Surging Unemployment in the US
Unemployment at 10% to Depress Consumer Spending, Survey Shows
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Global Research, June 10, 2009
Bloomberg
By Bob Willis and Alex Tanzi
June 10 (Bloomberg) — Surging unemployment in the U.S. will delay a recovery in consumer spending and mute the rebound when it does materialize, according to a Bloomberg News survey.
The jobless rate will climb to 10 percent by the end of 2009, 1.6 percentage points higher than projected at the start of the year, according to the median forecast of 62 economists surveyed from June 1 to June 8. Household purchases will drop this year more than previously estimated.
Fewer jobs, lower home values, limited credit and shrinking retirement funds will prompt Americans to save, blunting the Obama administration’s stimulus efforts. Still, government infrastructure projects, smaller stockpiles and stabilization in residential construction will help the economy start growing in the second half of this year.
“Consumer spending will come back grudgingly, slowly,” said John Lonski, chief economist at Moody’s Capital Markets Group in New York. “The unemployment rate should continue to rise and remain stubbornly high.” Lonski forecast the jobless rate will reach 10.2 percent in early 2010, higher than he previously estimated.
Personal spending, which accounts for 70 percent of the economy, will fall at a 0.6 percent annual pace in the current quarter and rise at an average 1.1 percent pace in the last six months of the year, down from last month’s projections. For all of 2009, purchases will drop 0.7 percent, the worst performance since 1974.
Spending ‘Muted’
“Consumer spending does look to be more muted in this recovery than typically after a deep recession,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “We would attribute that to the negative wealth effects from housing and stock market declines. There will only be a modest rebound in the next couple of quarters.”
The world’s largest economy will contract at a 2 percent pace this quarter, before growing 0.5 percent in the July-to- September period and 1.9 percent in the final three months of the year, according to the survey. For all of 2009, the economy will contract 2.7 percent, the biggest drop in the post-World War II era.
The jobless rate will average 9.2 percent in 2009, higher than the 8.9 percent worst-case scenario the government used in tests to determine whether a deteriorating economy would require the 19 largest banks to boost capital. The results last month showed 10 of those firms needed more funds. Unemployment climbed to 9.4 percent in May, the government reported last week.
The survey also showed unemployment will average 9.8 percent in 2010, compared with the 10.3 percent the government used in its stress test.
Stress Tests
The weakening in the labor market is one reason the panel overseeing the financial bailout yesterday said regulators should repeat the tests.
Restructuring efforts in the auto industry mean more job losses are on the way. AutoNation Inc., the largest U.S. new- vehicle retailer, plans to close seven showrooms, while Visteon Corp., the former parts-making unit of Ford Motor Co., and chassis manufacturer Metaldyne Corp. have joined General Motors Corp. and Chrysler LLC in declaring bankruptcy.
“Businesses have been very aggressive in cutting costs relative to declines in output,” said Robert Mellman, an economist at JPMorgan Chase & Co. in New York. “It could be because of financial difficulties and uncertainties about access to capital and unwillingness to borrow.”
Stimulus Plan
Already, the economy has lost 6 million jobs since the recession began in December 2007, the most of any slump since the Great Depression. That’s nearly double the 3.5 million jobs President Obama seeks to save or create with the $787 billion recovery plan passed in February.
The president last week announced 10 projects, including improvements in parks, highways and veteran medical facilities, intended to save or create more than 600,000 jobs over three months in an effort to stem the damage. “We have a long way to go on our road to recovery but we are going the right way,” Obama said in a statement.
The jump in government spending will cause the budget deficit to swell to 12 percent of gross domestic product this fiscal year, the highest since monthly records began in 1968, according to the survey median.
Still, government efforts to thaw credit are starting to pay off, making it easier for companies to borrow.
“Capital markets have largely healed,” General Electric Co. Chief Executive Officer Jeffrey Immelt said at a conference yesterday. “As a company you have to invest now. You have to invest when things are darkest.” Still, the economic recovery will be slower than that following the 1982 recession, he added.
A subdued expansion means Federal Reserve policy makers will hold the benchmark interest rate near zero until the second half of 2010, according to the survey median.
Complete article at:
http://www.globalresearch.ca/index.php?context=va&aid=13935
Bait and Switch The (Futile) Pursuit of the American Dream
by Barbara Ehrenreich
The bestselling author of Nickel and Dimed goes back undercover to do for America’s ailing middle class what she did for the working poor.
