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. ....
Tuesday, May 27, 2008
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
...
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. ...
...
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.
...
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.
...
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
...
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.
...
...
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.
...
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."
Monday, May 5, 2008
The very jobs we're training students to do are the ones we're exporting. ... number of computer science graduates fall [smart students ?]
Reforms, not rhetoric, needed to keep jobs on U.S. soil | By Ed Frauenheim and Mike Yamamoto | May 4, 2004, 4:00AM PT
..
... the chief information officer at Trimble Navigation, a satellite software company based in Sunnyvale, Calif., that has more than 2,000 employees. "The realism is missing: Unless they're in the top 5 percent of schools, they haven't got any hope. The very jobs we're training students to do are the ones we're exporting."
...
That movement is precisely what many fear most. While manufacturing, basic programming and other types of commoditized work have already left the country, the U.S. technology industry has traditionally viewed its advanced research as the secret ingredient that keeps it at No. 1.
..
... the chief information officer at Trimble Navigation, a satellite software company based in Sunnyvale, Calif., that has more than 2,000 employees. "The realism is missing: Unless they're in the top 5 percent of schools, they haven't got any hope. The very jobs we're training students to do are the ones we're exporting."
...
That movement is precisely what many fear most. While manufacturing, basic programming and other types of commoditized work have already left the country, the U.S. technology industry has traditionally viewed its advanced research as the secret ingredient that keeps it at No. 1.
"R&D budgets are migrating offshore. These are red flags, because this is the heart of our business," said George Gilbert, the managing partner of the Tech Strategy Partners consultancy and a former market analyst at Credit Suisse First Boston. "It's not just labor arbitrage. Now, it's being called 'distributed development.'"
...
Forrester Research has projected that about 473,000 computer services jobs will go offshore by 2015. In addition, research firm Gartner has estimated that 1 out of 10 jobs at information technology companies will move to emerging markets and that 1 out of 20 jobs in internal information systems departments will move overseas by the end of this year.
...
The
...
The enrollment decline is most striking in California, home to Silicon Valley. Preliminary figures from San Jose State University, which counted 765 students in its computer science program in spring 2002, show a drop of about 30 percent, to 535, in the same period this year. Similar decreases have been reported throughout California State University's 19-campus system, including the one in San Francisco, which had recently considered closing its School of Engineering altogether. ...
The H-1B Prevailing Wage is Substantially Below the Median Wage of U.S. Workers ... $25,000 less in Silicon Valley
The H-1B Prevailing Wage is Substantially Below the Median Wage of U.S. Workers
While several bills, such as the "SKIL Act of 2006," aim to nearly double the annual H-1B quota, all such bills provide for the legal displacement of U.S. workers by underpaid foreign workers under a flawed prevailing wage provision. The H-1B "prevailing wage" is a sham that allows employers to pay H-1B workers 25% below market wages while claiming full compliance with the law.
Sacramento, CA (PRWEB) July 6, 2006 -- The Programmers Guild, an organization advocating for US-based computer professionals, finds that the prevailing wage protections in pending immigration legislation, such as the "SKIL Bill," authorize corporations to pay foreign tech workers $25,000 below the wage paid to average U.S. workers in the same professions.
The General Accountability Office (GAO) reports that the Department of Labor (DOL) had approved thousands of H-1B applications, in spite of clear prevailing wage violations within the applications. But GAO did not consider whether the prevailing wages themselves were flawed. Had GAO evaluated the DOL's prevailing wages against actual U.S. wages, the number of violations might have exceeded one hundred thousand.
In the Silicon Valley, California region, the median wage in 2004 for the occupation "computer programmer" was $83,500. This median represents the wages for U.S. workers with average skills and experience. But of the 9721 LCAs (Labor Condition Applications) for H-1B computer programmer in the region in fiscal year 2005, 2877 (29%) were for a salary of $57,000 or less, and fully 8193 (84%) paid less than the median wage of $83,500. ..
While several bills, such as the "SKIL Act of 2006," aim to nearly double the annual H-1B quota, all such bills provide for the legal displacement of U.S. workers by underpaid foreign workers under a flawed prevailing wage provision. The H-1B "prevailing wage" is a sham that allows employers to pay H-1B workers 25% below market wages while claiming full compliance with the law.
Sacramento, CA (PRWEB) July 6, 2006 -- The Programmers Guild, an organization advocating for US-based computer professionals, finds that the prevailing wage protections in pending immigration legislation, such as the "SKIL Bill," authorize corporations to pay foreign tech workers $25,000 below the wage paid to average U.S. workers in the same professions.
The General Accountability Office (GAO) reports that the Department of Labor (DOL) had approved thousands of H-1B applications, in spite of clear prevailing wage violations within the applications. But GAO did not consider whether the prevailing wages themselves were flawed. Had GAO evaluated the DOL's prevailing wages against actual U.S. wages, the number of violations might have exceeded one hundred thousand.
In the Silicon Valley, California region, the median wage in 2004 for the occupation "computer programmer" was $83,500. This median represents the wages for U.S. workers with average skills and experience. But of the 9721 LCAs (Labor Condition Applications) for H-1B computer programmer in the region in fiscal year 2005, 2877 (29%) were for a salary of $57,000 or less, and fully 8193 (84%) paid less than the median wage of $83,500. ..
