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STOCK MARKET WATCH -- Thursday, 25 June 2015
[font size=3]STOCK MARKET WATCH, Thursday, 25 June 2015[font color=black][/font]
SMW for 24 June 2015
AT THE CLOSING BELL ON 24 June 2015
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[font color=red]Partial List of Financial Sector Officials Convicted since 1/20/09 [/font][font color=red]
2/2/12 David Higgs and Salmaan Siddiqui, Credit Suisse, plead guilty to conspiracy involving valuation of MBS
3/6/12 Allen Stanford, former Caribbean billionaire and general schmuck, convicted on 13 of 14 counts in $2.2B Ponzi scheme, faces 20+ years in prison
6/4/12 Matthew Kluger, lawyer, sentenced to 12 years in prison, along with co-conspirator stock trader Garrett Bauer (9 years) and co-conspirator Kenneth Robinson (not yet sentenced) for 17 year insider trading scheme.
6/14/12 Allen Stanford sentenced to 110 years without parole.
6/15/12 Rajat Gupta, former Goldman Sachs director, found guilty of insider trading. Could face a decade in prison when sentenced later this year.
6/22/12 Timothy S. Durham, 49, former CEO of Fair Financial Company, convicted of one count conspiracy to commit wire and securities fraud, 10 counts of wire fraud, and one count of securities fraud.
6/22/12 James F. Cochran, 56, former chairman of the board of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and six counts of wire fraud.
6/22/12 Rick D. Snow, 48, former CFO of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and three counts of wire fraud.
7/13/12 Russell Wassendorf Sr., CEO of collapsed brokerage firm Peregrine Financial Group Inc. arrested and charged with lying to regulators after admitting to authorities he embezzled "millions of dollars" and forged bank statements for "nearly twenty years."
8/22/12 Doug Whitman, Whitman Capital LLC hedge fund founder, convicted of insider trading following a trial in which he spent more than two days on the stand telling jurors he was innocent
10/26/12 UPDATE: Former Goldman Sachs director Rajat Gupta sentenced to two years in federal prison. He will, of course, appeal. . .
11/20/12 Hedge fund manager Matthew Martoma charged with insider trading at SAC Capital Advisors, and prosecutors are looking at Martoma's boss, Steven Cohen, for possible involvement.
02/14/13 Gilbert Lopez, former chief accounting officer of Stanford Financial Group, and former controller Mark Kuhrt sentenced to 20 yrs in prison for their roles in Allen Sanford's $7.2 billion Ponzi scheme.
03/29/13 Michael Sternberg, portfolio mgr at SAC Capital, arrested in NYC, charged with conspiracy and securities fraud. Pled not guilty and freed on $3m bail.
04/04/13 Matthew Marshall Taylor,fmr Goldman Sachs trader arrested, charged by CFTC w/defrauding his employer on $8BN futures bet "by intentionally concealing the true huge size, as well as the risk and potential profits or losses associated."
04/04/13 Matthew Taylor admits guilt, makes plea bargain. Sentencing set for 26 June; faces up to 20 years in prison but will likely only see 3-4 years. Says, "I am truly sorry."
04/11/13 Ex-KPMG LLP partner Scott London charged by federal prosecutors w/passing inside tips to a friend in exchange for cash, jewelry, and concert tickets; expected to plead guilty in May.
08/01/13 Fabrice Tourré convicted on six counts of security fraud, including "aiding and abetting" his former employer, Goldman Sachs
08/14/13 Javier Martin-Artajo and Julien Grout charged with wire fraud, falsifying records, and conspiracy in connection with JP Morgan's "London Whale" trade.
08/19/13 Phillip A. Falcone, manager of hedge fund Harbinger Capital Partners, agrees to admit to "wrongdoing" in market manipulation. Will banned from securities industry for 5 years and pay $18MM in disgorgement and fines.
09/16/13 Javier Martin-Artajo and Julien Grout officially indicted on charges associated with "London Whale" trade.
02/06/14 Matthew Martoma convicted of insider trading while at hedge fund SAC (Stephen A. Cohen) Capital Advisors. Expected sentence 7-10 years.
03/24/14 Annette Bongiorno, Bernard Madoff's secretary; Daniel Bonventre, director of operations for investments; JoAnn Crupi, an account manager; and Jerome O'Hara and George Perez, both computer programmers convicted of conspiracy to defraud clients, securities fraud, and falsifying the books and records.
05/19/14 Credit Suisse, which has an investment bank branch in NYC, agrees to plead guilty and pay appx. $2.6 billion penalties for helping wealthy Americans hide wealth and avoid taxes.
09/08/14 Matthew Martoma, convicted SAC trader, sentenced to 9 years in prison plus forfeiture of $9.3 million, including home and bank accounts
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[font size=3][font color=red]This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.[/font][/font][/font color=red][font color=black]
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Demeter
(85,373 posts)Critics of private equity often inveigh against the fact that the general partners (firms like KKR and Blackstone) have strong incentives to borrow heavily against the companies that they buy, since they collect so many fees that they profit whether or not the businesses they buy can survive with the debt load. It has reached the point where the European Union imposed restrictions on how much borrowed money private equity firms could use, out of concern about how many bankruptcies private equity firms were leaving in their wake.
