WALL STREET'S LOOMING COLLAPSE - AMERICA FACES THE NEXT DEPRESSION

As Dow drops another 560 points

Wall Street Journal warns of stock “stampede”

By Nick Beams 
8 December 2018

The sell-off on Wall Street continued Friday, with the Dow ending the day down 560 points. The new plunge came amid rising concerns over the impact of the arrest of Huawei executive Meng Wanzhou on the US-China trade conflict, slower global economic growth, and the intensification of class conflict as evidenced by events in France.

Reporting on the sell-off, the Wall Street Journal said the “retreat” away from US stocks “turned into a stampede Friday, with major indexes suffering declines of more than 4 percent for the week and their worst start to a December since 2008.”

The previous day the newspaper had played its part in trying to boost the markets, following a fall of 784 points in the Dow in the opening hours of trading, by publishing a front-page report that the US Federal Reserve was considering pulling back on interest rate rises next year. This led to an upturn, with the markets closing just 80 points down for the day.

On Friday, both the Dow and the S&P 500 indexes opened with slight gains, but then quickly moved into negative territory, with the Dow down by more than 660 points at one stage. Over the course of the week, the Dow finished down 4.5 percent, the S&P 500 4.6 percent lower and the Nasdaq off by 4.9 percent.

The larger fall in the Nasdaq reflects the sharp decline in tech stocks, which have been hard hit by the deepening US-China trade conflict because of the impact it could have on both the companies’ global supply chains and markets.

Reporting on the market downturn, the Financial Times pointed to the “bearish momentum” and the emergence of the so-called “death cross” in the graph of the S&P 500 index, as its 50-day moving average fell below its 200-day average.

Commenting on market sentiment to the Wall Street Journal, Erik Davidson, chief investment officer for Wells Fargo Private Bank, said: “The list of worries is very, very long these days. Investors are on pins and needles, worried about something at all times, whether it’s the China trade deal, Brexit, the inverted yield curve or monetary policy.”

The main factor in this week’s market downturn has been the issue of US-China economic relations and the prospect that the outcome of the talks between US President Trump and China’s President Xi Jinping, held on the sidelines of the G20 summit last Saturday night, is at best a temporary and very fragile ceasefire.

The Dow rose by 300 points on Monday following Trump’s positive tweets on the outcome of the discussions. But the upturn quickly went into reverse when divergent reports from US and Chinese authorities called that assessment into question, and the Dow plunged 800 points on Tuesday.

This was followed by a further 784 point drop on Thursday morning on the back of the news that Meng Wanzhou had been arrested during a layover at Vancouver international airport and that the US Justice Department was seeking her extradition to face charges related to the breach of US sanctions imposed on Iran.

Details of those charges were revealed in a court hearing yesterday at which it was alleged by Canadian authorities, acting on behalf of their US counterparts, that Meng had fraudulently covered up Huawei’s control of a company called Skycom that was doing business in Iran.

The Canadian prosecutor, John Gibb-Carsley, said Meng had misled financial authorities about the connection between Huawei and Skycom when US sanctions were in operation against Iran. Meng, he asserted, had said there was no connection, when in fact Huawei and Skycom were the same company. “This is the crux… of the alleged fraud,” he said.

Meng served on the board of Skycom, a Hong Kong-based company, for a period in 2008–2009. But Meng’s attorney, David Martin, said there was “no evidence” that Skycom was a subsidiary of Huawei during the time of the alleged sanctions breach. It had been a subsidiary, but had been sold in 2009, and the claim that Meng was engaged in fraud would be “hotly contested.”

The action against Meng and Huawei is the outcome of a long-running investigation by the US Justice Department and Gibb-Carsley said the warrant for Meng’s arrest was issued by a New York court on August 22 this year. It was executed at the Vancouver airport last Saturday at the very time Trump was in discussions with Xi.

There is uncertainty over who knew what while the talks were taking place and whether Trump had been advised. But the president’s national security adviser John Bolton, who was in overall charge of the US arrangements for the discussions, told National Public Radio on Thursday that he knew in advance of the request to Canada to detain Meng.

