4 August - Automatic Earth

Hippy Dropout Becomes Wind Energy Mogul

Dale Vince has been busy lately. From launching a network of nationwide free electric car charging stations, to building a bee-friendly utility-scale solar power plant, this former hippy traveler turned wind energy millionaire has been pushing the boundaries of renewable energy and clean transportation.

The Automatic Earth

August 3 2011: The Next Bank Bailout Bloodbath is Here 

now know why that is, why no-one in Washington talks about unemployment in connection with the federal debt. All I have to do is look at the stock markets.

The EU and ECB are not even going to be able to save all the countries that are in trouble, let alone the banks. All the markets have to do is to slowly tighten the screws, and that's what they will do. 

Spiegel magazine writes today:

German Economy Starts to Cool Down

Germany staged an impressive recovery from the 2008/2009 global economic crisis, but there are increasing signs that the boom is now coming to an end. After almost two years of strong growth, its economic outlook is starting to deteriorate, due to a slowdown in major emerging markets including China and fears of a possible United States recession caused by $2.4 trillion in spending cuts linked to the debt ceiling deal.

Various indicators released in recent weeks point to a deceleration of Europe's largest economy. The Ifo business climate index for July fell sharply to its lowest level in nine months, and analysts say it is likely to keep dropping. 

Unemployed Ignored In Debt Ceiling Deal
by Arthur Delaney - Huffington Post 

The long-term unemployed have been left out of a deal between congressional negotiators and the White House to enact massive spending cuts and raise the nation's debt ceiling before its borrowing limit is reached on Tuesday.

Under the so-called grand bargain President Obama tried to strike with House Speaker John Boehner (R-Ohio), federal unemployment benefits would have been extended beyond January 2012, when they are set to expire. But those negotiations collapsed in July. On Sunday, congressional leaders and the administration crafted a not-so-grand bargain that will cut spending without raising taxes or preserving stimulus programs like federal unemployment insurance.

"Sudden And Unexpected" Burst Of Downsizing Causes Layoffs To Explode Nearly 60% In July
by Joe Weisenthal - Business Insider 

July was a HUGE month for layoffs according to a survey from Challenger.

The announcement:

A sudden and unexpected burst in private-sector downsizing pushed the number of announced job cuts to a 16-month high of 66,414 in July, according the latest report on downsizing activity released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.

The 66,414 job cuts last month were up 60 percent from the previous month, when employers announced plans to shed 41,432 workers. The July figure was 59 percent higher than the 41,676 layoffs recorded in July 2010. It was the largest monthly total since March 2010, when 67,611 job cuts were announced by the nation’s employers.

The July job-cut surge was dominated by a flurry of large layoffs by a handful of private-sector employers, including Merck & Co., Borders,Cisco Systems, Lockheed Martin and Boston Scientific. The job cuts from these five companies alone accounted for 38,100 or 57 percent of the July total.

Debt Ceiling Deal A Major Setback For American Labor Market
by Lila Shapiro - Huffington Post 

For American workers -- both those employed and those looking for work -- the deal reached over the weekend to stave off an American default could spell disaster, labor economists say.

The deal struck between Obama and congressional leaders, announced Sunday night, may have averted a historic U.S. default, but the $917 billion dollars in cuts planned for the next decade could worsen an already stagnant labor market.

While many of the specifics of the planned cuts have yet to be settled, with less government spending to lift the labor market, employed workers, full- or part-time, could enjoy less job security and increasingly stagnant wages, economists say. And those without a job will face an ever more difficult route back to employment. An extension of federal unemployment insurance for the long-term unemployed, discussed in negotiations as late as July, was not included in the final plan. And cuts to government and state spending will likely mean that following months of decreases in public sector employment, even more government workers will be laid off.

The Biggest Middle Class Tax Increase In History Will Come In Five Months
by Bruce Krasting 

There is one aspect of the final debt deal from DC that took me by surprise. I was convinced the 2% reduction in payroll taxes would be extended through 2012. On July 12th I wrote about this and  got itcompletely wrong. Not only did I think there would be a one year extension of the existing holiday; I forecast that the subsidy would actually be increased. I was steered in the wrong direction by the Bosshimself. On July 11th Obama stated:

I want to be crystal clear. Nobody has talked about increasing taxes now. Nobody has talked about increasing taxes next year. We’re talking 2013 and the out years.

In the same press conference he added:

(cuts in FICA payroll taxes) would be a component of this overall package.

