Tuesday, July 4, 2017


Most people think the United States is the nation most heavily in debt. But if one looks at per capita values, the USA is far from the worst. The worst now looks like it may be China. According to the World Atlas, the United States does not even m...

China's Hidden Debt Bubble

Most people think the United States is the nation most heavily in debt. But if one looks at per capita values, the USA is far from the worst. The worst now looks like it may be China.
According to the World Atlas, the United States does not even make the top 10. What is truly scary is Japan, which has an incomprehensible 248% debt to GDP ratio.
Some other notable high debt to GDP ratios include that of the US at 105.8%, Jamaica at 124.3%, Cape Verde at 119.3% and Bhutan at 115.7% (because of its reliance on Indian financial assistance). Troubled European nations such as Cyprus, Ireland, Belgium, Spain, and Portugal also have troubling ratios. -- Nomad Capitalist
According to Market Realist, Greece, Italy, Portugal, France, and Spain are in worse shape than America, with the UK and Belgium not far behind. Another chart shows that the USA is not the worst in household debt to GDP.
Now, such data can change radically, and rapidly, per week. The point here is not to say that the USA is not doing so badly. One could think of this as individuals without a parachute in free fall from a height in the stratosphere, with the highest one shouting to the lower one, “I am in better shape than you.”
Nor is this to scold anyone. Rather, there is an ominous underreported tidal wave about to occur.
Chinese debt surpasses GDP by 300%.
Global Debt Hits A New Record High Of $217 Trillion; 327% Of GDP – Zero Hedge, June 29, 2017
Anyone who has surveyed the Chinese scene knows that China has been building massive empty urban areas with no one in them. There was massive and reckless speculation, which is now starting to collapse. To get a sense of the enormity of this, one need only see how much concrete was used.
China used more cement between 2011 and 2013 than the U.S. used in the entire 20th Century.
The statistic seems incredible, but according to government and industry sources, it appears accurate. -- Washington Post, 2015
China has “hidden” debt.
Rising defaults in China are unearthing hidden debt at companies across the country.
Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains. -- Bloomberg
This is the Chinese version of the Fannie Mae Crisis. Only, this seems to be driven by crony capitalism rather than bank corruption. Does it matter?
The world economy is poised for a disaster of unparalleled proportions.
Why The Next Recession Will Morph Into A Decades Long Depressionary Event... Or Worse
But the absence of a growing consumer base isn't just a US issue...this is a global problem. The annual growth of the 0-64yr/old population of the combined OECD nations (most the EU, US, Canada, Mexico, Chile, Japan, S. Korea, Australia / New Zealand) plus China, Brazil, and Russia show the growth that has driven nearly all economic growth has come to an end... and begins declining from here on. – Zero Hedge
Those without a sense of history, think that depressions are short interruptions. Depressions can last decades or even centuries. It would not be until 19th century Europe that the average standard of living would start to equal Rome in its heyday. This may be what we are looking at.
Moreover, two new features have arisen which were never seen before in history. In the past, during such debacles, there were places to flee. Until the Great Depression of 1929, it was common practice to return to a relative's farm and wait it out. What made the Great Depression so bad was that America was mostly urban by 1929 and many people had no relative to lodge with. But urbanization was not worldwide in 1929. It is now.
The pace of urbanization has been remarkably swift. In 1950, only 30 percent of the world’s people lived in cities. That has grown to 54 percent in 2014 -- NY Times
If a worldwide downturn occurs, over half the world's population may have no place to wait it out.
The second new feature is small families. Until the 20th century, it was common practice to have large families to provide for one's old age. Youngsters were what kept the economies growing and booming. That is gone. Europe is having a population collapse. America is being kept afloat, but only with immigration. China's one-child policy is blossoming to horrific consequences. Even India is leveling off. It seems that the only places where population is growing are in Islam, Africa, and Israel. Israel is also blessed with a relatively low debt to GDP ratio; making it one of the few nations with a growing population and low debt.
Now in 1929, some nations were affected differently. France was not as severely hit by the Great Depression, though it lasted a bit longer there. Argentina, which had an export economy, was thoroughly destroyed by the Great Depression, when countries closed their markets to Argentina grain. In reality, a good portion of the political and economic disasters that have plagued Argentina over the past century have stemmed from that Great Depression, where Argentina's military and political leaders have used every ridiculous trick in the book to regain the glory that was once theirs before 1929, when it had the 4th highest GDP per capita on the planet.
This time, there will be no place to flee -- not internally, not externally -- anywhere on the planet. The only exception may be that Jews may have an escape to Israel. What it now looks like is that it may be Chinese, not American nor European, debt which will take down the house of cards.
Anyone who has studied history knows that debt at these levels usually ends with war and revolution. The debt of from the French and Indian War had Britain taxing America, which lead to the American Revolution. The debt from supporting the American Revolution bankrupted France, which led to the world shattering French Revolution. German debt after WWI contributed to the rise of Hitler, and so on. The coming debacle will not be limited to a national crisis, nor a civilizational crisis, but will provoke an absolutely total worldwide crisis.

