STOCK MARKET WATCH -- Tuesday, 14 May 2013

[Tansy_Gold]

[font size=3]STOCK MARKET WATCH, Tuesday, 14 May 2013[font color=black][/font]

SMW for 13 May 2013

AT THE CLOSING BELL ON 13 May 2013
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Dow Jones 15,091.68 -26.81 (-0.18%)
[font color=green]S&P 500 1,633.77 +0.07 (0.00%)
Nasdaq 3,438.79 +2.21 (0.06%)


[font color=green]10 Year 1.92% -0.02 (-1.03%)
30 Year 3.11% -0.01 (-0.32%)[font color=black]


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[font size=2]Market Conditions During Trading Hours[/font]
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[font size=2]Euro, Yen, Loonie, Silver and Gold[center]

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[font color=black][font size=2]Handy Links - Market Data and News:[/font][/font]
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Economic Calendar
Marketwatch Data
Bloomberg Economic News
Yahoo Finance
Google Finance
Bank Tracker
Credit Union Tracker
Daily Job Cuts
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[font color=black][font size=2]Handy Links - Economic Blogs:[/font][/font]
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The Big Picture
Financial Sense
Calculated Risk
Naked Capitalism
Credit Writedowns
Brad DeLong
Bonddad
Atrios
goldmansachs666
The Stand-Up Economist
The Automatic Earth
Wall Street on Parade
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[font color=black][font size=2]Handy Links - Essential Reading:[/font][/font]
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Matt Taibi: Secret and Lies of the Bailout


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[font color=black][font size=2]Handy Links - Government Issues:[/font][/font]
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LegitGov
Open Government
Earmark Database
USA spending.gov
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[font color=black][font size=2]Handy Links - Videos:[/font][/font]
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Charlie Rose talks with Roubini
Charlie Rose talks with Krugman
William Black: This Economic Disaster
Bill Moyers with Kevin Drum and David Corn
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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.










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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]

[Demeter]

1. Your Cartoon Source Tracks the News Closely, Tansy

Good find.

[Demeter]

2. Success lessons

MEANWHILE: Aries

You might start the day off feeling invincible, but your plans may crumble if overconfidence makes you careless in your execution. Being prepared for what's ahead is crucial today and rewards are possible if you don't try to skip over the necessary details. Be realistic while setting your goals now, because aiming at the right destination is the first step to being successful.

[xchrom]

3. Internet giant Amazon hit by first strike in Germany

http://www.rawstory.com/rs/2013/05/14/internet-giant-amazon-hit-by-first-strike-in-germany/



German employees of Amazon staged their first-ever walkouts on Tuesday as the US Internet retail giant was hit by a dispute over pay.

Employees at two logistics centres in Bad Hersfeld and Leipzig launched a strike with the start of the early shift at 6:00 am (0400 GMT), the giant services sector union Verdi said.

In Bad Hersfeld, strikers planned to march to a rally in the city centre at around 11:00 am (0900 GMT), while employees in Leipzig rallied in front of the warehouse.

“There’s a good atmosphere. The whole thing is really great,” said Verdi’s chief negotiator Joerg Lauenroth-Mago.

[Demeter]

4. Afghan Taxes Weigh Heavily On U.S. Contractors

Go Karzai!


http://www.npr.org/blogs/thetwo-way/2013/05/14/183865455/afghan-taxes-weigh-heavily-on-u-s-contractors-report-says?ft=1&f=1001

Since 2008, the Afghan government has assessed nearly $1 billion dollars in taxes — sometimes erroneously — on U.S. contractors working in the country, according to a new report from the Pentagon's , NPR's Tom Bowman tells our Newscast Desk.

John Sopko, the special inspector general, says the tax confusion has led to the arrest of contractors, increased costs to the U.S. government and interruptions to American military operations.

According to the report, which we'll embed below and , Afghanistan's Ministry of Finance has levied some of the taxes despite agreements that should have provided exemptions: "For example, $93 million of the $921 million represented taxes levied on business receipts and annual corporate income — a tax category that both the U.S. and Afghan governments have agreed should be exempt for contractors operating under covered agreements."

