Elaine Meinel Supkis
Cheap oil and cheap loans were a trap for the American and European middle classes. When America and Europe produced energy, this was a key to wealth for the middle classes. But now this is reversed and proof is how OPEC now has great sovereign wealth as well as Russia. And China and India, working as the places where we not wring out energy-caused inflation, are hammering our middle classes as even all white collar as well as industrial jobs are outsourced. And more real estate organizations and moguls are going under, Moody's re-rates them as CCC or worse!
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.
While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
We knew from day one that the bulk of the tax cuts would flow to the top 10% of Americans. We knew that cutting the taxes for Wall Street's trading stream would cause a huge stock market boom based on little internal logic. We knew that privatizing war would lead to the bankruptcy of our nation. Coupling all these things and stirring into the pot the business of 'free trade' and we get the destruction of the American Empire.
Certainly, bin Laden is endlessly pleased about all this. His entire strategy is to keep Bush in power for a long as humany possible and to encourage the US to attack Muslim countries that stand in the way of his revolutionary dream of destroying the 'Crusaders' and riding into Mecca on a white horse, carrying the banner of jihad. The statistics published by the NYT makes it pretty clear, the US has chosen a course of re-enslavement. All my long life, our nation has boasted that the true power of democracy lies with growing the middle class in size and strength. Not making people richer or poor people into slaves. This was supposed to be the foundation stone of our democracy.
The rich want power. And if this means killing the middle class, they will cheerfully do this for this makes them stronger, politically, as well as richer. The rape of the middle class was assisted by these same victims who joined with the upper classes in attacking the poor. The desire to punish 'welfare moms' and to fix public and even more, private morals, lead many middle class people down the path to their own destruction on both points. As morals collapse in the middle class, so does their finances. The re-enslavement of the population of New Rome mirrors the same process that destroyed Old Rome.
When free trade was sold to the middle class as a great way to avoid the effects of inflation caused by oil price hikes and wars, the middle class was sold. Prices for toys like TVs and cars dropped like a rock compared to inflation. So long as wages kept up with or surpassed inflation, the middle class refused to understand the hazards behind their embrace of free trade. One ugly deal the middle made was to follow Ronald Reagan in his quest to destroy unions. This process has been a total success.
Alas, the only route to the middle class happens to be 'union made'! It doesn't matter what trade one is in, globalization is now eating into ALL occupations! From lawyers to accountants, automakers to toy makers, everyone and everything is beingn outsourced in order to make more money for the rich! And the wages of the top staff working on this massive project to destroy the middle class are going up, too. But everyone below the very top are seeing wages fall. This includes many occupations requiring college degrees. Once upon a time when the middle class was much smaller, the main road to the middle class was a college degree which is why the Democratic plan for the GI Bill was a huge boost to creating the middle class after WWII.
Now, it is increasingly a path to lifetime debt and poor pay as wages for workers with degrees now begin to drop.
The NYT:
The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.
These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich.
The group’s calculations showed that 28 percent of the investment tax cut savings went to just 11,433 of the 134 million taxpayers, those who made $10 million or more, saving them almost $1.9 million each. Over all, this small number of wealthy Americans saved $21.7 billion in taxes on their investment income as a result of the tax-cut law.
*snip*
Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.
Thanks to inflation, $50,000 is no longer middle class. The rise in value in real estate freed up lots of money for the retiring WWII generation which gave many of them a great retirement. And as this class dies, their children get the benefit of high return on inheritance values. But my generation, what are we planning to give our children? I see only debts being transmitted.
This loss is due to globalization. The wealth of the post-war generation was already being squandered before I became a wage earner. Thanks to the Vietnam war and cheap gas. To keep gas cheap, the US has chosen to import more oil than most nations combined. Ever since 1969, we have been importing oil even as all the other industrial nations pay high taxes on gasoline to stop overconsumption, the US does the exact opposite and the deficit this has caused is the open door to free trade as our government tries to balance trade by trading more. The more we trade, the deeper in the red we go and the root cause is oil but now, to hide inflation and expand profits, all our industries and office white collar jobs are now racing overseas.
