Category: Economics

Stephen Roach asks: Is this the last chance for Japan?

wr10

Japan is the petri dish for the struggle against the secular stagnation that is now gripping most major developed economies. And, notwithstanding all of the fanfare surrounding “Abenomics,” Japan’s economy remains moribund. In the six quarters of Shinzo Abe’s latest stint as prime minister, annualized real GDP growth has averaged just 1.4% – up only slightly from the anemic post-1992 average of 1%.

Abenomics, with its potentially powerful combination of monetary and fiscal stimulus, coupled with a wide array of structural reforms, was supposed to end Japan’s “lost decades.” All three “arrows” of the strategy were to be aimed at freeing the economy from a 15-year deflationary quagmire.

Unfortunately, not all of the arrows have been soaring in flight. The Bank of Japan seems well on its way to delivering on the first one – embracing what it calls quantitative and qualitative easing (QQE). Relative to GDP, the BOJ’s monetary-policy gambit could actually far outstrip the efforts of America’s Federal Reserve.

And that’s pretty much what happened in Japan over the last 24 hours – with an appropriately positive response from world stock markets.

But the flight of the other two arrows is shaky, at best. In recent days, Abe has raised serious questions about proceeding with the second phase of a previously legislated consumer-tax hike that has long been viewed as the linchpin of Japan’s debt-consolidation strategy. Abe has flinched because the economy remains weak, posing renewed risks of a deflationary relapse. Meanwhile, the third arrow of structural reforms – especially tax, education, and immigration reforms – is nowhere near its target.

Abenomics, one might conclude, is basically a Japanese version of the failed policy combination deployed in the United States and Europe: massive unconventional liquidity injections by central banks (with the European Central Bank apparently now poised to follow the Fed), but little in the way of fundamental fiscal and structural reforms. The political expedience of the short-term monetary fix has triumphed once again.

All the fixes left undone by the end of Barack Obama’s first term became impossible during his second term. The Republican strategy of doing nothing – was implemented and increased in the heart of the worst recession in decades. As if they cared?

The problems of dying infrastructure remain. The only tax structure revisions possible over the remaining two years of Obama’s second term would be in response to corporate demands – with a few sops thrown in for Democrat election campaigns in 2016. Even education at the broadly collegiate level is starting to crumble.

We grow closer to the Japanese model of self-destruction month-by-month. Stephen Roach’s article is as cogent as ever. Though his prime area of expertise is Asia – he may as well apply the same analysis to the United States.

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The Great Kansas Tea Party Debacle

Brownback_Cartoon

The Republican party headquarters in Wichita, Kansas, shares space in a strip mall with Best Friends Pet Clinic, a cowboy-boot repair shop and a Chinese restaurant called the Magic Wok. Inside, on a recent Wednesday afternoon, a modest gathering of party faithful mill about, I’M A BROWNBACKER stickers affixed to their blouses and lapels.

It’s a terrible slogan. Four years ago, when Kansas Gov. Sam Brownback first took office, you might’ve wondered if these people, on some subliminal level, actually wanted to be humiliated by a filthy-minded liberal activist looking to add a new “santorum” to Urban Dictionary. As a senator and a failed presidential candidate, Brownback was already one of the nation’s most prominent social conservatives, “God’s Senator,” in the words of a 2006 Rolling Stone profile. But Brownback turned out to be even more radical when it came to economic policy. In 2012, he enacted the largest package of tax cuts in Kansas history, essentially transforming his state into a lab experiment for extreme free-market ideology. The results (disastrous) have reduced the governor to making appearances at grim strip malls like this one in a desperate attempt to salvage his re-election bid.

The last time I came to Kansas, in March 2013, Brownback could often be found wandering the halls of the state Capitol, sporting one of his signature sweater vests, smiling and nodding at passing strangers or offering impromptu lectures to schoolchildren paused in front of the oil painting of John Brown, the fearsome Kansas abolitionist, that hangs outside his office. Here in Wichita, though, he looks exhausted. When he takes the stage, he squints out at the audience through puffy eyes. His Texas counterpart, Gov. Rick Perry, stands behind him, having been summoned north to help bail out Brownback’s flailing campaign…

Then the Texan steps to the podium and delivers a version of a speech I saw him give earlier this year in Kentucky, where he had been mobilized on a similar mission for Mitch McConnell. After boasting about all the jobs his policies have drawn to his state, Perry praises Brownback for placing Kansas on a similar “upward trajectory,”…

There are a couple of problems with Perry’s speech. First of all, he happens to be delivering it in Wichita, where, this summer, Boeing, for decades the largest private employer in the state of Kansas, shuttered its entire operation, shifting those jobs to cities like Seattle, Oklahoma City and San Antonio, Texas (oops).