One can foresee major governmental and cultural changes. In a drive to collect taxes, governments may go cashless so they can track all transactions, which will lead to a total abridgment of privacy and liberty. Count on it, health care will be pulled from the sickly and the poor. Who can afford it?
I do not think national governments will collapse – technology has given them a degree of totalitarian options; but societies and civilizations will radically change. A dark age may be coming.
What is interesting is that this collapse may not be able to be laid at anyone's feet – as it was formerly thought the U.S. would be to blame. The whole shebang may collapse overnight, with everyone at fault.
Mike Konrad is the pen name of an American who wishes he had availed himself more fully of the opportunity to learn Spanish in high school, lo those many decades ago. He writes on the Arabs of South America at http://latinarabia.com. He also just started a website about small computers at http://minireplacement.com.

"The Fed, as the central financial instrument of the corporate-financial elite, is concerned above all with preventing a surge in wages as the labor market tightens and workers feel themselves in a stronger position to resume their struggle for better wages and working conditions. The explosive growth of stock prices and corporate profits over the past several decades, and the record increase in the ratio of corporate profits to labor income over this period, have depended on a relentless offensive against the working class, carried out by the entire political establishment, Democratic no less than Republican."


Concerns grow over Fed interest rate policy

By Nick Beams
4 July 2017
A further fall in the US inflation rate announced last Friday is certain to fuel growing concerns in financial circles about whether the Federal Reserve should continue with its policy of tightening interest rates.

Following a rise in the base rate in June, the Fed is set to lift rates again before the end of the year and has laid out a policy for winding down its holdings--$4.5 trillion worth of government and corporate bonds largely accumulated through its program of massive asset purchases following the financial crisis of 2008.

But with inflation showing no sign of meeting the Fed’s target rate of around 2 percent, opposition is being voiced to further increases.

The latest data shows that the core personal consumption expenditures index, which excludes food and energy prices and is regarded by the Fed as its key price metric, rose at an annual rate of 1.4 percent in May, down from 1.5 percent the previous month and well below the 1.8 percent for February.

While short-term interest rates have lifted, in the expectation that the Fed will stick to its policy of rate rises, long-term bond rates, which tend to indicate the views of investors on the longer term prospects for the economy, have been falling.

This has given rise to what is known as a “flattening of the yield curve,” in which the short and long rates converge, possibly leading to an inversion of the yield curve, with the long-term rate falling below the short-term yield. Such a situation is regarded as a reliable indicator of recession. The last such occurrence was at the end of 2007.

Last week, Joachim Fels, an economic adviser for the $1.5 trillion global bond trading firm Pimco, issued a note warning that, while the Fed was lifting rates in order to have some ammunition to fight a future recession, “the risk is that by raising rates too fast and too far, the Fed brings about exactly what it is so afraid of--the next recession.”

He wrote that the US economy was only “one major adverse shock away from a serious deflationary scare,” and that there was a “substantial risk that the Fed’s opportunistic tightening campaign is a hawkish mistake.”

In an editorial comment last week, the Financial Times added its voice to those disagreeing with the Fed’s present agenda. “As the Federal Reserve marches on with its slow but steady campaign of increases in interest rates, the bond markets are sending a warning about the risks of advancing further,” it said, noting the flattening of the yield curve.

“One by one, sound arguments for the Fed continuing its expected series of rate rises are falling away. Real growth in the economy has been weaker than expected of late. Core inflation, and inflation expectations, remain stubbornly below the Fed’s target. And now a relatively reliable indicator of future recession is sounding an increasingly strident warning siren.”

The Fed’s rationale for pressing on with interest rate rises in order to return to what is regarded as a more normal monetary policy is based on an economic model known as the Phillips curve. First developed in 1958, this purports to show a relationship between the unemployment rate and inflation. As unemployment falls, it argues, the push for wage rises increases, leading to a lift in inflation.

