Daily Digest

Daily Digest 11/13 - EU Financial Bailout, Cut Social Security?, End of Growth

Saturday, November 13, 2010, 12:00 PM
  • Government Campaigns to Avoid EU Financial Bailout
  • Japan Hopes for U.S. Help in Row With China
  • Cut Social Security Benefits? Yes, Some Say
  • Price Volume Action Signals Countertrend Move in US Dollar, Gold
  • The End of Growth
  • Crude Falls on Economic Growth Fears
  • EPA Bid for Carbon-Rule Clarity Fails to Satisfy U.S. Business, Lawmakers

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Economy

Government Campaigns to Avoid EU Financial Bailout 



Uncertainty about Ireland’s frail position will come to the fore again on Tuesday when euro finance ministers gather in Brussels for their monthly meeting. Minister for Finance Brian Lenihan will be asked to provide an update on the bank rescue and on preparations for the 2011 budget and the four-year plan. Three sources familiar with ongoing European scrutiny of Ireland’s plans said there is concern to ensure the Government manages to pass the budget and demonstrate to the markets it is executing the promised measures. They also acknowledged worries that the €45 billion bank bailout bill might rise.

Japan Hopes for U.S. Help in Row With China



A Chinese fishing crew collided with two Japan coast guard vessels near islands in the East China Sea. Japan and China both claim the island as their territory. The Japanese coast guard detained the Chinese crew and captain, sparking an international dispute between the two countries and dragging relations to new lows. China, flexing its growing economic muscle in the region, canceled high level ministerial meetings and, according to multiple Japanese importers, cut off supply of rare earth materials Japan relies on to produce high tech products. Thousands of Chinese tourists canceled vacations to Japan, an increasingly important source of income for Japan's tourism trade.

Cut Social Security Benefits? Yes, Some Say

In its draft plan to rescue Social Security and prevent what some see as inevitable in the absence of action — a sudden 22% reduction in benefits for all beneficiaries in 2037 — the deficit commission wants to tax 90% of covered earnings by 2050, make the benefit formula more progressive so that high-income recipients receive relatively less, index the retirement age to longevity gains, and dampen COLAs, among other measures. In the main, retirement experts applaud the commission’s big plan, though some are doubtful and some are reminding us of the need for immediate action, whatever it might be.

Price Volume Action Signals Countertrend Move in US Dollar, Gold 



Price action that comes after a major announcement reveals a lot about underlying economic trends and the psychology of the market. Leading up to the election, investors became enthusiastic on precious metals and commodities as QE2 was celebrated. Then the official announcement of QE2 caused the precious metals to gap higher as euphoria of the Fed’s move was celebrated. As the celebration continued for gold bugs, as hard as it was, I believed it was time to fight the investment herd and take profits. I warned readers that a healthy correction could begin and to not buy the recent breakout. Key high volume reversal days and negative divergences indicated there could be a 15% to 20% correction and a countertrend rally in the dollar.

The End of Growth 



The “growth” we are talking about consists of the expansion of the overall size of the economy (with more people being served and more money changing hands) and of the quantities of energy and material goods flowing through it. The economic crisis that began in 2007-2008 was both foreseeable and inevitable, and it marks a permanent, fundamental break from past decades—a period during which most economists adopted the unrealistic view that perpetual economic growth is necessary and also possible to achieve. There are now fundamental barriers to ongoing economic expansion, and the world is colliding with those barriers.



 


Energy

Crude Falls on Economic Growth Fears 



In a report issued Friday, the International Energy Agency said that booming demand for crude from emerging economies like China has “stoked expectations of inexorably higher prices,” but that many traders have not taken into account the slowing rates of growth the agency expects in coming months.






Environment

EPA Bid for Carbon-Rule Clarity Fails to Satisfy U.S. Business, Lawmakers



The agency said yesterday that states can determine what pollution-cutting technologies power plants and oil refineries should use when the first national carbon-dioxide emission rules take effect next year. Environmental activists praised EPA’s flexibility. Opponents said the rules were too vague and would damage the economy. “The energy and manufacturing sectors will essentially be in a construction moratorium that could materially hamper economic recovery,” said Scott Segal, a Washington lawyer at Bracewell & Giuliani LLP who lobbies for utilities such as Southern Co. and Duke Energy Corp. that burn coal to make power.

