Daily Digest

Daily Digest 6/1 - Global Food Prices Rising, The Fall Of Atlantic City, Greece Debt Needs 'Massive Restructuring'

Wednesday, June 1, 2011, 9:50 AM
  • Belarus Freezes Food Prices
  • Deposits By Irish Residents Fall 9.1% In April From Year Ago
  • Monopoly lost: Atlantic City's rise and fall
  • Illinois Senate vote is next up for massive gambling expansion
  • Economists predict no immediate end to government debt purchases
  • China Has Done Study On Converting US Debt To Equities: Press
  • Fitch Confirms France’s AAA Rating, Warns Over Growing Debt
  • Keeley Says Greece Debt Needs `Massive Restructuring' (Video)
  • German FDP expert calls for Greek euro zone exit-report
  • Democrats: No pay for lawmakers if U.S. defaults
  • Congress Plans Symbolic Vote On U.S. Debt Ceiling
  • Goldman Sachs lost 98% of Gaddafi's $1.3bn investment
  • Heat Sends Some to Salvation Army for Breath of Cool Air
  • Shoppers Find Pain in Rising Food Costs
  • Europe locked in 'chaotic' debate over Greece
  • Cincinnati city manager: Raise taxes
  • Venezuelans battling soaring food prices
  • Rising water costs lead to uncertain future for farmers (California)
  • Global food crisis: Counting the real cost of biofuels
  • Cities that weathered housing bust now suffering
  • Gas Prices Threaten Meals On Wheels
  • U.S. Dollar May Weaken on Debt Ceiling Breach, Citigroup Says

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Economy

Belarus Freezes Food Prices

Belarus on Tuesday froze prices on a number of foodstuffs as analysts warned that the former Soviet republic could descend into economic chaos and an IMF mission headed to Minsk to assess the situation.

A government decree said prices for fish, tea, coffee, certain types of sausages, cheese and a number of fruits and vegetables — some of which have doubled in the last two months — cannot be raised further until July 1.

Deposits By Irish Residents Fall 9.1% In April From Year Ago

Amid Ireland's worst ever banking crisis, depositors have withdrawn huge amounts from Irish banks since last summer. The Irish lenders have received about EUR150 billion in the form of short term loans from the European Central Bank and emergency liquidity assistance from the Irish central bank to keep their doors open.

Monopoly lost: Atlantic City's rise and fall

Four years ago, some Atlantic City casino customers were shelling out $1,000 for a brownie sprinkled with edible gold dust in a Baccarat crystal they could take home. Nowadays, some wait until 11 p.m. to eat so they can get a steak dinner for $2.99.....(page 3) Casinos are selling at fire-sale prices. Within the past year, The Tropicana, Resorts and Trump Marina have all sold for about 10 cents on the dollar from their values of just a few years ago. The Atlantic City Hilton stopped paying its mortgage in 2009 and is looking for a buyer. The casinos have shed nearly 15,000 jobs since 1997, with more layoffs to come.

Illinois Senate vote is next up for massive gambling expansion

An Illinois Senate committee has approved a major gambling expansion to compete with neighboring states and pump more money into the treasury...The plan would add five new casinos in central and northern Illinois — including one in Chicago. Proponents say it would generate $1.6 billion in upfront fees and licenses to help pay down Illinois' massive debt. It would then bring in $500 million or more each year. Opponents argue the plan would not draw gamblers back from Iowa or Indiana but cannibalize business at nine current riverboat casinos.

Economists predict no immediate end to government debt purchases

In an interview with HousingWire, Princeton economist Paul Krugman said he believes there should be a QE3, and that it should focus on private market debt purchases. "I'm in the boat the Fed isn't doing remotely enough," Krugman said. Both Krugman and Meiners expect any new government debt program to likely be much larger than previously seen.

"It may be that the Fed is going to be buying up less than before, but that is doubtful because of government deficits," Meiners said. "I don't think there is going to be any choice but for the Fed to continue buying government debt."

China Has Done Study On Converting US Debt To Equities: Press

Jing Xuecheng, formerly deputy head of the Research Department under the People's Bank of China, told the newspaper that a research report on the debt-equity conversion issue has been submitted to relevant government authorities for review. It is unclear when, or even if, this idea will get serious consideration by the State Council, the central government cabinet that makes all major economic policy decisions.

"We need to safeguard and increase the value of our investments in America. Debt holdings in this case means all kinds of bonds, including U.S. Treasury bonds," said Jing.

