
The Commerce Department revised its growth data last month. It now shows the economy grew much slower over the last three years than we had previously thought. In particular, the new data implies productivity has been growing at just a 1.5 percent annual rate over the last three years. This is the same rate the economy experienced during the long productivity slowdown from 1973 to 1995. It is a full percentage point below the 2.5 percent growth rate from 1995 to 2004.
...
The fact productivity growth has now slowed is a very bad sign. It means the economy is not doing well by any measure. The argument for conservative economic policy was always that by giving people more incentive to work and invest, productivity would grow more rapidly, and that this would benefit everyone in the long run. It turns out, even with the massive upward redistribution of income over the last quarter century, productivity is now growing at its slowest pace in the post-war period. In short, we are not seeing much growth and the growth we are seeing is going to those at the top.
...
... We should all want higher, more rapid productivity growth. But this does mean the policy of redistributing income upwards has been a clear failure, insofar as its goal was to increase economic growth ...
Since leading in 1996 ... there are nine DEVELOPING countries that have more and better broadband service ...
August 3, 2007 | Pulpit | Game Over: The U.S. is unlikely to ever regain its broadband leadership.
...
[In 1996] America was the top broadband country in the world. But now we're in the middle of the pack among developed countries and there are nine DEVELOPING countries that have more and better broadband service than does America according to the Organisation for Economic Co-operation and Development (OECD). To those who say this is BS and that we're actually ahead of the world if you control for rural populations, family size, the effect of Wi-Fi hotspots, etc., I say that is simply wrong: we are behind and losing ground. And the countries ahead of us, a diverse lot including France, Iceland, Japan, Korea, Switzerland, the UK, and even Canada, are for the most part growing faster than we are in large part because of this IT advantage.
...
... Though they are required to operate in the public interest and to provide public services, these monopolies have never been forced to consider our place in the world.
If there's a solution to this problem it isn't wireless. U.S. mobile carriers are as far behind their foreign counterparts as U.S. ISPs are generally. For all the companies' talk of unlimited mobile broadband, three Slingboxes can take down an EVDO cell. What would happen if AT&T gave every iPhone as much bandwidth as it could easily use? Gridlock. And WiMax is effectively useless too, because the sweet spot in cell size is so large that no ISP can provision enough bandwidth to serve even a quarter of the people who might potentially sign up. They could do it with smaller cells, but then the companies wouldn't make money. ...
...
[In 1996] America was the top broadband country in the world. But now we're in the middle of the pack among developed countries and there are nine DEVELOPING countries that have more and better broadband service than does America according to the Organisation for Economic Co-operation and Development (OECD). To those who say this is BS and that we're actually ahead of the world if you control for rural populations, family size, the effect of Wi-Fi hotspots, etc., I say that is simply wrong: we are behind and losing ground. And the countries ahead of us, a diverse lot including France, Iceland, Japan, Korea, Switzerland, the UK, and even Canada, are for the most part growing faster than we are in large part because of this IT advantage.
...
... Though they are required to operate in the public interest and to provide public services, these monopolies have never been forced to consider our place in the world.
If there's a solution to this problem it isn't wireless. U.S. mobile carriers are as far behind their foreign counterparts as U.S. ISPs are generally. For all the companies' talk of unlimited mobile broadband, three Slingboxes can take down an EVDO cell. What would happen if AT&T gave every iPhone as much bandwidth as it could easily use? Gridlock. And WiMax is effectively useless too, because the sweet spot in cell size is so large that no ISP can provision enough bandwidth to serve even a quarter of the people who might potentially sign up. They could do it with smaller cells, but then the companies wouldn't make money. ...
From June 2006 to June 2007: essentially all of the new jobs are in low-paid domestic services that do not require a college education
Return of the Robber Barons | By Paul Craig Roberts
08/02/07 "ICH" -- -- As the Bush Regime outfits B-2 stealth bombers with 30,000 pound monster “bunker buster” bombs for its coming attack on Iran, the US economy continues its 21st century decline. While profits soar for the armaments industry, the American people continue to take it on the chin.
The latest report from the Bureau of Labor Statistics shows that the real wages and salaries of US civilian workers are below those of 5 years ago. It could not be otherwise with US corporations offshoring good jobs in order to reduce labor costs and, thereby, to convert wages once paid to Americans into multi-million dollar bonuses paid to CEOs and other top management.