He said the conduct of Chinese companies, and especially technology companies, which the US claims steal intellectual property and carry out forced technology transfers from US companies doing business in China, was a key issue.

“Huawei is one company we’ve been concerned about,” he said. “There are others as well.”

The move against Huawei is a further indication that for key sections of the US political and national security establishment, the conflict with China is not primarily over trade, but rather the drive to prevent it from expanding its technological and industrial base.

This is why, for past seven months, tentative agreements to move towards a resolution of the trade conflicts have broken down almost as soon as they were made. Last May, a deal that China increase its imports from the US, which US Treasury Secretary Steven Mnuchin said had put the trade war “on hold,” was overturned a few days later.

Now, within just a few days of the latest Trump-Xi talks, any prospect of an agreement appears to have been blown out of the water. This is because the action against Meng and Huawei will confirm the view in Beijing that there is no basis for any agreement because the central US aim is to halt China’s development in crucial high-tech areas.

While the US-China conflict was the central reason for this week’s market turbulence, other significant factors have been at work.

The agreement reached yesterday at the meeting of OPEC to reduce oil production brought a rise in the price. Under most conditions this would have led to a rise on Wall Street, but not on this occasion because of concerns that the oversupply of oil in the past two months is the outcome of a slowing global economy.

There is also another, longer-term process at work. The rise in financial markets, and above the surge on Wall Street since the low point in March 2009—the longest bull market in history—has rested on the suppression of the class struggle by the trade union bureaucracy. But this is now breaking apart, as the ongoing “yellow vests’ demonstrations in France, taking place outside the control of and in opposition to the trade unions, coupled with the growing anger among US autoworkers over latest round of plant closures, make clear.

"It identifies socialism with proposals for mild social reform such as “Medicare for all,” raised and increasingly abandoned by a section of the Democratic Party. It cites Milton Friedman and Margaret Thatcher to promote the virtues of “economic freedom,” i.e., the unrestrained operation of the capitalist market, and  to denounce all social reforms, business regulations, tax increases or anything else that impinges on the oligarchy’s self-enrichment."

 

 

America’s Thanksgivings

22 November 2018

In an effort to give a livelier and more in-depth picture of modern life, American novelists such as John Dos Passos—The 42nd Parallel (1930), 1919 (1932) and The Big Money (1936)—introduced “newsreel” sections including headlines, advertisements and popular songs. We hope the following selections will provide some sense of American reality on Thanksgiving Day 2018.

* * * * *

— “There aren’t many downsides to America’s humming economy. ” (Wall Street Journal)

— “On his days off from his $7.50-an-hour job as a cook at the Chicken Hut restaurant in Riverdale, Ga. [Georgia] , Laugudria Screven Jr., 23, travels more than 25 miles across Atlanta to sell plasma. By offering up his arm to a technician’s needle twice a week at $50 a shot, he scrapes together enough to pay his $360 rent.

“Yet donating plasma takes a toll on Screven’s body, leaving him drowsy and weak. And even with the extra income, he says he sometimes can’t afford to eat more than once a day. Often he comes home to a refrigerator that contains little more than mustard, ketchup and peanut butter.

“‘I sell my blood to pay my bills,’ he said, rubbing his arm as he waited for a bus in East Point, Ga. ‘It’s kind of messed up. If I were paid a fair wage, I wouldn’t have to go through this.’” (Los Angeles Times)

— “Set on 40 acres in Newport, Rhode Island, Castle Hill Inn, a Relais & Châteaux property, provides guests with a classic New England Thanksgiving. Chef Lou Rossi—an alum of NYC’s three-Michelin-starred Per Se—showcases the local harvest with appetizers like Native littleneck clams, Matunuck oysters and chilled white shrimp, plus herb roasted Helger’s Farm turkey with sage gravy and cranberry sauce, and a selection of pies, pastries and tarts. The hotel also features a spa, the Retreat at Castle Hill by Farmaesthetics, and has a selection of romantic and rustic rooms and cottages available by the beach, overlooking the harbor, and on its namesake hill. [A room in the Superior Beach House is $1,091.45 a night including taxes and fees.] (Town & Country)

