From Jesse’s Café:
Its pretty much a Ponzi scheme, and not all that well hidden. This is probably why insiders continue to sell in large numbers.
If the US market breaks it will go badly for many average people who do not understand how their government has failed to protect them.
But do not underestimate the power of the Bernanke Fed and its enablers in the central banks to continue printing enormous amounts of unfunded dollars and hiding the effects. This may buoy the US markets for longer than we might think, as it did in 2003 to 2007.
But at some point the payments will come due, value will be revealed, price discovery will assert itself, the US dollar and the bond will fail, and then comes the deluge.
Watch what India and China do with their reserves. They know full well what is coming and unlike the US are seeking to protect their people.
http://jessescrossroadscafe.blogspot.com/2009/12/us-bull-market-in-smoke-mirrors-and.html
Wednesday, December 23, 2009
Quantitative Easing in the U.S.
I concur with Jesse’s view on quantitative easing in the U.S. Japan has also been engaged in quantitative easing on and off for two decades, but it is the world’s most indebted country: Japan’s government debt totals 170% of GDP. Many experts predict that Japan would implode down the road at some point.
From Jesse’s Café:
Much is being made of Bernanke's program of quantitative easing, which is nothing more than an extreme form of artificially low rates of interest with direct monetization of debt in the aftermath of a financial crisis.
The current program of quantitative easing is not only no miracle cure, it will not work at all, will not 'fix' the problems that are plaguing the American economy in any substantial manner. It is a misguided subsidy and reinforcement of reckless behaviour, and a corrupt distribution of wealth.
Quantitative easing would only be a cure if the crisis had been caused by an exogenous credit shock, a sudden withdrawal of liquidity due to an event unrelated to the workings of the domestic economy like a war or an act of nature.
But this is clearly not the case. For the cause of the financial crisis was in fact a lengthy period of artificially low interest rates under the chairmanship of Alan Greenspan, which allowed all manner of financial excess and malinvestment and even fraud to fester in the real economy for a protracted period of time until it became embedded, and one might even say a dominant force, in the economy. It warped and distorted the productive economy.
Applying quantitative easing may relieve the symptoms of the credit crisis but it is merely a palliative, not a cure. It is similar to the case of a debilitated addict who, being denied his marcotics, goes into shock and suffers a heart attack. Yes, a 'fix' of the drug of choice will relieve the short term symptoms perhaps, but will do nothing for the underlying state of health which will continue to worsen.
The very low rates of interest have 'cured' the short term credit seizure in the financial markets, thereby providing time and opportunity to engage in genuine systemic reform and rebalancing to repair the distortions that caused the crisis in the first place: an outsized and corrupt financial sector, and a system of global trade that is freakishly imbalanced and manipulated by command economies and multinational corporations. That, and a lapse of western governance overcome by greed.
Until those reforms are made, the US economy will experience a series of bubbles and crises that, through the US dollar reserve currency system, will shake the governments of the world to their foundations.
http://jessescrossroadscafe.blogspot.com/2009/12/myth-of-quantitative-easing.html
From Jesse’s Café:
Much is being made of Bernanke's program of quantitative easing, which is nothing more than an extreme form of artificially low rates of interest with direct monetization of debt in the aftermath of a financial crisis.
The current program of quantitative easing is not only no miracle cure, it will not work at all, will not 'fix' the problems that are plaguing the American economy in any substantial manner. It is a misguided subsidy and reinforcement of reckless behaviour, and a corrupt distribution of wealth.
Quantitative easing would only be a cure if the crisis had been caused by an exogenous credit shock, a sudden withdrawal of liquidity due to an event unrelated to the workings of the domestic economy like a war or an act of nature.
But this is clearly not the case. For the cause of the financial crisis was in fact a lengthy period of artificially low interest rates under the chairmanship of Alan Greenspan, which allowed all manner of financial excess and malinvestment and even fraud to fester in the real economy for a protracted period of time until it became embedded, and one might even say a dominant force, in the economy. It warped and distorted the productive economy.
Applying quantitative easing may relieve the symptoms of the credit crisis but it is merely a palliative, not a cure. It is similar to the case of a debilitated addict who, being denied his marcotics, goes into shock and suffers a heart attack. Yes, a 'fix' of the drug of choice will relieve the short term symptoms perhaps, but will do nothing for the underlying state of health which will continue to worsen.
The very low rates of interest have 'cured' the short term credit seizure in the financial markets, thereby providing time and opportunity to engage in genuine systemic reform and rebalancing to repair the distortions that caused the crisis in the first place: an outsized and corrupt financial sector, and a system of global trade that is freakishly imbalanced and manipulated by command economies and multinational corporations. That, and a lapse of western governance overcome by greed.
Until those reforms are made, the US economy will experience a series of bubbles and crises that, through the US dollar reserve currency system, will shake the governments of the world to their foundations.
http://jessescrossroadscafe.blogspot.com/2009/12/myth-of-quantitative-easing.html
Tuesday, December 22, 2009
China Has Steadily Diversified Its Suppliers for Everything
China has many potential problems, but again, it is fully aware of the game the Western economies are in and has been prepared not to be plied in terms of economic and geopolitical aspects. China’s strategic moves have proved that.
From Zero Hedge:
China is very well aware that its economic growth and even domestic stability is conditioned upon securing supply chains through long-term agreements. One step at a time China is securing its supply of staple commodities, minerals and energy supplies. To further secure its position in the supply country, China offers loans and technical expertise in addition to gaining the management authority to run the local operations. China has become one of Africa's top three trading partners and several countries, no matter how unsavoury and corrupt they may be, became important trading partners like Sudan, which exports a majority of its oil to China, while others guarantee China's food supply. In November 2009, the China Metallurgical Group bought for US$3 billion a 30-year lease to exploit copper deposits in Afghanistan further demonstrating that no country, no matter how troubled it is, is off-limit.
http://www.zerohedge.com/article/guest-post-china-secures-gas-supply-turkmenistan-whos-true-winner
From Zero Hedge:
China is very well aware that its economic growth and even domestic stability is conditioned upon securing supply chains through long-term agreements. One step at a time China is securing its supply of staple commodities, minerals and energy supplies. To further secure its position in the supply country, China offers loans and technical expertise in addition to gaining the management authority to run the local operations. China has become one of Africa's top three trading partners and several countries, no matter how unsavoury and corrupt they may be, became important trading partners like Sudan, which exports a majority of its oil to China, while others guarantee China's food supply. In November 2009, the China Metallurgical Group bought for US$3 billion a 30-year lease to exploit copper deposits in Afghanistan further demonstrating that no country, no matter how troubled it is, is off-limit.
http://www.zerohedge.com/article/guest-post-china-secures-gas-supply-turkmenistan-whos-true-winner
Marc Faber on Bernanke and Economic Armageddon of the U.S.
