Tag: Economy

Chris Hayes, host of Up with Chris Hayes,  discusses the stand-off between President Obama and House Republicans over the “fiscal cliff,” the name given to the combination of the expiration of the Bush tax cuts and the sequestration cuts mandated by last year’s debt ceiling agreement. Chris’ “filibuster” in the first segment is a “Cliff Note” summation of the debate about the so-called “fiscal cliff.”

Chris is joined for a comprehensive, and somewhat wonky, discussion with Hakeem Jeffries, newly elected Congressman representing the 8th Congressional District in Brooklyn, New York State Assemblyman; Teresa Ghilarducci (@tghilarducci), labor economist and director of the Schwartz Center for Economic Policy Analysis at The New Schoo; Edward Conard, former partner at Bain Capital from 1993-2007 and author of “Unintended Consequences: Why Everything You’ve Been Told About The Economy Is Wrong;” Ohio Democratic Senator Sherrod Brown; and Molly Ball (@mollyesque), national political reporter for The Atlantic.

I found this article  about the debt/deficit/”fiscal cliff” from letdgetitdone quite interesting. It presents a very compelling argument, point by point, why this entire discussion about a “fiscal cliff” is a myth. He concludes his argument:

So, current claims that we have a fiscal crisis, must debate the debt, must fix the debt, and must immediately embark on a long-term deficit reduction program to bring the debt-to-GDP ratio under control, all misconceive the fiscal situation because they are based on the idea that fiscal responsibility is about developing a plan to bring the debt-to-GDP ratio “under control,” when it is really about using Government spending to achieve outputs that fulfill “public purpose.” There is no fiscal crisis that will require “a Grand Bargain” and cuts to popular discretionary spending and entitlement programs. It is a phoney issue.

The only real crisis is a crisis of a failing economy and growing economic inequality in which only the needs of the few are served. MMT policies can help to bring an end to that crisis; but not if progressives, and others continue to believe in false ideas about fiscal sustainability and responsibility, and the similarity of their Government to a household. To begin to solve our problems, we need to reject the neoliberal narrative and embrace the MMT narrative about the meaning of fiscal responsibility. That will lead us to fiscal policies that achieve public purpose and away from policies that prolong economic stagnation and the ravages of austerity.

Has it occurred to you how strange it is that your job can slip across international boundaries, but you are prohibited from crossing the same border to follow that job? It should.

Multinational Corporations have been busy for the last twenty years creating a new type of serf. In feudal Europe and Asia, serfs were tied to the land by a master, called the lord, and obligated to work for him. Now, the 1% are creating serfs out of whole nations of people. Sure, those lands are huge-nations-but they are still boundaries that bind you, and prevent you for selling your work freely, while multinational corporations are borderless entities.

Seeking to continue the tail spin to the bottom of wages, big business has been busy writing international treaties, allowing jobs to shift to ever lower paying environments with the least protections for workers. Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, United States, and Vietnam are already involved in the latest negotiations, the Trans-Pacific Partnership. If signed the treaty will be a “docking agreement” open to any country to sign later. Canada and Mexico are expected to join this month. Japan and China are being courted to join. It is the largest trade agreement the world has ever seen.

The treaty creates an über-government superseding and overriding existing law in sovereign nations–seeking to stamp out democracy. In old feudalism, it was the Catholic church that held dominion over the nations of man. Now “the market” has taken the place of God. Profits are all that matters. Anything the market endorses is right because the market is infallible, unchallengeable. Keep democracy out of it.

The powerful and wealthy have finally found a way to regain the power they once held in feudal times. They have done it in ways intentionally hidden from the majority. Most of us don’t even realize we are in a battle for the type of global governance we will have in the future. For the last 50 years corporate leadership have simply bought our democracies and media outlets, making it easy for corporations to gain the upper hand, and convince voters to support governance that is secretive and totalitarian, without letting voters know they are doing so. Now the 1% want to solidify that power into an actual international treaty. They are seeking one economy under the rule of American corporations. They are, in fact, seeking world dominion.

