Archive for July 2009
by Rick Ackerman
Posted July 31, 2009
SADLY, ANOTHER VENERABLE American institution has lost its way: the New York Stock Exchange. We read the other day that the Exchange is building a fast-trade hub in northern New Jersey that supposedly will help secure its future in an increasingly electronic world. But raising capital for companies that could conceivably help Build a Better Tomorrow is nowhere on their agenda. In fact, “fast trading” will be about as helpful in achieving that goal as placing five hundred slot machines in the NYSE’s lobby. Instead of one-armed bandits, however, the Exchange will be installing in its new Mahwah facility some very sophisticated computing equipment that will allow hedge funds and other firms to engage in high-frequency trading.
This type of trading is all the rage these days, and the firms that do it will be trying to get the jump on other traders who lack the hardware to execute scores or even hundreds of transactions in mere seconds. Firms on the cutting edge will be better able to exploit order flow in ways that traders could not have imagined even five years ago. Our guess is that fast trading was invented by the same geeks who gave us program trading. Who’d have imagined they could one-up themselves with yet a new game to further destabilize the markets?
By Carl Ginsburg
Posted June 19 – 21, 2009
Placating the Bankers, Again
THE ADMINISTRATION’S FINANCIAL fix-it plan was laid out this week and it was, underwhelming, to say the least. The New York Times dubbed it, “back to business as usual..” not a phrase commonly seen in the paper of record which, by the way, essentially managed to miss the true source of the country’s crisis – Underpaid America – for two generations.
None of this comes as a surprise given the top priority Mr. Obama set early on to fund banks and financial institutions. Everybody else should hang in there and brace yourselves for the Great Marginalization. So, aid to banks stays in place; derivatives are to remain a critical part of the finance system; there’ll be enhanced protection for accredited consumers who can still borrow money and invest. In other words, the protection of existing pools of money and investment is the goal of this government.
That is fine unless, of course, you have little or none of that money. That would be the millions of Americans who helped raise America’s productivity to new heights and got no rewards for the effort, for whom a pension system has fallen away and for whom there are now mounting health care and energy costs. Let’s keep in mind that the average consumer debt of an American family is $10,000. Let’s not kid ourselves: that’s an amount that served to augment low wages (much like food stamps for the working poor) and did not fund extravagant lifestyles, a popular obfuscation in the media embrace of Obama’s sociology.
Low wage America slammed people and NOTHING the Obama administration has on the table now or in the pipeline will address that fundamental dynamic this year, next… ever. Meanwhile, profits are up. Business Week reports: “Bank Reap Handsome Profits Cashing Out of Chinese Banks.” Those winners include Goldman Sachs, the investment firm that received $20 billion via our government bailout of insurance giant AIG. That’s called “restoring confidence”.
We are to continue life in one of the most economically stratified countries in the industrial world… as speculators swoop in buying up foreclosed properties, adults compete with high school kids for summer jobs, the price of gas goes back over $3 a gallon, and the stock market goes up, trumpeting “labor savings” as key to profit growth, the same labor savings that triggered the credit crunch. That simple and obvious construct – low wages triggered the crisis – seems to elude the so-called progressive pundits at MSNBC. The crisis we face is Mr. Obama’s cold indifference to the fact that growing numbers of American families cannot get by this year. He seems entirely disconnected from the economic realities of working Americans. If President Obama wants to get something done he is going to have to, in the words of one financial columnist, “make some bankers mad”. Fat chance.
Carl Ginsburg is a tv producer and journalist based in New York.
by Gary North
July 25, 2009
This is a short excerpt from an article of the same title, reprinted in full on sidebar, under Pages.
A MASS LAYOFF IS LIKELY to take place in one town. They would not be individual layoffs spread across several plants or regions. They are likely to hit one plant. The company shuts down a division. It finds that the entire output of a plant or a division is no longer profitable.
When this happens, the loss of income is concentrated in one geographical area. This hits housing harder than if the layoffs had been spread across several plants located in different towns.
Without warning, every fired person must scramble to get a job. The local market finds it costly to absorb all of them at once. The obvious response of employers is to offer a lower salary without fringe benefits. The job-seekers are not in a position to negotiate. They have bills to pay.
One of these bills is the monthly mortgage. It is a large share of the household budget. The family will resist skipping this payment. But, if they are facing a mortgage that is now larger than the market value of the home, they are tempted to stop paying.
If they knew how expensive it is for a lender to hire a lawyer and pursue the foreclosure in civil court in most states, a lot more families would stop paying. How much does foreclosure cost the lender? On average, $50,000. This includes the loan loss ($40,000 on a $210,000 home), lawyers’ fees, and court costs.
The lender does not want to foreclose, because the loss must be recorded. It can be delayed for as long as there is no final transfer of the house to the lender. The lender may like to threaten to foreclose, but if the family abandons the home, it becomes a high-risk asset. No money is coming in. The house is deteriorating. Vandals may hit the house. Squatters may move in.
The family finally has to throw in the towel. It either walks away from the home or is evicted. In either case, the equity is gone. The family now has a large black mark on its credit. It will be hard for the family to get a bank loan in the future. It may have to declare bankruptcy.
The threat posed by mass layoffs is terrible for a family. Yet people don’t see these layoffs coming. They stay in a doomed career, hoping that there will be some deliverance. In June, deliverance did not come for 279,231 workers.
