Sunday, August 30, 2015

Is the next recession on the way?

Returning profits to shareholders through buybacks and dividends accounted for 95 percent of all earnings in 2014. As a result, each additional dollar of corporate earnings now translates to under 10 cents of reinvestment, according to a study by J.W. Mason of the Roosevelt Institute. This explains why business investment is at record lows.  It’s because the bulk of earnings is being recycled into buybacks, over $2.3 trillion dollars since 2009 to be precise. Corporations no longer look for ways to grow their businesses, expand operations, hire more employees or improve productivity.  Instead, they look for the quick fix, that is, load up on debt, buy more shares, goose the stock price, and walk away with the loot. Last year, companies spent $553 billion to repurchase outstanding shares, just short of the record $589.1 billion in 2007. Large companies like Apple, General Motors, McDonald’s, Pfizer, Microsoft and more have engaged in buybacks in recent years.  Buybacks are driving the stock market higher. Corporations purchase buybacks with credit. The level of corporate debt relative to the size of the economy… is now at its highest level ever. As corporations have borrowed more and more money, the level of corporate debt relative to the size of the economy has continued to increase. As the chart below shows, this ratio is now at its highest level ever — even higher than it was in 2007, before the last debt-fueled economic implosion. Importantly, corporate net debt — the amount of debt that corporations are carrying minus the cash they have on hand — is also at its highest level ever as a percent of the economy. Those stock prices are a bubble and that a significant stock market shakeout could leave some of biggest corporations teetering towards insolvency.

The Wall Street Journal explains:

“Companies are increasingly turning to accelerated share repurchase agreements…to return cash to shareholders and secure an immediate boost to per-share profits…..But these turbo-charged stock buybacks can backfire, especially when a steep market plunge—such as the 5.3% drop in the markets over the past two trading days. That’s because a steep plunge in stock prices can force the companies to potentially pay more to buy the shares through an ASR than what they would pay if they purchased the shares over time on the open market. “Things can go wrong,” said Robert Leonard, head of specialty equity transactions at Citigroup Inc…

Michael Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City. His latest book, which we promise to unpack in detail very soon, is Killing the Host: How Financial Parasites and Debt Destroy Global Economy. He explains: 

Companies are under pressure. The managers are paid according to how well they can make a stock price go up. And they think, why should we invest in long-term research and development or long-term developments when we can use the earnings we have just to buy our own stock, and that’ll push them up even without investing, without hiring, without producing more. We can make the stock go up by financial engineering. By using our earnings to buy their own stock. So what you have is empty earnings. You’ve had stock prices going up without corporate earnings really going up. If you buy back your stock and you retire the shares, then earnings per shares go up. But all of a sudden the whole world realizes that this is all financial engineering, doing it with mirrors, and it’s not real. There’s been no real gain in industrial profitability. There’s just been a diversion of corporate income into the financial markets instead of tangible new investment in hiring…

… The job of the Federal Reserve is to increase the price of wealth and stocks and real estate relative to labor. The Federal Reserve is sort of waging class war. It wants to increase the assets of the 1 percent relative to the earnings of the 99 percent, and we’re seeing the fact that this, the effect of this class war is so successful it’s plunged the economy into debt, slowed the economy, and led to the crisis we have today…. when the 1 percent lose money, they scream like anything, and they say it’s the job of the 99 percent to bail them out.

Friday, August 21, 2015


From Chris Hedges

"The animal agriculture industry causes suffering, death and environmental degradation—to humans as well as animals—on a scale equaled only by the arms industry and the fossil fuel industry. And by eating meat and dairy products we aid and abet a system that is perhaps the primary cause of global warming and is pumping toxins and poisons into our bodies and the rest of the ecosystem.

