Daily Digest

Daily Digest 6/23 - Real vs. Imagined Deficit, The Scoop On Rising Food Costs, Report Finds BP Disaster Due To Negligence

Thursday, June 23, 2011, 10:53 AM
  • The Euro: Safer Than The U.S. Dollar?
  • As Economy Slowly Recovers, Fed Says It Has Done Enough
  • The Deficit, Real Vs. Imagined
  • Transocean Says Report Finds Gulf Disaster Due to BP Decisions
  • The Scoop On Rising Food Costs
  • Yes, There Are Pesticides On Organic Lettuce
  • City In North Dakota Braces For Flooding
  • Unusual Traits Blended in Germany E. Coli Strain

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Economy

The Euro: Safer Than The U.S. Dollar? (Joe P.)

Which one is safer: the euro or the U.S. dollar? Before jumping to a conclusion one way or the other, let’s look at different sides of the respective coins. We have been warning for years that there may be no such thing anymore as a safe asset and investors may want to take a diversified approach to something as mundane as cash. We believe Greece has rather serious issues, but concerned investors may want to take a closer look at their dollar holdings for potential “contagion” risks. Let us explain…

As Economy Slowly Recovers, Fed Says It Has Done Enough (jdargis)

At the same time, the Fed said the economy was expanding less quickly than it had predicted. It now projects a growth rate of 2.7 percent to 2.9 percent in 2011, and 3.3 percent to 3.7 percent in 2012. Both estimates are markedly below its last forecast in April.

The Deficit, Real Vs. Imagined (jdargis)

According to the government’s official forecasts, discretionary spending is already slated to shrink significantly. Military spending will fall by 25 percent, as a share of the economy, over the next decade. Domestic programs will shrink even more, and by 2021 they will account for their smallest share of the economy since the 1950s.

I’m guessing you haven’t heard of these plans, however. That’s probably because plans is a bit of an exaggeration. Assumptions is a better word: per Congress’s orders, the baseline budget numbers unrealistically assume that future discretionary spending will grow only with inflation, rather than with population growth and economic growth, too.

Energy

Transocean Says Report Finds Gulf Disaster Due to BP Decisions (jdargis)

Transocean Ltd. (RIG), owner of the Deepwater Horizon drilling rig that collapsed in the Gulf of Mexico in 2010, said its internal investigation found the the Macondo well disaster was the result of “a succession of interrelated well design, construction, and temporary abandonment decisions,” made by the operator, BP Plc.

Environment

The Scoop On Rising Food Costs (jdargis)

Ice cream may be a deliciously simple combination of milk, butter, and sugar, but the true cost of an ice cream cone is no simple business calculation. Toscanini’s price tag is part of complex and increasingly interconnected world economy, one that links a dairy farm in the tiny Western Massachusetts town of Colrain to the sprawling neighborhoods of Beijing.

Yes, There Are Pesticides On Organic Lettuce (jdargis)

The list isn't intended to scare you away from fruits and vegetables, but to help you decide when it might be best to go organic. While you'll find fewer pesticides on certified organic produce, organic doesn't always guarantee "pesticide-free." As Maureen Langlois explained recently on NPR’s Shots blog, the U.S. Department of Agriculture found that one-fifth of organic lettuces actually tested positive for spinosad, a naturally occurring soil bacterium that's manufactured by Dow Chemical and is one of about 40 synthetic chemicals permitted under the USDA's National Organic Standards.

City In North Dakota Braces For Flooding (jdargis)

In this summer of unrelenting flooding across the Midwest, with record flows along giants like the Mississippi and the Missouri Rivers, one of the most striking scenes of unfolding destruction is occurring here on the banks of the diminutive Souris River — known as “The Mouse,” after its French name.Ice cream may be a deliciously simple combination of milk, butter, and sugar, but the true cost of an ice cream cone is no simple business calculation. Toscanini’s price tag is part of complex and increasingly interconnected world economy, one that links a dairy farm in the tiny Western Massachusetts town of Colrain to the sprawling neighborhoods of Beijing.