At issue, the report adds, is the finance ministry's view that the agreements "provide tax-exempt status only to prime contractors, and not subcontractors, whereas U.S. government officials contend that the agreements provide tax exemption for all non-Afghan companies (both prime and subcontractors) supporting U.S. government efforts."

[xchrom]

5. Ecuador Voted The Best Place In The World To Live In Retirement

http://www.businessinsider.com/ecuador-voted-the-best-place-in-the-world-to-live-in-retirement-2013-5

Good living, great weather and excellent medical care make Ecuador the top spot for retirees.

The tiny country of Ecuador has been voted the best place in the world to retire to.

Located in the remote north-west region of South America, Ecuador has a population of just 15 million. But it is proving attractive for expats – with a cheap cost of living, good weather and top-class yet affordable health care.

Expats qualify for health care by paying a small monthly fee, while those looking for employment will find applying for a work visa much easier than in many Western countries.


Read more: http://www.businessinsider.com/ecuador-voted-the-best-place-in-the-world-to-live-in-retirement-2013-5#ixzz2TGiRCxkT

[Demeter]

6. Food-Stamp Use Rises From Year Ago

http://blogs.wsj.com/economics/2013/05/10/some-47-6-million-received-food-stamps-in-february/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+wsj/economics/feed+%28WSJ.com:+Real+Time+Economics+Blog%29



Food-stamp use rose 2.7% in the U.S. in February from a year earlier, with 15% of the U.S. population receiving benefits. One of the federal government’s biggest social welfare programs, which expanded when the economy convulsed, isn’t shrinking back alongside the recovery. Food stamp rolls increased on a year-over-year basis, but were 0.4% lower from the prior month, the U.S. Department of Agriculture reported. Though annual growth continues, the pace has slowed since the depths of the recession. The number of recipients in the food stamp program, formally known as the Supplemental Nutrition Assistance Program (SNAP), reached 47.6 million, or nearly one in seven Americans.

Illinois was the only state to see a double-digit year-over-year jump in use, while Utah, Michigan, North Dakota, Idaho, Pennsylvania, Missouri, Arizona, Maine and Texas all posted annual drops.

Mississippi was the state with the largest share of its population relying on food stamps — 22% — though Washington, DC was a bit higher overall at 23%. One in five residents in Oregon, New Mexico, Louisiana, Tennessee, Georgia and Kentucky also were food-stamp recipients. Wyoming had the smallest share of its population on food stamps — 7%.

(See an interactive map with data on use since 1990.)
http://blogs.wsj.com/economics/2013/05/10/some-47-6-million-received-food-stamps-in-february/tab/interactive/

[Demeter]

7. THE UNPAID INTERNS STRIKE BACK

http://www.businessweek.com/articles/2013-05-13/as-summer-job-season-starts-unpaid-interns-suffer-setback-in-court#r=hp-ls

Some interns are fed up. Giving up hope that their unpaid gigs will lead to paid jobs, they’re taking the extreme step of suing employers.

Whether this proves a smart career move in the long run remains to be seen. In the short term, a federal judge in New York has sent angry interns a discouraging signal.

In a ruling on May 8, U.S. District Court Judge Harold Baer told a group of former unpaid workers for Hearst they could not sue the large publisher as a class for having failed to treat them as regular employees. While the ruling was procedural and did not address the merits of the interns’ complaints, Baer said they’ll have to take Hearst to court individually.

The proposed class would have included more than 3,000 interns who have worked at Hearst since February 2006. The interns alleged that they performed tasks similar to employees and were entitled to minimum wage and overtime protections under federal and state labor laws, reported Bloomberg BNA. Hearst said interns do not need to be paid if they’re in college and eligible for academic credit, adding that the company did provide some training and benefits...

[Demeter]

8. Laptop U: Has the future of college moved online? by Nathan Heller

http://www.newyorker.com/reporting/2013/05/20/130520fa_fact_heller?mbid=nl_Daily%20%28241%29

...Many people think that MOOCs are the future of higher education in America. In the past two years, Harvard, M.I.T., Caltech, and the University of Texas have together pledged tens of millions of dollars to MOOC development. Many other élite schools, from U.C. Berkeley to Princeton, have similarly climbed aboard. Their stated goal is democratic reach. “I expect that there will be lots of free, or nearly free, offerings available,” John L. Hennessy, the president of Stanford, explained in a recent editorial. “While the gold standard of small in-person classes led by great instructors will remain, online courses will be shown to be an effective learning environment, especially in comparison with large lecture-style courses.”...

