American Energy Policy, Asleep at the Spigot | By NELSON D. SCHWARTZ | Published: July 6, 2008
...
Outside the thriving oil patch, it makes for a bleak economic picture. But it didn’t have to be this way.
Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.
...
... Last week, Ford Motor reported that S.U.V. sales were down 55 percent from a year ago, while demand for its full-size F-series pickup, a gas guzzler that was the country’s best-selling vehicle for 26 consecutive years, is off 40 percent.
...
... the largest energy appetite in the world is still found in the United States. Home to only 4 percent of the world’s population, the nation slurps up about a quarter of the planet’s oil ...
...
Indeed, low-priced gasoline has long been part of the American social contract, according to Newt Gingrich, the former House speaker and Republican leader. ...
...
Before that point, the country reaped the benefits of the first fuel-economy standards, passed in 1975, known as corporate average fuel economy, or CAFE. Between 1974 and 1989, the efficiency of a typical car sold in the United States almost doubled, to 27.5 miles per gallon from 13.8.
LARGELY as a result, oil consumption in 1990 totaled 16.9 million barrels per day, basically on a par with the 17 million barrels per day consumed in 1980, even as the economy grew substantially. Oil prices were in the middle of a long downward slide that would take them from well above $30 a barrel in 1980 to a low of just under $10 in late 1998 and early 1999, interrupted only by brief spike in 1990 after Iraq’s invasion of Kuwait.
...
Even as Congress idled when it came to tightening CAFE standards or substantially raising levies on gas, the Exxon Valdez oil spill in 1989 made offshore drilling yet another unpalatable option. “That caused a sea change and after that no one had any sympathy for the oil industry,” Mr. Becker says.
...
In any event, added drilling is unlikely to generate sharply lower prices. A recent study by the federal government’s Energy Information Administration estimated that under the best-case scenario opening up the Arctic National Wildlife Refuge would reduce prices by $1.44 a barrel by 2027. Drilling in broader swaths off the continental United States wouldn’t affect prices until 2030.
...
In 2007, with oil at $82 and gas nearing $3, Congress finally approved the first big increase in fuel-efficiency standards in 32 years, requiring the fleet average to reach 35 m.p.g. by 2020. That will save one million barrels a day by 2020, but onetime CAFE opponents like Mr. Castle now say they wish that Congress had acted sooner. Since the 1980s, fuel efficiency has flatlined at 24 m.p.g., while vehicle weight has jumped more than 25 percent and horsepower has nearly doubled. In Europe, on the other hand, fuel efficiency currently stands at 44 m.p.g. and is slated to hit 48 m.p.g. by 2012.
...
What Congress didn’t or couldn’t do, the free market is now doing in the form of higher gas prices: forcing Americans into more fuel-efficient cars. Ms. Cischke of Ford says that in the last two months, “We have seen more of a shift in the market than in 20 years of CAFE. People are buying what they need.”
Unfortunately, the shift is happening too fast for a company of Ford’s size. That is among the reasons Wall Street expects Ford to lose more than $2 billion this year.
...
Thursday, July 10, 2008
If ... really supported free trade, they would be insisting that we do the exact same thing for our most highly educated professionals
Free Trade, Why "Free" Matters | Monday 07 July 2008 | by: Dean Baker, t r u t h o u t
...
The most important point, which I unfortunately have to keep repeating, is that these are not free trade agreements. They do not free all trade and, in fact, increase some forms of protectionist barriers.
The main area in which US trade policy has sought "free" trade has been manufactured goods. A main purpose of most recent trade deals has been to make it as easy as possible for US firms to relocate their production to Mexico, Central America, and everywhere else and to ship their output back to the United States.
This does not mean just reducing tariff barriers. In most cases, the tariff barriers to imports were already low. The point of these deals was to set up an institutional framework that would facilitate foreign investment in manufacturing in these countries for the purpose of exporting back to the United States.
This meant talking to the auto companies, the textile companies, and other businesses and finding out exactly what was preventing them from taking advantage of the low-cost labor in these developing countries and then removing the obstacles. This had the effect of putting manufacturing workers in the United States in direct competition with low-paid workers in the developing world.
Putting US manufacturing workers in competition with low-paid foreign workers lowers their wages. It also has the effect of lowering the wages of non-college-educated workers more generally, since manufacturing has historically been a source of high-paying jobs for workers without college degrees.
Of course, we have seen a decline in the relative wages and job security of non-college-educated workers. This is not a case of the trade agreements not working or not following the course predicted by economic theory. This is what the trade agreements were designed to do - the reduction in the relative wages and living standards of non-college-educated workers is exactly the outcome predicted by economic theory.
But this is not "free trade." We decided to subject our non-college-educated workers to competition with low-paid workers in the developing world. If Senator McCain and others really supported free trade, they would be insisting that we do the exact same thing for our most highly educated professionals.
In other words, we would ask our hospitals, law firms, universities, and other employers of highly educated workers, what exactly is keeping them from filling their staffs with low-paid professionals from the developing world? We would then change the laws and structure the institutions to ensure that smart kids from the developing world, who were trained to our standards, could as easily work as professionals in the United States as kids born in New York or California.
This would send the wages of professionals tumbling, along with the price of their services. This is exactly the sort of gain from trade that economists like so much, except in this case it would come at the expense of the most highly paid workers instead of low- and moderate-income workers. ...
...
The most important point, which I unfortunately have to keep repeating, is that these are not free trade agreements. They do not free all trade and, in fact, increase some forms of protectionist barriers.
The main area in which US trade policy has sought "free" trade has been manufactured goods. A main purpose of most recent trade deals has been to make it as easy as possible for US firms to relocate their production to Mexico, Central America, and everywhere else and to ship their output back to the United States.
This does not mean just reducing tariff barriers. In most cases, the tariff barriers to imports were already low. The point of these deals was to set up an institutional framework that would facilitate foreign investment in manufacturing in these countries for the purpose of exporting back to the United States.
This meant talking to the auto companies, the textile companies, and other businesses and finding out exactly what was preventing them from taking advantage of the low-cost labor in these developing countries and then removing the obstacles. This had the effect of putting manufacturing workers in the United States in direct competition with low-paid workers in the developing world.
Putting US manufacturing workers in competition with low-paid foreign workers lowers their wages. It also has the effect of lowering the wages of non-college-educated workers more generally, since manufacturing has historically been a source of high-paying jobs for workers without college degrees.
Of course, we have seen a decline in the relative wages and job security of non-college-educated workers. This is not a case of the trade agreements not working or not following the course predicted by economic theory. This is what the trade agreements were designed to do - the reduction in the relative wages and living standards of non-college-educated workers is exactly the outcome predicted by economic theory.
But this is not "free trade." We decided to subject our non-college-educated workers to competition with low-paid workers in the developing world. If Senator McCain and others really supported free trade, they would be insisting that we do the exact same thing for our most highly educated professionals.
In other words, we would ask our hospitals, law firms, universities, and other employers of highly educated workers, what exactly is keeping them from filling their staffs with low-paid professionals from the developing world? We would then change the laws and structure the institutions to ensure that smart kids from the developing world, who were trained to our standards, could as easily work as professionals in the United States as kids born in New York or California.
This would send the wages of professionals tumbling, along with the price of their services. This is exactly the sort of gain from trade that economists like so much, except in this case it would come at the expense of the most highly paid workers instead of low- and moderate-income workers. ...
The employment to population ratio (EPOP) fell to 62.4 percent in June, its lowest level in more than three years, as the economy lost another 62,000
Employment Rate Drops as Economy Sheds 62,000 | Thursday 03 July 2008 | by: Dean Baker, t r u t h o u t
...
Private sector job gains in the Bush years may fall below 3 million by November. The employment to population ratio (EPOP) fell to 62.4 percent in June, its lowest level in more than three years, as the economy lost another 62,000 jobs in June. This was the sixth consecutive month in which the economy lost jobs. The private sector lost 91,000 jobs in June. With the April and May numbers revised down by 76,000, the job loss in the private sector over the last three months has been 273,000, an average of 91,000 a month. The private sector has now shed 578,000 jobs since employment peaked in November.
Job loss continues to be led by construction and manufacturing, but most sectors are now losing jobs. Construction lost 43,000 jobs in June, with both residential and non-residential construction now shedding jobs. Employment in residential construction has fallen by 15.8 percent since its peak in February of 2006. By comparison, real spending is down by almost 50 percent over this period. The fact that employment has fallen so much less than production undoubtedly reflects the fact that many undocumented workers never showed up in the employment data. ...
...
Private sector job gains in the Bush years may fall below 3 million by November. The employment to population ratio (EPOP) fell to 62.4 percent in June, its lowest level in more than three years, as the economy lost another 62,000 jobs in June. This was the sixth consecutive month in which the economy lost jobs. The private sector lost 91,000 jobs in June. With the April and May numbers revised down by 76,000, the job loss in the private sector over the last three months has been 273,000, an average of 91,000 a month. The private sector has now shed 578,000 jobs since employment peaked in November.
Job loss continues to be led by construction and manufacturing, but most sectors are now losing jobs. Construction lost 43,000 jobs in June, with both residential and non-residential construction now shedding jobs. Employment in residential construction has fallen by 15.8 percent since its peak in February of 2006. By comparison, real spending is down by almost 50 percent over this period. The fact that employment has fallen so much less than production undoubtedly reflects the fact that many undocumented workers never showed up in the employment data. ...
If supply-side economics/market fundamentalism worked, the economic landscape would look quite different than it does now
Jared Bernstein: The Antidote to Our Pessimism: Change - Politics on The Huffington PostPosted July 6, 2008
In decades of tracking such sentiments, I've never seen people so pessimistic about the economy. And remember, we haven't even had a quarter of contracting GDP yet.
Of course, rising gas prices, the deteriorating job market, and paychecks that are barely making it past gas and groceries are the major drivers of these poll results. But they're not the whole story. Well before gas prices spiked, majorities were telling pollsters that something fundamental was wrong in the economy, and that it had to do with the fact that most of the folks who were baking the economic pie were ending up with thinner slices.
These latest economic stressors have simply served to turn this underlying feeling that the game was rigged into a much more urgent sense that something's got to change.
...
First, the structural fissures in the US economy -- the bubble and bust macroeconomy, over-leveraged households consuming beyond their means, inequality levels not seen since the late 1920s -- had to come to light at some point. We're fortunate that they've done so a few months before a general election between the two candidates with starkly different economic visions. More on that in a moment.
...
If supply-side economics/market fundamentalism worked, the economic landscape would look quite different than it does now. The last eight years have served as something quite rare in economics: a natural experiment of the effectiveness of market forces, goosed liberally (wrong word, but you know what I mean) with high-end tax cuts, to address the challenges we face. Health care would be on a sustainable trajectory, energy policy would exist (subsidies to big oil don't count), tax policy would help to offset inequality, not exacerbate it, financial markets would speculate less, price risk more accurately, and be much less bubbly, and the benefits of productivity growth would be more broadly shared with the working men and women responsible for creating them.
...
... McCain can run from Bush, but as long as he doubles down on both Bushonomics and the war, he can't hide. ... His chief economic policy architect is Phil Gramm, that cowboy deregulator who brought us the Enron loophole and sponsored banking legislation that put us solidly on the path to where we are today, bailing out investment banks that failed partly from lack of oversight.
In decades of tracking such sentiments, I've never seen people so pessimistic about the economy. And remember, we haven't even had a quarter of contracting GDP yet.