Voter ID laws: 25% of adult African Americans don't have government-issed phot ID ... but Supreme Court upholds requiring one ...
How Republicans Quietly Hijacked the Justice Department to Swing Elections| By Steven Rosenfeld, Ig Publishing. Posted April 15, 2008.
The GOP may have committed massive vote fraud in plain sight by encouraging widespread voter purges and restricting registration campaigns.
Jim Crow has returned to American elections, only in the twenty-first century, instead of men in white robes or a barrel-chested sheriff menacingly patrolling voting precincts, we are more likely to see a lawyer carrying a folder filled with briefing papers and proposed legislation about "voter fraud" and other measures to supposedly protect the sanctity of the vote.
Since the 2004 election, activist lawyers with ties to the Republican Party and its presidential campaigns, Republican legislators, and even the Supreme Court -- in a largely unnoticed ruling in 2006 -- have been aggressively regulating most aspects of the voting process. Collectively, these efforts are undoing the gains of the civil rights era that brought voting rights to minorities and the poor, groups that tend to support Democrats.
The Brennan Center for Justice at New York University Law School has found that 25% of adult African-Americans, 15% of adults earning below $35,000 annually, and 18% of seniors over sixty-five do not possess government-issued photo ID. While various studies -- such as a 2006 Election Assistance Commission report by Tova Andrea Wang and Job Serebrov, and a 2007 study by Lorraine Minnite of Barnard College -- have found modern claims of a voter fraud "crisis" to be unfounded, that has not stopped states from adopting remedies that impose burdens across their electorate and on voter registration organizations. "Across the country, voter identification laws have become a partisan mess," Loyola University Law Professor Richard Hasen said in an Oct. 24, 2006 Slate.com column, speaking of one such remedy. "Republican-dominated legislatures have been enacting voter identification laws in the name of preventing fraud, and Democrats have opposed such laws in the name of protecting potentially disenfranchised voters." Hasen was commenting on a little-noticed 2006 Supreme Court ruling, Purcell v. Gonzales, which upheld Arizona's new voter ID law. The court unanimously affirmed the state's 2004 law, writing that, "Voter fraud drives honest citizens out of the democratic process and breeds distrust of our government. Voters who fear their legitimate votes will be outweighed by fraudulent ones will feel disenfranchised."
Hasen said that while the ruling "seem[ed] reasonable enough" at first glance, it actually was deeply troubling, as the Court never investigated if there was evidence of widespread voter fraud, and never examined "how onerous are such [voter ID] laws." Instead, it adopted the Republican rhetoric on the issue "without any proof whatsoever." Hasen then quoted Harvard University History Professor Alexander Keyssar on the Court's rationale. "FEEL disenfranchised? Is that the same as 'being disenfranchised?' So if I might 'feel' disenfranchised, I have a right to make it harder for you to vote? What on Earth is going on here?" ...
The GOP may have committed massive vote fraud in plain sight by encouraging widespread voter purges and restricting registration campaigns.
Jim Crow has returned to American elections, only in the twenty-first century, instead of men in white robes or a barrel-chested sheriff menacingly patrolling voting precincts, we are more likely to see a lawyer carrying a folder filled with briefing papers and proposed legislation about "voter fraud" and other measures to supposedly protect the sanctity of the vote.
Since the 2004 election, activist lawyers with ties to the Republican Party and its presidential campaigns, Republican legislators, and even the Supreme Court -- in a largely unnoticed ruling in 2006 -- have been aggressively regulating most aspects of the voting process. Collectively, these efforts are undoing the gains of the civil rights era that brought voting rights to minorities and the poor, groups that tend to support Democrats.
The Brennan Center for Justice at New York University Law School has found that 25% of adult African-Americans, 15% of adults earning below $35,000 annually, and 18% of seniors over sixty-five do not possess government-issued photo ID. While various studies -- such as a 2006 Election Assistance Commission report by Tova Andrea Wang and Job Serebrov, and a 2007 study by Lorraine Minnite of Barnard College -- have found modern claims of a voter fraud "crisis" to be unfounded, that has not stopped states from adopting remedies that impose burdens across their electorate and on voter registration organizations. "Across the country, voter identification laws have become a partisan mess," Loyola University Law Professor Richard Hasen said in an Oct. 24, 2006 Slate.com column, speaking of one such remedy. "Republican-dominated legislatures have been enacting voter identification laws in the name of preventing fraud, and Democrats have opposed such laws in the name of protecting potentially disenfranchised voters." Hasen was commenting on a little-noticed 2006 Supreme Court ruling, Purcell v. Gonzales, which upheld Arizona's new voter ID law. The court unanimously affirmed the state's 2004 law, writing that, "Voter fraud drives honest citizens out of the democratic process and breeds distrust of our government. Voters who fear their legitimate votes will be outweighed by fraudulent ones will feel disenfranchised."
Hasen said that while the ruling "seem[ed] reasonable enough" at first glance, it actually was deeply troubling, as the Court never investigated if there was evidence of widespread voter fraud, and never examined "how onerous are such [voter ID] laws." Instead, it adopted the Republican rhetoric on the issue "without any proof whatsoever." Hasen then quoted Harvard University History Professor Alexander Keyssar on the Court's rationale. "FEEL disenfranchised? Is that the same as 'being disenfranchised?' So if I might 'feel' disenfranchised, I have a right to make it harder for you to vote? What on Earth is going on here?" ...