In the US, the objections to private equity financial engineering and asset stripping generally focus on the risk of company failure and job loss. But an important part of the equation often gets second shrift: that of how private equity kingpins use bankruptcy to get rid of pensions. Eileen Appelbaum and Rosemary Batt did address it in their landmark book Private Equity at Work, but the practice still needs broader exposure.
A new paper by Elizabeth Lewis for Harvard’s Safra Center for Ethics, A Bad Man’s Guide to Private Equity and Pensions, helps fill this gap. I’ve embedded it below. SEE LINK FOR PAPER From its abstract:
Other types of businesses, including publicly held companies, have also abandoned pension plans in bankruptcy. But the business model and practices of some private equity firms can make pension-dumping in bankruptcy especially attractive.
The legal and regulatory environments in the U.S. combine with those practices to add up to a form of institutional corruption. In this working paper, I explain how Oliver Wendell Holmes’ hypothetical “bad man” can use bankruptcy as a strategy to profit. So, here is a bad man’s guide to ditching pensions in bankruptcy—legally.
One of the big drivers of private equity bankruptcies is the strategy called dividend recapitalization, in which the private equity buyer borrows heavily for the main, and in some cases, sole purpose of paying a large dividend to investors. In theory, this is just benign financial engineering, making use of excess borrowing capacity. In practice, in too many cases, aggressive dividend recaps lead rapidly to company failure. I’ve long been mystified as to why this isn’t considered a clear cut case of fraudulent conveyance, when consumers who do pretty much the same thing (max out on their credit cards and default within six months to a year) will have a resulting bankruptcy challenged by creditors. Applebaum and Batt did discuss one case that was so egregious that the creditors did sue, and its denouement may explain why creditors stand pat so often: it took years of legal wrangling and high legal costs for the lenders to extract a settlement, and it was markedly less than what they’d lost. So the short answer appears to be that the difficulties enforce what would seem to be common sense, established creditor rights allows bad men and bad practices to flourish. Lewis elaborates, starting with an illustration, Friendly’s Ice Cream:
Friendly’s is a case that shows how institutional corruption lives in the world of bankruptcy, especially for private equity companies that take companies private and wind up in bankruptcy. There is institutional corruption here because of legislative and regulatory inaction, built-in conflicts in the laws, and because of diffident judges unwilling to challenge the ideology of the market. Elements include unregulated shadow banking, the skewed power of secured lenders, and a nearly opaque practice that goes on in the shadows of bankruptcy, called credit-bidding. Institutional corruption has shaped a legal regime where values of protecting employees and retirees lose to practices that exploit American ideals in bankruptcy—ideals of shedding the past to create anew. Here, those practices are used as an efficient means to shed pension plans in insider deals.
As the headline promises, the article sets forth a how-to manual for how to use bankruptcy to dump pensions without wrecking the underlying business. Not to worry, Lewis is merely informing the broader public of how these tricks work. The playbook is already well known to insiders.
Public pension funds like CalPERS are the biggest investors in private equity, providing roughly 25% of assets under management. This practice of pension stripping means that public sector retirees pension payments depend in part on looting taxpayers and private sector retirees. Lewis has identified 51 private equity portfolio companies that have used bankruptcy to dump their pension obligations. That means $1.6 billion of additional costs to the general public via the federal Pension Benefit Guaranty Corporation, plus over 101,989 workers or retirees who have lost benefits of at least $128 million. CalPERS takes particular care to make sure its investments don’t hurt state and local public sector employees; it has a long-standing policy to restrict investments in companies that outsource their jobs. It’s time to demand that state officials require that public pension funds take a tougher against funding private equity looting of the rest of us.
Demeter
(85,373 posts)One of the more consequential moments for the future of the U.S. economy happened off the campaign trail...at a ballroom in the Mandalay Bay Hotel in Las Vegas. At the annual conference of the Mortgage Bankers Association, Mel Watt, chairman of the Federal Housing Finance Agency (FHFA)—the conservator for Fannie Mae and Freddie Mac—delivered a speech that will matter to anyone who wants to buy a home or even hold down a steady job in the next few years. As expected, Watt signaled to mortgage bankers that they can loosen their underwriting standards, and that Fannie and Freddie will purchase the loans anyway, without much recourse if they turn sour. The lending industry welcomed the announcement as a way to ease uncertainty and boost home purchases, a key indicator for the economy. But it’s actually a surrender to the incorrect idea that expanding risky lending can create economic growth.