Good jobs that still remain in the US are increasingly filled with foreign workers brought in on work visas. Corporate public relations departments have successfully spread the lie that there is a shortage of qualified US workers, necessitating the importation into the US of foreigners. The truth is that the US corporations force their American employees to train the lower paid foreigners who take their jobs. Otherwise, the discharged American gets no severance pay. [See, for example, http://www.amren.com/mtnews/archives/2006/06/bofa_train_your.php ]
...
Meanwhile, US colleges and universities continue to graduate hundreds of thousands of qualified engineers, IT professionals, and other professionals who will never have the opportunity to work in the professions for which they have been trained. America today is like India of yesteryear, with engineers working as bartenders, taxi cab drivers, waitresses, and employed in menial work in dog kennels as the offshoring of US jobs dismantles the ladders of upward mobility for US citizens.
Over the last year (from June 2006 through June 2007) the US economy created 1.6 million net private sector jobs. As Charles McMillion of MBG Information Services reports each month, essentially all of the new jobs are in low-paid domestic services that do not require a college education.
The category, “Leisure and hospitality,” accounts for 30% of the new jobs, of which 387,000 are bartenders and waitresses, 38,000 are workers in motels and hotels, and 50,000 are employed in entertainment and recreation.
The category, “Education and health services,” accounts for 35% of the gain in employment, of which 100,000 are in educational services and 456,000 are in health care and social assistance, principally ambulatory health care services and hospitals.
“Professional and technical services” accounts for 268,000 of the new jobs. “Finance and insurance” added 93,000 new jobs, of which about one quarter are in real estate and about one half are in insurance. “Transportation and warehousing” added 65,000 jobs, and wholesale and retail trade added 185,000.
Over the entire year, the US economy created merely 51,000 jobs in architectural and engineering services, less than the 76,000 jobs created in management and technical consulting (essentially laid-off white collar professionals).
...
In Richistan there is a two-year waiting list for $50 million 200-foot yachts. In Richistan Rolex watches are considered Wal-Mart junk. Richistanians sport $736,000 Franck Muller timepieces, sign their names with $700,000 Mont Blanc jewel-encrusted pens. Their valets, butlers (with $100,000 salaries), and bodyguards carry the $42,000 Louis Vitton handbags of wives and mistresses.
Richistanians join clubs open only to those with $100 million, pay $650,000 for golf club memberships, eat $50 hamburgers and $1,000 omelettes, drink $90 a bottle Bling mineral water and down $10,000 “martinis on a rock” (gin or vodka poured over a diamond) at New York’s Algonquin Hotel.
Who are the Richistanians? They are CEOs who have moved their companies abroad and converted the wages they formerly paid Americans into $100 million compensation packages for themselves. They are investment bankers and hedge fund managers, who created the subprime mortgage derivatives that currently threaten to collapse the economy. One of them was paid $1.7 billion last year. The $575 million that each of 25 other top earners were paid is paltry by comparison, but unimaginable wealth to everyone else.
...
America as the land of opportunity has passed into history.
Since Bush has been president: income down $1,300, 3 million less pensions-manufacturing jobs, 7M lost health insurance, graduate earnings down 5%
Monday, August 6, 2007 by CommonDreams.org | Roll Back the Reagan Tax Cuts | by Thom Hartmann
...
There is much discussion of what the floor on earnings should be - the minimum wage - but none about the ceiling. That’s largely because effectively there is no ceiling, and those who control vast wealth in America are happy to have Americans fight over “How poor is too poor?” just so long as nobody asks “How rich is too rich?”
...
But the rich fought back, and won big-time in 1980 when Reagan, until then the fringe “Voodoo economics” candidate who was heading into the election trailing far behind Jimmy Carter, was swept into the White House on a wave of public concern of the Iranians taking US hostages. Reagan promptly cut income taxes on the very rich from 70% down to 27%. Corporate tax rates were also cut so severely that they went from representing over 33% of total federal tax receipts in 1951 to less than 9% in 1983 (they’re still in that neighborhood, the lowest in the industrialized world).
The result was devastating. Our government was suddenly so badly awash in red ink that Reagan doubled the tax paid only by people earning less than $40,000/year (FICA), and then began borrowing from the huge surplus this new tax was accumulating in the Social Security Trust Fund. Even with that, Reagan had to borrow more money in his 8 years than the sum total of all presidents from George Washington to Jimmy Carter combined.
