Daily Digest

Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales Rebound, Gold Prices Flat

Thursday, December 2, 2010, 11:00 AM
  • Senate Approves Biggest Food-Safety Overhaul in 70 Years
  • As The Euro Goes The Way Of The Dodo, Where Does That Leave The Dollar?
  • Federal Reserve Data Disclose Big Loans To Financial Organizations
  • Retailers Nov Sales Show Strong Start To The Holidays
  • Pending Home Sales Rebound 10.4% in October
  • Initial Unemployment Claims Tick Back Up
  • Gold Prices Flat As Traders Await Data

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U.S. Senate Approves Biggest Food-Safety Overhaul in 70 Years (lastboyscout)

The U.S. Food and Drug Administration would gain more power to police food companies under the bill that passed today in a 73-25 vote. The measure, backed by the food industry, public- health groups and consumer advocates, adds inspections and lets the FDA force recalls, rather than relying on companies to voluntarily remove contaminated foods from store shelves. The bill had awaited a full Senate vote since winning unanimous approval a year ago by the Health, Education, Labor and Pensions Committee. It was prompted partly by recalls of cookie dough, spinach, jalapenos and salmonella-tainted peanuts that killed at least nine people and sickened more than 700 in 2008 and 2009.

As The Euro Goes The Way Of The Dodo, Where Does That Leave The Dollar? (ivo)

The Eurozone is heading for a crash—anyone saying otherwise is either stoned, works in Brussels, or hasn’t checked the European bond market action lately: All hell is breaking loose there. And if, as I have argued here, the Irish Parliament decides not to pass the austerity budget next December 7—that is, decides not to take the European Central Bank bailout—then hell is going to break out in Europe just in time for Christmas: Satan and Santa Claus just might be squaring off on the Rue Belliard before year’s end. Therefore, the smart money starts thinking about what’s going to happen after the euro-crisis-climax happens.

Federal Reserve Data Disclose Big Loans To Financial Organizations 

Federal Reserve data provide listed details of more than 12,000 transactions made between December 2007 and July 2010. The data include short-term liquidity measures for financial institutions, liquidity injections directly to borrowers and investors in key credit markets and big financial help to many organizations. The Federal Reserve data disclose the enormous financial help provided to various banks and companies. Citigroup acquired a loan of $2.2 trillion. Merill Lynch got $2.1 trillion. Morgan Stanley got help of $2tn whereas, Bank of America recieved help of $1.1 tn. The Fed has said that it was able to recover most of the loans it provided.

Retailers Nov Sales Show Strong Start To The Holidays 

According to 27 retailers tracked by Thomson Reuters, sales at stores opened more than a year rose 6% in November, above the estimated growth of 3.6% and the year-ago gain of 0.6%. Many retailers started the holiday season early in November, blitzing shoppers with promotions because of concerns that the still-uncertain economy would hold them back. "Retailers' game plan was aggressive promotions throughout the month," said John Long, retail strategist at Kurt Salmon Associates. "The results we are seeing are not solely the contribution of Black Friday sales." Black Friday is the retail nickname for the day after Thanksgiving. The strong early start has prompted some to wonder if the consumer will continue to spend throughout the holiday season. The National Retail Federation projects holiday sales will rise 2.3% this year after a 0.4% gain in 2009 and a 3.9% drop in 2008.

Pending Home Sales Rebound 10.4% in October 

An index that measures the number of contracts to buy previously owned homes in the U.S. rose 10.4% in October month-over-month to a reading of 80.9. The index remains 20.5% lower than year-earlier levels. October 2009 saw the highest level of pending home sales since May 2006 when it hit a reading of 112.6. Economists had expected the data to be flat after a 1.8% downtick in September. September's rate of pending home sales came in worse than expected and was 24.9% lower than in the year-earlier month.

Initial Unemployment Claims Tick Back Up 

The number of initial claims rose to 436,000 last week, up 26,000 from a revised 410,000 claims filed the week before, the Labor Department said Thursday. The number was disappointing for a couple of reasons. It meant more Americans filed for unemployment benefits, and it was a bigger increase than economists had expected. Forecasts from Briefing.com had expected initial claims to rise to 422,000. But experts weren't quick to take one week's worth of data as an entirely dismal sign.

