Daily Digest

Daily Digest 12/15 - Rare Earth Production Up, Food Pantry Demand Skyrockets, Budget Cuts Won't Cover Shortfall

Wednesday, December 15, 2010, 11:00 AM
  • Text of FOMC Statement
  • Moody's Warns Tax Deal Could Harm U.S's Triple-A Rating
  • State Unemployment Insurance Tax To Go Up For Nearly All Businesses
  • Rare Earth Production Revs Up as Shortage Looms
  • One Company Holds at Least 90% of London Metal Exchange Copper Stockpiles
  • Expensive Spanish, Belgian Auctions Suggest Tough Tenders Ahead
  • Food Pantry Demand Skyrockets
  • Study: Budget Cuts Alone Won't Cover The Shortfall
  • China To Raise Tariffs On Certain Rare Earth Exports In 2011
  • Pay Freeze Recommended for Public Employees
  • S.C. Health-Care System Headed For Disruption, Dhhs Director Says
  • Mortgage-Bond Slump No `Fun' for Housing as Rates Increase: Credit Markets
  • Slovak Remark Renews Eurozone Breakup Talk
  • Eurozone Debt Crisis Spreads To Belgium On Rising Political Risk

Read our 'What Should I Do?' guide to understand how to cook, heat and use electricity under any conditions.





Economy


 


Text of FOMC Statement

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.   

Moody's Warns Tax Deal Could Harm U.S's Triple-A Rating

It’s possible that the bond market vigilantes and Moody’s are more troubled by a failure to tax than a failure to cut spending. But it’s also quite possible that analysts and investors have lost faith in the ability of our political system, as currently constructed, to deal with the mismatch between the amount of government we want and the amount of money we’re willing to pay for it.

State Unemployment Insurance Tax To Go Up For Nearly All Businesses (Illinois)

The state’s 2011 unemployment insurance tax rates are out, and it’s going to be an expensive year for many Illinois companies.
More than nine in 10 businesses will see their per-employee unemployment tax rates rise, according to Illinois Department of Employment Security spokesman Greg Rivara, with only 8.8 percent of employers seeing a decrease in their rate. Nearly one out of five — 17.9 percent — companies will have the maximum tax rate....Although the rates are going up this year, they’re not being raised nearly enough to deal with the $2.2 billion loan to the state unemployment fund from the federal government. Interest charges start accumulating on the loan next year

Rare Earth Production Revs Up as Shortage Looms

A supply shortage of about 30,000 tons is expected next year. The vast majority of rare earths, about 97 percent, are mined in China, and the country has been steadily cutting exports. Ed Richardson, president of the U.S. Magnet Materials Association (USMMA), an industry group, says there are “some serious questions about where this stuff is going to come from.” He compares the worldwide hunger for rare earths to “unobtainium,” the mythical element sought in James Cameron’s “Avatar.” 
Shortages could increase costs for makers of hybrid cars and electronics. If the shortage is not addressed in the long run, Peter Dent of Electron Energy, a rare earth magnet-maker, believes consumers will have to settle for lower performance or pay more for electronic devices using bulkier and heavier magnets without rare earths.

One Company Holds at Least 90% of London Metal Exchange Copper Stockpiles

One unidentified company is holding 90 percent or more of copper stockpiles in warehouses monitored by the London Metal Exchange, driving up the cost of borrowing the metal to a 17-month high. 
There has been a so-called dominant position through cash warrants since Nov. 12, according to data from the bourse. It was previously at 50 percent to 79 percent, and moved to the higher band on Dec. 10, the data show. Each warrant represents one lot of metal and cash contracts are for delivery two days after being traded. One lot of copper is equal to 25 tons.

Expensive Spanish, Belgian Auctions Suggest Tough Tenders Ahead

Spain and Belgium were forced to pay sharply higher yields at separate Treasury bill auctions Tuesday, painting a bleak picture for debt sales from Spain and Portugal later this week. Investors are closely watching government debt tenders in Spain and Portugal amid fears that spiralling borrowing costs could eventually lock out both countries from the market, prompting them to seek external help. Government officials from both countries have expressed confidence that such a situation won't arise but given the current backdrop, investors aren't likely to drop their guard. Spain sold EUR2.513 billion of 12-month and 18-month T-bills, comfortably within the EUR2 billion to EUR3 billion target range, but the average yield on the 12-month T-bills rose 46% to 3.449% from 2.363% at the previous auction, Nov. 16, while for the 18-month T-bills, it increased almost 40% to 3.721% from 2.664%.

Food Pantry Demand Skyrockets

Record-setting demand will result in nearly 1.3 million pounds of food being distributed this year through the Greater Dover-New Philadelphia Food Pantry....Through Dec. 11, the pantry distributed a net total of 1,257,818 pounds of food, compared to 706,129 pounds during the same period in 2009.

