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Economic Stories of Relevance in Today's World -- July 1, 2012

JP Morgan Trading Loss May Reach $9 Billion - New York Times - By JESSICA SILVER-GREENBERG and SUSANNE CRAIG - June 28, 2012 - Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation.                           When Jamie Dimon, the bank’s chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.                 The bank’s exit from its money-losing trade is happening faster than many expected. JPMorgan previously said it hoped to clear its position by early next year; now it is already out of more than half of the trade and may be completely free this year.



Former Obama Advisor: 'Fiscal Cliff' Plunge Likely - CNBC - Eamon Javers - June 26, 2012 - ...In an interview, Bernstein said no matter who wins the Presidency this fall, the fiscal cliff may be unavoidable. “If you actually play out the difference scenarios here, the President wins, Romney wins — it’s hard to see that we don’t go off this fiscal cliff,” Bernstein said. “Because I don’t see how this compromise gets made.”...            That said, Bernstein argues that the fiscal cliff may not be the economic nightmare scenario many pundits have described. Bernstein thinks it’s possible to go over the cliff early in 2013, but not for long, and that Washington will come to a deal once the pain kicks in....                 “If we can reverse it in a matter of two or three weeks — and there is a scenario in which that can happen — that would do a lot less damage to the economy than if we stayed over the cliff,” he said. Bernstein is currently a fellow at the Center on Budget and Policy Priorities and a CNBC contributor.                      The fiscal cliff is a series of politically imposed deadlines on tax and spending policy that are all set to hit at the same time at the end of 2012. Taken together, many analysts argue that a massive decrease in federal spending and increase in federal taxation could paralyze the economy just as it is struggling to creep out of recession.                     Here’s what’s slated to end by the end of the year:                         The US government is expected to hit the debt ceiling of $16.394 trillion by the end of 2012, although Treasury has ways of stretching this that could push that deadline into the early part of 2013.                    Speaker Boehner has said he’ll only support extending the debt limit again if there are spending cuts put in place that are larger than the debt increase itself. That, plus Democrats’ insistence on increased taxes, could force a rerun of last year’s damaging debt ceiling debate.                      The Bush tax cuts are slated to expire by the end of this year, too. Democrats and the President want to extend them only for those making less than $250,000 per year, while Republicans would like to extend the entire set of cuts. In the context of the debt debate, this will be a tricky one to resolve.                        Remember the “sequester?” That’s the term for automatic spending cuts set to kick in at the end of this year because last year’s super committee was unable to reach a spending deal. The cuts total about $1.2 trillion, and they start January 2, split between defense and domestic spending and causing an estimated 15 percent across the board cut at the Pentagon.                            Throw in a payroll tax holiday expiration and emergency unemployment benefits ending at the end of the year as well, and we’re looking at a very tough New Year’s Eve in Washington.


U.S. Economic Confidence Continues to Slide - Economic confidence declines to -26, lowest since late January - Gallup - Jenny Marlar - June 26, 2012 - U.S. economic confidence last week was hardest hit June 19-21, when it fell to -28, but it bounced back to -25 over the weekend. The midweek slide may have resulted from the anticipated Moody's downgrade of several major banks and one of the worst trading days of the year on Thursday. However, the market rallied back on Friday, which may have led to the weekend improvement in confidence.                     Gallup's Economic Confidence Index consists of two measures -- one assessing current economic conditions and the other assessing the nation's economic outlook. Americans' perceptions of current economic conditions worsened to -31, down four from the previous week, with 44% saying the economy is poor and 13% saying it is excellent or good. Attitudes about the economic outlook were down marginally last week, at -21.

Mortgage applications fell last week: MBA - Reuters - June 27, 2012 - Reporting by Anna Louie Sussman; Editing by Diane Craft - Applications for U.S. home mortgages fell last week as refinancing applications for government loans slowed, an industry group said on Wednesday.                  The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 7.1 percent in the week ended June 22.                    The MBA's seasonally adjusted index of refinancing applications decreased by 8.3 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell by 1.4 percent.                  The refinance share of total mortgage activity fell to 79 percent of applications from more than 81 percent the week before. Michael Fratantoni, MBA's vice president of research and economics, attributed the decline to a fall-off in refinance applications for government-backed loans, which had soared the previous week.               "The large swings in activity were due to the implementation of FHA's new premiums on streamline refinances, and borrowers timing their application to lower their premiums," he said in a statement.


