Daily Digest

Daily Digest 4/19 - Why Silver Will Outperform Gold, Fed Aims At Mortgage Fraud, Eurozone Crisis Escalates On Greek Debt Fears

Tuesday, April 19, 2011, 9:45 AM
  • Nine Things The Rich Don't Want You To Know About Taxes
  • Gold Climbs to Record on Concern Global Inflation Accelerating
  • 12 Reasons Why Silver Will Outperform Gold
  • No Relief
  • Tocqueville Asset's Hathaway Interview About Gold
  • Fed Aims at Mortgage Fraud, Shoots Housing Market in the Gut
  • Will The Finnish Vote Dead End Europe's Bailout Bonanza?
  • Spitzer: If The Attorney General Does Not Sue Goldman Sachs, He Should Resign
  • Monetary Madness - The Dollar Starts To Look Good!
  • JPMorgan Aims To Double Headcount In Brazil: Report
  • ECB Officials Signal More Rate Increases This Year as Economy Strengthens
  • Euro Zone Crisis Escalates On Greek Debt Fears
  • El-Erian: A Warning For The U.S., And For The Global Economy
  • IMF Warns Response To Credit Boom "Insufficient"
  • Hong Kong Prime Office Rents Jump to Twice London’s
  • BOJ Said to Raise Inflation Forecast to 0.5% on Commodity Costs
  • Predicting Regional Petroleum Consumption In A Post-Export World
  • Nationwide Study Finds U.S. Meat And Poultry Is Widely Contaminated

Follow our steps to prepare for a world after peak oil, such as how to store & filter water

Economy

Nine Things The Rich Don't Want You To Know About Taxes (Justin M.)

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

Gold Climbs to Record on Concern Global Inflation Accelerating (Alfredo E.)

China increased banks’ reserve requirements to cool inflation that quickened in March to the fastest pace since 2008. The euro weakened against the dollar on speculation Greece will be unable to avoid a default. Unrest in the Middle East and North Africa and concerns about Japan’s nuclear crisis also helped gold’s gain this year.

“Resurfacing debt concerns in the euro zone will be bullion supportive in the short run,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report to clients. “Renewed inflation concerns” are supporting prices, he said.

12 Reasons Why Silver Will Outperform Gold (Alfredo E.)

4) Exchange traded funds registered another sterling performance in 2010, with global ETF holdings reaching an impressive 582.6 million ounces, representing an increase of 114.9 million ounces over the total in 2009, an increase of 24.6%.

No Relief (Claire H.)

The recent price change in silver has accelerated the growing awareness about silver. Amazingly, this awareness is still in its infancy. It will reach a mature stage when you hear the mainstream media discuss concentration, manipulation, position limits, and shortages. We are a long way from the silver story being fully known and discounted.

Tocqueville Asset's Hathaway Interview About Gold (ES)

John Hathaway, senior managing director of Tocqueville Asset Management and manager of the Tocqueville Gold Fund, talks about the gold market, investment in gold-mining companies and the decision by University of Texas Investment Management Co. to convert the endowment fund’s gold investments into bullion.

Fed Aims at Mortgage Fraud, Shoots Housing Market in the Gut (pinecarr)

The problem with mortgage fraud wasn't broker compensation: it was the ease of the fraud and the incentives throughout the food chain for collusion. New Fed rules simply wipe out competitors to the "too big to fail" mortgage banks.

Will The Finnish Vote Dead End Europe's Bailout Bonanza? (pinecarr)

The early Finnish votes are in and it does not look good for Portugal. As Reuters reports, Finland's anti-euro True Finns made huge gains in an election on Sunday, raising the risk of disruption to an EU bailout of Portugal. The right-leaning National Coalition topped the ballot, gaining just over a fifth of all votes. Party leaders will start talks soon on forming a new government. The problem is that as the anti-euro moniker indicates, the True Finns are pretty much hell bent on vetoing the Portugal bailout which means the ongoing annexation of Europe's periphery by Olli Rehn is about to finish (and yes there is a finish-Finnish joke in there somewhere).