Yes, the grand bargain is coming up before the deadline by December 31st, 2012.

Social Security, Medicare, and Medicaid will be on the chopping block like it was last time. This is not a conspiracy theory, and it comes from solid sources involved in all of the deliberations if you read the source material provided. Sure, some can pretend it is CT. They can even cry it out loud from the rooftops while closing their eyes and plugging their ears, but the reality based community is all talking about this because this is confirmed reality, and the prospects are real like they were last time.

It’s really up to those that would deny this confirmed reality to prove the actual sources in the Senate are all liars in the WaPo peice. Either that or they have heads their heads in the sand for all of 2011 and this is just too much of a downer to acknowledge but it’s time to grow up. These are facts. Denying the factual historical record in 2011 disqualifies anyone writing about these matters at all. Yes, when the entirely self induced entirely avoidable fake fiscal cliff was made real through the stop go that was passed to raise the debt ceiling in Aug 5, 2011 it set this whole pathetic fiscal cliff debacle coming up.

Rick Pearlstein: Author of Nixonland details the Grand Bargain coming up as well.

America didn’t vote for a “grand bargain”

I heard Dick Durbin, the Illinois senator who is close to Obama, on the radio the next morning boasting that he was one of the Democrats on the Simpson-Bowles Commission to vote for its recommendations – recommendations that included, in addition to changes in the tax code meant to increase revenue (while also cutting tax rates), diminishing eligibility and benefits for Medicare and Social Security. Though the commission failed to reach consensus, making its proposals moot, it was aiming at just the sort of “grand bargain” that Obama has consistently and quietly spoken about as his sort of beau ideal for what a successful presidency would look like. Durbin went on to say he hoped a grand bargain might be wrapped up in the next calendar year, before congressmen and senators became preoccupied with reelection.

I know it. You know it, so who are we kidding? I suppose anything can happen, but essentially the election is over and our President will very likely win the electoral college and the Democrats will keep the Senate and maybe pick up some new seats in the House. So I’m here to find meaning within it all, because I have not been able to grasp how shutting up during election season, but then speaking up after the election will make us “move froward.” Especially when the President and the filibuster-loving-set-to-do-nothing Congress do not have to care what we think at all afterwards.

They may get together for their grand bargain since many so called Democrats and Republicans are deficit terrorists and will work to tear down our social safety net in a bipartisan way for the mythical bond vigilantes and confidence fairies they believe in because Peter Peterson told them some scary bedtime stories in the chambers of Congress. This will all be hashed out in unrepresentative undemocratic gangs of 6 or 8 or 12 without our input. So what are we supposed to do when that happens and we are cut out? Make believe they still love us?

Or perhaps some think pointing this out is me being seduced by cynicism. Though I respect some who are arguing this now as opposed to the past, I have to vehemently disagree and I think I have a good case to make to counter that narrative.

U.S. Stocks Fall Sharply

by Nathaniel Popper, New York Times

The Dow Jones industrial average finished the day down 1.8 percent, or 243.36 points, to end at 13,102.53, its worst performance since June. The losses added to the big declines on Friday, and dropped leading indexes to their lowest levels since early September, before the Federal Reserve announced its latest monetary stimulus program.

Since the Standard & Poor’s 500 index hit this year’s high of 1,465.77 on Sept. 14, the benchmark index has fallen 3.6 percent. It finished Tuesday down 1.4 percent, or 20.71 points, to 1,413.11.

Share futures were falling even before the opening bell because of disappointing financial results from American companies. The chemical maker DuPont said Tuesday morning that its revenue was down 9 percent in the third quarter from a year ago, and that it would eliminate 1,500 jobs. The company’s stock ended down 9.1 percent.

Thomson Reuters said Tuesday that 63 percent of the companies that have reported earnings so far have given revenue figures for the third quarter that were lower than what analysts expected.