I don’t think the President said these words without having some sort of understanding with Speaker Boehner. Two weeks ago an economic stimulus was part of the plan. Today there is nothing. I think I understand what may have happened. When push came to shove the FICAholiday got shelved. That had to happen to get a deal done. Why?Because we are so broke we can’t afford the stimulus.

 we are economically vulnerable and we have no traditional responses. The second is that we are going to hit a very big economic wall on January 1, 2012.

As of the first of the year taxes on payrolls are going up by 2% across the board. This will suck $10b a month out of consumer’s pockets. I think it will prove to be a critical $10b.

The reason that the current stimulus was directed at FICA taxes is that this was the most progressive way to provide some relief. Those same individuals/families (average income of $37,000) will be hurt the hardest when the rates go back up. For a family with two average incomes the tax increase comes to $1,500 a year.

Will that make a difference? You bet it will. Toward the end of the month many families will get squeezed. (Good luck with your Wal-Martstock when that starts to happen.) 

The $120b in increased taxes will translate to a direct reduction of consumer spending. As a result, GDP will take a hit. The move to FICAtaxes will, by itself, reduce GDP by 1/2 to 3/4%. That is a very big deal. One would have to be blind not to recognize that the economy is currently approaching stall speed. And now we have introduced another big headwind. That wind will be blowing in our face in less than five months.

The debt limit crisis has forced the political leaders in DC to throw out the Keynesian playbook. In the end this might be a good thing. But it is going to hurt like hell this winter. Sometime around February we are going to hit a very cold and solid wall. The economy could tank.

....

What the heck happened?
So how did the debt grow from $5.8 trillion in 2001 to its current $14.3 trillion? The biggest contributors to the nearly $9-trillion increase over a decade were:

• The 2001 and 2003 tax cuts under President George W. Bush: $1.6 trillion.
• Additional interest costs: $1.4 trillion.
• Wars in Iraq and Afghanistan: $1.3 trillion.
• Economic stimulus package under Obama: $800 billion.
• 2010 tax cuts, a compromise by Obama and Republicans that extended jobless benefits and cut payroll taxes: $400 billion.
• 2003 creation of Medicare's prescription drug benefit under Bush: $300 billion.
• 2008 financial industry bailout: $200 billion.
• Hundreds of billions less in revenue than expected since the recession began in December 2007.
• Other spending increases in domestic, farm and defense programs, adding lesser amounts.

Debt Ceiling? What Debt Ceiling?
by Steven Van Zandt - Huffington Post 

First of all, just because the Tea Party people appear to be generally uneducated, ignorant about the political process, ignorant about economics, confused about their own platform from the beginning, and indelicate when it comes to the craft of diplomacy, doesn't mean they're wrong.

• They're right about our Debt being a bad thing.
• They are right about our Deficit being a bad thing.
• They are right about having a balanced budget.
• They're even right about taxes (although that really wasn't part of their initial platform exactly).

I've always considered the government taking one out of every two dollars I earn absolute tyranny. Especially since we get almost nothing back compared to every other civilized country. Now Hedge-fund guys and other billionaires paying 19 percent is another matter entirely, but that's an issue of tax reform and closing loopholes and no one objects to that. What the Tea Partyers are not correct about is connecting these things to the Debt Ceiling. But you can't really blame them. They didn't know there was one.

How should they know what's what when they, like most of America, look to Cable TV News and Radio Talk Shows as their exclusive sources of information?

This time it's the so-called Right mouthing untruths, next week it'll be the Left. Makes no difference to me, I'm a staunch Independent and always have been, does it matter to you who's lying? As most of the population suffers through life, barely surviving, disappointed and confused day after day, hopeless, wondering what happened to their strong and beautiful country, it is in the Media's power to restore, if not some of our quality of life, at least a bit of our peace of mind.

Since we can't have real democracy, or jobs, or a decent wage, or money that has any value, or affordable education, or real health care, or more importantly real health, at least let us have the emotional satisfaction of hating the right people for the right reasons!
The Media has become just another meaningless bureaucratic institution that exists solely for the purpose of keeping the population distracted and diverted by the use of a constant barrage of bad news, intentionally or unintentionally designed to keep us from thinking, acting, and organizing, but mostly to remind us about those starving children in Africa, keeping us grateful that our miserable lives aren't any worse.

Europe's money markets freeze as crisis escalates in Italy and Spain
by Ambrose Evans-Pritchard - Telegraph 

The European money markets have begun to seize up as pressure mounts on the Italian and Spanish banking systems, tracking the pattern seen during the build-up towards the financial crisis in 2008.

The three-month euribor/OIS spread, the fear gauge of credit markets, reached the highest level in two years today, jumping 7 basis points to 40 in wild trading. "Europe's money markets are undoubtedly starting to freeze up," said Marc Ostwald from Monument Securites. "It's not as dramatic as pre-Lehamn but it is alarming and shows the pervasive degree of fear in the markets. People are again refusing to lend except on a secured basis."

