Daily Digest

Daily Digest 3/25 - Another Year Of Living Dangerously, Euro Collapse 'Not Unthinkable', The Next Leg Down In House Prices

Friday, March 25, 2011, 9:41 AM
  • Global Economy: Another Year Of Living Dangerously
  • Euro's Collapse Is Not Unthinkable: Warren Buffet
  • Surf Warning: Tsunami To Lift Gold
  • Gold Prices Rise After The Nuclear Crisis Of Japan
  • Gold Futures Soon Will Set New Record Highs, Fund Manager Says
  • Automakers Still Reeling From Japan Quake
  • America's Property Market: On A Losing Streak
  • Phase Shift: The Next Leg Down in House Prices
  • A Nation Of Dropouts Shakes Europe
  • Britain's £200bn Time Bomb Of Debt Interest
  • IMF Prepares For "Threat To International Monetary System" 
  • Prepare For Lengthy Power Shortage
  • Sharjah Ruler Demands Action To Prevent Summer Power Cuts
  • Japan Nuclear Plans Derailed, Fossil Fuel Use To Stay High For Years
  • Japan Steps Up Nuclear Plant Precautions; Kan Apologizes

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Global Economy: Another Year Of Living Dangerously (jdargis)

This was supposed to be a stress-free year for the global economy. By January the financial crisis had faded and Europe’s sovereign-debt crisis seemed less acute. America’s economy was resurgent. Investors piled into equities and sold some of the government bonds they’d bought for troubled times. If there was a worry, it was that emerging economies would grow too quickly, inflating commodity prices.

Euro's Collapse Is Not Unthinkable: Warren Buffett (Dana T.)

"You can't have three or four or five countries that are in effect free-riding on the other countries. That won't work over time-they have to get their fiscal houses in reasonable harmony," he said.

The widely-watched investor spoke as yields on Portuguese bonds soared to new highs and markets remained alert for a potential European Union bailout of the troubled nation. Late Wednesday, Portugal's prime minister stepped down after the country's parliament rejected a fiscal austerity plan proposed by his government.

Surf Warning: Tsunami To Lift Gold (Claire H.)

The news stories out of Japan focus 98% on their Fukushima nuclear complex, with hardly a peep about the long list of other economic and financial effects. This article will focus on what they leave out, dutifully reporting amidst the purposeful new vacuum in a grand distraction.

Gold Prices Rise After The Nuclear Crisis Of Japan (Alfredo E.)

Not only because of Japan’s nuclear crisis, the price of gold have been rising for quite some time now. Spot gold traded for $1374.43 an ounce in the first part of February, thus representing a 1% gain from that of the previous week’s level. Moreover, gold has also been outperforming silver for some time now.

Other than this, the World Gold Council also believes that China’s demand for investment in gold may even rise between 40% and 50% in this year (2011) itself. With the inflation in Asia and the other parts of Europe still running quite high, investors are more likely to continue viewing gold as the most attractive asset.

Gold Futures Soon Will Set New Record Highs, Fund Manager Says (Alfredo E.)

Intensifying demand from Middle Eastern, Japanese and Chinese investors is likely to push gold futures beyond record prices set earlier this month as central banks will complement circumstances by fomenting hyper-inflation, the large fund's manager said.

Automakers Still Reeling From Japan Quake (Alfredo E.)

Toyota says it will probably idle a truck plant in Texas because it can't get enough parts, according to Reuters. "It is likely that we will see some nonproduction days coming," a spokesman said. "At this point, we are still not sure of when those might hit or, if they do it, what the duration may be."

America's Property Market: On A Losing Streak (jdargis)

The signs of the crash are everywhere in Las Vegas. The city’s outer suburbs are eerily quiet, thanks to the preponderance of unsold and foreclosed homes. There are few lights in any windows, and few cars on the roads. Banners and boards advertising hugely discounted housing flap and rattle mournfully in the desert wind. In North Las Vegas every second house on some streets carries a “For Rent” sign, offering rates of as little as $150 a month. One or two houses on each street have been boarded up and abandoned. Even on the city’s famous “strip” of cavernous casinos and high-rise hotels, the razzle-dazzle is marred by the grey concrete hulks of abandoned building projects.

Phase Shift: The Next Leg Down in House Prices (pinecarr)

Sales of new homes tumbled 16.9% in February from the prior month to a seasonally adjusted annual rate of 250,000, the lowest level since the series began in 1963.

The median price for a new home sold in February fell 13.9% from the prior month to $202,100, the lowest since December 2003.

