Saturday Reads Around the Internets - OMG Mitt Made Sense

shocknews Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.


Mitt Romney Speaks Some Truth on Mortgages

There has been more than one sane thing coming from Mitt Romney's mouth (surprise, surprise) and this one was so good even Eliot Spitzer and Dylan Ratigan took note:

Finally, a presidential candidate came out and honestly addressed the biggest problem in our economy, the enormous debt overhang in our mortgage market. A few days ago, Mitt Romney was at a forum in Florida talking about foreclosures, and his comments were actually refreshingly honest about our housing and banking situation and the need for a debt write-down.

Sure beats colonies on the moon, outlawing contraception and returning to the Gold standard.

This is the right approach to the problem. If you force the banks to recognize losses on the mortgage debt they are holding, then all of a sudden they will have an incentive to write down debt. Otherwise, a bank will do anything it can to maintain the fiction that the debt is worth 100 cents on the dollar, including lie, harass, and robo-sign.


Anti-Outsourcing Bill Has India, Philippines all in a Ruckus

There is a new anti-outsourcing bill in the House, the United States Call Center Worker and Consumer Protection Act. Of course offshore outsourcers are all prepping up and whipping out the lobbyists to stop the bill of course.

A bill that would punish American companies for sending their customer call centers overseas has caused an uproar in India and the Philippines, where politicians and corporations fear lost business due to the U.S. bill's protectionist measures.

The legislation, pushed by Rep. Tim Bishop (D-N.Y.) and the Communications Workers of America (CWA) union, would make companies that outsource their call center work ineligible for guaranteed federal loans and grants for a period of five years. The bill, entitled "U.S. Call Center Worker and Consumer Protection Act," would also require those companies to report themselves in advance to the Labor Department, which would maintain a public list of the companies who outsource.

Home to the largest call center industries in the world, India and the Philippines would stand to lose the most if such a law succeeded in deterring American corporations from taking their customer operations out of the U.S. in order to save on labor costs.


WTO & Financial Deregulation

Public Citizen alerts us to the WTO limiting and overriding national financial regulation and the ongoing efforts to wrestle those limits away from the GATS treaties.

The World Trade Organization’s General Agreement on Trade in Services limits the kinds of financial regulations countries can impose.

These rules were hashed out during the 1990s – before the lessons of the financial crisis, and when deregulation was in vogue. Documents we obtained under the U.S. Freedom of Information Act show that, in the late 1980s and 1990s, U.S. government officials worked closely with Wall Street executives to sell these rules to wary developing nations.

Unlike the re-regulation being discussed in the G-20 or the Bank of International Settlements, these rules at the WTO are highly enforceable. While the near-total absence of re-regulation over the last 15 years has presented few opportunities to road-test this services agreement, tax havens like Panama have already threatened to use them against the tax transparency initiatives of cash-starved countries like Ecuador. The U.S. lost a high-profile services trade case related to its ban on Internet gambling. Regulatory bans – even of questionable services – are prohibited under the WTO. And a European Commission staff paper about a potential financial transactions tax noted that it would be necessary to assess whether such a tax might conflict with the EU’s WTO commitments.

But the U.S., EU and the WTO Secretariat have spent the last 18 months trying to quash any discussion of these problems, much less consideration of possible updates to the old rules.


To Get a Job, Reveal Your Social Media Activities

This is fairly disgusting. Companies are refusing resumes and instead demanding your twitter account, Facebook information, videos and online screening software. The Wall Street Journal:

Instead of asking for résumés, the New York venture-capital firm—which has invested in Twitter, Foursquare, Zynga and other technology companies—asked applicants to send links representing their "Web presence," such as a Twitter account or Tumblr blog. Applicants also had to submit short videos demonstrating their interest in the position.

Union Square says its process nets better-quality candidates —especially for a venture-capital operation that invests heavily in the Internet and social-media—and the firm plans to use it going forward to fill analyst positions and other jobs.