"Mr. Bernanke, an academic who has never worked a single day in his life. He will take anything off a cliff: a business, a McDonald's stand, the Federal Reserve. And I have to say I have a certain sympathy for him as a character. He's ok, but completely useless. I would not even hire him as my butler...Mr Bernanke is a madman, a destroyer of the value of money. And he is a wealth destroyer and an economic criminal. It is the duty of a central bank to keep the value of money. I believe today for ninety percent of Americans life is harder than it was in 1999. Basically I think they are a bunch of crooks." Marc Faber on King World News
"The Future will be a total disaster with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society."
I heard him say this on numerous occasions. He resides in Thailand.
http://video.aol.co.uk/video-detail/marc-faber-nwo-series-economic-armageddon-in-the-us/2053056119
"The Future will be a total disaster with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society."
I heard him say this on numerous occasions. He resides in Thailand.
http://video.aol.co.uk/video-detail/marc-faber-nwo-series-economic-armageddon-in-the-us/2053056119
Sunday, December 20, 2009
Not Easy to Write about Other Countries
Mish Shedlock who maintains his highly popular blog has a post-up on China. Here is a link: http://globaleconomicanalysis.blogspot.com/2009/12/china-faces-crash-scenario.html
I’ve enjoyed his writing and take on the economy. I’ve found his analysis on the American economy quite astute. Yet, his piece on China was somewhat disappointing in not seeing the whole picture in its historical/political/developmental contexts. I’ve expressed my views on the Chinese economy and their moves on several occasions. Mish’s analysis on China seems to prove again how hard it is to write about other countries without understanding their culture, language, history, system, people, etc, while he says “I have been meaning to write about China for a long time. Finally got it done.” I often feel the same way with Michael Pettis’ posts on the Chinese economy.
This is one of the reasons why I’ve been writing about innovation strategies and trajectories in Korea, as mentioned before in this blog.
I’ve enjoyed his writing and take on the economy. I’ve found his analysis on the American economy quite astute. Yet, his piece on China was somewhat disappointing in not seeing the whole picture in its historical/political/developmental contexts. I’ve expressed my views on the Chinese economy and their moves on several occasions. Mish’s analysis on China seems to prove again how hard it is to write about other countries without understanding their culture, language, history, system, people, etc, while he says “I have been meaning to write about China for a long time. Finally got it done.” I often feel the same way with Michael Pettis’ posts on the Chinese economy.
This is one of the reasons why I’ve been writing about innovation strategies and trajectories in Korea, as mentioned before in this blog.
Thursday, December 17, 2009
Getting Hard to Buy U.S. Treasuries
From Reuters:
It is getting harder for governments to buy U.S. Treasuries because the United States' shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said on Thursday.
The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of U.S. government bonds.
Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its $2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.
China's State Administration of Foreign Exchange (SAFE) reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as Beijing seeks to diversify its investments.
In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.
http://www.reuters.com/article/idUSTRE5BG1W620091217
From Zero Hedge:
Critics of this line of thought can point out that China still has trillions in foreign exchange reserves. However, even as China has been selling mortgage backed securities almost as fast as PIMCO, it has not been buying treasuries: China's Treasury holdings have been flat at exactly $800 billion since May 2009. In the lesser of two maturity evils (the instantaneous, dollar bill, and the long-dated, the 30 Year) China has followed in the footsteps of so many millions of High Frequency Traders opting for that which can be liquidated instantaneously.
A different read of Zhu's statement is that the US should no longer rely on China for funding its bottomless deficits. And if that is the case, things are about to get much worse as the Fed has no choice but to turn the monetization machine on turbo.
http://www.zerohedge.com/article/dark-gray-swan-no-more-foreign-dollars-which-buy-us-treasuries
It is getting harder for governments to buy U.S. Treasuries because the United States' shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said on Thursday.
The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of U.S. government bonds.
Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its $2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.
China's State Administration of Foreign Exchange (SAFE) reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as Beijing seeks to diversify its investments.
In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.
http://www.reuters.com/article/idUSTRE5BG1W620091217
From Zero Hedge:
Critics of this line of thought can point out that China still has trillions in foreign exchange reserves. However, even as China has been selling mortgage backed securities almost as fast as PIMCO, it has not been buying treasuries: China's Treasury holdings have been flat at exactly $800 billion since May 2009. In the lesser of two maturity evils (the instantaneous, dollar bill, and the long-dated, the 30 Year) China has followed in the footsteps of so many millions of High Frequency Traders opting for that which can be liquidated instantaneously.
A different read of Zhu's statement is that the US should no longer rely on China for funding its bottomless deficits. And if that is the case, things are about to get much worse as the Fed has no choice but to turn the monetization machine on turbo.
http://www.zerohedge.com/article/dark-gray-swan-no-more-foreign-dollars-which-buy-us-treasuries
Time’s Man of the Year: Bernanke
Bernanke appears on the cover of Time as person of the year.
Again, I’m disheartened by the current state of affairs in the U.S. The U.S. seems to be not only financially broke but intellectually broke mainstream-wise. I studied journalism in the U.S., so I am not totally out of my depth here.