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A Nation Of Dropouts Shakes Europe (Phil)

Ms. Fernandes lives in a poor suburb near the airport. She doesn't work. Employers, she says, "are asking for higher education." Even cleaning jobs are hard to find.

Portugal is the poorest country in Western Europe. It is also the least educated, and that has emerged as a painful liability in its gathering economic crisis.

Britain's £200bn Time Bomb Of Debt Interest (pinecarr)

One of the biggest shockers from the detail of Thursday's OBR assessment is the escalating amount of money going straight down the drain of debt servicing costs. As public debt rises, these payments rise from £30.9bn last year to £66.8bn in 2015/16, or from 4.6pc to 8.8pc of all government spending.

Worse, these numbers are an understatement of the true position.

IMF Prepares For "Threat To International Monetary System" (pinecarr)

As if the IMF's trillions in open lending facilities (many of which have recently been adjusted to uncapped) were not enough, we now learn that the world lender of last resort (which in theory is the Fed, but apparently Bernanke has been getting a little shy lately so is offsetting his direct lending directives to secondary organizations like the IMF, leaving the Fed with only USD liquidity swaps) is about to activate a "Special Funding Pool" - Dow Jones explains: "The International Monetary Fund is expected to soon activate a special funding pool that will boost the fund's ability to prevent or resolve economic crises, two people familiar with the situation said Thursday. One of the people said the activation of the funding--which can only be made by a special request from the IMF managing director to the board--was in anticipation of an expected wave of new IMF programs, including the possible expansion of the Greek bailout package."


Prepare For Lengthy Power Shortage (guardia)

Planned blackouts in areas supplied with power from TEPCO began March 14. There was great confusion at first, partly due to inadequate explanations by TEPCO. Ten days have passed since then and problems remain, but the situation is stabilizing.

TEPCO plans to conclude its planned power outages by the end of April, when supply is expected to meet demand. But a worrisome situation is expected in summer.

Sharjah Ruler Demands Action To Prevent Summer Power Cuts (pinecarr)

The ruler of Sharjah has met with power chiefs in a bid to ensure the power cuts suffered by thousands in the emirate last summer are not repeated this year.

Japan Nuclear Plans Derailed, Fossil Fuel Use To Stay High For Years (guardia, login required)

With radioactivity above permissible levels in some areas outside the 20-kilometer evacuation zone around Tokyo Electric Power Co.'s (9501.TO) earthquake-hit Fukushima Daiichi nuclear complex, and the nation gripped by fears of contamination including in tap water in Tokyo, several reactor restarts and new building projects have already been pushed back.


Japan Steps Up Nuclear Plant Precautions; Kan Apologizes (guardia)

People living within 12 miles of the plant have been evacuated, yet those living between 12 and 18 miles of the facility have been told it is safe to remain as long as they stay indoors. But two weeks after a massive earthquake and tsunami struck the country and hobbled the plant, causing radiation to leak, the situation has yet to be resolved.

"It has become increasingly difficult for goods to arrive, and life has become harder," Chief Cabinet Secretary Yukio Edano said at a news conference.

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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Fed balance sheet grows to record in latest week

"(Reuters) - The U.S. Federal Reserve's balance sheet grew to another record size in the latest week as the central bank bought more bonds in an effort to support the economy, Fed data released on Thursday showed.

The purchase was part of its $600 billion quantitative easing program, dubbed QE2, with the goal to stimulate investments and economic activity.

The balance sheet, a broad gauge of Fed lending to the financial system, expanded to $2.585 trillion in the week ended March 16 from $2.567 trillion the prior week."

.................1A) Fed Assets Rise to Record $2.61 Trillion on Treasury Purchases

"The central bank has purchased $465.4 billion in Treasuries since Nov. 12 under plans to purchase $600 billion of government debt through June and reinvest proceeds from maturing mortgage debt."

"NEW YORK (CNNMoney) -- Texas could see more than 600,000 jobs disappear if lawmakers adopt the $83.8 billion budget that will go before the state House late next week, according to a state agency.

Harsh spending cuts in the budget could cost more than 263,500 private sector jobs and 343,000 government positions over the next two years, according to estimates released Wednesday by the Legislative Budget Board, a bipartisan committee."

"California's debt to the U.S. for covering its unemployment checks the last two years could reach $13.4 billion by the end of the year. If the loans aren't repaid by November, a payroll tax will kick in. It starts at $325 million next year and could rise to $6 billion."

"NEW YORK — The state Financial Control Board warned Thursday that this year's proposed cuts to New York City services are just the beginning, and residents should expect deeper reductions in the coming years.

In its report on Mayor Michael Bloomberg's proposed budget, the board said that unless the city curbs rising capital debt and growing pension and healthcare costs, it can expect deep reductions for years to come.