Watt’s remarks come amid a concerted effort by the mortgage industry to roll back regulations meant to prevent the type of housing market that nearly obliterated the economy in 2008. Bankers have complained to the media that the oppressive hand of government prevents them from lending to anyone with less-than-perfect credit. Average borrower credit scores are historically high, and lenders make even eligible borrowers jump through enough hoops to garner publicity. Why, even Ben Bernanke can’t get a refinance done! (Actually, he could, and fairly easily, but the anecdote serves the industry’s argument.)
It’s important to separate the truth about housing regulations from the industry’s propaganda. Doing so reveals the mortgage industry's effort to strangle the housing market in the short term and cull regulations in the long term...After the financial crisis, Congress did enact a series of changes designed to prevent another epidemic of predatory lending. The most important rules force lenders to actually consider a borrower’s ability to repay the loan—something that ought to be self-evident, but wasn’t during the bubble. But another thing happened after the crisis. The collapse of the private mortgage-backed securities market has led to Fannie and Freddie, the so-called government-sponsored enterprises (GSEs), either buying or guaranteeing nine out of every ten new loans. Lenders who want to sell their mortgages rather than hold onto them—and that’s basically everyone—must therefore conform to GSE purchasing standards. Under the “representations and warranties” language that accompanies any sale, the GSEs can identify loans that don’t meet their standards and force the lender to buy them back. Since 2011, FHFA has settled 17 lawsuits with banks over reps and warranties for over $18.2 billion in cash, and collected billions in additional repurchases.
This one-two punch of enhanced regulation and the threat of consequences for bad lending has created a much safer housing market. Mortgages originated in 2012-2014 have performed exceedingly well, with low rates of default. But mortgage lenders are unhappy with any oversight that eats into their profits. So the industry has engaged in an insidious tactic: tightening lending well beyond required standards, and then claiming the GSEs make it impossible for them to do business. For example, Fannie and Freddie require a minimum 680 credit score to purchase most loans, but lenders are setting their targets at 740. They are rejecting eligible borrowers (which, after all, make lenders money) so they can profit much more from a regulation-free zone down the line. Let’s call this what it is: a shakedown.
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mother earth
(6,002 posts)stranglehold...GW brought us to the brink, AND the steals during the midterms helped orchestrate the final scourge on the working class. Anyone who continues support of the GOP, or the DINO's are idiots, or are suicidal economically. This entire deterioration of our economy has been completely deliberate & it continues.
Demeter
(85,373 posts)IT IS never pleasant to watch a relationship founder. Greece’s prime minister, Alexis Tsipras, has charged its creditors with trying to humiliate the country; he has accused the IMF of “criminal responsibility” for Greece’s suffering. Prominent euro-zone politicians are saying openly that, without a deal to release rescue funds in the next few days, default and “Grexit” loom.
The urgency is because of a repayment of €1.5 billion ($1.7 billion), which Greece seemingly cannot afford, to the IMF on June 30th and because Greece’s European bail-out expires that day. Cue the last-ditch negotiations that have become a Euro-speciality: just after The Economist went to press, finance ministers were to assemble in Luxembourg; leaders may meet over the weekend; a European Union summit is scheduled at the end of next week. It may come down to a head-to-head between Mr Tsipras and Angela Merkel, Germany’s chancellor. A deal is still possible, but the sides have come to loathe each other. If this were a marriage, the lawyers would be circling.
Divorce would be a disaster—for everyone. The trouble is that, unless Greece and the euro zone change the terms of their relationship, staying together would not be a great deal better.
Exit Greece, stage far-left
To see why, start with the results of a default and Grexit. After arguing on and off for five infuriating years, some have begun to welcome the prospect. They are making a mistake. For Greece the gains from defaulting would be slight, and the costs potentially vast. True, the country could walk away from debts of €317 billion, or almost 180% of GDP. But that is worth less to Greeks than it sounds. Although the debt is huge, it is at bargain-basement interest rates and repayable over decades. Interest payments until the early 2020s are just 3% of GDP a year. Even for Greece, that is manageable. Nor would leaving the euro do much good. In theory, with a new drachma and its own central bank, Greece could devalue and gain competitiveness. But Greece’s trade is modest. And it has already lowered nominal wages by 16% without a boom in exports.
The costs of Grexit still outweigh the benefits
By contrast, the cost of Grexit would be exorbitant: bust banks, slashed savings, broken contracts and shattered confidence (see article). Politics could be devastated. Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise. Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive. Most of the parties in the middle, already discredited, would struggle. This week Mr Tsipras was due to play footsie with Vladimir Putin in Russia. Ejected from the euro, and possibly the EU, a country with a history of coups would risk becoming violent and even more corrupt.
That is one reason for the euro zone to think twice before ditching Greece. A failing state on the Aegean would be the EU’s problem regardless of whether its politicians accepted bribes in euros or drachmas—indeed, it would be a greater and less tractable problem than Greece is today. In addition, monetary union was supposed to be irrevocable. If, in fact, its members risk ejection, then contagion will be more likely to spread to other vulnerable economies, such as Portugal and Cyprus—if not in this crisis, then in the next.