Companies are increasingly relying on social networks such as LinkedIn, video profiles and online quizzes to gauge candidates' suitability for a job. While most still request a résumé as part of the application package, some are bypassing the staid requirement altogether.

On the other hand, if someone wants your social media, does that mean you can write online comments for your salary?


Cattle Herds at 60 Year Low

Bloomberg is reporting a 60 year low on cattle herds due to a double whammy of drought and corn feed skyrocketing in price. Thank you quantitative easing.

U.S. cattle inventories fell to the lowest in 60 years after a drought in the South scorched pastures, prompting ranchers to shrink herds.

As of Jan. 1, beef and dairy farmers held 90.77 million head of cattle, down 2.1 percent from a year earlier, the U.S. Department of Agriculture said today in a report. That’s the fewest since 1952. Ten analysts in a Bloomberg News survey were expecting a 1.5 percent decline.

“We had one of the biggest droughts in Texas this past year,” Chad Henderson, a market analyst at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin, said in telephone interview before the report. “Guys have been ripping up pasture and planting crops. It’ll take years for this thing to build back up.”

Cattle futures in Chicago surged to a record $1.29675 a pound on Jan. 25. Texas, the top state producer, had its driest year on record in 2011, according to the National Weather Service. The drought destroyed pastures, forcing ranchers to sell or slaughter animals rather than incur feed costs driven up by corn, the main ingredient, which reached an all-time high in 2011.

We might as well mention the Humane Society's webpage on inhumane treatment of farm animals.


Fitch Downgrades

More bad news for Euro Zone countries.

Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain on Friday, indicating there was a 1-in-2 chance of further cuts in the next two years.

In a statement, the ratings agency said the affected countries were vulnerable in the near-term to monetary and financial shocks.

"Consequently, these sovereigns do not, in Fitch's view, accrue the full benefits of the euro's reserve currency status," it said.

Fitch cut Italy's rating to A-minus from A-plus; Spain to A from AA-minus; Belgium to AA from AA-plus; Slovenia to A from AA-minus and Cyprus to BBB-minus from BBB, leaving the small island nation just one notch above junk status.

Ireland's rating of BBB-plus was affirmed.

All of the ratings were given negative outlooks.


HAMP Expanded

This is weird. The Obama administration is expanding HAMP. Yet, the government owned Fannie Mae and Freddie Mac will now be paid by the government to lower principle on mortgages. What? The government pays itself to reduce principle?

The Obama administration, seeking to help more homeowners lower their interest rates and shed mortgage debt, will relax the rules on a federal loan- modification program and triple its incentives to banks.

The revised Home Affordable Modification Program, or HAMP, also would pay Fannie Mae and Freddie Mac (FMCC) to forgive debt on homes that have lost value. The government-owned companies, citing cost, don’t reduce principal, a policy that has limited HAMP’s reach because they own or guarantee nearly half of U.S. home loans.


Never Ending Quantitative Easing

Seeking Alpha has a U.K. version of quantitative easing and the results thereof. Yup, not doing much there either.

Where does it end? The answer seems to be "it doesn't." There's quantitative easing as far as the eye can see, and this quantitative easing, while making it possible to run huge budget deficits for a long time, also totally impedes any kind of economic restructuring that would make it unnecessary.

So, with the entire developed world committed to diluting their money, what can be expected? One would expect, not surprisingly, for money to be diluted. For it to be worth less, when compared to goods, services and assets. In short, in spite of the seemingly excess capacity in almost everything except oil, one would expect that this monetary deluge will, over time, produce inflation.


Santorum Speaks with Forked Tongue

Why bother to cover the lies and absurdity of politicians but this one takes the cake. Sanctimonious Rick Santorum is investing in offshore outsourcing firms while claiming to support U.S. manufacturing.

Rick Santorum, seeking the votes of factory workers and laborers in today’s South Carolina (BEESSC) primary, has promoted what he calls his “Made in America” plan to eliminate U.S. corporate income taxes on manufacturing companies and reverse the flow of jobs to lower-cost countries.