Fitch Confirms France’s AAA Rating, Warns Over Growing Debt

“However, continued fiscal consolidation is needed to stabilize and then start to reduce public debt, which reached 81.7 percent of GDP as of end-2010,” Maria Malas-Mroueh, a director in Fitch’s sovereign team, said in the statement published in London today.

Keeley Says Greece Debt Needs `Massive Restructuring' (Video)

Terrence Keeley, senior managing principal at Sovereign Trends LLC and a Bloomberg Television contributing editor, discusses the outlook for additional aid to Greece from the European Union.

German FDP expert calls for Greek euro zone exit-report

"As long as Greece hasn't privatised a single cent worth of assets, increasing the aid would be absolutely the wrong signal," Free Democrat parliamentarian Frank Schaeffler told business daily Handelsblatt.

"At the same time governments must help with an orderly euro zone exit," added Schaeffler, one of the loudest dissenting voices against Greek aid in the FDP. Athens should restructure its debt and private creditors should participate in the restructuring, he said.

Democrats: No pay for lawmakers if U.S. defaults

Raise the debt ceiling or don't get paid. That's essentially what Senate Democrats are saying in the latest act of political theater surrounding the nation's debt ceiling.

Sens. Barbara Boxer and Bob Casey sent a letter to Treasury Secretary Tim Geithner on Tuesday, urging him to include lawmaker compensation in the list of things he will have to stop paying if Congress fails to raise the debt ceiling by Aug. 2.

Congress plans symbolic vote on U.S. debt ceiling

House Republicans, who control the lower chamber, have scheduled a symbolic vote one day before they hold budget talks with President Barack Obama. The president has asked Congress to raise the so-called debt ceiling in a “clean” vote that includes no other conditions.

Nearly all Republicans and some Democrats are expected to oppose the bill.

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Goldman Sachs lost 98% of Gaddafi's $1.3bn investment

A bitter rift has opened up between the world's most powerful bank and one of its most fearsome dictators after Goldman Sachs invested $1.3bn (£790m) of Colonel Gaddafi's money – and lost virtually all of it.

According to an investigation by the Wall Street Journal, Goldman offered to make Gaddafi one of its biggest investors as compensation for losing 98% of the money the Wall Street firm invested on behalf of the Libyan Investment Authority (LIA). This left the $53bn Gaddifi-controlled sovereign wealth fund, which elsewhere has stakes in companies such as Financial Times-owner Pearson and BP, with just $25.1m of the money it entrusted to Goldman.

Heat Sends Some to Salvation Army for Breath of Cool Air

But it's not just the homeless they're seeing.

They say people with homes or apartments are coming in for just a brief respite in the air conditioning, because they can't afford to turn theirs on. "I mean they're struggling now with food prices and gas prices, let alone a big high electric bill, so they're holding off as long as they can," says Janine Pietras, social worker at the Wheeling Salvation Army.

Shoppers Find Pain in Rising Food Costs

Summer grilling season is officially underway. And if you haven't noticed, that cookout is probably costing you more this year. Nationwide, the average cost of a Memorial Day BBQ was up 29-percent.

If the burgers at this years Memorial Day barbeque seemed a little deflated, you may have inflation to thank. "I paid about 100 bucks - 60 or 70 dollars just on meat," says one shopper.

Europe locked in 'chaotic' debate over Greece

"It's really very chaotic," a second European official said of the talks between representatives from eurozone finance ministries, the ECB and the EU. "There are loads of proposals but all proposals are opposed by some."....Many of the richer countries in the 17-nation eurozone are frustrated with Greece's slow implementation of the economic reforms and some euro50 billion in privatizations that were supposed to help its economy grow again and cut down a national debt of some 150 percent of economic output. They want assurances that they will get their money back as their own taxpayers are unhappy with what they see as undeserved help for less disciplined countries.

Cincinnati city manager: Raise taxes

Cincinnati taxpayers could pay more next year to help cover the projected deficit, now at $25.8 million. City Manager Milton Dohoney, in a memo to the mayor and City Council members, recommends raising the property tax rate to the maximum. That would generate $3.1 million more for the city's general fund.

He has suggested the increase before, but council has refused, keeping the rate for the past decade at whatever brings in the same $28.9 million. Now, an increase is necessary to hit that same mark because of the ongoing re-evaluation of property values in Hamilton County. To generate the $28.9 million, Dohoney estimates the tax rate would have to jump from the current 4.6 mills to 5.51. He is recommending it go to the maximum 6.1.