H-1b program is dissuading next generation of Americans from entering the tech profession ...paying H1-Bs 25% below what they would have to pay Ameri
Programmers Guild rebuts Bill Gates call for more H-1b visasMarch 12, 2008
1) One way to “allow more highly-skilled workers to remain in the U.S.” is to grant H-1b visas on the basis of skill rather than by a lottery. But just as last year the Programmers Guild expects USCIS to conduct a lottery, granting H-1b to $16/hour hotel clerks while denying visas to PhD genetic researchers. The best proxy for “skill” is “wage.” This simple reform in H-1b would allow Microsoft to have as many “highly skilled H-1b” as then need under the current cap – AS LONG AS THEY PAID THEM WHAT THEY ARE WORTH.
2) Our competitive advantage is eroding, and Bill Gates has used the H-1b program to facilitate that erosion. Microsoft used the H-1B visa to train a critical mass of foreign workers within the U.S., then used these workers to establish overseas operations, with U.S. technology in their back pockets. East Side Journal explained on October 10, 2002:
``The replication of Microsoft's culture [ at [Hyderabad's] Hi-Tec City ] has been possible because many people who worked in Redmond for many years have moved back to be part of the India Development Center,'' Koppolu wrote.
Between October 1999 and February 2000, [Microsoft] obtained 362 H-1B visas from the Immigration and Naturalization Service, making it the U.S.'s sixth-largest importer of Indian employees for that period.
...
3) We agree with Gates that U.S. “workforce development” needs to be improved. Gates claims that Microsoft needs more H-1b to hire new foreign graduates. But there are many U.S. graduates with several years of experience trying to find work at Microsoft and other employers – but Gates does not open these “entry level” positions to these Americans. Why? Experienced Americans are only considered for the positions that require an arbitrary 3 to 7 years of experience in several specific skills – then the Americans are summarily rejected for not meeting all of those arbitrary qualifications.
Nearly all Microsoft jobs require 3-5 years experience in several technologies. In effect the “richest man in the world” is too cheap to hire and train his American workforce. ...
...
Eight of the top 10 users of H-1b are foreign consulting firms. These Indian firms bring in thousands H-1b workers each, admit to paying them 25% below what they would have to pay Americans, thus displacing U.S. consulting firms and U.S. consultants. This is not helping “Americas global competitiveness.” H-1b needs to be reformed so that employers must pay at least a median wage to H-1b workers.
The H-1b program is dissuading the next generation of Americans from entering the tech profession. H-1b forces new graduates, with $50k student loans and no experience, to directly compete for American jobs against citizens from every country in the world. There is currently no requirement that employers give preference to American applicants. The Programmers Guild thinks that there should be. ....
1) One way to “allow more highly-skilled workers to remain in the U.S.” is to grant H-1b visas on the basis of skill rather than by a lottery. But just as last year the Programmers Guild expects USCIS to conduct a lottery, granting H-1b to $16/hour hotel clerks while denying visas to PhD genetic researchers. The best proxy for “skill” is “wage.” This simple reform in H-1b would allow Microsoft to have as many “highly skilled H-1b” as then need under the current cap – AS LONG AS THEY PAID THEM WHAT THEY ARE WORTH.
2) Our competitive advantage is eroding, and Bill Gates has used the H-1b program to facilitate that erosion. Microsoft used the H-1B visa to train a critical mass of foreign workers within the U.S., then used these workers to establish overseas operations, with U.S. technology in their back pockets. East Side Journal explained on October 10, 2002:
``The replication of Microsoft's culture [ at [Hyderabad's] Hi-Tec City ] has been possible because many people who worked in Redmond for many years have moved back to be part of the India Development Center,'' Koppolu wrote.
Between October 1999 and February 2000, [Microsoft] obtained 362 H-1B visas from the Immigration and Naturalization Service, making it the U.S.'s sixth-largest importer of Indian employees for that period.
...
3) We agree with Gates that U.S. “workforce development” needs to be improved. Gates claims that Microsoft needs more H-1b to hire new foreign graduates. But there are many U.S. graduates with several years of experience trying to find work at Microsoft and other employers – but Gates does not open these “entry level” positions to these Americans. Why? Experienced Americans are only considered for the positions that require an arbitrary 3 to 7 years of experience in several specific skills – then the Americans are summarily rejected for not meeting all of those arbitrary qualifications.
Nearly all Microsoft jobs require 3-5 years experience in several technologies. In effect the “richest man in the world” is too cheap to hire and train his American workforce. ...
...
Eight of the top 10 users of H-1b are foreign consulting firms. These Indian firms bring in thousands H-1b workers each, admit to paying them 25% below what they would have to pay Americans, thus displacing U.S. consulting firms and U.S. consultants. This is not helping “Americas global competitiveness.” H-1b needs to be reformed so that employers must pay at least a median wage to H-1b workers.
The H-1b program is dissuading the next generation of Americans from entering the tech profession. H-1b forces new graduates, with $50k student loans and no experience, to directly compete for American jobs against citizens from every country in the world. There is currently no requirement that employers give preference to American applicants. The Programmers Guild thinks that there should be. ....
Most foreign workers work at or near entry level, described by the Department of Labor in terms akin to apprenticeship.