Stock Market Suffers Worst Day In Months On Bernanke Separation Anxiety

by Mark Gongloff, Huffington Post

The stock market is freaking out like Bill Paxton’s panicky marine in “Aliens,” yelling “Game over, man! Game over!” All because it’s afraid of losing Ben Bernanke.

Late in the trading day on Tuesday, the Dow Jones Industrial Average was down more than 200 points, on track for its worst one-day loss since June. What had it in such a tizzy? There were lots of good reasons — third-quarter corporate earnings have been kind of awful, and Europe’s endless debt crisis continues.

But the main catalyst, according to Wall Street‘s best and brightest, are a couple of New York Times stories today, one by the well-sourced Andrew Ross Sorkin, suggesting that Federal Reserve Chairman Ben Bernanke probably won’t sign up for another term when his second term as Fed Chairman ends in January 2014. Binyamin Appelbaum runs through a handful of the possible replacements in a Mitt Romney administration, and at least one of them — Stanford’s John Taylor — is known to be opposed to Bernanke’s easy-money policies.

Of course the idea that Bernanke might be leaving should shock nobody, really. After eight years of riding herd on the worst economic crisis since the Great Depression, all the while being accused of treason and threatened with old-fashioned Texas lynchings, did anybody really expect that Ben would want another four years of this?

Apparently so. The market indeed seems shocked and horrified by the idea that it will no longer be able to depend on what’s come to be known as the “Bernanke Put” — the implied promise that Bernanke won’t let the stock market fall too far before riding to the rescue with another helicopter-load of money.

Sounds like a combination of the continued recession at the bottom of the economic stratus is trickling up to the top, at last, and the poor dears on Wall St. are concerned that they’re losing their “sugar daddy”. Tell me again why they hate Obama?

Matt Taibbi, contributing editor of Rolling Stone, and journalist Chrystia Freeland, author of the new book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else, joined Bill Moyers for a discussion on how the super wealthy use their increasing wealth to fund political candidates who will serve their interests.

Example: Goldman Sachs, which gave more money than any other major American corporation to Barack Obama in 2008, is switching alliances this year; their employees have given $900,000 both to Mitt Romney’s campaign and to the pro-Romney super PAC Restore Our Future. Why? Because, says the Wall Street Journal, the Goldman Sachs gang felt betrayed by President Obama’s modest attempts at financial reform. [..]

“We have this community of rich people who genuinely believe that they are the wealth creators and they should get every advantage and break,” Taibbi tells Bill. “Whereas everybody else is a parasite and they’re living off of them”

Freeland adds, “You know, 2008 is not so long ago, and already, the anti-regulation chorus is so strong. How dare they have the gall to actually argue that too much regulation of American financial services is what is killing the economy?”

Ms. Freeland also penned an interesting article at Huffington Post on the problems of plutocrats in the late nineteenth century and how it compares with today’s plutocracy problem:

Henry George is the most famous American popular economist you’ve never heard of, a 19th century cross between Michael Lewis, Howard Dean and Ron Paul. Progress and Poverty, George’s most important book, sold three million copies and was translated into German, French, Dutch, Swedish, Danish, Spanish, Russian, Hungarian, Hebrew and Mandarin. During his lifetime, George was probably the third best-known American, eclipsed only by Thomas Edison and Mark Twain. He was admired by the foreign luminaries of the age, too — Leo Tolstoy, Sun-Yat Sen and Albert Einstein, who wrote that “men like Henry George are unfortunately rare. One cannot image a more beautiful combination of intellectual keenness, artistic form and fervent love of justice.” George Bernard Shaw described his own thinking about the political economy as a continuation of the ideas of George, whom he had once heard deliver a speech. [..]

What George found most mysterious about the economic consequences of the industrial revolution was that its failure to deliver economic prosperity was not uniform — instead it had created a winner-take-all society: “Some get an infinitely better and easier living, but others find it hard to get a living at all. The ‘tramp’ comes with the locomotives, and almshouses and prisons are as surely the marks of ‘material progress’ as are costly dwellings, rich warehouses and magnificent churches. Upon streets lighted with gas and patrolled by uniformed policeman, beggars wait for the passer-by, and in the shadow of college, and library, and museum, are gathering the more hideous Huns and fiercer Vandals of whom Macaulay prophesied.”