Animal agriculture sends more greenhouse gas emissions into the atmosphere than worldwide transportation. The waste and flatulence from livestock are responsible for creating at least 32,000 million tons of carbon dioxide per year, or 51 percent of all worldwide greenhouse gas emissions. Livestock causes 65 percent of all emissions of anthropogenic nitrous oxide, a greenhouse gas 296 times more destructive than carbon dioxide. Crops raised to feed livestock consume 56 percent of the water used in the United States. Seventy percent of the crops we grow in the U.S. are fed to animals. Eighty percent of the world’s soy crop is fed to animals. It is a flagrant waste of precious and diminishing resources. It takes 1,000 gallons of water to produce one gallon of milk."

Saturday, August 15, 2015

Filipino poverty and population

The Philippine population reached 100 million in 2014, and is projected to reach 101.6 million this year. The projection is based on an annual growth rate of 2.1%, which, while lower than the 2.42% rate from 1990 to 1995, is still the highest in the Southeast Asian region. Population growth rate was 1.9% in Cambodia, 1.6% in Malaysia, 1% in Vietnam and Indonesia, and 0.4% in Thailand, according to Rosalinda Marcelino, Population Commission director for Metro Manila. During the public hearings on the Reproductive Health Bill, Marcelino also told the House Committee on Population that the population would continue to grow for the next 50 years even if couples were to limit the number of their children to two each, because the population is predominantly young. Some 35% of Filipinos are below 15 years old, while 15% are 15 to 24 years old. “…More than 50% of [Filipinos] are young and, in due time, would become parents. And even if each couple would only have two children, our population will still continue to grow in the next 50 years,” Marcelino said.

For many politicians such figures are “the best argument for birth control”. They argued that high population growth rates exacerbate poverty, and that there is more poverty among big families. In addition, families with fewer children can better provide for the education, health, nutrition and other needs of each child, since whatever income they earn can be divided among fewer individuals. There was nothing new in these arguments. Almost all have been raised in other countries with high incidences of poverty.

Against the argument that a lower population growth rate would reduce poverty is that the causes of poverty are: flawed philosophies of development, misguided economic policies, greed, corruption, social inequities, lack of access to education, poor economic and social services, poor infrastructures, etc. The conclusion is unavoidable: to escape from poverty, we have to address the real causes of poverty and not population. South Africa, for example, has lowered its previously high population growth rate, but is still hounded by poverty.

The Philippines can arguably support a population of 200 million — but only if the structural causes of poverty were addressed. Among these is the grossly unequal distribution of wealth, in which the 25 wealthiest individuals appropriate the equivalent of the incomes of 70 million Filipinos. IBON Databank also points out that while the wealth of the richest Filipinos tripled during the last five years, there are more poor Filipinos (25.8% of the population) during the same period. The solutions to Philippine poverty are fairly well known, but unlikely to be adopted by a political class that is hardly committed to the authentic transformation of Philippine society from one in which economic growth benefits only a handful of families to one in which economic development would benefit the majority. In the Philippine context, a key solution include the outright abolition of the land tenancy system. The archaic, grossly inefficient and unjust tenancy system has persisted, primarily because the attempts at so-called land reform have been deliberately riddled with loopholes by the landlord-dominated Congress.

Poverty is the cause of overpopulation, rather than its result.

Friday, August 14, 2015

Press Freedom?

2,040 press articles mention Yvette Cooper in the last month. Not one of these mentions her support for the war that wrecked Libya.
2,453 articles mention Andy Burnham in the last month. Not one of these mentions his support for the war that wrecked Libya.
1,855 articles mention Liz Kendall in the last month. Not one of these mentions her support for the war that wrecked Libya.

Regime change, illegal bombing, mass killing, ethnic cleansing, torture, fragmented militia rule, economic and social chaos, 100,000s of refugees, many of them drowning in the Mediterranean - you'd think it would feature. 

 Corbyn voted against military intervention in Libya.

It says a lot about the fanatical discipline of the 'free press' that no-one has discussed it in any newspaper - it's a very recent war crime and the consequences ('migrants') have been covered heavily by the press this summer.