The Fed, as the central financial instrument of the corporate-financial elite, is concerned above all with preventing a surge in wages as the labor market tightens and workers feel themselves in a stronger position to resume their struggle for better wages and working conditions. The explosive growth of stock prices and corporate profits over the past several decades, and the record increase in the ratio of corporate profits to labor income over this period, have depended on a relentless offensive against the working class, carried out by the entire political establishment, Democratic no less than Republican.

In this, the trade unions have played the central role, artificially suppressing the class struggle through their unbroken efforts to prevent strikes and isolate and sabotage them when they break out, while maintaining the political domination of the capitalist two-party system over the working class. To this point, despite being widely despised by workers, the trade union apparatuses, acting on behalf of the ruling class, have been able to continue to hold back the working class, as reflected in the continued stagnation in wages.

However, fears are mounting within ruling class circles that this long period of suppressed class struggle is coming to an end, with signs of intense social anger and political radicalization of working people increasing.

According to the Phillips model, with the official US unemployment rate at the historically low level of 4.3 percent, wages and inflation should now start to rise and interest rates should be lifted, if only at a slow rate. The Fed maintains that the absence of price increases is due to temporary factors and therefore “looks through” the present data to what it regards as longer-term processes that will eventually push up inflation.

But this view ignores that the fact that what were regarded for a long period as “normal” economic conditions and relations no longer exist. Price changes are, to be sure, affected by temporary fluctuations--a fall in cell phone charges has been cited as a cause of the most recent price slowdown--but the overall trend is down.

Furthermore, there has been no significant increase in wages, with pay levels continuing to fall in real terms. As the International Monetary Fund noted in its most recent assessment of the US economy, more than half of US households have a lower real income today than they did in 2000.

And the unemployment rate no longer signifies what it once did. This is because any newly created jobs are increasingly low-paid, part-time, casual and contract employment, not the full-time jobs which prevailed when the Phillips model was developed in the midst of the post-war capitalist boom.

The breakdown of the Phillips curve, on which the Fed seeks to base its decisions, points to far-reaching changes in the very structure of the US economy.

In analysing these changes, it must always be borne in mind that the driving force of the capitalist economy is not the expansion of economic output as such, but profit. And the mode of profit accumulation has undergone vast changes in recent decades--a process that began with the rise of financialisation in the 1980s, accelerated in the 1990s, and then took a further leap in the wake of the financial crisis of 2008.

Increasingly, the profits of major corporations are no longer derived from direct investment in productive activities, involving the employment of more workers, leading to wage increases, but through the appropriation of wealth produced elsewhere.

This takes place by two means: the siphoning off of wealth by financial means, and the monopolisation of scientific advancements via the establishment of so-called intellectual property rights by hi-tech firms such as Google, Apple and others, and by giant pharmaceutical and bio-tech companies.

At the heart of this process stand the banks, the investment funds and hedge funds, which dominate the shareholdings of major corporations. It has been calculated that whereas in 1990 the 10 biggest financial conglomerates controlled 10 percent of US assets, they now control 75 percent.

These financial behemoths do not directly produce surplus value--they appropriate it from other areas of the economy in a form of parasitism.

And just as in biology the parasite depends on the flow of life resources from the host, so these corporations depend, in the final analysis, on the flow of surplus value from other areas of the economy. Hence their very mode of accumulation--in which money seems to simply beget money--results in an ever more frenzied drive for the extraction of additional surplus value from the areas of the economy on which they feed, through the lowering of wages, more intensive exploitation and the destruction of previous working conditions.

The restructuring of the US economy to meet these demands has shattered the so-called Phillips curve and all other nostrums on which the Fed and other major policy-making bodies based themselves.

But even more significantly for the working class, it means that political perspectives of the past, based on the possibility of some kind of reform of the capitalist system, have been ground to dust. This poses the objective necessity for a socialist program, starting with the struggle for political power, the bringing of the “commanding heights” of the economy under public ownership, and the complete reorganisation of economic relations to meet human needs.
America’s Looming Economic Armageddon – Can the Rich Get Even Richer During the Meltdown?
Haven’t they looted us into bankruptcy?

 On behalf of bankster-owned Barack Obama, Yellen vows to the rich and crony banksters that they will be protected and subsidized with no strings bailouts during the next looming economic meltdown around the corner from elections.

“In fact, these policies have already produced financial and asset bubbles that are unsustainable, and there are increasing signs of financial instability and crisis. There are growing warnings that the spread of negative interest rates is leading to a new financial meltdown even worse than the disaster that struck eight years ago.”

"The same period has seen a massive growth of 

social inequality, with income and wealth 

concentrated at the very top of American 

society to an extent not seen since the 1920s."