Spitzer: If The Attorney General Does Not Sue Goldman Sachs, He Should Resign (pinecarr)

Some of the notable soundbites from the transcript: "Eliot, do you believe Goldman broke the law and lied? - Yes, I do. And I know people are going to say how can you say that as a lawyer? I have read this report. It confirms our worst fears about double dealing, lying. Goldman Sachs has zero, none, nada credibility in my book"

"Tim Geithner, treasury secretary, apparently reported in today's "New York Times" was calling people saying don't bring cases, it will unsettle the markets, so they let these guys go free. Meanwhile, he signed off on $12.9 billion to Goldman to cover a bad bet they made."

Monetary Madness - The Dollar Starts To Look Good! (Ilene)

You know it's bad when the US begins to look responsible compared to other World governments but even Alan Greenspan is now calling for an end to the Bush Tax cuts before they cost us another $3.6Tn over the next decade (and that's assuming no inflation and steady earnings) and we have Paul Ryan and the President calling for Trillions more in deficit reduction so I guess we sound serious about cutting our deficit and WE SHOULD BE because the IMF this week said the U.S. budget deficit was on course to hit 10.8 percent of nation's economic output this year, tying with Ireland for the highest deficit-to-GDP ratio among advanced economies.

JPMorgan Aims To Double Headcount In Brazil: Report (ES)

JPMorgan plans to nearly double the number of its employees in Brazil to keep pace with an expanding financial market in Latin America's largest economy, the Financial Times said on Sunday.

ECB Officials Signal More Rate Increases This Year as Economy Strengthens (ES)

Investor expectations that the benchmark interest rate will be increased by another 50 basis points in 2011 are “well- founded,” Austria’s Ewald Nowotny told Bloomberg News in Washington on April 16. Luc Coene of Belgium said in an interview yesterday that monetary “conditions are too accommodative.”

Euro Zone Crisis Escalates On Greek Debt Fears (ES)

Rising expectations that Greece will have to restructure its mountain of debt, possibly as early as the summer, sent the euro and the bonds of weak euro zone members tumbling on Monday in a dramatic escalation of the bloc's debt crisis.

El-Erian: A Warning For The U.S., And For The Global Economy (ES)

S&P reaffirmed this morning the AAA rating of the US but, importantly, slapped a “negative outlook” on the rating due to concerns on how the country will address its “very large budget deficits and rising government indebtedness.” In justifying this dramatic move, it noted that “there is a material risk that US policymakers might not reach an agreement in how to address medium- and long-term budgetary challenges by 2013.”

IMF Warns Response To Credit Boom "Insufficient" (ES)

The International Monetary Fund on Monday said the policy response by emerging market economies to deal with a surge in capital inflows was "insufficient" and warned it could lead to a hard landing.

Hong Kong Prime Office Rents Jump to Twice London’s (ES)

Prime office buildings in Hong Kong fetched $2,066.35 per square meter (11 square feet) as of Dec. 31, 2010, compared with $1,523.31 a year ago, Colliers said in its Global Office Real Estate Review.

BOJ Said to Raise Inflation Forecast to 0.5% on Commodity Costs (ES)

An estimate for an increase of about 0.5 percent in consumer prices will replace a January forecast of 0.3 percent, according to two of the people, who spoke on the condition of anonymity because the discussions are private. The policy board may tweak language related to price stability in the report, two people said.

Energy

Predicting Regional Petroleum Consumption In A Post-Export World (Crash_Watcher)

In part 2 and part 3 of this series, I presented my regional analysis of global production and consumption trends for the Middle East (ME), Former Soviet Union (FS), Africa (AF), South America (SA), Asia-Pacific (AP), Europe (EU) and North America (NA). In part 4, I put the regional analysis together to show that net-exports from the four exporting regions (ME, FS. AF, SA), will end in about 2030-2035. Here in part 5, I apply the same data to predict what petroleum consumption rates will look like for each of these regions as the global net-export pool declines to zero.

Environment

Nationwide Study Finds U.S. Meat And Poultry Is Widely Contaminated (Adam)

Nearly half of the meat and poultry samples — 47 percent — were contaminated with S. aureus, and more than half of those bacteria — 52 percent — were resistant to at least three classes of antibiotics, according to the study published today in the journal Clinical Infectious Diseases.

This is the first national assessment of antibiotic resistant S. aureus in the U.S. food supply. And, DNA testing suggests that the food animals themselves were the major source of contamination.

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."