Some people, including possibly Mr Tsipras, have concluded that the price of Grexit is so high that Greece can count on the euro zone giving ground at the last minute. But that is reckless. If the euro is to endure, its rules must be enforceable. So long as the monetary union is forged between sovereign states the principles of irrevocability and enforceability are contradictory. Yet you can be sure there is a limit to what the euro zone will tolerate—even if nobody knows where it lies.
Till debt do them part
The upshot is that Grexit is a process, not an event. Even if talks fail, even if Greece defaults, even if it introduces capital controls and the government starts to issue paper IOUs because no more euros are left—even then, a referendum or a new government could still offer Greece a way back. But a deal is a process, too. Though it would doubtless be hailed as a triumph, it would mark only a step towards the eventual restructuring of Greek debt. Trust is so low and Greece’s reluctance to honour its pledges so evident, that each slug of new rescue money will depend on Greece showing that it has kept its side of the bargain. Such conditionality is necessary and economically desirable (see article), but in today’s poisoned environment comes at a high cost. Relations between the euro zone and Greece are defined in terms of the “concessions” each has screwed out of the other. The marriage may endure, but even more unhappily than before.
A change of mindset is needed. Both sides have bungled the Greek crisis. Especially at the outset, the creditors put too much weight on rapid fiscal adjustment, in a doomed attempt to limit the size of Greek debt. As well as needlessly impoverishing Greece (GDP has shrunk 21% since 2010), this was a distraction from the real task, which is to sort out the structural impediments to growth—rampant clientelism, hopeless public administration, comically bad regulations, a lethargic and unreliable justice system, nationalised assets and oligopolies, and inflexible markets for goods and services and labour. But Mr Tsipras has made a bad situation worse. In 2014 the Greek economy grew. Now it is shrinking again, partly because Syriza has proved incompetent and even more clientelist than its predecessors. But also because posturing in negotiations has absorbed all Syriza’s attention and set the country back years. The need for a crisis to bring the talks to a head and to wring concessions from the other side has wrecked market confidence. Capital has flooded out of the banking system. Investors have kept away. Every reform has become a bargaining chip that must not be traded away before a deal and will not be exceeded once a deal has been struck. The idea that reform is actually good for Greece has been lost.
Most Greeks want to stay in the euro. But their politicians still look to Berlin for salvation, rather than to reform at home. Greece must understand that, if this does not change, the creditors will lose patience. Avoiding divorce would be better for everyone. But this marriage is not worth saving at any price.
Demeter
(85,373 posts)The European Central Bank limited a crucial lifeline for Greece, after the head of the Bundesbank told peers he had serious doubts about providing continued emergency funding to Greek banks, people familiar with the discussion said. ECB policy-setters held the limit on this emergency funding for Greek banks steady for the second day running after weeks of increases, a source familiar with those talks said. Greece's central bank may not have asked for an increase, though the country's lenders have seen their reserves dwindle daily as savers spooked by the prospect of default continue to withdraw cash.
This raises pressure on the government in Athens as time runs out for it to agree a cash-for-reforms with its creditors to avert a default.
Bundesbank President Jens Weidmann has warned against the use of emergency credit to prop up Greece's banks ever since the lenders started to rely on it in February. His latest protest was significant because of its timing...Earlier this week, politicians in Ireland and Germany voiced similar concerns...The objections of Germany's central bank, respected as a guardian of monetary order in the euro zone's biggest economy, are significant although it alone cannot stop the Emergency Liquidity Assistance (ELA) being extended to Greece's banking sector, which is now about 89 billion euros ($100 billion).
Greece's ruling Syriza party has dismissed reform demands from the country's international creditors as "blackmail", just as crisis talks to avert a debt default and a euro zone exit entered a critical phase.
As president of the Bundesbank, Weidmann also sits on the ECB's Governing Council, which holds daily phone calls to discuss the extension of the ELA funding. This group can restrict such funding if a two-thirds majority agrees. Others too have concerns about the funding lifeline although they have been wary about speaking out, not wanting to be accused of triggering Greece's financial collapse, one person who attends the meetings of central bank chiefs recently told Reuters. This could now change, as some countries typically fall in behind the Bundesbank. Ralph Brinkhaus, deputy parliamentary floor leader for German Chancellor Angela Merkel's conservatives, had said that the funding was keeping Greece "artificially ... above water".
Demeter
(85,373 posts)Greece's international creditors will put their own final proposal for a cash-for-reform deal to avert a Greek default to euro zone finance ministers for approval on Thursday after Athens let a deadline pass, euro zone officials said.
"If Greece says 'no go' now, it could be the final straw," one senior European official said.
The lenders had given leftist Prime Minister Alexis Tsipras an ultimatum to come up with a credible reform plan by mid-morning (5 a.m. EDT), saying they would otherwise send their own version to Eurogroup ministers. The dramatic move came hours before European Union leaders meet in Brussels for a summit on migration, the long-term future of the euro zone and renegotiating Britain's membership terms, that has been overshadowed by the Greek debt crisis.