Barbara Ehrenreich’s Nickel and Dimed explored the lives of low-wage workers. Now, in Bait and Switch, she enters another hidden realm of the economy: the shadowy world of the white-collar unemployed. Armed with a plausible résumé of a professional “in transition,” she attempts to land a middle-class job — undergoing career coaching and personality testing, then trawling a series of EST-like boot camps, job fairs, networking events, and evangelical job-search ministries. She gets an image makeover, works to project a winning attitude, yet is proselytized, scammed, lectured, and — again and again — rejected.
Bait and Switch highlights the people who’ve done everything right — gotten college degrees, developed marketable skills, and built up impressive résumés — yet have become repeatedly vulnerable to financial disaster, and not simply due to the vagaries of the business cycle. Today’s ultra-lean corporations take pride in shedding their “surplus” employees — plunging them, for months or years at a stretch, into the twilight zone of white-collar unemployment, where job searching becomes a full-time job in itself. As Ehrenreich discovers, there are few social supports for these newly disposable workers — and little security even for those who have jobs.
Like the now classic Nickel and Dimed, Bait and Switch is alternately hilarious and tragic, a searing exposé of economic cruelty where we least expect it.
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UPDATE 1-Ban CDS as “instruments of destruction” – Soros
Fri Jun 12, 2009
BEIJING, June 12 (Reuters) – Credit default swaps are “instruments of destruction” that should be outlawed, billionaire investor George Soros said on Friday.
Soros said the asymmetry of risk and reward embedded in CDS exerted so much downward pressure on the bonds underlying the contracts that companies and financial institutions could be brought to their knees.
“Some derivatives ought not to be allowed to be traded at all. I have in mind credit default swaps. The more I’ve heard about them, the more I’ve realised they’re truly toxic,” he told a banking conference.
“CDS are instruments of destruction which ought to be outlawed,” Soros told a meeting of the Institute of International Finance, many of whose member banks and financial institutions are active participants in the huge CDS market.
Going short on bonds by purchasing a CDS contract carried limited risk but almost unlimited profit potential. By contrast, selling CDSs offered limited profit and practically unlimited risk, Soros said.
This asymmetry, which encouraged investors in effect to sell corporate bonds short, was reinforced by the fact that CDS were traded and so tended to be priced as warrants, which could be sold at any time, and not as options, he added.
Credit default swaps are used to protect against nonpayment of debt or to speculate on a company’s credit quality.
But Soros said: “People buy a CDS not because they expect an eventual default but because they expect them to appreciate in response to adverse developments.”
SKEWED INCENTIVES
He said one financial institution that discovered to its cost the risk/reward distortions of CDS was insurer American International Group (AIG.N), which was a big seller of CDS, offering banks protection against a deterioration in their bond portfolios, especially mortgage-linked securities.
The U.S. government stepped in to save AIG from collapse under bad mortgage bets last September, and has put up to $180 billion at the company’s disposal since.
“AIG thought it was selling insurance on bonds and as such CDS were outrageously overpriced. In fact AIG was selling bear market warrants and it severely underestimated their value,” Soros said.
At this point, the phenomenon that Soros describes as reflexivity kicked in. That is to say, the mispricing of financial instruments — in this case, CDS — affected the fundamentals that the prices were supposed to reflect.
Nowhere were the consequences of the ensuing chain reaction more severe than in the case of financial institutions, whose ability to do business depended on trust, Soros argued. He cited the failures of Bear Stearns and Lehman Brothers.
But the potential damage that CDS could do was not limited to financial firms, Soros added. He pointed to the bankruptcy of North America’s largest newsprint maker, AbitibiBowater Inc (ABWTQ.PK), and the pending bankruptcy of General Motors (GM.N)
“In both cases, some bondholders owned CDS and they stood to gain more by bankruptcy than by reorganisation.
“It’s like buying life insurance on someone else’s life and owning a license to kill,” he concluded.
Soros’ criticism echoes fellow investor Warren Buffet’s description of derivatives in 2003 as “financial weapons of mass destruction”.
On derivatives in general, Soros said they should be as strictly regulated as stocks.
He said derivatives should be standardised and saw no case for custom-made derivatives, which he said only increased the profit margins of the financiers who tailored them.