H-1Bs: Still Not the Best and the BrightestCenter for Immigration Studies ^ | April 28, 2008 | Dr. Norman Matloff | Posted on Monday, April 28, 2008 11:38:13 AM by AuntB
In pressuring Congress to expand the H-1B work visa and employment-based green card programs, industry lobbyists have recently adopted a new tack. Seeing that their past cries of a tech labor shortage are contradicted by stagnant or declining wages, their new buzzword is innovation. Building on their perennial assertion that the foreign workers are “the best and the brightest,” they now say that continued U.S. leadership in science, technology, engineering, and mathematics (STEM) hinges on our ability to import the world’s best engineers and scientists. Yet, this Backgrounder will present new data analysis showing that the vast majority of the foreign workers — including those at most major tech firms — are people of just ordinary talent, doing ordinary work. They are not the innovators the industry lobbyists portray them to be.
I presented some initial analyses along these lines in an earlier Backgrounder,1 showing for instance that STEM foreign students at U.S. universities tend to be at the less-selective universities. Here I present a much more direct analysis, making use of a simple but powerful idea: If the foreign workers are indeed outstanding talents, they would be paid accordingly. ...
...
This article also presents further data showing an equally important point:
In pressuring Congress to expand the H-1B work visa and employment-based green card programs, industry lobbyists have recently adopted a new tack. Seeing that their past cries of a tech labor shortage are contradicted by stagnant or declining wages, their new buzzword is innovation. Building on their perennial assertion that the foreign workers are “the best and the brightest,” they now say that continued U.S. leadership in science, technology, engineering, and mathematics (STEM) hinges on our ability to import the world’s best engineers and scientists. Yet, this Backgrounder will present new data analysis showing that the vast majority of the foreign workers — including those at most major tech firms — are people of just ordinary talent, doing ordinary work. They are not the innovators the industry lobbyists portray them to be.
I presented some initial analyses along these lines in an earlier Backgrounder,1 showing for instance that STEM foreign students at U.S. universities tend to be at the less-selective universities. Here I present a much more direct analysis, making use of a simple but powerful idea: If the foreign workers are indeed outstanding talents, they would be paid accordingly. ...
...
This article also presents further data showing an equally important point:
* Most foreign workers work at or near entry level, described by the Department of Labor in terms akin to apprenticeship. This counters the industry’s claim that they hire the workers as key innovators, and again we will see a stark difference between the Asians and Europeans.
...
East vs. West The lobbyists love to claim that the industry resorts to hiring foreign workers because Americans are weak in math and science. Various international comparisons of math/science test scores at the K-12 level are offered as “evidence.” The claims are specious — after all, both major sources of foreign tech workers, India and China, refuse to participate in those tests, and India continues to be plagued with a high illiteracy rate. Serious educational research, including an earlier Arizona State university report4 and a recent major study by the Urban Institute5 show clearly that mainstream American kids are doing fine in STEM.
Nevertheless, the “Asian mystique” persists. The image is that our tech industry owes its success to armies of mathematical geniuses arriving to U.S. graduate schools from Asia. Once again, though, the data do not support this perception. Here is a comparison of TM values for foreign workers from the major Asian countries and their counterparts in Europe and Canada:
The differences here are not large, but nevertheless, all of the Western nations have higher median TM values than all the Asian nations — quite the opposite of the portrayal by the industry lobbyists. ...
...
The facts show otherwise. Most foreign tech workers, particularly those from Asia, are in fact not “the best and the brightest.” This is true both overall and in the key tech occupations, and most importantly, in the firms most stridently demanding that Congress admit more foreign workers. Expansion of the guest worker programs — both H-1B visas and green cards — is unwarranted.
only people who don't believe speculation is driving a commodities bubble are the big commodity traders and the commodities exchanges
Now, a Commodities Conundrum | By Steven Pearlstein | Wednesday, April 30, 2008; Page D01
The global financial system these days is beginning to look like a giant Whac-a-Mole game -- when we think we've knocked down one speculative bubble, another one just like it pops up.
The latest is the commodities bubble -- everything from oil and natural gas to gold, copper, wheat and rice. As with the credit bubble before it, the explosion in commodities prices has its origins in a global savings glut and massive trade imbalances. Like the credit bubble, this speculative bubble in commodities has badly distorted the workings of key markets and sectors of the global economy. And as with the other, this bubble is creating vast new wealth for some, including brokers, traders and investment houses who have gorged on fees and trading profits.
The difference this time, however, is that even before it bursts, this bubble is causing economic discomfort for households and businesses around the world, and misery for hundreds of millions of hungry people who suddenly cannot afford a bowl of rice or scrap of meat. The Post's eye-opening series this week on the global food crisis has provided a grim reminder that the global economic ecosystem has become so interdependent that a drought in Australia, a tax credit in the United States, French farm subsidies and export controls in India can wind up forcing a desperate African farmer to eat his seed corn.
Although commodity prices are notoriously volatile, the price increases in the past year are off the chart: rice up 122 percent; wheat, 95 percent; soybeans, 83 percent; crude oil, 82 percent; corn, 66 percent; gold, 37 percent.
...
On many commodities markets these days, the cash or spot market are often below that of futures market -- a condition known as "contango" that usually signals that something other than market fundamentals are at play.
The global financial system these days is beginning to look like a giant Whac-a-Mole game -- when we think we've knocked down one speculative bubble, another one just like it pops up.
