State of the Union: A Two Class Society Rising

“President Obama is dividing America into two nations — one rich, the other increasingly poor. And both more likely to elect Democrats. Americans growing richer support his policies, and those growing poorer are increasingly dependent on Democratic politicians for government handouts.

In this century, the economy has not performed well, and a jobs shortage has driven down the income of most Americans.

Obama’s “recovery” has managed only 2.4 percent growth, but President George W. Bush’s expansion scored about the same rate and then collapsed altogether.

Since 2001, when Bush took office, the U.S. economy has created only 4.7 million jobs — about 30,000 a month and less than one-fourth of those needed to keep pace with population growth. For most, wages after inflation and higher state taxes have fallen.

Technology is important. The digital revolution and the shift of news and entertainment to the Internet, cable, eBooks and the like have effectively killed 1 million jobs.

Globalization is a culprit. American industry still boasts many of the best products and most-efficient factories, but has shed 5 million jobs — far more than can be justified by rising productivity.

Manufacturing has enjoyed a small renaissance, but has recouped only one in nine lost jobs, because Bush and Obama poorly enforced trade agreements that apply to principal competitors. China, Japan and Germany systematically maintain currency advantages and barriers that artificially underprice their products and block our exports.

Obama has unilaterally imposed environmental and energy policies that needlessly raise costs and penalize competitiveness.

Increasingly, workers are divided into two groups.

Those with diplomas from elite universities rely less on sinking U.S. fortunes and more on global markets for their services, or who can simply manipulate markets. Big wealth is concentrated on Wall Street, Silicon Valley, Hollywood and players with monopoly power — like the NFL and your local cable operator.

Meanwhile, the rest of America goes without a job or languishes with sinking wages waiting on the new elite in restaurants and hotels….”

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“A former Harvard economics professor thinks the risks facing the banking system are so great that he has withdrawn nearly $1 million from his checking account, atBank of America.

And, oh yeah, he blames the Federal Reserve.

Terence C. Burnham, an associate professor of business and economics at Chapman University in Orange, Calif., told CNBC there is a “psychological connection” between the Fed’s low interest rate policies and the subsequent unrest in emerging market currencies. He also draws a connection between the central bank’s actions and the zero percent interest rate BofA offers on checking accounts.

Though Burnham acknowledged that Bank of America has little exposure to emerging markets, he worries that a sizable financial crisis could trigger a run on banks, leaving depositors unable to withdraw their money from the bank. But he implied any financial crisis could very well be the unintentional consequence of the Fed’s quantitative easing.

“The Fed has set interest rates at zero. So the reward is zero …”

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“At first we thought Reuters had been punk’d in its article titled “EU executive sees personal savings used to plug long-term financing gap” which disclosed the latest leaked proposal by the European Commission, but after several hours without a retraction, we realized that the story is sadly true. Sadly, because everything that we warned about in “There May Be Only Painful Ways Out Of The Crisis” back in September of 2011, and everything that the depositors and citizens of Cyprus had to live through, seems on the verge of going continental. In a nutshell, and in Reuters’ own words, “the savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.” What is left unsaid is that the “usage” will be on a purely involuntary basis, at the discretion of the “union”, and can thus best be described as confiscation.

The source of this stunner is a document seen be Reuters, which describes how the EU is looking for ways to “wean” the 28-country bloc from its heavy reliance on bank financing and find other means of funding small companies, infrastructure projects and other investment. So as Europe finally admits that the ECB has failed to unclog its broken monetary pipelines for the past five years – something we highlight every month (most recently in No Waking From Draghi’s Monetary Nightmare: Eurozone Credit Creation Tumbles To New All Time Low), the commissions report finally admits that “the economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment.”

The solution? “The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing”, the document said.”

Mobilize, once again, is a more palatable word than, say, confiscate.

And yet this is precisely what Europe is contemplating….”

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“The number of Americans filing new claims for unemployment benefits rose last week, government data showed Thursday.

A separate report showed retail sales slid 0.4 percent n January from December, the Commerce Department said. Excluding autos, retail sales were flat.

Initial claims for state unemployment benefits rose to a seasonally adjusted 339,000 from 331,000….”