I hope that Time Magazine's announcement would be a contrary indicator.
http://jessescrossroadscafe.blogspot.com/2009/12/in-ben-we-trust.html
Again, I’m disheartened by the current state of affairs in the U.S. The U.S. seems to be not only financially broke but intellectually broke mainstream-wise. I studied journalism in the U.S., so I am not totally out of my depth here.
I hope that Time Magazine's announcement would be a contrary indicator.
http://jessescrossroadscafe.blogspot.com/2009/12/in-ben-we-trust.html
Tuesday, December 15, 2009
Propaganda, Western Style
From Jesse's Cafe:
We bring it up because this article below exposes the typical modus operandi of the Western press, now and over the past twenty years. Carry a party line until the situation explodes, cover it up and distract the public with phony debates and verbal circuses, and then back to give breaking coverage of Armageddon, with a twist of shared guilt. No one is to blame.
Can you remember the coverage of the tech bubble of 2000 by the media? Giddy excitement as the numbers climbed higher, with reassurance as they turned down that this was just a temporary setback.
And I will never forget, as the stocks collapsed and people were wiped out, the CNBC regular arrogantly saying "Well, no one FORCED them to buy those stocks."
Keep this in mind, because we are nearing that point again, with the western media reassuring its public that all is well, while the insiders sell, and the grifters and grafters are draining the nation of its wealth, while the propaganda puppets mouth the slogans of the day. And after it blows up, they will shift gears without an afterthought, keeping the public mind moving on, trusting to the collective amnesia of a distracted populace.
As they said on Bloomberg this morning regarding the crisis just passed, 'We are all to blame; the regulators, the government, the rating agencies, the banks, and the public who was apathetic, who failed to act."
And then they moved on to let us know that Ashley Dupre will be providing a weekly advice column in the NY Post. Romance with a financial twist?
The difference here, at least it seems to me, is that the American public is still a believer in what the government says. The Russian people, at least by that time, did not. So perhaps there are a few more good years left.
The Nation
The Journal's Russia Scandal
By Matt Taibbi & Mark Ames
October 4, 1999
Just before Christmas in 1997, as a tumultuous stock-marketcrisis ravaged emerging markets in every corner of the globe, readers of theWall Street Journal were treated to some good news: Russia was going to emergefrom the mess unscathed. While conceding that "few debt markets outsideSoutheast Asia were hit harder by recent financial turmoil than Russia's," theJournal's Moscow bureau chief, Steve Liesman, added quickly that "many analystsbelieve an equally strong rebound may be in the offing." Moreover, Liesmanwrote, investors were rapidly coming to the realization that "Russia's problemsare far different and, for the moment, less dire than those that underminedAsian economies." The December 16 piece was headlined, "Russian Debt Markets Duefor Rebound."
A few weeks later, Liesman and the Journal used evenstronger language to trumpet Russia's economic merits. They chided investors who were too busy "fretting over Asia's financial crisis" to notice what they called"one of the decade's major economic events: the end of Russia's seven-yearrecession."
The Journal's prediction was more than a little precipitate.
Instead of getting better, things in Russia got worse. A lot worse. Nine monthsafter Liesman declared that Russia's debt market was due for a rebound, and just over seven months after proclaiming the end of the Russian recession, theJournal--like most US newspapers--found itself having to explain the near-totalcollapse of Russia's economy and capital markets...
Read the rest here: The Journal's Russia Scandal - Matt Taibbi, The Nation 1999
http://jessescrossroadscafe.blogspot.com/2009/12/propaganda-western-style.html
We bring it up because this article below exposes the typical modus operandi of the Western press, now and over the past twenty years. Carry a party line until the situation explodes, cover it up and distract the public with phony debates and verbal circuses, and then back to give breaking coverage of Armageddon, with a twist of shared guilt. No one is to blame.
Can you remember the coverage of the tech bubble of 2000 by the media? Giddy excitement as the numbers climbed higher, with reassurance as they turned down that this was just a temporary setback.
And I will never forget, as the stocks collapsed and people were wiped out, the CNBC regular arrogantly saying "Well, no one FORCED them to buy those stocks."
Keep this in mind, because we are nearing that point again, with the western media reassuring its public that all is well, while the insiders sell, and the grifters and grafters are draining the nation of its wealth, while the propaganda puppets mouth the slogans of the day. And after it blows up, they will shift gears without an afterthought, keeping the public mind moving on, trusting to the collective amnesia of a distracted populace.
As they said on Bloomberg this morning regarding the crisis just passed, 'We are all to blame; the regulators, the government, the rating agencies, the banks, and the public who was apathetic, who failed to act."
And then they moved on to let us know that Ashley Dupre will be providing a weekly advice column in the NY Post. Romance with a financial twist?
The difference here, at least it seems to me, is that the American public is still a believer in what the government says. The Russian people, at least by that time, did not. So perhaps there are a few more good years left.
The Nation
The Journal's Russia Scandal
By Matt Taibbi & Mark Ames
October 4, 1999
Just before Christmas in 1997, as a tumultuous stock-marketcrisis ravaged emerging markets in every corner of the globe, readers of theWall Street Journal were treated to some good news: Russia was going to emergefrom the mess unscathed. While conceding that "few debt markets outsideSoutheast Asia were hit harder by recent financial turmoil than Russia's," theJournal's Moscow bureau chief, Steve Liesman, added quickly that "many analystsbelieve an equally strong rebound may be in the offing." Moreover, Liesmanwrote, investors were rapidly coming to the realization that "Russia's problemsare far different and, for the moment, less dire than those that underminedAsian economies." The December 16 piece was headlined, "Russian Debt Markets Duefor Rebound."
A few weeks later, Liesman and the Journal used evenstronger language to trumpet Russia's economic merits. They chided investors who were too busy "fretting over Asia's financial crisis" to notice what they called"one of the decade's major economic events: the end of Russia's seven-yearrecession."
The Journal's prediction was more than a little precipitate.
Instead of getting better, things in Russia got worse. A lot worse. Nine monthsafter Liesman declared that Russia's debt market was due for a rebound, and just over seven months after proclaiming the end of the Russian recession, theJournal--like most US newspapers--found itself having to explain the near-totalcollapse of Russia's economy and capital markets...