Of course, rising gas prices, the deteriorating job market, and paychecks that are barely making it past gas and groceries are the major drivers of these poll results. But they're not the whole story. Well before gas prices spiked, majorities were telling pollsters that something fundamental was wrong in the economy, and that it had to do with the fact that most of the folks who were baking the economic pie were ending up with thinner slices.
These latest economic stressors have simply served to turn this underlying feeling that the game was rigged into a much more urgent sense that something's got to change.
...
First, the structural fissures in the US economy -- the bubble and bust macroeconomy, over-leveraged households consuming beyond their means, inequality levels not seen since the late 1920s -- had to come to light at some point. We're fortunate that they've done so a few months before a general election between the two candidates with starkly different economic visions. More on that in a moment.
...
If supply-side economics/market fundamentalism worked, the economic landscape would look quite different than it does now. The last eight years have served as something quite rare in economics: a natural experiment of the effectiveness of market forces, goosed liberally (wrong word, but you know what I mean) with high-end tax cuts, to address the challenges we face. Health care would be on a sustainable trajectory, energy policy would exist (subsidies to big oil don't count), tax policy would help to offset inequality, not exacerbate it, financial markets would speculate less, price risk more accurately, and be much less bubbly, and the benefits of productivity growth would be more broadly shared with the working men and women responsible for creating them.
...
... McCain can run from Bush, but as long as he doubles down on both Bushonomics and the war, he can't hide. ... His chief economic policy architect is Phil Gramm, that cowboy deregulator who brought us the Enron loophole and sponsored banking legislation that put us solidly on the path to where we are today, bailing out investment banks that failed partly from lack of oversight.
Health-Care Crisis Endangers Economy
Health-Care Crisis Endangers Economy | By Jason Leopold, Consortium News. Posted July 6, 2008.
A new report urges policymakers to find a solution to the health-care crisis; long-term fiscal problems may develop if the issue is not addressed.
If the United States does not act soon to address health-care costs, federal and state governments as well as American businesses could face a cascading fiscal crisis with devastating long-term consequences, says a new report by the Government Accountability Office.
In the report entitled, "Long Term Federal Fiscal Challenge Driven Primarily by Health Care," the GAO, the investigative arm of Congress, said an immediate "multi-pronged solution" must be pursued before the "window of opportunity" to address the issue closes.
"Rapidly rising health-care costs are not simply a federal budget problem," said the report, prepared by Gene Dodaro, acting U.S. Comptroller General. "Growth in health-related spending is the primary driver of the fiscal challenges facing state and local governments as well.
"Unsustainable growth in health-care spending also threatens to erode the ability of employers to provide coverage to their workers and undercuts their ability to compete in a global marketplace." ...
A new report urges policymakers to find a solution to the health-care crisis; long-term fiscal problems may develop if the issue is not addressed.
If the United States does not act soon to address health-care costs, federal and state governments as well as American businesses could face a cascading fiscal crisis with devastating long-term consequences, says a new report by the Government Accountability Office.
In the report entitled, "Long Term Federal Fiscal Challenge Driven Primarily by Health Care," the GAO, the investigative arm of Congress, said an immediate "multi-pronged solution" must be pursued before the "window of opportunity" to address the issue closes.
"Rapidly rising health-care costs are not simply a federal budget problem," said the report, prepared by Gene Dodaro, acting U.S. Comptroller General. "Growth in health-related spending is the primary driver of the fiscal challenges facing state and local governments as well.
"Unsustainable growth in health-care spending also threatens to erode the ability of employers to provide coverage to their workers and undercuts their ability to compete in a global marketplace." ...
Ralph Nader: Economic Domino Theory
Ralph Nader: Economic Domino Theory | July 2, 2008 | Greed Without Accountability
The worst top management of giant corporations in American history is also by far the most hugely paid. That contradiction applies as well to the Boards of Directors of these global companies.
Consider these illustrations:
The bosses of General Motors (GM) have presided over the worst decline of GM shares in the last fifty years, the lowering of GM bonds to junk status, the largest money losses and layoffs of tens of thousands of workers. Yet these top executives are still in place and still receiving much more pay than their successful counterparts at Toyota.
...
Then there are the financial companies. Top management on Wall Street has been beyond incompetent. Wild risk taking camouflaged for years by multi-tiered, complex, abstract financial instruments (generally called collateralized debt obligations) kept the joy ride going and going until the massive financial hot air balloon started plummeting. Finally told to leave their high posts, the CEOs of Merrill-Lynch and Citigroup took away tens of millions of severance pay while Wall Street turned into Layoff Street.
The banks, investment banks and brokerage firms have tanked to levels not seen since the 1929-30 collapse of the stock market. Citigroup, once valued at over $50 per share is now under $17 a share.
...
Countrywide, the infamous giant mortgage lender (subprime mortgages) is about to be taken over by Bank of America. Its CEO is taking away a reduced but still very generous compensation deal.
...
Now the entire U.S. economy is at risk. The domino theory is getting less theoretical daily. Without investors obtaining more legal authority as owners over their out of control company officers and Boards of Directors, and without strong regulation, corporate capitalism cannot be saved from its toxic combination of endless greed and maximum power—without responsibility.
Uncle Sam, the deeply deficit ridden bailout man, may have another taxpayers-to-the-rescue operation for Wall Street. But don’t count on stretching the American dollar much more without devastating consequences to and from global financial markets in full panic.
Consider the U.S. dollar like an elastic band. You can keep stretching this rubber band but suddenly it BREAKS. Our country needs action NOW from Washington, D.C.
The worst top management of giant corporations in American history is also by far the most hugely paid. That contradiction applies as well to the Boards of Directors of these global companies.
Consider these illustrations:
The bosses of General Motors (GM) have presided over the worst decline of GM shares in the last fifty years, the lowering of GM bonds to junk status, the largest money losses and layoffs of tens of thousands of workers. Yet these top executives are still in place and still receiving much more pay than their successful counterparts at Toyota.
...
Then there are the financial companies. Top management on Wall Street has been beyond incompetent. Wild risk taking camouflaged for years by multi-tiered, complex, abstract financial instruments (generally called collateralized debt obligations) kept the joy ride going and going until the massive financial hot air balloon started plummeting. Finally told to leave their high posts, the CEOs of Merrill-Lynch and Citigroup took away tens of millions of severance pay while Wall Street turned into Layoff Street.
The banks, investment banks and brokerage firms have tanked to levels not seen since the 1929-30 collapse of the stock market. Citigroup, once valued at over $50 per share is now under $17 a share.
...
Countrywide, the infamous giant mortgage lender (subprime mortgages) is about to be taken over by Bank of America. Its CEO is taking away a reduced but still very generous compensation deal.
...
Now the entire U.S. economy is at risk. The domino theory is getting less theoretical daily. Without investors obtaining more legal authority as owners over their out of control company officers and Boards of Directors, and without strong regulation, corporate capitalism cannot be saved from its toxic combination of endless greed and maximum power—without responsibility.
Uncle Sam, the deeply deficit ridden bailout man, may have another taxpayers-to-the-rescue operation for Wall Street. But don’t count on stretching the American dollar much more without devastating consequences to and from global financial markets in full panic.
Consider the U.S. dollar like an elastic band. You can keep stretching this rubber band but suddenly it BREAKS. Our country needs action NOW from Washington, D.C.
The Monkey Cage: Inequality and information among conservatives and liberals
The Monkey Cage: Inequality and information among conservatives and liberals
As a follow up to Lee’s post on Napier and Jost, this graph, from Larry Bartels’ Unequal Democracy, is pretty striking.
... Rather than being more likely to recognize the reality of growing inequality, those conservatives who were most politically aware were most likely to deny that income differences had increased. In this instance, political awareness did more to facilitate ideological consistency than it did to promote an accurate perception of real social conditions.
... Among liberals, recognition of increasing income inequality rose markedy with general political awareness, to 86% for people of average political awareness … and a near-unanimous 96% at the highest information level. However, the proportion of extreme conservatives who were willing to admit that economic inequality had increased actually decreased with political information, from 80% among those who were generally least informed about politics to 70% for people of average political awareness to a little less than 60% among those at the top of the distribution of political information.
backdoor H-1B cap increase that could lower wages for U.S. tech workers
June 13, 2008 (Computerworld) WASHINGTON -- The Bush administration's decision to allow foreign students to work in the U.S. for up to 29 months before getting an H-1B visa faces opposition from the AFL-CIO. The largest labor organization in the U.S. labeled the move a backdoor H-1B cap increase that could lower wages for U.S. tech workers, according to comments about the rule change made available this week by the government. ...
Moreover, Avendano said the rule change "allows employers to completely bypass" any of the protections in the H-1B program that prevent employers, for instance, from using foreign workers to break a strike. Moreover, students working on OPT won't have to be paid the prevailing wage as required under the H-1B program. An OPT employee could, theoretically, work for minimum wage, she wrote.
Moreover, Avendano said the rule change "allows employers to completely bypass" any of the protections in the H-1B program that prevent employers, for instance, from using foreign workers to break a strike. Moreover, students working on OPT won't have to be paid the prevailing wage as required under the H-1B program. An OPT employee could, theoretically, work for minimum wage, she wrote.
Friday, June 6, 2008
Oil prices and the U.S. trade deficit (2006-24, 09/22/2006)
Oil prices and the U.S. trade deficit (2006-24, 09/22/2006)
...
How has this adjustment process played out in the U.S. so far? During the last two years, the nonpetroleum trade deficit has not improved but has actually remained constant, at $44 billion. This suggests that the adjustment process in the U.S. overall trade deficit is occurring quite slowly. How long, then, can the adjustment process take? The answer depends, in part, on the persistence of the oil price increase: The longer oil prices stay at high levels, the longer it will take for the trade deficit to adjust.
...
Conclusions
Oil prices have almost quadrupled since the beginning of 2002. For an oil-importing country like the U.S., this has substantially increased the cost of petroleum imports. International trade data suggest that this increase has exacerbated the deterioration of the U.S. trade deficit, especially since the second half of 2004. One factor can explain this evolution: The real volume of U.S. petroleum imports has remained essentially constant. One explanation for why the demand for petroleum imports has not declined in response to higher prices comes from a model in which firms are fairly limited in their ability to adjust their use of energy sources, such as oil, in the short term. ...
...
How has this adjustment process played out in the U.S. so far? During the last two years, the nonpetroleum trade deficit has not improved but has actually remained constant, at $44 billion. This suggests that the adjustment process in the U.S. overall trade deficit is occurring quite slowly. How long, then, can the adjustment process take? The answer depends, in part, on the persistence of the oil price increase: The longer oil prices stay at high levels, the longer it will take for the trade deficit to adjust.
...
Conclusions
Oil prices have almost quadrupled since the beginning of 2002. For an oil-importing country like the U.S., this has substantially increased the cost of petroleum imports. International trade data suggest that this increase has exacerbated the deterioration of the U.S. trade deficit, especially since the second half of 2004. One factor can explain this evolution: The real volume of U.S. petroleum imports has remained essentially constant. One explanation for why the demand for petroleum imports has not declined in response to higher prices comes from a model in which firms are fairly limited in their ability to adjust their use of energy sources, such as oil, in the short term. ...
with health coverage, pension benefits, job security, workloads, stress levels, and often wages growing worse for millions of workers.
