Daily Digest

Daily Digest - June 23

Tuesday, June 23, 2009, 9:56 AM
  • Trim Tabs (Video)
  • Rockefeller Institute – State Revenue Report...
  • Shifting wealth: Is the US dollar Empire falling?
  • Obama Unveils Regulatory Revamp…
  • QUINN'S DAILY DOSE OF REALITY » Discussions (H/T ScottHW)
  • L.A. County officials offer a novel idea to save millions
  • Sunday Funnies: Schiff on there with Jon Stewart
  • 8 states see record unemployment rates in May
  • This Time its Different* (H/T Doug)


Trim Tabs (Video)

Rockefeller Institute – State Revenue Report...

Nice of the Rockefeller Institute to put together this report. The drop in revenue here is commensurate with the drop in national income tax and the cliff diving in corporate income tax which is far worse in percentage terms.

Shifting wealth: Is the US dollar Empire falling?

If history is any guide, the Chinese renminbi will soon be due to overtake the US dollar, just as the dollar replaced the pound sterling last century. But will the renminbi be ready for reserve currency status? This column discusses the issues at hand and explains why some experts would prefer the IMF’s Special Drawing Rights as the next global reserve currency.

Obama Unveils Regulatory Revamp…

And if you’re a real glutton for punishment, here is the “near final draft” of his proposals. Remember that everything he is proposing must first be made into law. Thus he needs the help of people like the dishonorable Barney Frank and others to get it done.

No, the Great American Heist is not yet complete, but they are certainly getting ready for the next round.


Dr Martin Weiss, PhD, recently analyzed the most recent Flow of Funds Report for the FEDS. While you may not agree with his comments or analysis, the black and white facts can be found in the actual Fed Report (URL Link Provided). I am hopeful that you will all read the following and pass it along to at least one of your elected officials. Martin's comments follow:

While most pundits are still grasping at anecdotal “green shoots” to celebrate the beginning of a “recovery,” the hard data just released by the Federal Reserve reveals a continuing collapse of unprecedented dimensions.

It’s all in the Fed’s Flow of Funds Report for the first quarter of 2009, which I’ve posted on our website with the key numbers in a red box for all those who would like to see the evidence.

Here are the highlights:

Credit disaster (page 11). First and foremost, the Fed’s numbers demonstrate, beyond a shadow of a doubt, that the credit market meltdown, which struck with full force after the Lehman Brothers failure last September, actually got a lot worse in the first quarter of this year.

This directly contradicts Washington’s thesis that the government’s TARP program and the Fed’s massive rescue efforts began to have an impact early in the year.

In reality, the credit market shutdown actually gained tremendous momentum in the first quarter. And although it’s natural to expect some temporary stabilization from the government’s massive interventions, the first quarter was SO bad, it’s impossible for me to imagine any scenario in which the crisis could be declared “over.”

Here are the facts:

We witnessed one of the biggest collapses of all time in “open market paper” — mostly short-term credit provided to finance mortgages, auto loans, and other businesses. Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $662.5 billion. (See line 2.)

Banks lending went into the toilet. Even in the fourth quarter, when the meltdown struck, banks were still growing their loan portfolios at an annual pace of $839.7 billion. But in the first quarter, they did far more than just cut back on new lending. They actually took in loan repayments (or called in existing loans) at a much faster pace than they extended new ones! They literally pulled out of the credit markets at the astonishing pace of $856.4 billion per year, their biggest cutback of all time (line 7).

Meanwhile, nonbank lenders (line 8) pulled out at the annual rate of $468 billion, also the worst on record.


L.A. County officials offer a novel idea to save millions

Supervisors suggest putting unemployed parents to work caring for their own children as part of proposed changes to CalWorks and other state government aid programs.

Sunday Funnies: Schiff on there with Jon Stewart

8 states see record unemployment rates in May

WASHINGTON (AP) -- The unemployment rates in eight states hit record-highs last month and only two -- Nebraska and Vermont -- did not report increases.

The Labor Department says 48 states and the District of Columbia saw employment conditions deteriorate last month. The fallout from the longest recession since World War II, was the worst in Michigan. Its unemployment rate rose to 14.1 percent.

The eight states that set records are: California, Nevada, North Carolina, Oregon, Rhode Island, South Carolina, Florida and Georgia.

The West region reported the highest jobless rate at 10.1 percent. The last time any region had a rate of at least 10 percent was September 1983, when the country was emerging from a severe recession.

Nebraska's jobless rate dipped last month, Vermont's was flat.