[Fuddnik]

9. Yves Smith. Welcome to the Brave New World of Corporatized Medicine:

IT'S WORSE THAN THE 'TOON!


Welcome to the Brave New World of Corporatized Medicine: Just Hope You Don't Get Sick!
"Business freedom" in America increasingly means the God-given right to exploit the vulnerability of the public.

http://www.alternet.org/economy/welcome-brave-new-world-corporatized-medicine-just-hope-you-dont-get-sick

May 13, 2013 |



One of the most effective scare techniques employed to preserve our grotesquely inefficient, overpriced health care system has been to invoke the red peril of “socialized medicine”. Never mind that foreigners in advanced economies fail to recognize the caricatures scaremongers supply, or that Americans who need emergency care while overseas are almost without exception impressed with the caliber of care and astonished by the low (sometimes no) cost to them. After all, Americans live in the best of all possible worlds, and consumer and business freedom are always better.

In fact, business freedom here increasingly means the God-given right to exploit the vulnerability of the public. The example slouching into view is more corporate control over the practice of medicine. And based on the previews, it will make the horrors falsely attributed to socialized medicine look pale.

Two accounts last week bring the issue home. The first came in the Health Care Renewal blog (hat tip Lysa). It’s a reminder of how the current institutional efforts to regiment doctors undermine the caliber of medical care. It has become distressingly common for HMOs and other medical enterprises to have business-school trained managers putting factory-style production parameters on doctor visits. Outside of foreclosure mills, it’s hard to find similar approaches in other professions.

The post describes how a pediatrician, Pauline, who has developed a reputation for treating chronic conditions is at loggerheads with her for-profit practice. The suits don’t like her patient mix. She gets too many tough cases, when they’d rather have basically healthy kids who are there for a cold or ear infection. Mind you, this is only partly a money issue. These visits can be “up coded” so as to get larger insurance/patient payments, but she gets a higher level of patients in less-generous state insurance programs. But some of the pushback is that her practice is perceived as disruptive, since she uses what is perceived as too much of her and staff time, separate and apart from the economics. She’s constantly breaking management’s precious guidelines. One of her turf struggles:

She had set up a visit to see a new medically complex patient and had blocked off 40 minutes, the amount of time she felt she needed to do a good job. The child had a complex genetic disorder, cerebral palsy, and heart, lung, and kidney problems. Both the cardiologist and the nephrologist had called asking her to take this patient. She agreed. After she had scheduled the visit, a manager called her and told her that she was being allowed only 15 minutes to see that patient. After some fruitless discussion with him, Pauline finally said, “Okay, I guess that means that you’ll be seeing the patient instead of me, right?” The shocked voice at the other end of the phone line replied, “What do you mean? I don’t know how to take care of patients.” “That’s exactly my point,” Pauline put in.

Pauline explained that this manager assigned to her office is not even a college graduate. Physicians cannot access the schedule electronically and have no control over scheduling. These functions are controlled by the office manager and (amazingly) by some of the medical assistants who have received some “leadership” training. These medical assistants are even allowed to evaluate the clinical competency and skills of the physicians.

(snip) much more

[xchrom]

10. It Doesn't Matter If We Never Run Out of Oil: We Won't Want to Burn It Anymore

http://www.theatlantic.com/technology/archive/2013/05/it-doesnt-matter-if-we-never-run-out-of-oil-we-wont-want-to-burn-it-anymore/275773/

Charles C. Mann is a great storyteller, but "What If We Never Run Out of Oil?" tells the wrong story and is marred by bloopers.

Mann's story is entirely about quantity of supply, not price nor the more-efficient use it encourages. Yet mainstream analysts see "peak oil" emerging not in supply but in demand: OECD oil use peaked in 2005, U.S. gasoline use peaked in 2007, and some analysts think world oil use may peak in this decade. Why? Modern technologies to save or displace oil cost far less than oil. The 2011 study Reinventing Fire found that an uncompromised, oil-free U.S. automobile fleet would cost $18 per saved barrel, rising to about $25 per barrel for all transpor­tation. That's manyfold cheaper than any source of oil Mann describes, yet he doesn't discuss efficient use or price. That's the big story: Like whale oil in the 1860s, oil has become uncompetitive even at low prices, long before becoming unavailable even at high prices.