In addition to badly throwing the nation into debt, Reagan’s tax cut blew out the ceiling on the accumulation of wealth, leading to a new Gilded Age and the rise of a generation of super-wealthy that hadn’t been seen since the Robber Baron era of the 1890s or the Roaring 20s.
...
And Bush, following closely in Reagan’s footsteps, is making things worse. As Senator Bernie Sanders pointed out at recent hearings for the confirmation of Bush’s new nominee for the Office of Management and Budget:
Since Bush has been president:
* over 5 million people have slipped into poverty;
* nearly 7 million Americans have lost their health insurance;
* median household income has gone down by nearly $1,300;
* three million manufacturing jobs have been lost;
* three million American workers have lost their pensions;
* home foreclosures are now the highest on record;
* the personal savings rate is below zero - which hasn’t happened since the great depression;
* the real earnings of college graduates have gone down by about 5% in the last few years;
* entry level wages for male and female high school graduates have fallen by over 3%;
* wages and salaries are now at the lowest share of GDP since 1929.
The debate about whether or not to roll Bush’s tax cuts back to Clinton’s modest mid-30% rates is absurd. It’s time to roll back the horribly failed experiment of the Reagan tax cuts. And use that money to pay down Reagan’s debt and rebuild this nation. ...
...
There is much discussion of what the floor on earnings should be - the minimum wage - but none about the ceiling. That’s largely because effectively there is no ceiling, and those who control vast wealth in America are happy to have Americans fight over “How poor is too poor?” just so long as nobody asks “How rich is too rich?”
...
But the rich fought back, and won big-time in 1980 when Reagan, until then the fringe “Voodoo economics” candidate who was heading into the election trailing far behind Jimmy Carter, was swept into the White House on a wave of public concern of the Iranians taking US hostages. Reagan promptly cut income taxes on the very rich from 70% down to 27%. Corporate tax rates were also cut so severely that they went from representing over 33% of total federal tax receipts in 1951 to less than 9% in 1983 (they’re still in that neighborhood, the lowest in the industrialized world).
The result was devastating. Our government was suddenly so badly awash in red ink that Reagan doubled the tax paid only by people earning less than $40,000/year (FICA), and then began borrowing from the huge surplus this new tax was accumulating in the Social Security Trust Fund. Even with that, Reagan had to borrow more money in his 8 years than the sum total of all presidents from George Washington to Jimmy Carter combined.
In addition to badly throwing the nation into debt, Reagan’s tax cut blew out the ceiling on the accumulation of wealth, leading to a new Gilded Age and the rise of a generation of super-wealthy that hadn’t been seen since the Robber Baron era of the 1890s or the Roaring 20s.
...
And Bush, following closely in Reagan’s footsteps, is making things worse. As Senator Bernie Sanders pointed out at recent hearings for the confirmation of Bush’s new nominee for the Office of Management and Budget:
Since Bush has been president:
* over 5 million people have slipped into poverty;
* nearly 7 million Americans have lost their health insurance;
* median household income has gone down by nearly $1,300;
* three million manufacturing jobs have been lost;
* three million American workers have lost their pensions;
* home foreclosures are now the highest on record;
* the personal savings rate is below zero - which hasn’t happened since the great depression;
* the real earnings of college graduates have gone down by about 5% in the last few years;
* entry level wages for male and female high school graduates have fallen by over 3%;
* wages and salaries are now at the lowest share of GDP since 1929.
The debate about whether or not to roll Bush’s tax cuts back to Clinton’s modest mid-30% rates is absurd. It’s time to roll back the horribly failed experiment of the Reagan tax cuts. And use that money to pay down Reagan’s debt and rebuild this nation. ...
Friday, August 3, 2007
Large majorities of people in the US and in Europe want higher taxation for the rich and even pay caps for corporate executives ...
Monday, July 23, 2007 by the Financial Times/UK New Poll: Globalization Backlash in Rich Nations by Chris Giles in London
A popular backlash against globalization and the leaders of the world’s largest companies is sweeping all rich countries, an FT/Harris poll shows.
Large majorities of people in the US and in Europe want higher taxation for the rich and even pay caps for corporate executives to counter what they believe are unjustified rewards and the negative effects of globalization.
Viewing globalization as an overwhelmingly negative force, citizens of rich countries are looking to governments to cushion the blows they perceive have come from the liberalization of their economies to trade with emerging countries.
Those polled in Britain, France, the US and Spain were about three times more likely to say globalization was having a negative rather than a positive effect on their countries. The majority was smaller in Germany, with its large export base.