Read the rest here: The Journal's Russia Scandal - Matt Taibbi, The Nation 1999
http://jessescrossroadscafe.blogspot.com/2009/12/propaganda-western-style.html
Has Asia Made the U.S. Look Like a Third World Country? (Plus Decoupling Revisited)
An article titled “how Asia makes the U.S. look like a third world country?” briefly talks about how Asia has been good at implementing new technology and ideas although it didn’t invent it with interesting pictures of a few examples.
As always, the Westerners’ comments are interesting too.
Having lived and worked in both Korea and the U.S., plus amazing at how the U.S. is falling apart (or about to do so), I’ve felt that Americans don’t seem to have appreciated what they have (their resources, wealth, technology, political system and liberty, etc.)
Whether the Asian economy has been decoupling (or would be) from that of the U.S. is a complex issue since so many factors are involved and interwoven. Yes, Japan has screwed up big time while other Asian countries are faring O.K. Perhaps the Smart Money may believe it can exploit the better opportunity in Asia. Yet, the Chinese leading the pack seems to be fully aware of the game the Westerners have been engaged in and prepared not to be plied. Plus, are the Chinese up for the democratic progress with the expanded middle class? We shall see.
http://www.businessinsider.com/why-asia-makes-the-west-look-like-the-stone-age-2009-12#comment-4b264f9f00000000000e394e
As always, the Westerners’ comments are interesting too.
Having lived and worked in both Korea and the U.S., plus amazing at how the U.S. is falling apart (or about to do so), I’ve felt that Americans don’t seem to have appreciated what they have (their resources, wealth, technology, political system and liberty, etc.)
Whether the Asian economy has been decoupling (or would be) from that of the U.S. is a complex issue since so many factors are involved and interwoven. Yes, Japan has screwed up big time while other Asian countries are faring O.K. Perhaps the Smart Money may believe it can exploit the better opportunity in Asia. Yet, the Chinese leading the pack seems to be fully aware of the game the Westerners have been engaged in and prepared not to be plied. Plus, are the Chinese up for the democratic progress with the expanded middle class? We shall see.
http://www.businessinsider.com/why-asia-makes-the-west-look-like-the-stone-age-2009-12#comment-4b264f9f00000000000e394e
Monday, December 14, 2009
China Builds Underground “Great Wall” to Hide Nukes
I’ve said all along that this crisis is not just an economic one.
Americans don’t seem to realize (or only a few realize) that it is a free market that drives military innovation, not vice versa, thus they may have to live with consequences.
From FTO:
The Chinese Army is one of the strongest and biggest in the world and they recently finished their underground "Great Wall of China". The underground tunnel is around 5500km long and starts in Northern China in the Hebei region.
http://fto.co.za/news/china-builds-5500km-underground-tunnel-hide-nukes-2009121416025.html
Americans don’t seem to realize (or only a few realize) that it is a free market that drives military innovation, not vice versa, thus they may have to live with consequences.
From FTO:
The Chinese Army is one of the strongest and biggest in the world and they recently finished their underground "Great Wall of China". The underground tunnel is around 5500km long and starts in Northern China in the Hebei region.
http://fto.co.za/news/china-builds-5500km-underground-tunnel-hide-nukes-2009121416025.html
Sunday, December 13, 2009
"The people asked him, “What should we do?”
He replied, “If you have two shirts, give one to the poor. If you have food, share with those who are hungry.”
Even public officials came to be forgiven and asked, “Teacher, what should we do?”
He replied, “Collect no more than the law requires, do not engage in graft and corruption.'
And What should we do?” asked some soldiers.
John replied, “Do not extort money or make false accusations. Be content with your just wages.”
Luke 3:10-14
He replied, “If you have two shirts, give one to the poor. If you have food, share with those who are hungry.”
Even public officials came to be forgiven and asked, “Teacher, what should we do?”
He replied, “Collect no more than the law requires, do not engage in graft and corruption.'
And What should we do?” asked some soldiers.
John replied, “Do not extort money or make false accusations. Be content with your just wages.”
Luke 3:10-14
Friday, December 11, 2009
IMF Provides Funds for Dubious Green Investments
Another bubble forming? What was the role of the IMF to begin with?
From Bloomberg:
Billionaire George Soros asked the richest nations to use $100 billion of foreign-exchange reserves to finance emissions-reducing projects in poor countries.
The reserves, from the International Monetary Fund, would go into a green fund to “jump start” investments in rain forests, agriculture and land use that would lower carbon- dioxide emissions, the financier said today at climate negotiations involving more than 190 nations in Copenhagen.
http://www.bloomberg.com/apps/news?pid=20601170&sid=azLkakf3nQu0
From Bloomberg:
Billionaire George Soros asked the richest nations to use $100 billion of foreign-exchange reserves to finance emissions-reducing projects in poor countries.
The reserves, from the International Monetary Fund, would go into a green fund to “jump start” investments in rain forests, agriculture and land use that would lower carbon- dioxide emissions, the financier said today at climate negotiations involving more than 190 nations in Copenhagen.
http://www.bloomberg.com/apps/news?pid=20601170&sid=azLkakf3nQu0
Foreign Official Questions Sovereign Debt Default by the U.S.
It’s not just people in the U.S. blogosphere who are concerned about sovereign debt default by the U.S. A Minister of the Australian Parliament has questioned whether the U.S. will default on its debt.
From the Age:
Senior government figures have taken aim at Barnaby Joyce's dire warning about a global financial meltdown if the United States government defaults on its debt. Mr Joyce also came under fire for comments about the financial health of Australian states.
Senator Joyce is concerned that demand for Australia's resources would ''go through the floor'' if the US was not able to pay off its burgeoning foreign debt.
Senator Joyce told Fairfax Media he did not mean to alarm the public but there needed to be a debate about Australia's ''contingency plan'' for a sovereign debt default by the US or even by a local state government.