When he invests, though, Santorum’s put some of his own money in companies that ship much of their manufacturing work to factories in China, Thailand, Malaysia and other countries.

Of 18 publicly traded stocks listed in the former Pennsylvania senator’s most recent financial disclosure, six companies sell fiber-optic equipment and outsource production to overseas factories-for-hire or operate their own plants abroad.


Insourcing Obama

Trade Reform kind of nails more Obama campaign rhetoric on bringing jobs back from abroad.

The “insoucring” rhetoric is fine. And it demonstrates that our push on the trade deficit and offshoring has an impact.

But, if Obama really wanted to “insource”, he should push for the currency manipulation bill and fully re-tool his trade strategy, including trade agreements. And offset the foreign VAT tariffs. Oh… and get Immelt of outsourcing GE off his jobs and competitiveness council.


New Manufacturing Report

The AAM highlights a new Department of Commerce report on U.S. competitiveness and manufacturing.

The U.S Department of Commerce (DOC) recently delivered a comprehensive report to Congress on “The Competitiveness and Innovative Capacity of the United States.” According to the DOC, the report “serves as a call to arms, highlighting bipartisan priorities to sustain and promote American innovation and economic competitiveness.”

The report examines several areas that are critically important to improving our competiveness including basic research, education, infrastructure, and most notably, manufacturing.

According to the report, the DOC recognizes "that a flourishing U.S. manufacturing sector is crucial to competitive strength, economic growth and job creation, as well as to sustaining a strong middle class."

The report also notes that manufacturing is the “biggest source of innovation in our economy” and that “Sixty-seven percent of all the business R&D in America is done by manufacturing companies.”

We couldn't agree more. Manufacturing and innovation go hand in hand, and without a strong manufacturing base, we stand to lose our competitive edge.


$15 Trillion and Counting

Russ Winter gives a starting wake up call in how much Central Banks have in bloatware securities these days:

Japan is just one insolvent country; there are others. In tandem, the central banks of these nations hold $15 trillion plus in inflated securities, loans and sovereign securities, in one giant Ponzi pool holding increasingly insolvent debt and "liquidity" loans to banks. As defaults and more credit downgrades gather steam (UK, US, France, Germany and others), the markdowns of these $15 trillion will accelerate. It is important to remember that the capital for central banks is provided by the participating govts.


Can We Put This Supply Side Claim to Bed Once and For All?

One of the most amazing things is how politicians can say, with a straight face, some policy does x when we all know it does not. Such is the case with tax cuts.

Dean Baker is sick of this economic insanity too with the piece The Earth Orbits the Sun and Gingrich's Supply Side Economics Doesn't Work:

The Post devoted a business section article to Newt Gingrich's supply side economics. It would have been useful to note the findings of the research on this topic, for example this Congressional Budget Office study. It found that even in a best case scenario the additional growth sparked by a tax cut could replace less than a third of the lost tax revenue. Even this effect would be temporary, with slower growth in later years implying larger deficits.

The Post should not just throw Gingrich's assertions out to readers as though they might be true. There is extensive research on this topic which the Post's business reporters should be familiar, its readers almost certainly are not.


The Siren Song of Austerity

We love analogies and David Cay Johnston has outdone himself. One could also make austerity calls analogous to the sounds of the animal herd.

The World Economic Forum opened in Davos amid choruses of central bankers and economists calling for governments to cut spending.

This message of austerity is like the call of the ancient Sirens, whose music lured sailors to shipwreck.

We should take a lesson from Odysseus, who poured wax into the ears of his crew and had himself lashed to the mast of his ship to resist the Siren call.

Austerity supporters are selling the idea that governments, like families, must cut back when income shrinks. But economically, governments are not like families.

If you read an incredible article this week that sticks in your head, please leave a comment and share with the rest of the class. Else, school's out! Have a Happy Saturday and Happy Reading!