...
Europeans still overwhelmingly support the principle of free competition within the European Union, contrary to Nicolas Sarkozy’s wishes at the recent European summit, but in France, Germany and Spain, the populations want their political leaders to play a larger role in managing their economies.
...
The issue of rising inequality is now high on the political agenda of every country and will feature prominently in the 2008 US presidential election.
A popular backlash against globalization and the leaders of the world’s largest companies is sweeping all rich countries, an FT/Harris poll shows.
Large majorities of people in the US and in Europe want higher taxation for the rich and even pay caps for corporate executives to counter what they believe are unjustified rewards and the negative effects of globalization.
Viewing globalization as an overwhelmingly negative force, citizens of rich countries are looking to governments to cushion the blows they perceive have come from the liberalization of their economies to trade with emerging countries.
Those polled in Britain, France, the US and Spain were about three times more likely to say globalization was having a negative rather than a positive effect on their countries. The majority was smaller in Germany, with its large export base.
...
Europeans still overwhelmingly support the principle of free competition within the European Union, contrary to Nicolas Sarkozy’s wishes at the recent European summit, but in France, Germany and Spain, the populations want their political leaders to play a larger role in managing their economies.
...
The issue of rising inequality is now high on the political agenda of every country and will feature prominently in the 2008 US presidential election.
where new innovations aren't held hostage to the competition-killing carriers that control the network ... left U.S. generations behind other nations
Members of Congress Call for iPhone Freedom Posted July 11, 2007 06:27 PM (EST)
Bipartisan members of Congress spoke out today to free the iPhone and other next generation hand-held computers from the grip of phone incumbents like AT&T and Verizon.
During the hearing of the House Subcommittee on Telecommunications and the Internet, representatives from both sides of the aisle called for a more open wireless system where new innovations aren't held hostage to the competition-killing carriers that control the network.
...
"The iPhone highlights both the promise and the problems with the wireless industry today," Rep. Markey said holding up before other members his newly acquired iPhone. "On the one hand, it demonstrates the sheer brilliance and wizardry of wireless engineering. On the other hand, the advent of the iPhone raises questions about the fact that a consumer can't use this phone with other wireless carriers."
Markey highlighted myriad problems with our wireless marketplace, where "many consumers feel trapped having bought an expensive device or having been locked into a long-term contract with significant penalties for switching."
...
'Calcified' Markets
Markey and Pickering spoke about the current dilemma in America's wireless system. The iPhone is shackled to AT&T and won't work on any other network. The reason? We have allowed carriers to exert almost complete gatekeeper control over all devices, services and content in the wireless sector.
This has left the U.S. generations behind other nations, a failure that prompted New York Times blogger David Pogue to call American carriers "calcified, conservative and way behind their European and Asian counterparts." ...
...
"I am an entrepreneur and I am mad as hell that I require permission to innovate in the wireless market. I don't have to go to the great companies that built our public highways and ask them for their views for what kind of cars I can put on those roads...
"For some reason I have never been able to understand, I have to ask permission of Verizon Wireless to attach a computer or the computers that they now call phones to their wireless networks and I have to ask their permission to run applications and services on those phones." ...
...
In the wireless world this includes the freedom to use any device on any network, the freedom to choose among competing providers and the freedom to access any content or services without gatekeeper interference.
Bipartisan members of Congress spoke out today to free the iPhone and other next generation hand-held computers from the grip of phone incumbents like AT&T and Verizon.
During the hearing of the House Subcommittee on Telecommunications and the Internet, representatives from both sides of the aisle called for a more open wireless system where new innovations aren't held hostage to the competition-killing carriers that control the network.
...
"The iPhone highlights both the promise and the problems with the wireless industry today," Rep. Markey said holding up before other members his newly acquired iPhone. "On the one hand, it demonstrates the sheer brilliance and wizardry of wireless engineering. On the other hand, the advent of the iPhone raises questions about the fact that a consumer can't use this phone with other wireless carriers."
Markey highlighted myriad problems with our wireless marketplace, where "many consumers feel trapped having bought an expensive device or having been locked into a long-term contract with significant penalties for switching."
...
'Calcified' Markets
Markey and Pickering spoke about the current dilemma in America's wireless system. The iPhone is shackled to AT&T and won't work on any other network. The reason? We have allowed carriers to exert almost complete gatekeeper control over all devices, services and content in the wireless sector.