A Greek official said Athens was standing by the proposals submitted on Monday with the inclusion of some modifications made during negotiations this week. The heads of the European Commission, International Monetary Fund and European Central Bank set Tsipras the deadline to come up with a new, workable proposal of reforms to unlock new funding and avert a debt default next Tuesday. Tsipras left European Commission headquarters smiling and flashing a thumbs-up sign after three hours of meetings on Thursday but made no comment. Euro zone finance ministers, known as the Eurogroup, were to meet again at 7.30 a.m EDT after cutting short a meeting on Wednesday evening because there was no draft agreement to discuss.
Diplomats said the lenders' tactics reflected exasperation at Tsipras's refusal to compromise on key reforms of pensions, labor markets, wages and taxation, which cross his Syriza party's self-declared "red lines". Greek officials close to the talks say the government has already compromised on its red lines by offering to raise taxes and pension contributions. They say the lenders showed a lack of will to do a deal by changing estimates of how much each measure they propose could raise, making it difficult to come up with an acceptable offer. Without a cash-for-reform deal in the next 48 hours, the chances of Greece averting a default to the IMF look slim. Failure to repay 1.6 billion euros owed to the IMF on Tuesday could trigger a bank run and capital controls, followed by a slide out of the single currency area. Austrian Finance Minister Hans Joerg Schelling, a hardliner on Greece, said the ultimate deadline for a deal was Sunday, a day before a German parliament sitting that would have to approve the release of aid to meet the IMF payment.
"BLACKMAIL"
Greek politicians in Tsipras' party continued to be defiant. "The lenders' demand to bring annihilating measures back to the table shows that the blackmail against Greece is reaching a climax," Nikos Filis, Syriza's parliamentary spokesman, told Mega TV. He said the Greek side was maintaining its insistence on debt relief as part of any accord, in comments that were echoed by Labor Minister Panos Skourletis. "There cannot be a deal without a substantial reference and specific steps on the issue of debt," Skourletis said in an interview with state broadcaster ERT.
Frustration was palpable on both sides, with one euro zone official describing the loss of trust in the Greeks as "extreme" and questioning whether an agreement was realistic given the intransigence from Athens. In Frankfurt, a source familiar with ECB deliberations said powerful German Bundesbank chief Jens Weidmann had expressed concern about the continued provision of emergency liquidity to keep Greek banks afloat despite deposit flight. ECB policy-setters held the limit on this emergency funding for Greek banks steady for the second day running after weeks of increases.
Positive signals earlier in the week, when the Greek government submitted a new list of proposals, mostly involving increases in tax and social security deductions, have given way to a growing belief that an accord is slipping away, although seasoned diplomats cautioned that in EU negotiations the situation always seems bleakest before a last-gasp deal. Negotiators have been unable to produce an agreed draft text due to lingering differences over pension reform, taxation, labor law, public sector wages, the opening of closed professions, and investment. Among the most crucial unresolved issues are Greek demands for debt restructuring, differences over reforming Greece's costly pensions system and Athens' focus on tax hikes versus spending cuts. The latest Greek proposals, made in a five-page document on Monday, featured a series of tax rises on consumption, businesses and the wealthy, as well as higher contributions to pensions to meet budget targets.
"You can't build a program just on the promise of improved tax collection, as we have heard for the past five years with very little result," IMF chief Lagarde told French magazine Challenges on Wednesday.
The more concessions Tsipras makes, the more resistance he will face in parliament within his coalition and on the streets, where recent protests, some organized with Syriza's support, have underlined opposition to yet more belt-tightening.
"Lenders are opposing a tax on e-gambling but want a 23 percent VAT tax on milk. Are they doing this for growth or (to serve) interests?" Dimitris Papadimoulis, a Syriza lawmaker at the European parliament, tweeted on Thursday morning. "The lenders' hard core faction does not want a deal but a rift, Greece's humiliation and the fall of the Tsipras government. It won't get its way."
Demeter
(85,373 posts)...Tsipras went to Brussels yesterday to try to rescue an agreement. In a very bad sign, there were few leaks despite the meeting with Lagarde, Juncker, and Draghi going until past midnight, seven hours in total. Press reports today all indicate little progress was made. ...
...Greek pollster Alco says support for dropping out of the euro has grown from 20 to 30 % in recent weeks...
THIS MAY BE WHAT TSIPRAS IS TRYING TO DO---MOVE GREEK PUBLIC OPINION TO THE EXIT
MORE THAN YOU CAN STAND AT LINK
Demeter
(85,373 posts)NOT SURE WHY YVES SAYS "IF"
http://www.nakedcapitalism.com/2015/06/what-if-the-euro-area-falls-into-serious-deflation.html
Yves here. This post explains indirectly why one of the “reforms” that the creditors have been insisting that Greece implement is “liberalizing” the labor market, which is bureaucrat-speak for squeezing workers. Astute readers will notice that the logic is based on the loanable fund model, which we’ve been debunking every time a good paper or story gives us an excuse to return to that theme (see this post AT LINK IN ORIGINAL for a recent discussion).
