Daily Digest

Daily Digest 1/13 - US, China Accused of Currency Manipulation, Budget Battles, France Worried About Global Food Prices

Thursday, January 13, 2011, 11:00 AM
  • Brazil Accuses US, China of Currency Manipulation, Looming Trade War
  • Merk Commentary: Budget Battles Ahead
  • Wildlife Wednesday – The Portu-Goose!
  • Fed's Kocherlakota: Not Yet Time For Fed's Exit Strategy
  • France Says Concerned By Surging Global Food Prices
  • US Mint Bullion Product Revenue Rises 68.5% to Record $2.8 Billion
  • Fed Bid to Limit Rescission Rights Sparks Consumer Outrage

Crash Course DVDInsightful analysis on the Three E’s. Take home a Special Edition DVD today. (NTSC or PAL)

Economy

Brazil Accuses US, China of Currency Manipulation, Looming Trade War (pinecarr)



Here are a few of the many stories I am following: The risk of trade wars escalates as Brazil accuses the United States and China of currency manipulation. In turn, the IMF is upset at Brazil for imposing capital controls. In Belgium, the king wants to end the "unprecedented hell" that has left Belgium without a government for 211 days smack in the midst of a budget crisis. China is set for multiple rounds of credit tightening even though China's growth is weakening. Interest rates in Portugal and Spain suggest more bailouts coming up. Ireland is pondering the Iceland Solution and that has the IMF more than a bit upset.

Merk Commentary: Budget Battles Ahead (joe)



The U.S tax battle on the federal level was fought and resolved a few weeks ago, but only temporarily. In early December, President Obama’s Deficit Commission (officially, National Commission on Fiscal Responsibility and Reform) presented its report, with the provocative title “The Moment of Truth.” Unfortunately, the report seems to have dropped out of the news already. I have read a huge amount of recent press commentary on what lies ahead, but some key issues are missing.

Wildlife Wednesday – The Portu-Goose! (ilene)



The investors jacking up the markets at 6am this morning understand very little about the relevance of Portugal’s sale of $1.62Bn in bonds. While the auction was a "success" with longer bonds going off at 6.7% that’s WITH intervention by China and Japan on an auction amount that either one of them could have tipped the cab driver on the ride over from the airport and not missed it. This is like going to your rich uncle for a used car loan because the bank wants 12% and your uncle says "sure I will help you out but you will owe me big time and I will make my brother’s life miserable because I have to give his kid money and I’ll never let him forget it" and then he hands you a contract to pay him back at 11.5%.

Fed's Kocherlakota: Not Yet Time For Fed's Exit Strategy

The U.S. Federal Reserve will likely wait until next year to begin an "exit strategy" from measures implemented to spur domestic economic growth, a Fed official said Tuesday. The U.S. central bank early last year discussed the structure of such a move, but the continued fragility of the U.S. economy makes it too soon to begin yet, according to Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis.

France Says Concerned By Surging Global Food Prices

France is worried by sharp rises in global food prices, Agriculture Minister Bruno Le Maire said on Tuesday as he called again for stricter regulation to avoid speculation on commodities leading to sharp market swings....The UN Food and Agriculture Organization said last week food prices hit a record high in December and could rise further on erratic global weather patterns.


US Mint Bullion Product Revenue Rises 68.5% to Record $2.8 Billion

Revenue from the United States Mint’s American Eagle and American Buffalo Bullion Coin Programs rose to a record high of more than $2.8 billion for the fiscal year ending September 30, 2010. This represents an increase of 68.5% from the prior year, driven by higher prices and volumes.


Fed Bid to Limit Rescission Rights Sparks Consumer Outrage

The Federal Reserve is moving ahead with plans to change the right-of-rescission rule as part of the Truth in Lending Act (TILA) despite intense outcry from consumer advocates, civil rights groups,  and top members of the Senate Banking Committee. Revised TILA will require borrowers to repay a mortgage in full before a loan is rescinded. Consumer groups say the measure is designed to prevent homeowners from using the right-of-rescission protection as a defense against improper foreclosure.
The Fed’s proposal is designed to ward off frivolous lawsuits that will delay foreclosures and have an adverse impact on economic recovery by ensuring “a clearer and more equitable process for resolving rescission claims” that closely mirrors present court requirements. The central bank wants to lift what it views as undue compliance burdens and litigation risk for creditors.


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6 Comments

saxplayer00o1's picture
saxplayer00o1
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Pension pledges have left UK and US 'insolvent';US credit rating

"The world's most advanced economies, including Britain and the US, would be insolvent if they accounted properly for the pension and health pledges made to their aging populations, an authoritative report has warned.