This has left the U.S. generations behind other nations, a failure that prompted New York Times blogger David Pogue to call American carriers "calcified, conservative and way behind their European and Asian counterparts." ...
...
"I am an entrepreneur and I am mad as hell that I require permission to innovate in the wireless market. I don't have to go to the great companies that built our public highways and ask them for their views for what kind of cars I can put on those roads...
"For some reason I have never been able to understand, I have to ask permission of Verizon Wireless to attach a computer or the computers that they now call phones to their wireless networks and I have to ask their permission to run applications and services on those phones." ...
...
In the wireless world this includes the freedom to use any device on any network, the freedom to choose among competing providers and the freedom to access any content or services without gatekeeper interference.
The U.S. Income Tax Burden:..."legal plunder." ... Where is the hoel in the logic?
The U.S. Income Tax Burden: An Analysis of Congressional Budget Office (CBO) Numbers by Sugi Sorensen and Stephen Cobb Last Revised: 17-Apr-2000
Introduction
Introduction
- Below is an analysis of Congressional Budget Office (CB0) report entitled "Preliminary Estimates of Effective Tax Rates" (07-Sep-1999). The raw numbers can be scrutinized here:
http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0 - All I did was try to make heads or tails of the data by plotting it and extracting the most salient data. The Income Tax Burden is defined simply as who pays U.S. income taxes in the form of individual and corporate income taxes, payroll taxes, and federal excise taxes.
- Based on this information, the following conclusions clearly emerge:
An enormous percentage of taxes are payed by a minority of Americans:
The Top 1% of taxpayers pay 29% of all taxes.
The Top 5% of taxpayers pay 50% of all taxes. - Our tax system is not so much progressive as it is confiscatory -- Frederic Bastiat called this phenomenon "legal plunder." ...
- ...
- The Top 1% of income earners (comprising about 1 million families) earn about 15% of the total income earned by all wage earners [??? vs, total income? including capital gains?] in the United States, yet they pay almost 30% of all individual income taxes.
economy is built on spending ... produce less, ship jobs overseas, increase our national and trade deficits ... become mired in debt ... not regulated
Hold On to Your Seat: America and Its Debt Based Economy by John Kelley / July 31st, 2007
...
Virtually unreported over at the Washington Post, Michael J. de la Merced was citing a significant crack in the debt dike preventing a flood of defaults on leveraged buyout deals. Most of the run-up on Wall Street has been based on the idea that there is an unlimited amount of debt that can be piled up to buy and flip companies, kind of like the housing market speculators. ...
...
What the general public doesn’t understand is that the wealthy have been taking their extra money from tax breaks and investing it in speculation. The theory of trickle down economics is that the rich will invest it in increased production capacity, hire more people and generally lift everyone (“a rising tide lifts all boats”). But, true to human behavior, that’s not what happens. Instead, when people have extra money over their needs they tend to invest it in more speculative investments because the potential loss won’t affect their lifestyle while the potential gains are higher than from a more stable but slow-growing investment. ...
...
Private Equity and Hedge Funds have been the chief investment vehicles used by the wealthy to speculate on these long shots. Wealthy investors, institutional funds (pension) and other money pools have been joyously jumping on the bandwagon. As more and more people and funds (up to 9,000 hedge funds now) scout for undervalued companies to buy, the competition has grown fierce, driving up prices. In fact, many of the companies bought don’t justify the price, but what the heck? Neither did that $100,000 house you bought for $150,000 because it was going to be worth $175,000 next week. Right?
...
Several indicators say that the end of this bubble is near. One of the first is when Hedge and Private Equity Funds go public as several have attempted to do recently. What this means is they believe the best times are over ...
Another is that debt buyers are getting a belly full and beginning to question the value of the debt whether in the form of loans or bonds. Merced reports that 20 recent debt offerings, including debt to finance the Chrysler Group buyout, have joined $235 billion dollars in loans sales that have been have been postponed. Bond sales are also suffering with billions in offerings being put off by First Data, Alliance Boots, U.S. Foodservice, Service Master International and Dollar General.
...
Cheap financing advanced to consumers in the middle and working classes, who have had declining real income since the ’70s, has been purposeful public policy that forces consumers to borrow more and more to maintain their lifestyle. Incomes have not kept up with inflation, off shored manufacturing jobs have been replaced with service jobs that pay an average of 20% less, federal and state governments have shifted more cost to local entities, increasing property taxes, and the costs to participate in the legal economy for everything from daycare, to college, to medical insurance have been shifted to the worker. The result is a massive transfer of wealth over time from the general population to a very small percentage of super wealthy.