Wash Trading by High-Frequency Firms Said to Face U.S. Scrutiny - Bloomberg - Joshua Gallu and Silla Brush - Jun 22, 2012 - High-frequency trading firms are drawing scrutiny from U.S. regulators seeking evidence that they may be distorting market prices by conducting transactions with themselves, said two people with knowledge of the matter.                      So-called wash trades, in which a party buys a contract from itself, could be executed inadvertently by firms with multiple algorithms active in the same stock or derivative, said the people, who requested anonymity because the review isn’t public. Such trades, which can alter the price of shares if they are executed above or below market rates, would be illegal if deemed intentional efforts to manipulate stocks.                    The Securities and Exchange Commission and Commodity Futures Trading Commission have sharpened their focus on high- frequency and algorithmic trading since May 6, 2010, when about $862 billion was erased from stock values in 20 minutes before share prices recovered from the plunge. Regulators have expressed concern that some firms and electronic exchanges don’t have sufficient controls to prevent a range of events -- from improper trades to programming glitches -- that could roil markets even when there is no wrongdoing.                    High-frequency trading, in which computer algorithms are used to buy and sell stocks in fractions of a second, accounts for more than half of equity trading volume. Getco LLC and Citadel LLC, both based in Chicago, and New York-based Virtu Financial LLC are among the biggest automated-trading firms.


17 Reasons To Be EXTREMELY Concerned About The Second Half Of 2012 - The Economic Collapse Blog - What is the second half of 2012 going to bring? Are things going to get even worse than they are right now? Unfortunately, that appears more likely with each passing day. I will admit that I am extremely concerned about the second half of 2012. Historically, a financial crisis is much more likely to begin in the fall than during any other season of the year. Just think about it. The stock market crash of 1929 happened in the fall. "Black Monday" happened on October 19th, 1987. The financial crisis of 2008 started in the fall. There just seems to be something about the fall that brings out the worst in the financial markets. But of course there is not a stock market crash every year. So are there specific reasons why we should be extremely concerned about what is coming this year? Yes, there are. The ingredients for a "perfect storm" are slowly coming together, and in the months ahead we could very well see the next wave of the economic collapse strike. Sadly, we have never even come close to recovering from the last recession, and this next crisis might end up being even more painful than the last one.                      The following are 17 reasons to be extremely concerned about the second half of 2012....       #1 Historical Trends...       #2 JP Morgan...       #3 Derivatives...   #4 LEAP/E2020 Warning...     #5 Increasing Pessimism...   #6 Spain...   #7 Italy...   #8 Greece...   #9 Cyprus...   #10 Germany...    #11 Bank Runs...    #12 Preparations For The Collapse Of The Eurozone...    #13 Global Lending Is Slowing Down...   #14 Sophisticated Cyber Attacks On Banks...   #15 U.S. Municipal Bankruptcies...   #16 The Obamacare Decision...   #17 The U.S. Election...


Why the Middle Class Is Doomed - Of Two minds - Charles Hugh Smith - April 17, 2012 - The dwindling middle class, squeezed by higher taxes and costs, is losing its political voice.             The middle class is doomed by some very basic dynamics. Economic historian David Hackett Fischer laid out the fundamental dynamic in his book The Great Wave: Price Revolutions and the Rhythm of History.               By assembling price and wage data stretching back hundreds of years, Fischer found that cycles of economic growth spawned population growth, an expanding number of workers entering the market economy (as opposed to the non-market subsistence economy) and a demand-driven expansion of essential commodities such as grain and energy (wood, coal, oil, etc.).                In the initial phase, wages rise and commodity prices remain stable as supplies of essential goods expand and the demand for labor pushes up wages.                 But this virtuous cycle reverses when the supply of essentials no longer keeps pace with rising population and demand: the price of essentials begin an inexorable rise even as an oversupply of labor drives down wages.

Declining Wages

Income by Age Bracket

 
What all this reveals is that the middle class has lost its political power. Roughly 40% of all households receive a check or equivalent from the Federal government, while at the top Power Elite crony capitalists skim capital gains and pay an average of 17% of all income.               The 100 million dependents on the Federal government (Central State) vote to support their share of the largesse, regardless of the consequences to future generations, and the Power Elite crony capitalists buy political protection for their cartels and financialization scams. The dwindling middle class ends up paying most of the taxes even as their percentage of the population falls to the point that their political voice is drowned out by more numerous dependents and Elites that both favor the Status Quo. 

We Are Living in a ‘Modern-Day Depression’: David Rosenberg - Yahoo Finance - By Aaron Task | Daily Ticker – Mon, Jun 25, 2012

NUM3ER$

1961
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2012
2,560

Mission #1 - Check

July will not be boring

I know that most people go on vacation in July. Well, they all can go on vay-kay, but we aren't going anywhere. There are going to be some awesome developments taking place over the next few weeks that are going to make you start paying closer attention. So stay tuned...

