30 Statistics That Prove The Elite Are Getting Richer, The Poor Are Getting Poorer And The Middle Class Is Being Destroyed
by ilene - August 31st, 2010 3:49 am
30 Statistics That Prove The Elite Are Getting Richer, The Poor Are Getting Poorer And The Middle Class Is Being Destroyed
Courtesy of Michael Snyder at Economic Collapse
Not everyone has been doing badly during the economic turmoil of the last few years. In fact, there are some Americans that are doing really, really well. While the vast majority of us struggle, there is one small segment of society that is seemingly doing better than ever. This was reflected in a recent article on CNBC in which it was noted that companies that cater to average Americans are doing rather poorly right now while companies that market luxury goods and services are generally performing exceptionally well. So why aren’t all American consumers jumping on the spending bandwagon?
Well, it seems that there are a large number of Americans who either can’t spend a lot of money right now or who are very hesitant to. A stunningly high number of Americans are still unemployed, and for many other Americans, there is a very real fear that hard economic times will return soon. On the other hand, there is a significant percentage of Americans who are blowing money on luxury goods and services as if the economy has fully turned around and it is time to let the good times roll. So exactly what in the world is going on here?
Well, in 2010 life is very, very different depending on whether you are a "have" or a "have not". The recent article on CNBC referenced above described it this way….
Consumer spending in the U.S. has turned into a tale of two cities in 2010, with an entire segment of consumers splurging confidently on the finer things in life, while another segment, concerned about unemployment and with little or no discretionary income, spends only on bare necessities.…
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DiggThe Housing Holocaust
by ilene - August 26th, 2010 1:42 pm
The Housing Holocaust
Courtesy of MIKE WHITNEY, writing at CounterPunch
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Don’t look now, but someone just pushed the housing market off a cliff. The National Association of Realtors announced on Tuesday that the sales of existing homes fell a staggering 27.2 per cent to a seasonally adjusted rate of 3.83 million units. This is the lowest number of sales since 1995. The reaction on Wall Street has been swift. Shares plunged in a wild sell-off that pushed stocks down more than 100 points in a matter of minutes. US Treasuries rallied on the news, sending bond yields lower as jittery investors sought safety from the ongoing avalanche of dismal economic data. The 10-year slid to 2.49 per cent while the 2 year note dipped to 0.46 per cent. Bond yields are a gauge of investor pessimism. At present, confidence in the management of the economy is at a nadir.
Analysts expected that housing sales would suffer after the Obama administration’s First-time Home-buyer credit expired in April, (deals had to close by the June 30 deadline) but they hadn’t expected a real estate holocaust ending in sales that are a paltry 25 per cent of their peak in 2005. The shocking drop in sales has added 2.5 months to the massive stockpile of unsold homes that is presently clogging the system and threatens to send prices into freefall. The pace of existing home sales is now slower than any time on record.
This latest housing smackdown will put more pressure on homeowners who are already in arrears or trying to decide whether its in their interest to make payments on a $300,000 mortgage for a house that is currently worth only $150,000. Expect foreclosures to rise sharply. 24 per cent of all mortgages already have negative equity. That’s 11.2 million loans. According to housing expert Charles Hugh Smith:
"Since there are about 47 million outstanding mortgages, and 24 million homes owned free and clear (no mortgage), then we can calculate that free-and-clear owners hold about a third of the $16.5 trillion in home equity — roughly $5.3 trillion. That leaves about $1.2 trillion in equity spread amongst the 47 million homes with mortgages…..
“Never before have American homeowners with mortgages held such a thin slice of equity, and never before have so many homeowners been at risk of negative equity. Predicting accurately how many homeowners end up underwater is…
Are Bank Stocks Such a Good Buy?
by ilene - August 18th, 2010 11:37 pm
Are Bank Stocks Such a Good Buy?
Courtesy of Yves Smith at Naked Capitalistm
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A fund manager who will go unnamed mentioned to me that he is putting clients into bank stocks because they are trading at or below book value.
Now of course, individual stocks can and do always outperform the outlook for their sector, so there are no doubt particular banks whose stocks are cheap right now. But there are good reasons to question the notion that banks in general, and money center banks in particular, are a bargain.