Gold Prices Flat As Traders Await Data

Comex gold futures held near steady Thursday as a stable dollar and little economic news left traders searching for direction ahead of Friday's U.S. employment report. The most actively traded contract, for February delivery, was recently up $1.30, or 0.1%, at $1,389.60 per troy ounce on the Comex division of the New York Mercantile Exchange. Gold traders continued to look for direction from the dollar, which traded near flat against the euro Thursday morning. The euro was recently at $1.3085 from $1.3122 late Wednesday. Dollar-denominated gold futures tend to repel investors using foreign currencies when the dollar strengthens.

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."


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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

"The Treasury sold the securities due in October 2013 today at an average yield of 3.717 percent, Bank of Spain data showed today, compared with a yield of 2.527 percent at the last sale on Oct. 7 and below the 3.937 percent for the same bond in secondary markets before the auction. "

"FRANKFURT — A German five-year bond issue on Wednesday was undersubscribed, figures released by the central bank showed, the second time in two weeks that a German debt issue has gone uncovered.

Last week, an issue of 10-year German bonds, the eurozone benchmark, also met with offers for less than was available, amid heightened market tensions stemming from the Irish debt crisis.

This time, the agency which manages Germany's sovereign debt received offers for just 4.55 billion euros (5.96 billion dollars) after tendering bonds worth a total five billion euros, the central bank data showed."

"Dec. 1 (Bloomberg) -- Los Angeles’s budget deficit may grow by 7.2 percent to $343 million for the fiscal year that begins July 1, according to a memo from City Administrative Officer Miguel Santana.

The gap would widen from $320 million projected earlier if the board of the Los Angeles Fire and Police Pensions Plan votes tomorrow to increase city contribution rates, based on the latest actuarial valuation, according to the administrator’s memo released today."

"(Reuters) - The euro slipped versus the dollar on Thursday, erasing early gains after European Central Bank President Jean-Claude Trichet disappointed investors who had expected for an increase in its bond purchase program.

The euro last traded at $1.3121, down 0.1 percent on the day, well off a session high of $1.3217 set on trading platform EBS.

"Trichet has failed to signal that the ECB will increase its government bond purchases as the market had hoped for," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington D.C. "Essentially, what we're hearing from the ECB is that its policies will remain mostly unchanged.""

"Hungary raised more debt than planned at a sale of government bonds today as borrowing costs jumped on concern Europe’s sovereign debt crisis will spread and the country’s budget won’t be sustainable.

The government sold 51 billion forint ($242 million) in bonds due in 2014, 2016 and 2020, 11 billion forint more than initially planned, according to auction results on the debt management agency’s Bloomberg page. Yields on the auctioned maturities rose between 79 basis points and 94 basis points compared with yields at the last auction two weeks ago.

Bond yields have risen across Europe since Hungary last sold government bonds on Nov. 18 as Ireland’s bailout fueled speculation that more countries may seek aid. The central bank in Budapest on Nov. 29 unexpectedly raised its benchmark interest rate, citing accelerating inflation and the country’s worsening risk assessment.

The state raised 25 billion forint in 2014 bonds at an average yield of 7.9 percent, compared with 6.96 percent, 13 billion forint of debt maturing in 2016 at 7.93 percent versus 7.17 percent and 13 billion forint of 2020 notes at 8.08 percent compared with 7.29 percent. The agency received bids totaling 165.7 billion forint compared with 186.9 billion. "

  • Other news, headlines and opinion:

China Gold Imports Soar Almost Fivefold on Inflation

China Gold Investment Demand May Gain to 150 Tons This Year, Council Says

China gold imports headed for big rise

Fed could launch third round of printing money, warns economist

IMF Expects to Double Its Lending Capacity

Portugal's Central Bank Sees 'Serious Challenges'

Japan Monetary Base Rises 7.6% In November

Inglewood declares public "fiscal emergency"

Planned November Layoffs Jump to Highest Since March: Challenger

Medicaid due to cost Ind. $1.1B more over 2 years

Argonaut Sees Portugal Bailout as Europe Tops Hedge Funds' List of Worries

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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

The Fiscal Commission that was put together in February released their 66 page report on their recommendations.