— “Hundreds of people in need lined Bleecker Street in downtown Utica[New York] to receive a free Thanksgiving day meal to make with their families. … This year roughly 700 meals were donated, an increase of about 200 from last year. In Utica 1 in 3 people are living in poverty, according to DataUSA.” (WKTV )

— “Despite a relatively good economy, local food pantries are seeing a double-digit increase in the number of hungry residents. Des Moines [Iowa] pantries normally expect about a 3.5 percent increase each month, compared to the previous year. But for the last six months, that increase has more than tripled in the metro area, said Rev. Sarai Schnucker Rice, executive director of the Des Moines Area Religious Council, which oversees the network of 14 local pantries.” (Des Moines Register)

— “Though major cities, such as Dayton [Ohio], are often thought of as having the most households facing hardship, several of the Gem City’s suburbs actually rival it. Thousands of families around the Miami Valley are not necessarily in poverty but are still struggling to get by financially, according to the United Way report.” (Dayton Daily News)

— “Three dynastic wealth families—the Waltons, the Kochs, and the Mars—have seen their wealth increase nearly 6,000 percent since 1982. Meanwhile, median household wealth over the same period went down by 3 percent. …

“The median family in the United States owns just over $80,000 in household wealth. The richest person in the United States (and the world), Jeff Bezos, has accumulated a fortune nearly 2 million times that amount. The Bezos fortune expanded by $78.5 billion just in the last year to $160 billion. Even at the recently increased wage of $15/hour, a full-time Amazon worker would need to toil for 2.5 million years to generate this much money.” (Institute for Policy Studies)

— “Gone are lucrative manufacturing positions [in Indianapolis, Indiana]that could elevate a family into the middle class, even without higher education. Those jobs were in city neighborhoods. They offered salaries high enough to pay for homes, send kids to college, and build up savings accounts. And there were tons of them. At their peaks, the General Motors stamping plant employed 5,600 people, Western Electric had 8,000 workers, and RCA had 8,200.

“But today, scattered brownfields—some with crumbling buildings, some vacant lots—are the only remnants of those once-bustling factories. …

“Stefanie Bell and Steven Pedrazoli—and their 8-year-old son, Chance—are living that new reality. Both parents have regularly worked, but the family is homeless. They’ve been living since April at Dayspring Center at 1537 Central Ave.

“Bell, 37, a server, has uncertain wages because she relies on tips and a $2.13 hourly wage that barely covers taxes. During some shifts, the money at Primanti Bros. restaurant downtown is good. During others, factoring in $3.50 for a round-trip IndyGo bus fare, it’s barely worth showing up. The night before meeting with IBJ, Bell made just $30 in tips, despite working 5 p.m. to close.” (Indianapolis Business Journal)

— “There are a lot of things in life you might expect to cost $150,000—just probably not a Thanksgiving dinner. And yet, that’s exactly what Old Homestead, a New York City steakhouse, is offering this year with what it bills as the most expensive Thanksgiving dinner in history, topping the record set by the $76,000 dinner the restaurant offered last year.

“This year’s dinner, which at a total price of $150,000 is nearly three times more than the average U.S. household income, comes complete with all of the world’s finest ingredients, as well as keys to a 2018 Maserati Levante nestled inside a $135-per-pound free-range, organic turkey sprinkled with gold flakes.” (Yahoo Finance)

— “Near where he slept on a Salinas [California] sidewalk Monday night, David Rodriguez, 39, regularly gets meals at Dorothy’s Kitchen in Salinas’ Chinatown. He has not gone to the nonprofit’s Thanksgiving festivity before, but he plans on going for the first time Thursday.