US auto sales fall for sixth straight month
By Shannon Jones
5 July 2017
US auto sales fell again in June marking four months when year over year figures have declined. US-based automakers led the way, with General Motors and Ford both recording sharp drops.
Ford reported a 5.1 percent sales decline for the month while GM said it sales were down 4.7 percent. Hyundai recorded the sharpest decline at 19.2 percent and Fiat Chrysler sales were down 7 percent year over year. Hyundai relies on passenger car sales, which have been hardest hit by the sales slump.
The fall in car sales takes place under conditions of general economic stagnation and signs of mounting crisis. GDP growth for the first quarter of 2017 came in at a revised 1.4 percent, an anemic growth rate for a supposed recovery. Wages gains are all but nil, state and local governments are cutting spending and consumers are burdened with high levels of debt.
Sagging Jeep sales pulled down Fiat Chrysler numbers, with the Jeep brand recording an 11 percent drop. The Jeep Wrangler showed a 55 percent drop and Cherokee sales fell 27 percent. Grand Cherokee sales rose 21 percent and Renegade sales were up 2 percent.
While Japanese-based automakers Toyota, Nissan and Honda recorded small gains, the poor numbers from US car manufacturers led to an overall decline for the month of about two percent. Year over year sales by the six largest automakers are down about 2.6 percent for 2016.
Analysts tried to put a good face on the numbers, noting that auto sales were still expected to hit close to the 17 million mark in 2017, after posting a record 17.55 million units in 2016.
However, June’s sales meant that the industry has experienced declines for the first six months of the year, the first time this has happened since 2009, the year after the financial crash and the same year as the GM and Chrysler bankruptcies. The sales pace was at its lowest since 2014 and the number of customers visiting dealerships was at its lowest level in five years. The lower sales number came despite significant consumer discounts and easier credit terms.
Consumers are hard pressed to afford new vehicles that are becoming more expensive year by year. The larger vehicles that are now in demand carry price tags in the $30,000-$60,000 range, out of the reach for ever greater numbers of low wage workers. The average monthly payment on a car or truck is now over $500. At the same time banks are tightening loan requirements as the default rate surges. For example, JP Morgan Chase reduced its auto lending by 17 percent in the first three months of 2017 compared to last year. As of March 31, auto loan debt made up about 9 percent of total household debt of $12.72 trillion.
Declining sales have already led to layoffs in the auto industry as auto companies cut production to reduce unsold inventories. The cuts threaten to have a ripple effect as auto production is a significant part of overall manufacturing production in the US, with auto part suppliers dependent on orders from assembly plants. Overall US manufacturing fell 0.4 percent in May, fueled by a 2 percent drop in auto manufacturing. Initial reports indicate that US manufacturing output also fell in June. Auto analysts warn that a flood of previously leased vehicles hitting the market could further hurt sales.
In May, Ford announced that it was planning mass layoffs of its salaried workforce in a cost cutting move. Ford said it needed to free up some $3 billion to assist in development of new technologies such as driverless cars.
While Ford has not made permanent cuts to its hourly workforce in the US, it has ordered temporary shutdowns at several plants, including those that build its popular F series pickup trucks. It has meanwhile made cuts to its hourly workforce in Europe. In Germany, it has offered buyouts to staff over the last several months.
GM has announced a series of permanent layoffs over the last six months, eliminating shifts at its Lordstown, Ohio plant, and Lansing Grand River and Detroit-Hamtramck factories in Michigan. It recently announced the elimination of a shift at its Fairfax Assembly Plant in Kansas City, Kansas that builds the Malibu passenger car.
Fiat Chrysler has ended passenger car production in the US in favor of larger size vehicles, which are more profitable and more in demand. Still its overall sales have slumped. Thousands of workers are currently on layoff as it retools its Toledo Jeep and Sterling Heights, Michigan assembly plants to build its new models.
Pressure from financial markets for higher profits has led auto companies to abandon the practice of using fleet sales to car rental companies to offset slack retail sales. Fleet sales usually come with a big discount and therefore eat into profit margins. For example, GM sold 31,000 rental cars in the first half of 2017, a decline of 21 percent from one year ago. Rental sales now account for about 8 percent of total GM sales. That is about one half what it was in years past.
The downward pressure on auto stocks is so great that auto startup Tesla, which has yet to mass produce a vehicle, has a market capitalization on a par with GM, the largest US automaker.
The United Auto Workers (UAW) facilitated the current round of layoffs by agreeing in the 2015 contract to permit the hiring of more temporary and part time workers, who enjoy few job protections and limited recall rights. These workers are being treated by the auto companies as a disposable workforce. Many of those laid off are facing the end of their state unemployment benefits and are not eligible for supplementary unemployment benefits due to being part time or temporary.
Despite the sales slowdown automakers are expected to announce steady second quarter profits later this month due to the wage and benefit cuts and speedup the UAW has enforced in the plants.