Month after month, this process continues relentlessly. Occasionally, a television news show will cover a town that has been hit with a major mass layoff. But there is no realization that these events are taking place, month by month, in thousands of communities.
by Edmund Conway
Published: 11 Jul 2009
Chances are you are already bored to death with the endless debate on public spending and the fiscal deficit. For weeks, Labour and Conservatives have traded blows in Parliament over the extent to which the other will cut its spending plans. The next chapter is likely to concern tax rises, as the Tories lay into the Government for hiding their planned increases after the election. But, like it or not, the budget and its parlous state will remain one of the most contentious and hotly-debated topics next year.
The reason is very simple. The combined effect of the financial crisis and recession has been to generate a deficit the likes of which has not been since since the aftermath of the Second World War. Britain’s total public sector net debt will be catapulted from a level of below 40pc last year to around 80pc or perhaps 100pc and beyond.
In part, this is due to the extra cash needed for unemployment benefits, bailing out stricken banks such as HBOS and Royal Bank of Scotland and temporary Keynesian tax cuts and spending increases. But the greater part of the black hole is due to the fact that a massive chunk of the tax revenue the Government assumed would keep flowing into its coffers has simply dried up, mainly because the golden goose that was the City is no longer so prodigious.
by James Howard Kunstler for ClusterFuck Nation
THE EULOGY FOR WALTER CRONKITE as “the most trusted man in America” on the CBS “Sixty Minutes” show said a lot about the condition of this nation – though it did not signify what CBS thought it did. It wasn’t about the death of one hugely esteemed individual; it was about the broad institutional failure of TV news in general and the current grievous loss of legitimacy and authority in shaping a national consensus of reality. Watching the old clips of Cronkite delivering the evening news years ago, one couldn’t help weighing the contrast with the current spectacle of snide, combative, overbearing idiocy acted out nightly by the likes of Kudlow, Olberman, Kneale, O’Reilly, Matthews, and Dobbs as they shout down their invited guest commentators, pander to their demographic, and diss their rivals for ratings.
It was instructive to notice that the program following “Sixty Minutes” – in the supreme weekly slot of 8p.m. Sunday – was a childish and stupid “reality” show called “Big Brother.” This said even more about the craven quality of the people currently running CBS. It was also a useful lesson in the diminishing returns of technology as applied to television, since it should now be obvious that the expansion of cable broadcasting since the heyday of the “big three” networks has led only to the mass replication of video garbage rather than a banquet of culture, as first touted.
by Michael Rivero
Aurick says: This superb article was first written in 1998. I am posting it here not so much as to say “The author told you so”, but to point out that the long term economic future of the United States was obvious, or should have been obvious, to the people who are awarded lofty degrees and paid huge salaries to comprehend such things. Instead, the economists persisted in explaining away the visible signs of gathering troubles and earned their salaries by justifying why the policies that robbed the poor to give to the rich should continue unabated.
I should also mention that the current general public consensus regarding the economic disaster unfolding around us is that “it all began with subprime and irresponsible lending by the banks”. No, it did not. It began many years before, and had nothing to do with housing bubbles or banks.
Click on the link to go straight there, or else locate it under the sidebar Pages, on the right of the screen: https://quantumpranx.wordpress.com/the-united-states-is-in-deep-doodoo/
by Donald W. Miller, Jr., MD
Posted originally October 3, 2008
ANOTHER INFLUENZA SEASON is beginning in the northern temperate zone, and our government’s Center for Disease Control and Prevention (CDC) will strongly urge Americans to get a flu shot. Health officials will say that every winter 5–20 percent of the population catches the flu, 200,000 people are hospitalized, and 36,000 people will die from it.
The CDC’s 15-member Advisory Committee on Immunization Practices (ACIP) makes recommendations each year on who should be vaccinated. Ten years ago, for the 1999–2000 season, the committee recommended that people over age 65 and children with medical conditions have a flu shot. Seventy-four million people were vaccinated. Next season (2000–01) the committee lowered the age for universal vaccination from 65 to 50 years old, adding 41 million people to the list. For the 2002–03 season, the ACIP added healthy children 6 months to 23 months old, and for 2004–05, children up to 5 years old. For the 2008–09 season the committee has advised that healthy children 6 months to 18 years old have a flu shot each year. Its recommendations for influenza vaccination now covers 256 million Americans – 84 percent of the U.S. population. Only healthy people ages 19–49 not involved in some aspect of health care remain exempt. Pharmaceutical companies have made 146 million influenza vaccines for the U.S. market this flu season.
Almost all the ACIP members who make these recommendations have financial ties to the vaccine industry. The CDC therefore must grant each member a conflict-of-interest waiver.
The CDC mounts a well-orchestrated campaign each season to generate interest and demand for flu shots. Along with posters for the public, flyers, and health care provider materials, it encourages doctors to “recommend/urge flu shots.” Medical groups, nonmedical organizations (like the YMCA), and the media trumpet CDC-released messages on influenza, notably: “Flu kills 36,000 per year,” “This could be a bad/serious flu year,” and “Flu vaccine is the best defense against flu.” The government promotes National Vaccination Week, which this year is December 8–14. This year, however, rather than uniformly following the government’s “Seven-Step Recipe” for generating demand for flu shots, the mainstream media has questioned their benefits.