More painful austerity measures, of higher taxes and further spending cuts, will be necessary in the years ahead "to cover the gap between expected future liabilities and expected future income", the World Economic Forum said in its Global Risks 2011 report.

"Age-related liabilities dwarf short-term issues such as the cost of fiscal stimulus [in the recession]," the report added. It estimated that the undisclosed cost of age-related spending in the UK is roughly 3.5 times the size of the UK economy – or around £5 trillion.

Daniel Hofmann, chief economist at Zurich Financial Services and a co-author of the report, said: "Under a proper accounting framework, most advanced economies would be fiscally insolvent... In the absence of far-reaching structural corrections, there will be a high risk of sovereign defaults."

The UK economy is "close to unsustainable", he said, due to its mix of high public debt and deficit. The US finances, though, would already be "no longer sustainable" were the dollar not the world's reserve currency, he added.

Christian Mumenthaler, chief marketing officer at Swiss Re and a co-author, said cultural changes would be necessary. People will have to work longer, pay more towards age-related care and receive less in old age. In the European Union, 16pc of the population is currently above 65. Within 40 years, it will be 28pc, he added. "

"LONDON (Dow Jones)--Two leading credit rating agencies Thursday warned the U.S. on its credit rating, expressing concern over a deteriorating fiscal situation that needs correcting.

Moody's Investors Service Inc. said in a report Thursday that the U.S. will need to reverse an upward trajectory in its debt ratios to support its Aaa rating.

"We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase," Sarah Carlson, senior analyst at Moody's, told Dow Jones Newswires.

Standard & Poor's Corp. Thursday also didn't rule out changing the outlook for its U.S. sovereign debt rating because of the recent deterioration of the country's fiscal situation.

The U.S. currently has a triple A rating with a stable outlook at both agencies.

"The view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. dollar" to fund its deficits, Carol Sirou, head of S&P France, said at a Paris conference Thursday.

"But that may change. We can't rule out changing the outlook" on the U.S. sovereign debt rating in the future, she warned.

She added the jobless nature of the U.S. recovery was one of the biggest threats to the U.S. economy. "No triple-A rating is forever," she said. "

....................2A) Moody's Says France, Germany, UK, US Must Control Health-Care Spending

....................2B) Poor US Debt Trajectory Could Mean Negative Outlook

"The EU's executive Commission urged states to boost the existing euro440 billion ($571 billion) bailout fund for countries that run into financial trouble, cut public spending, and roll back benefits to make their economies more competitive.

After debt market turmoil caused Greece and Ireland to require bailouts, Portugal is now being engulfed despite a successful bond sale. The fear is the crisis will spread to larger nations and cost Europe years of economic growth."

"The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said. "

.............................4A) Foreclosures hit record high in 2010

  • Other news, headlines and opinion:

S&P Sees 40% Probability Of Greece Defaulting On Its Debt

Fiscal Crises, Governance Failures Risk Disrupting Global Economy

US runs $79.9b December budget deficit

JPMorgan's Dimon Forecasts More Municipal Bankruptcies

Florida 2012 Budget-Deficit Projection Grows to $3.6 Billion

Italy Sells Five-Year Debt at Highest Yield in Two Years, Demand Steady

Norway Oil Output May Drop 6% in 2011, Gas Rise 2.5%, Oil Directorate Says

Poland Said to Face Higher Yields in 2021 Bond Sale

Wisconsin Suffers as Build America Bonds Demise Raises Costs: Muni Credit

New Jersey Agency Seeing Mediocre Reception For Muni Debt

France's budget deficit at $183 bln in November

Brown Budget May Cost Los Angeles County $2 Billion

U.S. Unlikely To Recoup GM Bailout, Panel Says

Gold Shows Central Bank Losing Inflation Battle: India Credit

Moody's: CMBS Delinquencies Up Again In Dec, Surged In 2010 and CMBS delinquencies rose 79% in 2010: Moody's

Merkel's Pledge to Defend Euro Region Risks Revolt by German Lawmakers

Food prices set to rise after US cuts crop stock forecasts and Corn Surges to 30-Month High After USDA Cuts Supply Estimates

San Diego Mayor Sanders Plans `Harshest' Budget Cuts, Services Competition

Jackson Facing Major Budget Problems (Michigan)

UNC system leaders to face financial challenges

Fresno State Faces More Budget Cuts

State Lawmakers Face Budget Woes Again (Colorado...$1 billion deficit)

1 million homes repossessed in 2010

Long Beach police association unhappy with mayor's ultimatum (Pensions underfunded by $1.2 billion)