Unusual Traits Blended in Germany E. Coli Strain (jdargis)

Experts in the United States praised the German scientists’ work. The work and the entire outbreak are “a real game-changer,” said Dr. Philip I. Tarr, a professor of pediatrics and an expert in gut infections at the Washington University School of Medicine in St. Louis. Dr. John Mekalanos of Harvard called the paper “extremely important.”

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."

13 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4149
U.S. Default Would Change Fundamentals of Rating, Moody's Says

"The U.S. would risk not winning back its top Aaa credit rating soon if a failure by Congress to raise the nation's debt limit causes even a short-term default, according to Moody's Investors Service's senior credit officer.

"Up until now, our assumption was that the risk is virtually zero of them ever missing an interest payment," Moody's Steven Hess said during an interview. "If they actually miss a debt payment, then it's a fundamental change.""

"The International Energy Agency will release 60 million barrels of oil from strategic government stockpiles held by industrialized consumer nations in a bid to push down oil prices, the 28-member group announced on Thursday.

The announcement comes after OPEC failed to raise production at a meeting on June 8 and despite assurances from OPEC's biggest producer Saudi Arabia that it would lift supplies unilaterally.

"Greater tightness in the oil market threatens to undermine the fragile global economic recovery," the IEA said."

"Efforts led by Vice President Joe Biden to reach a deal that would allow the United States to avoid a debt default reached an impasse on Thursday as Republican Representative Eric Cantor said he was pulling out of the discussions.

Cantor said participants in the talks had identified trillions of dollars in potential spending cuts but were deadlocked over tax increases that Democrats want.

"Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue," Cantor said in a statement."

 

 

  • Other news, headlines and opinion: 

Parliament Torpedoes EU Reform Plan

Greece may threaten global finances: Bernanke

U.S. debt may lead to crisis, report warns

Athens Accused of Bid to Amend Austerity Deal

Raising $50 Billion From Greece's Real Estate Is Herculean Task

Harrisburg readies for bankruptcy; Piccola bill being vetted today

State Lawmakers Accelerate To Take Over Harrisburg

Greek 5 year credit default swaps rise to 2025 bps

April commercial real estate prices dip: Moody's

Illinois racing to erase $1.8B in Medicaid bills in June

Irish Q1 rebound masks domestic gloom

Euro better off without Greece: Merkel MP in paper

Anglo Irish Cut to CCC by S&P After Noonan's Bond Warning and S&P Lowers Anglo Irish Bank Ratings One Step Closer To Default

Gov. Snyder agrees to $470 per student cut (Michigan)

$11 billion in state service cuts apply July 1 (California)

Requests for jobless benefits rise to 429,000

Is Your Pension Safe? States Struggle With Pricey Challenges (PBS)

Is Social Security an investment Ponzi scheme? (USA Today)

For third year in a row, no COLA for Warwick's retired municipal workers

Dumanis' Pension: $249600 a Year, At Least (San Diego)

The Revenue Demands of Public Employee Pension Promises* and UPDATE 1-Tax hikes needed for U.S. pension funding -study

Greece Budget Hole Threatens to Swallow Europe

France’s Sarkozy Urges Action Against the ‘Plague’ of Food Price Surges

Aflac May Sell Bonds After $610 Million Loss on European Bank Investments

Ireland must cede more control over Budget to EU -- Sutherland

 

Arthur Robey's picture
Arthur Robey
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Posts: 3936
Another door opens

This is begining to have the patina of Reality.

http://www.defkalion-energy.com/home

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
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Posts: 3936
Russia expresses concern

Russia expresses concern that it may not have enough oil to export to China.

ESPO Pipe Dreams

Russian Oil Expansion to the East May Be Hindered by Low Profitability and a Lack of Available Oil

http://russiaprofile.org/business/38798.html

There seems to be quite a bit of that going on recently.

 

EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
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Posts: 546
Another door opens

Hi Arther- Is that link to fuel cell technology? Been looking for a 1KW unit to test.

