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Sep 06 2010

Economics 101

Monday Business Edition

I seem to be writing a lot about Economics these days.  Starting with The Big Fail (last week’s Monday Business Edition) there are 7 diaries-

What are my qualifications to do this?  Absolutely none.  I’m a critic, not a reporter Jim; except that as a History major I was required to take Economics 101 (where I got a gentleman’s B).  You might say I’m Neo-classically trained because along with millions of others my principal text was Economics by Paul Samuelson.

But I don’t often rest my hat on my own analysis, I prefer to cite others who have not ‘spent decades unlearning‘ the foundational principles of their “Science” (dismal though it is) in favor of Snake Headed Oil Salesmen hissing from the serpents in the garden (that’s another Stargate joke).

The Real Lesson of Labor Day

By Robert Reich

Friday, September 3, 2010

Welcome to the worst Labor Day in the memory of most Americans. Organized labor is down to about 7 percent of the private work force. Members of non-organized labor – most of the rest of us – are unemployed, underemployed or underwater. The Labor Department reported on Friday that just 67,000 new private-sector jobs were created in August, which, when added to the loss of public-sector (mostly temporary Census worker jobs) resulted in a net loss of over 50,000 jobs for the month. But at least 125,000 net new jobs are needed to keep up with the growth of the potential work force.



(T)he real problem has to do with the structure of the economy, not the business cycle. No booster rocket can work unless consumers are able, at some point, to keep the economy moving on their own. But consumers no longer have the purchasing power to buy the goods and services they produce as workers; for some time now, their means haven’t kept up with what the growing economy could and should have been able to provide them.



(The) Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures – Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage – leveled the playing field.

In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs.

1938 in 2010

By PAUL KRUGMAN, The New York Times

Published: September 5, 2010

The economic moral is clear: when the economy is deeply depressed, the usual rules don’t apply. Austerity is self-defeating: when everyone tries to pay down debt at the same time, the result is depression and deflation, and debt problems grow even worse. And conversely, it is possible – indeed, necessary – for the nation as a whole to spend its way out of debt: a temporary surge of deficit spending, on a sufficient scale, can cure problems brought on by past excesses.

But the story of 1938 also shows how hard it is to apply these insights. Even under F.D.R., there was never the political will to do what was needed to end the Great Depression; its eventual resolution came essentially by accident.

I had hoped that we would do better this time. But it turns out that politicians and economists alike have spent decades unlearning the lessons of the 1930s, and are determined to repeat all the old mistakes. And it’s slightly sickening to realize that the big winners in the midterm elections are likely to be the very people who first got us into this mess, then did everything in their power to block action to get us out.

If you still have the stomach for it I’ll also cite this analysis on Open Left brought to my attention by Jay Ackroyd on Eschaton

When we say “the Dems hate the Left” or they’re beating up on “dirty fucking hippies”, what we’re REALLY saying is that, for the Third-Wayers, neoliberalism vs. social democracy is actually the whole ballgame.  The last vestiges of American social democracy - the New Deal and all its accoutrements - must be wiped out, at all costs.

They haven’t been able to say so – because they need the votes of the “little people”.  But there’s almost no play left in that gambit.  With each [dispiriting] election betrayal (Clinton and NAFTA, Obama and Health Care, Obama and Social Security) the Democratic brand gets weaker and weaker.

We on the Left, the “netroots”, etc., need to understand the centrality of this point more than we do.  The coming fight over Social Security is not one issue among many, it’s the defining issue of this period.  Third Way politics is dependent on the bubble economy.  This has failed.  We can’t go back there.  We have to make this known.

As Jay says- “Eventually you have to consider the possibility they are getting the policies they want to get.”

From Yahoo News Business

1 What might make the Fed flinch?

By Emily Kaiser, Reuters

Sun Sep 5, 3:54 pm ET

WASHINGTON (Reuters) – The U.S. economy appears to be trudging along, neither booming nor busting, growing steadily enough to diminish double-dip recession fears but not quickly enough to bring down unemployment.

That puts the Federal Reserve in a bit of a policy pickle. If the economy were clearly backsliding, Fed Chairman Ben Bernanke has made it clear he would not hesitate to provide further support. But what about an economy that is moving forward, albeit painfully slowly?

Minutes of the central bank’s August 10 policy meeting said several officials felt the outlook would have to deteriorate “appreciably” to trigger more action, which might include additional purchases of government debt or a promise to keep interest rates near zero for an even longer stretch.

2 Bankers gather to assure industry is on right track

By Arno Schuetze, Reuters

Mon Sep 6, 2:30 am ET

FRANKFURT (Reuters) – Top executives from some of the world’s leading banks are due to gather for a conference in Frankfurt later this week as lenders seek to avoid what they see as overly harsh regulation following the global financial crisis.

Existing rules failed to ensure that banks held enough capital and liquidity to withstand the crisis, forcing governments to bail out lenders with taxpayer money.