By Philip Arestis, Professor of Economics at the University of the Basque Country, Spain and Malcolm Sawyer, Professor of Economics, University of Leeds. Originally published at Triple Crisis
The economies of the euro area monetary union are close to deflation. In May 2015, the annual rate of inflation averaged 0.3% across the euro area, after six months during which the rate of inflation had been zero or below. The question then arises as to whether the deflation has been internally or externally generated, whether it becomes self-perpetuating, and what the consequences would be...The dramatic drop in global oil prices have had a significant effect in the reduction of the rate of inflation, though with some recent rises, this dampening effect on inflation may have come to an end. The threat of zero or negative inflation means that households and firms, which are heavily indebted, find it difficult to service their debt, partly because its real value increases with falling prices and also because current household income is falling and firms are reluctant to invest in view of expected falling demand.
Deflation could well compound the lack of aggregate demand which stalks the euro area. The strategy of the euro area to reduce unemployment is based on a twin track approach of reducing budget deficits based on a belief in “expansionary fiscal consolidation,” and reinforcement of so-called structural reforms to make labour and product markets more “flexible.” But structural reforms and improving competitiveness entail flexible labour markets, a lower minimum wage, less labour job protection, and a strategy of wage cuts as a way forward. Surely, though, a successful implementation of these policies would result in lower aggregate demand and lower wages. Consumption, the largest component of aggregate demand, would tend to decrease, being closely linked with wage income. Much reliance is placed by policy-makers on a boost to investment coming from the reduction of budget deficits and lower wages. But the outcome is more likely to be lower investment as aggregate demand is adversely affected. Exports could be aided through lower prices, but much would depend on the response of the euro exchange rate such that the export prices in, say, dollars would change little. In any case, exports by the euro area as a whole are a relatively small proportion of GDP.
One of the arguments for “structural reforms” to create “flexible labour markets” is that “inflexible labour markets” mean that a stimulus to demand (e.g., coming from a reduction in interest rates) is swallowed up by wage and price rises with little effect on output and employment. This is explained by the existence of labour market rigidities, which, in the words of the ECB (2004), “limit the pace at which an economy can grow without fuelling inflationary pressures” (p. 21). Thus, if the ECB lowered the rate of interest in an attempt to expand economic activity in the euro area economy, this would merely be translated into higher prices with only limited effects on real economic activity. This is the ECB-handicap hypothesis (Angeloni et al. 2003). In terms of labour market reforms, this hypothesis suggests that labour markets should become more flexible if more jobs are to be created, which would promote growth. Available evidence, however, suggests that these reforms are not important in creating jobs and promoting growth. Inflexible labour markets do not appear to be as important as insufficient aggregate demand in explaining the euro area’s inability to increase income and employment. If at all important, they are so in the long run.
De Grauwe and Costa Sorti (2005) investigated the ECB-handicap hypothesis. The authors of this study utilise a “meta-analysis,” which aims first to “statistically analyse the estimated effects of monetary policy shocks on output and prices, and second to identify the factors that can explain the differences in these estimated effects” (p. 4). They employ 83 studies, which report on the impact of interest rates on inflation and output. Four different parameters that measure the effect of monetary policy are examined: short-term effects on prices and output; and long-term effects on prices and output (effect after one year measures the short term; effect after five years measures the long term). Since many of the 83 studies employed report results for more than just one country, 278 parameters that measure the short-term and long-term effects on output are obtained, while only 185 parameters are possible to obtain for the short-term and long-term effects on the price level. An econometric equation explaining these different parameters is employed. The purpose is to control for a number of variables that can affect the size of the estimated coefficients (different estimation methods, different time periods, etc.). It is concluded that, for the euro area, like for the United States, that the short-term effect on the price level is very small, while the long-term effect on prices is significant. Short-term and long-term effects on output are significant. The ECB-handicap hypothesis is, thus, not upheld. It is, thus, not the case that the ECB cannot affect output because of the existence of rigidities, especially in the labour markets.
We may therefore conclude that the key to avoiding deflation in the euro area, and elsewhere, is not to introduce structural reforms. It is, rather, a solid growth of domestic demand. A stable and healthy wage growth that would encourage consumption and thereby aggregate demand is the solution, rather than structural reforms.
mother earth
(6,002 posts)Yves? That's WHY people are pro-Greece, until now I honestly did not see her supporting that. Until now, I took her opinion as being dismissive of Syriza. I'm a fan of NC, but didn't really like her assessment at times. It seems the wisdom of Varoufakis has been right all along & consistently.
The Troika has been wrong, wrong, wrong & it seems they don't care if they take Europe down with them. If they continue on & it appears they will, TSHTF scenario will be, a rocky road for all. Germany's beggar thy neighbor tactics are making debt slaves of all the other nations in the EU.