18 Comments

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Saudi slashes oil output, says market oversupplied

Saudi slashes oil output, says market oversupplied

Saudi Arabia's oil minister said on Sunday the kingdom had slashed output by 800,000 barrels per day in March due to oversupply, sending the strongest signal yet that OPEC will not act to quell soaring prices.

http://www.reuters.com/article/2011/04/17/us-saudi-oil-idUSTRE73G14020110417

 

This was posted late yesterday, reposting today as it seems important.  Check out the comments left yesterday on this.

http://www.peakprosperity.com/blog/daily-digest-418/56540

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Carried Interest

Well here's another thing the rich don't want you to know about taxes - they get the 15% tax rate instead of 35 %!

From Wikipedia:

Taxation of carried interest

[edit] United States

Because the manager is compensated with a profits interest in the fund, the bulk of its income from the fund is taxed, not as compensation for services, but as a return on investment. Typically, when a partner receives a profits interest (commonly referred to as a "carried interest"), the partner is not taxed upon receipt, due to the difficulty of ascertaining the present value of an interest in future profits.[3] Instead, the partner is taxed as the partnership earns income. In the case of a hedge fund, this means that the partner defers taxation on the income that the hedge fund earns, which is typically ordinary income (or possibly short-term capital gains), due to the nature of the investments most hedge funds make. Private equity funds, however, typically invest on a longer horizon, with the result that income earned by the funds is long-term capital gain, taxable to individuals at a maximum 15% rate. Because the 20% profits share typically is the bulk of the manager’s compensation and because this compensation can reach, in the case of the most successful funds, enormous figures, concern has been raised, both in Congress and in the media, that managers are taking advantage of tax loopholes to receive what is effectively a salary without paying the ordinary 35% marginal income tax rates that an average person would have to pay on such income. To address this concern, Congressman Sander M. Levin introduced H.R. 2834, which would eliminate the ability of persons performing investment adviser or similar services to partnerships to receive capital gains tax treatment on their income. [4] However, the Treasury Department has suggested, both in testimony before the Senate Finance Committee[5] and in public speaking engagements,[6] that altering the tax treatment of a single industry raises tax policy concerns, and that changing the way partnerships in general are taxed is something that should only be done after careful consideration of the potential impact.

Congressman Charles B. Rangel included a revised version of H.R. 2834 as part of the "Mother of All Tax Reform" and the 2007 House extenders package. A line item on taxing carried interest at ordinary income rates was included in the Obama Administration's 2008 Budget Blueprint.[7] On April 2, 2009, Congressman Levin introduced a new and substantially revised version of the carried interest legislation as H.R. 1935.[8]

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9 Things Rich Don't Want You To Know...

That article is a MUST read - really, really disturbing.  Not only should we continue to spead the word, I say we need tell our friends and family to repost on Facebook and other social networking mediums!

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The Science of Why We Don't Believe Science

I know some of you think Mother Jones magazine is a "liberal" publication. However, I think this is an interesting article (admittedly written from that slant, but also poking fun at some liberals with it's mention of Whole Foods and vaccine-autism link believers) about why we as human beings tend to deny any facts that don't fit with our line of thinking. It happens to both liberals and conservatives.

I think it's worth reading with an open mind and a grain of salt. Especially if you like reading about psychology and experiments. Might just explain very well why some people don't believe in the concepts of the Crash Course even after watching it...

The Science of Why We Don't Believe Science
"In other words, when we think we're reasoning, we may instead be rationalizing. Or to use an analogy offered by University of Virginia psychologist Jonathan Haidt: We may think we're being scientists, but we're actually being lawyers (PDF). Our "reasoning" is a means to a predetermined end—winning our "case"—and is shot through with biases. They include "confirmation bias," in which we give greater heed to evidence and arguments that bolster our beliefs, and "disconfirmation bias," in which we expend disproportionate energy trying to debunk or refute views and arguments that we find uncongenial."
http://motherjones.com/politics/2011/03/denial-science-chris-mooney

Poet

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es2 wrote: Saudi slashes oil
es2 wrote:

Saudi slashes oil output, says market oversupplied

Saudi Arabia's oil minister said on Sunday the kingdom had slashed output by 800,000 barrels per day in March due to oversupply, sending the strongest signal yet that OPEC will not act to quell soaring prices.

http://www.reuters.com/article/2011/04/17/us-saudi-oil-idUSTRE73G14020110417

 

This was posted late yesterday, reposting today as it seems important.  Check out the comments left yesterday on this.

http://www.peakprosperity.com/blog/daily-digest-418/56540

saudi arabia has been unwilling or unable to increase output at $140/brl, why should they do it now?

jim hamilton, econobrowser:

What will Saudi Arabia do? » The failure of Saudi production to increase between 2005 and 2008 in the face of booming demand for oil from the newly industrialized economies was in my opinion a key reason for the dramatic increase in oil prices over that period.
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hedge fund gamblers taxed at 15%
danrhino wrote:

Well here's another thing the rich don't want you to know about taxes - they get the 15% tax rate instead of 35 %!