First and perhaps most fundamental is the notion that bank equity is a readily-measured number, and that book value is therefore a useful metric. In general, even in companies in make-and-sell businesses, balance sheet items are subject to artful reporting. Notice, for instance, how every four or five years most big public companies take a writeoff that they classify as extraordinary, and equity shills dutifully exclude it from their calculation. In most cases, the writeoff is an admission that past earnings were overstated, but seldom is anyone bothered by what this says about the integrity of that company’s accounting or the acumen of its management.
Bank earnings, even under the best circumstances, involve a great deal of artwork, and most of all in the very big banks with large dealer operations. As Steve Waldman pointed out,
Bank capital cannot be measured. Think about that until you really get it. “Large complex financial institutions” report leverage ratios and “tier one” capital and all kinds of aromatic stuff. But those numbers are meaningless. For any large complex financial institution levered at the House-proposed limit of 15×, a reasonable confidence interval surrounding its estimate of bank capital would be greater than 100% of the reported value. In English, we cannot distinguish “well capitalized” from insolvent banks, even in good times, and regardless of their formal statements.
Lehman is a case-in-point. On September 10, 2008, Lehman reported 11% “tier one” capital and very
…
The Bernanke Cycle
by ilene - August 17th, 2010 8:45 pm
The Bernanke Cycle
Courtesy of Joshua M Brown, The Reformed Broker
“Eighty-one percent of the jobs lost in America were from small business,”
-Senator Mary L. Landrieu, (D) Louisiana and chairwoman of the small-business committee
One of my pet topics here is the utter neglect of small businesses, which have been completely ignored during the race to stimulate and reflate The Systemic Six banks. In a press release from something called Industry Source Network, this systemic neglect is given a name - The Bernanke Cycle…
The Bernanke Cycle works as follows:
1. Small business gets battered by the economy. The business is still profitable but less so than before.
2. The business sees its lending facility pared back or eliminated by their bank.
3. Small business cuts jobs, moves to a smaller building or stops future equipment orders so that their expenses reflect the reality of their new lower revenues.
4. These cuts also negatively impact other small businesses associated with the small business’ supply chain which gives the cycle a multiplier effect.
5. Small business owner takes their austerity program to their lender in hopes of restoring some of their lost borrowing capabilities. The lender looks at the lower revenues, layoffs and downsizing as a further deterioration of the business. The lender lowers the business’s line of credit even further.
6. The business now has to run on even less cash and is not able to replenish inventory at the levels needed to grow its business.
7. Go back to step 1 and repeat until the business becomes truly uncreditworthy and eventually becomes insolvent.
I couldn’t agree more, and I see very little being done to help, either nominally or tactically.
Source:
The Bernanke Cycle is Crippling Small Business (PRLog)
The Ecstasy of Empire
by ilene - August 17th, 2010 4:42 pm
The Ecstasy of Empire
Courtesy of PAUL CRAIG ROBERTS writing at CounterPunch
The United States is running out of time to get its budget and trade deficits under control. Despite the urgency of the situation, 2010 has been wasted in hype about a non-existent recovery. As recently as August 2 Treasury Secretary Timothy F. Geithner penned a New York Times column, “Welcome to the Recovery.”
As John Williams (shadowstats.com) has made clear on many occasions, an appearance of recovery was created by over-counting employment and undercounting inflation. Warnings by Williams, Gerald Celente, and myself have gone unheeded, but our warnings recently had echoes from Boston University professor Laurence Kotlikoff and from David Stockman, who excoriated the Republican Party for becoming big-spending Democrats.
It is encouraging to see some realization that, this time, Washington cannot spend the economy out of recession. The deficits are already too large for the dollar to survive as reserve currency, and deficit spending cannot put Americans back to work in jobs that have been moved offshore.
However, the solutions offered by those who are beginning to recognize that there is a problem are discouraging. Kotlikoff thinks the solution is savage Social Security and Medicare cuts or equally savage tax increases or hyperinflation to destroy the vast debts.
Perhaps economists lack imagination, or perhaps they don’t want to be cut off from Wall Street and corporate subsidies, but Social Security and Medicare are insufficient at their present levels, especially considering the erosion of private pensions by the dot com, derivative and real estate bubbles. Cuts in Social Security and Medicare, for which people have paid 15 per cent of their earnings all their lives, would result in starvation and deaths from curable diseases.