But the unwritten media agreement with politics, as we know, is that no matter how many people our politicians kill abroad, the issue doesn't feature in domestic elections. Even though it matters hugely to many voters, and even though it has obvious implications for future killing. For example, the unwritten rule allows the Guardian and Telegraph to endorse Cooper in the full knowledge that she'll support more war crimes. They care so much about the 'responsibility to protect' - they could start by discussing political candidates' penchant for killing.

Chaplin's Second Greatest Speech

Charlie Chaplin's speech at the end of The Great Dictator has become famous as one of the most inspirational ever recorded. 17 years later, having been forced from the United States because of his political views, Chaplin made A King In New York, satarising McCarthyism and once again using an epic speech to share his views. This time it is his 10 year old son, Michael Chaplin, who delivers it...

A spectre is haunting the Tories

Kenneth Clarke, a major figure in the Conservative Party (a former Chancellor, Home Secretary, Lord Chancellor, Justice Secretary, Education Secretary and Health Secretary) explained “If you have another recession or if the Conservative Government becomes very unpopular, he could win. In difficult times the party with the duty of government can become unpopular. He will be difficult to campaign against.”

Matthew d’Ancona, former editor of The Spectator and Deputy Editor of The Sunday Telegraph, is well-connected in Tory circles argues a Corbyn’s leadership “would drag the overall debate to the left and the tiny risk of his victory would be a catastrophe for Britain”. … Even Corbyn’s failure would threaten to re-define the centre ground and, by definition, make the Tories look more rightwing.”

Oliver Cooper – Tory Councillor and Chair of the Conservative Way Forward organising committee – warns Conservatives not to welcome Corbyn’s success. “Corbyn’s views will be more left-wing, so will shift the entire political debate to the left. Long-term, so long as Labour and the Conservatives remain the two major parties in the UK, the only way to make progress is to persuade Labour to accept our position. Our ideas don’t win just when our party does, but when the other party advocates our ideas, too. a Corbyn victory would lend credibility to the far-left … giving a megaphone to their politics. Inevitably, this would skew the discourse, letting Corbyn’s ideas become the default alternative to the Conservatives. Corbyn’s brand of socialism would poison the groundwater of British politics for a generation: influencing people, particularly young people, across the political spectrum.”

Asa Bennett, assistant comment editor at The Telegraph, argues:
 “ just think of this: it takes one calamity – let’s say the Eurozone blows up – and then suddenly the government will fall, and you’ll find Jeremy Corbyn as Prime Minister.”

Thursday, August 13, 2015

Detention camp

It shouldn't be emphasised enough that those detained are NOT criminals and are being imprisoned indefinitely on the say-so of a faceless civil servant bureaucrat. 

Sunday, August 09, 2015

Big Generic V Big Pharma

Generic drugs are supposed to be cheap, so why has the price of some generics risen a thousandfold or more? Blame the not-so-free market.

In October 2013, a month's supply of doxycycline, a widely used antibiotic that has been available in generic form for three decades, cost hospitals $1.20. Just six months later, it cost $111.00, an increase of 9,150 percent. In July 2013, a month of tetracycline, another antibiotic long generically available, cost pharmacies $1.50, but a year later it was $257.70, an increase of 17,080 percent. These are extreme instances, but they are not aberrant.

According to Medicare and Medicaid data, from July 2013 to July 2014, the price of half of all generics went up, and nearly 10 percent of them went up by double or more. Among this 10 percent, the average increase was 448 percent. By remarkable coincidence, the most frequently prescribed generics were among the more dramatic risers. One report found that in 2010, the 50 most popular generics cost an average of $13.14 per prescription, but by 2014, it was $62.10, a 373 percent spike.

Teva's share of the US generics market in recent years has ranged from just 13 to 22 percent. Second-place Mylan has held a mere 8 to 13 percent. The four biggest generics manufacturers combined control only 40 to 50 percent. Those numbers don't have the ring of oligopoly, but the generic market is different from most, chiefly because even the biggest manufacturers can make only a modest fraction of the thousands of generic drugs in existence. Teva and Mylan, for example, make 400 or so each, many overlapping. Other manufacturers make but a few dozen. The industry as a whole may not be oligopolistic, but the production of particular drugs most assuredly is.