The larger problem, of course, is that Perry wouldn’t even have to be here in Kansas if Brownback’s economic plan had not already proved catastrophic…not only cutting taxes but also slashing spending on education, social services and the arts, and, later, privatizing the entire state Medicaid system. Brownback himself went around the country telling anyone who’d listen that Kansas could be seen as a sort of test case, in which unfettered libertarian economic policy could be held up and compared right alongside the socialistic overreach of the Obama administration, and may the best theory of government win…

That word, “experiment,” has come to haunt Brownback as the data rolls in. The governor promised his “pro-growth tax policy” would act “like a shot of adrenaline in the heart of the Kansas economy,” but, instead, state revenues plummeted by nearly $700 million in a single fiscal year, both Moody’s and Standard & Poor’s downgraded the state’s credit rating, and job growth sagged behind all four of Kansas’ neighbors. Brownback wound up nixing a planned sales-tax cut to make up for some of the shortfall, but not before he’d enacted what his opponents call the largest cuts in education spending in the history of Kansas.

Read ‘em and weep, folks – except the good folks don’t deserve the tears. They knew what this idiot was going to do. Even though every previous attempt by a supply-side economics reactionary had failed – all the way up to and including Reagan’s guru, David Stockman. Read Mark Binelli’s whole article.

They voted Brownback into office. He did what he promised to do. The state now waits for bankruptcy, fully prepared to deal with nothing but more disaster, education system crushed, employers ready to flee.

Any history-literate cynic knows American aren’t well enough-educated to vote in their own economic interest. Our nation’s history of bigotry and racism aid the whole process. Reactionary demagogues who would only be considered fringe candidates in other Western nations regularly take their seats in Congress. But, still – Kansas voters outdid themselves with God’s favorite candidate.

Thanks, Mike

Infant deaths near oil drilling sites raise questions


Donna Young, midwifeRJ Sangosti/The Denver Post

The smartphone-sized grave marker is nearly hidden in the grass at Rock Point Cemetery. The name printed on plastic-coated paper — Beau Murphy — has been worn away. Only the span of his life remains.

“June 18, 2013 – June 18, 2013″

For some reason, one that is not known and may never be, Beau and a dozen other infants died in this oil-booming basin last year. Was this spike a fluke? Bad luck? Or were these babies victims of air pollution fed by the nearly 12,000 oil and gas wells in one of the most energy-rich areas in the country..?

But just raising that possibility raises the ire of many who live in and around Vernal. Drilling has been an economic driver and part of the fabric of life here since the 1940s. And if all that energy development means the Uintah Basin has a particularly nasty problem with pollution, so be it, many residents say. Don’t blame drilling for baby deaths that obituaries indicate were six times higher than the national average last year…

“Suffice it to say that air pollution from drilling is a part of it,” Dr. Brian Moench said of the Vernal-area deaths.

Moench, a Salt Lake City-based anesthesiologist and president of Utah Physicians for a Healthy Environment, admits that establishing a scientifically solid link between dead babies and drilling pads is complicated…

Moench took it seriously this year when Vernal midwife Donna Young told him that she had researched obituaries and was alarmed by the high numbers of dead babies.

Young and Moench were able to convince the TriCounty Health Department in Vernal to work with the state on a study to determine if Young’s trend figures are correct.

Moench said that people who aren’t looking at the possibility of a connection “have blinders on…”

Part of the reluctance of residents around Vernal to ascribe any ill effects to energy-field pollution could be tied to the average $3,963 average monthly nonfarm wage in Uintah County — the highest in Utah…

The Utah Department of Health is now working on a study. Epidemiologists initially are using birth and death certificates to determine if there truly was a spike in infant deaths, as Young’s numbers show.