This Time its Different* (H/T Doug)

David Rosenberg, now with Gluskin Sheff, offers us this insight:

“What really struck us in the employment report of a few weeks ago was the fact that the only segment of the population that is gaining jobs is the 55+ age category. This group gained 224,000 net new jobs in May while the rest of the population lost 661,000. In fact, over the last year, those folks 55 and up garnered 630,000 jobs whereas the other age categories collectively lost over six million positions. This is epic.” [See chart below.]

“Moreover, the number of 55 year olds and up who have two jobs or more has risen 1.1% in the last year, the only age cohort to have managed to gain any multiple jobs at all. Remarkable. These folks have seen their wealth get destroyed by two bubble-busts less than seven years apart … the Nasdaq nest egg back in 2001 and the 5,000 square foot McMansion in 2007. Both bubbles ended in tears … and so close together.”

As we will see, the housing market is going to take at least two more years to truly recover. Looking at one month’s data that shows housing starts up a few thousand as a sign of recovery in the housing market is, well, silly. Housing starts are anemic and the inventory of unsold homes is still at all-time highs (a ten-month supply) with more and more homes coming onto the market through foreclosure.


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Re: Dailt Digest - June 23

Three TARP Banks Already Classified as Deadbeats? Uh-Oh -- Seeking Alpha

The Wall Street Journal reports that three banks that received TARP funds have stopped paying the required dividends to the Treasury. The Treasury says a “number” of banks have not been making their payments.

From the WSJ:

The banks are not technically in default as they are allowed to miss up to six payments before default occurs. Still, it raises some troubling questions.

For instance, this money was only distributed late last year. Did the Treasury totally botch their due diligence with regard to the banks selected to receive the money or have the smaller regional and community banks deteriorated much more quickly than anyone anticipated? Given the lack of transparency in the disbursement of TARP funds, the question of political influence affecting the choices of recipients also raises its ugly head. Clearly something has gone badly wrong.

Let’s give Treasury the benefit of the doubt and assume that they did reasonable due diligence and doled out the money to banks that were in fairly decent shape. If that’s the case and a number of these institutions are now in such dire shape that they can’t make their payments then one would assume that the banking system, at least the small regional and community banking system, is deteriorating rapidly.

That’s certainly at odds with the party line out of Washington. The meme that you are all familiar with is that the financial part of the crisis is past and now we just need to general economy to get back on its feet. Maybe that is true as it pertains to the large banks but this information certainly raises some questions about part of the system. It also makes me a bit queasy about the big banks.

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Re: Dailt Digest - June 23

 Hello Fujisan: Good read, as always, thanks. 

Wait to the CRE market gains momentum down the cliff and the rest of wave 2 (alts a's and option arms) rolls to shore. Green shoots!

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Related thoughts from Niall

#6 out of 6; the whole interview is worthy, but #6 says most of it.

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Re: Related thoughts from Niall

If I get this straight, Niall is saying that the only way to get away from a total financial collapse is to have people that make 1/20th what we make on average support us by buying our debt so we can keep buying stuff at an alarming rate. 

We are in deep trouble.

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Steve Keen's blog - A tale of two depressions


Economic historians Barry Eichengreen and Kevin H. O’Rourke are using empirical data to compare this downturn to the Great Depression. I’ll be referring to and adding to their comparison in the next Debtwatch (which will be published late next week, before the RBA’s July meeting), but the research is so good that it deserves to be highlighted now.

Their conclusion is compelling:

To summarise: the world is currently undergoing an economic shock every bit as big as the Great Depression shock of 1929-30. Looking just at the US leads one to overlook how alarming the current situation is even in comparison with 1929-30.

Click here to see the full post;  below I simply link to some of the figures.

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Re: Dailt Digest - June 23

A group of wealthy pensioners have been accused of kidnapping and torturing a financial adviser in Germany after he lost £2 million of their savings in the financial crisis.

The men, dubbed the "Geritol Gang" by police after an arthritis drug, face up to 15 years in jail if found guilty of subjecting German-American James Amburn to the alleged four-day ordeal.

Two of his kidnappers are said to have hit him with a Zimmer frame outside his home in Speyer, western Germany, before he was bound up with duct tape, bundled into the boot of a car and driven 300 miles to the home of two of the abductors on the shores of Lake Chiemsee in Bavaria.

"I was bleeding from my eyes, nose and my mouth," he said. "But the nightmare had only just started."

During his alleged confinement in an unheated cellar, Mr Amburn, 56, claims he was burned with cigarettes, beaten, had two of his ribs broken was hit with a chair leg and chained up "like an animal."