Now the world is getting older
There´s a few things to be said
Do you believe the things they told you
Do you believe the things you´ve read

There´s a rumour on the corner
But it´s always been denied
Cause they don´t want you any wiser
You´re just toeing the party line

From the west side to the east side
From the north side to the south
You´ll never get bad information
If you believe in the word of mouth

Look out for those who still want to hang on
Look out for those who live in the past
Get out and listen to the whisper
Because the times are changing fast

From the west side to the east side
From the north side to the south
You´ll never get bad information
If you believe in the word of mouth

You don´t believe the information
You don´t believe it when it´s denied
So when you´re reading explanations
You have to read between the lines

From the west side to the east side
Through the windows I´m looking out
You´ll never get bad information
If you believe in the word of mouth

From the west side to the east side
From the north side to the south
You´ll never get bad information
If you believe in the word of mouth

"Word of Mouth" by Mike and the Mechanics -  © 1991 Hidden Pun Music, Inc (BMI)/63 Songs Ltd.

 [  From: http://www.elyrics.net/read/m/mike-&-the-mechanics-lyrics/word-of-mouth-lyrics.html ]

Congratulations Ulysses Long on your way to New York City - America's Got Talent - June 26, 2012

Ulysses My Man, we are so proud of you. Ulysses is on his way to New York City to perform further on America's Got Talent. I have to admit it brought tears to my eyes when they announced that you had made it. You made it a little closer than it needed to be.

Thank you for inspiring us and showing America that you have got it. Wish they had given you some more time and can't wait to see a segment devoted to you again.

You have been given an opportunity and now it is time to go make the most of it. Put a suit and tie on, because I have seen you dressed to the nines and I think you need to throw a little more body language into your presentation. I know you can do this, like so many others, because we are witnesses. We can testify!!!

We love you Ulysses and we've got your back. Go make it happen. Give us some of that bravado, confidence, and swagger. We have never seen you nervous. Now is surely not the time to go getting nervous.

Go Ulysses!!!

Middle Out Economics

Over the last several days Barack Obama has pushed a notion that we need to have bottom up economics. Without mincing words, I think he is a little off. He does talk about the middle class, but the middle class isn't the bottom. It is the middle. The problem is that it is shrinking.

Trickle Down or Bottom Up, these are both notions of Democrats. Neither is a sustainable economic theory. They are just simple slogans. What we have to do is reinvigorate the Middle Class. There is really only one way to do that. We need to regain the sovereignty of our nation by putting corporations back in their box.

Currently, we don't have a Capitalist system. There is a notion pushed by Democrats that we do. The Bail Outs have sheared the vestiges of capitalism back to nothing. Capitalism is an idea and ideas don't die, but the system that is currently in place is a Corporate centered Neo-Feudalistic model.

The Neo-Feudalistic model basically centers itself around having no middle class. There will be an elite class who control the Mega-Corporations and include those who revolve in and out of the government and then there will be the peasant class.

In Romney's latest commercial, the ad says that he wants to cut taxes to create jobs. Well, we've had taxes cut and stimulus ad nauseum. The plan has been very successful and created millions of jobs. The problem is that those jobs have been created in China and other third world countries. Last week I spoke with associates about our need to push back Free For All trade. They said that we need to work on issues that we can influence. The problem that I have is that any issues we work on are irrelevant until we address the 800 pound guerrilla in the room.

So you want to grow the economy, then you are going to have to get the real middle class back on track. How do we do this? By investing money in our nation's physical infrastructure. Where does this money come from? By getting Wall Street back under control with a tax on high frequency algorithm computer trading  and bringing labor price parity into the Free Trade equation.

Will there be unintended consequences? Yes, we can't avoid consequences whether we act upon this or not. Will increased domestic labor costs cause prices to rise? Yes, but people will have jobs and without this prices will rise anyway, but there will be a continued deterioration of our job market. Without people having money, then there is no marketplace and that is where we are steaming towards. We have fundamental flaws in the marketplace/economy.

So the political contenders can continue bobbing and weaving on the real issues and ducking and dodging the real questions, but at the core of this lack of growth in our economy is the issue of job growth (both capacity and wages). Without good paying jobs, we will not have a middle class. Competing against people making pennies to our dollars is not going to grow wages. Wages have not kept up with costs. People have less and spend less and the economy naturally shrinks.

What has the average American gotten out of this current system? The Wealthy class isn't assuming the risk they did in the past. If they fail, then one of their set up cronies will be along shortly to bail them out. If they succeed, then they get millions in stock options and other benefits that aren't afforded to the working class. And while this continues, our nation's future outlook continues to deteriorate.