Her numbers show an upward four-year trend in infant deaths: One in every 95.5 burials in Uintah County in 2010 was a baby, according to Young. In 2011 it was one in every 53. In 2012, one in every 39.7. And in 2013 the number jumped to one in every 15…

Besides oil-and-gas-stoked pollution, there could be many other causes…Twice as many residents here smoke than in the rest of Utah. More residents, in an area rife with new fast-food chains, are overweight. More residents admit to drinking heavily. There are more teen mothers and more mothers on average who don’t get good prenatal care.

For now, infant deaths have dropped back to average. Residents are reluctant to talk about the infant-death issue. Many are focusing on a future that is filled with expanded fossil-fuel prospects. Nearly 85 percent of Vernal residents indicated in a recent survey that they welcome oil shale development.

Give me a chance for a voice and a vote – I’d vote for a wind farm or a solar farm on the mesa across our valley. We haven’t wind speeds averaging as high as downstate; but, we sure have sunlight.

Anyone want to drill for oil in my neck of the prairie, I’ll be the first to set this old butt down in the middle of the highway to stop them.

Thanks, Mike

Unfair pay for women and people of color

unfair pay
Click on the graphic for a personal view

American women who work full time, year round are paid only 77 cents for every dollar paid to their male counterparts. But the wage gap is even larger for many women of color working full time, year round, as African-American women are paid only 64 cents, and Hispanic women only 54 cents, for every dollar paid to white, non-Hispanic men.

These gaps translated into a loss of $18,650 for African-American women and $24,111 for Hispanic women in 2012. Closing the wage gap is, therefore, particularly important for African-American and Hispanic women, who are already more likely to have lower incomes and to be in poverty than virtually all other groups.4 Although enforcement of the Equal Pay Act and other civil rights laws has helped narrow the wage gap over time, addressing the significant disparity that remains is critical for women and their families.

The wage gap for African-American and Hispanic women [.pdf] working full time, year round persists even when the effect of race or sex is considered alone.

• The typical African-American woman working full time, year round is paid roughly 83 cents for every dollar paid to her white, non-Hispanic female counterpart. The gap is larger for Hispanic women working full time, year round, who are paid just 69 cents for every dollar paid to their white, non-Hispanic female counterparts.

• The typical African-American woman working full time, year round is paid roughly 88 cents for every
dollar paid to her African-American male counterpart. The gap is the same for Hispanic women working full time, year round, who are also paid 88 cents for every dollar paid to their Hispanic male counterparts.

RTFA for example after example of death by a thousand cuts if you ain’t white and male.

Not so incidentally, if you are white and male don’t get smug. Although you may not have confronted pay cuts directly, part of the discrimination that adds to profit – is that white men also receive less than they might because “Hey, look. You’re better off than they are, eh?” And that’s good enough for plenty of guys who haven’t looked at what they might be earning if they got together and joined forces with the rest of their class.

Thanks, Mike

The Inequality Trifecta


– and in the United States, they own pretty much all the politicians

There were quite a few disconnects at the recently concluded Annual Meetings of the International Monetary Fund and World Bank. Among the most striking was the disparity between participants’ interest in discussions of inequality and the ongoing lack of a formal action plan for governments to address it. This represents a profound failure of policy imagination – one that must urgently be addressed.

There is good reason for the spike in interest. While inequality has decreased across countries, it has increased within them, in the advanced and developing worlds alike. The process has been driven by a combination of secular and structural issues – including the changing nature of technological advancement, the rise of “winner-take-all” investment characteristics, and political systems favoring the wealthy – and has been turbocharged by cyclical forces.

In the developed world, the problem is rooted in unprecedented political polarization, which has impeded comprehensive responses and placed an excessive policy burden on central banks. Though monetary authorities enjoy more political autonomy than other policymaking bodies, they lack the needed tools to address effectively the challenges that their countries face.

…These are not normal times. With political gridlock blocking an appropriate fiscal response – after 2008, the United States Congress did not pass an annual budget, a basic component of responsible economic governance, for five years – central banks have been forced to bolster economies artificially. To do so, they have relied on near-zero interest rates and unconventional measures like quantitative easing to stimulate growth and job creation…

As a result, most countries face a trio of inequalities – of income, wealth, and opportunity – which, left unchecked, reinforce one another, with far-reaching consequences. Indeed, beyond this trio’s moral, social, and political implications lies a serious economic concern: instead of creating incentives for hard work and innovation, inequality begins to undermine economic dynamism, investment, employment, and prosperity.