The latest is the commodities bubble -- everything from oil and natural gas to gold, copper, wheat and rice. As with the credit bubble before it, the explosion in commodities prices has its origins in a global savings glut and massive trade imbalances. Like the credit bubble, this speculative bubble in commodities has badly distorted the workings of key markets and sectors of the global economy. And as with the other, this bubble is creating vast new wealth for some, including brokers, traders and investment houses who have gorged on fees and trading profits.
The difference this time, however, is that even before it bursts, this bubble is causing economic discomfort for households and businesses around the world, and misery for hundreds of millions of hungry people who suddenly cannot afford a bowl of rice or scrap of meat. The Post's eye-opening series this week on the global food crisis has provided a grim reminder that the global economic ecosystem has become so interdependent that a drought in Australia, a tax credit in the United States, French farm subsidies and export controls in India can wind up forcing a desperate African farmer to eat his seed corn.
Although commodity prices are notoriously volatile, the price increases in the past year are off the chart: rice up 122 percent; wheat, 95 percent; soybeans, 83 percent; crude oil, 82 percent; corn, 66 percent; gold, 37 percent.
...
On many commodities markets these days, the cash or spot market are often below that of futures market -- a condition known as "contango" that usually signals that something other than market fundamentals are at play.
Perhaps the best proof of all that there's a speculative bubble in commodities that may be about to burst: ConAgra, the 147 year-old food professor, last month sold its commodity trading division to a hedge fund for $2.1 billion. Cash.
Indeed, the only people who don't believe speculation is driving a commodities bubble are the big commodity traders and the commodities exchanges, which are profiting handsomely from the soaring prices and trading volumes, and the regulators at the Commodities Futures Trading Commission, whose economists cannot seem to find statistical evidence that financial investors have had much of an impact on commodity prices. ...
Friday, May 2, 2008
Finance capitalism has "devoured landlord and industrialist alike" and created a galaxy of seductive liabilities which masquerade as assets
Mike Whitney: Want to Save the Economy? Apri1 12 / 13, 2008 | Spread the Wealth and Give Workers a Raise
...
The US subprime fiasco has spiraled into what the IMF is calling "the largest financial shock since the Great Depression." America's capital markets are on the fritz. The corporate bond market is frozen, the banks are buckling from their losses, and the housing market is in a shambles. No one is buying and no one is lending. Private equity deals are off 75 per cent from last year and no one will touch a mortgage-backed security (MBS) with a ten foot pole. The mighty wheel of modern finance is grinding to a standstill and no one's quite sure how to rev it up again.
...
That's why so many people bought homes when they should have opened savings accounts. They were duped into speculating on housing so they could get a chunk of money. It looked like a good way to overcome stagnant wages and crappy hours. The cheer-leading TV pundits offered assurances that "housing prices never go down". It was all baloney. Now 15 million homeowners are upside-down on their mortgages and the very same experts are scolding workers for fudging the facts on their income disclosure forms. It's all backwards.
...
Michael Hudson: "The problem with parasites is not merely that they siphon off the food and nourishment of their host, crippling its reproductive power, but that they take over the host's brain as well. The parasite tricks the host into thinking that it is feeding itself.
"Something like this is happening today as the financial sector is devouring the industrial sector. Finance capital pretends that its growth is that of industrial capital formation. That is why the financial bubble is called 'wealth creation,' as if it were what progressive economic reformers envisioned a century ago. They condemned rent and monopoly profit, but never dreamed that the financiers would end up devouring landlord and industrialist alike. Emperors of Finance have trumped Barons of Property and Captains of Industry." (Michael Hudson, "The Coming Financial Reality", counterpunch, interviewed by Standard Schaefer.)
Bingo. Hudson not only explains how finance capitalism is inserting itself into the governmental power structure but, also predicts that "industrial capital formation" -- which is the production of things that people can really use to improve their lives -- will be replaced with complex debt-instruments and derivatives that add no tangible value to people's lives and merely serve to expand the wealth of an entrenched and increasingly powerful investor class.
Finance capitalism has "devoured landlord and industrialist alike" and created a galaxy of seductive liabilities which masquerade as assets. Derivatives contracts, for example, represent over $500 trillion of unregulated counterparty transactions; a "shadow banking system" completely disconnected from the underlying "real" economy, but large enough to send the world into a agonizing depression for years to come.
...
Henry Liu expands on this idea in his excellent article "A Panic-stricken Federal Reserve":
"In the 1920s, the wide disparity of wealth between the rich and the average wage earner increased the vulnerability of the economy. For an economy to function with stability on a macro scale, total demand needs to equal total supply. Disparity of income eventually will result in demand deficiency, causing over-supply. The extension of credit to consumers can extend the supply/demand imbalance but if credit is extended beyond the ability of income to sustain, a debt bubble will result that will inevitably burst with economic pain that can only be relieved by inflation.....More investment normally increases productivity. However, if the rewards of the increased productivity are not distributed fairly to workers, production will soon outpace demand. The search for high returns in a low demand market will lead to consumer debt bubbles with wide-spread speculation .... Today, outstanding consumer credit besides home mortgages adds up to about $14 trillion, about the same as the annual GDP. "
Voila. A strong economy requires a strong workforce and an equitable distribution of wealth. When money is concentrated in too few hands, the political system atrophies and becomes unresponsive to the needs of its people. That's when the nation's laws and institutions are reshaped to reflect the ambitions of rich and powerful.
