Monday, December 6, 2010

notes & comments on the week ended Dec 4th

i was almost stunned by the november unemployment report: only 39,000 jobs were added and the rate was up to 9.8%...im usually more bearish than the average bear, but i have to admit the severity of the reversal surprised me...new claims for unemployment had been trending down, almost all the regional Fed reports as well as ISM surveys had been positive, so at worst, i expected a neutral report...but i can still offer my usual positive spin; if you recall last months positive report, i noted that in part it was due to early seasonal retail hiring; well, this month that normalized and, due to the normal seasonal adjustment, 28,000 more jobs evaporated; there have really been something on the order of 300,000 season hires so far this year, and the adjustment parallels what BLS has determined to be normal, thereby reducing employment; this is all reversed in january, when those seasonal temps are let go, and the figures will adjust for that too, so january may well look positive even when all 300,000 are let go...anyway, the complete numbers & charts are among the first few links below, so you can get the details there...i just want to focus on one number; thats the 6.8 million american that have been unemployed for over 26 weeks...on nov 30th, the unemployment stipends for those long term jobless expired, and it's expected that rations will run out for 2 million of them by the end of the year...as the tiers of rations that each are in run out, more will be added each week thereafter...and to those without any safety net, we should add the 1.3 million who have been without work for more than the maximum 99 weeks, a number growing every week now that we've passed the 2 year mark for the crisis...as it stands this weekend, the democrats are trying to make a deal; the republicans get the bush tax cuts for the rich, the people get unemployment rations re-instated...if such a deal can be worked out, a million dollar CEO would get $46,000 in benefits, the richest 0.1% of taxpayers would get an average tax cut of $370,000 -- and the unemployed would get a $290 a week ration...but that aint even a done deal, as republicans have already said that they'll block all activity until the bush tax cuts a for the rich are extended...if the rations dont get passed, this would be a good time to start thinking about a donation to a food pantry, hunger center or homeless shelter, because they'll sure be needing all the help they can get...and it aint looking up either, because according to the challenger job firm, corporations are planning the most job cuts that they have in the past 8 months...

deficit-pig-eating-bush-tax-cuts

prior to the GOP imposed gridlock, the senate voted for the 11th time to postpone for one month a scheduled 23% cut to physicians treating patients under medicare, that would have been imposed under a 1997 law which attempted to tie doctor's pay to inflation; they also passed a food-safety bill pushed by agri-business which would control trade in home-grown produce, but due to a turf violation of a constitutional provision requiring that tax provisions originate in the house, house democrats are expected to block it by a legislative maneuver...oh well, at least there wasnt anything important congress had to do before the holiday recess..

the biggest news this week was what happened over two years ago...to partially comply with the 'audit the Fed' provisions in the dodd-frank reform bill, the Fed released the details of three of the Fed’s six emergency facilities which were run by the Fed during the financial implosion of 2008...taking toxic junk as collateral, the Fed sent out it's worldwide fleet of money-dropping helicopters & loaned or otherwise made available $3.3 trillion to banks, hedge funds, the international wealthy & elite, and even corporations like Caterpillar, Harley-Davidson, General Electric, McDonald’s, Toyota and Verizon...of the top 11 recipients of Fed cash, 6 were foreign banks...as dirty as all this laundry is, the Fed is still keeping the details of three of its facilities secret, ostensibly because it would damage the reputations of some mega-banks...links to the articles detailing these programs are right at the beginning of this weeks blog post..

as was expected, the simpson-bowles deficit control plan failed to get enough votes to send it to congress, but all the press it has garnered over the past month has spawned a raft of proposals with the same general objective; last week the Rivlin-Domenici (Bipartisan Policy Center) plan was released; & this week, a consortium of progressive groups released their plan, the Citizens' Commission On Jobs, Deficits And America's Economic Future released theirs; Think 2040: a Blueprint for the Millennial America, a college based plan, was developed by young people, and Nobel prize winning economist joseph stiglitz also released an alternate budget plan...opposing any plans for immediate deficit reduction, both ben bernanke and vice-chairman janet yellen called for additional fiscal stimulus (without further elaboration), saying that quantitative easing alone couldnt be counted on to lift the country out of the recession....

investigations into mortgage fraud and MBS probes continued, with Fed governor tarullo testifying that she ees big put-back costs for banks, but declining to opine as to if the problems are a systemic risk... the double-dip in housing prices has officially begun with the release of the case-shuller index for sept, covering the 3 summer months, and finally gaging the impact of the end of tax credits...U.S. home prices fell 2% over the previous release, and indications are for further prices erosion going forward as the months of inventory on the market remains in double digits...

the EU imposed rescue of ireland was completed this week, and the irish were forced to pledge their €17.5 billion public pension fund as part of a €85 billion rescue package of irish banks to bail out british and german banks...there was no haircut for the bondholders as had previously been hinted at...part of the problem with bond haircuts is bank interconnectedness; a 20% haircut on greece, irish, spanish & portuguese bonds that french banks are exposed to would wipe out french bank equity....so the package didnt solve the contagion problem, as by mid-week bonds of ireland, portugal, spain, belgium and italy were all at new high yield spreads from the benchmark german bonds...by the end of the week pension funds in hungary & france were also seized by their respective governments...to break the panic in the bond markets, the ECB started buying peripheral debt & offered "unlimited cash" for 3 Months at 1%...analysts expected the intervention might eventually be as much as 1 to 2 trillion euros, or about $2.6 trillion dollars, four times the size of our Fed's QE2 program...but the ECB siad it's not the same as QE, as their bond purchases would be sterilized by otherwise removing liquidity from the markets...ive tried include a representative selection of links to this here, but there's probably at least six dozen on the euro-mess at the end of this week's blog post, if you want to see them all...overall, bond markets experienced their worst month in november since the lehman collapse, with even investment grade bonds such as walmart getting hit from euro-contagion

a new study of global feedback mechanisms published by the oxford physics department to coincide with the start of a new round of international climate talks in cancun predicted global temperatures could rise 4C, or 7.2F degrees by 2060...largely due to the rising release of greenhouse gases from the tundra & arctic ocean, this would cost up to a billion people their homes, disrupt weather, rainfall, & crop yields, and require an annual investment of $270 billion to protect major cities against rising sea levels...a lot of people are gonna be surprised when they find out that gaia doesnt do bailouts...

the above are my weekly comments that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, mostly from the aforementioned GGO posts, contact me...

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