Links: 2012-12-29

America’s Deceptive 2012 Fiscal Cliff | Michael Hudson

“The reality is that when banks load the economy down with debt, this leaves less to spend on domestic goods and services while driving up housing prices (and hence the cost of living) with reckless credit creation on looser lending terms. Yet on top of this debt deflation, bank lobbyists urge fiscal deflation: budget surpluses rather than pump-priming deficits. The effect is to further reduce private-sector market demand, shrinking markets and employment. Governments fall deeper into distress, and are told to sell off land and natural resources, public enterprises, and other assets. This creates a lucrative market for bank loans to finance privatization on credit. This explains why financial lobbyists back the new buyers’ right to raise the prices they charge for basic needs, creating a united front to endorse rent extraction. The effect is to enrich the financial sector owned by the 1% in ways that indebt and privatize the economy at large – individuals, business and the government itself.”

Let’s cut the crap about Japan’s ‘lost decade’. – Macrobits by Marshall Auerback

“growth should be refocused on socio-ecologically durable domestic consumption. At the same time, it is important to avoid the financial dynamics that have been at play in the United States. The United States has been following a strategy of consumption-led growth for the past 30 years, but it has been based on unsound financial practices induced in part by growing income inequality.  Japan has less of that problem.

Another shortcoming of investment-led growth is that it is prone to Ponzi finance”

China Budget Gap Said Set to Widen 50% to $192 Billion – Bloomberg

“China plans to increase the budget deficit by 50 percent to 1.2 trillion yuan ($192 billion) in 2013, including the sale of 350 billion yuan of bonds to fund local governments, a person familiar with the matter said.
The central government deficit is budgeted at 850 billion yuan, according to the person, who asked not to be identified as the deliberations are not public. The nation’s leaders target about 8 percent trade growth, down from this year’s 10 percent goal, the person said.
A bigger fiscal deficit may give China’s new leadership under Xi Jinping more room for tax cuts and measures to boost urbanization and consumer demand. “

IPOs Slump to Lowest Level Since Financial Crisis – Bloomberg

“Initial public offerings in 2012 slumped to the lowest level since the financial crisis as signs of an economic slowdown and Facebook Inc.’s (FB) disappointing debut curbed demand and prompted companies to push back sales.
IPOs have raised $112 billion worldwide this year, the least since 2008, according to data compiled by Bloomberg. Initial sales in western Europe dropped to one-third of last year’s level, while concern about China’s economy helped cut proceeds in Asia by almost half. U.S. offerings raised $41 billion, little changed from last year, as Facebook’s IPO spurred a monthlong drought in U.S. deals.”

BBC News – Living wage could save £2bn – think tank research

“They say paying staff at least £7.45 per hour outside London, and £8.55 within the capital, would boost the nationwide income by £6.5bn a year.

But the government would collect more income tax and pay out less in benefits and tax credits.”

Shinzo Abe’s Monetary-Policy Delusions by Stephen S. Roach – Project Syndicate

“Massive liquidity injections carried out by the world’s major central banks – the Fed, the ECB, and the BOJ – are neither achieving traction in their respective real economies, nor facilitating balance-sheet repair and structural change. That leaves a huge sum of excess liquidity sloshing around in global asset markets. Where it goes, the next crisis is inevitably doomed to follow.”

Distressed home listings down 93% from peak – Lansner on Real Estate : The Orange County Register

“Distressed homes made up 12 percent of the market on Dec. 20, Thomas reported. By comparison, they made up 38 percent a year ago and 45 percent at the end of 2008 and start of 2009.
Yet, competition to buy those homes remains high. Distressed homes accounted for a third of the housing deals signed in the previous month, Thomas reported.”

Mobile Market Share – Business Insider

“Over the past couple of years, we have written often about a major long-term risk for Apple, which is the gradual loss of mobile market share to the Android platform.
This trend has continued in recent months, to the point where Apple has now been reduced to a niche player in the global market.
The more market share Apple loses, the more worried Apple shareholders should become. And the more Apple should consider making a subtle but important shift to its product and pricing strategy.”

Euro doomsayers adjust predictions after 2012 apocalypse averted | Reuters

“”There may be a logic to Greece leaving, but the mechanics are too disruptive for both Greece and its neighbors,” said Barry Eichengreen, an economist at U.C. Berkeley, who has long argued that the euro is irreversible.