...
The only way to break the stranglehold of Wall Street's financial Politburo is to level the playing field through greater wealth distribution. That's the best way to rekindle democracy and make America the land of opportunity again. And it all starts with giving America's workers a raise. ...
...
The US subprime fiasco has spiraled into what the IMF is calling "the largest financial shock since the Great Depression." America's capital markets are on the fritz. The corporate bond market is frozen, the banks are buckling from their losses, and the housing market is in a shambles. No one is buying and no one is lending. Private equity deals are off 75 per cent from last year and no one will touch a mortgage-backed security (MBS) with a ten foot pole. The mighty wheel of modern finance is grinding to a standstill and no one's quite sure how to rev it up again.
...
That's why so many people bought homes when they should have opened savings accounts. They were duped into speculating on housing so they could get a chunk of money. It looked like a good way to overcome stagnant wages and crappy hours. The cheer-leading TV pundits offered assurances that "housing prices never go down". It was all baloney. Now 15 million homeowners are upside-down on their mortgages and the very same experts are scolding workers for fudging the facts on their income disclosure forms. It's all backwards.
...
Michael Hudson: "The problem with parasites is not merely that they siphon off the food and nourishment of their host, crippling its reproductive power, but that they take over the host's brain as well. The parasite tricks the host into thinking that it is feeding itself.
"Something like this is happening today as the financial sector is devouring the industrial sector. Finance capital pretends that its growth is that of industrial capital formation. That is why the financial bubble is called 'wealth creation,' as if it were what progressive economic reformers envisioned a century ago. They condemned rent and monopoly profit, but never dreamed that the financiers would end up devouring landlord and industrialist alike. Emperors of Finance have trumped Barons of Property and Captains of Industry." (Michael Hudson, "The Coming Financial Reality", counterpunch, interviewed by Standard Schaefer.)
Bingo. Hudson not only explains how finance capitalism is inserting itself into the governmental power structure but, also predicts that "industrial capital formation" -- which is the production of things that people can really use to improve their lives -- will be replaced with complex debt-instruments and derivatives that add no tangible value to people's lives and merely serve to expand the wealth of an entrenched and increasingly powerful investor class.
Finance capitalism has "devoured landlord and industrialist alike" and created a galaxy of seductive liabilities which masquerade as assets. Derivatives contracts, for example, represent over $500 trillion of unregulated counterparty transactions; a "shadow banking system" completely disconnected from the underlying "real" economy, but large enough to send the world into a agonizing depression for years to come.
...
Henry Liu expands on this idea in his excellent article "A Panic-stricken Federal Reserve":
"In the 1920s, the wide disparity of wealth between the rich and the average wage earner increased the vulnerability of the economy. For an economy to function with stability on a macro scale, total demand needs to equal total supply. Disparity of income eventually will result in demand deficiency, causing over-supply. The extension of credit to consumers can extend the supply/demand imbalance but if credit is extended beyond the ability of income to sustain, a debt bubble will result that will inevitably burst with economic pain that can only be relieved by inflation.....More investment normally increases productivity. However, if the rewards of the increased productivity are not distributed fairly to workers, production will soon outpace demand. The search for high returns in a low demand market will lead to consumer debt bubbles with wide-spread speculation .... Today, outstanding consumer credit besides home mortgages adds up to about $14 trillion, about the same as the annual GDP. "
Voila. A strong economy requires a strong workforce and an equitable distribution of wealth. When money is concentrated in too few hands, the political system atrophies and becomes unresponsive to the needs of its people. That's when the nation's laws and institutions are reshaped to reflect the ambitions of rich and powerful.
...
The only way to break the stranglehold of Wall Street's financial Politburo is to level the playing field through greater wealth distribution. That's the best way to rekindle democracy and make America the land of opportunity again. And it all starts with giving America's workers a raise. ...
Thursday, May 1, 2008
Sen Voinovich, an Ohio Republican: "We've kind of bankrupted this country" with the war spending.
Biden treads lightly at Iraq hearing - 2008 Presidential Campaign Blog - Political Intelligence - Boston.comApril 8, 2008
...
Senator George Voinovich, an Ohio Republican, broke with the party line, declaring, "We've kind of bankrupted this country" with the war spending. "We're in a recession," he added, "and God knows how long it's going to last." ...
...
Senator George Voinovich, an Ohio Republican, broke with the party line, declaring, "We've kind of bankrupted this country" with the war spending. "We're in a recession," he added, "and God knows how long it's going to last." ...
Programmers Guild: U.S. Rep. Gabrielle Giffords targets U.S. tech workers for displacement
Programmers Guild: U.S. Rep. Gabrielle Giffords targets U.S. tech workers for displacementSunday, March 23, 2008
It is well documented that qualified U.S. workers are being displaced by H-1b workers, even at the current cap of 65,000. See the testimonials at HireAmericansFirst.org, for example.
What is Gifford's solution? To double the cap to 130,000. I left a message for staff C.J. Karamargin 520-881-3588 (or 202-225-2542) on March 20th but C.J. did not return my call.
According to the March 19th InfoWorld article "Bill would double cap on H-1B visas," she introduced the bill just one day after Bill Gates had testified before Congress - and no representatives of U.S. workers were invited to rebut Gates: ...