Truthdig - Arts and Culture - Nicholas von Hoffman on ‘The Big Squeeze’Posted on Jun 6, 2008 | book cover | By Nicholas von Hoffman
You may be surprised to learn that the pleasant person from FedEx Ground delivering your package owns the truck which he or she has parked in front of your house. FedEx Ground drivers, you will find out in Steven Greenhouse’s “The Big Squeeze: Tough Times for the American Worker,” are not FedEx employees.
They are what are called independent contractors, although it demands no little effort to discern what about their position is independent. If they do not do what they are told, their contracts are abrogated forthwith. They are required to buy their own truck with 60 monthly installments of $781.12, which comes to $46,867.20. Plus there is a final kicker payment of $8,000, all of which adds up to a grand total of almost $55,000. On top of this, as an independent business person, the driver must bear the costs of insurance, maintenance, fuel, repairs and the fee for the FedEx uniform rental.
...
... you are introduced to an electrical engineer named Myra Bronstein, working for Watchmark, a Bellevue, Wash., firm which develops software used by cell phone companies. ... Myra recalled, “The head of HR said, ‘Unfortunately, we’re having layoffs, and you’re in the room because you’re being impacted by the layoffs.’ ” The 18 engineers were dumbstruck, but the head of human resources pressed on. “ ’Your replacements,’ ” she continued, “ ’are flying in from India, and you’re expected to train them if you are going to receive severance.’ ” ...
...
The writer’s central thesis is, “One of the least examined but most important trends taking place in the United States today is the broad decline in the status and treatment of American workers—white-collar and blue-collar workers, middle-class and low-end workers—that began nearly three decades ago, gradually gathered momentum, and hit with full force soon after the turn of this century. A profound shift has left a broad swath of the American workforce on a lower plain than in decades past, with health coverage, pension benefits, job security, workloads, stress levels, and often wages growing worse for millions of workers.” ...
You may be surprised to learn that the pleasant person from FedEx Ground delivering your package owns the truck which he or she has parked in front of your house. FedEx Ground drivers, you will find out in Steven Greenhouse’s “The Big Squeeze: Tough Times for the American Worker,” are not FedEx employees.
They are what are called independent contractors, although it demands no little effort to discern what about their position is independent. If they do not do what they are told, their contracts are abrogated forthwith. They are required to buy their own truck with 60 monthly installments of $781.12, which comes to $46,867.20. Plus there is a final kicker payment of $8,000, all of which adds up to a grand total of almost $55,000. On top of this, as an independent business person, the driver must bear the costs of insurance, maintenance, fuel, repairs and the fee for the FedEx uniform rental.
...
... you are introduced to an electrical engineer named Myra Bronstein, working for Watchmark, a Bellevue, Wash., firm which develops software used by cell phone companies. ... Myra recalled, “The head of HR said, ‘Unfortunately, we’re having layoffs, and you’re in the room because you’re being impacted by the layoffs.’ ” The 18 engineers were dumbstruck, but the head of human resources pressed on. “ ’Your replacements,’ ” she continued, “ ’are flying in from India, and you’re expected to train them if you are going to receive severance.’ ” ...
...
The writer’s central thesis is, “One of the least examined but most important trends taking place in the United States today is the broad decline in the status and treatment of American workers—white-collar and blue-collar workers, middle-class and low-end workers—that began nearly three decades ago, gradually gathered momentum, and hit with full force soon after the turn of this century. A profound shift has left a broad swath of the American workforce on a lower plain than in decades past, with health coverage, pension benefits, job security, workloads, stress levels, and often wages growing worse for millions of workers.” ...
Trading Loophole for Wall Street Speculators Is Driving Up Prices, Critics Say
Investors' Growing Appetite for Oil Evades Market Limits | By David Cho | Washington Post Staff Writer | Friday, June 6, 2008; Page A01
Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, according to a growing number of lawmakers and prominent investors, who blame the practice for helping to push oil prices to record highs.
The federal agency that oversees oil trading, the Commodity Futures Trading Commission, has exempted these firms from rules that limit speculative buying, a prerogative traditionally reserved for airlines and trucking companies that need to lock in future fuel costs.
The CFTC has also waived regulations over the past decade on U.S. investors who trade commodities on some overseas markets, freeing those investors to accumulate large quantities of the future oil supply by making purchases on lightly regulated foreign exchanges.
Over the past five years, investors have become such a force on commodity markets that their appetite for oil contracts has been equal to China's increase in demand over the same period, said Michael Masters, a hedge fund manager who testified before Congress on the subject last month. The commodity markets, he added, were never intended for such large financial players.
...
Walter Lukken, the acting chairman of the CFTC, acknowledged in an interview that his agency has had a hard time keeping up with the sector it oversees. Commodity trading has exploded in complexity and popularity, he said, growing six-fold in trading volume since 2000. That was the year a handful of giant energy companies, including Enron, successfully lobbied Congress to ease the regulation of energy markets.
Meanwhile, the CFTC's staffing has dropped to its lowest levels in the agency's 33-year history.
"We could hire an extra 100 people and put them to work tomorrow given the inflow of trading volume," Lukken said. "We are doing the best we can in difficult circumstances. . . . This is something that we are obviously concerned with -- the potential for manipulation." ...
Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, according to a growing number of lawmakers and prominent investors, who blame the practice for helping to push oil prices to record highs.
The federal agency that oversees oil trading, the Commodity Futures Trading Commission, has exempted these firms from rules that limit speculative buying, a prerogative traditionally reserved for airlines and trucking companies that need to lock in future fuel costs.
The CFTC has also waived regulations over the past decade on U.S. investors who trade commodities on some overseas markets, freeing those investors to accumulate large quantities of the future oil supply by making purchases on lightly regulated foreign exchanges.
Over the past five years, investors have become such a force on commodity markets that their appetite for oil contracts has been equal to China's increase in demand over the same period, said Michael Masters, a hedge fund manager who testified before Congress on the subject last month. The commodity markets, he added, were never intended for such large financial players.
...
Walter Lukken, the acting chairman of the CFTC, acknowledged in an interview that his agency has had a hard time keeping up with the sector it oversees. Commodity trading has exploded in complexity and popularity, he said, growing six-fold in trading volume since 2000. That was the year a handful of giant energy companies, including Enron, successfully lobbied Congress to ease the regulation of energy markets.
Meanwhile, the CFTC's staffing has dropped to its lowest levels in the agency's 33-year history.
"We could hire an extra 100 people and put them to work tomorrow given the inflow of trading volume," Lukken said. "We are doing the best we can in difficult circumstances. . . . This is something that we are obviously concerned with -- the potential for manipulation." ...
Many see the [early termination] fees as an unfair penalty that makes it difficult to switch providers.
Scrutiny of Phone Fees May Broaden to TV, Internet | FCC Hearing to Target Cancellation Charges | By Cecilia Kang | Washington Post Staff Writer | Saturday, May 31, 2008; Page D01
A planned federal hearing on penalties that cellphone users pay for canceling their contracts early may be expanded to include a discussion on similar fees for ending cable and Internet services ahead of schedule, the chairman of the Federal Communications Commission said in an interview yesterday.
...
The attention to cancellation fees illustrates a growing frustration among consumers, who spend an average of $200 each month for wireless phone, cable and Internet services. Many see the fees as an unfair penalty that makes it difficult to switch providers. Early-termination fees were among the five most common complaints by cellphone users, who filed 20,300 service-related complaints in 2007, according to the FCC.
Many wireless companies are fighting lawsuits seeking hundreds of millions of dollars in fees that have been collected from former subscribers. Cable, DSL Internet and paid television services such as Verizon's FiOS also have had an increase in complaints from consumers about early-termination fees.
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Now wireless carriers are pushing a policy that, if adopted, could provide relief from the fines, which typically range from $150 to $200. Verizon and AT&T have recently softened their policies, with prorated plans that would knock down the penalty by $5 for each month of service. T-Mobile intends to introduce a similar plan next month; ...
A planned federal hearing on penalties that cellphone users pay for canceling their contracts early may be expanded to include a discussion on similar fees for ending cable and Internet services ahead of schedule, the chairman of the Federal Communications Commission said in an interview yesterday.
...
The attention to cancellation fees illustrates a growing frustration among consumers, who spend an average of $200 each month for wireless phone, cable and Internet services. Many see the fees as an unfair penalty that makes it difficult to switch providers. Early-termination fees were among the five most common complaints by cellphone users, who filed 20,300 service-related complaints in 2007, according to the FCC.
Many wireless companies are fighting lawsuits seeking hundreds of millions of dollars in fees that have been collected from former subscribers. Cable, DSL Internet and paid television services such as Verizon's FiOS also have had an increase in complaints from consumers about early-termination fees.
ad_icon
Now wireless carriers are pushing a policy that, if adopted, could provide relief from the fines, which typically range from $150 to $200. Verizon and AT&T have recently softened their policies, with prorated plans that would knock down the penalty by $5 for each month of service. T-Mobile intends to introduce a similar plan next month; ...
Iraq War May Have Increased Energy Costs Worldwide by a Staggering $6 Trillion
Iraq War May Have Increased Energy Costs Worldwide by a Staggering $6 Trillion | By Geoffrey Lean, The Independent. Posted May 27, 2008.
The invasion of Iraq by Britain and the US has trebled the price of oil, according to a leading expert, costing the world a staggering $6 trillion in higher energy prices alone.
The oil economist Dr Mamdouh Salameh, who advises both the World Bank and the UN Industrial Development Organisation (Unido), told The Independent on Sunday that the price of oil would now be no more than $40 a barrel, less than a third of the record $135 a barrel reached last week, if it had not been for the Iraq war. ...
The invasion of Iraq by Britain and the US has trebled the price of oil, according to a leading expert, costing the world a staggering $6 trillion in higher energy prices alone.
The oil economist Dr Mamdouh Salameh, who advises both the World Bank and the UN Industrial Development Organisation (Unido), told The Independent on Sunday that the price of oil would now be no more than $40 a barrel, less than a third of the record $135 a barrel reached last week, if it had not been for the Iraq war. ...
Ralph Nader: What's Really Driving the High Price of Oil?
Ralph Nader: What's Really Driving the High Price of Oil? May 28, 2008 | By RALPH NADER
What factors are causing the zooming price of crude oil, gasoline and heating products? What is going to be done about it?
Don’t rely on the White House—with Bush and Cheney marinated in oil—or the Congress—which has hearings that grill oil executives who know that nothing is going to happen on Capitol Hill either.
Last week the price of crude oil reached about $130 a barrel after spiking to $140 briefly. The immediate cause? Guesses by oil man T. Boone Pickens and Goldman Sachs that the price could go to $150 and $200 a barrel respectivly in the near future. They were referring to what can be called the hoopla pricing party on the New York Mercantile Exchange. (NYMEX)
...
Oil was at $50 a barrel in January 2007, then $75 a barrel in August 2007. Now at $130 or so a barrel, it is clear that oil pricing is speculative activity, having very little to do with physical supply and demand. An essential product—petroleum—is set by speculators operating on rumor, greed, and fear of wild predictions.
Over the time since early 2007, U.S. demand for petroleum has fallen by 1 percent and world demand has risen by 1.3 percent. Supplies of crude are so plentiful, according to the Wall Street Journal, “traders of physical crude oil say their market is suffering from too much supply, not too little.”
...