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5 Comments

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Oil will run dry before substitutes roll out


Oil will run dry before substitutes roll out

"At the current pace of research and development, global oil will run out 90 years before replacement technologies are ready, says a new University of California, Davis, study based on stock market expectations. The forecast was published online Monday (Nov. 8) in the journal Environmental Science & Technology."

http://www.physorg.com/news/2010-11-oil-substitutes.html

 

Poet

wmarsden's picture
wmarsden
Status: Bronze Member (Offline)
Joined: Apr 6 2008
Posts: 38
"The Ben Bernank": Quantatative Easing explained

http://www.wallstreetwindow.com/content/node/18288

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2244
Re: Daily Digest 11/13 - EU Financial Bailout, Cut Social ...

"The CATO Institute Finds That The Fed Must Be Abolished" at: http://www.zerohedge.com/article/cato-institute-finds-fed-must-be-abolished.  Clip below:

"A must read paper from George Selgin and the Cato Institute, which confirms what Zero Hedge has been saying since inception: the Fed must be abolished immediately: "The Federal Reserve System has not lived up to its original promise. Early in its career, it presided over both the most severe inflation and the most severe (demand-induced) deflations in post-Civil War U.S. history. Since then, it has tended to err on the side of inflation, allowing the purchasing power of the U.S. dollar to deteriorate considerably. That deterioration has not been compensated  for, to any substantial degree, by enhanced stability of real output... A genuine improvement did occur during the sub-period known as the "Great Moderation." But that improvement, besides having been temporary, appears to have been due mainly to factors other than improved monetary policy. Finally, the Fed cannot be credited with having reduced the frequency of banking panics or with having wielded its last-resort lending powers responsibly. Its record strongly suggests that the Federal Reserve‘s problems go well beyond those of having lacked good administrators. Although it has manifested itself in different ways during different decades, the Fed‘s failure has been chronic. The problems appear to reside with the institution, and not with particular personalities who have been placed in charge of it. Hence the record would not be likely to improve substantially even with complete turnover in the Board of Governors. The only real hope for a better monetary system lies in regime change.""

ljhaines's picture
ljhaines
Status: Bronze Member (Offline)
Joined: Apr 23 2009
Posts: 35
Re: Daily Digest 11/13 - EU Financial Bailout, Cut Social ...
pinecarr wrote:

"The CATO Institute Finds That The Fed Must Be Abolished" at: http://www.zerohedge.com/article/cato-institute-finds-fed-must-be-abolished.  Clip below:

"A must read paper from George Selgin and the Cato Institute, which confirms what Zero Hedge has been saying since inception: the Fed must be abolished immediately: "The Federal Reserve System has not lived up to its original promise. Early in its career, it presided over both the most severe inflation and the most severe (demand-induced) deflations in post-Civil War U.S. history. Since then, it has tended to err on the side of inflation, allowing the purchasing power of the U.S. dollar to deteriorate considerably. That deterioration has not been compensated  for, to any substantial degree, by enhanced stability of real output... A genuine improvement did occur during the sub-period known as the "Great Moderation." But that improvement, besides having been temporary, appears to have been due mainly to factors other than improved monetary policy. Finally, the Fed cannot be credited with having reduced the frequency of banking panics or with having wielded its last-resort lending powers responsibly. Its record strongly suggests that the Federal Reserve‘s problems go well beyond those of having lacked good administrators. Although it has manifested itself in different ways during different decades, the Fed‘s failure has been chronic. The problems appear to reside with the institution, and not with particular personalities who have been placed in charge of it. Hence the record would not be likely to improve substantially even with complete turnover in the Board of Governors. The only real hope for a better monetary system lies in regime change.""

"....lies in regime change" - That statement has merit on several levels.

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