EGP

irongamer's picture
irongamer
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Posts: 22
The technology is

Hi Arther- Is that link to fuel cell technology? Been looking for a 1KW unit to test.

EGP

The technology is purported to be some kind of "Hydrogen and Nickel exothermic reaction, calling it the Energy Catalyzer; commonly referred to as the E-Cat)."  A number of tech, cold fusion, and free energy sites have been a buzz with this news over the past few months.  The site http://www.defkalion-energy.com/, I believe is the company site for this technology. I don't know if it is real or not. The implications are huge if it really works, but I'm skeptical.

Here are some links:

http://coldfusionnow.wordpress.com/2011/06/23/the-defkalion-website-is-live/
http://coldfusionnow.wordpress.com/2011/06/22/a-nobel-laureate-speaks-out-on-the-energy-catalyzer/
http://freeenergytruth.blogspot.com/ 

tomccoy1's picture
tomccoy1
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Posts: 21
What does Oil Supply Release Mean?

http://seekingalpha.com/article/276323-the-dark-side-of-the-oecd-oil-inventory-release

Here is a great article by Doanold Gregor of Gregor US on the greater ramifications of the IEA's announced oil supply release today.  Today’s release of inventory is confirmation that the era of permanently constrained supply is now very much with us.

 

 

zoneblue's picture
zoneblue
Status: Member (Offline)
Joined: Nov 23 2008
Posts: 6
After spending a morning

After spending a morning reading about it i agree, its both promising but unlikely based on the nature of the material they have released. Surely if you really invented such a real game changer, your obvious choice to protect both yourself and the design would be to simply release the plans on the internet. Insteads its hush hush commercial secrets, self destruct mechanisms, patents that fail to adequately describe the invention, and an inventor who talks in monosyllables.

 

Damnthematrix's picture
Damnthematrix
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Joined: Aug 10 2008
Posts: 3998
Chinese 1- And 2-Week SHIBOR Rates Surge Over 9%

Chinese 1- And 2-Week SHIBOR Rates Surge Over 9%, Highest Since 2007

 

And while the developed world wonders whether or not Greece will default (it will), the real news continues to come from the new "White Knight" and IMF replacement, China, which according to the China Securities Journal is about to see an unprecedented surge in inflation, making life for the schizophrenic PBoC (on one hand handing out liquidity, on the other reeling it back in with rate hikes), untenable. Market News reports: "The Chinese central bank will need to raise interest rates in the near future if it is to tackle inflation pressure, despite the potential hit to economic growth, the official China Securities Journal said in an unsigned, front-page editorial Thursday. The newspaper said the central bank will move in the near future because the monetary conditions that are driving inflation are still in place, while negative rates are driving money out of the banking system, and putting those funds outside of the scope of reserve requirement adjustments. "The China Securities Journal believes that the current monetary conditions driving inflation haven't been reversed (and) the central bank will raise interest rates to address this," it said. Consumer inflation in June is very likely to exceed 6% y/y following May's 5.5% rise, the newspaper warned." Just as importantly, "real interest rates [have been pushed] into negative territory and triggered a drain of funds from the traditional banking system in search of yield. The newspaper said that M1 and M2 are no longer reliable indicators of fund flows within the economy because of this drain and said "it is urgent that interest rates are raised to reverse negative rates and guide funds to return to the banking system." Which simply said means that the liquidity crisis we have been following every day for the past week is about to get far worse. Indeed, as of tonight, both 1 and 2 week SHIBORs are above 9%. The highest 1 week Shibor has ever been is just over 10% back in 2007, right after the quant crash in August of that year. We are confident this all time high will be taken out in a few days.

1 Week:


pinecarr's picture
pinecarr
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Posts: 2244
tomccoy1
tomccoy1 wrote:

http://seekingalpha.com/article/276323-the-dark-side-of-the-oecd-oil-inventory-release

Here is a great article by Doanold Gregor of Gregor US on the greater ramifications of the IEA's announced oil supply release today.  Today’s release of inventory is confirmation that the era of permanently constrained supply is now very much with us.