Cephalon held the exclusive patent to modafinil and had been selling it since 1998, but the patent was set to expire in 2006. Teva wanted a piece of the action when it did expire. Cephalon, however, wasn't ready to give up its monopoly, so in 2005 and 2006, it paid more than $300 million to Teva and three other makers of generics to stay out of the market until 2012. Generic firms love "pay to delay" deals, as they are known in the trade, because of the guaranteed profit. Name-brand firms of course love the extension of their monopoly. After buying off its competitors, Cephalon's profits on Provigil took on a fleece-like texture. In 2005, when the first deal was struck, annual US sales of the drug were $475 million. Just two years later, they topped $800 million. By 2011, the last full year of Cephalon's monopoly, they reached $1.1 billion. In 2004, a month's supply of Provigil cost about $166 (drug prices vary from pharmacy to pharmacy), but by 2007 it was $272, by 2009 it was $409, and by the last year of Cephalon's patent in 2012 it was $1,001. The gross take - an altogether apt phrase - during the extra years of Provigil's monopoly came to about $5 billion, not a shabby return on $300 million in baksheesh to the generic companies.

Another trick of the pharma trade as a drug approaches the patent cliff is to develop a new drug to replace the old one, often by making the merest of tweaks, like putting an extended-release coating on an immediate-release tablet. Sometimes the benefits are more substantial, but even then they may be outweighed by new side effects or may be helpful only to a small subpopulation of patients. Regardless, the drug maker will tout its new pill - often spending millions, even tens of millions, to herald its improvements (and minimize its flaws) - and a lot of doctors and patients will be swayed. Those who aren't swayed may migrate to the new drug anyway because the price of the old one has been jacked up so high, as Cephalon did with Provigil, that even the new drug is a bargain. The value of all this is not just the short-term profiteering but getting a base of doctors and patients hooked on the new drug before the old one turns generic. Most doctors and patients don't care to fix what ain't broke, so if the new drug works OK, they're less likely to use the old drug even after it goes generic and its price plummets. This was essentially Cephalon's strategy for Provigil and its lightly tweaked replacement, Nuvigil. Trouble was, in 2005, Cephalon was running behind in getting FDA approval for Nuvigil. By buying off Teva and the rest, Cephalon was buying time to get the drug approved and market it to doctors and patients. Nuvigil finally arrived in pharmacies in mid-2009 (priced at $269 a month, compared to Provigil's jacked-up $409) and grossed $39 million over the remainder of the year. By 2012, when Provigil went generic, annual sales of Nuvigil had reached $437 million. In all, Cephalon took $1 billion from Nuvigil during the extra years of its Provigil monopoly and along the way established a solid base of doctors and patients from which to wring future profits.

What happened to modafinil after Provigil went generic in 2012 is emblematic. By the end of that year, things looked good for consumers: a month's supply of modafinil dropped from Provigil's larcenous peak of $1,101 to as low as $5. But the descent was ephemeral. Only months later, the price soared to more than $1,200 - seven times the true value of even name-brand Provigil (if you take as its true value the cost, $166, before Cephalon made the pay-for-delay deals and started hiking up Provigil's price). The price has since dropped again, but only from the stratospheric to the tropospheric. In Boulder, Colorado, the lowest advertised price for the most common dose was $706. Even in more competitive precincts - lower Manhattan and downtown San Francisco, for example - the cost was $520. Big Generic has yet to offer an explanation for the prices, but surely it is no coincidence that when prices reached their nadir in 2012, more manufacturers seem to have sold generic modafinil than sell it today.

Under the most basic Obamacare plan, the average copayment for generic drugs is 32 percent, which would leave the patient who has a $700 modafinil prescription stuck paying $224 out of pocket each month, nearly $2,700 a year. (Out-of-pocket costs aren't capped until $6,600 for an individual and $13,200 for a family.) This is in addition to the plan's annual premium, which, depending on one's age, health, income and state of residence, runs from $1,000 to $8,000.