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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

Here's where your money went. Fed was really busy. This had to involve not one but a fleet of helicopters.



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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

House May Block Food Safety Bill Over Senate Error - A food safety bill that has burned up precious days of the Senate’s lame-duck session appears headed back to the chamber because Democrats violated a constitutional provision requiring that tax provisions originate in the House. By pre-empting the House’s tax-writing authority, Senate Democrats appear to have touched off a power struggle with members of their own party in the House. The Senate passed the bill Tuesday, sending it to the House, but House Democrats are expected to use a procedure known as “blue slipping” to block the bill, according to House and Senate GOP aides.

btw, reuters changed the story on sax's 4th link above...

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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

[Telegraph] Sir Fred Goodwin in the clear as FSA ends RBS bail-out inquiry

Sir Fred Goodwin, the former chief executive of the Royal Bank of Scotland, has escaped punishment by the Financial Services Authority (FSA) despite what the regulator described as a “series of bad decisions” in 2007 and 2008.

So not a crook, just staggeringly incompetent. Personally I'd say he was both. And the FSA's credibility is in question. Again.


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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

Ambrose Evans-Pritchard'ss latest, "ECB bows to German veto on mass bond purchases", at http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8177568/ECB-bows-to-German-veto-on-mass-bond-purchases.html

A chorus of influential voices in Germany has warned that any attempt by the ECB to prop up Club Med with loose money would be a grave error, undermining German political support for monetary union.



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Peak Oil May Get Subverted, When You Should Get Out, Etc.

Two really interesting articles that give a lot of food for thought, and another for good measure.

In The Wake Of Victory

"There’s a famous quote of Gandhi’s: 'First they ignore you, then they laugh at you, then they fight you, then you win.' We're well past the stage of being ignored, and the few voices still laughing at peak oil are sounding very hollow and forced these days; the fighting is still going on, but that last stage is starting to look more and more like a near term probability."

"...the problem that the peak oil movement is most likely to face is the one that comes when a movement, having gotten access to the halls of power, lowers its sights to target only that set of goals it can reach consensus on, and thinks it can get from whichever subset of the political class is currently in charge."

"That's a fatal mistake, in two mutually reinforcing ways. First, it allows the subset of the political class that’s currently in charge to turn the movement into a wholly owned subsidiary..."


When You Should Not Adapt in Place
"Our homes are our homes, and our right to stay and choose them sometimes seems inviolable - but it isn't. In the next decades there are going to be a lot of migrants - and you may be one of them..."

"So here's my list of when to think seriously about getting out. There will be exceptions in every case - my claim is not 'you definitely must go' but "think hard about what you are choosing."


Why "Recession-Proof" Jobs Are a Myth
"As with so many other things, many of the old assumptions about safe jobs and stable careers have been shattered by the grueling economic transformation we're still in the middle of. Yet the ubiquitous lists of best careers and recession-proof jobs continue to propagate the phony idea that some lines of work are immune to economic stress. Here are some of the careers recommended by outfits like CareerBuilder, Forbes, Time, HR World, and Associated Content, along with the more sobering reality:"



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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...
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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

In a move ECB President Jean-Claude Trichet says is NOT Quantitative Easing, ECB Delays Exit of Emergency Measures, Buys Bonds to Fight ‘Acute’ Tensions - The European Central Bank delayed its withdrawal of emergency liquidity measures and bought more government bonds as President Jean-Claude Trichet pledged to fight “acute” financial market tensions. Trichet said the ECB will keep offering banks as much cash as they want through the first quarter over periods of up to three months at a fixed interest rate. “It’s not quantitative easing, we’re withdrawing all the liquidity,” he said

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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

Europe Making More Progress on Debt Than US: Black Swan  http://www.cnbc.com/id/40476222

Europe is ahead of the United States in its debt crisis in that it at least has identified the problem and is taking steps to correct it, "Black Swan" author Nassim Taleb told CNBC.