This comparison doesn't even consider hidden or external costs. Just the economic and military costs of U.S. oil dependence, if paid at the pump rather than through taxes and reduced wealth, would triple the price of oil -- plus any costs to health, safety, environment, climate, global stability and development, or our nation's independence and reputation.

Climate risk alone makes it dangerous to burn most known oil and other fossil-fuel reserves (conventional and unconventional), so the more carbon-intensive and costly new fuel sources that Mann describes are even more unburnable. Ways to get more oil or gas we don't need, can't afford, and can't safely burn will hardly define the future of our energy mix.

[xchrom]

11. Why Washington Saved the Economy, Then Permanently Destroyed the Labor Market

http://www.theatlantic.com/business/archive/2013/05/why-washington-saved-the-economy-then-permanently-destroyed-the-labor-market/275747/

On April 24, Minnesota Sen. Amy Klobuchar scheduled a hearing. Fun story, right? A hearing in Washington is like a fern in the rainforest. But this hearing was notable for both its subject and its attendance. It was a meeting about the most important economic crisis facing America today: long-term unemployment.

At 10:30am, the hearing began. She was the only attendant.

***

I have two stories for you about Washington and the economy. Both true. But very different.

The first story is called: How Washington Saved the Economy. You might begin in 2008, when the Federal Reserve went on an unprecedented spree of asset-buying to un-gunk the banks, push down interest rates, and spur investing in mortally weakened economy. This was followed, in 2009, with an equally historic stimulus package aimed at filling holes in state budgets and sending cash back to families and businesses. The government ran steep $1+ trillion deficits to keep as much money in the weak private sector as possible.

There is little question that monetary and fiscal stimulus blunted the recession -- and saved the economy.

The second story is called: How Washington Permanently Scarred the Labor Market. You might begin this story in 2011, when Congress (led by Republican obstructionism) embarked on a historic quest to crush deficit spending by any means necessary. Hold the economy hostage over the debt ceiling? Check. Kill the American Jobs Act while scheduling a too-awful-to-be-a-real-law sequester? Check. Allow the too-awful-to-be-a-real-law sequester to become a real law? Checkmate.

[xchrom]

12. Europeans disillusioned and divided by debt crisis, survey finds

http://www.guardian.co.uk/business/2013/may/14/europeans-disillusioned-divided-debt-crisis

Public support for the European project has fallen and distrust between countries is growing, according to a new survey released overnight that shows the damage caused by the region's debt crisis over the last few years.

The respected Washington-based Pew Research Centre warned that support for the EU has slid over the last 12 months, from 60% in 2012 to just 45% this year.

In a report titled "The New Sick Man of Europe: the European Union", Pew showed that backing for European integration tumbling in France.

Europeans are increasingly gloomy about economic conditions, disillusioned about their leaders, and losing faith in the whole idea of European Unity, the poll found.

[xchrom]

13. Young people have 10% less chance of securing a job, TUC study finds

http://www.guardian.co.uk/business/2013/may/14/young-people-less-chance-of-finding-work

Young people are 10% less likely to be in work today than before the recession, the TUC has said ahead of official data tomorrow that is expected to show stubbornly persistent unemployment.

Only 58% of 18-24 year olds found work in 2013, compared with almost 65% in 2009, the unions said, leaving a shortfall of 395,000 jobs.

TUC general secretary Frances O'Grady said: "Ministers never stop claiming that a record number of people are in work. What they fail to mention is that it is more down to population growth than as a result of their employment policies."

"It's particularly worrying that 18-24-year-olds have not benefited from the recent improvement in the jobs market and they are losing out again as unemployment is rising."

[xchrom]

14. Never mind tax havens – the real hidden billions are in company coffers

http://www.guardian.co.uk/commentisfree/2013/may/13/tax-havens-hidden-billions

You know how it goes in a recession: the rivers stop flowing, the factories collapse, the banks crumble and the crops dry up. Or, to put it in another more accurate way, none of that happens. Everything we need to feed, house and clothe everyone is still there. The crisis is a failure of the way we organise society.