NJ local taxes jump an average of 7 percent in past year

SB COUNTY: $16.4 million pension cost increase worries supervisors

NIA Economic News Update (Video)

Jobless Claims in U.S. Rose 35,000 Last Week to 445,000

`Huge' Chile Inflation Concerns Prompt Switch to Rate Increase Predictions

Producer Prices in U.S. Increased 1.1% in December on Fuel

American Investors May Be Shunned by Banks as Tax-Compliance Law Kicks In

Trichet Faces `Annus Horribilis' as Crisis Tests ECB

saxplayer00o1's picture
saxplayer00o1
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We may see QE3 this year,Stifel strategist says(Joe Battipaglia)

"Joe Battipaglia, the high-profile market strategist for Stifel Nicolaus, sees a good chance that the Federal Reserve may undertake a third round of quantitative easing this year.

The Fed's second series of securities purchases, nicknamed QE2, has been controversial. Political concerns, though, won't stop Fed chairman Ben Bernanke from doing more if he sees the need, Battipaglia told the CFA Society of St. Louis in a speech today"

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r
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Re: Daily Digest 1/13 - US, China Accuesd of Currency ...

Around the Horn:

http://www.telegraph.co.uk/news/worldnews/southamerica/brazil/8256997/Br...

"Devastating mudslides and floods have killed at least 335 people in the mountainous area near Rio de Janeiro, according to reports."

http://www.bbc.co.uk/news/world-south-asia-12179296

"A government spokesman said more than 325,000 people had been displaced by flooding. At least 23 people have died and more than a million are affected."

http://blogs.telegraph.co.uk/news/jamesdelingpole/100071290/queensland-f...

"Andrew Bolt has similarly harsh words for Australia’s eco nuts. Were it not for the actions of Environment Minister Peter Garrett, for example, the Queensland town of Gympie would not now be underwater. Unfortunately, Garrett took it upon himself to block the proposed dam that would have prevented it."

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rjs
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also the wettest year on record...

Last Year: The Warmest On Record (Again) - Every January for the past decade, you've heard the same basic news story: It announces that last year was one of the warmest years on the planet since 1880, when record-keeping began in earnest. Well, it's January, and yes, last year was one of the warmest years on record since 1880. In fact, 2010 ties the record with 2005 as the hottest year in the historical record. . "This is the 34th consecutive year with temperatures above the 20th century average." In fact, you need to go back to 1976 to find a year with below-average global temperatures, as measured on thermometers around the world. But what about rain and snow? "Preciptiation is highly variable from place to place, so there were lots of dry areas, lots of wet areas. But when we average those out, it was also the wettest year on record," Arndt said.

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Damnthematrix
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Re: Daily Digest 1/13 - US, China Accuesd of Currency ...

Climate link to floods: some recent media

http://www.smh.com.au/environment/weather/all-the-wrong-stars-aligned-for-perfec\
t-storms-20110111-19mrr.html

''Australia has been known for more than 100 years as a land of droughts and flooding rains, but what climate change means is Australia becomes a land of more droughts and worse flooding rains,'' David Karoly, from Melbourne
University's school of earth sciences, said. Professor Karoly stressed individual events could not be attributed to climate change. But the wild extremes being experienced by the continent were in keeping with scientists' forecasts of more flooding associated with increased heavy rain and more droughts as a result of high temperatures and more evaporation. ''On some measures it's the strongest La Nina in recorded history … [but] we also have record-high ocean temperatures in northern Australia which means more moisture evaporating into the air,'' he said. ''And that means lots of heavy rain.''

http://www.reuters.com/article/idUSTRE70B1XF20110112

http://www.msnbc.msn.com/id/41041650/ns/us_news-environment

http://www.sbs.com.au/news/article/1464847/Qld-floods-%27linked-to-climate-chang\
e%27

"I think people will end up concluding that at least some of the intensity of the monsoon in Queensland can be attributed to climate change," said Matthew England of the Climate Change Research Center at the University of New South Wales in Sydney. David Jones, head of climate monitoring and prediction at the Australia Bureau
of Meteorology in Melbourne: "The first thing we can say with La Nina and El Nino is it is now happening in a hotter world," he told Reuters, adding that meant more evaporation from land and oceans, more moisture in the atmosphere and stronger weather patterns. "So the El Nino droughts would be expected to be exacerbated and also La Nina floods because rainfall would be exacerbated," he said, though adding it would be some years before any climate change impact on both phenomena might become clear. Prominent U.S. climate scientist Kevin Trenberth said the floods and the intense La Nina were a combination of factors. He pointed to high ocean temperatures in the Indian Ocean near Indonesia early last year as well as the rapid onset of La Nina after the last El Nino ended in May. "The rapid onset of La Nina meant the Asian monsoon was enhanced and the over 1 degree Celsius anomalies in sea surface temperatures led to the flooding in India and China in July and Pakistan in August," he told Reuters in an email. He said a portion, about 0.5C, of the ocean temperatures around northern Australia, which are more than 1.5C above
pre-1970 levels, could be attributed to global warming. "The extra water vapor fuels the monsoon and thus alters the winds and the monsoon itself and so this likely increases the rainfall further," said Trenberth, head of the Climate
Analysis Section at the National Center for Atmospheric Research in Boulder, Colorado.