Historically, oil has been afflicted with the control of monopolists. From the late nineteenth century days of John D. Rockefeller, and his Standard Oil monopoly, to the emergence of the “Seven Sisters” oligopoly, made up of Standard Oil, Shell, BP, Texaco, Mobil, Gulf and Socal, to the rise of OPEC representing the major producing countries, the “free market” price of oil has been a mirage. Despite the breakup of the Standard Oil company by the government’s trustbusters about 100 years ago, selling cartels and buying oligopolies kept reasserting themselves. ...
What factors are causing the zooming price of crude oil, gasoline and heating products? What is going to be done about it?
Don’t rely on the White House—with Bush and Cheney marinated in oil—or the Congress—which has hearings that grill oil executives who know that nothing is going to happen on Capitol Hill either.
Last week the price of crude oil reached about $130 a barrel after spiking to $140 briefly. The immediate cause? Guesses by oil man T. Boone Pickens and Goldman Sachs that the price could go to $150 and $200 a barrel respectivly in the near future. They were referring to what can be called the hoopla pricing party on the New York Mercantile Exchange. (NYMEX)
...
Oil was at $50 a barrel in January 2007, then $75 a barrel in August 2007. Now at $130 or so a barrel, it is clear that oil pricing is speculative activity, having very little to do with physical supply and demand. An essential product—petroleum—is set by speculators operating on rumor, greed, and fear of wild predictions.
Over the time since early 2007, U.S. demand for petroleum has fallen by 1 percent and world demand has risen by 1.3 percent. Supplies of crude are so plentiful, according to the Wall Street Journal, “traders of physical crude oil say their market is suffering from too much supply, not too little.”
...
Historically, oil has been afflicted with the control of monopolists. From the late nineteenth century days of John D. Rockefeller, and his Standard Oil monopoly, to the emergence of the “Seven Sisters” oligopoly, made up of Standard Oil, Shell, BP, Texaco, Mobil, Gulf and Socal, to the rise of OPEC representing the major producing countries, the “free market” price of oil has been a mirage. Despite the breakup of the Standard Oil company by the government’s trustbusters about 100 years ago, selling cartels and buying oligopolies kept reasserting themselves. ...
German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds
Germany in call for ban on oil speculation | By Ambrose Evans-Pritchard | Last Updated: 12:53am BST 27/05/2008
German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.
It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.
...
Mr Beckmeyer said the last 25pc rise in the price of oil to $135 a barrel had nothing to do with underlying supply and demand. “It’s pure speculation,” he said.
...
There is now broad support in Germany for a clampdown on “locust” funds. President Horst Köhler said modern capitalism had turned into a “monster”, bringing the entire financial system to the brink of collapse this spring. ...
German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.
It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.
...
Mr Beckmeyer said the last 25pc rise in the price of oil to $135 a barrel had nothing to do with underlying supply and demand. “It’s pure speculation,” he said.
...
There is now broad support in Germany for a clampdown on “locust” funds. President Horst Köhler said modern capitalism had turned into a “monster”, bringing the entire financial system to the brink of collapse this spring. ...
Swiss bank paid McCain co-chair to push agenda on U.S. mortgage crisis
McCain economic policy shaped by lobbyist - Countdown with Keith Olbermann- msnbc.comBy Jonathan Larsen, producer,
with Keith Olbermann | MSNBC | updated 7:52 p.m. CT, Tues., May. 27, 2008
Republican presidential candidate Sen. John McCain’s national campaign general co-chair was being paid by a Swiss bank to lobby Congress about the U.S. mortgage crisis at the same time he was advising McCain about his economic policy, federal records show. [See sidebar.] ...
with Keith Olbermann | MSNBC | updated 7:52 p.m. CT, Tues., May. 27, 2008
Republican presidential candidate Sen. John McCain’s national campaign general co-chair was being paid by a Swiss bank to lobby Congress about the U.S. mortgage crisis at the same time he was advising McCain about his economic policy, federal records show. [See sidebar.] ...
all we would have to do to fully fund our nation’s entitlement programs would be to cut discretionary spending by 97 percent
Storms on the Horizon - Richard Fisher Speeches - News Remarks before the Commonwealth Club of California | San Francisco, California | May 28, 2008
...
Eight years ago, our federal budget, crafted by a Democratic president and enacted by a Republican Congress, produced a fiscal surplus of $236 billion, the first surplus in almost 40 years and the highest nominal-dollar surplus in American history. While the Fed is scrupulously nonpartisan and nonpolitical, I mention this to emphasize that the deficit/debt issue knows no party and can be solved only by both parties working together. For a brief time, with surpluses projected into the future as far as the eye could see, economists and policymakers alike began to contemplate a bucolic future in which interest payments would form an ever-declining share of federal outlays, a future where Treasury bonds and debt-ceiling legislation would become dusty relics of a long-forgotten past. The Fed even had concerns about how open market operations would be conducted in a marketplace short of Treasury debt.
...
Eight years ago, our federal budget, crafted by a Democratic president and enacted by a Republican Congress, produced a fiscal surplus of $236 billion, the first surplus in almost 40 years and the highest nominal-dollar surplus in American history. While the Fed is scrupulously nonpartisan and nonpolitical, I mention this to emphasize that the deficit/debt issue knows no party and can be solved only by both parties working together. For a brief time, with surpluses projected into the future as far as the eye could see, economists and policymakers alike began to contemplate a bucolic future in which interest payments would form an ever-declining share of federal outlays, a future where Treasury bonds and debt-ceiling legislation would become dusty relics of a long-forgotten past. The Fed even had concerns about how open market operations would be conducted in a marketplace short of Treasury debt.
That utopian scenario did not last for long. Over the next seven years, federal spending grew at a 6.2 percent nominal annual rate while receipts grew at only 3.5 percent. Of course, certain areas of government, like national defense, had to spend more in the wake of 9/11. But nondefense discretionary spending actually rose 6.4 percent annually during this timeframe, outpacing the growth in total expenditures. Deficits soon returned, reaching an expected $410 billion for 2008—a $600 billion swing from where we were just eight years ago. This $410 billion estimate, by the way, was made before the recently passed farm bill and supplemental defense appropriation and without considering a proposed patch for the Alternative Minimum Tax—all measures that will lead to a further ballooning of government deficits.
...
Now, fast forward 70 or so years and ask this question: What is the mathematical predicament of Social Security today? Answer: The amount of money the Social Security system would need today to cover all unfunded liabilities from now on—what fiscal economists call the “infinite horizon discounted value” of what has already been promised recipients but has no funding mechanism currently in place—is $13.6 trillion, an amount slightly less than the annual gross domestic product of the United States.
...
Please sit tight while I walk you through the math of Medicare. As you may know, the program comes in three parts: Medicare Part A, which covers hospital stays; Medicare B, which covers doctor visits; and Medicare D, the drug benefit that went into effect just 29 months ago. The infinite-horizon present discounted value of the unfunded liability for Medicare A is $34.4 trillion. The unfunded liability of Medicare B is an additional $34 trillion. The shortfall for Medicare D adds another $17.2 trillion. The total? If you wanted to cover the unfunded liability of all three programs today, you would be stuck with an $85.6 trillion bill. That is more than six times as large as the bill for Social Security. It is more than six times the annual output of the entire U.S. economy.
...
Suppose we decided to tackle the issue solely on the spending side. It turns out that total discretionary spending in the federal budget, if maintained at its current share of GDP in perpetuity, is 3 percent larger than the entitlement shortfall. So all we would have to do to fully fund our nation’s entitlement programs would be to cut discretionary spending by 97 percent. But hold on. That discretionary spending includes defense and national security, education, the environment and many other areas, not just those controversial earmarks that make the evening news. All of them would have to be cut—almost eliminated, really—to tackle this problem through discretionary spending.
...
Of late, we have heard many complaints about the weakness of the dollar against the euro and other currencies. It was recently argued in the op-ed pages of the Financial Times [3] that one reason for the demise of the British pound was the need to liquidate England’s international reserves to pay off the costs of the Great Wars. In the end, the pound, it was essentially argued, was sunk by the kaiser’s army and Hitler’s bombs. Right now, we—you and I—are launching fiscal bombs against ourselves. You have it in your power as the electors of our fiscal authorities to prevent this destruction. Please do so ...
Wednesday, June 4, 2008
America's house prices are falling even faster than during the Great Depression ... 18% vs.10.5% in 1932
House prices | Through the floor | May 29th 2008 | From Economist.com
AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year. ...
AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year. ...
Overpaid Bosses
Overpaid Bosses | Saturday 31 May 2008 | by: Le Monde| Editorial
Is it tolerable that company executives should receive as much salary in a week as an employee does during his whole working life? ...
...
There's no question in this instance of pleading for a leveling equalitarianism, only of asserting that it is indecent, amoral, socially destructive and irresponsible to practice such wage disparities. They are, moreover, unprecedented in the history of capitalism. In several Northern European countries, voices are protesting in favor of a ceiling on the most extravagant remunerations. That would be a second-best solution. But, clearly, self-discipline is not adequate - even to protect capitalism from its own excesses.
Is it tolerable that company executives should receive as much salary in a week as an employee does during his whole working life? ...
...
There's no question in this instance of pleading for a leveling equalitarianism, only of asserting that it is indecent, amoral, socially destructive and irresponsible to practice such wage disparities. They are, moreover, unprecedented in the history of capitalism. In several Northern European countries, voices are protesting in favor of a ceiling on the most extravagant remunerations. That would be a second-best solution. But, clearly, self-discipline is not adequate - even to protect capitalism from its own excesses.
US; A Broadband Backwater: drops from 4th to 15th out of 30 indusrtrial countries in 6 years ...
The Cure for America’s Internet - CommonDreams.org
...
A Broadband Backwater
The shortcomings of the U.S. broadband market are tremendous - more than 10 million U.S. households remain un-served, while nearly 50 million homes are priced out of subscribing to broadband services - and the social and economic consequences are dire.
Late last month, yet another global survey confirmed this, showing the U.S. to be more of an Internet backwater than a world leader. According to the Organization for Economic Cooperation and Development (OECD), Internet access and services in America have slid to 15th place among 30 developed nations, a drop from our 12th place ranking in 2006, and from fourth in 2001 when the OECD began its international survey.
In real terms this means Internet users in Japan pay little more than half the price (65 cents to the dollar) for an Internet connection that’s 20 times faster than what’s commonly available to people in the United States.
...
In 2004, President Bush pledged “to have a universal, affordable access for broadband technology by the year 2007.”
As if on cue, last year, Mr. Bush’s chief Internet officer John Kneuer declared “Mission Accomplished” — that all the international surveys were misleading and that the “free market” had ensured that Americans across the country enjoy real choice in high-speed internet access.
...
What he and his White House compatriots refuse to acknowledge, though, is that a free market approach for Internet services in the U.S. is a chimera. The only hand in play here belongs to the phone and cable duopoly, which controls broadband access for more than 98 percent of homes.
The net effect of this duopoly is a dearth or real choices; allowing providers like AT&T and Comcast to exact high prices from Internet users, while delivering connections that are too slow — and, often in the case of cable, too congested - to meet growing demand.
The market imbalance is beginning to take its toll. A Brookings Institution study counts 300,000 new American jobs each year for every 1 percent increase in broadband adoption.
...
Japan Pries Open Its Market
...
A Broadband Backwater
The shortcomings of the U.S. broadband market are tremendous - more than 10 million U.S. households remain un-served, while nearly 50 million homes are priced out of subscribing to broadband services - and the social and economic consequences are dire.
