Thursday, April 14, 2011

notes on the week ended april 9th

it was an interesting week on the federal budget front, in that due to what seemed to be an intractable impasse in congress over the budget for the rest of the fiscal year, most of the talk and preparation seemed resigned to planning on a government shutdown...most commentary fully expected national parks & museums to be closed for the weekend, and all govt agencies contracted to have automated software answering the phones and displaying information messages on government websites (one agency head said they were literally planning to pull the plug on govt computers)...but late friday night, just minutes after the government was scheduled to turn into a pumpkin, an agreement was reached on a plan to fund government operations for the remainder of this fiscal year, ending Sept 30...so a 7th continuing resolution of the year was quickly passed and post dated to midnight to keep the show running another week until the final details could be ironed out, which is expected by midweek...

  although the negotiations started with the parties far apart on the amount of spending to cut, the gap seemed to close, & most of the difficulty in reaching an agreement centered around impediments to the EPA and planned parenthood that the tea party faction wanted included in the deal, but at the end of the week, restrictions on those programs were left out of the final compromise, although restrictions on abortions in DC were included as a compromise...so i figure the democrats must have won: the $37.8B in cuts to programs they got were more than the $32B in cuts compromise that Boehner was asking for when the week started...and they're the only ones to blame for the consequences, because they could have easily passed their own budget for this fiscal year before it started in october, when they had a majority in both houses...since a similar stalemate is scheduled for a encore this september when the budget for fiscal year 2012 comes up up for a vote, i've included a number of links regarding the consequences of a shutdown along with the play-by-play of this weeks game among the first links in this mailing…

  but even before september rolls around, we stlll have another one of these budget tete-a-tetes coming soon, as the time when we hit the debt ceiling is fast approaching...it's now expected sometime next month, and although some have suggested if it's not raised the country will default, i dont think that's likely, as im sure the treasury will pay the interest on the debt before anything else...moreover, i dont think the majority of the republicans would want to put the US in a position of not being able to borrow, so i think saner heads will prevail...puzzling...why this sudden leap of faith on my part?

   also this week, the chair of the house budget committee, paul ryan, proposed a long term budget plan which will become the basis for the republican budget proposal in 2012; what this plan proposes is to repeal the affordable health care act, replace medicare with a system of vouchers for seniors to buy health care on the private market after 2022, change medicaid and food stamps programs into block grants to the states with a 1% annual increment, cut taxes for the uber rich to 25% and exempt investment income, eliminate estate taxes on the first $10 million, & repeal the dodd-frank financial reform act...with the private sector thus freed up, a balanced budget would be achieved by unemployment falling to 4% by 2015 and 2.8% by 2021, and jump starting home building to the level of the housing boom...it goes without saying that there was plenty of commentary on this plan around the blogosphere, & of the 6 dozen links on it ive got on my blog, ive selected a couple dozen for a guest post at angry bear, if you want to comment; however, since Paul Krugman had 18 blogposts on the Ryan plan in addition to his regular column on it, i havent included them here; for his complete analysis, you can either find them piecemeal on my blog, or drill back thru his blog to the Apr 5th post titled "Groundhog Day on the Budget" to catch them all...

since the lion's share of the ryan plan involves getting the government out of health care, i thought it worthwhile to remind everyone what we found out when health care reform was being debated; that being that we have the most expensive health care in the world, and get far from the best results...compared to the OECD, we spend 141% more per capita than the average country, yet have lower than average life expectancy & higher than average infant mortality...our health care is uber-expensive because of a combination of factors; a for-profit insurance industry, a for-profit health care system, extra procedures done to protect against liability, and doctors who clear more than twice the average elsewhere, etc...for a detailed breakdown of our healthcare costs compared to the rest of the world, see the series of 12 posts by health care economist aaron carroll at the incidental economist, all linked here..