“Born and raised in the Salinas Valley, Rodriguez grew up going to his grandmother’s for Thanksgiving. Homeless since 2012, Rodriguez said he considers many others in Chinatown—a neighborhood often synonymous with poverty—like his family. The opportunity to share his childhood tradition with his new family would mean a lot to him, he said.”(The Californian)

— “The 8th Annual Readers’ Choice Survey from Business Jet Travelerprovides an interesting look into why people fly privately, what they want in their private jets, where they are going, who they fly with, their favorite aircraft and more. … First some good news. If flying privately and planning to fly privately are signs of a strong economy, readers are quite optimistic. While 45% of respondents said they flew about the same amount as the previous year, 22% said they flew more and 8% said they flew much more, compared to 14% who flew a bit less and 12% who flew much less. Looking ahead, 44% of the magazine’s readers said they will fly about the same during the next 12 months, 34% said they will fly a bit more and 11% will fly much more, compared to just 11% who predict they will fly less.” (Forbes)

— “Last August, Destini Johnson practically danced out of jail, after landing there for two months on drug charges. She bubbled with excitement about her new freedom and returning home to her parents in Muncie, Ind. She even talked about plans to find a job.

“Eight months later, Johnson, 27, lay in a coma, silent except for the beeping of machines. She looked small and pale, buried in a tangle of hospital bedsheets and tubes, after suffering a dozen or so strokes as a result of her latest opioid overdose.

“Her mother, Katiena Johnson, kept vigil at the intensive care unit at Ball Memorial Hospital in Muncie every day, fretting not only about whether her daughter would live, or how much brain damage she’d suffered, but also how to pay for the myriad costs resulting from the latest harrowing chapter of Destini’s opioid addiction. Katiena Johnson says her daughter is regaining consciousness and is out of the ICU.” (NPR)

— “We are especially reminded on Thanksgiving of how the virtue of gratitude enables us to recognize, even in adverse situations, the love of God in every person, every creature, and throughout nature. Let us be mindful of the reasons we are grateful for our lives, for those around us, and for our communities. We also commit to treating all with charity and mutual respect, spreading the spirit of Thanksgiving throughout our country and across the world.” (Donald J. Trump’s Presidential Proclamation on Thanksgiving Day,November 20, 2018)

— “MAKE AMERICA GREAT AGAIN! AMERICA FIRST! …

“There are a lot of CRIMINALS in the [immigrant] Caravan. We will stop them. Catch and Detain! Judicial Activism, by people who know nothing about security and the safety of our citizens, is putting our country in great danger. Not good!” (Donald J. Trump’s tweets, November 21)

— “Some vehicles made it out in time the day the Camp Fire [in northern California] ignited. Others became grenades after being hit by flaming embers. The worst of it may have happened in a town called Paradise, approximate population 26,000. ‘I was driving down Neal Road, and the houses by the horse stables were already on fire—the side of the road was on fire as we were driving through,’ said David Cuen, a Paradise resident who I met at a tent encampment of Camp Fire survivors in a Walmart parking lot in Chico. Neal Road is one of only three roads from Paradise with access to Highway 99. It was one of the few ways out: ‘I look in my rear-view mirror, count back 10 cars, and the 10th or 15th car, it blew up. The flames had overwhelmed all the cars by it. And the cops were making people get in cars that had room. So, you’re talking four to five people in each car.’ Cuen spent the week after escaping the fire sharing a tent with his wife and her family.” (Slate)

* * * * *

Vast popular hardship and suffering, on the one hand, and almost indescribable wealth and social indifference, on the other. Two parties of the corporate oligarchy, dedicated to war and political reaction. The impossible economic and political conditions must produce sooner rather than later the greatest social upheavals in American history.

 

"A series of recent polls in the US and Europe have shown a sharp growth of popular disgust with capitalism and support for socialism. In May of 2017, in a survey conducted by the Union of European Broadcasters of people aged 18 to 35, more than half said they would participate in a “large-scale uprising.” Nine out of 10 agreed with the statement, “Banks and money rule the world.”