Nassim Taleb
Photo by: YechezkelZilber
Nassim Taleb

The two regions differ in that the US instead has chosen to bail out institutions, which Taleb, promoting his latest book "The Bed of Procrustes," said is immoral.

"At least we know that we need austerity there. People can't spend money they don't have," he said. "They're ahead of us in that they have identified the problem further. We over here still don't know that we're living on borrowed money and we're borrowing more."

Taleb spoke as global policy makers are working through a plan to help troubled countries such as Ireland, Portugal and Italy deal with their sovereign debt issues. The debt problems have caused wide swings in the stock market as investors try to get a handle on where the crisis is heading.

The US, meanwhile, is working on a far-reaching plan to cut U.S. deficits and slow the growth of long-term debt. The plan, announced earlier this week by a commission appointed by President Obama, gained crucial support from two key Republican senators on Thursday but remained short of votes needed to trigger congressional action.

Taleb rose to prominence with this 2007 book in which he cautioned against excessive risk-taking. The title arose from the discovery of black swans that were thought not to exist, and the philosophy espoused in the book cautions investors that such unpredicted events have the greatest consequences.

In his latest piece, he takes Federal Reserve Chairman Ben Bernanke to task for engineering the bailouts of institutions that got into trouble through excessive risk.

Whether the gamble turned out to work in the end is immaterial, Taleb said. The larger point is moral hazard—that Bernanke used the money of innocent taxpayers and investors to rescue those who jeopardized the system in the first place.

"He's trying to bail out those who made mistakes with retirees' money," Taleb said. "We have a subsidy...of those who made a mistake, taking money away from those who are innocent. To me that is immoral...it's beyond unwise.

He advocated austerity measures such as program cuts undertaken during the Ronald Reagan presidency, reasoning that Americans would willingly accept "the pill knowing it's the remedy."

As for those on Wall Street and in Washington who caused the financial crisis, he recommended stiff retribution.

"You need to go after people promoting risk management methods that don't work, that help hide risk and at the same time have no downside," Taleb said. "The best way to get rid of the problem is the captain goes down with the ship—every captain, every ship."

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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

China's Gold Imports Surge Fivefold  http://www.cnbc.com/id/40483948

 Gold imports into China have soared this year, turning the country, already the largest bullion miner, into a major overseas buyer for the first time in recent memory.

The surge, which comes as Chinese investors look for insurance against rising inflation and currency appreciation, puts Beijing on track to overtake India as the world’s largest consumer of gold and a significant force in global gold prices.

Gold bars
Tom Grill | Iconica | Getty Images

The size of the imports — more than 209 tons of gold during the first 10 months of the year, a fivefold increase from an estimate of 45 tons last year — was revealed on Thursday. In the past, China has kept the volume secret.

“Investment is really driving demand for gold,” said Cai Minggang, at the Beijing Precious Metals Exchange. “People don’t have any better investment options. Look at the stock market, or the property market — you could make huge losses there.”

Beijing has encouraged retail consumption, with an announcement in August of measures to promote and regulate the local gold market, including expanding the number of banks allowed to import bullion.

Shen Xiangrong, chairman of the Shanghai Gold Exchange, who disclosed the import numbers, said uncertainties about the Chinese and global economies, and inflationary expectations, had “made gold, as a hedging tool, very popular”.

The rise in Chinese demand could further inflate gold prices

[XAU=  1390.6    5.85  (+0.42%)   ]

. Bullion hit a nominal all-time high of $1,424.10 a troy ounce last month. But adjusted for inflation, prices are far from the 1980 peak of $2,300.

“The trend is undeniable — gold demand in China is rising rapidly,” said Walter de Wet, of Standard Bank in London. China surpassed South Africa three years ago as the world’s largest producer.