“An appreciation of European politics makes you realize that everything will be done to prevent a breakup of the monetary union. It would be intensely catastrophic, economically and politically.””

The robot economy and the new rentier class | FT Alphaville

“It seems more top-tier economists are coming around to the idea that robots and technology could be having a greater influence on the economy (and this crisis in particular) than previously appreciated. Paul Krugman being the latest.”

GOP and Feinstein join to fulfill Obama’s demand for renewed warrantless eavesdropping | Glenn Greenwald | Comment is free |

“To this day, many people identify mid-2008 as the time they realized what type of politician Barack Obama actually is. Six months before, when seeking the Democratic nomination, then-Sen. Obama unambiguously vowed that he would filibuster “any bill” that retroactively immunized the telecom industry for having participated in the illegal Bush NSA warrantless eavesdropping program.

But in July 2008, once he had secured the nomination, a bill came before the Senate that did exactly that – the FISA Amendments Act of 2008 – and Obama not only failed to filibuster as promised, but far worse, he voted against the filibuster brought by other Senators, and then voted in favor of enacting the bill itself.”

Who killed Newsweek? » The Spectator

“much of the grandeur had probably turned to flab. But it’s easy to look back from a deathbed and point to early signs of decrepitude. Newsweek, for all its profligacy, was profitable as recently as 2006. Time, its older and flashier rival, remains ‘highly profitable’, according to executive Peter Kafka (though critics claim that’s only because much of its overhead gets spread across the Time-Warner media stable). The Economist too, is doing well — its last accounts show operating profit up 6 per cent.

So the death of Newsweek is not the journalistic equivalent of ash-tree dieback — patient zero of an epidemic that will fell the whole forest. Newsweek’s demise was of its own making.”

Housing, factory data point to momentum in economy | Reuters

“Contracts for U.S. home resales hit a 2-1/2-year high in November and factory activity in the Midwest expanded this month, suggesting some strength in the economy despite the threat of tighter fiscal policy.”

Irish house prices rise at fastest pace in six years – Telegraph

“House prices in Ireland rose at the fastest pace in more than six years in November, as the country recovers from Europe’s worst real estate crash.”

The fiscal cliff meets the debt ceiling: what’s the latest? | Heidi Moore | World news |

“This coming week promises to be a decisive one for the US economy – and by “decisive” we mean “nothing will get done even though we are facing some desperate deadlines”, but you knew that, because that’s what’s been happening in Washington since last August. The US Treasury has already given up any expectation that Congress will do anything to battle the twin demons of the fiscal cliff and the debt ceiling before the Tuesday deadline.”

Shares in Spain’s troubled Bankia plummet 26pc | South China Morning Post

“On Wednesday, Spain’s state-backed Fund for Orderly Bank Restructuring, or FROB, said Bankia had a negative value of 4.148 billion euros and its parent group BFA a negative value of 10.444 billion euros.

Spanish banks are still struggling with a mass of loans that turned sour after a property bubble collapsed in 2008.”

Spain does not need European help for now, says PM | Reuters

“Spanish Prime Minister Mariano Rajoy said on Friday that Spain did not need to tap for now the European Central Bank’s bond-buying program for troubled euro zone governments but did not rule out asking for aid in the future.”

Munis Beat All Assets in Longest Streak Since 2006: Muni Credit – Bloomberg

“About $26 billion flowed out of muni mutual funds in 2011 on concern that state and local government credit quality would deteriorate after the 18-month recession that ended in June 2009. The outflows were spurred in part by banking analyst Meredith Whitney’s incorrect December 2010 prediction of “hundreds of billions of dollars” of muni defaults within a year.
Instead of widespread municipal failures, local governments showed signs of stabilizing in 2012.
Half of all U.S. states either returned to peak tax- collection levels from before the recession or will soon, according to a survey by the National Conference of State Legislatures released this month.”

Noahpinion: Trust not in Shinzo Abe, ye monetarists!

“Abe is targeting exchange rates, not inflation (or NGDP). He’ll do what he has to do to tweak foreign expectations enough to keep the yen weak, but he won’t actually follow through and revoke BOJ independence. And even if by some miracle he does revoke BOJ independence, he won’t insist on a hard inflation target. A non-independent BOJ wouldn’t be controlled by Shinzo Abe, it would be controlled by the Ministry of Finance, and those people are just as likely to fear the peril of hyperinflation.”

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