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Thousands of people who represent some of the highest positions in government, the military, the police, and respective professional fields of science and engineering are still looking for answers.

We may never know the truth, but that does not mean you can not search for it.

At any rate, this was an interesting perspective on why some people have a hard time accepting a truth even when the facts are clearly available from trusted sources.

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“A chart of the Dow Jones Industrial Average going back to July 2012 closely matches one from 1928-29, signaling a crash may be coming later this month or in March, if the correlation continues, says Mark Hulbert, editor of Hulbert Financial Digest.

“There are eerie parallels between the stock market’s recent behavior and how it behaved right before the 1929 crash,” he writes in an article for MarketWatch.

He first wrote about the chart on MarketWatch in early December, questioning its validity. But now that the pattern has continued to repeat, he’s turning into a believer.

“One of the biggest objections I heard two months ago was that the chart is a shameless exercise in after-the-fact retrofitting of the recent data to some past price pattern,” Hulbert notes.

“But that objection has lost much of its force. The chart was first publicized in late November of last year, and the correlation since then certainly appears to be just as close as it was before.”

Another objection Hulbert heard was that the Dow soared more than 100 percent in 1928-29, compared with a gain of less than 50 percent in 2012-13….”

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“BEIJING—China’s exports jumped unexpectedly in January, a potentially positive sign for the world’s second-largest economy even as it raised fresh doubts about the reliability of China’s trade data.

The country’s exports rose 10.6% compared with January last year, up from a 4.3% year-over-year rise in December, official customs data show. This is well ahead of the median 0.1% growth forecast by 11 economists polled by The Wall Street Journal and suggests a gradual recovery of demand in western economies is helping to boost China’s trade.

“These are very strong figures, mainly reflecting the recovery of developed nations, especially Europe, with exports to the European Union up more than 10%,” said Shen Jianguang, an economist at brokerage Mizuho Securities.

The strong performance comes as other data, including purchasing-managers indexes, suggested the crucial manufacturing sector may have slipped into contraction at the start of the year….”

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Despite fears subsiding the rally in Asia goes flat

 

 

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“As high-speed stock traders push to trade ever faster, their newest move involves harnessing a technology that U.S. military jets use to communicate as they soar across the sky: lasers.

In March, a small Chicago communications company plans to switch on an array of laser devices linking the New York Stock Exchange’s data center in Mahwah, N.J., with theNasdaq Stock Market‘s NDAQ +2.29% data center in another New Jersey community, Carteret.

The lasers, perched atop high-rise apartment buildings, towers and office complexes along the 35-mile stretch between the communities, are the first phase of a grid intended to link nearly all U.S. stock exchanges this way, zipping market data and rapid-fire trades.

It is the latest salvo in the “race to zero,” traders’ term for their efforts to whittle away the difference between the speed their orders travel at and the speed of light. Zero, the point at which that difference would disappear, has become a kind of holy grail to computerized traders, for whom nanoseconds—billionths of a second—can spell the difference between profit and loss in their algorithm-driven trades.

In recent years, so-called high-frequency trading firms, which account for about half of U.S. stock trading, have adopted first custom-built fiber-optic cables, then microwave and later millimeter-wave transmissions. Networks built on all three technologies operate today, tying together exchanges around the U.S. Internationally, fiber-optic cables laid across the oceans link America’s markets with Europe’s and Asia’s….”

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“Bitcoin is being hit by attacks from unknown computer hackers who are sending “mutated” lines of code into the program that runs the virtual currency, a spokeswoman from its main trade organization said in a statement on Tuesday.

The attacks are responsible for problems experienced by two bitcoin exchanges that caused them to temporarily halt withdrawals by customers who stored bitcoins in digital wallets provided by the exchanges, the Bitcoin Foundation said in a statement.

“This is a denial-of-service attack,” said the spokeswoman, Jinyoung Lee Englund. “Whoever is doing this is not stealing coins, but is succeeding in preventing some transactions from confirming. It’s important to note that DoS attacks do not affect people’s bitcoin wallets or funds.”

Englund said a team of core software developers who focus on bitcoin were working to fix the problem, but until it was solved some users would not be able to do anything with their bitcoins, and the affected bitcoins would appear to be “tied up” in transactions.