Tax increases make even less sense. It is widely acknowledged that the majority of households cannot survive on one job. Both husband and wife work and often one of the partners has two jobs in order to make ends meet. Raising taxes makes it harder to make ends meet--thus more foreclosures, more food stamps, more homelessness. What kind of economist or humane person thinks this is a solution?
Ah, but we will tax the rich. The rich have enough money. They will simply stop earning.
Let’s get real. Here is what the government is likely to do. Once Washington realizes that the dollar is…
MAX KEISER: ‘BANKERS SHOULD BE TRIED IN FRONT OF A HUMAN RIGHTS COURT AND ALL HUNG’
by ilene - August 10th, 2010 1:53 am
MAX KEISER: ‘BANKERS SHOULD BE TRIED IN FRONT OF A HUMAN RIGHTS COURT AND ALL HUNG’
Courtesy of Richard Metzger at Dangerous Minds
I’m always amused by bomb-throwing economic pundit and talkshow host Max Keiser. His fast-talking, fast-thinking tell it like it is persona is always entertaining, even when I’m not 100% in agreement with what he is saying. (I also like watching his various programs (made for Russia Today, Press TV and BBC) because he produces them using the same suitcase sized production suite that I use for the DM talkshow, the NewTek Tricaster.)
When someone who puts themselves and their opinions out there as forthright as Max Keiser does his, it tends to be a love it or hate it affair. I love the guy, how refreshing is it that someone is saying something like this? Now mind you, he’s saying it on Iran’s PressTV network, but still… he’s right:
Press TV: Is the dollar in a freefall or exactly what is going on?
Kesier: Well what’s going on is you have the banks in the United States committing a financial holocaust. It is probably the worst holocaust in the last 100 years. What there doing is they’re destroying real estate values, jobs, wages and pensions. And they do this by flooding the market with more debt in the form of US dollars. As your package accurately said, the US has no reserves upon which to issue dollars; therefore, by definition every dollar that is issued is debt. This debt holocaust is wiping out the middle class on purpose. Because the rich people in America want to buy those houses. Those millions of houses out there that people are still living in. They want to buy them back for maybe one penny on the dollar. This is a financial holocaust by design. The American bankers are holocaust brokers. They should be in front of a human rights court and taken up on human rights abuses and all hung.
Press TV: Now Max, you’re saying that it’s by design for the benefit of the rich to destroy the middle class. Wouldn’t that in effect destroy the economy as a whole?
Kesier: No, because if you’re a Goldman Sachs banker, you are completely protected from this phenomenon. Plus you’re buying gold, you’re buying silver and you’re buying tangible assets. So you are not taking any risks. It’s okay to simply wipe…
Wall Street’s Big Win
by ilene - August 6th, 2010 11:46 pm
Excellent article. I recommend reading the whole thing… Matt tells the story behind the sabotage of real financial reform as reflected in the final bill. – Ilene
Wall Street’s Big Win
Finance reform won’t stop the high-risk gambling that wrecked the economy – and Republicans aren’t the only ones to blame
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By Excerpts:
But Dodd-Frank was neither an FDR-style, paradigm-shifting reform, nor a historic assault on free enterprise. What it was, ultimately, was a cop-out, a Band-Aid on a severed artery. If it marks the end of anything at all, it represents the end of the best opportunity we had to do something real about the criminal hijacking of America’s financial-services industry. During the yearlong legislative battle that forged this bill, Congress took a long, hard look at the shape of the modern American economy – and then decided that it didn’t have the stones to wipe out our country’s one dependably thriving profit center: theft.
[...]
All of this is great, but taken together, these reforms fail to address even a tenth of the real problem. Worse: They fail to even define what the real problem is. Over a long year of feverish lobbying and brutally intense backroom negotiations, a group of D.C. insiders fought over a single question: Just how much of the truth about the financial crisis should we share with the public? Do we admit that control over the economy in the past decade was ceded to a small group of rapacious criminals who to this day are engaged in a mind-numbing campaign of theft on a global scale? Or do we pretend that, minus a few bumps in the road that have mostly been smoothed out, the clean-hands capitalism of Adam Smith still rules the day in America? In other words, do people need to know the real version, in all its majestic whorebotchery, or can we get away with some bullshit cover story?
In passing Dodd-Frank, they went with the cover story.
[...]