http://www.guardian.co.uk/environment/2011/jan/11/australia-floods-la-nina
But as a general point, said Prof Vicky Pope, head of climate change advice at the Met Office, a warmer world is a wetter world. "As the average global temperature increases one would expect the moisture content of the atmosphere to rise, due to more evaporation from the sea surface. For every 1C sea surface temperature rise, atmospheric moisture over the oceans increases by 6-8%. Also in general, as more energy and moisture is put into the atmosphere [by warming], the likelihood of storms, hurricanes and tornadoes increases."

http://climateprogress.org/2010/06/14/ncar-trenberth-global-warming-extreme-weat\
her-rain-deluge/

I find it systematically tends to get underplayed and it often gets underplayed by my fellow scientists. Because one of the opening statements, which I'm sure you've probably heard is "Well you can't attribute a single event to climate
change." But there is a systematic influence on all of these weather events now-a-days because of the fact that there is this extra water vapor lurking around in the atmosphere than there used to be say 30 years ago. It's about a 4%
extra amount, it invigorates the storms, it provides plenty of moisture for these storms and it's unfortunate that the public is not associating these with the fact that this is one manifestation of climate change. And the prospects are
that these kinds of things will only get bigger and worse in the future. That's Dr. Kevin Trenberth, head of the Climate Analysis Section at the National Center for Atmospheric Research, on the warming-deluge connection.

http://www.acfonline.org.au/uploads/res/Flooding_fact_sheet_12-1-11.pdf

Recent scientific advice to the Queensland Government warned that the state would be threatened by higher flood levels from intense torrential downpours brought on by climate change. In 2010 the Scientific Advisory Group to the
Queensland Government's Inland Flooding Study advised that "an increase in rainfall intensity is likely" and "the available scientific literature indicates this increased rainfall intensity to be in the range of 3–10 per cent per degree
of global warming".

http://www.theaustralian.com.au/national-affairs/climate/global-warming-will-cau\
se-further-extreme-weather-patterns-climate-change-chief-says/story-e6frg6xf-122\
5985772600

ONE of Julia Gillard's top climate change advisers has warned that global warming may cause more extreme rain events. Climate change committee member Professor Will Steffen, the executive director of the ANU Climate Change
Institute, said there was no direct link between global warming and the tragic flash flooding in Toowoomba which has killed at least nine people in southeast Queensland. But he told The Australian Online that climate change would lead to heavier, more frequent rain.

AND two oldies from CSIRO in 1994 and 2003:

http://www.csiro.au/files/mediaRelease/mr2003/Prextreme.htm
The cost to the community of coastal flooding could more than double in some areas in the next fifty years due to global warming.The effects of extreme weather events will be worsened by the increase in Australia's coastal population.Dr Debbie Abbs and Dr Kathy McInnes, from CSIRO Atmospheric Research, assessed the likely costs of severe weather events on cities in a warmer world.

http://www.csiro.au/files/mediaRelease/mr2004/rain2040.htm
The climate of 2040 is likely to bring more intense and more frequent extreme rainfall events to coastal eastern Australia, according to a CSIRO climate expert. While climatologists have suggested for some time that climate change
would lead to more intense rainfall globally, results from a computer model focussing on regional Australia suggest small areas receive much more extreme rainfall. "Global climate models simulate rainfall over areas as wide as 200
kilometres. Extreme rainfall over small areas is much more than that found over large areas where results are averaged out," says Dr Debbie Abbs, a climate scientist at CSIRO Atmospheric Research in Melbourne. "This means there is a need to provide extreme rainfall scenarios at regional scales so projected climate change can be factored into major infrastructure projects that are being designed to last for decades to come."

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bandvbandv
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Re: Daily Digest 1/13 - US, China Accused of Currency ...

New NIA vidoe

http://vinceseconomicblog.wordpress.com/2011/01/13/nia-economic-news-upd...

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