The credit stress was triggered by fresh mayhem in the southern European bond markets and ominously in parts of the eurozone's soft core as well, including Belgium. Spanish yields pushed further into the danger zone to 6.42pc. Italian debt reached a post-EMU high of 6.22pc before falling back slightly on reports of Chinese buying.

"We have a revolt taking place by foreign investors in these bond markets," said Hans Redeker, currency chief at Morgan Stanley. "There have been hardly any purchases for several months. We are seeing net disinvestment because people fear that these countries lack the potential to grow their way out of the problem, and risk falling into a Fisherite debt trap."

How to ruin Italy
by Ambrose Evans-Pritchard - Telegraph Italy’s real M1 deposits have been contracting at a 7pc rate over recent months, and M3 is not far behind. This is catastrophic.

Italy is the victim of an entirely inappropriate monetary policy.

The country needs ultra-loose money to offset €48bn of fiscal tightening and stave off a bond crisis.

The ECB could prevent such a downward spiral. It chooses not to do so, and is therefore pushing Italy ever closer to the brink.

Euro faces meltdown in the August heat
by Larry Elliott - Guardian 

There has to be a good reason to keep euro leaders at their desks in the holiday month of August – this year there is

Less than two weeks ago the leaders of the eurozone were looking forward to an August sunning themselves on the beach after concluding a deal that was supposed to resolve once and for all the debt crisis on the fringes of the single currency. Now the euphoria seems a distant memory, redolent of Neville Chamberlain's "peace in our time" as the financial markets threaten two of the big beasts of monetary union – Italy and Spain.

As bond yields in both countries rose to levels not seen since monetary union was created more than a decade ago, Spain's prime minister, José Luis Rodríguez Zapatero, said he was postponing his three-week holiday to monitor economic developments. Italy's economics minister, Giulio Tremonti, called an emergency meeting to discuss how his country, which has the biggest national debt of any eurozone nation bar Greece, could cope with the speculative attacks.

Greece begins €50 billion privatisation drive
by Helena Smith - Guardian 

The starting gun for one of the biggest fire-sales in western history was fired as Greek officials began appointing advisers for the country's ambitious privatisation drive. "Our target is clear, and it is to generate €1.7bn from privatisations by the end of September and €5bn by the end of the year," said the finance minister, Evangelos Venizelos.

After securing a second aid package to prop up an economy now dependent on international handouts to pay public wages and pensions, Athens has moved with record speed to divest itself of state assets ranging from prime real estate to loss-making companies.

By any measure it is a gargantuan task. At stake is Greece's €350bn debt, which before the EU and IMF agreed to bailout the country again was predicted to peak at 172% of GDP next year.

The socialist government says it aims to raise €50bn through the campaign by 2015. Enough, it is hoped, to not only make a dent in the debt but send a convincing message to the markets that have pummelled Athens since the onset of the crisis 18 months ago. The prime minister, George Papandreou, has cancelled his summer holidays to accelerate the dismantling of a sector that his father Andreas – Greece's fiery socialist premier in the 1980s – did much to foster.

International lenders have warned that if there no progress with privatisations they will withhold the next tranche of aid in September.

After years of resisting privatisations, the breakneck speed at which Athens has agreed to conduct the sales – nearly one every 15 days – has raised fears that state jewels will be sold at rock-bottom prices. "In a buyer's market our biggest concern is that this entire process will only serve to benefit the forces of capitalism and do nothing to create development," said Yiannis Panagopoulos, president of the Confederation of Greek Workers, the country's biggest labour grouping.
"We will strongly oppose the sale of any sector in which the government has a strategic interest … there will be huge resistance if it tries to sell the electricity company, the water board, our post office or ports, sectors that are vital to developing this country."Europe on the Verge of Becoming a Transfer Unionby Christian Reiermann - Spiegel 

The euro zone looks set to evolve into a transfer union as it struggles to overcome the debt crisis. There are a number of options for the institutionalized shift of resources from richer to poorer member states -- and Germany would end up as the biggest net contributor in every scenario.

Merkel and her colleagues have now pushed the doors wide open for a European community based on shared liability. As a result of their decisions, euro-zone member countries will have to provide much greater guarantees for the solvency of countries that have run into financial trouble. In other words, there will now be an even greater redistribution of wealth between the richer and the poorer states.