Venezuelans battling soaring food prices

Soaring food prices are forcing many Venezuelans to change their eating habits, trim their shopping lists and set aside more of their earnings to feed their families. The oil-exporting country is coping with one of the highest inflation rates in the world: 22.9 percent as of last month, and food prices are rising even faster.

Rising water costs lead to uncertain future for farmers (California)

There are growers who are turning off water to their avocado groves and I worry about what that trend means for other crops."

Mellano said growers are struggling with skyrocketing water costs, in many cases with increases of nearly 130 percent in just the past five or six years. And, water agencies warn that prices will continue to escalate for the foreseeable future. Costs to deliver water have increased; supplies have been reduced in recent years due to drought and restrictions on delivering water from the Sacramento-San Joaquin Delta; costs have risen for water from the Colorado River and for water on the spot market. In addition, discounts once offered to farmers are ending.

Global food crisis: Counting the real cost of biofuels

This year, 40% of America's corn crop will go into car engines rather than stomachs. Add the fact that the US is both the world's largest producer of corn and the largest exporter, and that 10 years ago only 7% of its corn went to ethanol production, and you start to see why the sudden enthusiasm for biofuels among oil importers has had such a marked impact on food prices.

Of course, a perfect storm of other factors besides biofuels has also driven the breathtaking rates of inflation and volatility seen in food markets over the last few years – among them rising global population, millions more people shifting to western diets, declining rates of crop yield growth, years of under-investment, extreme weather, high oil prices increasing the cost of inputs like fertiliser, low stock levels, and kneejerk actions by governments such as food export bans and panic buying by importers.


Cities that weathered housing bust now suffering

Home prices in big metro areas have sunk to their lowest since 2002, the Standard & Poor's/Case-Shiller 20-city monthly index showed Tuesday. Since the bubble burst in 2006, prices have fallen more than they did during the Great Depression.

Gas Prices Threaten Meals On Wheels

Philadelphia has one of the largest elderly populations in the country. Many need help with the basics like getting food to eat every day, but that service may be in jeopardy because of high gas prices.

A lot of volunteers who want to help out by bringing the elderly food have had to bow out because they can't afford to fill their tank to drive over food. That could be devastating for the homebound.

U.S. Dollar May Weaken on Debt Ceiling Breach, Citigroup Says

A breach of the U.S. debt ceiling may affect the dollar more than Treasuries because international holders of the debt may view the risk of permanent losses greater than domestic investors, according to Citigroup Inc.

"The foreign exchange reaction to a debt ceiling breach would be sharper and probably more permanent," Steven Englander, the head of Group of 10 foreign-exchange strategy in New York at Citigroup, wrote in a note today. "It would legitimately tax foreign investor patience and lead to further dollar dumping whenever the opportunity arises."

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

11 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4238
Pace of Dollar Decline Reflects Currency Market’s QE3 Bets, Citi

"The average yield on the Sept. 23 maturity rose to an all-time high of 4.967 percent for the shortest T-bills, up from 4.652 percent in the previous auction of three-month paper -- the closest comparable maturity -- on May 4.

Elisabeth Afseth, fixed-income analyst at Evolution Securities in London said the high yield was surprising after some improvement in market sentiment as hopes rose that officials may agree a second bailout for Greece.

"This is evidence however that there is still a lot of nervousness in the market and fears that there will be contagion from the Greece situation to Ireland and Portugal," she said."

"The $100,000 pension club is growing fast.

Almost 9,000 retirees in the California Public Employees' Retirement System receive at least $100,000 in annual benefits, more than quadruple the number getting that much during 2005, according to a Bee review of CalPERS data.

Collectively, these pensioners will receive about $1.1 billion in benefits this year – roughly triple the general fund budget of the Sacramento City Unified School District. "

pensions

 

"The dollar’s drop over the past week suggests currency traders may be speculating that the Federal Reserve will implement a third program of asset purchases, known as quantitative easing, Citigroup Inc. said.

“The pace of dollar weakening during the past week is noteworthy,” Greg Anderson, a senior currency strategist at Citigroup Inc. in New York, wrote in a research report today. “It certainly supports the notion that foreign-exchange markets are beginning to price in QE3.”"

