Daily Digest

Daily Digest 2/14 - Big Changes Come Unexpectedly, The Great Spending Debate Continued, Biofuels And Food Prices

Monday, February 14, 2011, 10:44 AM
  • An Export Land Model Analysis for the USA - Part 4
  • Egypt's Message To America: Big Changes Come Unexpectedly
  • Phil's Stock World Newsletter
  • Grapes Of Wrath 2011
  • The Four Pieces of the Great Spending Debate
  • Bank of England Chief Mervyn King: Standard Of Living To Plunge At Fastest Rate Since 1920s
  • Why Biofuels Help Push Up World Food Prices
  • Preparing Accordingly II

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An Export Land Model Analysis for the USA - Part 4 (Crash Watcher)

In the fourth and final part of the series, I summarize the results of my analysis from the first three parts, explore the economic implications, consider the likely government response leading up to net zero exports and give you some advice on individual preparation.

Egypt's Message To America: Big Changes Come Unexpectedly (Truthsavvy)

Can a government fall after just three weeks of protests? People who were ignored when they predicted these things even a year ago look really wise today. While the future of Egypt is very uncertain, dramatic and unexpected changes have arrived.

Americans are already forgetting the "shock and awe" of October 2008, when the world was completely surprised by the unraveling of financial markets. Dramatic changes were made under the stress of the moment — actions that transferred trillions in bad bets to the unsuspecting American taxpayer. "What else could we do?", they lament. The term "moral hazard" was an understated way to describe the warped "means-to-an-end" mentality that was willing to do anything to keep powerful financial interests in charge.

Phil's Stock World Newsletter (Ilene)

At 10am on Wednesday, February 9, Texas Representative Ron Paul (R-TX), an outspoken critic of the Federal Reserve, held his first official hearing as Chairman of the House Financial Subcommittee on Domestic Monetary Policy. The topic of the meeting was “Can Monetary Policy Really Create Jobs?” At the same time, two buildings over from Representative Paul’s hearing, Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee.

Grapes Of Wrath 2011 (JimQ)

The America of 1930 was different in many aspects from the America of 2011. The population of the U.S. was 123 million, living in 26 million households, or 4.7 people per household. Today the population of the U.S. is 310 million, living in 118 million households, or 2.6 people per household. The living and working structure of the country was dramatically different in 1930. The percentage of the population that lived in rural areas exceeded 40%, down from 60% in 1900, as the country rapidly industrialized. One quarter of the population still worked on farms. Today, less than 20% of Americans live in rural areas, while less than 2% live on farms. In 1935, there were 6.8 million farms in the U.S. Today there are 2.1 million farms. The family farm has been slowly but surely displaced by corporate mega-farms since the 1920s, with 46,000 farms now accounting for 50% of all farm production today.

The Four Pieces of the Great Spending Debate (Jeff B.)

The Administration has made it clear in recent weeks that they get that spending needs to be tackled and they've leaked a few details of items they plan on cutting. But Obama is still insisting on two key elements that Republicans adamantly oppose: some corporate tax increases to help subsidize unemployment benefits and targeted spending increases in areas vital to keep the economic recovery on track. The big debates on this budget, however, won't happen for another two months, until the House releases its version and committees begin hearings.

Bank of England Chief Mervyn King: Standard Of Living To Plunge At Fastest Rate Since 1920s (Marteen)

Mr. King said he was unable to offer any imminent hope of a rise in interest rates in coming months because of the poor economic outlook. Savers and “those who behaved prudently” would be among the biggest losers in the squeeze, he admitted.


Why Biofuels Help Push Up World Food Prices (Jeff B.)

Less clear is what's actually behind the spike in food prices. Bad weather plays a major role — a devastating heat wave in Russia last summer ruined grain harvests and prompted that country to suspend exports, jolting global markets. Excessive heat in the Midwest stunted the corn crop, leading to a 5% drop in production last year. Rising demand for food — especially meat, whose production requires lots of grain and water — in the richer parts of the developing world is straining supplies.

Preparing Accordingly II (pinecarr)

The only thing that has kept cow and pig prices from rising at the same rate as the grains is this temporary increase in supply. Replacement rate of a herd or barn is usually not much more than 1:1 so it follows that all of the excess supply currently in the market will lead to a commensurate drop in supply later this year. Add less supply to increased demand (due to QE) and you get explosive price increases. So, not only are the grains significantly more expensive, protein is, too. Not good. Not good at all.