Regulators have been moving to put banks on a shorter leash — a set of rules called “Basel III” — with decisions likely to be made by November.

3 China Inc gets new chairman as state-owned firms’ clout grows

By Zhou Xin and Simon Rabinovitch, Reuters

1 hr 26 mins ago

BEIJING (Reuters) – Wang Yong, a name little heard on the global business stage, has become boss of the world’s biggest mobile telecom carrier, the most valuable coal producer and Asia’s top oil refiner.

Wang replaces Li Rongrong as chairman of China’s State-owned Assets Supervision and Administration Commission (SASAC), an agency created in 2003 with the aim of “growing the value” of state-owned firms, the government said on its website on Monday (www.gov.cn), confirming earlier reports in local media.

On that count, SASAC has been a remarkable success story.

4 China allows insurers to invest in PE, property

By Samuel Shen and Melanie Lee, Reuters

Mon Sep 6, 12:46 am ET

SHANGHAI (Reuters) – China will allow insurers to broaden their investment channels into private equity and real estate, a long-awaited move that could unleash as much as $100 billion worth of fresh funding into unlisted firms and the property sector.

Chinese insurers are allowed to invest up to 5 percent of their total assets in private equity and related financial products and 10 percent in real estate, according to rules published on the website of the China Insurance Regulatory Commission (CSRC) over the weekend.

A broader investment pipeline for China’s 4.5 trillion yuan ($661 billion) insurance industry could boost long-term investment returns for insurers including China Life and Ping An, benefit cash-strapped private companies, and enable private equity firms such as TPG, and the Carlyle Group to raise money more easily in China.

5 German banker hits nerve with anti-immigration book

by Simon Sturdee, AFP

1 hr 52 mins ago

BERLIN (AFP) – Politicians have rushed to condemn a board member of the German central bank for a new book tackling immigration, but his views have found considerable support among the population at large.

Thilo Sarrazin’s book “is not convincing, but it has convinced many people,” said the influential Spiegel magazine, which this week has the Bundesbank executive on its cover, calling him a “people’s hero.”

His publisher is rushing to print more copies of “Germany Does Itself In” to meet demand. Online retailer Amazon.de has a massive 207 reader reviews on its website, with the average score 4.4 stars out of a possible five.

6 Afghans crowd scandal-hit bank to withdraw savings

by Lynne O’Donnell, AFP

Sat Sep 4, 12:07 pm ET

KABUL (AFP) – Afghan officials sought Saturday to head off a run on the country’s biggest bank, reassuring customers of Kabul Bank that their money was safe following corruption allegations in US newspapers.

Branches of Kabul Bank across the country were crowded as anxious depositors joined hundreds of thousands of government employees queuing to collect their salaries, which were being paid through the bank on Saturday.

The privately-owned bank has been the subject of reports alleging large-scale corruption by executives, though the government and central bank have said it is solvent and there is no need for customers to panic.

7 Germany to extend life of nuclear reactors

AFP

Sun Sep 5, 11:03 pm ET

BERLIN (AFP) – Germany said it would extend the life of its nuclear reactors by 12 years on average Monday after marathon talks on the controversial issue that will shape the energy policy of Europe’s top economy.

The decision came after 12 hours of talks between senior politicians and means that some of the 17 plants will now be operational until the 2030s.

The lives of older plants will be extended by eight years and those of newer ones by 14 years, Environment Minister Norbert Roettgen said.

8 BP spill costs hit 8 bln dlrs as crews unearth clues

by Jo Biddle, AFP

Sat Sep 4, 3:25 am ET

WASHINGTON (AFP) – British oil giant BP has spent eight billion dollars to battle the Gulf of Mexico disaster, the company has revealed as its crews retrieved key evidence from the seabed.

Robotic submarines recorded the delicate operation as engineers raised a failed blowout preventer from the ruptured well and began lifting it to the surface in order to hand it over to the US Justice Department.

The US government is conducting what could be a criminal investigation into the April 20 explosion and subsequent oil spill and BP is hoping to shift some of the responsibility to its contractors.

9 Petrobras sells 64 bln dlrs of stock to fund oil exploration

by Mauricio Rabuffetti, AFP

Fri Sep 3, 4:57 pm ET

RIO DE JANEIRO (AFP) – Brazil’s Petrobras unveiled one of the world’s biggest share offerings Friday, a sale of up to 64 billion dollars in new stock to finance oil exploration aimed at turning Brazil into a leading oil exporter of the 21st century.

The transaction could be expanded to 74 billion dollars if there was heavy demand, the state-run company said.

The cash serves as the core of an ambitious plan Petrobras has already outlined to boost capital expenditure over the next five years to 224 billion dollars as it seeks to tap potentially vast oil reserves discovered recently off the coast of Rio de Janeiro.

10 Shipping companies eye fabled Asia route as ice melts

by Pierre-Henry Deshayes, AFP

Fri Sep 3, 2:59 pm ET

OSLO (AFP) – Shipowners are showing growing interest in a fabled trade route to Asia which climate change is beginning to open up at last as polar ice recedes.