From Wikipedia:

Taxation of carried interest

 

Hedge Fund Gamblers Earn the Same In One Hour As a Middle-Class Household Makes In Over 47 Years - Historians are certain to look back at this period and wonder why the richest country in history consumed itself in a struggle over how many teachers to fire. Just take a look at the latest reports on what the top hedge fund managers haul in. In 2010 John Paulson led the list with a record $4.9 billion in personal earnings. That’s a whopping $2.4 million an HOUR. Here’s a factoid to make you wretch: It would take the median US household over 47 years to earn as much as Paulson pocketed in just 60 minutes. The top 25 hedge fund earners took in $22.07 billion in 2010. Thanks to a generous tax loophole these billionaires will pay a top tax rate of 15 percent instead of 35 percent. Closing that loophole on just those 25 individuals – just 25 guys who wouldn’t miss a penny of it -- would raise $4.4 billion, which is enough to rehire 126,000 laid-off teachers.

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Yes it is disturbing...

Disturbing that this article is really a call for socialism or even communism.  Be careful what band wagon u jump on when u don't know which direction it's headed.

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Oh Yeah They'd Miss It!
Quote:

The top 25 hedge fund earners took in $22.07 billion in 2010. Thanks to a generous tax loophole these billionaires will pay a top tax rate of 15 percent instead of 35 percent. Closing that loophole on just those 25 individuals – just 25 guys who wouldn’t miss a penny of it -- would raise $4.4 billion, which is enough to rehire 126,000 laid-off teachers.

Don't know know how much high class call girls and top-quality snow costs?!? How can any self-respecting hedge fund manager go sailing on his luxury yacht without a full crew and a sundeck full of bikini-clad babes? We're providing employment to dozens of otherwise unskilled young laborers here!

What's wrong with this picture?!?

No babes - I mean employees! That's a sacrilege to those engaged in "doing God's work."

Poet

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Poet wrote: I think it's
Poet wrote:

I think it's worth reading with an open mind and a grain of salt. Especially if you like reading about psychology and experiments. Might just explain very well why some people don't believe in the concepts of the Crash Course even after watching it...

It's astounding. I am seriously starting to accept that the human race is ultimately doomed, beyond all hope. If 98% of people can't understand simple arithmetic and what a spiralling out of control debt-to-GDP ratio means...... how can we be expected to predict and alter our behaviors to deal with more esoteric problems like invisible tasteless GHG's, or peak oil, or ecological degradation, overfishing..... until we all directly experience these problems first hand in a crash, when by then it's already too late? And then we'll continue to get the science deniers after the fact blaming something else.

I can tell people all I want that the debt is out of control. If they don't want to believe it, they won't. Out of sight, out of mind. Everyone in the MSM says to park your money in stocks and bonds, that's the way it's always been, as long as food continues to be avaialable at the store, just deny deny deny....

I am now seen as kind of a quack amongst my friends, or at least as having had my mind temporarily obsessed with some cultish fad, until I am brought back down to reality when the alien spaceship doesn't come down to Earth (reference from Poet's article) and I am forced to face the folly of my hysterical shrieking.

Even though I make 10 times what any of my friends make, based on nothing more than sitting on gold and silver, they still will not pay attention to it. Doing so violates their pre-existing beliefs about how the world works. G & S are in bubbles, apparently, they will have to come down...... That's their rationalization.

This experience has been a great exposee about how the human mind (doesn't) works.

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Secret memos expose link between oil firms and invasion of Iraq

I guess the Brits have a harder time fighting their Freedom of Information Act requests from reporters than our U.S. government does. Or, maybe the people in power now are just jaded...

Secret memos expose link between oil firms and invasion of Iraq
"Over 1,000 documents were obtained under Freedom of Information over five years by the oil campaigner Greg Muttitt. They reveal that at least five meetings were held between civil servants, ministers and BP and Shell in late 2002."
http://www.independent.co.uk/news/uk/politics/secret-memos-expose-link-b...