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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Interest expense on national debt to rise

"Barack Obama may lose the advantage of low borrowing costs as the U.S. Treasury Department says what it pays to service the national debt is poised to triple amid record budget deficits.

Interest expense will rise to 3.1 percent of gross domestic product by 2016, from 1.3 percent in 2010 with the government forecast to run cumulative deficits of more than $4 trillion through the end of 2015, according to page 23 of a 24-page presentation made to a 13-member committee of bond dealers and investors that meet quarterly with Treasury officials. "

"Obama's new budget projects that the deficit for the current year will surge to an all-time high of $1.65 trillion. That reflects a sizable tax-cut agreement reached with Republicans in December. For 2012, the administration sees the imbalance declining to $1.1 trillion, giving the country a record four straight years of $1 trillion-plus deficits."

.................2A) White House Expects Deficit to Spike to $1.65 Trillion


  • Other news, headlines and opinion:

Tax hike not enough; Quinn wants to borrow $8.75 billion (Illinois)

Cash-Strapped States Facing Budget Crises, Governors Facing Tough Decisions

Cities and states are grappling with retiree health costs

Greece slams EU-IMF asset sale call

Municipalities may for first time consider a new chapter -- Chapter 9 bankruptcy

Study Predicts 3300 Teacher Layoffs On LI

Ohio Medicaid reductions could make hospitals sick

City of Davis, workers face $1.4 million hike in pension contributions

U.S. Government Lying About Inflation and Jobs Market ( InflationUS video)

Gross Cuts Government Holdings to Lowest Since 2009

Rising Milk Prices Are ‘New Normal,’ Fonterra Says

Wheat Surges to a Record in China on Drought, Rising Imports

Brazilian Economists Raise Inflation, Cut GDP Forecasts for 2011 in Survey

Roubini’s Next Crisis Is Scary Food for Thought: William Pesek

U.S. investors fear muni defaults, job losses

Housing Crash Is Hitting Cities Once Thought to Be Stable

saxplayer00o1's picture
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Merscorp Lacks Right to Transfer Mortgages, Judge Says

(Thanks to zerohedge for catching this one)

"Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said.

U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a “significant impact,” wrote that the membership rules of the company’s Mortgage Electronic Registration Systems, or MERS, don’t make it an agent of the banks that own the mortgages.

“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”"

"Proper Status

“‘Don’t come around here no more,’ is basically the message to MERS,” said April Charney, a senior attorney with Jacksonville Area Legal Aid in Jacksonville, Florida. “The judge basically deconstructed MERS and said there’s no possible way in any case you can come in and show you have this appropriate proper status to transfer the note.”

“MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process,” Grossman wrote. “The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.” "

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Re: Daily Digest 2/14 - Big Changes Come Unexpectedly, The ...

Housing Crash Is Hitting Cities Once Thought to Be Stable http://www.cnbc.com/id/41574051

Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping.

Home For Sale or For Rent

The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.

In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.

“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall.

Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off.

“We went into 2010 feeling gangbusters, thanks to Uncle Sam,” Mr. Humphries said. “We ended it feeling penniless, with home values tanking.”

The fact that even a fairly prosperous area like Seattle was ensnared in the downturn shows just how much of a national phenomenon the crash has been.

The slump began when the low-quality loans that drove the latter stage of the boom began to go bad, but the resulting recession greatly enlarged the crisis. Many people could not get a mortgage, and others simply gave up the hunt.

Now, though the overall economy seems to be mending, housing remains stubbornly weak. That presents a vexing problem for the Obama administration, which has introduced several initiatives intended to help homeowners, with mixed success.

CoreLogic, a data firm, said last week that American home prices fell 5.5 percent in 2010, back to the recession low of March 2009. New home sales are scraping along the bottom. Mortgage applications are near a 15-year low, boding ill for the rest of the winter.

It has been a long, painful slide. At the peak, a downturn in real estate in Seattle was nearly unthinkable.

In September 2006, after prices started falling in many parts of the country but were still increasing here, The Seattle Times noted that the last time prices in the city dropped on a quarterly basis was during the severe recession of 1982.

Two local economists were quoted all but guaranteeing that Seattle was immune “if history is any indication.”