George’s diagnosis was beguilingly simple — the fruits of innovation weren’t widely shared because they were going to the landlords. This was a very American indictment of industrial capitalism: at a time when Marx was responding to Europe’s version of progress and poverty with a wholesale denunciation of private property, George was an enthusiastic supporter of industry, free trade and a limited role for government. His culprits were the rentier rich, the landowners who profited hugely from industrialization and urbanization, but did not contribute to it. [..]

America today urgently needs a 21st century Henry George — a thinker who embraces the wealth-creating power of capitalism, but squarely faces the inequity of its current manifestation. That kind of thinking is missing on the right, which is still relying on Reagan-era trickle-down economics and hopes complaints about income inequality can be silenced with accusations of class war. But the left isn’t doing much better either, preferring nostalgia for the high-wage, medium-skill manufacturing jobs of the post-war era and China-bashing to a serious and original effort to figure out how to make 21st century capitalism work for the middle class. [..]

We are living in an era of comparably tumultuous economic change. The great challenge of our time is to devise the new social and political institutions we need to make the new economy work for everyone. So far, that is a historic task neither party is taking on with enough energy, honesty or originality.

America’s super rich are having a good decade, but The New Yorker claims they can’t enjoy it because President Obama hurt their feelings.

The growing antagonism of the super-wealthy toward Obama can seem mystifying, since Obama has served the rich quite well. His Administration supported the seven-hundred-billion-dollar TARP rescue package for Wall Street, and resisted calls from the Nobel Prize winners Joseph Stiglitz and Paul Krugman, and others on the left, to nationalize the big banks in exchange for that largesse. At the end of September, the S. & P. 500, the benchmark U.S. stock index, had rebounded to just 6.9 per cent below its all-time pre-crisis high, on October 9, 2007. The economists Emmanuel Saez and Thomas Piketty have found that ninety-three per cent of the gains during the 2009-10 recovery went to the top one per cent of earners. Those seated around the table at dinner with Al Gore had done even better: the top 0.01 per cent captured thirty-seven per cent of the total recovery pie, with a rebound in their incomes of more than twenty per cent, which amounted to an additional $4.2 million each.

Notwithstanding Occupy Wall Street’s focus on the “one per cent,” or Obama’s choice of two hundred and fifty thousand dollars as the level at which taxes on family income should rise, the salient dividing line between rich and not rich is much higher up the income-distribution scale. Hostility toward the President is particularly strident among the ultra-rich.

In a speech to the National Press Club, Senator Charles Schumer (D-NY) rejected the current compromise for a bipartisan deficit reduction plan that would prevent the trigger of tax increases and automatic spending cuts that go into effect on January 1. He stated that the compromise could not bring in more revenue by lowering the top tax rate and still protect the middle class from tax increases:

Specifically, he’s publicly urging Democrats to abandon a tax reform model that calls for ending tax expenditures, many of which benefit middle income earners, in order to finance a large tax rate cut for wealthier people. It’s a framework that’s popular among economists, particularly conservative ones, but that a group of Democrats negotiating with Republicans to avert large tax increases and sharp spending cuts next year have also embraced.

Instead, he proposes targeting tax loopholes and deductions that benefit top earners and raising their top income tax rate, while simultaneously narrowing the tax code’s preference for capital gains by ratcheting up the capital gains rate from its current, historically low rate of 15 percent. Taken altogether it’s a call for significantly more revenue from high-income earners than Dems have sought by proposing to allow the Bush tax cuts for top earners to expire; and an attempt to strengthen Dems’ negotiating posture, lest they get lured into conceding another large income tax cut for the wealthy.

Sen. Schumer proposes to freeze the top two tax bracket, cut the loopholes and deductions that benefit the top earners and raise the capital gains tax.