So far, Mohamed El-Erian has avoided political office. In the United States as well as Egypt. Understandable when common understanding of officeholders in either nation leaves voters with a choice between the corrupt elected by the ignorant or someone too dumb to comprehend the differences.

Though he easily fits the populist definition of a prince of economics, history and academia both recognize his commitment to common folk, those of us who toil and spin, creating the profits of industry and commerce. I know I needn’t be concerned about most of the wasters in Congress understanding the article. They will not have read it.

Still, around the civilized world, most elected leaders trying to affect the lives of citizens in a positive fashion will read it and at least take his analysis to heart as honest and forthright – whether or not they agree with any logical tough remedies.

I suggest you click the link and read the whole article.

Rich get richer – and meaner

Even as the income gap widens, the wealthiest Americans are giving a smaller share of their income to charity, while low- and middle-income people are donating a larger share, according to an extensive analysis of Internal Revenue Service data conducted by the Chronicle of Philanthropy.

The Chronicle…said in a report released on Monday that Americans who earned $200,000 or more reduced the share of their income they gave to charity by 4.6 percent from 2006 to 2012. Those earning less than $100,000 donated 4.5 percent more of their income, the report said…

The Chronicle’s editor, Stacy Palmer, said that wealthy donors were more likely to support the arts and higher education and less likely to give to social-service charities

They’ve learned to think like Republicans. They contribute to services which add to their own quality of life. That doesn’t include the overwhelming portion of the population struggling to make a living.

Changes in giving patterns were most pronounced in major cities, where the percentage of income that residents donated dropped markedly between 2006 and 2012, according to the report.

In Philadelphia and Buffalo, New York, the share of income given to charity fell by more than 10 percent, and there was a 9 percent drop in Los Angeles, Minneapolis-St. Paul and Washington, D.C.

The cities where residents gave the smallest share of their income to charity were Hartford, Connecticut; Providence, Rhode Island and San Jose, California.

My characterization of Republican ideology, ethos, rejection of concern for those in need isn’t a snap judgement. It includes all the foolish folks who look upon class distinctions as irrelevant. Stack up those who identify thoroughly with the wealthy without differentiation between the head start of inherited wealth – and patent leather-libertarians who only care that they succeeded regardless of the greater scheme of economics and the distribution of wealth.

In other words, I’m not surprised by this report. The response from our wealthy class and their Republican flunkies is also predictable: this must be a flawed report and in any case it will be ignored.

Head of the Fed, Ben Bernanke couldn’t refinance his mortgage – WTF?

The former head of the Federal Reserve, Ben Bernanke, has had a request declined to have his mortgage renewed.

According to Bloomberg News, Mr Bernanke told a conference in Chicago: “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

I’m not making that up,” he added, as the audience laughed.

He went on to suggest that banks “may have gone a little bit too far on mortgage credit conditions”.

He added that the market for first-time home buyers was “not what it should be”…

There is endless discussion among Wall Street types and politicians about the event. Most of it being irrelevant. Motivation, tax decisions, the whole ball of crud comes down to bank regulators who were caught with their nickers in a bunch over their role in aiding the construction of the Bush housing bubble – that brought us the Great Recession. They’re now in the position of overreacting. They’d rather be holier-than-thou than have the slightest suspicion of being easy-peasy on folks trying to get a mortgage.

Point remains, if a creditworthy economist like Ben Bernanke ain’t getting a refi, the average working family doesn’t stand much of a chance at a mortgage under any circumstances.

The funny bit was watching this discussed on Bloomberg Surveillance, this morning. The guest host for the second hour was Alan Krueger, former chairman of the White House Council of Economic Advisors, Research Associate at the National Bureau of Economic Research. He was just turned down for a mortgage on a second home – with 50% down!

Economics 101 for our latest Coalition of the Willing

US/UK warplanes are flying sorties, at a cost somewhere between $22,000 to 30,000 per hour for the F-16s, to drop bombs that cost at least $20,000 each, to destroy ISIL hardware.