Late last month, yet another global survey confirmed this, showing the U.S. to be more of an Internet backwater than a world leader. According to the Organization for Economic Cooperation and Development (OECD), Internet access and services in America have slid to 15th place among 30 developed nations, a drop from our 12th place ranking in 2006, and from fourth in 2001 when the OECD began its international survey.
In real terms this means Internet users in Japan pay little more than half the price (65 cents to the dollar) for an Internet connection that’s 20 times faster than what’s commonly available to people in the United States.
...
In 2004, President Bush pledged “to have a universal, affordable access for broadband technology by the year 2007.”
As if on cue, last year, Mr. Bush’s chief Internet officer John Kneuer declared “Mission Accomplished” — that all the international surveys were misleading and that the “free market” had ensured that Americans across the country enjoy real choice in high-speed internet access.
...
What he and his White House compatriots refuse to acknowledge, though, is that a free market approach for Internet services in the U.S. is a chimera. The only hand in play here belongs to the phone and cable duopoly, which controls broadband access for more than 98 percent of homes.
The net effect of this duopoly is a dearth or real choices; allowing providers like AT&T and Comcast to exact high prices from Internet users, while delivering connections that are too slow — and, often in the case of cable, too congested - to meet growing demand.
The market imbalance is beginning to take its toll. A Brookings Institution study counts 300,000 new American jobs each year for every 1 percent increase in broadband adoption.
...
Japan Pries Open Its Market
In 2000, Japan faced a similar dilemma — an Internet industry stifled by the heavy hand of a few network gatekeepers. But the government responded by pulling together the nation’s leaders from the pubic and private sector to launch an “e-Japan strategy” aimed at connecting 40 million of Japan’s 46 million households within five years.
The Japanese government quickly moved to create a highly competitive private sector by compelling regional telephone companies to open their residential lines to wholesale access by other competitors. They also adopted policies to prevent the type of online discrimination that has reared its head recently in the U.S.
In 2001, Japan counted only 2.2 broadband subscribers per 100 inhabitants. By mid-2004, ultra-high-speed broadband connections were available to more than 80 percent of Japan’s citizens. By 2006, Japan declared that it had surpassed the broadband goals of e-Japan and was ready to launch its next national strategy, called “u-Japan“. The “u” takes the nation’s broadband beyond “ubiquitous,” to become “universal,” “user-oriented,” and “unique.” ...
at least 3 million too many empty housing units in the country. This number, moreover, is rising ...
It's Only Going to Get Worse Everything you always wanted to know about the housing crash, but were afraid to ask. | by Lawrence B. Lindsey | 06/09/2008,
...
There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty. This vacancy rate is 2.5 percentage points higher than it has been at any point in the half century the data have been tracked, translating into at least 3 million too many empty housing units in the country. This number, moreover, is rising. This is the most intractable part of the real estate bubble, for we cannot find a true bottom to home prices until this inventory of empty units starts to clear, and we cannot find a bottom to the mortgage finance market until home prices bottom out. ...
...
There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty. This vacancy rate is 2.5 percentage points higher than it has been at any point in the half century the data have been tracked, translating into at least 3 million too many empty housing units in the country. This number, moreover, is rising. This is the most intractable part of the real estate bubble, for we cannot find a true bottom to home prices until this inventory of empty units starts to clear, and we cannot find a bottom to the mortgage finance market until home prices bottom out. ...
A State-by-State Assessment of America's Economic Health and a Prescription for Change
The Stress Test | A State-by-State Assessment of America's Economic Health and a Prescription for Change | By Eric Lotke, Alex Carter, Molly Swartz | Institute for America's Future | May 14th, 2008
Read the full report (PDF) | State stress test statistics
What "The Stress Test" Measures
Jobs
- Unemployment rates and changes in unemployment rates (March 2000-March 2008)
- Changes in the number of goods-producing and service-providing jobs (March 2000-March 2008)
- Changes in available construction jobs (March 2000-2008)
- Changes in available manufacturing jobs (March 2000-2008)
- Changes in average weekly wage (Q3 2001-Q3 2007)
Costs and quality of life
- People without health insurance, per 1,000 residents; rate and change over time; overall and employer-based (2000-2006)
- Population spending 25 percent of pre-tax income on health care; rate and change (2000-2008)
- Public college tuition as a percentage of income; rate and change over time (2000-2001 – 2006-2007)
- Bankruptcy, per capita; rate and change over time (2006-2007)
- Foreclosures, per capita (2007)
- Average price of gas, change over time(January 2000-February 2008) ...
Crisis shows us once again that the markets are incapable of self-regulation ... Decent capitalism requires effective government intervention ...
Mad Finance Must Not Rule Us | Wednesday 21 May 2008 | by: Jacques Delors, Jacques Santer, Helmut Schmidt, Massimo d'Alema, Lionel Jospin, Pavvo Lipponen, Goran Persson, Poul Rasmussen, Michel Rocard, Daniel Daianu, Hans Eichel, Par Nuder, Ruairi Quinn, Otto Graf Lambsdorff, Le Monde
This financial crisis is not the product of an accident. It was not impossible to foresee, as many of the world's top financial and political leaders today allege. The alarm had been sounded, years ago already, by clear-mined individuals. This crisis, in fact, incarnates the failure of little- or poorly-regulated markets and shows us once again that the markets are incapable of self-regulation. ...
Financial markets have become more and more opaque and identifying those who bear and evaluate their risks has been revealed as a titanic challenge. The so-called "shadow" banking sector - barely or not-at-all regulated - has only grown during the last 20 years. The big banks have participated in a "creation and distribution" game of extremely complex financial products and embarked on the sale of debts - wrapped in rather questionable packaging - linked to high-risk real estate loans. Defective bonus systems, excessively short-term vision and obvious conflicts of interest have encouraged speculative transactions.
Unsound mortgage loans wrongly based on the idea that real estate prices would continue to climb forever, thus allowing the debt contracted to be reimbursed, are only a symptom of a broader crisis in financial governance and commercial practices. The world's three top rating agencies rated these phony assets as relatively riskless. An investment bank earned billions of US dollars speculating on subprime securities' reduction in value, even as they were selling those securities to their clients, which more than eloquently summarizes the loss of any ethics in the business world!
...
Growing income inequality has occurred in tandem with the continuous growth of the financial sector. It's true that technical progress has contributed significantly to the ever more significant differences in income that benefit highly trained personnel. Nonetheless, imprudent policies have also had a major impact in this domain. Financial capital currently represents 15 times the gross domestic product (GDP) of all countries. The cumulative debts of households, financial and non-financial companies, and American government at all levels represents over three times the United States's GDP, or twice the level recorded at the time of the 1929 stock market crash.
...
Free markets cannot make a mockery of social morality. The father of economic laissez-faire, Adam Smith, also wrote the "Theory of Moral Sentiments," while Max Weber established the connections between hard work and moral values on the one hand and the advance of capitalism on the other. Decent capitalism (that is capitalism which respects human dignity, to re-echo Amartya Sen's remarks) requires effective government intervention. The pursuit of profit constitutes the essence of the market economy. But when everything is for sale, social cohesion disintegrates and the system collapses. ...
...
Jacques Delors and Jacques Santer are former presidents of the European Commission.
Helmut Schmidt is a former German chancellor.
Massimo d'Alema (Italy), Lionel Jospin (France), Pavvo Lipponen (Finland), Goran Persson (Sweden), Poul Rasmussen (Denmark), Michel Rocard (France) are former prime ministers.
Daniel Daianu (Romania), Hans Eichel (Germany), Par Nuder (Sweden), Ruairi Quinn (Ireland), Otto Graf Lambsdorff (Germany) are all former economics and/or finance ministers.
This financial crisis is not the product of an accident. It was not impossible to foresee, as many of the world's top financial and political leaders today allege. The alarm had been sounded, years ago already, by clear-mined individuals. This crisis, in fact, incarnates the failure of little- or poorly-regulated markets and shows us once again that the markets are incapable of self-regulation. ...
Financial markets have become more and more opaque and identifying those who bear and evaluate their risks has been revealed as a titanic challenge. The so-called "shadow" banking sector - barely or not-at-all regulated - has only grown during the last 20 years. The big banks have participated in a "creation and distribution" game of extremely complex financial products and embarked on the sale of debts - wrapped in rather questionable packaging - linked to high-risk real estate loans. Defective bonus systems, excessively short-term vision and obvious conflicts of interest have encouraged speculative transactions.
Unsound mortgage loans wrongly based on the idea that real estate prices would continue to climb forever, thus allowing the debt contracted to be reimbursed, are only a symptom of a broader crisis in financial governance and commercial practices. The world's three top rating agencies rated these phony assets as relatively riskless. An investment bank earned billions of US dollars speculating on subprime securities' reduction in value, even as they were selling those securities to their clients, which more than eloquently summarizes the loss of any ethics in the business world!
...
Growing income inequality has occurred in tandem with the continuous growth of the financial sector. It's true that technical progress has contributed significantly to the ever more significant differences in income that benefit highly trained personnel. Nonetheless, imprudent policies have also had a major impact in this domain. Financial capital currently represents 15 times the gross domestic product (GDP) of all countries. The cumulative debts of households, financial and non-financial companies, and American government at all levels represents over three times the United States's GDP, or twice the level recorded at the time of the 1929 stock market crash.
...
Free markets cannot make a mockery of social morality. The father of economic laissez-faire, Adam Smith, also wrote the "Theory of Moral Sentiments," while Max Weber established the connections between hard work and moral values on the one hand and the advance of capitalism on the other. Decent capitalism (that is capitalism which respects human dignity, to re-echo Amartya Sen's remarks) requires effective government intervention. The pursuit of profit constitutes the essence of the market economy. But when everything is for sale, social cohesion disintegrates and the system collapses. ...
...
Jacques Delors and Jacques Santer are former presidents of the European Commission.
Helmut Schmidt is a former German chancellor.
Massimo d'Alema (Italy), Lionel Jospin (France), Pavvo Lipponen (Finland), Goran Persson (Sweden), Poul Rasmussen (Denmark), Michel Rocard (France) are former prime ministers.
Daniel Daianu (Romania), Hans Eichel (Germany), Par Nuder (Sweden), Ruairi Quinn (Ireland), Otto Graf Lambsdorff (Germany) are all former economics and/or finance ministers.
In 20 years, incomes of top 1 percent of taxpayer jumped from 11.3 to 21.2 percent of the national total
Poisonous Plutocracy Pushes Economic Inequality : Information Clearing House - ICH By Joel S. Hirschhorn
28/05/08 "ICH" -- - The biggest political issue receiving no attention by the Democratic and Republican presidential candidates is the powerful plutocracy that has captured the government to produce rising economic inequality.
Both major parties have enabled, promoted and supported this Upper Class plutocracy. Myriad federal policies make the rich super-rich and the powerful dominant in both good and bad economic times. Meanwhile, despite elections, the middle class sinks into one big Lower Class as the plutocracy ensures that national prosperity is unshared.
Economic data show the plutocracy’s assault on American society. Consider these examples.
The top 20 percent of households earned more, after taxes, than the remaining 80 percent in 2005, while the topmost 1 percent took home more than the bottom 40 percent.
No American state has seen the gap between rich and poor widen faster than Connecticut. From 1987 through 2006, the top fifth of the state’s households saw their incomes increase by 44.8 percent, after inflation. Incomes for the bottom fifth fell 17.4 percent. On the other coast, just three of every 1,000 Californians in 2005 reported at least $1 million in income. But they got $213 of every $1,000 Californians earned in 2005 income. The state’s top 1 percent – average income $1.6 million – pay 7.1 percent of their incomes in income, sales, property, and gas taxes. The poorest fifth of California households pay 11.7 percent.