Study: Budget Cuts Alone Won't Cover The Shortfall(North Carolina - Video)

A new study by the NC Justice Center's Budget & Tax analysts finds that even with the worst-case cuts of ten and fifteen percent for state agencies, more revenue will be needed to cover the $3.7 billion budget shortfall.
Analyst Edwin McLenaghan suggests Gov. Bev Perdue's budget managers should consider a balanced approach of targeted tax cuts, revenue reforms and extending the temporary tax package.

China To Raise Tariffs On Certain Rare Earth Exports In 2011

China will raise export tariffs on certain rare earths in 2011, said a statement on the website of the Ministry of Finance (MOF) Tuesday.
From Jan. 1, 2011, China will adjust tariff rates on certain exports and imports and the changes have been approved by the State Council, or the Cabinet.
The statement, however, did not specify what types of rare earth products would be included in the readjustment.

Pay Freeze Recommended for Public Employees (New York)

Cities across New York are talking about a different kind of freeze - a temporary Pay freeze for public employees. The New York State Conference of Mayors and Municipal Officials is asking the state legislature to declare a fiscal emergency and freeze public sector pay for one year. 
NYCOM Executive Director Peter Baynes says this would give Albany lawmakers time to roll back unfunded state mandates that are crippling local governments, "So that there'd be a fiscal pause if you will or suspended animation where for one year local governments in the state can try to get their fiscal house stabalized while the other recommendations in our report are enacted, implemented and start to take effect."

S.C. Health-Care System Headed For Disruption, Dhhs Director Says

The state is moving close to a "catastrophic disruption" of the state's health-care system because of funding shortfalls for Medicaid, the director of the state's Medicaid agency says.
And while there are some suggestions to save money, including cutting provider rates and eliminating some adult optional services, those savings total only a fraction of the $228 million deficit the Department of Health and Human Services now faces, its director says.
With the loss of federal dollars tied to the $228 million, the state is facing a $1 billion loss in Medicaid funding.

Mortgage-Bond Slump No `Fun' for Housing as Rates Increase: Credit Markets

A slump in government-backed mortgage bonds that’s sent yields to the highest level since May is threatening a recovery in the U.S. housing market, which had been bolstered by record-low borrowing costs.
Yields on Fannie Mae-guaranteed securities that most affect loan rates jumped as high as 4.21 percent yesterday, an increase of 1 percentage point from an all-time low in October, according to data compiled by Bloomberg. They ended New York trading at 4.1 percent.

Slovak Remark Renews Eurozone Breakup Talk

Last in, first out, when it comes to the euro?
That's the question getting attention in Slovakia, the newest member of Europe's common currency, after the speaker of its parliament said that the country should be ready to abandon the euro if the continent's widening debt crisis keeps spreading.

Eurozone Debt Crisis Spreads To Belgium On Rising Political Risk

The yield spread on Belgian 10-year bonds has ballooned to 102 basis points over German Bunds, raising fears of a funding squeeze next year. S&P said the country needs to refinance debt equal to 11pc of GDP next year, leaving it "exposed to rising real interest rates". 
"It's ugly for our reputation," said Jean Deboutte, head of Belgium's debt office. "This is bearable but the premiums are mounting little by little."

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

11 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4061
2011 – 2014: The Inevitable Hyperinflation with John Williams

2011 – 2014: The Inevitable Hyperinflation with John Williams (McAlvany audio)

From around 12 to 15 minutes into this he explains why unemployment is at 22% or higher.

Hyperinflation talk starts at 23 minutes.

========== A Must Listen =================

 

"Dec. 15 (Bloomberg) -- Portugal’s borrowing costs rose at a sale of 500 million euros ($666 million) of 3-month bills today as Moody’s Investors Service put neighboring Spain’s debt rating on review, increasing pressure on peripheral euro-area nations.

The securities due March 18 were issued today at an average yield of 3.403 percent, the country’s debt management agency said. That compares with an average yield of 1.818 percent at a previous sale of 3-month bills on Nov. 3. "

"Dec. 15 (Bloomberg) -- Spain’s credit rating may be cut from Aa1, Moody’s Investors Service said, as the government prepares its final bond sale of the year tomorrow amid concern it may follow Greece and Ireland in seeking a bailout.

Spain has to raise 170 billion euros ($226 billion) next year, while refinancing needs for its regions total 30 billion euros and for banks around 90 billion euros, Moody’s estimates.

“Spain’s substantial funding requirements, not only for the sovereign but also for the regional governments and the banks, make the country susceptible to further episodes of funding stress,” Kathrin Muehlbronner, an analyst at Moody’s, said in a report today."