Tomccoy1, I agree.  I think this story is potentially a strong indicator of the kind of a situation/predicament we may now be in.  The thought of the US and other countries opening up their strategic oil reserves for what "looks like" no good reason suggests that there's probably a real good reason in there somewhere.  Throw in the near end of QE2 (yes?) and all its implications, and it sure seems like things are getting dicey.  I would be very interested to hear Chris's take on all this if he chooses to comment on it!

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
pinecarr wrote: tomccoy1
pinecarr wrote:
tomccoy1 wrote:

http://seekingalpha.com/article/276323-the-dark-side-of-the-oecd-oil-inventory-release

Here is a great article by Doanold Gregor of Gregor US on the greater ramifications of the IEA's announced oil supply release today.  Today’s release of inventory is confirmation that the era of permanently constrained supply is now very much with us.

Tomccoy1, I agree.  I think this story is potentially a strong indicator of the kind of a situation/predicament we may now be in.  The thought of the US and other countries opening up their strategic oil reserves for what "looks like" no good reason suggests that there's probably a real good reason in there somewhere.  Throw in the near end of QE2 (yes?) and all its implications, and it sure seems like things are getting dicey.  I would be very interested to hear Chris's take on all this if he chooses to comment on it!

A monumental moment in the history of Peak Oil.
 
OECD made an unusual announcement before the OPEC meeting asking for more oil to be released. OPEC were politically divided on whether to release more, and afterwards Saudi announces that it will produce more anyway, but doesn't make public any details. Claims that the market is well-supplied are clearly absurd. OPEC has almost ceased to exist as a cartel.
 
Then OECD dips into its reserves by 60 millions barrel roughly equivalent to 46 days of Libya's production rate pre-war. This clearly indicates they don't have any faith in promises of increased production.


 
And it's not as if the OECD economies are booming and demand is high. The slack capacity since the 2008 price crash has been gradually swallowed up by China and India's growth, and now the only stuff left is so heavy and sour that many European refineries can't handle it.
 
So it MUST have been in the strategy all along to deny Peak Oil and keep denying it even while they are dipping into the reserves. If they keep doing that, and I presume they will, I wonder how long they can keep things going.
 
Will there be mass demonstrations in the streets demanding more oil be released from the reserves so we can keep driving affordably ?
 
Oz doesn't have a strategic reserve even though the rules say it should have one with a capacity equivalent to a 90 day supply of net imports.  Instead we have a sheet of paper signed by OECD partners that we can share the oil in their reserves.
 
Probably the trigger for OECD's announcement is also available now to allow Australia's Energy Minister to declare a liquid fuel emergency and bring in rationing.
Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
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Posts: 3936
Videos thick and fast

Another longish video dubbed in English. This stuff is still very fresh and raw. I was viewer no 189.

Discusses explosive limits, sprectum analysis, explosive tempers and the usual re-hash of the early Pons and Fleishmann.

Unfortunately money is being thrown at the thing, with it's usual corrupting influence.

I used to be interested in Fuel Cells but they may become an historical footnote.

 

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2244
Well said, DTM!

Well said, DTM!

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Buy Food!

Buy Food!
Chris Mayer
http://www.dailyreckoning.com.au/buy-food/2011/06/23/

A headline caught my eye last week, beyond all the ink spent on European debt woes. It read, "Hungry China Shops in Argentina." China already buys most of Argentina's soybean exports. And now China's largest farming company is trying to lock down acreage for more soybeans. It also unveiled a plan to grow wheat, corn, vegetables, fruit and even wine - all for export to China.

The moves in Argentina mirror China's efforts in other parts of the world to secure food supplies. The simple reason is that China is having more and more problems producing the foodstuffs it needs at home.

The biggest challenge may be finding sources of water.

For months, south and central China have been suffering from drought. In the spring, Beijing sent deep well-drilling teams from all over the country to these parched provinces. The aquifers these regions relied on were dry. They needed to drill deeper. This required more specialized equipment. Hence, Beijing's order.

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