If the past five years has taught us anything, moreover, there is no socially neutral way to resolve such a crisis. One of the scandals of this depression has been the way the rich have made a killing while austerity promises to penalise the poor. Last week, the Guardian reported that the hundred richest Britons are hoarding billions in offshore tax havens. UK Uncut has long argued that simply closing tax loopholes that allow the rich to keep more of their cash would supply the revenue supposedly saved through cuts.

There is an element of truth in this. It is clear that the government has chosen a way out of the crisis, justified by the pretext of paying off debt, whose effect will be to transfer wealth and power to the wealthy and powerful.

Yet far more scandalous, in a way, is the little known fact that Britain's companies are sitting on £318bn in cash, because they don't see a profitable investment opportunity. That has been the case for several years. The government has been relying on the idea of a private sector-led recovery. Expand and invest, Nick Clegg has urged, while George Osborne has begged businesses to help the government "fight the forces of stagnation". Yet each year, the statisticians come back with the same dismal story: businesses refuse to expand and invest.

[xchrom]

15. ECB Picks Fight With Germany on EU Plan for Failing Banks

http://www.bloomberg.com/news/2013-05-14/ecb-picks-fight-with-germany-on-rules-for-handling-failing-banks.html

The European Central Bank clashed with Germany over how the European Union will handle struggling banks and whether to create a common agency and fund to manage failures.

ECB Executive Board member Joerg Asmussen called for creating a central agency and an industry-funded common backstop for handling failing banks by “the summer of next year,” when the ECB takes up new supervisory duties. He set out the central bank’s position before EU finance chiefs met in Brussels today.

In a public debate during the meeting, Finance Minister Wolfgang Schaeuble held to Germany’s view that the EU shouldn’t try to create a single resolution agency without amending current treaties.

EU leaders began work on a banking union last year to break the cycle of contagion between nations and their banks that has plagued the euro area since the region’s financial crisis emerged in Greece in 2009. They started by giving the ECB oversight powers, and committed to accompany this with a single “mechanism” for handling bank failures.

[xchrom]

16. Africa Oil Demand to Rise Faster Than Most Areas, IEA Says

http://www.bloomberg.com/news/2013-05-14/africa-oil-demand-to-expand-faster-than-most-of-world-iea-says.html

Oil demand in Africa will climb at a faster pace than most of the world in the next five years because of rising transport and power-generation needs, a report by the IEA showed.

Gasoline and gasoil consumption are each forecast to rise 4.5 percent a year, while the use of jet fuel or kerosene will advance 3.9 percent, the International Energy Agency said in its medium-term oil market report today. The gains will boost Africa’s oil use by 4 percent a year from 2012 to 2018 compared with an average of 1.2 percent growth globally for that period.

“The very low historical base of African demand and the region’s rapid income gain mean that great leaps in demand growth may be in the cards,” the Paris-based agency said. “The prospect of excess global gasoline and naphtha production in the next few years could set the stage for an abundance of light ends looking for new market outlets.”

Consumption of liquid petroleum gas, seen as a transition fuel between burning wood and municipal gas in emerging economies, is growing because it’s easy to distribute and several countries have been building plants and terminals for the gas, according to the report.

[Fuddnik]

17. Sweet!

Last edited Tue May 14, 2013, 02:17 PM - Edit history (1)

I just bought myself a new Nook HD+ for my birthday. Target had a really good Mothers Day sale, so at that price I had to grab it. This is my first post from it!

[Demeter]

18. Install Spellcheck---Immediately!

Do your friends a favor!

[Fuddnik]

20. Not spell check.

Fat fingers

[DemReadingDU]

21. Happy Birthday!

[Demeter]

22. Oh, Yeah! That too!

[Demeter]

19. Destroying the Lair of the Budget-Balancing Cretins By Dean Baker

http://www.nationofchange.org/destroying-lair-budget-balancing-cretins-1368459023


By now almost everyone knows of the famous Excel spreadsheet error by Harvard professors Carmen Reinhart and Ken Rogoff. It turns out that the main conclusions from their paper warning of the risks of high public sector debt were driven by miscalculations. When the data are entered correctly, this hugely influential paper can no longer be used to argue that the United States or other wealthy countries need fear a large growth penalty by running deficits now. There is no obvious reason that governments can’t increase spending on infrastructure, research, education and other services that will both directly improve people’s lives and foster future growth.