"I told them that if I sold certain securities in Switzerland they could get their money and for this I had to send a fax to a bank in that country so funds could be transferred."

They agreed and he sent a fax, but unbeknown to them he scribbled a message on the bottom of the paper for whoever received it to call police.

"It was disguised as a policy," he said. "I wrote `call. po-lice' and they didn't notice it but someone at the bank was bright enough to pick up on it."

He attempted to escape when he was allowed out of the cellar on Friday for cigarette break in the garden while the kidnappers waited on their loot attempted. In the pouring rain he ran down the street pursued by his captors in the Audi A8 they had used to transport him to the house.

Several people saw him but one of the captors shouted: "He's a burglar!" Held by people who believed him to be a crook, he was dragged back to the cellar.

He then claims to have sustained broken ribs when he was "punished" for the escape attempt.

When the Swiss bank telephoned police in Germany an armed team of commandos was scrambled and the house was stormed in the early hours of Saturday morning.

Forty armed police rescued Mr. Amburn who was naked except for his underwear. A physician had to be on hand to help his captors into police vans because of their various infirmities.

Volker Ziegler, the chief public prosecutor from nearby Traunstein, said: "They were angry because they invested money in properties in Florida and he lost it all. This was black money – they hadn't declared it to the revenue authorities in Germany."

The pensioners now face up to 15 years in jail each for illegal hostage taking, torture and grievous bodily harm.


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Re: Dailt Digest - June 23

Pensions: Out of pocket | The Economist


Out of pocket

Jun 23rd 2009

From Economist.com

How much people contribute to their own retirement income




PENSIONS are another casualty of the recent global economic turmoil. Public-pension schemes are under pressure as output falls and unemployment rises. Private funds in OECD countries, meanwhile, lost $5.4 trillion last year, or 23% of their value. Countries differ in the importance of private pensions for the retired. In five OECD countries, private capital makes up over 40% of retirement income. This includes all private savings (mainly pensions) and excludes income from work, which accounts for about a fifth of the income of people aged over 65. Although eastern European countries have traditionally relied on public provision, many now have mandatory private pensions. For today's employees, such pensions are expected to provide a third of retirement income in Hungary, around half in Poland and 60% in Slovakia.


See also other charts:

Daily charts, maps, graphs and tables | The Economist


Unemployment during the downturn


Where unemployment has hit hardestJun 22nd 2009 Web only

Explaining the oil-price rally

A bucking bronco 

As oil prices surge, so do worries about speculationJun 19th 2009 Web only

Food prices

Up and down 

How food prices have changed in different countriesJun 18th 2009 Web only


Forced migration 

Countries with most refugees, and their population burdenJun 17th 2009 Web only

Drink-driving limits

One for the road 

Drink-driving limits around the worldJun 16th 2009 Web only

Oil supply

A peak at oil reserves 

Who has the biggest oil reserves?


Note: They obviously do not understand peak oil...

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Re: Dailt Digest - June 23

 Investors are worrying about big bank problems again - Jun. 24, 2009

A key market measure of credit risk is deteriorating again, as investors fret over the side effects of giant federal bailouts for the nation's largest banks.

NEW YORK (Fortune) -- Betting against the banks is back in fashion.

A key market measure of the health of the biggest global financial institutions has deteriorated this month, after showing sharp improvement in April and May.

The price of betting that big banks will default on their debt -- made via derivatives known as credit default swaps -- has risen 17% in June, according to data from New York-based Credit Derivatives Research.

The uptick in wagers against banks such as Bank of America (BAC, Fortune 500), Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) comes as the spring's scorching stock market rally peters out and doubts about the health of the global economy and the banking sector re-emerge.


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Re: Dailt Digest - June 23

 Research Recap » Blog Archive » One Third of UK Prime Mortgages to Slip Underwater

Fitch Ratings says that 15% of mortgage loans by value in UK prime RMBS master trust programs are in negative equity. The agency expects that to increase to 34% if house prices fall in line with Fitch’s expectations of a 30% house price decline peak to trough, which would mean a further 14% fall from today’s values.




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Durable Goods Advance Repot for May 2009



and Deninger's take on it:


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Re: Dailt Digest - June 23

I appreciate the info from this site so I can see through the false spin about economic recovery in mainstream articles like this...


The Fed is supposedly buying treasuries to keep interest rates down.  Yet at the same time that action may be causing interest rates to rise based on fears of inflation and decline in value of the dollar.  So the Fed is going to ease back now, using pretend economic recovery as an excuse? 

I don't see how market intervention can possibly be effective.




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