David Dayen at FDL News Desk notes that this would be a “major blow” to the Simpson-Bowles plan that would see the tax rates reduced to 23% for the top earners.

So how would Schumer get the Republicans to sit down at the table? As David point out, simple by dangling “entitlement” reform:

But there’s a giant caveat to all of this, based on the excerpts (haven’t yet found the full speech):

  But he says that Republicans should be drawn to such a deal by the prospect of a bipartisan bargain that also includes changes to improve the sustainability of entitlement programs. Those programs – such as Social Security and Medicare – are expected to run substantial shortfalls in the future, adding dramatically to budget deficits.

   “The lure for Republicans to come to the table around a grand bargain should be the potential for serious entitlement reform, not the promise of a lower top rate in tax reform,” Mr. Schumer is expected to say, according to excerpts of his speech.

So Schumer wants to trade unworkable “tax reform” for deeply unpopular “entitlement reform.” That’s not really a great trade. It’s good to acknowledge that tax reform will never work the way its most passionate advocates suggest. But if that doesn’t exist as a “get” for Republicans in a grand bargain, and entitlement cuts are the substitute, we have a whole different problem.

While Schumer claims that the concession on “entitlement” reform would not include privatization or a voucher program,  Atrios noted the Republicans have no interest in “reform” of entitlements unless it includes privatization and tax cuts for the wealthy. In other words, the chances of getting anything done have greatly increased.

And it’s not just people like me that support the Democratic Party Platform over any politician that noticed this. It was one of the President’s biggest most enthusiastic supporters; Ed Schultz of the Ed Show on MSNBC.

Let’s look at the transcript:

LEHRER: All right? All right. This is segment three, the economy. Entitlements. First — first answer goes to you, two minutes, Mr. President. Do you see a major difference between the two of you on Social Security?

OBAMA: You know, I suspect that, on Social Security, we’ve got a somewhat similar position. Social Security is structurally sound. It’s going to have to be tweaked the way it was by Ronald Reagan and Speaker — Democratic Speaker Tip O’Neill. But it is — the basic structure is sound.

And yes, I know the President offered a touching anecdotal of what SS has meant for his family and I respect that; however I’m going to borrow a line from someone whom I won’t speak for, but it’s a good line anyway so I’ll tweak it for my POV on this. Mr. President, don’t tell me what you believe about Social Security, you have shown what you plan to do with Social Security by agreeing to another Greenspan commission like “tweak.” So I’ll tell you what you really believe and why that is a problem.

High Speed Frequency Trading (HFT) has been known to rattle traders and disrupt the stock market but has yet to be harnessed by regulators, until now.

Germany Acts to Increase Limits on High-Speed Trades

by Melissa Eddy and James Kanter

Chancellor Angela Merkel’s government approved draft legislation on Wednesday that foresees imposing additional controls on such trading. The proposed measures include requiring that all high-frequency traders be licensed, requiring clear labeling of all financial products traded by powerful algorithms without human intervention and limiting the number of orders that may be placed without a corresponding trade. Traders who violate the limits, which would be set once the law took effect, would face a fine.

“Computer-generated algorithmic transaction involves a variety of new risks,” Germany’s finance ministry said in a statement. “Germany is reacting to these risks with legislation that will create more transparency, security and a better overview.”

The legislation, which is subject to approval by both houses of Parliament, was written with an eye toward similar legislation being discussed in Brussels that could eventually apply across the European Union, which has 27 member nations, the official said.

A prime example of what happens when HFT runs amok occurred in August this year by Knight Match, a system used by high speed trades, nearly bankrupted the trading company Knight Capital that lost $440 million in 45 minutes.

Knight was saved by a hastily assembled $400 million from a consortium of investors, but it appears the damage to Knight’s reputation with customers, particularly high frequency traders, will take longer to repair. Knight says the volume numbers, which were compiled by stock market and technology research firm Tabb Group, exclude the trading glitch, which happened on August 1st. Knight was forced to shut down its systems for part of that day. The volume drop shows that traders shied away from Knight longer than just in the days following the trading glitch. A Knight spokeswoman says the company won’t comment on whether trading volumes rebounded in September until early next month.