"If people are complaining about the cuts the mayor's already made ... they're just going to get worse and worse," said board Executive Director Jeffrey Sommer. "The economy will not recover at a speed fast enough to close these gaps on its own."

This year's proposal calls for closing budget shortfalls by laying off thousands of city teachers and other workers, shuttering some fire companies and reducing library hours, among other measures. Sommer suggested the mayor would need to make $1 billion more in new cuts in the budget he proposes next year."

"The mood was somber as Jeff Weiler, chief financial officer for the Clark County School District, finished a presentation Thursday night at a School Board meeting.

Sitting in front of a standing-room-only crowd, Weiler served as the bearer of bad news: As part of a tentative 2012 budget, $411 million would be cut from the district and nearly 2,500 employees would lose their jobs.

The tentative budget includes a 7.8 percent reduction in salaries for all employees, a 25 percent cut in funding for textbooks and supplies, a 20 percent cut in administrative department budgets, an increase in health insurance costs for employees and an increase in class sizes by three to seven students."

"Around 3,000 documented gangbangers, belonging to 30 gangs, prowl Merced's streets and alleys.

With Merced police layoffs looming, the ranks of the task force devoted to keeping tabs on those bad guys may be slashed in coming months.

That's just one scenario police officials are bracing for as a result of the city's fiscal crisis.

The gang unit isn't the only part of the department subject to the budgetary scalpel. The Traffic Division will probably be cut substantially. Moreover, officers will no longer personally respond to lower priority property crimes, such as certain types of theft."

"OSAKA, March 25, 2011 (AFP) - Disaster-struck Japan is bracing for months of energy shortages that could curb factory production and force households and workers to sweat out the humid summer with little or no air conditioning.

The world's number three economy, which endures 20 percent of all major earthquakes, generates about 30 percent of its power from nuclear plants.

The record 9.0-magnitude tremor and monster wave which battered Japan's northeast coast on March 11 prompted 11 of Japan's 55 nuclear reactors to automatically shut down and triggered a major crisis at a plant in Fukushima.

The nuclear problems are causing "serious constraints on the supply of electricity", so managed blackouts are likely to continue "at least over the summer," said Credit Agricole economist Susumu Kato. "

.........................7A) Japan May Consider Daylight Saving to Curb Power Use After Quake

"Syria should follow Egypt’s lead and the Syrian army should “empower a revolution”, Robert Gates, US secretary of defence, argued as thousands marched in a southern city.

Mr Gates made his comments – some of the toughest remarks to date by a US official about the rule of Bashar al-Assad, Syria’s president – on a day of further upheaval in the Middle East and beyond."

"More than 150 school districts and charter schools in Michigan are teetering on the edge of going broke, a situation that is likely to get worse under Gov. Rick Snyder's proposed cuts of $470 per pupil.

These are the districts that have so little set aside in rainy day funds that Snyder's cuts -- coupled with a huge increase in retirement costs this summer -- could put them in a deficit, joining the 43 districts and charters already there.

It's a situation that has mobilized school leaders -- testifying in Lansing, writing lawmakers and sending letters to parents. They say that after years of closing schools, laying off staff and slashing programs, there's little left to cut."

  • Other news, headlines and opinion:

S&P cuts Portugal credit rating, warns of further downgrade

Portugal Bonds Fall, Spain Dodges Contagion Effect 

Portugal bailout could top $100 billion

Portugal 'headed towards a default' (BBC)

China PBOC: See Risk Of "Competitive Devaluation" By Developed Countries

IMF Said to Be Discussing Activation of $583 Billion Crisis Lending Pool

Irish bond yields remain close to 10%

Ireland's borrowing costs hit record high as GDP falls

Irish Banks May Need 27.5 Billion Euros More Aid, Analysts Say

Treasury to Sell $161 Billion in Securities (Next week)

US High-Yield Bond Supply For Quarter Is Second-Highest On Record

Hong Kong Official: Expect Next Fiscal Year Budget Deficit HK$8.5 Billion

Hawaii's New Budget Deficit: $1.3 Billion

Expert says 10% of Hungarian hotels may soon go bankrupt

Salinas layoff list draws worst-case scenario (California)

Elmira School District Considering 200 Staff Layoffs (NY....20% of the district's workforce)

Hundreds of Layoffs at Montgomery Public Schools

Lightstone's $10M Bid Wins Distressed Hotel ("The seller, WPH Boston LLC, had previously acquired the property in September of 2005 at $26.6 million")

Phoenix expects big budget shortfall ($59 million)

Roach Sees a ‘Powerful’ Japan Rebound Fading to Lost Decade

Israel May Use ‘Great Force’ in Retaliation for Gaza as Gates Urges Peace


......................Belgium protester video

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Syrian troops open fire on
Syrian troops open fire on protesters http://english.aljazeera.net/news/middleeast/2011/03/2011325145817688433.html
At least 20 killed in Daraa, according to witness, as anti-government protesters defy security crackdown.