“Only users who make multiple transactions in a short period of time will be affected,” she said.

On Tuesday, Slovenia-based Bitstamp became the second major bitcoin exchange to halt customer withdrawals in the past several days, citing “inconsistent results,” and blaming a denial-of-service attack….”

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“WASHINGTON-The new leader of the Federal Reserve, Janet Yellen, on Tuesday told lawmakers she expects there to be “a great deal of continuity” in the central bank’s policies in testimony prepared for her first congressional appearance since becoming the central bank’s first chairwoman.

“I served on the Committee as we formulated our current policy strategy and I strongly support that strategy,” Ms. Yellen said in her remarks prepared for delivery before the House Financial Services Committee. The hearing is scheduled to start at 10 a.m. EST.

Ms. Yellen signaled that recent soft economic data has not swayed the central bank from a strategy of trimming its monthly bond purchases by $10 billion at each of its policy meetings this year. She repeated language from the Fed’s January policy statement, saying that if the economy improves as the Fed expects, the Fed “will likely reduce the pace of asset purchases in further measured steps at future meetings.” She also emphasized that the bond-buying program is “not on a preset course” and officials will base their decisions about the pace of the program on their economic outlook as well as their view of the costs and benefits of the program.

The Fed cut the bond purchases to $65 billion per month at its January meeting. The program aims to spur investment, hiring and spending by pushing down long-term borrowing costs. The Fed’s next meeting is March 18-19.

Surveying the economy, Ms. Yellen said that “the recovery in the labor market is far from complete,” despite progress made in the last year. The jobless rate, which stood at 6.6% in January, is still “well above levels” that Fed officials consider sustainable by a healthy economy, she said.

Ms. Yellen also pointed to a number of signs other than the unemployment rate that suggested the labor market is still weak, including the high percentage of unemployed people who’ve been out of work for more than six months and the large number of people who are working part-time but would prefer to have full-time jobs.

“These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market,” Ms. Yellen said…..”

 

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“Optimism among owners of small business in the U.S. crept higher in January, continuing a trend, amid hopes for higher sales.

The National Federation of Independent Business’s small business optimism index rose to 94.1 from 93.9 the previous month. It was the third straight month in a row that the index has improved.

Despite the upbeat direction, the NFIB said in a statement that the “index is still just treading water.” …”

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“On both sides of the Atlantic, failed policies threaten to doom people to years of slow economic growth and stagnant incomes, asserts Columbia University professor Joseph Stiglitz.

“There are alternatives,” writes the Nobel laureate in an article for Project Syndicate, published just days ahead of new Federal Reserve Chair Janet Yellen’s widely anticipated testimony to Congress on monetary policy and the economy. “But we will not find them in the self-satisfied complacency of the elites, whose incomes and stock portfolios are once again soaring. Only some people, it seems, must adjust to a permanently lower standard of living. Unfortunately, those people happen to be most people.”

Stiglitz warned of entrenched Japanese-style sluggish growth in 2008. Leaders on both sides of the Atlantic claimed they had learned lessons from Japan, and then promptly repeated the same mistakes.

The U.S. economy was sick even before the 2008 financial crisis, he writes. It wasn’t just the housing bubble. Problems festering beneath the surface included growing inequality, global imbalances and rampant speculation that was doing nothing to spur productivity or create jobs.

Policymakers not only failed to address those problems, they actually made them worse and created news ones, Stiglitz charges. Austerity polices made the downturn deeper and longer than necessary — and “with long-lasting consequences.”

Many countries became more indebted as the downturn diminished tax revenues. Because of public and private underinvestment, a generation of young people who should have been improving their skills have become idle and increasingly alienated.

Inflation-adjusted GDP per capita is lower in most Western countries than in 2007. Median real income in the U.S. is less than it was in 1989…..”

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“Unemployment across the 34-nation Organization for Economic Cooperation and Development fell for the third straight month in December, driven by falling jobless rates among young people and men.

The OECD said Tuesday the unemployment rate for its members—mostly countries with developed economies—fell to 7.6% from 7.7% in November and 7.8% in October, having been steady at 7.9% for much of 2013.