Clients are pushing law firms like Jones Day and Kirkland & Ellis to send basic legal tasks to India, where lawyers tag documents and investigate takeover targets for as little as $20 an hour. The firms are part of a trend that will move about 50,000 U.S. legal jobs overseas by 2015, according to Forrester Research in Boston.
"The objective is to have only the most valuable people in London or New York, and the others in India, China or Columbus, Ohio," said Robert Profusek, co-head of the mergers and acquisitions practice at Jones Day in New York.
See how it works! There is NO 'safe' profession. We may as well outsource our elected offices! I notice that everyone requiring paperwork is now departing to far shores. The once-safe white collar jobs are history and this goes all the way down the line. The only jobs that can't be outsourced is plumbing and electrical work. And even these are being undermined via illegal aliens and green card union busters.
But as the crisis over subprime residential mortgages spills over into other real estate sectors, causing a severe tightening of credit, there is widespread talk in the industry that Mr. Macklowe is in deep trouble — so much so that he could lose control not only of the newly acquired portfolio but also of the G.M. Building and other properties that were used as collateral for short-term debt that must be repaid six months from now.
Through a spokesman, Mr. Macklowe, who lost the Hotel Macklowe in a real estate squeeze in the mid-’90s, declined a request for comment. But his son, William S. Macklowe, expressed confidence that their company, Macklowe Properties, would be able to pay off the debt.
Some real estate specialists say that the February acquisition of the seven Manhattan buildings — a deal consummated in just 10 business days —will be remembered not just as a feat of financial derring-do but also as a watershed that ended two years of frenzy in the commercial real estate market.
Like Donald Trump and his ilk, this rich man is actually up to his toupee in debts. Only, unlike the hapless homebuyers of the former middle class trying to make ends meet while living an hour away from work in some exurb bedroom community, this guy can cause a total crash in our economy. It takes 50,000 homeowners owing a million bucks, going bankrupt in California to equal this one clown going bankrupt. His game is to raise rents on Manhattan properties when the leases are up. But of course, if there is a recession, this can't be done.
Manhattan's top real estate moguls loved 9/11. Interest rates were precipitously dropped to 1%. All the big shots in NYC were estatic because the loss of office space on 9/11 was the biggest loss of office space in one day than any previous time in history since WWII. I remember the WTC being finished. It coincided with the beginning of the great 1970's stagflation/bear market and real estate values of offices in Manhattan collapsed due to excess capacity. The Bridge and Tunnel Authority couldn't fill the offices in the WTC so they strongarmed the steamship companies to move in which is how my husband ended up working there on the 68th floor of the North Tower. Ugh.
For years and years, this was a huge lead weight in NYC real estate and only after 25 years, did it finally finish soaking up office space and building resumed. So, after all this was destroyed, millions of office square footage vaporized in one hour, real estate moguls made a killing in NYC real estate. They, not just the little people bidding up the price of houses, have been the machine that has sucked literally trillions of dollars out of the world's banking system to build stuff just like the condos built in Miami Beach. These towers in Florida are quadrupling the number of condos in the community and have virtually no buyers. They will go bankrupt very soon and this represents hundreds of millions of dollars. The crash and burn of the big real estate speculators will dwarf the collective losses of the small homesteaders.
Standard & Poor's slashed the ratings on debt sold by two European mortgage-backed securities funds to junk from the highest investment grade after investors refused to provide short-term funding.
S&P cut the rankings on $3.2 billion debt issued by funds run by Solent Capital Partners LLP and Avendis Group by as much as 17 levels to CCC, eight steps below investment grade. The credit rankings may be cut further, S&P said today in an e-mailed statement.
