Tuesday, January 10, 2012

January, Tuesday 10, 2012

DOW + 69 = 12,462
SPX + 11 = 1292
NAS +25 = 2702
10 YR YLD +.01 = 1.97%
OIL +.84 = 102.15
GOLD +21.20 = 1633.20
SILV +.89 = 30.04
PLAT + 39.00 = 1467.00

 The S&P 500 Index moved back to its highest level since July. There was positive reaction to earnings. Alcoa kicked off the earnings reporting season by announcing they lost $193 million dollars in the fourth quarter. Go figure.

Is the economy facing inflation or deflation? The answer is – yes. Two Federal Reserve officials laid out contrasting views of Fed attempts to bolster the economy, with one seeing a need for more asset purchases and another warning that current accommodation risks provoking instability.

Federal Reserve Bank of San Francisco President John Williams sees a “strong” case for new purchases of mortgage bonds given his expectation that inflation will fall below 1.5 percent this year. His counterpart in Kansas City, Esther George, said officials must weigh whether their current policy is increasing the odds of renewed financial turmoil.

In his speech, Williams credited the Fed’s emergency lending to financial institutions with keeping the U.S. economy from falling into an abyss in 2008 and 2009. He said it’s “vital” for policy makers to support an economy that’s hobbled by high unemployment, anemic spending and a weak housing market. Williams thinks the Fed should provide more stimulus for the economy.

George, in her speech said “the economy is going through a deleveraging process and that takes time. Efforts to speed up that process run some risks. It’s going to take things other than interest rates to stimulate that economy.”

There’s nothing like an election year to stimulate the economy.

Today is primary Election Day in New Hampshire. I can tell you who the big winner is; I don’t have to wait for the polls to close. The winners are the people that produce negative attack ads – this is the new growth industry in America. While some industries are laying off workers and cutting back hours, the negative attack ad industry is ramping up, and paying for overtime for anyone with the unique skill set to dig up dirt and then sling it in an entertaining, captivating, provocative manner without regard to truth, accuracy, or democracy.

The 2012 elections will feature unprecedented spending by corporations and a few wealthy individuals, much of it channeled through independent organizations and trade associations not required to disclose their donors. In many races, unaccountable Super PACs and trade associations will spend significantly more money than candidates or political parties. 

Independent entities spent $300 million in the 2010 federal elections; almost all of that money went for negative attack ads.  It worked. They supported 60 of the 75 Congressional races where party control changed.  And this year they are expected to spend more than $1 billion dollars. Next week, you’ll see a new “documentary” on Mitt Romney and Bain Capital. If you don’t know the definition of vulture capitalism, wait a week. This follows a blitz of negative attack ads against Newt Gingrich in Iowa. Don’t even think about a Google search on Santorum. And the latest ads target Jon Huntsman for being an acolyte of Chairman Mao because he adopted a daughter who was born in China.  Look for the republican candidates to cannibalize their fellow candidates; the 11th Commandment be damned. And all that is before we get to the main event. When the republicans and democrats square off later in the year things will really turn ugly.

It is all the result of the U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission.  The Court held for the first time that corporations have a First Amendment right to spend unlimited money on behalf of individual candidates and causes. More generally, the Court signaled that the old customary restraints on election spending no longer applied.  

The source of corporate involvement in politics goes back to laws that give personhood to corporations. Even though corporations are abstractions, have special protection from liabilities, and are not limited to a natural lifespan, they have created a super-person with the potential for something like immortality; they can live forever, as long as their money, their lifeblood doesn’t run out. This is a strange power for an entity that is never mentioned in the Constitution. By achieving this designation of corporations as person, real flesh and blood people are relegated to subhuman status. The Constitution only mentions We the people and the government; it says nothing about We the Corporations. Corporations are legal entities; machines for getting a job done; they have no soul; they can’t dream. Corporate Personhood is the legal fiction that property is a person.  This is just as absurd as the legal fiction of slavery, which determined that people are property.