"The governor-elect benefited from tens of thousands of dollars in donations from state teacher unions in his battle to defeat billionaire businesswoman Meg Whitman. The 120,000-member California Federation of Teachers plans to lobby Brown to extend $8 billion in temporary taxes to help limit budget cuts, said Fred Glass, a spokesman. Last week, Brown said the state faces budget deficits of $28.1 billion over the next 18 months.

“This is a huge challenge, unprecedented in my lifetime,” said Brown, 72, who served as California governor from 1975 to 1983. “I didn’t know it was going to be this bad.”

Brown, joined in the meeting by state Controller John Chiang, Treasurer Bill Lockyer and Finance Director Ana Matosantos, highlighted California’s financial issues, including pension liabilities of as much as $500 billion, a $10.3 billion deficit in its unemployment-insurance fund and federal health- care changes that could add $3.5 billion to annual expenses. The event, held yesterday on the University of California, Los Angeles campus, was the second in a series of public meetings on the budget.

Falling Education Budget

California’s education spending fell to $43.5 billion this year, compared with an inflation-adjusted $54 billion in 2008"

.............3A) Jerry Brown warns educators to brace for more cuts

"WASHINGTON (MarketWatch) -- Foreign investors bought a net $27.6 billion of long-term U.S. assets in October down from $77.2 billion in September, the Treasury Department said Wednesday. International demand for Treasurys decelerated to an increase of $23.5billion in October from a gain of $78.9 billion in September. Official purchases from foreign central banks declined $1 billion in October after a $39.5 billion gain in the previous month. Including short-term securities and bank lending data, foreigners purchased a net $7.5 billion of U.S. assets compared with net purchases of $80.1 billion a month earlier."

  • Other news, headlines and opinion:

 

France to revise current global monetary system

Economist says shaky US dollar threatens UAE stability

Analysis pegs US debt service at $800B by 2020

Italy: Public debt hit record 1.87 trillion euros in October

Spain's Lenders May Need Additional $120 Billion in Capital, Moody's Says

Mexico asks IMF to boost credit line to over $70 billion

UK Local Pension Plans Are Short $157 Billion, Study Says

Mount Diablo School District May Be Headed To Bankruptcy (California)

More and More Senior Citizens Filing For Bankruptcy

Florida's Budget Hole Now at Least $3.5 Billion

Irish Bailout May Be Last Creditor-Friendly Rescue, Fitch Says

Forbes: Phoenix housing prices falling dangerously

Greek Strikers Halt Flights, Buses as Bailout Bites

Video of Unrest on Rome's Streets After Berlusconi Wins Vote

Unemployed and Uncounted (20% unemployment rate?...RT Video)

alcatwize's picture
alcatwize
Status: Bronze Member (Offline)
Joined: Dec 24 2008
Posts: 78
Net foreign buys of U.S. assets $27.6 bln in Oct.

This is a real important parameter to watch.  If foreigners don't buy then the Fed has to or rates go up.  Stay tuned on this one.

 

 

britinbe's picture
britinbe
Status: Gold Member (Offline)
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Posts: 381
Re: Daily Digest 12/15 - Rare Earth Production Up, Food ...

http://www.bbc.co.uk/news/world-asia-pacific-12002253

Social discontent rising in China, says report

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4061
Re: Daily Digest 12/15 - Rare Earth Production Up, Food ...

 

"Harrisburg, the capital of Pennsylvania, was declared “financially distressed” under the state’s Act 47 program.

The city of 47,000, which has considered seeking bankruptcy protection in the face of guarantees on $282 million in debt related to a trash-to-energy incinerator, is the 20th municipality to enter the 23-year-old program, the Department of Community and Economic Development said in a statement today.

The department, through Act 47, will appoint a coordinator who will have 90 days to develop a recovery plan for consideration by the mayor and City Council, according to the news release."

"“The speculative bubble in oil prices has concrete detrimental consequences for the real economy,” said Richard B. Hirst, general counsel to Delta, in a Dec. 13 letter that encouraged the CFTC to move “aggressively” to limit the number of contracts a single firm can hold.

The law gives the CFTC until January to impose restrictions on energy and metals trading, and until April to place a cap on agricultural contracts."

 

`Avalanche' of Investor Sales Pushes Yields to 16-Month High: Muni Credit

Silver at $40 Will Be Best 2011 Metals Bet, Standard Bank's Ikemizu Says

Empty Southbound Trucks Show Canada Recovery Relies on U.S.

PA Fraudclosure Scandals Taint Thousands of Court Actions

 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
The problems of Mass Transit

5 years ago, CT ordered new train cars to replace the existing stock of train cars, which were well past their life expectancy. Today, we find out there are yet more delays due to glitches in the testing phase. Once the latest glitch has been fixed, the train cars need to run for 4,000 miles without ANY faults before they can be deployed and additional cars ordered. Additional cars need to run 1,000 miles error free as well before they are deployed.