Real hourly wages for most workers have risen only 1 percent since 1979, even as those workers' productivity has increased by 60 percent. Higher efficiency has rewarded business executives, owners and investors, but not workers. What's more, American workers now work more hours per year than their counterparts in virtually every other advanced economy, even Japan, and without universal health care.
A typical hedge fund manager makes 31 times more in one hour than the typical American family makes in a year. In 2007, the top 50 hedge fund income-earners collected $29 billion – an average of $581 million each. John Paulson took home $3.7 billion from his hedge fund labors.
...
Between 1986 and 2005, the income of America’s top 1 percent of taxpayer jumped from 11.3 to 21.2 percent of the national total. Their federal income taxes dropped from 33.13 percent of total personal income in 1986 to 23.13 percent in 2005. From 2001 to 2008, the net worth of the wealthiest 1 percent grew from $186 billion to $816 billion. ...
28/05/08 "ICH" -- - The biggest political issue receiving no attention by the Democratic and Republican presidential candidates is the powerful plutocracy that has captured the government to produce rising economic inequality.
Both major parties have enabled, promoted and supported this Upper Class plutocracy. Myriad federal policies make the rich super-rich and the powerful dominant in both good and bad economic times. Meanwhile, despite elections, the middle class sinks into one big Lower Class as the plutocracy ensures that national prosperity is unshared.
Economic data show the plutocracy’s assault on American society. Consider these examples.
The top 20 percent of households earned more, after taxes, than the remaining 80 percent in 2005, while the topmost 1 percent took home more than the bottom 40 percent.
No American state has seen the gap between rich and poor widen faster than Connecticut. From 1987 through 2006, the top fifth of the state’s households saw their incomes increase by 44.8 percent, after inflation. Incomes for the bottom fifth fell 17.4 percent. On the other coast, just three of every 1,000 Californians in 2005 reported at least $1 million in income. But they got $213 of every $1,000 Californians earned in 2005 income. The state’s top 1 percent – average income $1.6 million – pay 7.1 percent of their incomes in income, sales, property, and gas taxes. The poorest fifth of California households pay 11.7 percent.
Real hourly wages for most workers have risen only 1 percent since 1979, even as those workers' productivity has increased by 60 percent. Higher efficiency has rewarded business executives, owners and investors, but not workers. What's more, American workers now work more hours per year than their counterparts in virtually every other advanced economy, even Japan, and without universal health care.
A typical hedge fund manager makes 31 times more in one hour than the typical American family makes in a year. In 2007, the top 50 hedge fund income-earners collected $29 billion – an average of $581 million each. John Paulson took home $3.7 billion from his hedge fund labors.
...
Between 1986 and 2005, the income of America’s top 1 percent of taxpayer jumped from 11.3 to 21.2 percent of the national total. Their federal income taxes dropped from 33.13 percent of total personal income in 1986 to 23.13 percent in 2005. From 2001 to 2008, the net worth of the wealthiest 1 percent grew from $186 billion to $816 billion. ...
The Global Trade in Prisoners' Blood: FDA pulled the company’s license to sell blood “for falsifying records and shipping hot blood.”
Jeffrey St. Clair: Arkansas Bloodsuckers May 31 / June 1, 2008 | The Global Trade in Prisoners' Blood | By JEFFREY ST. CLAIR
... fat contract to a Little Rock company called Health Management Associates, or HMA. The company was paid $3 million a year to run medical services for the state’s prison system, which had been blasted in a ruling by the US Supreme Court as an “evil place run by some evil men.”
HMA not only made money from providing medical care to prisoners, but it also started a profitable side venture: blood mining. The company paid prisoners $7 per pint of their blood. HMA then sold the blood on the international plasma market for $50 a pint, splitting the proceeds 50/50 with the Arkansas Department of Corrections. Since Arkansas is one of the few states that does not pay prisoners for their labor, inmates were frequent donors at the so-called “blood clinic.” Hundreds of prisoners sold as much as two pints a week to HMA. The blood was then sold to pharmaceutical companies, such as Bayer and Baxter International; blood banks, such as the Red Cross; and so-called blood fractionizers, who transformed the blood into medicines for hemophiliacs.
...
... the FDA pulled the company’s license to sell blood “for falsifying records and shipping hot blood.” The report goes on to say that “the suspension was for collecting and shipping plasma which had been collected from donors with a history of positive tests for [Hepatitis B]...the violations were directly related to using inmate labor in the record and donor reject list.”
Dunn, and the Arkansas Department of Corrections, convinced the FDA that the fault lay with a prison guard who was taking kickbacks from prisoners in order to let them get back into the blood trade. The license was quickly restored and tainted blood once more began to flow. ...
... fat contract to a Little Rock company called Health Management Associates, or HMA. The company was paid $3 million a year to run medical services for the state’s prison system, which had been blasted in a ruling by the US Supreme Court as an “evil place run by some evil men.”
HMA not only made money from providing medical care to prisoners, but it also started a profitable side venture: blood mining. The company paid prisoners $7 per pint of their blood. HMA then sold the blood on the international plasma market for $50 a pint, splitting the proceeds 50/50 with the Arkansas Department of Corrections. Since Arkansas is one of the few states that does not pay prisoners for their labor, inmates were frequent donors at the so-called “blood clinic.” Hundreds of prisoners sold as much as two pints a week to HMA. The blood was then sold to pharmaceutical companies, such as Bayer and Baxter International; blood banks, such as the Red Cross; and so-called blood fractionizers, who transformed the blood into medicines for hemophiliacs.
...
... the FDA pulled the company’s license to sell blood “for falsifying records and shipping hot blood.” The report goes on to say that “the suspension was for collecting and shipping plasma which had been collected from donors with a history of positive tests for [Hepatitis B]...the violations were directly related to using inmate labor in the record and donor reject list.”
Dunn, and the Arkansas Department of Corrections, convinced the FDA that the fault lay with a prison guard who was taking kickbacks from prisoners in order to let them get back into the blood trade. The license was quickly restored and tainted blood once more began to flow. ...
Indefensible Spending - future planned investment in those ultra-pricey weapons from $790 billion to $1.6 trillion
Indefensible Spending - CommonDreams.orgSunday, June 1, 2008 by the Los Angeles Times | by Robert Scheer
... Why is U.S. military spending at the highest point, in inflation-adjusted dollars, than at any time since the end of World War II? Why, without a sophisticated military opponent in sight, is the United States spending trillions of dollars on the development of high-tech weapons systems that lost their purpose with the collapse of the Soviet Union two decades ago?
...
The Pentagon’s budget for fiscal year 2008 set a post-World War II record at $625 billion, and that does not include more than $100 billion in other federal budget expenditures for homeland security, nuclear weapons and so-called black budget — or covert — operations.
And what are we spending all this money on? We are talking high-tech war toys designed to fight a Cold War enemy that no longer exists, including the F-35 Joint Strike Fighter program, with its estimated total price tag of $300 billion, and Virginia-class submarines at $2.5 billion each. Who cares that the terrorists lack submarines for the Navy to battle deep in the ocean, for which the Virginia-class submarine was designed?
...
Since President Bush’s first year in office, according to the Government Accountability Office, the Defense Department has doubled its future planned investment in those ultra-pricey weapons from $790 billion to $1.6 trillion. ...
...
Maybe one can make a case that it is appropriate that more than half of the discretionary funds in the 2009 budget go to defense, and all the other federal programs for science, education, infrastructure, global warming and nonmilitary international programs compete for the rest. But isn’t it bizarre that the biggest peacetime military budget in U.S. history — 35% higher than when Bush came into office and larger than the military budgets of all other nations combined — is not even discussed in the current presidential contest? ...
... Why is U.S. military spending at the highest point, in inflation-adjusted dollars, than at any time since the end of World War II? Why, without a sophisticated military opponent in sight, is the United States spending trillions of dollars on the development of high-tech weapons systems that lost their purpose with the collapse of the Soviet Union two decades ago?
...
The Pentagon’s budget for fiscal year 2008 set a post-World War II record at $625 billion, and that does not include more than $100 billion in other federal budget expenditures for homeland security, nuclear weapons and so-called black budget — or covert — operations.
And what are we spending all this money on? We are talking high-tech war toys designed to fight a Cold War enemy that no longer exists, including the F-35 Joint Strike Fighter program, with its estimated total price tag of $300 billion, and Virginia-class submarines at $2.5 billion each. Who cares that the terrorists lack submarines for the Navy to battle deep in the ocean, for which the Virginia-class submarine was designed?
...
Since President Bush’s first year in office, according to the Government Accountability Office, the Defense Department has doubled its future planned investment in those ultra-pricey weapons from $790 billion to $1.6 trillion. ...
...
Maybe one can make a case that it is appropriate that more than half of the discretionary funds in the 2009 budget go to defense, and all the other federal programs for science, education, infrastructure, global warming and nonmilitary international programs compete for the rest. But isn’t it bizarre that the biggest peacetime military budget in U.S. history — 35% higher than when Bush came into office and larger than the military budgets of all other nations combined — is not even discussed in the current presidential contest? ...
Tuesday, May 27, 2008
U.S. home prices dropped at the sharpest rate ... since index created in 1988 ... 19/20 metro areas drop ...
S&P: US home prices tumble a record 14.1 pct in 1Q | By J.W. ELPHINSTONE, AP Business Writer Tue May 27, 10:57 AM ET
NEW YORK - U.S. home prices dropped at the sharpest rate in two decades during the first quarter, a closely watched index showed Tuesday, a somber indication that the housing slump continues to deepen.
Standard & Poor's/Case-Shiller said its national home price index fell 14.1 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988. The quarterly index covers all nine U.S. Census divisions. ...
...
Nineteen of the 20 metro areas reported annual declines, with 15 of them posting record lows. Six metro areas lost more than 20 percent. ....
NEW YORK - U.S. home prices dropped at the sharpest rate in two decades during the first quarter, a closely watched index showed Tuesday, a somber indication that the housing slump continues to deepen.
Standard & Poor's/Case-Shiller said its national home price index fell 14.1 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988. The quarterly index covers all nine U.S. Census divisions. ...
...
Nineteen of the 20 metro areas reported annual declines, with 15 of them posting record lows. Six metro areas lost more than 20 percent. ....
Speculators are largely responsible for driving crude prices to their peaks in recent weeks ...
George Soros: rocketing oil price is a bubble | By Edmund Conway, Economics Editor | Last Updated: 12:53am BST 27/05/2008
Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.
The billionaire investor's comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.
In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation.
"Speculation... is increasingly affecting the price," he said. "The price has this parabolic shape which is characteristic of bubbles," he said.
# 'We face the most serious recession of our lifetime'
The comments are significant, not only because Mr Soros is the world's most prominent hedge fund investor but also because many experts have claimed speculation is only a minor factor affecting crude prices. ..
Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.
The billionaire investor's comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.
In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation.
"Speculation... is increasingly affecting the price," he said. "The price has this parabolic shape which is characteristic of bubbles," he said.
# 'We face the most serious recession of our lifetime'
The comments are significant, not only because Mr Soros is the world's most prominent hedge fund investor but also because many experts have claimed speculation is only a minor factor affecting crude prices. ..