''How would Australia go forward in a position where the dynamics of the global economy are all changed,'' he said on ABC Radio today.
http://www.theage.com.au/business/joyce-blasted-for-extremist-views-on-debt-20091211-kn3d.html
From the Age:
Senior government figures have taken aim at Barnaby Joyce's dire warning about a global financial meltdown if the United States government defaults on its debt. Mr Joyce also came under fire for comments about the financial health of Australian states.
Senator Joyce is concerned that demand for Australia's resources would ''go through the floor'' if the US was not able to pay off its burgeoning foreign debt.
Senator Joyce told Fairfax Media he did not mean to alarm the public but there needed to be a debate about Australia's ''contingency plan'' for a sovereign debt default by the US or even by a local state government.
''How would Australia go forward in a position where the dynamics of the global economy are all changed,'' he said on ABC Radio today.
http://www.theage.com.au/business/joyce-blasted-for-extremist-views-on-debt-20091211-kn3d.html
Thursday, December 10, 2009
Thoughts on Writing Posts on the Blog
I started writing on the blog mainly because I wanted to put up some of my drafts I’ve been working on to get some inputs from people around the globe. Then the global financial crisis has gotten worse since the Lehman collapse, so I started writing a blog post on the current matters as they evolve. Of course, the ongoing affairs are closely interrelated with the books I’ve been working on.
I’m careful when I put up my comment on the U.S.’s sites and blogs regarding innovation and economics because despite my good intention (I spent a good portion of my life in the U.S., so I do understand its system and culture, but still), being a non-American I may come across rather condescending and offensive. It would be like how I feel when I see someone other than a Korean criticize the Korean policies and corporate strategies and practices from their perspective. The same holds true for a Korean who write stuff on Korea, but his view is rather Western-centric (frequently U.S.-funded). It’s our history, our policy, our predicament, and our mistake.
Now I’m posting my analysis and thoughts on the innovation strategies of Korea, their relation to economic/social/political progress, comparison to other countries mainly in the hope that next generations (especially leaders) would learn from our experiences and would not commit the same moral corruption. I’ll continue to write about various current issues as the global economy is unfolding since they’re relevant to all of us.
I am afraid that the path the U.S., Japan and some other countries are taking is in the wrong direction. Many predicaments the U.S. faces are not limited to the U.S. We are in this debacle together.(A lot of countries out there and a lot of trouble brewing.) The Dubai incident is just one of them. If the U.S goes down, many other countries could go down with it (e.g., many countries are in a dollar trap). We may be witnessing historical shifts in the global economy. We seem to live in remarkable times.
We all know that the global economic crisis is far from being over and it’s not just the economic one. I know that despite all our earnest efforts, we may not be able to change the current course of affairs, but I feel we still have to do what we can.
I’m careful when I put up my comment on the U.S.’s sites and blogs regarding innovation and economics because despite my good intention (I spent a good portion of my life in the U.S., so I do understand its system and culture, but still), being a non-American I may come across rather condescending and offensive. It would be like how I feel when I see someone other than a Korean criticize the Korean policies and corporate strategies and practices from their perspective. The same holds true for a Korean who write stuff on Korea, but his view is rather Western-centric (frequently U.S.-funded). It’s our history, our policy, our predicament, and our mistake.
Now I’m posting my analysis and thoughts on the innovation strategies of Korea, their relation to economic/social/political progress, comparison to other countries mainly in the hope that next generations (especially leaders) would learn from our experiences and would not commit the same moral corruption. I’ll continue to write about various current issues as the global economy is unfolding since they’re relevant to all of us.
I am afraid that the path the U.S., Japan and some other countries are taking is in the wrong direction. Many predicaments the U.S. faces are not limited to the U.S. We are in this debacle together.(A lot of countries out there and a lot of trouble brewing.) The Dubai incident is just one of them. If the U.S goes down, many other countries could go down with it (e.g., many countries are in a dollar trap). We may be witnessing historical shifts in the global economy. We seem to live in remarkable times.
We all know that the global economic crisis is far from being over and it’s not just the economic one. I know that despite all our earnest efforts, we may not be able to change the current course of affairs, but I feel we still have to do what we can.
Wednesday, December 9, 2009
Knowing but Not Acting Upon vs. Not Knowing until Cardiac Arrest
Some bloggers and people who follow the real news in the U.S. know that the U.S. economy is in such bad shape (e.g., huge debt overhangs, market manipulation, entitlement liabilities, derivative liabilities, states’ economies collapsing, and so on). They seem to realize how the U.S. has got here (e.g., bad policies, greedy, and stupidity). And yet, the bottom line is: they keep ranting on, but don’t seem to act upon the causes of the problem.
In the meanwhile, many in Asia don’t seem to look at their countries’ books until cardiac arrest.
Which is worse?
In the meanwhile, many in Asia don’t seem to look at their countries’ books until cardiac arrest.
Which is worse?
Tuesday, December 8, 2009
Meredith Whitney’s Latest Calls
I respect her macro calls by and large. She has been bearish on the fundamentals like consumer credit collapsing and lack of industrial growth.
The video of Whiney is below:
http://video.msn.com/video.aspx?mkt=en-us&brand=money&vid=d3a2502e-3e9a-45f1-97dc-3c7321dff45d
The video of Whiney is below:
http://video.msn.com/video.aspx?mkt=en-us&brand=money&vid=d3a2502e-3e9a-45f1-97dc-3c7321dff45d
Monday, December 7, 2009
Korea Bolstering Its Supplier Infrastructure
I’ve pointed out on several occasions that Korea has a weak supplier infrastructure even if it has become a high tech powerhouse.
Samsung and Hynix, the two top contenders in the memory sector, have agreed to use the semiconductor equipments developed by the Korean SMEs. They have imported five times more equipment from overseas. In the meantime, the Korean government is providing R&D funding for the equipments and promise to buy their products if SMEs meet the performance requirements.
Good seems to come out of the economic crisis.
