Daily Digest

Daily Digest - September 29

Tuesday, September 29, 2009, 10:48 AM
  • Jim Quinn: Founding Fathers Of Our New Country
  • Hotel RevPAR off 18.3 Percent
  • U.S. Ratings Fraud Continues
  • Commentary: We Shouldn't Have Homeless Children in America
  • Saddled with Debt
  • En Down Ments (Chart)
  • Ludwig von Mises Institute (Video, H/T iDoctor)
  • The Economic Crisis and How to Deal with It (Video, H/T iDoctor)
  • Ferguson On US Deficit - Bloomberg (H/T iDoctor)

Economy

Jim Quinn:  Founding Fathers Of Our New Country

“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.” – Ron Paul

Hotel RevPAR off 18.3 Percent

We are now into the business travel season, and as expected, RevPAR is off sharply from 2008.

From HotelNewsNow.com: Oahu Island occupancy increases in STR weekly numbers

Overall the U.S. industry’s occupancy fell 8.6 percent to end the week at 59.6 percent. Average daily rate dropped 10.5 percent to finish the week at US$98.34. Revenue per available room for the week decreased 18.3 percent to finish at US$58.57.

U.S. Ratings Fraud Continues

This is only one of the outrageous aspects of this obvious scam. Ratings agencies are paid by the sellers of these products. Thus, the ratings agencies don't even pretend to independently evaluate these products (which, of course, is the primary function of these companies). The companies selling these products have to explain to the ratings agency how they should value them. If a particular ratings agency doesn't supply the appropriate “rubber-stamp” for the toxic security in question, then they don't get any future business.

It is a scam which is openly fraudulent, yet nothing has been done. Ratings agencies are still being paid by the sellers of these fraudulent securities. They still haven't even hired enough staff to evaluate the products they are “rating”. And government “regulators” still turn a blind-eye to this institutionalized fraud.

Commentary: We Shouldn't Have Homeless Children In America

The effects of homelessness on children are crippling.

Children who are homeless are in bad health twice as often as other children, and four times as often as children with a family annual income of more than $35,000. They are four times as likely to have asthma, and they go hungry twice as often as other children.

Homeless children have delayed development at a rate four times the national average. More than one-fifth of homeless children between 3 and 6 years have emotional problems that require professional attention.

Saddled with Debt

Ignoring the massive spike in government related debt (Federal, State, AND Local) for the time being and focusing instead on household liabilities as a percent of the national income, we see mortgage debt is now at 70% of GDP (more than double the level seen in the 1980's and 50% more than that seen at the beginning of this decade) and consumer debt is now at 18% of GDP.

The importance of all this is of course that all that debt that has been added over the years has been a huge contributor to that GDP. The fear is that the debt has just pulled a lot of consumption forward rather than infrastructure or other long term investments that will provide future growth opportunities.

En Down Ments (Chart)

Ludwig von Mises Institute (Video, H/T iDoctor)

The Economic Crisis and How to Deal with It (Video, H/T iDoctor)

iDoctor writes:

"WOW!! watch at (starts) 1:15:00 where Nail Ferguson starts speaking the truth that no one wants to hear & they cut him off...."

Ferguson On US Deficit - Bloomberg (H/T iDoctor)

19 Comments

John99's picture
John99
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Re: Daily Digest - September 29

Your right - dirty shut-down on Ferguson. He starts talking at about 1:16 and the shutdown is shortly after.

Many thanks

spinone's picture
spinone
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Re: Daily Digest - September 29

If they let Ferguson finish, I think we would have found he was creating a false choice between the unregulated (crony) capitalism of the 2000's and soviet-style central planning.  People on the panel are bright, and were calling him on a cheap rhetorical trick.  No one on the panel was advocating communism.

Having regulation and truly free markets with a social saftey net does not preclude private industry and innovation.  Don't fall for the false choice.