20 years down the road, please tell me how this Free Trade World is working?

The Race to the Bottom

Economic Stories of Relevance in Today's World -- June 24, 2012

Obama's Approval in Freefall on Stagnant Economy - Newsmax.com - Paul Scicchitano - June 22, 2012 - Just 33 percent of Americans now believe the president is doing a “good” or “excellent” job when it comes to the economy, according to a Rasmussen poll.             That’s down from 41 percent at the beginning of May, which could be yet another sign that the president’s re-election chances are tied more to the economy than to any other political issue.                 “This election is more than just a referendum on President Obama. It is a referendum on his handling of the economy,” declares Political analyst and Democratic pollster Doug Schoen in an exclusive interview with Newsmax on Friday.                 ... U.S. manufacturing grew at its slowest pace in 11 months in June and the number of Americans filing new applications for unemployment aid fell only slightly last week.               “With more than 8 percent out of work and an equal number under employed or discouraged workers, the American people are hurting and the fall in president Obama’s approval rating, vote share, and ratings on the economy reflect just that,” Schoen explained.            Most Americans already believe that the United States is in a recession, observed Towery.                “People don’t have any money in their pocket and they can’t borrow any money. They don’t qualify for loans,” he said. “The banks will only loan to people who have money in the first place and so we are basically at a complete stalemate in terms of our economy. There’s nothing that anyone can think of that will spur it to go forward.”                ....“If the election were a personality contest there’s every reason to believe president Obama would have a very good chance of getting re-elected, but since it’s a referendum on the economy it makes for a much more difficult and uphill climb for President Obama than anyone would have expected just a few short months ago,” Schoen said.


Analysts: Moody’s Bank Downgrade Will Hurt Recovery, Consumers - Newsmax.com - Jim Meyers - June 22, 2012 - The decision by Moody’s Investors Service on Thursday to downgrade the credit ratings of 15 global banks and securities firms will have a negative impact on borrowers as well as the banks themselves.                  The downgrades of financial institutions such as Citigroup, Bank of America, J.P. Morgan, Barclays, and Goldman Sachs reflect Moody's concern over the ability of the banks to repay their debts during times of crisis.                  The result: Credit could become costlier and/or harder to obtain.                   Since the cost of doing business for these giant financial institutions will go up as a result of having their rating lowered, the banks could pass along their higher costs — such as the higher interest rates they will have to pay to borrow money.               Or the institutions will have lower profits, which will inhibit their ability to lend.

Job Growth: Why US Remains Stuck in Neutral - CNBC via Yahoo - Mark Koba | CNBC – June 22, 2012 -... The lack of job growth in the U.S. should not be a surprise. Even before the Great Recession of 2007-2009, the number of jobs created tapered off significantly from the Internet boom in the 1990s, leaving the economy very little cushion when the downturn slammed the country with the loss of some 7.5 million jobs....                 The numbers show that as bad as the unemployment rate is for college graduates-around 19.1 percent-the jobless rate for high school graduates is near 54 percent......                  And the skills gap could get worse. Nearly 17 percent of high school graduates had no job or were not enrolled in college in 2011, up from 13.7 in 2007, according to the Economic Policy Institute.......                  The shortage of high tech workers has created a demand for the right skills and a jobless rate for the sector at half the national rate. With more seniors retiring than ever before, health care related positions are expected to grow at a rate of 35 percent in the next eight years, according to the Bureau of Labor Statistics. Professional and business services are also expected to see job growth as well as green energy sectors and even construction.               Many areas of the country are seeing fewer job losses if not some minimal job growth. Some 32 states, including Minnesota as well as Texas, New Hampshire and New Mexico are below the national average on jobless rates, according to the BLS. Ohio has seen its rate drop 10 months in a row to a current 7.3 percent.                       If the projections of job growth don't match the current reality, it shows the instability of the moment and beyond, say experts.                      Coupled with the sluggish economy are upcoming political battles: ending or extending the Bush era tax cuts, scheduled payroll tax increases, as well as another showdown over the government's ability to borrow money.