"The U.S. Mint sold 3.65 million ounces of American Eagle silver coins last month and had the best January through May sales since 1986 as prices for the metal almost doubled. "

"The Treasury Department on Wednesday reiterated its projection that its borrowing authority will be exhausted on Aug. 2 as it urged Congress to raise the debt ceiling. In a largely symbolic vote, the House of Representatives overwhelmingly voted against a "clean" increase of the debt ceiling last night. House Republicans are due to meet President Barack Obama to negotiate about the debt ceiling increase, which Republicans want to marry with spending cuts."

  • Other news, headlines and opinion:

Japan PM faces party rebellion; no-confidence vote looms

Marcus Says Greek Debt Crisis Deteriorating, Threatening Global Economy

Greece Needs Brady Bond-Style Aid, Merkel Adviser Bofinger Says

Spaniards' Anger at Bankers Spills Over as Protests Spread to City Centers

Australia Must Raise Debt Ceiling, Treasury Secretary Says

Tunisia Rules Out Debt Restructuring

Bank of Ireland to negotiate restructuring with junior bondholders

German report casts doubt on IMF payout for Greece

San Jose City Council imposes 10 percent pay cuts on four unions

Crime spikes in cities with police layoffs

1100 Cook County health workers face layoffs

Police layoffs in Cleveland deplete specialized units

As shutdown looms, state layoff notices on their way (Minnesota) and State starts sending out 36000 pink slips

Private sector adds 38,000 jobs in May ("Economists surveyed by Reuters had forecast the ADP Employer Services report would show a gain of 175,000 jobs.")

California Assembly OKs bill to tax Amazon sales

Texas Legislature Passes Budget That Cuts Billions

Panel to seek solutions for Kansas PERS underfunding ($7.7 billion)

Special report: If Monterrey falls, Mexico falls

With 10-year yields down to 3%, Bill Gross warns again

ECB Officials May Accept Soft Debt Restructuring, FTD Reports

Numb and Number: The Dangerous Non-reaction to the Current Crises (McAlvany audio.. the real national debt and GDP. Don't miss this one. Listen to the implied (June to October) economic warning at the end of this)

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1892
More Jobs Available, But At Lower Wages

I don't know if this was posted earlier:

More Jobs Available, But At Lower Wages
"Employers are hiring again, but many salaries have stagnated or fallen in recent years and haven't kept up with the higher costs of fuel and food."
http://articles.latimes.com/2011/may/27/business/la-fi-wages-20110526

Poet

Roundhouse's picture
Roundhouse
Status: Bronze Member (Offline)
Joined: Sep 14 2008
Posts: 36
Numb and Number: The

Numb and Number: The Dangerous Non-reaction to the Current Crises (McAlvany audio.. the real national debt and GDP. Don't miss this one. Listen to the implied (June to October) economic warning at the end of this)

Wow.  Now I'm late for work but well worth the listen.

Thanks for the great post, Sax.  As always, much appreciated.

 

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1714
Shocked about Atlantic City

I'm shocked! Shocked, I say, about Atlantic City. Back when (the last time) Atlantic City was a seedy ghost town we were PROMISED bringing gambling in with tax breaks and incentives for the wealthy owners/developers would save the city. In fact they said the wealth would trickle down to every level of the city, including the poor and working class.  I'm shocked it hasn't worked out.  But at least "this time it will be different" in Philadelphia and surrounding burbs as we rush to bring in casino's and other gambling venues.  Thank goodness we'll be saved, even if Atlantic City wasn't.

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4238
Now starts the debate on QE3

 

(Earlier we had this one: Markets Bracing For QE3 - Citigroup)

 

"Investors should prepare themselves for a third round of quantitative easing, Simon Maughn, co-head of European equities at MF Global, told CNBC Wednesday."

"Michael Pento makes a number of interesting points about the Federal Reserve’s balance sheet and the possibility of QE3 in this video. Some of the points he makes include:

The Fed can’t aggressively sell it’s mortgage backed securities, they won’t be able to get the money back they paid for them. This means the money they pumped into the system will probably just stay in the system.

Bernanke will likely wait to construct QE3 until economic data gets worse (which is already starting to happen) "

 

"Stocks would suffer after an initial jump should the Federal Reserve decide to extend economic stimulus beyond the June expiration of its current quantitative easing program, Oppenheimer & Co.’s Brian Belski said.

“We become excessively bearish if the Fed goes to QE3,” Belski said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu."