A for this failed practice of austerity...they knew damned well what they were doing when they insisted upon it. To hear that the IMF is decrying income inequality at this stage of the game is a joke. They have been a driving force of income inequality, paying lip service to pretend they aren't guilty...I'd say soothe their souls, but clearly they have none.
mother earth
(6,002 posts)Demeter
(85,373 posts)The second of two former U.S. government agents charged with stealing hundreds of thousands of dollars in bitcoin has reached a plea agreement with the prosecutors. Carl Force, a former U.S. Drug Enforcement Administration (DEA) agent, was charged with stealing bitcoins during the investigation of the illegal Silk Road Internet drug emporium, according to Bloomberg. The investigation led to the conviction of Ross Ulbricht, the site’s founder. Force agreed to plead guilty to money laundering and extortion, according to a court filing Monday.
Force Extorted Payments from Ulbricht
Without telling his superiors, Force used the alias “French Maid” to extort and negotiate with Ulbricht. Force sold information about the government’s investigation in exchange for payment, according to a San Francisco federal court filing Monday. Using this alias and others, Force channeled more than $400,000 in digital currency to his personal bank accounts, according to the filings.
Force’s agreement follows a similar arrangement on June 17 with Shaun Bridges, a U.S. Secret Service agent who worked with Force on the same Baltimore task force.
Ivan Bates, a lawyer for Force, and prosecutors requested a July 1 hearing to enter the guilty pleas...Force was a DEA agent for almost 15 years who resigned last year after the investigation began, according to CCN. Bridges was a Secret Service agent for about six years and also resigned last year when the investigation began.
The amount of bitcoins stolen is unknown.
A court sentenced Ulbricht the harshest sentence possible, including a 20-year life sentence, one for five years, one for 15 years and two for life, all served concurrently and without the possibility of parole. Ulbricht has appealed his conviction and life sentence. A jury found Ulbricht guilty in February on all seven counts with which he was charged, such as running a narcotics-trafficking enterprise, money laundering and computer hacking.
Punx
(446 posts)Shocking! uh...not.
I suppose we should be happy someone from the agency got prosecuted. Ulbricht looks to have been made an example of.
Demeter
(85,373 posts)THE HEAVENS—Saying that His opinion of the heavens and the earth seems to change every time He looks at them, The Lord Our God, Supreme Ruler of the Universe, admitted Monday that He is simply too close to His divine creation to judge whether it’s any good or not.
“I worked on this thing for over 13 billion years, so sometimes I wonder whether I really have enough critical distance,” said God Almighty, adding that, having poured His heart and soul into the universe for so many eons, His attachment to it may be blinding Him to some of its flaws.
“I’m still on the fence about certain creative choices I made, but there are also times when I feel like I’m probably being too critical about small corners I cut when making the cosmos—things that only I would ever notice. What I could really use is an outsider’s perspective.”
At press time, the Lord had decided to step away from His work for a few millennia and hopefully come back to it with a fresh set of eyes.
THIS SONG WRITTEN BY Kurt Weill: "Lost in the Stars" is a musical with book and lyrics by Maxwell Anderson and music by Kurt Weill, based on the novel Cry, the Beloved Country (1948) by Alan Paton. The musical premiered on Broadway in 1949; it was the composer's last work for the stage before he died the following year.
Demeter
(85,373 posts)Former International Monetary Fund chief Dominique Strauss-Kahn was acquitted in France on pimping charges this month, but his legal headaches may not be over.
While Strauss-Kahn will try to put the Lille trial with its days of embarrassing testimony behind him, he and his lawyers must shift their focus to Luxembourg and the failure of a hedge fund that bore Strauss-Kahn’s name. The state prosecutor there is reviewing complaints stemming from the collapse last November of Leyne Strauss-Kahn & Partners following the suicide of Thierry Leyne, who had co-founded the investment firm with Strauss-Kahn months earlier.
“The cases in Luxembourg will drag on for at least two years,” said Lex Thielen, a Luxembourg lawyer who isn’t involved in the cases. “All of this will continue to weigh on his reputation and on him financially.”
Strauss-Kahn stepped down as head of the IMF in 2011 after being charged with sexually assaulting a New York hotel maid. That case was dropped and he reached a civil settlement with the woman in 2012, but his presidential ambitions were dashed. The French prostitution case and his business partner’s death have further damaged his efforts to rehabilitate his professional reputation...
Demeter
(85,373 posts)THE HEADLINE EXAGGERATES
http://www.theverge.com/2015/6/21/8820059/samsung-road-safety-truck-prototype
Back in 2009, Russian design house Art Lebedev introduced the dramatically titled Transparentius concept for improving road safety. It was remarkably simple: put a camera on the front of large, slow-moving trucks and connect it to video displays on the back, thereby informing trailing drivers whether it's safe to overtake the big rig. That's the exact same idea that Samsung is now pursuing with a new prototype truck. Making use of its abundance of outdoor displays, the Korean company has stitched together a video wall of four displays at the rear of the truck, which transmits video captured by a wireless camera at the front.