Debt deal: anger and deceit has led the US into a billionaires' coup
by George Monbiot - Guardian 

There are two ways of cutting a deficit: raising taxes or reducing spending. Raising taxes means taking money from the rich. Cutting spending means taking money from the poor. Not in all cases of course: some taxation is regressive; some state spending takes money from ordinary citizens and gives it to banks, arms companies, oil barons and farmers. But in most cases the state transfers wealth from rich to poor, while tax cuts shift it from poor to rich.

So the rich, in a nominal democracy, have a struggle on their hands. Somehow they must persuade the other 99% to vote against their own interests: to shrink the state, supporting spending cuts rather than tax rises. In the US they appear to be succeeding.

AFP mobilised the anger of people who found their conditions of life declining, and channelled it into a campaign to make them worse. Tea Party campaigners take to the streets to demand less tax for billionaires and worse health, education and social insurance for themselves.

Are they stupid? No. They have been misled by another instrument of corporate power: the media. The movement has been relentlessly promoted by Fox News, which belongs to a more familiar billionaire. Like the Kochs, Rupert Murdoch aims to misrepresent the democratic choices we face, in order to persuade us to vote against our own interests and in favour of his.Central Falls Bankruptcy Driven by Pensions Casts Shadow Over Rhode Islandby Michael McDonald, David McLaughlin and Laura Keeley - Bloomberg 

Central Falls, Rhode Island, whose motto is "a city with a bright future," cast a shadow across the rest of the state yesterday by entering bankruptcy.

Rhode Island’s poorest city sought court protection after retirees failed to accept cuts in pensions and benefits, pushing it into insolvency, according to Robert Flanders, a former state Supreme Court justice named to oversee Central Falls finances earlier this year. The city asked the court to let it impose "a prudent plan" to adjust what it pays retirees.

The city’s plight echoes an imbalance found in other municipalities across the U.S., including Vallejo, California, and Harrisburg, Pennsylvania, where local governments failed to curb spending to fit shrinking economies. In Rhode Island, the move into court is sounding an alarm because many local pension plans are "considerably underfunded," the state’s auditor- general said in a report last year.

"Unless there’s pension reform, Central Falls may not be the last municipality in Rhode Island that faces bankruptcy," said Gary Sasse, former Governor Donald Carcieri’s chief of administration. "No question Central Falls was unique and was an economic basket case but there are other communities in the state with locally administered pension plans that are in serious trouble."

The Tent City of New Jersey: Desperate victims of the economic slump forced to live in makeshift homes in forest 
by Daily Mail 

In scenes reminiscent of the Great Depression these are the ramshackle homes of the desperate and destitute U.S. families who have set up their own 'Tent City' only an hour from Manhattan.

More than 50 homeless people have joined the community within New Jersey's forests as the economic crisis has wrecked their American dream. And as politicians in Washington trade blows over their country's £8.8 trillion debt, the prospect of more souls joining this rag tag group grows by the day. Building their own tarpaulin tents, Native American teepees and makeshift balsa wood homes, every one of the Tent City residents has lost their job.

These people have been reduced to living on handouts from the local church and friendly restaurants and the community is a sad look at troubles caused as the world's most powerful country struggles with its finances. 'We have been in and out of the camp for a year,' said ex-hotel worker Burt Haut, 43, who lives with his wife, ex-teacher Barbara, 48 in a tent styled like a teepee from the Old West. 'Our financial difficulties since the credit crisis three years ago have caused us to camp on public ground, at the back of churches and down the backs of closed down stores. "We have had help from our friends and family, but we have run that well dry.

Ex-minister Steve Brigham, 50, runs Tent City, which consists of a dirt road running through a two-acre encampment which has flowerpots laid out front of proud tents and homes. Functioning as near to a normal town as possible, Tent City is governed by democratic rules agreed by all the residents. They all must agree to no fighting, to clean the camp, to volunteer their time when they have it, and to most importantly keep the noise down after 10pm.

The camp is currently involved in a legal battle with local Ocean County authorities which wants to remove the camp and the case has gone all the way to New Jersey Superior Court. Steve and the community of Tent City want Ocean County to provide a purpose built shelter for the homeless and are working with a local lawyer working who works for free. 'This is a place to recover, to dry out, to get back on your feet to help to re-enter the world,' said minister Steve who was ordained eight years ago but has given up all his possessions to live in poverty with the growing community in Tent City.

'We have a petrol-powered generator that heats up the water for the shower and lets us wash up dishes after donated meals. 'We have pet chickens which are not for eggs, they are to eat the ticks that could make us feel very ill with Lyme disease or a blood infection. 'It is a racially diverse community with Mexicans, Polish, Irish, African American and white people. 'There are eight women living here too, which was a problem in the past, but has now made the camp more calm by their presence. 'The struggle for every day existence here makes us realise how lucky we are when we have our homes and our lives all in front of us with our televisions and microwave meals.'