While I am a big fan of mass transit, and I take the train to work everyday myself, I start to wonder if mass transit is the transportation answer to our complex society. Too many moving parts to fix and too many pieces that can break.

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Re: The problems of Mass Transit
joemanc wrote:

5 years ago, CT ordered new train cars to replace the existing stock of train cars, which were well past their life expectancy. Today, we find out there are yet more delays due to glitches in the testing phase. Once the latest glitch has been fixed, the train cars need to run for 4,000 miles without ANY faults before they can be deployed and additional cars ordered. Additional cars need to run 1,000 miles error free as well before they are deployed.

While I am a big fan of mass transit, and I take the train to work everyday myself, I start to wonder if mass transit is the transportation answer to our complex society. Too many moving parts to fix and too many pieces that can break.

If done right, mass transit is still cheaper, with fewer parts compared to the hundreds of automobile trips a typical train load can save. Moving a ton of freight (human or otherwise) several hundred miles on just a gallon of diesel is a big deal.

The other thing about rail is... Locomotives can be powered by coal and steam... Those model train enthusiasts are gonna have a frickin' field day in about 20 years.

However, yet another, other thing, about rail is... These are choke points that can be disrupted by sabotage. There are a lot of roads, but few rail lines.

Poet

idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest 12/15 - Rare Earth Production Up, Food ...

AinSophAur's picture
AinSophAur
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Joined: Sep 25 2009
Posts: 18
Re: Daily Digest 12/15 - Rare Earth Production Up, Food ...

U.S. triple-A Rating? Joke of the year!

Phil Williams's picture
Phil Williams
Status: Gold Member (Offline)
Joined: Oct 14 2009
Posts: 337
Re: Daily Digest 12/15 - Rare Earth Production Up, Food ...

IDocter,

             I enjoyed that Peter Schiff video, thank you. I don't have cable, so I very rarely see main stream media. I liked how they portrayed gold getting smashed. The tone is so negative. Can you imagine if stocks had been going up for a decade, then had a bad day. They would be talking about a healthy correction, and a buying opportunity. Of course the buying opportunity according to the talking head was long dated treasuries, which are safe because the market is so big. I'm not a genius, but correct me if I am wrong, if there is an oversupply of something, that is generally bad for the price, not good.

             The other moron, as Davos would say, was telling Schiff about how the economy was growing because of the retail spending. Do people really believe this crap. If you count the real inflation from shadow stats, we are still in recession. Anyway, I was starting to worry about a correction in gold and silver, and we may, but if this is any indication to what the general public thinks, it may not come for awhile.

             I was at a party recently, and I was talking to a guy that was pretty well informed, and he was telling me how he got killed in the tech bubble. He also told me that when it comes to investing you should buy the opposite of what he is buying. Guess what he is buying now? Bonds. His rationale is that stocks are risky, and bonds are safe. "Of course houses never go down in price either."

Also, great quote from Carlin, "They call it the American Dream, because you got to be asleep to believe it."

 

 

vinnya's picture
vinnya
Status: Bronze Member (Offline)
Joined: Jan 5 2009
Posts: 27
Re: Daily Digest 12/15 - Rare Earth Production Up, Food ...

I dont like Donald Trump but I agree with him here

http://vinceseconomicblog.wordpress.com/2010/12/16/trump-china-laughing-...

mono's picture
mono
Status: Martenson Brigade Member (Offline)
Joined: Nov 13 2008
Posts: 70
Re: Daily Digest 12/15 - Rare Earth Production Up, Food ...
vinnya wrote:

I dont like Donald Trump but I agree with him here

http://vinceseconomicblog.wordpress.com/2010/12/16/trump-china-laughing-...

 

Vinnya,

I think he´s not at all right. In fact I think, he´s rather wrong. The first thing to notice is that D.Trump´s view

of the world is rather xenophobic. To him, it´s the Opec and the Chinese that brought the problems the US are encountering right now.

Thats nonsense. It´s the FED and the unwanted consequences of the so called "monetary policy" and Wall Street with their synthetic derivate Inventions that brought the financial system worldwide to the brink of collapse.

Marketmanipulation for the benefit of a few at the cost of all. That is what it all boils down too.

Trump´s remark where he says that the americans don´t need chinese goods, is a giveaway of how far his live is removed from ordinary people´s lifes. You would expect that off course, but what he does´nt get is, cheap chinese goods are about the last thing people nowadays can afford. Take that away and it will become apparent how bad the american people have been conned by Wall Street and their own political Class. Without cheap chinese goods in the US right now, you`d probably have riots on the streets.

His "Buy american" approach might seem honorable but, even if all US Billionaires would buy american and full of honor and pride would propagate that idea, the claim would have to be" Buy american, if you can afford too".

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