That means if an F-16 were to take off from Incirclik Air Force Base in Turkey and fly two hours to Erbil, Iraq, and successfully drop both of its bombs on one target each, it costs the United States somewhere between $84,000 to $104,000 for the sortie

Watching today’s endlessly repeated video clip of one of our heroic sorties bombing a freaking pickup truck. At a cost of $85K-104K.

Just send in some creepy salesman from a local used car lot and offer the bandit in charge $20K cash on the spot for his truck – and we’re in business – making the world safe for capitalism.

A small town in Utah with a future


Geneva Steel under construction 1942

Vineyard, Utah — The future is swiftly unfolding just to the north where Utah’s Geneva Steel once stood.

In a few short years, a huge development at the site will transform his hometown with a pulsing 1,700-acre complex of houses, apartments, town homes, stores, offices, factories, school buildings and a new town center.

Vineyard is expected to mushroom from about 465 residents to as many as 27,000 in less than a decade as a shortage of developable land and booming real-estate markets drive one of the most ambitious projects seen in Utah County. That’s a growth rate of more than 5,700 percent.

The development, dubbed @geneva, is meant to bring new life and value to one of the largest U.S. brownfields west of the Mississippi River…

Today, construction crews are finishing the first homes and paving the initial roads into what is envisioned as a blend of residential, commercial and industrial buildings worth upward of $3.2 billion. Final totals on office and retail space alone could top 5.6 million square feet, comparable in span to 30 Wal-Mart Supercenters…

Land-use blueprints call for single- and multifamily housing, lakefront properties, commercial districts, corporate headquarters, a Utah Valley University satellite campus, Larry H. Miller Megaplex Theatres, a transit hub centered on FrontRunner and, perhaps, TRAX, three Interstate 15 interchanges, nine stoplights and a town center rivaling those in nearby Orem and Provo.

Managers with Anderson Development, which acquired the site for $46.8 million in bankruptcy proceedings in 2005, are moving fast these days. More than half the roughly triangular @geneva footprint has sold to future builders, said Park, with many remaining parcels under contract or getting multiple bids.

Anderson and town officials both say their dealings are cooperative these days. Longtime Town Council member Sean Fernandez said Vineyard’s leaders, for their part, have scaled a steep learning curve.

For a long time we were somewhat skeptical, but we’ve really embraced it and tried to make it a nice development,” Fernandez said. “It’s a huge deal, especially for the residents who have grown up in Vineyard.”

The mayor and four-member council reluctantly created a Redevelopment Agency, or RDA, letting Vineyard bond for more than $300 million to put toward cleanup, developer incentives and new water, sewer and road amenities for the project… The town’s RDA debts will be paid off in increments with new tax monies drawn from @geneva’s upward impact on the site’s property values…

The kind of thing that can be developed in many a depressed area. All it takes is up-to-date planning, an educated population capable of providing workforce requirements, a local political structure that isn’t too greedy.

Well, OK. Maybe it is difficult to find somewhere to accomplish this.

Thanks, Mike

World Wildlife Fund – and Pangasius

06 August 2014 – ASC certified GODACO farm, in Vietnam, opened its doors to fish buyers this week to demonstrate how environmentally and socially responsible pangasius [.pdf] is produced.

The EU co-funded ‘Establishing a Sustainable Pangasius Supply Chain in Vietnam (SUPA)’ project’s partners: World Wide Fund For Nature (WWF), Vietnam Association of Seafood Exporters and Producers (VASEP) and Vietnam Cleaner Production Centre (VNCPC), along with the Aquaculture Stewardship Council (ASC), joined together to host a tour of the farm and processing facility followed by a Pangasius Forum discussion during the Vietfish Fair in Ho Chi Minh City.

This pleases me on a couple of levels. I grew up subsistence fishing along the southern New England coast. We fished to eat. Simple as that. I credit my dear mother for having been inventive enough to keep us from going stark raving mad – eating whatever species was running for three months – five times a week.

But, I’m pleased to see a nation – where the United States got partway to genocide through carpet bombing and Agent Orange and napalm – is stepping further into independent economic self-sustaining commerce. I know damned well there are a lot of Vietnamese mothers figuring out how to make Asian Catfish taste different one more time this week – because it’s affordable. And I sympathize. And I also appreciate the effort of the World Wildlife Fund to develop Mekong aquaculture into environmentally friendly farming.

Thanks, Mike