(Reporting by Alan Wheatley; Editing by Chris Lewis)
Complete article at:
http://www.reuters.com/article/marketsNews/idUSPEK34367320090612
Failure of Capitalism: The Crisis of ’08 and the Descent into Depression – Richard A. Posner
The financial and economic crisis that began in 2008 is the most alarming of our lifetime because of the warp-speed at which it is occurring. How could it have happened, especially after all that we’ve learned from the Great Depression? Why wasn’t it anticipated so that remedial steps could be taken to avoid or mitigate it? What can be done to reverse a slide into a full-blown depression? Why have the responses to date of the government and the economics profession been so lackluster? Richard Posner presents a concise and non-technical examination of this mother of all financial disasters and of A the, as yet, stumbling efforts to cope with it. No previous acquaintance on the part of the reader with macroeconomics or the theory of finance is presupposed. This is a book for intelligent generalists that will interest specialists as well.
Among the facts and causes Posner identifies are: excess savings flowing in from Asia and the reckless lowering of interest rates by the Federal Reserve Board; the relation between executive compensation, short-term profit goals, and risky lending; the housing bubble fuelled by low interest rates, aggressive mortgage marketing, and loose regulations; the low savings rate of American people; and the highly leveraged balance sheets of large financial institutions.
Posner analyzes the two basic remedial approaches to the crisis, which correspond to the two theories of the cause of the Great Depression: the monetarist—that the Federal Reserve Board allowed the money supply to shrink, thus failing to prevent a disastrous deflation—and the Keynesian—that the depression was the product of a credit binge in the 1920’s, a stock-market crash, and the ensuing downward spiral in economic activity. Posner concludes that the pendulum swung too far and that our financial markets need to be more heavily regulated.
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Signe Wilkinson
Philadelphia Daily News Mar 12, 2009 |
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Op-Ed: The healthcare war has officially begun
Will Obama stand up to lobbyists and insurers to give Americans a needed public option?
Salon
http://www.salon.com/opinion/feature/2009/06/12/reich/
By Robert Reich
ROBERT REICH, A PROFESSOR OF PUBLIC POLICY AT THE UNIVERSITY OF CALIFORNIA AT BERKELEY, was secretary of labor during the Clinton administration. He is also a blogger and the author of “Supercapitalism: The Transformation of Business, Democracy, and Everyday Life.”
June 12, 2009
Wednesday the American Medical Association came out against a public option for healthcare. The President has reaffirmed his support for it. The next weeks will show what Obama is made of — whether he’s willing and able to take on the most formidable lobbying coalition he has faced so far on an issue that will define his presidency.
And make no mistake: A public option large enough to have bargaining leverage to drive down drug prices and private-insurance premiums is the defining issue of universal healthcare. It’s the only way to make healthcare affordable. It’s the only way to prevent Medicare and Medicaid from eating up future federal budgets. An ersatz public option — whether Kent Conrad’s non-profit cooperatives, Olympia Snowe’s “trigger,” or regulated state-run plans — won’t do squat….
The President can’t do this alone. You must weigh in and get everyone you know to weigh in, too. Bombard your senators and representatives. Organize and mobilize others. And let the White House know how strongly you feel. This is one of those battles that define a presidency. But more importantly, it’s one of those battles that define the state of American democracy.
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Lisa Benson
Victor Valley Daily Press Jun 4, 2009 |
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American Journal of Medicine: Medical Bankruptcy in the United States, 2007: Results of a National Study
June 9th, 2009
Medical Bankruptcy in the United States, 2007: Results of a National Study (PDF; )
http://www.amjmed.com/article/S0002-9343(09)00404-5/fulltext
Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.
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Lawmakers Reveal Health-Care Investments –Key Players Have Stakes in Industry
13 Jun 2009
Almost 30 key lawmakers helping draft landmark health-care legislation have financial holdings in the industry, totaling nearly $11 million worth of personal investments in a sector that could be dramatically reshaped by this summer’s debate. The list of members who have personal investments in the corporations that will be affected by the legislation includes Congress’s most powerful leaders and a bipartisan collection of lawmakers in key committee posts.
At:
http://www.washingtonpost.com/wp-dyn/content/article/2009/06/12/AR2009061204075.html
From: CLG News
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Does the AMA Represent Doctors?
Saturday, June 13, 2009
President Barack Obama is scheduled to speak at the American Medical Association in Chicago on Monday.
AARON CARROLL, M.D., M.S., aaecarro@iupui.edu
Lead author of a study published in the Annals of Internal Medicine on doctors’ views on a national health program, Carroll is associate professor of pediatrics and director of the Center for Health Policy and Professionalism Research at the Indiana University School of Medicine.
He said today: “We conducted what is by far the largest poll done of doctors and found that 59 percent of U.S. physicians favor government legislation to establish national health insurance, an increase of 10 percentage points from five years prior. Much of the general public and Congress seems to think that the AMA represents doctors, but that is far from the case. Most doctors are not members of the organization and the group has ties to financial interests opposed to reforms.