Nearly $50 million in cuts planned for northern Virginia school district

By Harvey Simpkins
4 July 2017
In late May the Fairfax County, Virginia school board adopted its $2.8 billion budget for the 2017-2018 school year. The board’s budget included $50 million in cuts from its initial proposed budget.
Fairfax County has the third highest median income among all counties in the United States. Nevertheless, the cuts in the county, just outside of Washington, DC, underscore the fact that even relatively better-off areas are struggling to provide inadequate funding for basic social services.
Due to the cuts, Fairfax County will hire fewer teachers than expected, with a resultant increase in class sizes for the upcoming school year. In addition, the school system will charge students a $50 fee for participating in after-school activities.
The 2017-2018 budget reductions come on the heels of steep cuts in the previous school year when the district faced a $70 million deficit. In fact, the school system has made cuts every year since 2008. Due to the budget issues, Fairfax County has struggled to offer competitive salaries to teachers, resulting in a 50 percent turnover rate in the first five years of employment. At the start of the 2015-16 school year, there were 200 vacant teacher positions.
Prior to the cuts, class sizes in Fairfax County were already among the highest in the DC region. In 2016-2017, the average elementary school class size was 22.4 students per classroom teacher. Middle and high school class sizes were 24.6 and 25.8 respectively. With the cuts, the board says average class sizes will grow by about half a student.
In addition to school cuts, due to budget woes, Fairfax County cancelled a 1.65 percent “market rate adjustment” salary increase for county employees, deferred facility upgrades, sidewalk/trail maintenance, eliminated a program that allowed people with mental health issues to get treatment instead of jail time, and underfunded by $6.7 million a program for employment and day services used by individuals with intellectual and developmental disabilities.
Seventy-two percent of the school system’s funding comes from county tax revenues, with most of that from real estate taxes. The county has faced a declining real estate tax base in recent years, with average home values flat and office real estate values declining in 2016. The county also has a high office vacancy rate, with more than 20 million square feet empty out of the available 116.4 million square feet.
To raise additional revenues, instead of raising taxes on the wealthy or corporations, Fairfax County proposed a regressive meals tax, which was put up for referendum in the November 2016 election. The proposal called for an additional four percent tax on prepared food and beverages. The measure was defeated.
A large part of the decade-long revenue shortfall for the school system is due to substantial reductions in state funding for Virginia schools. Since 2010 the state government has cut $6 billion in funding for K-12 education.
On the federal level, Trump’s fiscal year 2018 budget proposal calls for $9.2 billion in spending cuts for education, a 13.5 percent reduction from 2017. Among the proposed cuts nationally are the elimination of a $2.3 billion program for teacher training and class-size reduction, the elimination of a $1.2 billion after-school academic enrichment program, which serves nearly 2 million children, and the elimination of a $190 million literacy program.
Trump’s austerity measures follow eight years of the attacks on public education by the Obama administration, which used federal dollars to encourage cash-strapped school districts to expand for-profit charter schools, push merit pay schemes on teachers and other corporate-backed “school reforms.”
As the Trump administration slashes educational funding, it will sharply increase military spending. On June 22, both the House and Senate and Armed Services Committees proposed a $706 billion military budget, nearly $100 billion higher than the 2017 budget. Fairfax County is home to numerous military contractors, including Raytheon, BAE Systems, SAIC, and Booz Allen Hamilton. According to the Fairfax County Economic Development Authority, in 2015, $9.4 billion in federal procurement contracts were awarded to Fairfax County businesses to directly support the US Army, Air Force and Navy.
At the same time the defense giants have been handed hundreds of millions in tax abatements and other incentives by state and local governments at the expense of the public schools and other essential services. The financial starvation of education and other social programs in even the wealthiest districts is yet another exposure of the fraudulent claim that the US is experiencing an “economic recovery.”

….. the American Middle-Class at death’s door and knocking

Have you notice Democrat Party politicians always keep their fat mouths closed tight on the topic of the Mexican drug cartels operating across America???


In West Virginia, 5,182 children were in foster care in 2016, most orphaned by the heroin epidemic.

The death toll translates into an average of one fatal overdose every 12 hours in the state of West Virginia.