Bernanke 'prepared' to do more - CNN Money - Annalyn Censky - June 20, 2012 - Could more stimulus be on the way?             Federal Reserve Chairman Ben Bernanke certainly left the option on the table Wednesday, making perfectly clear that he stands ready to do more should the U.S. economy take a turn for the worse.                 Could more stimulus be on the way?                     Indeed, the job market remains one of Bernanke's top concerns. The unemployment rate is still uncomfortably high at 8.2%, and the government's latest jobs report showed employers added only 69,000 jobs in May-- the weakest hiring in a year.                    Amid those concerns, the Fed extended its existing policy known as Operation Twist, and lowered its expectations for the job market and the broader U.S. economy this year.The central bank predicts the unemployment rate will end the year between 8% and 8.2%. Just two months ago, it was more optimistic, predicting the jobless rate could fall as low as 7.8%.                       "Growth in employment has slowed in recent months, and the unemployment rate remains elevated," the Fed said in an official statement.                   The Fed also sees broader weakness ahead, predicting the economy will grow between 1.9% and 2.4% this year. When the Fed met back in April, it had forecasted that the economy would grow as much as 2.9%.                  That weaker outlook prompted the Fed to extend Operation Twist by $267 billion.                  The program swaps short-term bonds for ones with longer durations, thereby pushing interest rates lower on mortgages and business loans. The hope is that cheaper credit will reach consumers and business, who will then boost the economy by spending more.                  The effect on Main Street has been questionable though. Mortgage rates are at record lows, but even so, new home sales have been choppy and banks are still unwilling to lend to anyone with less-than-perfect credit. Small business owners are also struggling to get loans. 

Lost in Recession, Toll on Underemployed and Underpaid - New York Times - Michael Cooper - June 18, 2012 - Throughout the Great Recession and the not-so-great recovery, the most commonly discussed measure of misery has been unemployment. But many middle-class and working-class people who are fortunate enough to have work are struggling as well,....                             These are anxious days for American workers. Many, like Ms. Woods, are underemployed. Others find pay that is simply not keeping up with their expenses: adjusted for inflation, the median hourly wage was lower in 2011 than it was a decade earlier, according to data from a forthcoming book by the Economic Policy Institute, “The State of Working America, 12th Edition.” Good benefits are harder to come by, and people are staying longer in jobs that they want to leave, afraid that they will not be able to find something better. Only 2.1 million people quit their jobs in March, down from the 2.9 million people who quit in December 2007, the first month of the recession.                “Unfortunately, the wage problems brought on by the recession pile on top of a three-decade stagnation of wages for low- and middle-wage workers,” said Lawrence Mishel, the president of the Economic Policy Institute, a research group in Washington that studies the labor market. “In the aftermath of the financial crisis, there has been persistent high unemployment as households reduced debt and scaled back purchases. The consequence for wages has been substantially slower growth across the board, including white-collar and college-educated workers.”                   And household wealth is dropping. The Federal Reserve reported last week that the economic crisis left the median American family in 2010 with no more wealth than in the early 1990s, wiping away two decades of gains. With stocks too risky for many small investors and savings accounts paying little interest, building up a nest egg is a challenge even for those who can afford to sock away some of their money.                    People with college degrees still get jobs with better pay and benefits than those without, but many recent college graduates are finding it hard to land the kinds of jobs they had envisioned. David Thande, 27, who graduated from the University of California, Los Angeles, five years ago, works part time as a clerk in an Apple Store.                         Things are much worse for people without college degrees, though. The real entry-level hourly wage for men who recently graduated from high school fell to $11.68 last year, from $15.64 in 1979, according to data from the Economic Policy Institute. And the percentage of those jobs that offer health insurance has plummeted to 22.8 percent, from 63.3 percent in 1979.                       Though inflation has stayed relatively low in recent years, it has remained high for some of the most important things: college, health care and even, recently, food. The price of food in the home rose by 4.8 percent last year, one of the biggest jumps in the last two decades. 

Turns Out China IS Lying About Everything - Zero Hedge - Tyler Durden - June 23, 2012 - Even that lonely indicator that some, even us, had considered somewhat realistic: electric output, is a mirage.               Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country’s economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.             But an economist with ties to the agency said that officials had begun making inquiries after detecting signs that electricity numbers may have been overstated.               Another top corporate executive in China with access to electricity grid data from two provinces in east-central China that are centers of heavy industry, Shandong and Jiangsu, said that electricity consumption in both provinces had dropped more than 10 percent in May from a year earlier. Electricity consumption has also fallen in parts of western China. Yet, the economist with ties to the statistical agency said that cities and provinces across the country had reported flat or only slightly rising electricity consumption.

War On The American Middle Class - Fifteen Steps to Corporate Feudalism author Dennis Marker provides a step-by- step account of how and why the US middle class has been working harder than ever and is still losing ground . There are fifteen steps to corporate feudalism outlined in Dennis Marker's new book.If you are an American citizen, and you hear this report, and it doesn't make you either upset or angry, then you are in denial. The American Worker has been utterly forgotten and screwed up by everyone in power .We need to downsize the Federal Government and give more power to the States and each other. As a Nation we could stand without the Government ruling our every move.