The sustained decline suggests the labor market has started to benefit from the modest economic recovery that took root across developed economies last year.

In another encouraging development, the rate of youth unemployment fell to 15.5% from 15.6% in November. Young people were particularly hard hit by the shrinking job market in the years following the global financial crisis, leading to fears of a “lost generation” whose life prospects would be impaired by a lack of work experience.

The number of people without jobs fell to 46.2 million from 46.9 million in November, but remained 11.5 million higher than in July 2008, before the global financial crisis and ensuing economic slowdown.

The U.S. and Japan led the decline in unemployment….”

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“Caldicott: 50 years or more of highly contaminated water flowing into Pacific from Fukushima — Tepco VP not optimistic: “I have concerns” for long-term plan — Location of melted fuel a mystery

OKUMA, Fukushima Prefecture–The 1,533 nuclear fuel assemblies were lined up in neat rows in the storage pool of the No. 4 reactor building amid new equipment and a clean environment.

But in stark contrast was the scene around the No. 4 reactor building at the Fukushima No. 1 nuclear power plant.

Concrete walls were still missing from the third and fourth floors of the No. 4 reactor building, raising questions among onlookers if the structure could withstand a huge earthquake.

On the sea side of the building, a piping system and metal rods were exposed behind collapsed walls of a former boiler building.

A truck swept up by the 2011 tsunami remained upside down by the side of the turbine building.

Amid these surroundings, Tokyo Electric Power Co. plans to start removing the nuclear fuel assemblies from the No. 4 storage pool as early as next week. The work would represent a new stage in the overall plan to end the nuclear crisis that started 32 months ago.

“It is a big step in the process to decommission the reactor,” Nuclear Regulation Authority Commissioner Toyoshi Fuketa said.

The entire decommissioning plan for the plant is expected to take 30 to 40 years to complete, and the strategy could change at any moment.

Workers still do not know the location of melted nuclear fuel in the No. 1, No. 2 and No. 3 reactors. High radiation levels are preventing entry to some areas. And contaminated water leaks continue to plague the site.

And removing the nuclear fuel from the No. 4 pool will require delicate procedures, considering the state of the building and the dangers involved.

NRA Chairman Shunichi Tanaka told TEPCO President Naomi Hirose to use extreme caution in removing the assemblies.

“The process involves a very large risk potential,” Tanaka told Hirose. “In a sense, it is more risky than the radioactive water crisis.”

TEPCO on Nov. 6 allowed reporters to see the spent fuel storage pool of the No. 4 reactor building and other areas of the stricken nuclear plant.

An elevator took the reporters to the top floor of the five-story building. A steel frame had been assembled near the pool, and a new fuel hoist and a new crane had been installed.

The No. 4 reactor building itself was covered by a canopy to replace the roof that was blown off in an explosion on March 15, 2011.

TEPCO plans to transfer the 1,533 nuclear fuel assemblies to a “storage pool for common use” 100 meters west of the No. 4 reactor.

The removal and transfer is expected to be completed at the end of next year.

The assemblies contain both spent and unused fuel. Some bundles were moved to the pool from the reactor core because the No. 4 reactor was undergoing a regular safety check when the Great East Japan Earthquake and tsunami struck the plant on March 11, 2011.

The disaster knocked out the cooling system for the storage pool, sparking fears that it would dry up, leaving the fuel exposed and allowing huge amounts of radioactive substances to spew into the air.

That didn’t happen. However, the explosion four days after the tsunami left large chunks of debris in the storage pool.

Those chunks have been cleared, but a number of smaller pieces remain in the storage pool.

The fuel removal process will use a cask receptacle that is 5.5 meters long, weighs 91 tons and can hold 22 fuel assemblies. It will be submerged in the pool and receive one fuel assembly at a time to prevent a nuclear reaction from occurring.

A crane will lower the receptacle to the ground, where a vehicle will pick it up and take it to the common-use storage pool.

TEPCO plans to use two receptacles to speed up the transfer process and finish removing all the fuel in just over a year.

In addition to uranium, spent nuclear fuel contains highly toxic plutonium and other radioactive substances, which could be released if the fuel assemblies are damaged during the removal or transfer process…..”

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