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saxplayer00o1
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Posts: 2466
Re: Daily Digest - September 29

1) WB president: Dollar's role as world's reserve currency may be diminishing (video)

2) Fannie Mae Mortgage Defaults Climb to Record in July

"Fannie Mae and McLean, Virginia-based rival Freddie Mac have shrunk their portfolios this year as the Federal Reserve’s buying of $1.25 trillion of mortgage bonds limits opportunities for profitable investments, while continuing to increase their debt guarantees. They must keep their portfolios below $900 billion after being placed in government-run conservatorships last September."

3) ICN Informed Citizen News 09/27/09

Her story #1 Rep. Alan Grayson:Questions Fed General Counsel

Click on "more info" to see links to her info.

4) S&P cuts MBIA bond-insurance unit to junk

"S&P said losses on residential mortgage-backed securities and collateralized debt obligations that MBIA guaranteed from 2005 to 2007 could be higher than the agency had expected. The downgrade also reflects potentially higher losses on other assets, such as commercial mortgage-based securities, S&P added." More info

5) Volcker Says China’s Rise Highlights Relative U.S. Decline

"Sept. 29 (Bloomberg) -- Former Federal Reserve chairman Paul Volcker said the rise of China and other emerging economies has underscored a decline in the comparative economic and intellectual leadership of the U.S.

“I don’t know how we accommodate ourselves to it,” Volcker, an economic adviser to President Barack Obama, said in an interview with PBS’s Charlie Rose taped yesterday in New York. “You cannot be dependent upon these countries for three to four trillion dollars of your debt and think that they’re going to be passive observers of whatever you do.”"

6) Rents getting cheaper in Southern California

7) City of Menasha sued after defaulting on bonds

8) Investors Sue Wisconsin City After Steam-Bond Default

Sept. 25 (Bloomberg) -- Menasha, Wisconsin, the first U.S. city to default on bonds since Vallejo, California, filed for bankruptcy in 2008, defrauded a Maryland retirement complex and a Wisconsin community bank, according to a lawsuit.

9)  State Rep. Mark Meadows, D-East Lansing, has posted a Facebook status update early Tuesday morning signaling a vote on Michigan’s budget is likely to happen Tuesday.

On his Facebook page, Meadows wrote:

“looks like votes on all budgets Tuesday. Glad this day has come. Still cannot stomach k-12 (with 220 million set aside for no programs in that budget), higher ed (with no promise grant money) and government operations (with a devastating cut to police and fire and the likelihood that many of our communities all over the state will enter municipal bankruptcy), I feel like it is either put up–or shut down.”

10) Royal Oak, Mich.-based Beaumont Hospitals has announced plans to layoff an additional 353 employees as well as freeze pay and reduce employee vacation and sick days, according to a report by the Detroit Free Press.

The health system cited the economy and patients postponing medical care as contributing to the need for the cuts, which will not affect patient care, according to the report.

11) Pensions Ticking ‘Time Bomb’ for Publishers

"Take the New York Times Co., whose plans lost 32% of its value last year and were underfunded by $643 million. And Sun-Times Media Group, which is in bankruptcy, lost $116 million on its plans last year and owes $18.4 million in pension obligations."

12) Retail Stores Dropping like Flies; Michigan Government Shutting down (DEMCAD...Video)

(Please click on "more info" for links to what he is reporting. Use this to get info on Retail Stores)

CAH's picture
CAH
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Re: Daily Digest - September 29

You said it well before I could.  Ferguson was setting up a false dichotomy in order to justify a POV hardly grounded in reality.  The financial deregulation of the 1980s is what got us to the point at which we are now, with massive debt and a speculative-investment fueled "economy".

Regarding technological innovation, it needs to be said that some of the greatest technological innovation of the last 70 years -- nuclear energy and the internet for starters -- came from government-sponsored research.  Granted, these technologies may have been diffused into broader society through the use of private industry, but the initial impetus came from the government.

Shoddy work by Ferguson, but not really that surprising having read the shoddy justification for imperialism he provided in "Colossus".

targetbuster's picture
targetbuster
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Fergusen

It sucks to be on the leading edge of the wave. Everyone behind you giggles with delight, having a great time and you are the only one that can see what is coming, ala Peter Schiff / Ron Paul. The abuse they have withstood is hard to imagine a normal person enduring.