Samsung and Hynix, the two top contenders in the memory sector, have agreed to use the semiconductor equipments developed by the Korean SMEs. They have imported five times more equipment from overseas. In the meantime, the Korean government is providing R&D funding for the equipments and promise to buy their products if SMEs meet the performance requirements.
Good seems to come out of the economic crisis.
Sunday, December 6, 2009
A Decoupling from Reality
Experts in the Western financial sectors lament “a growing gap between what we read in the papers and what really happens in the global economy.” In the case of Korea, GDP is up and consumer spending has increased. Yet, there is a growing concern over declining household income and expanding household debt. There is growth in Korea, but while some are making more money, there are even more people who don’t, which is the case for the U.S. as well. This gap appears to be widening, as Dr. Warren at Harvard and Dr. Reich at Berkeley contend. In the U.S. case, the worst financial crisis becomes the best year in bonuses and compensation on Wall Street.
Yes, there seems to be a decoupling from reality around the globe, and again, we are long the real economy.
Yes, there seems to be a decoupling from reality around the globe, and again, we are long the real economy.
Friday, December 4, 2009
Japan to Pursue QE Again to Fight Deflation
Japan is reportedly set to launch quantitative easing again.
How can the Bank of Japan be ignorant of the effect that the two decades of poor decision has had on Japan’s economy? Japan poured 1.4 quadrillion yen, or 3 years worth of Japan’s GDP for the last 17 years, but it is still mired in deflation. Despite Japan’s failure, the U.S. is following the Japan’s path. We sure seem to live in interesting times.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIJs51f_KJ0U&pos=2
How can the Bank of Japan be ignorant of the effect that the two decades of poor decision has had on Japan’s economy? Japan poured 1.4 quadrillion yen, or 3 years worth of Japan’s GDP for the last 17 years, but it is still mired in deflation. Despite Japan’s failure, the U.S. is following the Japan’s path. We sure seem to live in interesting times.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIJs51f_KJ0U&pos=2
Senator Bunning Says to Bernanke “You Are the Definition of a Moral Hazard”
Bernanke used to be a professor at Princeton. Obviously, he is a well-educated and intelligent person. And yet, how to use that education and intelligence for the common good seems to be an entirely different matter. I’m curious as to what he tells his children and grandchildren about his life: he’ll tell them “I just take care of myself and my family as we all should do”?
http://www.msnbc.msn.com/id/21134540/vp/34258918#34258918
A Partial Transcript:
Alan Greenspan refused to look for bubbles or to do anything other than create them. Likewise it is clear from your statements over the last four years that you failed to spot the housing bubble despite many warnings.
Under your watch every one of the major banks failed or would have failed had you not bailed them out.
After taking over the Fed you did not seen any need for more substantial regulation of derivatives until it was clear that they were headed into the financial meltdown thanks in part to those products.
The Greenspan policy on transparency was to talk a lot, use plenty of numbers, but say nothing. You promised congress more transparency when you came to the job. You promised more transparency when you came begging for TARP. To be fair you have published more information than before but those efforts are inadequate and you still refuse to provide details on the Fed's bailout last year on all the toxic waste you have bought.
Chairman Greenspan sold the Fed's independence to Wall Street on the so called "Greenspan PUT". Whenever Wall Street needed a boost, Alan was there. But you went even farther than that when you bowed to the political pressure of the Bush and Obama Administrations, and turned the Fed into an arm of the Treasury.
Under your watch the "Bernanke PUT" became a bailout for all large financial institutions, including many foreign banks.
And you put the printing presses into overdrive to fund the government's spending and hand out cheap money to your masters on Wall Street.
In short, you are the definition of a moral hazard.
You are repeating the same mistakes as Japan in the 1990's on a much larger scale while sowing the seeds for the next bubble.
The AIG bailout alone is reason enough to send you back to Princeton.
I will do everything I can to stop your nomination and drag out this process as long as I can. We must put an end to your and the Fed's failure and there is no better time than now.
Your Fed has become the creature from Jekyll Island.
http://www.msnbc.msn.com/id/21134540/vp/34258918#34258918
A Partial Transcript:
Alan Greenspan refused to look for bubbles or to do anything other than create them. Likewise it is clear from your statements over the last four years that you failed to spot the housing bubble despite many warnings.
Under your watch every one of the major banks failed or would have failed had you not bailed them out.
After taking over the Fed you did not seen any need for more substantial regulation of derivatives until it was clear that they were headed into the financial meltdown thanks in part to those products.
The Greenspan policy on transparency was to talk a lot, use plenty of numbers, but say nothing. You promised congress more transparency when you came to the job. You promised more transparency when you came begging for TARP. To be fair you have published more information than before but those efforts are inadequate and you still refuse to provide details on the Fed's bailout last year on all the toxic waste you have bought.
Chairman Greenspan sold the Fed's independence to Wall Street on the so called "Greenspan PUT". Whenever Wall Street needed a boost, Alan was there. But you went even farther than that when you bowed to the political pressure of the Bush and Obama Administrations, and turned the Fed into an arm of the Treasury.
Under your watch the "Bernanke PUT" became a bailout for all large financial institutions, including many foreign banks.
And you put the printing presses into overdrive to fund the government's spending and hand out cheap money to your masters on Wall Street.
In short, you are the definition of a moral hazard.
You are repeating the same mistakes as Japan in the 1990's on a much larger scale while sowing the seeds for the next bubble.
The AIG bailout alone is reason enough to send you back to Princeton.
I will do everything I can to stop your nomination and drag out this process as long as I can. We must put an end to your and the Fed's failure and there is no better time than now.
Your Fed has become the creature from Jekyll Island.
Thursday, December 3, 2009
Why Has North Korea Engaged in the So-Called Economic Reform?
From Time:
North Korean leader Kim Jong Il and his cohorts labeled this week's sudden change in the country's currency, which has left chaos in its wake, economic "reform." On Monday the North Korean regime decided to lop off two zeroes from the existing paper currency, the won, and gave North Koreans less than a week to exchange all their old notes for new ones.