Saturday, May 24, 2008
the American economy is now mortgaged to foreign nations. ... Wall Street financial industry has no patriotic interest in America
Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (Hardcover)Kevin Phillips
...
In his latest book, Phillips pulls the fire alarm on an American economy that both political parties have turned over to the finanical industry -- including hedge funds -- and sacrificed to globalized trade and debt.
In short, Kevin Phillips debunks the notion of American economic dominance and reveals that we're living a charade, being sold siren songs of super power prowess that's built on trillions of dollars in debt.
The truth is that the American economy is now mortgaged to foreign nations.
And the Wall Street financial industry has no patriotic interest in America. They just go where the money is.
...
The bestselling author reveals how the U.S. financial sector has hijacked our economy and put America's global future at risk
In American Theocracy, Kevin Phillips warned us of the perilous interaction of debt, financial recklessness, and the increasing cost of scarce oil. The current housing and mortgage debacle is proof once more of Phillips's prescience, and only the first harbinger of a national crisis. In Bad Money, Phillips describes the consequences of our misguided economic policies, our mounting debt, our collapsing housing market, our threatened oil, and the end of American domination of world markets. America's current challenges (and failures) run striking parallels to the decline of previous leading world economic powers-especially the Dutch and British. Global overreach, worn-out politics, excessive debt, and exhausted energy regimes are all chilling signals that the United States is crumbling as the world superpower.
"Bad money" refers to a new phenomenon in wayward megafinance-the emergence of a U.S. economy that is globally dependent and dominated by hubris-driven financial services. Also "bad" are the risk miscalculations and strategic abuses of new multitrillion-dollar products such as asset-backed securities and the lure of buccaneering vehicles like hedge funds. Finally, the U.S. dollar has been turned into bad money as it has weakened and become vulnerable to the world's other currencies. In all these ways, "bad" finance has failed the American people and pointed U.S. capitalism toward a global crisis. Bad Money is the perfect follow- up to Phillips's last book, whose dire warnings are now proving frighteningly accurate. ...
...
In his latest book, Phillips pulls the fire alarm on an American economy that both political parties have turned over to the finanical industry -- including hedge funds -- and sacrificed to globalized trade and debt.
In short, Kevin Phillips debunks the notion of American economic dominance and reveals that we're living a charade, being sold siren songs of super power prowess that's built on trillions of dollars in debt.
The truth is that the American economy is now mortgaged to foreign nations.
And the Wall Street financial industry has no patriotic interest in America. They just go where the money is.
...
The bestselling author reveals how the U.S. financial sector has hijacked our economy and put America's global future at risk
In American Theocracy, Kevin Phillips warned us of the perilous interaction of debt, financial recklessness, and the increasing cost of scarce oil. The current housing and mortgage debacle is proof once more of Phillips's prescience, and only the first harbinger of a national crisis. In Bad Money, Phillips describes the consequences of our misguided economic policies, our mounting debt, our collapsing housing market, our threatened oil, and the end of American domination of world markets. America's current challenges (and failures) run striking parallels to the decline of previous leading world economic powers-especially the Dutch and British. Global overreach, worn-out politics, excessive debt, and exhausted energy regimes are all chilling signals that the United States is crumbling as the world superpower.
"Bad money" refers to a new phenomenon in wayward megafinance-the emergence of a U.S. economy that is globally dependent and dominated by hubris-driven financial services. Also "bad" are the risk miscalculations and strategic abuses of new multitrillion-dollar products such as asset-backed securities and the lure of buccaneering vehicles like hedge funds. Finally, the U.S. dollar has been turned into bad money as it has weakened and become vulnerable to the world's other currencies. In all these ways, "bad" finance has failed the American people and pointed U.S. capitalism toward a global crisis. Bad Money is the perfect follow- up to Phillips's last book, whose dire warnings are now proving frighteningly accurate. ...
“But we’ve never had an expansion in which the middle of income distribution had no wage growth.”
For Many, a Boom That Wasn’t | By DAVID LEONHARDT | Published: April 9, 2008
...
The bigger problem is that the now-finished boom was, for most Americans, nothing of the sort. In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.
...
The bigger problem is that the now-finished boom was, for most Americans, nothing of the sort. In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.
This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economy’s health: does it produce ever-rising living standards for its citizens?
...
“We have had expansions before where the bottom end didn’t do well,” said Lawrence F. Katz, a Harvard economist who studies the job market. “But we’ve never had an expansion in which the middle of income distribution had no wage growth.”
...
Real median family income more than doubled from the late 1940s to the late ’70s. It has risen less than 25 percent in the three decades since. Statistics like these are now so familiar as to be almost numbing. But the larger point is still crucial: the modern American economy distributes the fruits of its growth to a relatively narrow slice of the population. We don’t need another decade of evidence to feel confident about that conclusion.
...
The same goes for public works. Spending on physical infrastructure is at a 20-year high as a share of gross domestic product, but too much of the money is spent on the inefficient pet programs championed by individual members of Congress. Pork barrel spending does not add up to a national economic strategy.
Health care and taxes will have to be part of the discussion, too. Dr. Ezekiel Emanuel of the National Institutes of Health pointed out to me that a serious effort to curtail wasteful medical spending would directly help workers. It would spare them from paying the insurance premiums and taxes that now cover that care.
The tax code, meanwhile, has become far more favorable to high-income workers at the same time that they — and they alone — have received large pretax raises. That doesn’t make much sense, does it? ...
American cousins think financial engineering is economic salvation. They don't seem to mind that if manufacturing keeps moving offshore -- devestating
How Europe Avoided Our Mess | Robert Kuttner | May 5, 2008
The credit crisis, which is sapping America's economic strength, was the result of an almost religious belief in deregulation. It is instructive to consider the economic situation in nations that resisted deregulation.
...
None of this had to happen. The credit crisis, which is sapping America's economic strength, was the result of an almost religious belief in deregulation whose excesses are now coming home to roost.
It is instructive to compare the American financial mess with the economic situation in nations that resisted deregulation. Old Europe tends to get a scornful press in the U.S. But Europe is not suffering a financial meltdown today -- mainly because Europeans (with the exception of Britain and Switzerland) took only a few sips of the financial Kool-Aid so heavily promoted by U.S. banks.
A few European banks did get into trouble last summer, because they had been persuaded to buy toxic sub-prime securities made in America. Germany's powerhouse Deutsche Bank continues to suffer some big losses. But the European Central Bank, in its first real test since the Euro made its public debut in 2002, has performed well and the crisis has largely passed. On our side of the ocean, the Fed keeps lurching from bailout to bailout.
...
Europe also has high domestic savings rates and balanced trade accounts with the rest of the world. Europe, unlike the U.S., is not increasingly in hock to China. The high Euro, the flipside of the cheap dollar, protects the European economy from inflation. And despite using an expensive Euro that has appreciated 60 percent against the dollar in six years, Germany is running record trade surpluses.
How can that be? As German Chancellor Angela Merkel once twitted Britain's then Prime Minister Tony Blair, "Mr. Blair, we still make things." By contrast, the Brits and their American cousins think financial engineering is economic salvation. They don't seem to mind that if manufacturing keeps moving offshore, which is devastating for the trade balance.
In a recent interview, Germany's Gunter Verheugen, the vice-president of the EU, told me, "We need a strong and competitive industrial base in order to have a strong service economy. Don't try to be cheaper. Try to be better. Don't try to compete on low social standards."
So as the U.S keeps trying to contain a needless crisis caused by an extreme faith in financial engineering, the Europeans have kept their heads and a more balanced form of capitalism. While Europe has its own debate about the right balance between market innovations and social protections, there is little enthusiasm for taking more lessons from market-besotted Americans who have managed to sink what was once the world's strongest economy. The main worry is how much contagion from America will spill over onto Europe.
The credit crisis, which is sapping America's economic strength, was the result of an almost religious belief in deregulation. It is instructive to consider the economic situation in nations that resisted deregulation.
...
None of this had to happen. The credit crisis, which is sapping America's economic strength, was the result of an almost religious belief in deregulation whose excesses are now coming home to roost.
It is instructive to compare the American financial mess with the economic situation in nations that resisted deregulation. Old Europe tends to get a scornful press in the U.S. But Europe is not suffering a financial meltdown today -- mainly because Europeans (with the exception of Britain and Switzerland) took only a few sips of the financial Kool-Aid so heavily promoted by U.S. banks.
A few European banks did get into trouble last summer, because they had been persuaded to buy toxic sub-prime securities made in America. Germany's powerhouse Deutsche Bank continues to suffer some big losses. But the European Central Bank, in its first real test since the Euro made its public debut in 2002, has performed well and the crisis has largely passed. On our side of the ocean, the Fed keeps lurching from bailout to bailout.
...
Europe also has high domestic savings rates and balanced trade accounts with the rest of the world. Europe, unlike the U.S., is not increasingly in hock to China. The high Euro, the flipside of the cheap dollar, protects the European economy from inflation. And despite using an expensive Euro that has appreciated 60 percent against the dollar in six years, Germany is running record trade surpluses.
How can that be? As German Chancellor Angela Merkel once twitted Britain's then Prime Minister Tony Blair, "Mr. Blair, we still make things." By contrast, the Brits and their American cousins think financial engineering is economic salvation. They don't seem to mind that if manufacturing keeps moving offshore, which is devastating for the trade balance.
In a recent interview, Germany's Gunter Verheugen, the vice-president of the EU, told me, "We need a strong and competitive industrial base in order to have a strong service economy. Don't try to be cheaper. Try to be better. Don't try to compete on low social standards."
So as the U.S keeps trying to contain a needless crisis caused by an extreme faith in financial engineering, the Europeans have kept their heads and a more balanced form of capitalism. While Europe has its own debate about the right balance between market innovations and social protections, there is little enthusiasm for taking more lessons from market-besotted Americans who have managed to sink what was once the world's strongest economy. The main worry is how much contagion from America will spill over onto Europe.
behaving more like Americans: choosing better-paying fields like finance and medicine, [over [under paid] engineering ... ]
High-Tech Japanese, Running Out of Engineers | By MARTIN FACKLER | Published: May 17, 2008
TOKYO — Japan is running out of engineers.
...
Universities call it “rikei banare,” or “flight from science.” The decline is growing so drastic that industry has begun advertising campaigns intended to make engineering look sexy and cool, and companies are slowly starting to import foreign workers, or sending jobs to where the engineers are, in Vietnam and India.
It was engineering prowess that lifted this nation from postwar defeat to economic superpower. But according to educators, executives and young Japanese themselves, the young here are behaving more like Americans: choosing better-paying fields like finance and medicine, or more purely creative careers, like the arts, rather than following their salaryman fathers into the unglamorous world of manufacturing.
...
But engineering students see themselves as a vanishing breed. Masafumi Hikita, a 24-year-old electric engineering senior, said most of his former high school classmates chose college majors in economics to pursue “easier money” in finance and banking. In fact, friends and neighbors were surprised he picked a difficult field like engineering, he said, with a reputation for long hours. ...
TOKYO — Japan is running out of engineers.
...
Universities call it “rikei banare,” or “flight from science.” The decline is growing so drastic that industry has begun advertising campaigns intended to make engineering look sexy and cool, and companies are slowly starting to import foreign workers, or sending jobs to where the engineers are, in Vietnam and India.
It was engineering prowess that lifted this nation from postwar defeat to economic superpower. But according to educators, executives and young Japanese themselves, the young here are behaving more like Americans: choosing better-paying fields like finance and medicine, or more purely creative careers, like the arts, rather than following their salaryman fathers into the unglamorous world of manufacturing.