Syrian security forces have opened fire on anti-government protesters near the city of Daraa, killing at least 20 people, residents have told Al Jazeera.

"There are more than 20 martyrs .... they (security forces)
opened fire haphazardly," the witness said.

Reuters also reported that heavy gunfire could be heard in the southern city, the focal point for demonstrations against Bashar al-Assad''s regime in recent days.

The incident comes as protesters demanding greater freedom called for a "day of dignity" on Friday following a week-long crackdown by pro-regime forces that has left dozens dead.

At least 200 people marched in the centre of Damascus after Friday prayers in support of the people of Daraa, scene of protests against Baath Party rule, a Reuters news agency witness said.

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Extent of Damage to Japan’s Infrastructure Still Unclear

"...While much attention has been focused on the crisis at the Fukushima Daiichi nuclear plant, only fragmentary information has become available about damage to other large complexes, like water distribution and sewage treatment plants.

Even Japanese government agencies and professional engineering groups appear to have limited knowledge of the scope of the destruction along the northeastern coast of Honshu Island, where the tsunami hit on March 11, and further inland, where the quake damaged buildings and other structures and caused landslides.

“We don’t understand the real situation,” Hiroyuki Yanagawa of the Japan Society of Civil Engineers wrote in an e-mail. “We cannot investigate the area.” The group is based in Tokyo, far from the affected region, where entry has been restricted largely to emergency vehicles.

In the United States, earthquake engineers who often travel to the scene of a major quake within days have been unable to go to Japan because of concerns about radiation.

Stephen Mahin, a structural engineering professor at the University of California, Berkeley, and the director of the Pacific Earthquake Engineering Research Center, said that he and others had been planning to go but that the university had canceled their travel insurance. ...."


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japan's nuclear crisis

I am not knowledgable enough about radiation to answer this question.  We import scads of shipping containers from China.  Is the radiation close enough to affect them and the shipping lanes?  Do you just wash off the radiation, decontaminate them into the ocean?  Will the radiation permeate into the containers?  I imagine  some shipments are on U.S. shores already, yet I have not heard one iota about this.  I realize this is trivial to Japan's problem, but just how far DO the ramifications go? 

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Bill GatesTED Talk highlights US State Government budget 'lies'

As a new member to CM's Crash Course (and very overwhelmed by the reality of lies I now realise I've been fed by Govt), I am discovering that if you look, there are more people starting to raise awareness of the systemic mismanagement CM highlights. See Bill Gates' recent TED Talk http://www.ted.com/talks/bill_gates_how_state_budgets_are_breaking_us_schools.html

If more people like Bill, who are well known and respected, start calling it out, then maybe we can hope that politicians will start to deal more in reality....a stretch I know, but let's put the pressure on!

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Time4Change wrote:

As a new member to CM's Crash Course (and very overwhelmed by the reality of lies I now realise I've been fed by Govt), I am discovering that if you look, there are more people starting to raise awareness of the systemic mismanagement CM highlights.


Welcome to the forums.  You will find a lot of interesting people here and a lot information to stimulate your mind.  It will be an exciting journey.


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Canada heads to polls after PM toppled

Canada heads to polls after PM toppled

By Craig McMurtrie and wires

Canadians are going back to the polls after the Conservative government of prime minister Stephen Harper was toppled in a no-confidence motion.

The main opposition Liberal Party united with two other opposition parties to bring down the Harper government over concerns about the federal budget.

The motion passed by just 11 votes, with 156 votes in favour to 145 against.

It is the first time that a Canadian government has been found in contempt of parliament.

The opposition claimed that the Conservatives failed to disclose the full cost of proposals, including the purchase of 65 F35 stealth fighters.

Like Australia, Canada is one of the international partners in the troubled US fighter project.

Opinion polls show the Conservative Party is the frontrunner for the coming election, but observers say Mr Harper is unlikely to be able to form a majority government.

Opposition MPs insist that Canada's continuing commitment to the strike fighter is in doubt.

"The vote today obviously disappoints me and will, I suspect, disappoint most Canadians," Mr Harper said in a statement.

He says he will ask governor-general David Johnston to officially dissolve parliament on Saturday (local time) and send Canadians to the polls in early May.

The election will be the fourth in seven years.

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