The surge in gold imports to China bodes well for some of the world’s biggest hedge fund managers, including David Einhorn of Greenlight Capital and John Paulson of Paulson & Co, who have invested heavily in bullion, and top miners Barrick Gold

[ABX  53.29    0.85  (+1.62%)   ]

of Canada, U.S.-based Newmont Mining

[NEM  60.51    0.86  (+1.44%)   ]

and AngloGold Ashanti

[AU  48.44    1.12  (+2.37%)   ]

of South Africa.

The market upswing has prompted an increase in gold scams in Hong Kong, according to industry executives. The counterfeits have shocked the Chinese’ territory’s gold community not because of the amounts involved — between 200 and 2,000 ounces — but because of their sophistication.

In one case, executives discovered a coating advertised as pure gold that masked a complex alloy which included rare metals such as osmium, iridium, ruthenium and rhodium.

Chinese total gold demand rose last year to nearly 450 tons, up from about 200 tonnes a decade ago, according to the World Gold Council, the lobby group of the mining industry. Analysts anticipate a further leap this year, putting the country within striking distance of India’s total gold demand of 612 tons in 2009.

Additional reporting by Javier Blas and Jack Farchy in London

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Shai Agassi: Transforming Transportation

Sorry if this has been posted, but I watched a recent Charlie Rose interview with Shai Agassi and found it rather intriguing.  Here is a presentation of his from youtube that discusses much of the same material as in the interview; mainly, how to get a country off oil by 2020, focusing on changes to transportation initially.

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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...



For 12/3 News:



"Dec. 3 (Bloomberg) -- China needs to gradually make the yuan fully convertible to facilitate the currency’s internationalization, Xiao Gang, chairman of Bank of China Ltd., wrote in a commentary published in the China Daily today.

The non-convertibility of the yuan is a major hurdle in China’s efforts to become a “real financial power,” Xiao wrote. He also said it will probably take a long time for China to liberalize the capital account.

China is allowing greater use of its currency for cross- border transactions to reduce reliance on the U.S. dollar, after Premier Wen Jiabao said in March he is “worried” about holdings of assets denominated in the greenback. The Federal Reserve last month expanded its asset purchase program to buy $600 billion of Treasuries in six months in an effort to bolster the economy."

"Warning European Union leaders that they can’t rely on “benign neglect” to quell market turmoil, Trichet, the ECB’s president, is deploying a two-pronged strategy to ease roiled markets. The bank snapped up Portuguese and Irish bonds again today after Trichet yesterday assured investors that policy makers will delay the withdrawal of emergency liquidity."

" The ECB’s purchases, which were stepped up during Trichet’s press conference in Frankfurt yesterday, have triggered a surge in bonds across the euro region’s periphery.

The extra yield that investors demand to hold Portuguese 10-year bonds over German bunds today fell below 300 basis points for the first time since August. Irish yields dropped 28 basis points to 8.51 percent after falling 38 basis points yesterday.

Market Risk

The Spanish 10-year yield, which jumped to a euro-era record of 5.67 percent on Nov. 30, was at 4.59 percent at 10:41 a.m. in London. The euro rose 0.4 percent to $1.3265 today. "

................2A) Irish, Portuguese Bonds Rise Amid Speculation ECB Buying Debt

"Adopting the new rate of return lowers CalSTRS' long-term funding level to 76.5%.

On June 30, 2009, the fund had 78% of the money it needed, down from 87% the previous year. CalSTRS' unfunded liability hit $40.5 billion in 2009, compared with $22.5 billion in 2008.

Investment earnings alone are not enough to meet future obligations, CalSTRS said. As a result, the board is planning to ask the state Legislature next year to approve an increase in the employer retirement contribution rate paid by 1,400 school districts, county offices of education and community college districts."

"Dec. 2 (Bloomberg) -- Higher interest rates and refinancing risks will likely prompt a “second wave of defaults” in Europe in 2012 and 2013, particularly among leveraged buyouts, according to Standard & Poor’s.

The 12-month European default rate may rise to as high as 7.5 percent in 2012 from an expected 4 percent by the end of this year, S&P analysts led by Paul Watters in London said in a report. The rate reached a peak of 14.8 percent at the end of the third quarter of 2009."

