Middle class is drowning in debt, hobbling the economy | Rex Nutting

From Rex Nutting at MarketWatch:

For decades, economic growth in America was driven by a powerful and sustainable force: increased consumption paid for by the rising incomes for middle-class and working-class Americans.

But somewhere around 1980, that model broke down. Wages flattened out, but consumption didn’t. Americans cut back on their savings, and took on more debt — mostly mortgage debt — to satisfy their needs and desires.

It’s not a sustainable model, but it did persist for nearly 30 years until the credit bubble burst in 2007. Millions of Americans lost their jobs, and millions lost their homes when the credit spigot was shut off, forcing average families to cut back on their consumption and live within their means once again.

And now, with the economy only partially healed, it seems we’re going back to the lend-and-spend economy that failed us before.For the past six or seven years, most of what the Federal Reserve has done to fix the problem has been focused on getting the credit spigot turned back on: cutting interest rates and hectoring banks to start lending again, even though demand for loans was weak….

Read more at Middle class is drowning in debt, hobbling the economy – Rex Nutting – MarketWatch.

Russell shake-up likely to drive heavy volume at Friday’s close | Reuters

From Reuters:

Investors can expect a surge in volume at the close of trading on Friday, when Russell Investments announces the annual rebalance of its series of indexes that will affect more than $5 trillion in assets…..Credit Suisse anticipates about $42 billion will trade on Friday as a result of the reconstitution, which will make it one of the biggest trading days of the year in terms of dollar volume.

Read more at Russell shake-up likely to drive heavy volume at Friday's close | Reuters.

US inflation: Will the recent uptrend persist?

From Elliot Clarke at Westpac:

…it seems as though these price movements have not been driven by demand. This is particularly true for food services, which has seen growth in consumption volumes fall from 5.3% in November to –0.6% in May. Housing and utility demand has remained highly volatile, but there was no evidence of a ‘break out’ move in this component of personal consumption in early 2014, and growth has since slumped back to 0.2%. This is not to say that rents have not contributed materially to the level of housing inflation in recent years; more below.

This then points to an exogenous shock being to blame for the recent jump. Further, the coincident nature of the inflation uptrends for food and housing services alludes to a common cause: the cost of energy. The 6.1% gain in total PCE energy prices from April 2013 to May 2014 corroborates this belief. To the extent that shifts in energy costs typically prove temporary, this inflationary impulse will likely dissipate in coming months – leaving aside current geopolitical concerns.

Read more at WIB IQ – world-class thinking in real time..

The tragic record of American policy in the Middle East | BillMoyers.com

Investigative journalist Charles Lewis, author of 935 Lies: The Future of Truth and the Decline of America’s Moral Integrity tells Bill Moyer:

An outrageous thing happened. We lost $2 trillion. More than 100,000 people died. Folks are going to be maimed for life in the tens of thousands… And no one has ever acknowledged that this [Iraq] was a war on a lark. It was a complete war of choice, because a certain little faction wanted to do it and they orchestrated it… Did they make statements that weren’t true? The answer is yes…

 

A complicit partner, he says, is a media “intent on preserving the status quo …and never offending the ruling elite”.

Washington Post’s Walter Pincus:

More and more the media become, I think, common carriers of administration statements and critics of the administration….We’ve sort of given up being independent on our own.

Read more at Bill Moyers: Buying the War – How big media failed us

Andrew Bacevich: The End of American Exceptionalism | BillMoyers.com

Extended Interview: Andrew Bacevich
June 20, 2014

 

After the broadcast interview, Bill continued his conversation with military historian Andrew Bacevich about what America should do in the Middle East.

Bacevich draws parallels between the current Iraqi crisis and the Vietnam War, discusses our evolving relationship with Iran and challenges neoconservatives for their take on US foreign policy.

“My reading [of history] is of course there is evil in the world that needs to be taken into account and some time must be confronted,” Bacevich tells Moyers. “But let’s not kid ourselves: In somehow imagining that the United States represents all that is good and virtuous, we, ourselves, have committed many sins. And we ought to be cognizant of those sins before we go pronouncing about how the world ought to be run.”

Producer: Gina Kim. Segment Producer: Robert Booth. Editor: Sikay Tang.

Fedex brings a warm glow

Summary:

  • Bellwether transport stock Fedex completes a cup-and-handle continuation pattern.
  • The Dow continues its strong up-trend.

Bellwether transport stock Fedex completed a strong cup and handle continuation pattern, offering a target of 160*. Recovery of 13-week Twiggs Money Flow above zero and the descending trendline indicates medium-term buying pressure. Breakout brings a warm glow as I find Fedex one of the most reliable indicators of overall market direction — as in November 2007.

Fedex

* Target calculation: 145 + ( 145 – 130 ) = 160

Dow Jones Industrial Average is testing medium-term resistance at 17000. Breakout is likely and would signal an advance to 17500*. Recovery of 13-week Twiggs Money Flow above the descending trendline would indicate medium-term buying pressure. Reversal below 16750 is unlikely, but would warn of a correction.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

Canada: TSX 60 marches on

Canada’s TSX 60 marches on towards its target of the 2008 high at 900. Rising troughs on 13-week Twiggs Money Flow signal strong buying pressure. Reversal below support at 845 is unlikely.

TSX 60

Why US hard power failed in Iraq and elsewhere | Bill Moyers

Outstanding. Military historian Andrew Bacevich sums up the stupidity of US foreign policy and how repeated failures could be rectified. He exposes the “duplicity of ideologues” on calls for intervention in Iraq and discusses the moral responsibility to the people of Iraq. What can be done to alleviate the suffering of the people in Iraq? “There is remarkably little discussion as to cost if you want to bomb someone, but we suddenly become acutely cost-conscious if there is a proposal to assist them.”

 

Dick Cheney [at 06:00] in 1993, answering a question on the first Gulf war, predicted what would happen if Iraq was invaded: “…Once you take down Saddam Hussein’s government in Iraq, then what are you going to put in its place? If you take down the central government in Iraq, you could easily see pieces of Iraq fly off…..it’s a quagmire.”

Projection of hard power by the US has not solved global problems over the last 50 years. In fact it has exacerbated problems in the Middle East. Soft power is far more effective. But it needs a change of mind-set on the part of the US. Don’t get me wrong. You still need Teddy Roosevelt’s “big stick” as a deterrent, but soft power — engineers, doctors and school teachers — are far more effective at winning people over to your world-view than B52s and unmanned drones.

The inequality debate | Thomas Piketty and Ryan Bourne IEA

The inequality debate: Thomas Piketty and Ryan Bourne, of the Institute of Economic Affairs.

http://vimeo.com/98715433

One mistake Piketty makes: he uses a marginal tax rate of 80% in the US in the 1920s and 1930s on incomes over $1 million to justify higher taxes on incomes over $1 million today. This fails to consider inflation. Adjusted for the CPI, an income of $1m in 1920 equates to an income of $12m today.

High marginal tax rates in the 1920s in the US were introduced to pay back war debt from WWI. They had the opposite effect of that intended and reduced tax collections. Treasury secretary Andrew Mellon subsequently increased tax collections by reducing maximum tax rates, with the famous quip: “73% of nothing is nothing.”