A risk index from PMI Mortgage Insurance gave the odds of Seattle prices dropping at a negligible 11 percent.

These days, the mood here is chastened when not downright fatalistic. If a recovery depends on a belief in better times, that seems a long way off. Those who must sell close their eyes and hope for the best.

Those who hope to buy see lower prices but often have lighter wallets, removing any sense of urgency.

Arne Klubberud and Melissa Lee-Klubberud paid $358,000 for a new, 960-square-foot townhouse on trendy Capitol Hill a few weeks after that Seattle Times article was published. Now, with one child and with hopes for more, they need more space.

They just put the townhouse on the market for $300,000.

“Obviously, this is not the ideal situation,” said Ms. Lee-Klubberud, a 32-year-old lawyer. They are hoping to take advantage of the sour market to buy at a good price, but first, they must sell for an amount that is acceptable.

“Everyone has their limits,” she said. “We have ours.”

On a dark, dank Sunday, a handful of people came to look at the three-level unit. One of them was Katherine Davis, who had just sold her house in the far eastern suburbs. It took 14 months, during which she had to drop the price several times.

The equity she had accumulated over the decades disappeared quickly.

“At first, I thought it would be nice to come out of this with $200,000, but I adjusted my expectations,” Ms. Davis said. She ended up with less than half of that. Her goal is to buy a small place in the city, but not yet.

“Selfishly, I’m hoping the market continues to drop,” she said. Increasing numbers of sellers are simply surrendering.

Megan and Ryan Dortch tried to sell their one-bedroom Eastlake condo for $325,000 two years ago. They rejected an offer of $295,000 as inadequate. A year later, they relisted it for $289,000, then $279,000, which was less than they paid.

Without a sale at that price, they could not afford to buy a place big enough for them and their new baby.

They have given up on real estate. They are renting out their old apartment at a small loss every month, and living in a rented house.

“I don’t expect the market to get better,” said Ms. Dortch, 31, a customer service consultant.

Neither does Gene Burrus, another frustrated seller who became a landlord. “Rent is so cheap it doesn’t make sense to buy now,” he said. He might reconsider if 10 or 15 percent more comes out of the market.

Redfin, a real estate brokerage firm based in Seattle, says foot traffic began picking up in the last several weeks. Mortgage rates are rising, which could nudge those who need to buy to make a deal now for fear rates will rise even more.

But whenever the market finally does pick up, all those accidental landlords will want to unload, putting another burden on the market.

“So many sellers are waiting in the shadows,” said Redfin’s chief executive, Glenn Kelman. “The inventory is going to expand and expand and expand. I don’t see any basis for significant price increases.”

While almost every economist is expecting another round of price declines for the next few months, many see a leveling off in the second half of the year.

Fiserv, the company that produces the monthly Case-Shiller Home Price Indexes, analyzed prices in 375 communities. About three-quarters of them will be stable by December, Fiserv calculates.

“We’re at a period near the bottom but with more volatility than we normally see at this point,” said David Stiff, Fiserv’s chief economist. “This sort of double dip is unprecedented for housing.”

Maybe that is why belief in a bottom is as elusive now as fears of a top were in 2006.

“We would love to have a house,” said Dan Cunningham, a 41-year-old renter. “I have more than enough for a down payment. I’m preapproved for a loan. But I have to have confidence it’s not going to lose another 20 percent.”

He plans to wait until he sees prices rising before making any offers.

This story originally appeared in the The New York Times
Wendy S. Delmater's picture
Wendy S. Delmater
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Re: Daily Digest 2/14 - Big Changes Come Unexpectedly, The ...

Wow, the MERS thing means that all of the slicing and dicing of mortgages into mortgage-backed securities was not only immoral, it was totally illegal. IMHO that's what you get when investors try to work outside of the regulatory system.

So the question is now - who owns the underlying assets? Was it the "last person holding the note" before a mortgage went into MERS, if they are even still in business? What a mess.

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Re: Daily Digest 2/14 - Big Changes Come Unexpectedly, The ...

Ron Paul on MSNBC


Poet's picture
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MERS Was Trying To Avoid Paying Recording/Transfer Fees


Yep. And MERS also a way to avoid paying recording/transfer fees everytime a mortgage was sold or sliced/diced.

Sounds like this could be something counties and states could use to sue banks for money. Sometimes the only way to make progress is to get two powerful interest after each other...


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