NSA snooping could cost US tech companies up to $35bn over 3 years

The role of America’s intelligence boss on the panel reviewing government surveillance programmes is causing controversy. James Clapper was expected to lead the inquiry, which was promised to be independent – but now it looks like he’ll only have a limited part to play. And all this scrutiny of spying methods is costing big tech companies, big money.

Walmart sales expose collapsing economy

Walmart reported earnings of $1.24 a share Thursday on revenues of $116.2 billion for the second quarter. Analysts had been expecting $1.25 on $118.5 billion. Sales in stores open more than a year declined 0.3%. Walmart also guided lower for the full year citing a “challenging sales and operating environment.” The stock is off sharply and at risk of going negative for the last 52 weeks.
Those are the numbers, but not the whole story. Walmart is the thermometer of the American economy. Disregard the government data. Jobs and GDP and all the rest are at best inaccurate measures of the economy and at worst flat out corrupt. Walmart is capitalism writ large.
The entire organization is focused on nothing but selling goods and services to Americans. It may be an empire in decline, but Walmart sells more than $1 billion worth of merchandise per day in a bad quarter. When Walmart misses estimates, it can only mean one of two things: either Walmart or the American economy is weaker than anyone thought.
“Walmart is a terrific retail operator… They didn’t suddenly become stupid,” says Howard Davidowitz, one of the top retail minds in the country. “The economy is in collapse. That’s what’s going on.”
Davidowitz points out that Walmart isn’t just a store for the downtrodden. They have 150 million customers which collectively spent less in Walmart stores than in the same period last year. Davidowitz says another 50 million customers shop at Target, which he also expects to have negative comp stores sales when it reports next week.

Don’t forget that Macy’s also missed expectations yesterday. Three makes a trend. The GDP data is positive and the employment data says things are improving gradually. Either the best merchants in America forgot how to sell, Americans stopped consuming beyond their means, or the economy is turning south, not getting better.
“I don’t think we’re in a recession right now, but I think there’s a 50 percent chance we’ll be in one next year,” Davidowitz shouts, and there’s nothing the government is going to be able to do about it. “We’ve spent all the money, we’ve borrowed all the money, and we’re in the tank.”
AHT/DB

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Republished from: Press TV

Upper West Side condo has separate entrances for rich and poor

This is rich!
The poor will use a separate door under plans for a new Upper West Side luxury tower — where affordable housing will be segregated from ritzy waterfront condos despite being in the same building.
Manhattan developer Extell is seeking millions in air rights and tax breaks for building 55 low-income units at 40 Riverside Boulevard, but the company is sequestering the cash-poor tenants who make the lucrative incentives possible.
Five floors of affordable housing will face away from the Hudson River and have a separate entrance, elevator and maintenance company, while 219 market-rate condominiums will overlook the waterfront.

“You know that show ‘Downton Abbey’? Where the servants have to come and go through separate entrances and bow their heads when they see a noble?” wrote the author behind the blog West Side Rag. “Well, there could soon be a version right here on the Upper West Side!”
Extell broke ground on the building between West 61st and West 62nd streets last year as part of the 15-tower Riverside South residential complex stretching to West 72nd Street.
Now the company is applying for the city’s Inclusionary Housing Program, which gives developers more floor area in exchange for building on- or off-site affordable housing.
But instead of building a larger condo, Extell plans to sell the bonus floor area to another building within a half-mile of the site. Real-estate attorneys say such a sale could be worth millions.
Extell is also seeking a controversial 421a exemption — a tax break given to developers who include affordable housing in their market-rate buildings.
In October, The Post reported that five of the luxury firm’s towers cost the city $21.8 million in tax revenue in their first year alone.
Together, the buildings paid just $567,337 in annual taxes. Without the 421a program, they would have paid the city $22 million, according to appraisal firm Miller Samuel Inc.
Extell declined to comment.
A spokesman for the Department of Housing Preservation and Development said Extell’s application is still under review.
Assemblywoman Linda Rosenthal, a Democrat who represents the Upper West Side, told The Post that Extell’s plans “smack of classism,” and feared they could set a dangerous precedent for other developers.
“It’s a blatant attempt to segregate people,” fumed Rosenthal, who is demanding that HPD deny Extell’s request for tax breaks. “It’s just not a good thing for the city of New York to be supporting.”“I hate the visual of market-rate tenants going in one door and affordable tenants going in another, but that’s a visceral reaction,” Diller said.
Community Board Chair Mark Diller sent a letter to HPD last month asking for safeguards to protect low-income residents, who are relegated to floors two to six.
Under Extell’s plans for the low-income units, a studio will go for $845 a month, a one-bedroom for $908, and two-bedrooms for $1,099.
Households with incomes below 60 percent of the city’s area median income qualify for the units.
A family of four, for example, would need to make less than $51,540; an individual would need to earn less than $36,120.
Fat cats living in the condos will pay more than $1,000 per square foot. At The Aldyn, Extell’s 40-story luxury building next door, one-bedrooms sell for a whopping $1.3 million. A six-bedroom, eight-bath pad goes for $15.9 million.