...
As we learned in 1929, great disparity of wealth (which this process has increased tremendously) leads to a disproportionate investment in speculation, driving up prices to unsustainable amounts that then crash back to their real worth. Eventually the transfer of wealth from the working and middle class through increased debt deprives them of both purchasing power and the ability to borrow more, triggering deflation. Of course the devastation occurs mostly to the middle and working class who were already deprived of sharing the wealth of the speculative bubble, but now pay the consequences with layoffs and pension losses.
Our whole economy is built on consumer spending and as we produce less, ship good paying jobs overseas, increase our national and trade deficits, we have become a nation mired in debt. It’s no accident; we long ago passed the point were we “needed” more stuff, so we used advertising and planned obsolescence to create need and cheap financing to acquire it. Debt itself became the primary product. Whether it is the working poor at the window of the payday loan outlet, the Hedge fund manager at the conference table of Goldman Sachs or George W. Bush racking up $10 million an hour in Iraq, debt is the major creative enterprise in America today. ...
...
At some point this must come unraveled in a rather nasty way. Whether it happens tomorrow or not is not the question, the answer is, it will happen and when it does it will be catastrophic for individuals, businesses, and government entities at all levels. ...
...
The private equity and hedge funds are not regulated by the SEC and most are registered offshore for tax and liability purposes. When it all falls apart most will be able to retire to their homes in the Mediterranean and live off their money in the Caymans, while the rest of us pick up the pieces.
...
Virtually unreported over at the Washington Post, Michael J. de la Merced was citing a significant crack in the debt dike preventing a flood of defaults on leveraged buyout deals. Most of the run-up on Wall Street has been based on the idea that there is an unlimited amount of debt that can be piled up to buy and flip companies, kind of like the housing market speculators. ...
...
What the general public doesn’t understand is that the wealthy have been taking their extra money from tax breaks and investing it in speculation. The theory of trickle down economics is that the rich will invest it in increased production capacity, hire more people and generally lift everyone (“a rising tide lifts all boats”). But, true to human behavior, that’s not what happens. Instead, when people have extra money over their needs they tend to invest it in more speculative investments because the potential loss won’t affect their lifestyle while the potential gains are higher than from a more stable but slow-growing investment. ...
...
Private Equity and Hedge Funds have been the chief investment vehicles used by the wealthy to speculate on these long shots. Wealthy investors, institutional funds (pension) and other money pools have been joyously jumping on the bandwagon. As more and more people and funds (up to 9,000 hedge funds now) scout for undervalued companies to buy, the competition has grown fierce, driving up prices. In fact, many of the companies bought don’t justify the price, but what the heck? Neither did that $100,000 house you bought for $150,000 because it was going to be worth $175,000 next week. Right?
...
Several indicators say that the end of this bubble is near. One of the first is when Hedge and Private Equity Funds go public as several have attempted to do recently. What this means is they believe the best times are over ...
Another is that debt buyers are getting a belly full and beginning to question the value of the debt whether in the form of loans or bonds. Merced reports that 20 recent debt offerings, including debt to finance the Chrysler Group buyout, have joined $235 billion dollars in loans sales that have been have been postponed. Bond sales are also suffering with billions in offerings being put off by First Data, Alliance Boots, U.S. Foodservice, Service Master International and Dollar General.
...
Cheap financing advanced to consumers in the middle and working classes, who have had declining real income since the ’70s, has been purposeful public policy that forces consumers to borrow more and more to maintain their lifestyle. Incomes have not kept up with inflation, off shored manufacturing jobs have been replaced with service jobs that pay an average of 20% less, federal and state governments have shifted more cost to local entities, increasing property taxes, and the costs to participate in the legal economy for everything from daycare, to college, to medical insurance have been shifted to the worker. The result is a massive transfer of wealth over time from the general population to a very small percentage of super wealthy.
...
As we learned in 1929, great disparity of wealth (which this process has increased tremendously) leads to a disproportionate investment in speculation, driving up prices to unsustainable amounts that then crash back to their real worth. Eventually the transfer of wealth from the working and middle class through increased debt deprives them of both purchasing power and the ability to borrow more, triggering deflation. Of course the devastation occurs mostly to the middle and working class who were already deprived of sharing the wealth of the speculative bubble, but now pay the consequences with layoffs and pension losses.