In many countries, economic reform can be a good thing. Even draconian changes to paper currency can help governments draw a line between "bad economic policies of the past, often after taming a hyperinflation," says Marcus Noland, an economist at Washington's Peterson Institute of International Economics. However, this being North Korea, one of the most repressive and impoverished nations in the world, that's not the case. The government announced that it would limit the amount an individual can exchange to just 100,000 won — or less than $40 at black-market exchange rates — and any amount above that threshold would be, in effect, worthless. NGOs in Seoul reported that in response to citizens' immediate and widespread anger, those limits were raised to 150,000 won in cash and 500,000 won in bank notes.
So why would Pyongyang make such a change? As usual, parsing the reasons the North Korean government does anything is murky business. But Pyongyang watchers in Seoul believe the crackdown comes for two main reasons. First, there has been a widening gap between the haves and the have-nots in North Korea, partly due to the prevalence of relatively free markets, says Cheong Seong-chang, senior fellow at the Sejong Institute, a think tank in Seoul. Since 2000, the bigger traders in North Korea have come to live a life "almost as lavish as South Koreans," says Cheong. "They have big refrigerators, color televisions, DVD players." In a socialist utopia like North Korea, such economic divides are unacceptable; the currency change would reduce inequality by making a broad swath of the North Korean population poorer.
The second reason for the crackdown — as ever with Pyongyang — is control. The government allowed black markets to proliferate this decade out of desperation, but they had grown to the point where the leadership may have begun to feel threatened. Small traders and black markets existed outside of government control, and by definition at some point the regime was not going to tolerate that, analysts say. "The breakaway, snowballing market is a threat to the regime," says Lim Kang-taeg, senior research fellow at the Korean Institute for National Unification, a government-sponsored think tank in Seoul. "This is a significant blow leveled at the market, and will help the government tighten up control."
Tighten up control — once again at the expense of the poor, benighted North Koreans citizens.
http://www.time.com/time/world/article/0,8599,1945251,00.html
From Al Jazeera:
According to South Korea's Yonhap news agency, the surprise announcement sent many North Koreans rushing to the black market to convert hoarded bills into US dollars and Chinese yuan.
Shops, restaurants and other businesses have closed while the switch is taking place.
Groups in South Korea with contacts in the North say the move has hit private market traders with large hoards of the old currency particularly hard.
In one case guards blocked the entrance to a bank in the city of Hoeryong after a stampede of people trying to offload old banknotes, the Seoul-based Network for North Korean Democracy and Human Rights said, citing unidentified sources.
Analysts have said the surprise switch appears to be part of a government crackdown on private markets, which have become an essential part of the food-supply system in aid-dependent North Korea.
The markets, which have gradually emerged across North Korea in recent years, have become a profitable business for some traders.
But their growth outside of government controls is believed to have unnerved authorities.
Faced with mounting food shortages, rigidly-controlled North Korea began allowing some private markets including farmers' markets to begin trading in 2002.
The markets have encouraged trade and boosted the supply of food, but they also become a source for banned goods such as films and soap operas from South Korea, which the government sees as a threat to its rule, analysts say.
http://english.aljazeera.net/news/asia-pacific/2009/12/200912371139615612.html
Fom YTN:
북한의 화폐 개혁은 2002년 '경제 관리 개선 조치' 이후 경제 자유화 흐름과 함께 개인적인 부를 쌓고 국가적 통제를 벗어나려는 중산층의 태동 움직임을 막으려는 북한 신보수주의 조치라고 북한 문제 전문가가 분석했습니다.
옛 동독 출신으로 김일성 종합대학에서 공부한 오스트리아 빈 대학의 루디거 프랭크 교수는 미국 안보 전문 연구 기관 노틸러스 연구소 홈페이지에 올린 보고서에서 이같이 분석했습니다.
프랭크 교수는 사적 경제 영역에서 활동하며 시장 경제적 요소를 주도하는 중산층을 겨냥한 이번 화폐 개혁이 단기적으로 국가가 주도하는 계획 경제를 복원하는 데 기여하겠지만, 장기적으로는 북한 체제 정통성을 잃게 하는 정치적 위험 요소를 동반하고 있다고 지적했습니다.
North Korean leader Kim Jong Il and his cohorts labeled this week's sudden change in the country's currency, which has left chaos in its wake, economic "reform." On Monday the North Korean regime decided to lop off two zeroes from the existing paper currency, the won, and gave North Koreans less than a week to exchange all their old notes for new ones.
In many countries, economic reform can be a good thing. Even draconian changes to paper currency can help governments draw a line between "bad economic policies of the past, often after taming a hyperinflation," says Marcus Noland, an economist at Washington's Peterson Institute of International Economics. However, this being North Korea, one of the most repressive and impoverished nations in the world, that's not the case. The government announced that it would limit the amount an individual can exchange to just 100,000 won — or less than $40 at black-market exchange rates — and any amount above that threshold would be, in effect, worthless. NGOs in Seoul reported that in response to citizens' immediate and widespread anger, those limits were raised to 150,000 won in cash and 500,000 won in bank notes.
So why would Pyongyang make such a change? As usual, parsing the reasons the North Korean government does anything is murky business. But Pyongyang watchers in Seoul believe the crackdown comes for two main reasons. First, there has been a widening gap between the haves and the have-nots in North Korea, partly due to the prevalence of relatively free markets, says Cheong Seong-chang, senior fellow at the Sejong Institute, a think tank in Seoul. Since 2000, the bigger traders in North Korea have come to live a life "almost as lavish as South Koreans," says Cheong. "They have big refrigerators, color televisions, DVD players." In a socialist utopia like North Korea, such economic divides are unacceptable; the currency change would reduce inequality by making a broad swath of the North Korean population poorer.
The second reason for the crackdown — as ever with Pyongyang — is control. The government allowed black markets to proliferate this decade out of desperation, but they had grown to the point where the leadership may have begun to feel threatened. Small traders and black markets existed outside of government control, and by definition at some point the regime was not going to tolerate that, analysts say. "The breakaway, snowballing market is a threat to the regime," says Lim Kang-taeg, senior research fellow at the Korean Institute for National Unification, a government-sponsored think tank in Seoul. "This is a significant blow leveled at the market, and will help the government tighten up control."