With the advocates of austerity on the run this is a great time to pursue the attack. The public should understand that the often expressed concerns about long-term growth, the future, and the well-being of our children are simple fig-leafs for inhumane policies that deny people (a.k.a. the parents of our children) work and redistribute income upward. We can only harm our children by reducing the deficit in the current economy; we are not helping them. The wealthy people who benefit from the policies of austerity may have the power to keep them in place, but the public should realize that the politicians and public figures who promote these policies are not doing it out of a concern for the future. Once we get past the Reinhart-Rogoff debt disaster story, the only argument left against government deficits is the standard economic argument that it could raise interest rates by crowding out private investment. This argument can easily be shown to be ridiculous; there will almost certainly not be any crowding out in the economy now. Interest rates will likely remain very low even if the government undertook a major investment program. Furthermore the spur to demand is likely to increase private investment because firms invest more when they see demand for their products growing. Since some of the spending, such as spending on improved infrastructure and reduced energy consumption, will make the economy more productive, a public investment program today should make our children richer, not poorer. This fact is not changed even if we pass on more government debt; although debt can raise distributional issues within generations. This point is straightforward. At some point everyone alive today will be dead. This means that the government debt (bonds) that people alive today possess will be passed on to future generations. Future generations will not just owe future debt; they will also own future debt. If we take the extreme case where the ownership of government bonds are evenly divided among our children and grandchildren, then the burden of the debt will be money that they are paying to themselves. How can that make them poorer? Of course the debt is not evenly held so there can be intra-generational distributional issues. Suppose that Bill Gates grandchildren end up owning all the debt. Then the debt will impose a burden on everyone else’s children and grandchildren. They will be paying interest to Bill Gates’ grandchildren. But this is an issue between Bill Gates’ grandchildren and everyone else’s grandchildren. If our children and grandchildren tax Bill Gates’ grandchildren, then they will face little burden from debt built up today.

Many of the deficit scare mongers have raised the issue of foreign, and especially Chinese, ownership of the debt. While this may appeal to racist sentiments, it has little to do with government deficits. China is able to buy up government debt because it has a trade surplus with the United States of roughly $300 billion a year. As long as it has a $300 billion trade surplus China can buy up government debt, regardless of whether or not the government is currently running a deficit. If the government is not currently borrowing then China could just buy up government bonds in the secondary market where hundreds of billions of dollars of government debt are bought and sold every day. Of course even if China didn’t buy up government bonds, but instead bought the bonds of private corporations or stock and U.S. real estate, the situation would be the same. A portion of future output would be paid to China and other foreigners as interest, profits, or dividends. If this outflow is large enough (the net flow of such payments is still in the U.S. favor) then it will pose a burden to future generations, but this speaks to the importance of getting the trade deficit down. This in turn depends overwhelmingly on the value of the dollar. If the value of the dollar were lower we would export more and import less, bringing our trade closer to balance. If the deficit hawks were really concerned about our children’s future, they would be focusing on the over-valued dollar, not yelling about budget deficits.

Finally it is important to keep these issues in some proportion. Even though our debt burden is relatively large, because interest rates are extremely low, the interest burden is not. In fact, relative to the size of the economy is near post-war lows. It is at post-war lows if we subtract the $80 billion in interest refunded to the Treasury each year by the Federal Reserve Board. While this burden is projected to rise somewhat when interest rates return to a more normal level, even in a decade the interest burden is not projected to be back to its early 1990s level. In short, there is absolutely no horror story in this picture.

The deficit hawks have used dishonest fear-mongering to prevent the country from taking the steps needed to get the economy back to full employment. These people have enormous economic and political power. As a result they may be able to keep their austerity policies in place. But we have to recognize, this is about making the rich richer, not helping our children and children.

[Demeter]

23. Another gratutitous, last minute 50 point gain

I swan.