*snip*
Portions of Avendis' Golden Key fund were downgraded to CCC from AAA, S&P said. The fund's short-term commercial paper rating was cut to the non-investment grade level of B, from the highest ranking of A-1+. Avendis is based in Geneva.
Ratings on parts of Solent Capital's Mainsail II fell by 16 steps to CCC+ from the highest grade. Mainsail II's commercial paper rating dropped three steps to A-3 from the highest ranking.
Ratings on similar funds operated by London-based Cairn Capital Ltd. and Sachsen LB Europe, may also be cut, S&P said.
Now Moody's is downgrading all those funds that should have been downgraded 7 months ago when the first winds of this storm hit at the end of February. Instead, the entire system tried to re-establish the building boom's good times and this led to the much nastier crash in mid August. They are now trying to correct things while still running as if there is a building boom. This will cause a greater crash around mid-October. The downgrading of Avendis' hedge fund is incredible and rather funny if we remember everything these guys spouted during the building boom. Downgrading from AAA to CCC in one day is amazing. But still a lie! It should be XXX or ZZZ. And it will be. Soon enough. I notice Mainsail has been unable to tack to the winds and is now floundering in the cross waves generated by Hurricane Greenspan.
Hell, we should name hurricanes after hedge funds and Federal Reserve officers. They are equally capricious and destructive. All the hedge funds will see their ratings drop now. And I say, to the cellar!
From International Herald Tribune:
A former U.S. hedge fund president arrested in Greece was freed Tuesday pending an extradition hearing next week, officials said.
Angelo Haligiannis, 35, former president of the Sterling Watters Hedge Fund, is wanted by authorities in New York, where he was convicted of defrauding investors of at least US$27 million (€20 million) by grossly misrepresenting the fund's returns since 1996.
And arrest them all! Note that they run off when wanted. They are not good citizens. They be pirates!
Vietnam has enough foreign exchange reserves to cover 20 weeks of imports, a senior central bank official was quoted on Tuesday as saying.
“We have dozens of billions of US dollar in reserves,” the Thanh Nien newspaper quoted Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien as saying.
Absolutely everyone is imitating China. Note that these are all communist nations. Every one of them is doing what China is doing and for the same reasons. Japan, of course, started all this. The game is not to make a currency strong...someone better tell the Europeans...but to make it as weak as possible. This is the exact opposite of what was the philosophy just a mere 12 years ago...except for the US. We have negotiated the loss of value of the dollar over and over again since 1972! Many concords like Bretton Woods II and the Plaza Accords were all about weakening the dollar due to our trade deficit. Each time, the deficit shrinks for about two years until our trade partners abroad and the rich at home conspire to get around all this and continue onwards with the strong dollar.
After all, the dollar is the fiat default currency and thus cannot be weakened in the end! The only time this has not been true is the rise of the euro. And Europeans will figure out in about a year or so, they must weaken the euro or they will be shoved into a vast, ugly depression worse than the one the Japanese endured when the yen got stronger versus the dollar.
Japan saw its trade surplus fall in July - the first drop in nine months - as higher fuel prices pushed up the cost of imports.
The trade surplus fell 21.1% from a year earlier to 671.22bn yen ($5.8bn; £2.9bn), figures from the Ministry of Finance showed.
Ie: Japan is seeing significant inflation that is increasingly hard to hide. Yet they must keep the status quo running or the US will hit a brck wall and 50%+ of Japan's high-return export trade is with the US and if the US ceases buying, Japan sinks like a rock.
As key financers of the huge US current account deficit, these countries have now more reserves in their coffers than they need as a precautionary measure for their short-term liability management. Thus, they look beyond treasuries and money market instruments and have developed an interest in higher yielding equities and strategic investments abroad. China is about to move $300 billion reserves away from the central bank to the newly established State FX Investment Corporation (SFEIC).
Russia has already established its Oil Stabilization Fund in 2004 and has recently enhanced the strategy to invest in riskier and potentially higher yielding assets by announcing the establishment of a Future Generation Fund by February 2008. A first taste of things to come was the Chinese purchase of a $3 billion stake in the private equity firm Blackstone.