Poet

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Poet wrote: Quote: The top
Poet wrote:
Quote:

The top 25 hedge fund earners took in $22.07 billion in 2010. Thanks to a generous tax loophole these billionaires will pay a top tax rate of 15 percent instead of 35 percent. Closing that loophole on just those 25 individuals – just 25 guys who wouldn’t miss a penny of it -- would raise $4.4 billion, which is enough to rehire 126,000 laid-off teachers.

Don't know know how much high class call girls and top-quality snow costs?!? How can any self-respecting hedge fund manager go sailing on his luxury yacht without a full crew and a sundeck full of bikini-clad babes? We're providing employment to dozens of otherwise unskilled young laborers here!

What's wrong with this picture?!?

No babes - I mean employees! That's a sacrilege to those engaged in "doing God's work."

Poet

 

What's wrong with this picture?!?

I don't see any cocaine.

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Only Little People Pay Taxes

Interesting article here, too.

Only Little People Pay Taxes
"As Martin A. Sullivan of Tax.com recently calculated, a New York janitor making slightly more than $33,000 a year pays an effective tax rate of nearly 25%. And the effective tax rate for a resident of the Park Avenue building named after Helmsley, earning an average of $1.2 million annually? A cool 14.7%."
http://motherjones.com/politics/2011/04/taxes-richest-americans-charts-g...

And here's also an interesting chart from the Senate Joint Committee on Taxation that is referenced in the article above:

I think government has been relying a little too much on current payroll taxes in the form of Social Security and Medicare to fund current general expenditures at the expense of underfunding future promises. As the Baby Boomers exit their peak earning years for a retirement partially or wholly funded by Social Security and Medicare promises, they'll stop paying those payroll taxes, won't they?

Poet

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Mark_BC wrote: It's
Mark_BC wrote:

It's astounding. I am seriously starting to accept that the human race is ultimately doomed, beyond all hope. If 98% of people can't understand simple arithmetic and what a spiralling out of control debt-to-GDP ratio means...... how can we be expected to predict and alter our behaviors to deal with more esoteric problems like invisible tasteless GHG's, or peak oil, or ecological degradation, overfishing.... G & S are in bubbles, apparently, they will have to come down...... That's their rationalization.

This experience has been a great exposee about how the human mind (doesn't) works.

Good friend of mine that I've known for a very long time.  Extremely intelligent, lawyer, owns an investment firm, absolutely believes that life was good under GB, and it's all the current Presidents fault.  I'm not turning this into a political this vs them discussion, because this fiat fraud has been going on for decades.  There is no inflation, the world revolves around wall street, we just need a change in political party.  I just shake my head, this is so freaking obvious...

What is scary to me, I'm not fully prepared for what I believe is going to be a partial anarchy.

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phecksel wrote: What is
phecksel wrote:

What is scary to me, I'm not fully prepared for what I believe is going to be a partial anarchy.

I'm with you, phecksel, I'm with you.

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Irish banking collapse caused by greed and complicit public

Per the Guardiam , at http://www.guardian.co.uk/business/2011/apr/19/nyberg-report-into-irish-banking-collapse,  "Irish banking collapse caused by greed and complicit public - report"

Bankers taking risks on a "almost unbelievable" scale, a complicit public willing to "let the good times roll" and a lack of regulation combined to cause the collapse of the Irish banking system, a government-commissioned report concludes. [bold mine]

A nine-month inquiry by Finnish finance expert Peter Nyberg published is scathing about the banks which, he says, lost control, but also contains criticism of Irish society in general and institutions including the civil service and regulatory authorities.

Nyberg, a former International Monetary Fund economist, says that no one in the banks appreciated the risks being run and, that although global events did not help, the main reason for the Irish banking collapse was "the unhindered expansion of the property bubble financed by banks using wholesale market funding".

"It appears now, with hindsight, to be almost unbelievable that intelligent professionals appear not have been aware of the size of the risk they were taking," as they piled money into property pipedreams with little regard for risk analysis or even loan documentation, he says in the 156-page report commissioned by former finance minister Brian Lenihan.

There was, he says, an "inability and unwillingness to remember basic principles of banking" that providing credit is not a sale, "it is the acquisition of a risky asset".The public was also complicit, he says, because "large parts of Irish society were willing to let the good times roll". 

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