Our whole economy is built on consumer spending and as we produce less, ship good paying jobs overseas, increase our national and trade deficits, we have become a nation mired in debt. It’s no accident; we long ago passed the point were we “needed” more stuff, so we used advertising and planned obsolescence to create need and cheap financing to acquire it. Debt itself became the primary product. Whether it is the working poor at the window of the payday loan outlet, the Hedge fund manager at the conference table of Goldman Sachs or George W. Bush racking up $10 million an hour in Iraq, debt is the major creative enterprise in America today. ...
...
At some point this must come unraveled in a rather nasty way. Whether it happens tomorrow or not is not the question, the answer is, it will happen and when it does it will be catastrophic for individuals, businesses, and government entities at all levels. ...
...
The private equity and hedge funds are not regulated by the SEC and most are registered offshore for tax and liability purposes. When it all falls apart most will be able to retire to their homes in the Mediterranean and live off their money in the Caymans, while the rest of us pick up the pieces.
the credit card industry is the only one allowed to increase the price of a product after it has been sold.
Credit Card Buyer Beware | Published: July 31, 2007
The federal agencies that are supposed to regulate the banking and credit card industries have failed utterly to keep pace with deceptive and unfair practices that have become shamefully standard in the business. As a consequence many hard-working Americans who pay their bills are mired in debt — and in danger of losing whatever savings they have, and perhaps their homes. Congress, which sat on its hands while the problem got worse and worse, needs to rein in this sometimes predatory industry.
The scope of the problem was laid out in Congressional hearings this spring held by Senator Carl Levin, the Democrat from Michigan. According to testimony, one witness exceeded his charge card’s $3,000 limit by $200 — triggering what eventually amounted to $7,500 in penalties and interest. After paying an average of $1,000 a year for six years, the man still owed $4,400.
That experience has become all too common as the credit card industry has stealthily adopted methods designed to maximize burdensome penalties and fees, while ratcheting up interest rates as high as 30 percent. Companies bombard unwary consumers with teaser packages that promise very low interest rates to start, while reserving for themselves the right to raise rates whenever they choose. The details are buried in deliberately arcane contracts that run 30 pages long and that even lawyers have trouble understanding.
Congressional investigations and studies by consumer advocates have exposed other unsavory practices. Some card companies apply penalty rates retroactively — to purchases that were made before the penalty was incurred or in some cases to debts that were even paid off. As one Congressional witness pointed out, the credit card industry is the only one allowed to increase the price of a product after it has been sold. ...
A bill introduced by Senator Levin would limit “penalty” interest rates to an additional 7 percent above the previous rate. It would also prohibit retroactive penalties and double cycle billing, and it would limit the amount of fees companies could charge customers who exceed their credit limit. ...
The federal agencies that are supposed to regulate the banking and credit card industries have failed utterly to keep pace with deceptive and unfair practices that have become shamefully standard in the business. As a consequence many hard-working Americans who pay their bills are mired in debt — and in danger of losing whatever savings they have, and perhaps their homes. Congress, which sat on its hands while the problem got worse and worse, needs to rein in this sometimes predatory industry.
The scope of the problem was laid out in Congressional hearings this spring held by Senator Carl Levin, the Democrat from Michigan. According to testimony, one witness exceeded his charge card’s $3,000 limit by $200 — triggering what eventually amounted to $7,500 in penalties and interest. After paying an average of $1,000 a year for six years, the man still owed $4,400.
That experience has become all too common as the credit card industry has stealthily adopted methods designed to maximize burdensome penalties and fees, while ratcheting up interest rates as high as 30 percent. Companies bombard unwary consumers with teaser packages that promise very low interest rates to start, while reserving for themselves the right to raise rates whenever they choose. The details are buried in deliberately arcane contracts that run 30 pages long and that even lawyers have trouble understanding.
Congressional investigations and studies by consumer advocates have exposed other unsavory practices. Some card companies apply penalty rates retroactively — to purchases that were made before the penalty was incurred or in some cases to debts that were even paid off. As one Congressional witness pointed out, the credit card industry is the only one allowed to increase the price of a product after it has been sold. ...
A bill introduced by Senator Levin would limit “penalty” interest rates to an additional 7 percent above the previous rate. It would also prohibit retroactive penalties and double cycle billing, and it would limit the amount of fees companies could charge customers who exceed their credit limit. ...
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