A Russian state bank has bought a five per cent stake in EADS in 2006 and Russian gas giant Gazprom has pressed for market entry into the retail energy market of West European countries like Germany. With oil prices likely to stay high and Asian export manufacturing continuing to rise, the expected growth of SWF assets is mind boggling – they already manage $2.5 trillion assets; by 2012, they will have overtaken official central bank reserves in importance; and by 2022, their assets will reach $27.2 trillion, according to recent estimates by Morgan Stanley.
Their size will then be twice the official central bank reserves and their share of worldwide financial assets will have grown from the current 2.5 per cent to nearly 10 per cent. It is likely that this shift in SWFs towards equities will lead to higher P/E ratios, lower bond prices and rising interest rates. If oil prices should fall, the share of Asian surpluses and SWF assets is expected to increase, while a rise in oil prices will lead to rising assets of the SWFs of oil exporters and would set off concomitant declines of the SWFs of Asian manufacturers. The bottom line is that the importance of SWFs in world finance is about to rise significantly in any case.
Just three months ago, public officials in the Federal Reserve and Treasury openly wondered what 'sovereign wealth' meant. I called for them to be arrested for fraud. Anyone running a national banking system or trade office should have a vague idea what is 'sovereign' and what 'wealth' is. It is NOT debt. It is NOT being owned by foreigners! It is all about owning something and controlling it and the route to this is to run a trade SURPLUS something we haven't done ever since I left college.
70% of the Sovereign Wealth Fund entities buying up US businesses, banks and facilities like roads, ports and rail lines is from the Middle East. Slowly but surely, they are buying up as much as they dare The biggest purchase is US politicians. There is this race going on as the oil Arabs compete with the Jews supporting Zionism in the Holy Land, to buy up political power. The Jews are in control of vast real estate in this matter but they have a problem: they need money from taxpayers all the time and on top of that, more than one Jewish financial empire is based nearly totally on mountains of trillions of dollars in debts owed to people who are being taken over by the oil pumping nations.
We can see the end of this story pretty clearly. The struggle over control of the IMF is being waged below the headlines. China and the oil pumping nations are being joined by Russia in demanding move votes and more control. After all, they are the ones with Soveriegn Wealth! Years and years ago, one President after another promised to cease being dependent on Arab or OPEC oil yet here we are, twice as dependent as we were when Jimmy Carter asked us to turn down our thermostats.
Only 14 per cent of people in Qatar and 13 per cent of Saudis expressed high satisfaction with their current salaries. The findings are from the second Consumer Confidence Index (CCI) conducted by Bayt.com and YouGovSiraj.
Sixty-two per cent of people in the region believe their personal financial situations will improve in the year ahead, compared to 59 per cent in a survey carried out in April.
Overall, respondents showed a modest rise in confidence in such areas as job availability, business conditions and inflation. Some 59 per cent of respondents in Qatar said they felt upbeat about their country's economic prospects, a figure that reached a low of 27 per cent in Lebanon and was 55 per cent for the UAE.
They have inflation and don't like it. This is where China steps in. Before China, the G7 nations could steathily raise prices and give its workers wage hikes and the OPEC people had to eat the inflation for us. Today, thanks to China, we no longer have this ability so inflation has to be stripped off the backs of all the working and middle class people. It is a bloody business. The growing number of uninsured in America or the Brits who can't get good health care in that dying ember of an empire, the stagnation of wages and benefits in Europe, all this is connected to our collective inabilty to tranfer energy inflation back to OPEC. Europe is involved in a hysterical attempt to reverse energy inflation and send it back to Russia and Russia has outwitted them and is now the third biggest entity after China and the OPEC financial warehouse in Dubai, in bypassing European and American attempts at exporting inflation. This is due to them having 'sovereign wealth'.
We must change direction, fast. Cheap oil and cheap debts are killing us.