Tighten up control — once again at the expense of the poor, benighted North Koreans citizens.
http://www.time.com/time/world/article/0,8599,1945251,00.html
From Al Jazeera:
According to South Korea's Yonhap news agency, the surprise announcement sent many North Koreans rushing to the black market to convert hoarded bills into US dollars and Chinese yuan.
Shops, restaurants and other businesses have closed while the switch is taking place.
Groups in South Korea with contacts in the North say the move has hit private market traders with large hoards of the old currency particularly hard.
In one case guards blocked the entrance to a bank in the city of Hoeryong after a stampede of people trying to offload old banknotes, the Seoul-based Network for North Korean Democracy and Human Rights said, citing unidentified sources.
Analysts have said the surprise switch appears to be part of a government crackdown on private markets, which have become an essential part of the food-supply system in aid-dependent North Korea.
The markets, which have gradually emerged across North Korea in recent years, have become a profitable business for some traders.
But their growth outside of government controls is believed to have unnerved authorities.
Faced with mounting food shortages, rigidly-controlled North Korea began allowing some private markets including farmers' markets to begin trading in 2002.
The markets have encouraged trade and boosted the supply of food, but they also become a source for banned goods such as films and soap operas from South Korea, which the government sees as a threat to its rule, analysts say.
http://english.aljazeera.net/news/asia-pacific/2009/12/200912371139615612.html
Fom YTN:
북한의 화폐 개혁은 2002년 '경제 관리 개선 조치' 이후 경제 자유화 흐름과 함께 개인적인 부를 쌓고 국가적 통제를 벗어나려는 중산층의 태동 움직임을 막으려는 북한 신보수주의 조치라고 북한 문제 전문가가 분석했습니다.
옛 동독 출신으로 김일성 종합대학에서 공부한 오스트리아 빈 대학의 루디거 프랭크 교수는 미국 안보 전문 연구 기관 노틸러스 연구소 홈페이지에 올린 보고서에서 이같이 분석했습니다.
프랭크 교수는 사적 경제 영역에서 활동하며 시장 경제적 요소를 주도하는 중산층을 겨냥한 이번 화폐 개혁이 단기적으로 국가가 주도하는 계획 경제를 복원하는 데 기여하겠지만, 장기적으로는 북한 체제 정통성을 잃게 하는 정치적 위험 요소를 동반하고 있다고 지적했습니다.
Chinese Official Criticize Western IBs for Derivatives
At least Chinese officials seem to be fully aware of the derivative nightmare engineered by Western financial entities and criticize it.
From the Financial Times:
A senior Chinese official who oversees the country’s largest state-owned enterprises has publicly slammed western investment banks for “maliciously” peddling complicated derivative products that caused huge losses for Chinese companies over the last year.
In Beijing’s strongest criticism on the matter to date, Li Wei, vice director of the State-owned Assets Supervision and Administration Commission, singled out Goldman Sachs, Morgan Stanley, Merrill Lynch and Citigroup in a long and highly critical article in the latest issue of an official Communist party newspaper.
The large losses suffered by Chinese state companies were “closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions,” Mr Li asserted. “To a certain extent some international investment banks were the chief criminals and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo.”
http://www.ft.com/cms/s/0/9d3ce434-e029-11de-8494-00144feab49a.html
From the Financial Times:
A senior Chinese official who oversees the country’s largest state-owned enterprises has publicly slammed western investment banks for “maliciously” peddling complicated derivative products that caused huge losses for Chinese companies over the last year.
In Beijing’s strongest criticism on the matter to date, Li Wei, vice director of the State-owned Assets Supervision and Administration Commission, singled out Goldman Sachs, Morgan Stanley, Merrill Lynch and Citigroup in a long and highly critical article in the latest issue of an official Communist party newspaper.
The large losses suffered by Chinese state companies were “closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions,” Mr Li asserted. “To a certain extent some international investment banks were the chief criminals and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo.”
http://www.ft.com/cms/s/0/9d3ce434-e029-11de-8494-00144feab49a.html
Wednesday, December 2, 2009
America without a Strong Middle Class?
I had a post-up about Elizabeth Warren’s views on the demise of the American middle class before. She is voicing her opinion again in her article in the Huffington post. She has written several books on this issue. She is a professor of Law at Harvard and is currently the chair of the congressional oversight panel created to oversee the banking bailouts.
From the Huffington Post:
Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.
America without a strong middle class? Unthinkable, but the once-solid foundation is shaking.
www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html
In the meantime, Robert Reich, a professor at the U.C.-Berkeley and former Secretary of Labor, echoes Warren’s view, confirming the destruction of middle-class jobs:
From the Huffington Post:
The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.
Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.
This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they've lost higher-paying jobs and are now in a new ones that pays less.
Yet reducing unemployment by cutting wages merely exchanges one problem for another. We'll get jobs back but have more people working for pay they consider inadequate, more working families at or near poverty, and widening inequality. The nation will also have a harder time restarting the economy because so many more Americans lack the money they need to buy all the goods and services the economy can produce.
www.huffingtonpost.com/robert-reich/the-economic-reality-that_b_377167.html
From the Huffington Post:
Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.
America without a strong middle class? Unthinkable, but the once-solid foundation is shaking.
www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html
In the meantime, Robert Reich, a professor at the U.C.-Berkeley and former Secretary of Labor, echoes Warren’s view, confirming the destruction of middle-class jobs:
From the Huffington Post:
The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.
Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.
This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they've lost higher-paying jobs and are now in a new ones that pays less.
Yet reducing unemployment by cutting wages merely exchanges one problem for another. We'll get jobs back but have more people working for pay they consider inadequate, more working families at or near poverty, and widening inequality. The nation will also have a harder time restarting the economy because so many more Americans lack the money they need to buy all the goods and services the economy can produce.
www.huffingtonpost.com/robert-reich/the-economic-reality-that_b_377167.html
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