To read Justice Kennedy's decision in Citizens United is to enter a convoluted universe of "legal fiction" where the distinctions between living breathing human beings and intangible corporations are blissfully ignored. "Speech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people," wrote Justice Kennedy. On this point we all agree; but it is to citizens -- actual people -- that officials should be held accountable, not Goldman Sachs, ExxonMobil or NewsCorp. 

Individual citizens have no hope of matching the money of corporations. Corporations have special advantages when earning money, plus liability from certain losses. If money is considered free speech, there is no way individual citizens’ voices can be as loud and powerful as corporations. In politics, money doesn’t’ talk, it screams; it drowns the voices of mere mortal citizens. The concept that corporations are person also means that corporations can govern – not with a vote, but with political manipulation.

While there are a host of reforms that would diminish the impact of Citizens United -- most notably, public financing of public elections -- there is ultimately no legislative fix for Citizens United. The 5-4 majority in the case found that corporations have a protected First Amendment right to spend unlimited money on elections.  Absent the unlikely near term scenario of the Supreme Court reversing itself, we need a constitutional amendment to restore our democracy. That’s not going to happen.

In his Citizens United dissent, Justice John Paul Stevens rightly recognized that "corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their 'personhood' often serves as a useful legal fiction. But they are not themselves members of 'We the People' by whom and for whom our Constitution was established."

It shouldn’t be a controversial position. Corporations are not people. Corporations can’t vote. And so the money they spend on elections should be called by it’s rightful name – bribery.

Of course, whenever the government tries to impose an unnatural idea on the population there is the possibility of unintended consequences. People tend to reject something that is shoved down their throats. The negative attack ads might backfire – it could happen, but I’m guessing we’re still at least $2 billion dollars away from that possibility.

The European Central Bank released data today showing that the ECB’s policies are helping to restore calm in the money markets, even though the policies aren’t doing anything to help the worsening economy. Demand for the ECB’s weekly loans has been falling since Dec. 21, when the ECB allotted nearly half a trillion euros in long-term loans to more than 500 euro-zone banks. Banks faced with mounting debt redemptions and tightening credit standards appear to be hoarding the cash for their own reserves and in case of future market unrest. So, Europe didn’t implode overnight but it was largely forgotten by traders on Wall Street.

In Europe over the past few weeks the banks deposited about 500 billion euros at the ECB getting a return of 0.25%. The banks could make more by lending the money on the interbank market; they could earn 0.4%. This used to be considered an easy and safe place to park money. Not anymore. Banks don’t trust other banks, mainly because the banks know they hold toxic assets on their own books, and they don’t think the other banks hold anything other than toxic assets. The credit markets are telling us there is a crisis. The governments can’t do much because the toxic assets the banks hold is government debt. It’s a mess, but apparently it’s a mess for another day.

Europe and Japan moved ahead Tuesday in planning for punitive cuts in oil imports from Iran. A day after Iran confirmed the start of uranium enrichment at a mountain bunker - and sentenced an American to death for spying - the European Union brought forward a ministerial meeting to consider an oil embargo. The 27 EU governments are still debating how quickly some of their ailing and oil-dependent economies can afford to drop a key supplier and find alternatives. Oil prices moved higher -

In a sign of pessimism about humanity's future, scientists today set the hands of the infamous "Doomsday Clock" forward one minute from two years ago.  "It is now five minutes to midnight."  That represents a symbolic step closer to doomsday, a change from the clock's previous mark of six minutes to midnight, set in January 2010.

 The clock is a symbol of the threat of
 humanity's imminent destruction from nuclear or biological weapons, climate change and other human-caused disasters. In making their deliberations about how to update the clock's time, the Bulletin of the Atomic Scientists focused on the current state of nuclear arsenals around the globe, disastrous events such as the Fukushima nuclear meltdown, and biosecurity issues such as the creation of an airborne H5N1 flu strain.

I don’t believe it. I think they should have rolled the clock back, at least I hope so. And that brings us to our quote of the day, it comes from the Greatest, Muhammad Ali: “It's the repetition of affirmations that leads to belief.  And once that belief becomes a deep conviction, things begin to happen.” 

Be careful what you choose to believe.


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