"Skyrocketing employee costs will deal a $100 million blow to San Francisco coffers next fiscal year despite wage concessions.

Pensions rank among the most escalating labor costs for San Francisco. Less than a month after voters rejected Proposition B, which would have increased employees’ pension contributions, a $379.8 million deficit projection was released this week."

"In a report to Mayor Antonio Villaraigosa and City Council, obtained by City News Service, Santana calculated the new contribution rates will boost the projected deficit for the 2011-2012 fiscal year by $23 million to a total of $343 million"

"The city next year faces a 10th straight operating deficit, and city officials announced Thursday that it had grown from $70 million to $90 million because of increased pension payments. Just two weeks ago, the estimate was $41 million."

"Mitchell warned the city was facing projected budget deficits totaling around $600 million during the next five years, in large part because of the costs of contributing to employee pensions.

"We have to do something about those pensions. You can't be anything but pessimistic when you have numbers like that," she said.

"You cannot sustain those kind of numbers and give the services needed in the fourth largest city in the United States.""

"A day after getting an earful from the public, Cincinnati City Council began picking through an unpopular budget proposal to close a $60 million deficit on Thursday."

"Montgomery County is facing a $350 million shortfall over the next year and a half, officials announced Thursday, just the latest in a series of deepening budget woes afflicting jurisdictions across the Washington region.

Months after closing a $1 billion gap, County Executive Ike Leggett estimated another $100 million deficit this fiscal year ?-- and predicted a $250 million shortfall next fiscal year.

"Given all the cuts we already have made over the past four years, these reductions will be very painful," Leggett said. "There is no more 'low-hanging fruit.' There will be things county government will do differently. And, yes, there may be things we do not do at all.""

"The Illinois Senate on Thursday approved police and firefighter pension legislation that Mayor Daley warned would blow a $550 million hole in the city budget, but the top Senate Democrat pledged to try softening that financial hit next month.

The measure, which passed 46-4 and now heads to Gov. Quinn, essentially is a trade-off between police and fire unions wanting to keep their pension funds solvent and local governments aiming to cut pension costs."

"But the legislation requires a steep ramp-up in contributions to the funds starting in 2015 -- and it mandates those contributions be paid for by property taxes. Daley estimates that would require a $550 million property tax increase."

"To place the entire burden on Chicago property owners -- and mandate the largest property tax increase in the city's history -- would paralyze home sales, the mayor said.

"From today on, you won't be able to sell your house. . . . These taxes are gonna go up by 100 percent or more,' " Daley said."

"David Wyss, the chief economist at Standard and Poor's, hopes the November jobs report is a fluke. "If not, we could be in for a much weaker first half of 2011 than we expected," says Wyss. Not that his forecast was optimistic to begin with. Listen to this special edition of MarketWatch News Break for more of his thoughts, plus reports on how MBAs are faring in this job market, and a new standardized test aimed at new college grads on the job hunt."

 Other news, headlines and opinion:

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Gold > US$1400, Silver > US$29

Sure, the POMOs and Market-Packing Ninjas can make the US markets close up today, but they evidently can't keep a lid on PMs...

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Re: Gold > US$1400, Silver > US$29
SagerXX wrote:

Sure, the POMOs and Market-Packing Ninjas can make the US markets close up today, but they evidently can't keep a lid on PMs...

And yowsa! -- in the last 15 minutes, gold shot up another US$10+, maybe on this news (hat tip to Pinecarr for posting this in another thread):


That makes a 2% move for gold today, and nearly 3% for silver.  Still an hour left in the trading week, though...

Fasten your seatbelts.  The captain has word that there could be some turbulence on this flight...

Viva -- Sager

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Fed Policies Work....Greenspan


"Current monetary policy has worked because it has helped lift stock prices which in turn have fueled the economic recovery, former Federal Reserve Chairman Alan Greenspan told CNBC on Friday.

Addressing a gamut of issues, from the European debt crisis to the floundering US housing industry, the former central bank chief said the rising stock market-up more than 80 percent from its March 2009 financial crisis lows-has been pivotal."