Is The Wealth Effect In The US Already Tapering?

In his latest video update, Peter Schiff discussed three important evolutions of this week. It gives an insight about the wealth effect, particularly in the US. The wealth effect is undoubtedly very high on the agenda of central planners.

1. Weak retail sales, increased credit card usage

Two retail chains (Macy’s and Walmart) came with lower than expected earnings. Those results came right after credit card companies announced better than expected earnings.
Peter Schiff interprets this as a bad evolution. He thinks people are using debt to pay for necessities at grocery stores and gasoline stations, ending up with less purchasing power in total.

2. Phony housing recovery

The housing numbers came out a bit better than anticipated. But Peter Schiff points to the data “under the hood” which reveal a worse situation. It appears that the demand for rental units has increased which goes with a decrease in new mortgages. No coincidence that housing stocks have been among the weakest lately.
Moreover, the latest data show that 60% of home buyers are paying all cash. It can only be investors or speculators buying new homes; the average American can’t afford buying a new property by paying cash.
Data clearly point to a phony housing recovery. Peter Schiff concludes that the housing market is already tapering before Fed is tapering. The reasonable question to ask is what will happen when the speculators are going to unwind if the Fed starts the real taper? Who will be left buying when investors and speculators start selling?

3. Consumer confidence is down

The latest consumer confidence figures from the Michigan University have dropped compared to the previous month. Consumers appear to be less confident. The most likely explanation is that they have only been hearing about an economic recovery, but they have not experienced it. At one point in time, the experience takes over expectations.

The wealth effect already tapering

The above data show that the wealth effect is working in reverse already. Peter Schiff compares it with a “house of cards recovery” which is already collapsing before the real taper starts.
Now the remarkable thing is that the Fed has only been talking about a slight easing of their asset purchases. They are not even talking about a significant taper or even about unwounding previous purchases.

The gold price rising

There was a lot of speculation by market watchers about the recent gold price rally. The real predicament, according to Schiff, is related to the failure of the latest bond auction. In fact, the bond auction saw its weakest demand since March 2009. On top of that, private investors from abroad (China, Singapore, etc) have been selling treasuries, according to recent data. So with less demand for bonds by the Fed and private investors abroad, it means that interest in the dollar is going down as well. That is what shapes the prospects for gold and explains recent price action.

UK food bank inquiries up by 78%

UK food bank inquiries show a shocking rise of 78 percent in the last six months.

There has been an “alarming” 78 percent increase in the number of food bank inquiries in Britain over the last six months, a charity says.
According to figures released by Citizens Advice, more Britons are asking for emergency food aid as poverty rises throughout the country.
The charity also warned that people in employment are seeking assistance with obtaining food for the first time.
Citizens Advice Chief executive Gillian Guy said the data showed that millions of British families were struggling with financial problems.