COMMENTS
According to Arizona Central CareerBuilder job search, there are 832 IT positions advertised. But there are also 1840 sales and marketing ads, and 2680 healthcare ads. So how did Rep. Giffords determine that IT workers rather than healthcare, sales, and marketing workers are what are needed to keep Arizona's economy strong?
The InfoWorld article states, "The bill would prohibit companies from hiring H-1B workers, then outsourcing them to other companies, he said. H-1B opponents have complained that outsourcing companies are among the top users of H-1B visas." Can you please show us in the bill where the top users of H-1b "InfoSys, TCS, Wipro..." would be limited in their use of H-1b? We can't find any such language. ...
It is well documented that qualified U.S. workers are being displaced by H-1b workers, even at the current cap of 65,000. See the testimonials at HireAmericansFirst.org, for example.
What is Gifford's solution? To double the cap to 130,000. I left a message for staff C.J. Karamargin 520-881-3588 (or 202-225-2542) on March 20th but C.J. did not return my call.
According to the March 19th InfoWorld article "Bill would double cap on H-1B visas," she introduced the bill just one day after Bill Gates had testified before Congress - and no representatives of U.S. workers were invited to rebut Gates: ...
COMMENTS
According to Arizona Central CareerBuilder job search, there are 832 IT positions advertised. But there are also 1840 sales and marketing ads, and 2680 healthcare ads. So how did Rep. Giffords determine that IT workers rather than healthcare, sales, and marketing workers are what are needed to keep Arizona's economy strong?
The InfoWorld article states, "The bill would prohibit companies from hiring H-1B workers, then outsourcing them to other companies, he said. H-1B opponents have complained that outsourcing companies are among the top users of H-1B visas." Can you please show us in the bill where the top users of H-1b "InfoSys, TCS, Wipro..." would be limited in their use of H-1b? We can't find any such language. ...
Past and current military spending consumes more than 40 cents of every federal income tax dollar.
59.pdf (application/pdf Object)
...
The median income family in Illinois paid $3,336 in federal income taxes in 2007. Here is how that money was spent:
Military $1,407
Health $737
Interest on Non-military Debt $342
Anti-Poverty Programs $289
Education, Training & Social Services $146
Government & Law Enforcement $130
Housing & Community Development $111
Environment, Energy & Science $88
Transportation, Commerce & Agriculture $51
International Affairs $35
...
The median income family in Illinois paid $3,336 in federal income taxes in 2007. Here is how that money was spent:
Military $1,407
Health $737
Interest on Non-military Debt $342
Anti-Poverty Programs $289
Education, Training & Social Services $146
Government & Law Enforcement $130
Housing & Community Development $111
Environment, Energy & Science $88
Transportation, Commerce & Agriculture $51
International Affairs $35
US Imports: 17% of GDP ... manufacturing, 11% of GDP ... behind government, .... education and health ... [massive trade deficit]
Paul Craig Roberts: The Fading American EconomyApri1 9, 2008 | Government is the Largest Employer | By PAUL CRAIG ROBERTS
According to the Bureau of Labor Statistics, the US economy lost 98,000 private sector jobs in March, half of which were in manufacturing. Today 13,643,000 Americans are employed in manufacturing, of which 9,849,000 are production workers.
Government employs 22,387,000 Americans, 8,744,000 more than manufacturing. Even the category leisure and hospitality employs 13,682,000 Americans, slightly more than manufacturing. There are as many waitresses and bartenders as production workers.
Wholesale and retail trade employ 21,467,000 Americans. Professional and business services employ 18,036,000 Americans of which 8,368,000 are in administrative and waste services. Education and health services employ 18,699,000 Americans.
Financial activities employ 8,228,000 Americans. The information sector employs 3,010,000. Transportation and warehousing employ 4,532,000. Construction employs 7,338,000, and natural resources, mining and logging employ 751,000. Other services such as repair, laundry, and membership associations employ 5,516,000 Americans.
...
Is this a portrait of a super economy?
To help answer the question, consider that US imports in 2007 were 17% of US GDP, according to the National Income and Product Account tables provided by the Bureau of Economic Affairs. In contrast, the BEA industry tables show that in 2006 (2007 data not yet available) US manufacturing comprised only 11.7% of US GDP.
If US imports actually exceed total US manufacturing output by 5% of GDP, it does not seem possible that the US can close its massive trade deficit. Even if every item manufactured in the US was exported, the US would still have a large trade deficit.
...
During the current school year, 3.3 million high school students are expected to graduate. If we assume that half will go on to college, that leaves 1.6 million entering the work force. College enrollment in 2007 totaled 18 million. If we assume 20% graduate, that makes another 3.6 million job seekers for a total of 5.2 million. Clearly, immigration, work visas, and high school and college graduates exceed the 1.5 million jobs created by the economy. Unless retirements opened up enough jobs for graduates, the unemployment rate has to rise. ...
According to the Bureau of Labor Statistics, the US economy lost 98,000 private sector jobs in March, half of which were in manufacturing. Today 13,643,000 Americans are employed in manufacturing, of which 9,849,000 are production workers.
Government employs 22,387,000 Americans, 8,744,000 more than manufacturing. Even the category leisure and hospitality employs 13,682,000 Americans, slightly more than manufacturing. There are as many waitresses and bartenders as production workers.