Even though the camp has relied heavily on the ingenuity of Steve and his able helpers, keeping hope alive in Tent City is his toughest task. 'We have a working chapel here that is built out of recovered wood and a tarpaulin roof,' explained Steve. 'In summer we perform the service outside in a circle laid out with chopped tree bases as seats. 'It is not a requirement to come to a service, but spirituality and hope can help these people who have hit their darkest hours.'

One couple who have lived for over a year in the camp are Elwood and Cynthia, who have both built there own cabin complete with functioning door and even have got themselves a sofa. 'We have upgraded from our tarpaulin tent to a balsa wood one, which should help us in the winter in case the snow weighs down our roof,' Elwood said. 'Hopefully in the summer too the temperature wont be so hot as well. 'Every help we get from Steve puts us that bit further on the path to a social security cheque or a government assisted housing scheme. 'I used to work cleaning for a local restaurant and Cynthia used to be a waitress.'



For Burt and Barbara the care that they receive here is preferable to living on benefits provided by the Government. 'The care and community offered by the Tent City is wonderful,' said Burt. 'It is just like getting back to nature and it makes you realise that all our wonderful appliances like microwaves, telephones and even cars are not essential. 'Food, shelter and water is what you need and is what we get here.'

Happiness: the price of economic growth
by Andrew Simms - Guardian 

The relentless pursuit of productivity is socially divisive, environmentally destructive and doesn't make us any happier

Last week, on the same day that we learned economic growth in the UK was running at a miserly 0.2%, the Office for National Statistics launched a new programme of work on measuring human well-being.

The latter was the result of a month-long survey in which the public were asked what mattered to them. To barely disguised yawns, the answers that came back were, "family, friends, health, financial security, equality and fairness in determining well-being", according to national statistician Jill Matheson.

So we were caught on one hand between a low-grade, generalised fear that people weren't buying enough stuff to keep the economy going, and being told on the other hand something we already knew deep down: that a better quality of life stems not from consuming more, but from a range of mostly immaterial things. Crucially, in a society like the UK, enjoyment of these does not correlate in any positive, straightforward manner with economic growth. On the contrary, some policies used to promote growth can directly undermine a range of the factors that do contribute to well-being, such as the time we need to spend with family, health, equality and fairness.

Depending on how it is pursued, economic growth can be jobless, socially divisive and environmentally destructive. It can, in other words, be "uneconomic growth". In a quite extraordinary intervention, as part of the government's desire to cut spending on public services, Oliver Letwin, the coalition's policy minister, recently suggested that "fear" of losing your job should be used to increase the productivity of workers.

This approach appears to be wrong on so many levels that I first thought it had to be a spoof. It will do nothing for growth; it chronically misunderstands how to get the best out of people; it contradicts the prime minister's own public conversion to the importance of well-being at work and, perhaps most importantly, it misunderstands real productivity.

In professions like health and education, if you drive out costs (ie people) you get a worse service. Quality of care and nurturing depends to a huge degree on attentive human contact in a convivial context. Subject people to old-fashioned Taylorist production-line management, coupled with the intimidation of a threatened job loss, and nobody wins.

It is wrong, also, because buried in this conundrum, may also be the secret of how, in the long term, we align our livelihoods and lifestyles with the limited planet on which we depend. This is about designing an economy of better, not more. And that suggests fundamentally rethinking what we mean by efficiency and productivity.

An economy that is more based on services, and in which we are sharing, repairing, recycling, reusing, learning, collaborating and coproducing services (that's the jargon, at any rate – it just means give and take) is one in which, ultimately, we may have more people doing fewer things in formal paid employment. In that context, we might have more time for "family, friends, health", and all the things that do add to our well-being.

The big objection is that growth is needed for jobs, and that these are what we need for financial security. On one level, yes, of course. However, financial security is also a function of equality and fairness, and given other economic problems (such as that many of the jobs created in a push for growth alone do not deliver financial security) as well as environmental constraints, there may be more reliable paths to find security. Inequality both creates insecurity and raises a society's costs in relation to health problems, crime and almost everything else.

Redistribution of income and access to employment, therefore, compared with generalised, unequal and resource-hungry growth, can be quicker, less destructive and a more effective way of delivering security.

A sensible approach to enhance economic activity in a way that met many needs would be to take Vince Cable's suggestion of another round of quantitative easing, but instead of just spraying a general injection of cash via the banks (who take a cut) into the economy, to channel it into the productive low-carbon economy – a sort of green easing.