I don't know about anyone else, but Chris' latest blog on the housing market and the Fed being the terminal lender for  ALL the mortgages initiated in 2009 is the most frightening and ominous thing I've seen yet. I mean, think about it......there is NO market for mortgage backed securities at current price levels. Not to mention the market the Fed is creating is being driven by "issued" money. Add to that, the distressed loan levels in most bank portfolios continues to rise over the 50% level and some much higher. Go to the Fed web site and spend an hour or so. You'll be dumbfounded by the quarter over quarter degradation of their loan portfolios....I'm no financial guru but this doesn't look good at all to me.

Oh, but don't worry, the recession is over...I forgot that part.

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dcm
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Re: "Tons of Money" - Heavy Concept

"We have tons of money to protect insured depositors," FDIC Chairman Sheila Bair said. "This is really about the mechanics of funding."

http://www.cnbc.com/id/33071391 

hucklejohn's picture
hucklejohn
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Re: "Tons of Money" - Heavy Concept

Karl Denninger says:

"The entire banking system and likely The Fed, given the quantity of Fannie and Freddie paper it has been and is "eating", is insolvent.  These facts are why the government is lying - they're well-aware of the near-zero cure rates and know that these facts mean that the banking industry has nowhere near sufficient capital to withstand these losses without folding like a paper cup getting stomped on by an elephant.

(Remember that these numbers do not include any commercial real estate losses and we have found that banks are frequently over-stating their claimed values for these loans by 50% or more - as was seen with Colonial.)

It gets better.  The FDIC has a negative balance both in its fund balance and the reserve ratio projected for the end of the quarter, which is, big surprise, tomorrow. Oh, and there is this pesky problem that the FDIC has - contrary to its mandate - been issuing bond guarantees for banks, so if and when that banking insolvency is recognized the FDIC will implode into a gravity well also, since it is on the hook for the entire deficiency of those bonds that were issued with its "guarantee" should they default."

http://market-ticker.denninger.net/archives/1476-The-Banking-System-Is-Insolvent.html

So the banking system is insolvent.  And the FDIC has a negative balance.  And the US government has $70-80 trillion in unfunded liabilities.  And the Federal Reserve is full of toxic assets and is looking longingly at money market funds: 

http://jessescrossroadscafe.blogspot.com/2009/09/fed-and-those-money-market-funds-redux.html

So everybody's broke!  How come there isn't more discussion about this?  So what's holding up a complete collapse?  Just smoke and mirrors?  Am I missing something?

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Tommygun
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Re: Daily Digest - September 29

I don't think anybody really wants the monopoly money game to stop. If everyone really knew that the whole country is in debt with no way to get out of the mess, the system would truly collapse. Faith in the paper dollar would vanish. The Chinese, Russians, and Saudis to name a few would lose big time. I think everyone will exit the money game quietly by moving very quietly out of the dollar and into food,agriculture, land, tangibles,commodities, other currencies, PM, etc.

So for now....everyone is pretending otherwise. Collectively though, people can feel what is going on. Some people (the Media via government) are being optimistic in the hopes that optimism will get people to spend and speed up the velocity of money and get our American consumerism back on track. It is not going to happen.

Chris Martenson is right. The next twenty years will be unlike the last twenty years. Like a stadium filling up with water a drop at a time, the end is getting closer. The Fed will try a few more tricks to keep things going, but it is only a matter of time before the collapse is clearly evident. I am in the furniture business 22 years now...it has never been like this.

The Feds know that the baby boomers have their retirement and the forth coming inheritances from their parents money and houses and savings. That inheritance is the greatest transference of wealth ever to happen. The government must be thinking how to get their hands on that money. Somebody is crunching numbers in Washington.

Doug's picture
Doug
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Re: Daily Digest - September 29

Tommygun

Quote:
The government must be thinking how to get their hands on that money. Somebody is crunching numbers in Washington.

Bingo!!!  Give that man a kewpie doll.  

Oh yeh, don't forget Wall St.  They want their share too, in fact they want way more than their share.  Gotta keep the Bentley running.

Doug

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JAG
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Re: Daily Digest - September 29

I miss Davos already.

JAG's picture
JAG
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Got Shorts?