Wholesale and retail trade employ 21,467,000 Americans. Professional and business services employ 18,036,000 Americans of which 8,368,000 are in administrative and waste services. Education and health services employ 18,699,000 Americans.
Financial activities employ 8,228,000 Americans. The information sector employs 3,010,000. Transportation and warehousing employ 4,532,000. Construction employs 7,338,000, and natural resources, mining and logging employ 751,000. Other services such as repair, laundry, and membership associations employ 5,516,000 Americans.
...
Is this a portrait of a super economy?
To help answer the question, consider that US imports in 2007 were 17% of US GDP, according to the National Income and Product Account tables provided by the Bureau of Economic Affairs. In contrast, the BEA industry tables show that in 2006 (2007 data not yet available) US manufacturing comprised only 11.7% of US GDP.
If US imports actually exceed total US manufacturing output by 5% of GDP, it does not seem possible that the US can close its massive trade deficit. Even if every item manufactured in the US was exported, the US would still have a large trade deficit.
...
During the current school year, 3.3 million high school students are expected to graduate. If we assume that half will go on to college, that leaves 1.6 million entering the work force. College enrollment in 2007 totaled 18 million. If we assume 20% graduate, that makes another 3.6 million job seekers for a total of 5.2 million. Clearly, immigration, work visas, and high school and college graduates exceed the 1.5 million jobs created by the economy. Unless retirements opened up enough jobs for graduates, the unemployment rate has to rise. ...
As Jobs Vanish and Prices Rise, Food Stamp Use Nears Record
As Jobs Vanish and Prices Rise, Food Stamp Use Nears Record | By ERIK ECKHOLM | Published: March 31, 2008
Driven by a painful mix of layoffs and rising food and fuel prices, the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the aid program began in the 1960s.
...
... recent rises in many states appear to be resulting mainly from the economic slowdown, officials and experts say, as well as inflation in prices of basic goods that leave more families feeling pinched. Citing expected growth in unemployment, the Congressional Budget Office this month projected a continued increase in the monthly number of recipients in the next fiscal year, starting Oct. 1 — to 28 million, up from 27.8 million in 2008, and 26.5 million in 2007. ...
Driven by a painful mix of layoffs and rising food and fuel prices, the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the aid program began in the 1960s.
...
... recent rises in many states appear to be resulting mainly from the economic slowdown, officials and experts say, as well as inflation in prices of basic goods that leave more families feeling pinched. Citing expected growth in unemployment, the Congressional Budget Office this month projected a continued increase in the monthly number of recipients in the next fiscal year, starting Oct. 1 — to 28 million, up from 27.8 million in 2008, and 26.5 million in 2007. ...
Trade Debt: service amounts to $2000 for each working American per year ... [Econmy smaller] This comes to about $10,000 per worker
Peter Morici: The Corrosive Consequences of the Trade Deficit March 17, 2008 | The Damage Worsens Each Month | By PETER MORICI
...
In the 2007, the United States had a $106.9 surplus on trade in services and a $106.9 billion surplus on income payments. This was hardly enough to offset the massive $815.9 billion deficit on trade in goods, and net unilateral transfers to foreigners equal to $104.4 billion.
...
U.S. investments abroad were $ 1,206.3 billion, while foreigners invested $1,863.7 billion in the United States. Of that latter total, only $204 billion or 11 percent was direct investment in U.S. productive assets. The remaining net capital inflows were foreign purchases of Treasury securities, corporate bonds, bank accounts, currency, and other paper assets. Essentially, Americans borrowed or sold off real estate and other assets of about $600 billion to consume about 5.3 percent more than they produced.
Foreign governments loaned Americans $412.7 billion or 3 percent of GDP. The Chinese and other governments are essentially bankrolling U.S. consumers, who in turn are mortgaging their children's income.
The cumulative effects of this borrowing are frightening. The total external debt now is about $6.5 trillion. The debt service at 5 percent interest, amounts to $2000 for each working American.
...
Lost growth is cumulative. Thanks to the record trade deficits accumulated over the last 10 years, the U.S. economy is about $1.5 trillion smaller. This comes to about $10,000 per worker.
...
Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.
...
In the 2007, the United States had a $106.9 surplus on trade in services and a $106.9 billion surplus on income payments. This was hardly enough to offset the massive $815.9 billion deficit on trade in goods, and net unilateral transfers to foreigners equal to $104.4 billion.
...
U.S. investments abroad were $ 1,206.3 billion, while foreigners invested $1,863.7 billion in the United States. Of that latter total, only $204 billion or 11 percent was direct investment in U.S. productive assets. The remaining net capital inflows were foreign purchases of Treasury securities, corporate bonds, bank accounts, currency, and other paper assets. Essentially, Americans borrowed or sold off real estate and other assets of about $600 billion to consume about 5.3 percent more than they produced.
Foreign governments loaned Americans $412.7 billion or 3 percent of GDP. The Chinese and other governments are essentially bankrolling U.S. consumers, who in turn are mortgaging their children's income.
The cumulative effects of this borrowing are frightening. The total external debt now is about $6.5 trillion. The debt service at 5 percent interest, amounts to $2000 for each working American.
...
Lost growth is cumulative. Thanks to the record trade deficits accumulated over the last 10 years, the U.S. economy is about $1.5 trillion smaller. This comes to about $10,000 per worker.
...
Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.
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