“So not only are most doctors likely for a so-called public option that Obama is proposing, but they are for a much more fundamental reform of establishing national health insurance.”
The results of the poll published in the Annals of Internal Medicine are available here:
Also see: “The AMA’s Ties to For-Profit Health Care.”
http://yglesias.thinkprogress.org/archives/2009/06/the-amas-ties-to-for-profit-health-care.php
From: Institute for Public Accuracy
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About that DHS report
Fringe extremism is a scary, sometimes deadly reality, regardless of the ideology that creates it.
Read More
http://mediamatters.org/items/200906110047?lid=1043074&rid=29494065
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Quillen: Updating Aesop’s fables
By Ed Quillen
The Denver Post
Posted: 06/14/2009
For the past 2,600 years or so, children have learned important lessons from short tales credited to Aesop, an ancient Greek slave.
Times have certainly changed since then, but scholars say the fables have remained pretty much the same. That means they’re not providing the fabulous lessons that modern children need, so I suggest some updates:
The Grasshopper and the Ants:
During summer, when times were good, the grasshopper goofed off. Credit was easy, and the grasshopper acquired a Ferrari and purchased a large flat-screen TV for his palatial abode, which he got for no money down on an adjustable rate mortgage.
Meanwhile, the ants toiled away, storing assets for the future by investing their 401(k) plans in solid enterprises like GM, Chrysler, Citicorp, Lehman Brothers and AIG.
Then winter came. The grasshopper lost all to foreclosure and the repo man. He was starving and penniless as the wind howled and the snow fell. Hoping for charity from the prudent ants, he crawled toward their colony, only to find them scurrying toward him. “We have no sustenance,” they said. “We’ve been wiped out, too. We seek justice.”
The grasshopper joined their chorus, which was drowned out by accusations from the Fox that they were “attempting to foment class warfare,” and they were never heard from again.
Moral of the story: Don’t look for a connection between morality and economics.
The Hare and the Tortoise:
While out jogging to keep in shape, a hare spotted a tortoise plodding along, and began to laugh at the pitiful reptile, who in turn challenged the hare to a race.
The hare got off to a bounding start. Reasoning that he had plenty of time, the hare left the course and pursued a haress for a while, then relaxed with a cold brew. He returned to the course and bounded toward the end where the tortoise was nearing the finish line.
The hare dug hard, his big hind legs made more powerful by anabolic steroids. Within yards of the finish line, just as he began to pass the tortoise, an eagle swooped down and carried off the hare for dinner. This became the basis for a popular video game.
Moral of the story: It’s not win or lose or how you play the game; it’s how the game plays out on the screen.
The Dog in the Manger:
While surfing the Internet one lazy afternoon, the dog discovered that the registration for “cows.com” had expired. For a trifling sum, he acquired the domain, even though he had no use for it.
After discovering that they no longer owned cows.com, the cows approached the dog. “You don’t need cows.com,” they pointed out, “so why don’t you give it back to us?”
The dog snarled and growled until the cows met his outrageous price, then retired to a perfect canine life that involved sleeping a lot and gnawing on T-bones.
Moral of the story: You can do pretty well if you can grab something others covet, even if you can’t use it yourself.
The Fox and the Grapes:
A fox spotted a bunch of grapes hanging high above him. He leapt and clawed at them, to no avail. Then he realized that he was a carnivore and that the only reason he wanted grapes was that he’d just seen an enticing Food Nework feature about luscious fruits of the vine. So he left and went about his business of raiding henhouses.
Moral of the story: Make sure you really want something before making a fool out of yourself trying to get it.
There are many other possibilities — The Boy Who Cried WMD, The Goose who Laid the Leveraged Eggs, The Farmer and the Newt, to name a few. Life has changed much since 600 B.C., and shouldn’t our fables change too?
Ed Quillen (ed@cozine.com) of Salida is a freelance writer and history buff, and a frequent contributor to The Post.
Complete article at:
http://www.denverpost.com/quillen/ci_12573252
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Jimmy Fallon
“President Obama is proposing a new national healthcare plan that’s both inexpensive and accessible. He’s calling it Have Your Surgery In Mexico.”
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three thousand words
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David Cohen
cohencidents.com Jun 15, 2009 |
Cameron Cardow: it’s really important to not to overreact
(www.cagle.com)
Marshall Ramsey: UP
(politicalirony.com)