On Saturday the first non-Russian vessel to make an intercontinental commercial voyage through the Arctic Northeast passage will set sail from Norway for China.

The route is thousands of kilometres (miles) shorter than traditional passages, promising to reduce travel time dramatically, along with fuel consumption and carbon dioxide emissions.

11 Azerbaijan, Russia seal major gas deal, more to come

by Emil Guliyev, AFP

Fri Sep 3, 2:15 pm ET

BAKU (AFP) – Azerbaijan will double gas exports to Russia in 2011 and increase them further from 2012, the countries said Friday in a move that could undercut Europe’s drive to secure supplies for its Nabucco project.

The agreement between Azerbaijan state energy company SOCAR and Russia’s Gazprom was signed during Russian President Dmitry Medvedev’s visit to Baku as both Moscow and the West vie for access to the energy-rich ex-Soviet state.

Medvedev and his host Azerbaijani President Ilham Aliyev praised growing economic ties and said the new accord was not directed at any rival project.

12 Carrefour says it will open first Indian outlet by November

by Penny MacRae, AFP

Fri Sep 3, 10:01 am ET

TEEKLI, India (AFP) – French supermarket giant Carrefour said on Friday it would open its first wholesale store in India by November, joining other foreign chains aiming to break into the country’s vast retail sector.

The world’s second-largest retailer hopes the wholesale outlet in New Delhi will pave the way for a string of hypermarkets to serve consumers in the fast-growing economy.

“We plan to open a cash-and-carry store by November,” Carrefour spokesman Franck Kenner told AFP in Teekli village in northern Haryana state.

13 Official: Obama backing research tax credits

By JULIE PACE, Associated Press Writer

Sun Sep 5, 12:23 pm ET

WASHINGTON – Seeking ways to spur economic growth ahead of the November elections, President Barack Obama will ask Congress to increase and permanently extend research and development tax credits for businesses, a White House official said Sunday.

Obama will outline the $100 billion proposal during a speech on the economy Wednesday in Cleveland, the official said. The announcement is expected to be the first in a series of new measures Obama will propose this fall as the administration looks to jump-start an economy that the president himself has said isn’t growing fast enough.

In addition to making the research credits permanent, Obama will also ask Congress to extend one of the credit options available to businesses from 14 to 17 percent, according to the official, who spoke on the condition of anonymity because the proposal has not been formally announced.

14 Greenest state behind the waste-to-energy race

By NOAKI SCHWARTZ, Associated Press Writer

Sun Sep 5, 1:27 pm ET

LONG BEACH, Calif. – Government officials from around the world used to come to this port city to catch a glimpse of the future: Two-story piles of trash would disappear into a furnace and eventually be transformed into electricity to power thousands of homes.

Nowadays, it’s U.S. officials going to Canada, Japan and parts of Western Europe to see the latest advances.

The Long Beach plant, for all its promise when it began operations roughly 20 years ago, still churns out megawatts. But it is a relic, a symbol of how California, one of America’s greenest states, fell behind other countries in the development of trash-to-energy technology.

15 Afghan Central Bank: Kabul Bank has ‘stabilized’

By DEB RIECHMANN, Associated Press Writer

Sun Sep 5, 11:16 am ET

KABUL, Afghanistan – Afghanistan’s largest bank remained solvent Sunday after a nearly weeklong run on the troubled institution, according to the governor of the nation’s central bank, which is being criticized for looking the other way at the bank’s mismanagement problems for too long.

Nervous depositors continued to make withdrawals, but Central Bank Governor Abdul Qadir Fitrat said the Kabul Bank was on sound footing. He said no decision had been made about whether the central bank would use money in its coffers to shore up Kabul Bank, partly owned by President Hamid Karzai’s brother.

“It’s stabilized. The bank is already stabilized and hopefully in the next few days it will become 100 percent normal,” Fitrat told The Associated Press. “It is almost 60 percent to 70 percent returned to normal. Most of the branches are now empty (of customers). People have taken their money and gone home. It’s very good today. The operation is becoming very normal.”

16 Farms being prosecuted for importing Thai workers

By MARK NIESSE, Associated Press Writer

Sat Sep 4, 5:39 pm ET

HONOLULU – Two prominent, popular brothers who operate the second-largest vegetable farm in Hawaii will be sentenced in federal court this week on human trafficking charges – they pleaded guilty – but two former state governors, community groups, fellow farmers and other supporters are trying to keep them out of prison.

The brothers were convicted of shipping 44 laborers from Thailand and forcing them to work on their farm, part of a pipeline to the United States that allegedly cornered foreign field hands into low-paying jobs with few rights.

Aloun Farms may be too important to fail in an island state that once relied on pineapples and sugar cane but grows less than 15 percent of the food it consumes, according to supporters of defendants Alec and Mike Sou.

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