 

El-Erian: Why Fed Is Unlikely To Have Third Round of Easing

Fed very unlikely to launch QE3: JP Morgan Chase

Marteen's picture
Marteen
Status: Bronze Member (Offline)
Joined: Sep 29 2010
Posts: 40
Numbers but now with date
Roundhouse wrote:

Numb and Number: The Dangerous Non-reaction to the Current Crises (McAlvany audio.. the real national debt and GDP. Don't miss this one. Listen to the implied (June to October) economic warning at the end of this)

Wow.  Now I'm late for work but well worth the listen.

Thanks for the great post, Sax.  As always, much appreciated.

 

Tks Sax for this link.

Write in your agenda: Stock exchange crash :: Monday September 26th till September 28th

Why. Extreme Hide tide in New York in combination of last cycle of condratief.

Oh yeah regarding greece? It seems to be that the CIA is expecting a new eara of military coupdetat.

(http://www.bild.de/politik/ausland/griechenland-krise/griechenland-geheimdienst-angst-vor-neuer-gewalt-welle-zerbricht-das-land-an-der-krise-18102150.bild.html)

NB Article is in German but with google translate you can read it in your favorite language.

Marteen

rjs's picture
rjs
Status: Gold Member (Offline)
Joined: Aug 8 2009
Posts: 445
More Jobs Available, But Without Wages
Poet wrote:

More Jobs Available, But At Lower Wages
"Employers are hiring again, but many salaries have stagnated or fallen in recent years and haven't kept up with the higher costs of fuel and food."
http://articles.latimes.com/2011/may/27/business/la-fi-wages-20110526

Poet

it's even worse than that:

We're in Dire Straits When the Only Employment Sector Catching Fire Is in Unpaid Internships: The United States still counts a depressing 24 million unemployed currently hunting for a full-time job, and the only employment sector really catching fire is unpaid jobs and internships, which have steadily increased to fill the undignified void. Whether you're a new college graduate or an unemployed veteran of the pre-recession employment landscape, you're now either fighting for a shrinking pool of new low-paying positions or plenty of gratis gigs where you won't ever see a dime for your earnest blood, sweat and tears.

maybe this is the problem:

The US is living below its “means - The US press was awash with claims over the weekend that the US was “living beyond” its “means” and that “will not be viable for a whole lot longer”. One senior US central banker claimed that the way to resolve the sluggish growth was to increase interest rates to ensure people would save. Funny, the same person also wants fiscal policy to contract. Another fiscal contraction expansion zealot. Pity it only kills growth. Another commentator – chose, lazily – to be the mouthpiece for the conservative lobby and wrote a book review that focused on the scary and exploding public debt levels. Apparently, this public debt tells us that the US is living beyond its means. Well, when I look at the data I see around 16 per cent of available labour idle in the US and capacity utilisation rates that are still very low. That tells me that there is a lot of “means” available to be called into production to generate incomes and prosperity. A national government doesn’t really have any “means”. It needs to spend to get hold off the means (production resources). Given the idle labour and low capacity utilisation rates the government in the US is clearly not spending enough. The US is currently living well below its means. But the US government can always buy any “means” that are available for sale in US dollars and if there is insufficient demand for these resources emanating from the non-government sector then the US government can bring those idle “means” into productive use any time it chooses.
Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3200
Below my means

We've been living below our means for a couple decades.  I thought that's how we were supposed to live.  It means:

We can put our kids through college debt free.

We are out of debt.

We can think about retirement in a few years.

We're a lot better prepared than most of our peers.

Our home and land are paid off.

We can continue to build our resilience.

Those are the lessons we learned from our depression era parents.  Those notions still work.

Doug

 

earthwise's picture
earthwise
Status: Platinum Member (Offline)
Joined: Aug 10 2009
Posts: 848
Doug wrote: Quote:The US is
Doug wrote:

We've been living below our means for a couple decades.  I thought that's how we were supposed to live.  It means:

We can put our kids through college debt free.

We are out of debt.

We can think about retirement in a few years.

We're a lot better prepared than most of our peers.

Our home and land are paid off.

We can continue to build our resilience.

Those are the lessons we learned from our depression era parents.  Those notions still work.

Doug

 

An excellent achievement and a comfortable place to be. Congratulations!

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Yeah but

Doug

Yeah but, now the problem is how to keep those assest from melting away in a financial storm.  It never ends does it?

Travlin 

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3200
Travlin wrote: Doug Yeah
Travlin wrote:

Doug

Yeah but, now the problem is how to keep those assest from melting away in a financial storm.  It never ends does it?

Travlin 

You got that right.  There are fewer assets all the time that the carrion eaters haven't picked over.

Doug

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