"See-through trucking"
Samsung says it's now working to obtain regulatory approval for the deployment of its so-called Safety Truck, however the idea doesn't appear economically practical at large scale. The camera might be cheap and simple enough to install, but four displays per truck would be a major investment for any transport company to make, especially since it wouldn't lead to any direct financial benefit. Still, it's impressive that Samsung has managed to overcome the technical challenges (like solar glare) of realizing this otherwise laudable idea.
A more realistic solution to improving information while driving will be provided by Vehicle-to-Vehicle Communication (V2V) systems, which are expected to arrive in US cars next year. This is a form of networked intelligence whereby your car transmits data about its position, direction, and speed, and receives the same about cars around it. It can thus issue alerts about unsafe driving by others or notify of any collisions ahead even before any other drivers have had the time to react. In that way, V2V does even more than just give you vision the way Samsung's Safety Truck would, though making big trucks transparents is undoubtedly a much cooler application of technology.
ONE THAT DOESN'T IGNORE PEOPLE, EITHER
Demeter
(85,373 posts)I decided to satisfy my prurient curiosity and look up the definition of "twerking".
Would you believe there are visual demonstrations of this on youtube?
I may go blind.
After passage of the Treaty that Will Not Be Named, this may be a blessing in disguise.
Demeter
(85,373 posts)
Demeter
(85,373 posts)http://www.washingtonpost.com/politics/obama-poised-for-a-major-trade-win-burnishing-his-foreign-policy-legacy/2015/06/24/e940c6fa-1a77-11e5-93b7-5eddc056ad8a_story.html
LAST PARAGRAPHS:
Simon Rosenberg, president of the liberal think tank NDN, included the trade accord among a series of diplomatic efforts by the Obama administration that could help remake U.S. foreign policy. He also cited the administration’s reopening of diplomatic relations with Cuba and the ongoing negotiations aimed at preventing Iran from obtaining nuclear weapons.
“All of a sudden, if you’re a student of history, you’re seeing him use all the tools in the toolbox in a far more traditional manifestation of American power than just bombing people into the Stone Age,” Rosenberg said. “The conventional wisdom in Washington on the way Obama approaches foreign policy is largely wrong and unfair in many ways.”
IF DESTROYING YOUR NATION IS AN ACHIEVEMENT....MAYBE, JAPAN WILL SAVE US. ALTHOUGH, AFTER WWII, WHY THEY WOULD BOTHER IS BEYOND ME....
Hotler
(11,428 posts)I had a post hidden by the Jury. Of course it was the Obama can do no wrong jury. I ripped on Obamas ass about the TPP and must have ruffled the Obama is a saint crowd, but I DON'T FREAKING CARE. Sometimes I can't help going into Jonestown. I know I shouldn't, but it's a train wreak and it's fun to watch and stir the pot sometimes.
One of the jurors said it was hateful. I say it was hateful the way he rammed Fast track through Congress and keep everything a secret. Take care my friends.
Demeter
(85,373 posts)It used to be you could post, and be considered thoughtfully and respectfully. You could see minds changing.
Now, there's the Bots. They are mindless, so there's no point in trying to affect them. They exist to freeze out discussion and even fact. They are like attack dogs--trained for one purpose and one purpose only....blocking all intellectual and moral development in support of the little tin gods with feet of clay that pass for our "leaders". We don't even get to discuss where we should be led, anymore.
But, the Bots pay their dues and keep the Moderators in funds. It is a sick arrangement.
mahatmakanejeeves
(57,504 posts)Source: Department of Labor, Employment and Training Administration
Read More: http://www.dol.gov/opa/media/press/eta/eta20151255.pdf
News Release
Connect with DOL at http://blog.dol.gov
TRANSMISSION OF MATERIALS IN THIS RELEASE IS EMBARGOED UNTIL 8:30 A.M. (Eastern) Thursday, June 25, 2015
UNEMPLOYMENT INSURANCE WEEKLY CLAIMS
SEASONALLY ADJUSTED DATA
In the week ending June 20, the advance figure for seasonally adjusted initial claims was 271,000, an increase of 3,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 267,000 to 268,000. The 4-week moving average was 273,750, a decrease of 3,250 from the previous week's revised average. The previous week's average was revised up by 250 from 276,750 to 277,000.
There were no special factors impacting this week's initial claims.
The advance seasonally adjusted insured unemployment rate was 1.7 percent for the week ending June 13, unchanged from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending June 13 was 2,247,000, an increase of 22,000 from the previous week's revised level. The previous week's level was revised up 3,000 from 2,222,000 to 2,225,000. The 4-week moving average was 2,237,000, an increase of 5,250 from the previous week's revised average. The previous week's average was revised up by 750 from 2,231,000 to 2,231,750.
UNADJUSTED DATA
....
The total number of people claiming benefits in all programs for the week ending June 6 was 2,101,392, a decrease of 40,915 from the previous week. There were 2,441,475 persons claiming benefits in all programs in the comparable week in 2014.