Both of these takes were engineered to avoid an uncomfortable political truth: The huge profits that Wall Street earned in the past decade were driven in large part by a single, far-reaching scheme, one in which bankers, home lenders and other players exploited loopholes in the system to magically transform subprime home borrowers into AAA investments, sell them off to unsuspecting pension funds and foreign trade unions…
Natural Selection, Finance and Extinction
by ilene - July 28th, 2010 11:37 pm
Charles makes an interesting analogy between the banking system and a parasite whose aggressive feeding on its host will eventually lead to its extinction. - Ilene
Natural Selection, Finance and Extinction
Courtesy of Charles Hugh Smith Of Two Minds
The current U.S. financial sector has been selected to reap enormous profits off a very narrow ecology of speculation, credit, risk and leverage. That parasitic specialization makes it highly vulnerable to extinction.
One of my projects is to integrate the insights offered by the processes of natural selection into the Survival+ critique and recommendations.
This line of inquiry has led me to ask: is the current financial system as robust and resilient as its many backers claim, or beneath the hype and propaganda, is it actually acutely vulnerable to collapse?
From the point of view of selection, we would start by considering the ecology the system has evolved in, and ask how specialized the system has become--in other words, how dependent is the financial system on narrow and potentially vulnerable sources of energy?
In nature, species which go extinct often do so when they have become increasingly specialized to exploit a narrow source of sustenance. Such species evolve that specialization in order to exploit the windfall offered by a food supply that has fewer (or even no) competitors.
This lack of competition offers the species rich rewards for specializing (long beaks maximized to fit certain flowers, etc.) even as they increase the species’ vulnerability to a breakdown or collapse in the limited source of food they have been selected to exploit.
The narrower the base of food and the greater the specialization, the more vulnerable the species will be to reductions in that food source. Thus a plant disease which wipes out the specific flowers will drive the bird with a highly specialized beak to extinction unless it can adapt quickly enough to another food source, or leave that ecology for one with a new source of similar flowers.
The U.S. financial system has already exploited the standard ecologies of capital and lending. How profitable is originating and holding plain-vanilla mortgages? Not very profitable at all, compared to the vast profits generated by securitizing mortgages and writing derivatives against those bundled and tranched loans.
The U.S. financial system in effect stumbled into a new ecology of profitable windfalls that no one else had ever seen or exploited:…
The Con of the Decade Part II
by ilene - July 10th, 2010 10:01 am
The Con of the Decade Part II
Courtesy of Charles Hugh Smith Of Two Minds
The con of the decade (Part II) involves sheltering the Power Elites’ income while raising taxes on the debt-serfs to pay the interest owed the Power Elites.
The Con of the Decade (Part II) meshes neatly with the first Con of the Decade. Yesterday I described how the financial Plutocracy can transfer ownership of the Federal government’s income stream via using the taxpayer’s money to buy the debt that the taxpayers borrowed to bail out the Plutocracy.
In order for the con to work, however, the Power Elites and their politico toadies in Congress, the Treasury and the Fed must convince the peasantry that low tax rates on unearned income are not just "free market capitalism at its best" but that they are also "what the country needs to get moving again."
The first step of the con was successfully fobbed off on the peasantry in 2001: lower the taxes paid by the most productive peasants marginally while massively lowering the effective taxes paid by the financial Plutocracy.
One Year Later, No Sign of Improvement in America’s Income Inequality Problem:
Income inequality has grown massively since 2000. According to Harvard Magazine, 66% of 2001-2007′s income growth went to the top 1% of Americans, while the other 99% of the population got a measly 6% increase. How is this possible? One thing to consider is that in 2001, George W. Bush cut $1.3 trillion in taxes, and 32.6% of the cut went to the top 1%. Another factor is Bush’s decision to increase the national debt from $5 trillion to $11 trillion. The combination of increased government spending and lower taxes helped the top 1% considerably.
The second part of the con is to mask much of the Power Elites’ income streams behind tax shelters and other gaming-of-the-system so the advertised rate appears high to the peasantry but the effective rate paid on total income is much much lower.
The tax shelters are so numerous and so effective that it takes thousands of pages of tax codes and armies of toadies to pursue them all: family trusts, oil depletion allowances, tax-free bonds and of course special one-off tax breaks arranged by "captured" elected officials.
Step three is to convince the peasantry that $600 in…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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