“The combined impact of welfare upheaval, cuts to public spending, low wages and the high cost of living are putting unbearable pressure on many households, forcing them to seek emergency help putting food on the table,” Guy added.
The charity also identified the West Midlands as the worst affected area, with a 142 percent rise in food bank inquiries since February.
Earlier in April, the Trussell Trust, the largest food bank provider in the UK, said over 350,000 hungry Britons have turned to food banks last year, almost triple the number who has received food aid in 2011, due to the government’s welfare reforms
SSM/HE

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Republished from: Press TV

Detroit: Government Chooses Big Banks Over the American People Once Again

Government Sides with the Big Banks Every Time

Ellen Brown noted recently that Detroit is yet another example of the government choosing big banks over the American people:

The argument for the super-priority of derivative claims [background] is that nonpayment on these bets represents a “systemic risk” to the financial scheme. Derivative bets are cross-collateralized and are so inextricably entwined in a $600-plus trillion house of cards that the whole financial scheme could go down if the betting scheme were to collapse. Instead of banning or regulating this very risky casino, Congress has been persuaded by the masterminds of Wall Street that it needs to be preserved at all costs.
The same tortured logic has been used to justify the fact that the federal government deigned to bail out Wall Street but not Detroit. Supposedly, the mega-banks pose a systemic risk and Detroit doesn’t. On July 29th, former Obama administration economist Jared Bernstein pursued this line of reasoning on his blog, writing:

[T]he correct motivation for federal bailouts — meaning some combination of managing a bankruptcy, paying off creditors (though often with a haircut), or providing liquidity in cases where that’s the issue as opposed to insolvency – is systemic risk. The failure of large, major banks, two out of the big three auto companies, the secondary market for housing – all of these pose unacceptably large risks to global financial markets, and thus the global economy, to a major industry, including its upstream and downstream suppliers, and to the national housing sector. Because a) there’s not much of a case that Detroit is systemically connected in those ways, and b) Chapter 9 of the bankruptcy code appears to provide an adequate way for it to deal with its insolvency, I don’t think anything like a large scale bailout is forthcoming.

The New York Times Editorial Board writes:

What we do have a problem with is shared sacrifice that does not seem to apply to the big banks that abetted Detroit’s descent into bankruptcy.
Last month, just days before its bankruptcy filing, Detroit reached its first settlement with creditors. The settlement was with UBS and Bank of America, and though the precise terms will not be nailed down until the bankruptcy judge weighs in, Detroit is set to pay an estimated $250 million to terminate a soured derivatives transaction from 2005.
The derivatives, known as interest-rate swaps, were supposed to protect Detroit from rising interest payments on a chunk of its variable rate debt. The banks would pay Detroit if interest rates rose, and Detroit would pay the banks if rates fell. By 2009, both interest rates and the city’s credit rating were falling, forcing Detroit to pay the banks some $50 million a year and to pledge roughly $11 million a month in casino-tax revenue as additional collateral. [Background on how the big banks suckered Detroit]
***
But the haircut doesn’t mean that the banks will suffer. They have already made money on the swaps; the true extent of any discount will not be known until the deal is finalized.
This much is clear:
■ The banks’ 25 percent hit is nothing compared with the city’s suggested 90 percent cut to the pensions’ unfunded liability  —  which will result in benefit cuts that would be disastrous in both human and political terms and that the State of Michigan must prevent from happening.
■ Municipal officials are prey for Wall Street. The Dodd-Frank financial reform law called on regulators to establish “enhanced protection” for municipalities and other clients in their dealings with Wall Street, but the Securities and Exchange Commission has not yet completed rules, while the Commodity Futures Trading Commission’s rules are so weak as to virtually invite the banks to exploit municipalities.
■ The special treatment banks receive when debtors are in or near bankruptcy is unfair and economically destabilizing. Detroit’s agreement with the two banks requires court approval, but, in general, swap deals by banks are not subject to the constraints that normally apply in bankruptcy cases; in effect, the banks are paid first, even before other secured creditors and certainly before pensioners. That privilege, dating to the heyday of derivatives deregulation in the 1990s and 2000s, is destabilizing because the assurance of repayment fosters recklessness.
Detroit’s problems are a reminder of broader challenges, identified but still unmet: protecting pensions; protecting municipalities from Wall Street; and, at long last, revoking the obscene privileges of banks that allow them to prosper on the failings of others

Reuters adds some details:

The city is paying its swap counterparties a fixed interest rate of approximately 6 percent and receiving payments back of approximately 0.57 percent (current three month Libor ~0.27 percent + 0.30 percent = 0.57 percent for the floating rate). The city’s swap counterparties cannot take haircuts if bankruptcy is filed, according to a creditor attorney that I spoke to. In fact, they move to the head of the creditor line. The same part of the bankruptcy code that was used in the Lehman bankruptcy (Chapter 11) applies to Detroit (Chapter 9). Swaps are settled (netted and paid) when the entity enters the bankruptcy process. From the Stanford Law Review:

Under the Bankruptcy Code, creditors of a failed entity are stayed or prohibited from seizing that entity’s assets. Since 1978, however, Congress has exempted derivatives counterparties from the automatic stay and permitted the termination of the derivatives contracts.

Clearly Detroit’s derivative counterparties will siphon precious cash away from the insolvent city if it were to enter bankruptcy. This cash payment to swap counterparties could likely be in the $400 million range.

The bigger pictures is that the government always chooses the big banks over the little guy:

All of the top independent economists and financial experts (and many bankers) say that we’ve got to break up the big banks to save the economy.
Instead, the government has thrown trillions at the big banks to artificially make them appear profitable.
The bailouts are continuing non-stop … to this very day (and see this).
Indeed, the government chose the big banks over Main Street, the average American … or the economy as a whole.  And see this and this.
As such, the government has sucked trillions out of the real economy by pushing policies which destroy jobs (sorry … Obama doesn’t care), redistributed wealth upwards from the broad economy to a handful of the very richest (which trashes the economy .. and Obama is even worse than Bush), and destroyed savers and Main Street.
In other words, we have thrown many trillions of dollars at the banks, and then sucked trillions more out of the real economy.
As we noted recently:

The central banks’ central bank – the Bank for International Settlements- warned in 2008 that bailouts of the big banks would create sovereign debt crises … which could bankrupt nations.
That is exactly what has happened.
The big banks went bust, and so did the debtors. But the government chose to save the big banks instead of the little guy, thus allowing the banks to continue to try to wring every penny of debt out of debtors.
Treasury Secretary Paulson shoved bailouts down Congress’ throat by threatening martial law if the bailouts weren’t passed. And the bailouts are now perpetual.
Moreover:

The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:

• A lot of the bailout money is going to the failing companies’ shareholders

• Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”

• The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry (this has caused a lot of companies to bite off more than they can chew, destabilizing the acquiring companies)

And as the New York Times notes, “Tens of billions of [bailout] dollars have merely passed through A.I.G. to its derivatives trading partners”.
***
In other words, through a little game-playing by the Fed, taxpayer money is going straight into the pockets of investors in AIG’s credit default swaps and is not even really stabilizing AIG.

Moreover, a large percentage of the bailouts went to foreign banks (and see this). And so did a huge portion of the money from quantitative easing. Indeed, the Fed bailed out Gaddafi’s Bank of Libya, hedge fund billionaires, and big companies, but turned its back on the little guy.
A study of 124 banking crises by the International Monetary Fund found that propping up banks which are only pretending to be solvent often leads to austerity:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.
Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.
***

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

In other words, the “stimulus” to the banks blows up the budget, “squeezing” public services through austerity.
Numerous top economists say that the bank bailouts are the largest robbery and redistribution of wealth in history.
Why was this illegal? Well, the top white collar fraud expert in the country says that the Bush and Obama administrations broke the law by failing to break up insolvent banks … instead of propping them up by bailing them out.
And the Special Inspector General of the Tarp bailout program said that the Treasury Secretary lied to Congress regarding some fundamental aspects of Tarp – like pretending that the banks were healthy, when they were totally insolvent. The Secretary also falsely told Congress that the bailouts would be used to dispose of toxic assets … but then used the money for something else entirely. Making false statements to a federal official is illegal, pursuant to 18 United States Code Section 1001.

Given the above – and the fact that we no longer prosecute the big white collar criminals – we no longer have a free market economy … we have fascism, communist style socialism, kleptocracy, oligarchy or banana republic style corruption.    As such, the machinery of capitalism – which could generate enough prosperity to dig us out of this budget deficit – has been broken.

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Republished from: Global Research

Cutting Loose: Hungary pays off IMF debt, may eye EU exit