If your short the market, you probably understand this sculpture:

gregoro's picture
gregoro
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Re: Daily Digest - September 29

Zimbabwe restroom instructions:

The dollar may soon find a new use.  Any suggestions for whose image should be placed on the million dollar note?

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - September 29

1) Peter Schiff thinks FDIC bailout could require well over $1 Trillion. Listen

at 1 minute 15 seconds into this.

On the 25th he explained carry trades.

2) SEOUL - The president of the Asian Development Bank (ADB) has called for an "Asia-common" currency as another international reserve currency

3) Now even Nigeria talks about an African reserve currency

"Mr. Oyekan also said the South African rand stood a better chance of becoming the reserve currency for the continent. “The South African rand is a more stable currency than naira. Yes, South Africa is struggling with social inequality in a broad sense, (but) the rand would play a better role in that regard.”

Chris Vermont, one of the panelists, argued that, before pushing the naira as a reserve currency, there was the need to ‘de-dollarise’ the Nigerian economy."

4) Why did we have that small recovery in the dollar yesterday?

"One of the large forex trading rooms said foreign banks were buying dollars yesterday morning, as was one large Israeli bank"

goes211's picture
goes211
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Re: Daily Digest - September 29

Niall Ferguson has an online 4 hour PBS special on his book Ascent of Money

http://www.pbs.org/wnet/ascentofmoney/

It seems interesting if not a bit incomplete.

jpbeer's picture
jpbeer
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Re: Daily Digest - September 29

We Shouldn't Have Homeless Children In America

Why dont try in the world????  

SagerXX's picture
SagerXX
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Posts: 2099
Re: Daily Digest - September 29

Doug wrote:

Tommygun

Quote:
The government must be thinking how to get their hands on that money. Somebody is crunching numbers in Washington.

Bingo!!!  Give that man a kewpie doll.  

Oh yeh, don't forget Wall St.  They want their share too, in fact they want way more than their share.  Gotta keep the Bentley running.

Doug

Dang!  Beat me to the punch...

Second that!

Viva -- Sager

SagerXX's picture
SagerXX
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Posts: 2099
Re: Daily Digest - September 29

JAG wrote:

I miss Davos already.

Awww, Cap'n...he's not even gone yet!  C'mon, man...we'll get through this together... -- >>>>BIG HUG<<<<!!!!

coolhandluke's picture
coolhandluke
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FDIC Discloses Deposit Insurance Fund Is Now Negative

http://www.zerohedge.com/article/fdic-discloses-deposit-insurance-fund-n...

Lucas

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Farmer Brown
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Posts: 1496
Sign of the times

We've sunken so low economically, that we put our hopes on hosting a sporting event 7 years from now.  Good grief.  As far as I know, this marks the first time a sitting US president devotes a personal trip to the Olympic committee to lobby for the games to be hosted in the US.  I guess that wouldn't be so bad if we weren't facing a few other issues like oh, I don't know, two wars, an economic crisis, a broke FDIC, a decimated auto industry, ever-increasing foreign-energy dependence, broke municipal and state governments, insolvent penion funds, and a still tail-spinning real estate market. 

As a side-bet, I'll wager that no matter who wins the Olympic bid, gold medals will be much smaller in 2016, or they will simply be gold-"plated" hockey pucks.

http://sports.yahoo.com/olympics/news?slug=ap-2016bids-chicago&prov=ap&type=lgns

Michelle Obama arrives in Copenhagen for IOC vote

Although IOC president Jacques Rogge has taken great pains to say heads of state aren’t expected to attend, their presence has been instrumental in recent votes. Tony Blair is widely credited for tipping the 2012 vote in London’s favor, spending two days doing one-on-one meetings with IOC members in his hotel suite.

Vladimir Putin did much the same thing two years later, when Sochi won the 2014 Olympics.

And there are few people better to sell Chicago’s bid than Michelle Obama.

Funny, gracious and incredibly accomplished, she’s one of the few people who can rival her husband’s popularity. She also knows the neighborhoods where the games would be, having grown up on the South Side of Chicago. The Obamas’ Chicago home is a short walk from the planned Olympic stadium.

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