The HFT system has caused some concern in Washington. At a Senate Banking Committee hearing trading professional expressed the the fears of investors:

It no longer is your parents’ or grandparents’ stock market. Rather, it’s become a Wild West of trading, with errant technology too often in control and setting stocks, commodities, currencies and futures up for violent moves that could make the $1 trillion flash crash of May 2010 look tame by comparison, testified David Lauer, who has designed trading technology and worked as an analyst for Allston Trading and Citadel Investment Group.

“U.S. equity markets are in dire straits,” Lauer said. “We are truly in a crisis.”

He noted that “retail investors have been fleeing the stock market in droves” and that the Chicago Booth/Kellogg School Financial Trust Index shows “investor confidence is nonexistent – with only 15 percent of the public expressing trust in the stock market.”

Rather than buying a stock and holding onto it, institutions using high-frequency trading buy and sell stocks constantly in milliseconds, or much faster than a blink of the eye. Lauer said about 50 to 70 percent of the volume of trading in the stock market now takes that form. Often trading systems send out phony trades aimed at manipulating others into buying or selling. The activity can mislead legitimate traders working for mutual funds, pension funds or individuals to buy a stock at too high a price or sell it at too low a price.

The system is also riddled with fraud:

A New York-based brokerage allowed overseas clients to run a scheme aimed at distorting stock prices by rapidly canceling orders, according to the U.S. Securities and Exchange Commission.

Clients of Hold Brothers On-Line Investment Services were “repeatedly manipulating publicly traded stocks” by placing and erasing orders in an illegal strategy designed to trick others into buying or selling, the SEC said today in a release. Hold Brothers, its owners, and the foreign firms Trade Alpha Corporate Ltd. and Demonstrate LLC agreed to settle allegations that the New York broker failed to supervise customers and pay $4 million in total SEC fines.

The SEC complaint targeted practices that abused high-speed computer trading on American equity venues. As high-frequency activity has grown in recent years, the agency’s efforts to stop fraudulent practices such as “layering” or “spoofing” have extended to the automated trading tactics.

However, the SEC has been called the “Barney Fife” of regulators when it comes to regulating HFT and their competence has been questioned:

But the agency is clearly outgunned when it comes to dealing with high-frequency trading, many experts agree. And a new lawsuit goes so far as to accuse the SEC of covering up high-speed fraud so nobody will know just how incompetent it really is, Courthouse News reports.

In the suit, a Wisconsin company called EMM Holdings accuses the SEC of not investigating a Houston high-speed trading firm called Quantlab Financial. According to EMM, Quantlab is perpetrating fraud amid all the high-speed churning and burning it does in the stock market. EMM notes that Quantlab has been flagged six times in the past eight years by the Financial Industry Regulatory Authority, the brokerage industry’s self-regulatory body, for not properly documenting its trades. EMM thinks this is evidence that Quantlab is trying to cover up some fraud, and it has asked the SEC (pdf) for any documents showing an investigation of Quantlab. The SEC has refused (pdf), on the grounds that doing so might interfere with law-enforcement activities. EMM has sued the SEC to force it to give up whatever goods it has on Quantlab.

Trouble is, it’s not entirely clear if the SEC is actually investigating Quantlab at all. EMM argues in its complaint that the only way the SEC could deny its record request is “if there is an on-going and active investigation.” And EMM accuses the SEC of letting this investigation fester, hoping the statute of limitations will run out.

“Given [the SEC’s] near complete abdication of its prosecutorial duties during the 2008 financial crisis, inaction and delay may unfortunately have become [the SEC’s] modus operandi for dealing with complex financial malfeasance,” EMM said in its complaint.

At least the Germans are willing to take the “bull by the horns” by limiting the ability of these trades to disrupt the market with rules that would slow trading, curb the volume and make it more expensive for traders to cancel large volumes of orders.