...
But engineering students see themselves as a vanishing breed. Masafumi Hikita, a 24-year-old electric engineering senior, said most of his former high school classmates chose college majors in economics to pursue “easier money” in finance and banking. In fact, friends and neighbors were surprised he picked a difficult field like engineering, he said, with a reputation for long hours. ...
Thursday, May 22, 2008
The worldwide increase in the rate of exploitation cuts the proportion of total output that workers can afford to buy as consumption goods.
From the credit crunch to the spectre of global crisis : Information Clearing House - ICH By Chris Harman |
Blaming the bankers
... The head of the US Federal Reserve, Ben Bernanke, has cursed this “saving glut in the rest of world” for feeding the upsurge of lending to the US.7 But surpluses have also been generated nearer to home: “Investment rates have fallen across virtually all industrial country regions”.8 According to one report:
...
...There is a hierarchy of precedents for financial crises. In August, as things began to unravel, the initial comparisons were with the 1998 collapse of Long Term Capital Management. That is, a freak event in which the sins of a few egg-heads temporarily hit confidence. Then, as it became clear that banks were in pain, the comparator became the 1980s and 1990s Savings and Loan crisis that saw bank losses worth 3 percent of US economic output. Now, after a very nasty week in markets, the whispers are that it might even be the big one: the worst crisis since the 1930s.
The Lex Column, Financial Times, 7 March 2008
Blaming the bankers
The easiest explanation for the crisis is to blame the bankers. The crisis “follows a well-trodden path laid down by centuries of financial folly”, says Ken Rogoff, former chief economist at the International Monetary Fund.1 Raghuram Rajan, another former IMF chief economist, thinks the problem is the vast bonuses bankers receive when they lend and borrow.2 Billionaire financier George Soros blames “the financial authorities” for “injecting liquidity…to stimulate the economy”. This “encouraged ever greater credit expansion”.3 Even the French president, Nicolas Sarkozy, has joined the chorus, declaring that “something seems out of control” with the financial system.4 He should know, since his half-brother heads the European wing of the Carlisle Group, whose hedge fund has gone bust.
For supporters of capitalism to heap blame on the financial system is not as strange as it may seem. In so far as mainstream neoclassical economists have explanations for the slump of the 1930s, they are in terms of the operations of the money markets. The same is true of most mainstream Keynesian economists, who now believe their chance has arrived to come in out of the cold after three decades. So the Guardian’s Larry Elliot argues:
...This is a chance, perhaps a once in a lifetime chance, to break the dependency culture by forcing big finance to be more transparent, having a clearly defined separation between commercial and investment banking, and by banning some of the more toxic products.5
... The head of the US Federal Reserve, Ben Bernanke, has cursed this “saving glut in the rest of world” for feeding the upsurge of lending to the US.7 But surpluses have also been generated nearer to home: “Investment rates have fallen across virtually all industrial country regions”.8 According to one report:
The real driver of this saving glut has been the corporate sector. Between 2000 and 2004, the switch from corporate dis-saving to net saving across the G6 [France, Germany, the US, Japan, Britain and Italy] economies amounted to over $1 trillion… The rise in corporate saving has been truly global, spanning the three major regions—North America, Europe, and Japan.9
In other words, “Instead of spending their past profits, [US] businesses are now accumulating them as cash”.10
Such an excess of saving has an effect noted by John Maynard Keynes in the 1930s—and by Karl Marx 60 years earlier. It creates recessionary pressures. The capitalist economy can only function normally if everything produced is sold. This will only happen if people spend all the income from producing goods—the wages of workers, the profits of the capitalists—on buying those goods. But if the capitalists do not spend all their profits (either on their own consumption or, more importantly, on investment) then a general crisis of overproduction can spread through the system. Firms that cannot sell their goods react by sacking workers and cancelling orders, and this in turn causes further contractions in the market. What begins as an excess of saving over investment ends up as a recession that can turn into a slump....
As I have argued in this journal in the past, the partial recovery that did occur was based on three things. The lower rate of profit caused a slowdown in investment, which did not rise as rapidly in relation to new profit as previously. Some firms went bust, particularly during and after the recession of the early 1990s, allowing the remainder to benefit at their expense. Most importantly, there was a general increase in the share of output going to capital as opposed to labour—in Marx’s terms an increase in the rate of exploitation (figure 1).20
Figure 1: Wage share of national income (percent)
Source: OECD
The worldwide increase in the rate of exploitation cuts the proportion of total output that workers can afford to buy as consumption goods. The economy is therefore dependent on investment if all the goods produced are to be sold, and the failure of capital to invest creates a potentially recessionary situation that may be hidden by financial and other bubbles.
Such bubbles arise because profits are not invested productively and instead flow, via the financial system, from one speculative venture to another. Each venture seems for a time to offer above average profits—the stock exchange and property booms of the late 1980s, the dotcom boom of the late 1990s, the subprime mortgage boom of 2002-6. Although none of these are directly productive, they can, for a period, provide a boost to spending (through outlay on office buildings, spending by those managing the speculation, the conspicuous consumption needed to attract speculative funds, and so on). That leads to a short term increase in real economic output.
As the economists Boyer and Aglietta have explained, the US boom of the second half of the 1990s rested on “a growth regime whereby overall demand and supply are driven by asset price expectations, which create the possibility of a self-fulfilling virtuous circle. In the global economy, high expectations of profits trigger an increase in asset prices which foster a boost in consumer demand, which in turn validates the profit expectations… One is left with the impression that the wealth-induced growth regime rests upon the expectation of an endless asset price appreciation”.23
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Some commentators hold a different view on trends in long term profit rates. They believe that profit rates have been completely restored by increasing exploitation. This is held to be particularly true in the US, where increased productivity over the past seven years has been accompanied by stagnating wages and the loss of one in six manufacturing jobs. ...
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The mainstream economist Andrew Smithers has drawn attention to the way the profitability figures provided by companies give an exaggerated picture of what is really happening. He points out that the US’s official figures shown in the “Flow of Funds” accounts involve adjustments that have the effect of “massively boosting US net worth by the addition of ‘statistical discontinuities’ and rising property values”.31 In fact, the Flow of Funds accounts showed increases in “real estate worth” alone accounting for $757 billion out of the $1,239 billion increase in “net worth” of the whole of the non-farm, non-financial corporate sector in 2005 (while “discontinuities” accounted for another $506 billion).32 According to Samuel DiPiazza, chief executive of PwC, one of the US’s four big accounting firms, many industrial concerns in the US have looked to finance to augment their profits in recent years and have “invested in the asset-backed and mortgage-backed securities”.33
In other words, much of the apparent profitability of US corporations has depended upon the way the bubble increased the paper value of their financial and real estate assets well above their underlying real value.
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Two nightmares haunt defenders of the system. One is the great slump of 1929-33. This is not completely off key. There are similarities between what happened in the 1920s and what has happened in recent years. In both cases profit rates were stopped from falling from previously fairly low levels by increased exploitation, creating underlying imbalances between production and consumption that were bridged, for a period, by speculation, unproductive use of resources, and lending to finance consumption.42 Then, as now, it only required the bubble to deflate for the underlying imbalance to make itself felt.
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The second, slightly less frightening, scenario is what happened to Japan in the early 1990s. The collapse of a boom based on a real estate bubble resulted in a long period of near stagnation that has not yet come to an end 16 years later. The losses incurred by the Japanese banks were around the same level as those incurred so far in the US (losses that could well double in the months ahead). ...
Wednesday, May 21, 2008
Most chilling parallel: United States' unhealthy reliance on the financial sector as the engine of its growth
The Old Titans All Collapsed. Is the U.S. Next? - washingtonpost.comBy Kevin Phillips | Sunday, May 18, 2008
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But in the background, one could hear the groans and feel the tremors as larger political and economic tectonic plates collided. Nine months later, Greenspan's soothing analogies no longer wash. The U.S. economy faces unprecedented debt levels, soaring commodity prices and sliding home prices, to say nothing of a weak dollar. Despite the recent stabilization of the economy, some economists fear that the world will soon face the greatest financial crisis since the 1930s.
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There is a considerable literature on these earlier illusions and declines. Reading it, one can argue that imperial Spain, maritime Holland and industrial Britain shared a half-dozen vulnerabilities as they peaked and declined: a sense of things no longer being on the right track, intolerant or missionary religion, military or imperial overreach, economic polarization, the rise of finance (displacing industry) and excessive debt. So too for today's United States.
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But in the background, one could hear the groans and feel the tremors as larger political and economic tectonic plates collided. Nine months later, Greenspan's soothing analogies no longer wash. The U.S. economy faces unprecedented debt levels, soaring commodity prices and sliding home prices, to say nothing of a weak dollar. Despite the recent stabilization of the economy, some economists fear that the world will soon face the greatest financial crisis since the 1930s.
...
There is a considerable literature on these earlier illusions and declines. Reading it, one can argue that imperial Spain, maritime Holland and industrial Britain shared a half-dozen vulnerabilities as they peaked and declined: a sense of things no longer being on the right track, intolerant or missionary religion, military or imperial overreach, economic polarization, the rise of finance (displacing industry) and excessive debt. So too for today's United States.
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The most chilling parallel with the failures of the old powers is the United States' unhealthy reliance on the financial sector as the engine of its growth. In the 18th century, the Dutch thought they could replace their declining industry and physical commerce with grand money-lending schemes to foreign nations and princes. But a series of crashes and bankruptcies in the 1760s and 1770s crippled Holland's economy. In the early 1900s, one apprehensive minister argued that Britain could not thrive as a "hoarder of invested securities" because "banking is not the creator of our prosperity but the creation of it." By the late 1940s, the debt loads of two world wars proved the point, and British global economic leadership became history.
In the United States, the financial services sector passed manufacturing as a component of the GDP in the mid-1990s. But market enthusiasm seems to have blocked any debate over this worrying change: In the 1970s, manufacturing occupied 25 percent of GDP and financial services just 12 percent, but by 2003-06, finance enjoyed 20-21 percent, and manufacturing had shriveled to 12 percent.
The downside is that the final four or five percentage points of financial-sector GDP expansion in the 1990s and 2000s involved mischief and self-dealing: the exotic mortgage boom, the reckless bundling of loans into securities and other innovations better left to casinos. Run-amok credit was the lubricant. Between 1987 and 2007, total debt in the United States jumped from $11 trillion to $48 trillion, and private financial-sector debt led the great binge.
Washington looked kindly on the financial sector throughout the 1980s and 1990s, providing it with endless liquidity flows and bailouts. Inexcusably, movers and shakers such as Greenspan, former treasury secretary Robert Rubin and the current secretary, Henry Paulson, refused to regulate the industry. All seemed to welcome asset bubbles; they may have figured the finance industry to be the new dominant sector of economic evolution, much as industry had replaced agriculture in the late 19th century. But who seriously expects the next great economic power -- China, India, Brazil -- to have a GDP dominated by finance?
With the help of the overgrown U.S. financial sector, the United States of 2008 is the world's leading debtor, has by far the largest current-account deficit and is the leading importer, at great expense, of both manufactured goods and oil. The potential damage if the world soon undergoes the greatest financial crisis since the 1930s is incalculable. The loss of global economic leadership that overtook Britain and Holland seems to be looming on our own horizon.
Kevin Phillips is the author, most recently, of "Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism."
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