CoreLogic House Price Index

it appears that the bank-centric foreclosure fraud settlement that i've mentioned the past couple of weeks has fallen apart completely amid turf battles between the administration, the Fed, the comptroller of the currency, & the state attorney generals, however, the fraud perpetrated by the servicers that we've been following over the past six months is unlikely to be swept under the rug now, as 60 minutes did a spot on it last sunday, which i've posted on MW666 as 60 minutes on widespread document forgeries and mortgage fraud...they also did a follow up on how clear title to almost all houses which have been transferred since the boom has been lost in the frenzy by the banksters to bypass state laws & electronically register mortgages with their shell corporation MERS, which i also posted: 60 minutes overtime – who really owns your home?; its amazingly revealing for MSM; a dozen high school kids sitting around a table stacked with mortgage documents, all signing themselves as "linda green, vice president" of as many as 20 different banks at once...related to that, the ACLU has announced it will contest the procedures used by such foreclosure mills in florida, and the fast foreclosures courts set up in that state to service them...also, the ohio supreme court upheld lower court rulings that questioned the veracity of bank documents used in foreclosures, and the washington state AG moved against foreclosures being initiated by out of state trustees...

   another popular housing price index was also released this week, according to CoreLogic, national home prices declined 2.7% in February (from Jan) and home prices are now 4.1% below the lows hit in 2009…note that unlike Case-Shiller, which covers 20 large cities, this is a national price index, and is now down 6.7% over a year ago, and 34.5% from the peak...

as a followup to my comments last week on unemployment, i was remiss in not remembering that the numbers are seasonably adjusted, so i should have noted the actual job creation number for march was 25,000; obviously, the three late winter months are adjusted upwards, just as summer & pre-holiday job numbers are adjusted downward...in related news this week, the teen unemployment rate rose slightly to 24.5% in march and the rate for black teens rose to 42.1%; georgia led the nation in teenage unemployment at 37%...north carolina joined michigan in cutbacks to unemployment rations, and more states are expected to follow suit...toyota has announced 25,000 layoffs as their plants shut down due to lack of parts, which will likely affect other domestic suppliers, but the good news is that McDonalds plans to hire 50,000 more burger flippers this summer...

there was a report this week from the USGS and the U of California that Oklahoma is now drier than it was during the 1930s dustbowl; that was followed by a report from the USDA that crop conditions for wheat were the poorest since 2002, with only 37% of the crop in good shape, compared with 65% at this time last year...but as corn futures hit an all time high @ $8 bu this week, it was reported that livestock producers were switching to feed their animals more wheat, as stockpiles of both continue to shrink...you should recall that 40% of our corn crop goes to ethanol, so with oil & gasoline hitting new highs this week, it's not much of a surprise to see corn trading like a fuel...oil, by the way, crossed over $113 a barrel, and i just checked the spot brent crude price, which is the price most US refiners are paying, and its and a new post recession high of $126.74/brl...in a related food to fuel story, prices for the thai staple crop cassava are rising, squeezing southeast asian peasants, as 98% of their exports are going to china for use in biofuel...

you may have heard that japan was hit by another 7.4 quake in the same area as the big one...that knocked out power again for several million & put several of their nuclear facilities on emergency backup power, and there have been reports of new damage at another nuclear plant at onagawa...TEPCO, which is still dealing with high radiation levels at the damaged plants at fukushima, dumped 11,500 tons of radioactive water into the ocean to make room for water which was even more radiocative, and as ocean radiation hit 7.5 million times legal limit, they're meeting with korean officials over the issue of contaminated fisheries...in europe, portugal finally asked for a EU bailout, and even more stringent austerity than was imposed on greece and ireland is now being demanded of portugal...also, the ECB became the first of the major central banks to raise rates, from 1% to 1.25%, as the germans are understandably more afraid of inflation than we are...as usual, you can find dozens on those stories at the end of this weeks GGO blog post...

the above is my weekly commentary 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, most coming from the aforementioned GGO posts, contact me...

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