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CBS: Bernanke doesn't rule out more bond-buys


"WASHINGTON (MarketWatch) - Federal Reserve Board Chairman Ben Bernanke will tell "60 Minutes" that he won't rule out expanding the Fed's $600 billion bond-purchase plan, CBS News said Friday. In a preview of the interview sent in a press release, CBS said Bernanke "explains why the Fed announced its intention to buy $600 billion in Treasury securities, defending against charges the move will lead to inflation and not ruling out the purchase of more." U.S. financial markets rallied in closing minutes of the trading day after the release was sent out shortly after 3:30 p.m."




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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...

Declining Energy Quality Could Be Root Cause of Current Recession, Expert Suggests

ScienceDaily (Dec. 2, 2010) — An overlooked cause of the economic recession in the U.S. is a decade long decline in the quality of the nation's energy supply, often measured as the amount of energy we get out for a given energy input, says energy expert Carey King of The University of Texas at Austin.

Many economists have pointed to a bursting real estate bubble as the initial trigger for the current recession, which in turn caused global investments in U.S. real estate to turn sour and drag down the global economy. King suggests the real estate bubble burst because individuals were forced to pay a higher and higher percentage of their income for energy -- including electricity, gasoline and heating oil -- leaving less money for their home mortgages.

In economic terms, the quality of the nation's energy supply is referred to as Energy Return on Energy Investment (EROI). For example, if an oil company uses a 10th of a barrel of oil to drill, pump, transport and refine one barrel of oil, the EROI for the refined fuel is 10.

"Many economists don't think of energy as being a limiting factor to economic growth," says King, a research associate in the university's Center for International Energy and Environmental Policy. "They think continual improvements in technology and efficiency have completely decoupled the two factors. My research is part of a growing body of evidence that says that's just not true. Energy still plays a big role."

In a paper published this November in the journal Environmental Research Letters, King introduced a new way to measure energy quality, the Energy Intensity Ratio (EIR), that is easier to calculate, highly correlated to EROI and in some ways more powerful than EROI. EIR measures how much profit is obtained by energy consumers relative to energy producers. The higher the EIR, the more economic value consumers (including businesses, governments and people) get from their energy.

When King plots EIR for various fuels every year since World War II, the graphs indicate two large declines, one before the recessions of the mid-1970s and early 1980s and the other during the 2000s, leading up to the current economic recession. There have been other recessions in the U.S. since World War II, but the longest and deepest were preceded by sustained declines in EIR for all fossil fuels.

EIR is proportional to EROI, meaning they rise and fall together, but the basic data behind the EIR calculations come out annually as opposed to every five years for EROI. EIR also gives insight into different parts of the supply chain such as at the refinery or at the gas pump, which are harder to study with EROI.

King's analysis suggests if EIR falls below a certain threshold, the economy stops growing. For example, in 1972, EIR for gasoline was 5.9 and in 2008 it was 5.5. During times of robust economic growth, such as the 1990s, EIR for gasoline was well over eight. Compare that to some estimates of EROI and EIR for corn ethanol of around one, and it's clear why corn ethanol has been widely criticized as a low quality energy source.

To get the U.S. economy growing again, King says Americans will have to produce and use energy more efficiently. That's essentially what the U.S. did after the last energy crisis by raising fuel efficiency standards for cars, increasing use of natural gas for electric power generation and developing new technologies such as Enhanced Oil Recovery to coax more oil out of the ground.

"If we aren't fundamentally changing the way we produce or consume energy now, don't expect the economy to grow as much as the past two decades," he says.

The worst recessions of the last 65 years were preceded by declines in energy quality for oil, natural gas, and coal. Energy quality is plotted using the energy intensity ratio (EIR) for each fuel. Recessions are indicated by gray bars. In layman's terms, EIR measures how much profit is obtained by energy consumers relative to energy producers.The higher the EIR, the more economic value consumers (including businesses, governments and people) get from their energy. (Credit: Carey King)
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Re: Daily Digest 12/2 - Fed Discloses Big Loans, Home Sales ...


I just get error messages when I try to play those vids.


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