Daily Digest

Daily Digest 6/7 - Financial Overhaul Mired In Dissent, Eurozone Woes Are U.S. Woes, Taps For A Community Hospital

Tuesday, June 7, 2011, 9:45 AM
  • Financial Overhaul Is Mired in Detail and Dissent\
  • Eurozone Woes Are U.S. Woes
  • Are We There Yet?
  • Chaos In Yemen Drives Economy To Edge Of Ruin
  • Why Are The French So Determined To Run The IMF - And What Will It Cost You?
  • Taps For A Community Hospital
  • Iowa Town Is Largely Emptied In Fear Of Rising Missouri River
  • E. Coli Not Found in Initial Testing of Sprouts

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Economy

Financial Overhaul Is Mired in Detail and Dissent (jdargis)

The rules are mandated by the Dodd-Frank financial regulatory law and range from curbs on executive compensation to consumer banking protection provisions to more transparency in the trading of derivatives, those complex financial instruments that contributed to the 2008 financial crisis.

Eurozone Woes Are U.S. Woes (anton95)

The scale of how much money American banks have at risk in the eurozone comes from a new BIS table of the actual and potential exposure of banks to most economies via cross-border loans and financial transactions. It's the detail on potential exposures that is illuminating.

Are We There Yet? (Ilene)

We don't get a lot of trades where the manipulation is so blatant that I can (and have for the last 2 weeks) publicly call trade ideas that thousands can participate in but, in this case, each single oil contract made $1,350 on that move - in 12 hours - there's plenty of money to be made and, of course, we're doing it to PUNISH the speculators so we need as many participants as possible to maximize their pain (and keep in mind we use very tight stops to minimize ours!).

Chaos In Yemen Drives Economy To Edge Of Ruin (jargis)

After four months of mass protests and political deadlock, Yemen — already the poorest Arab country, a place where many people have become accustomed to mere subsistence — has had its domestic oil supplies and electricity network largely cut off by hostile tribes. Gas lines now extend for miles in the capital, Sana, provoking fights and new protests; electricity is available for only a few hours a day. Cooking gas and diesel for generators have also grown scarce, and with food prices rising fast, people have begun hoarding basic supplies, including water.

Why Are The French So Determined To Run The IMF - And What Will It Cost You? (jdargis)

Greece has a current account deficit but its money, the euro, is one of the world’s hardest currency – it is a “reserve currency” meaning that central banks and private business keep their rainy day funds in euros (as well as dollars, yen, Swiss francs, and perhaps still British pounds.) The eurozone as a whole does not have a current account deficit.

I recall vividly discussions with eurozone authorities in 2007 – when I was chief economist at the IMF – in which they argued that current account imbalances within the eurozone had no meaning and were definitely not the business of the IMF. Their argument was that the IMF was not concerned with payments imbalances between US states (all using the dollar), and we should likewise back away from discussing the fact that some eurozone countries, like Germany and the Netherlands, had large surpluses on their current account while others, like Greece and Spain, had big deficits.

Taps For A Community Hospital (jdargis)

The decision by one of the nation’s leading health care systems to close a neighborhood hospital, once a relatively rare event, reflects a stark new reality that is likely to play out across the country at hundreds of other hospitals that can no longer afford empty beds or wings and unused medical services. The federal health care law, which is likely to reduce payments for in-patient care, as well as changing demographics and a lessening dependence on hospitals, are converging into a death knell for longstanding health institutions. While many hospitals will be bought and converted into clinics or other health care centers, a lot are likely to be closed.

Environment

Iowa Town Is Largely Emptied In Fear Of Rising Missouri River (jdargis)

On Sunday, the river temporarily breached a levee in Atchison County, Mo., leading the authorities to direct about 600 residents in low-lying areas of Hamburg, Iowa, to leave within 24 hours. The Red Cross set up a shelter at a nearby high school.

The levee was repaired Sunday evening after National Guard troops in a Black Hawk helicopter dropped 22 half-ton bags of sand to shore it up, said John Benson, a spokesman for the Iowa Department of Homeland Security and Emergency Management.

E. Coli Not Found in Initial Testing of Sprouts (jdargis)

“Based on previous experience during the examination of part of the sample,” the ministry said in a statement, “we assume that intensive analytical effort will be necessary to identify the pathogen with certainty.”

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."

12 Comments

saxplayer00o1's picture
saxplayer00o1
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Posts: 4066
China official warns on "excessive" holdings of U.S. assets

"China should guard against risks from "excessive" holdings of U.S. assets as Washington could pursue a policy to weaken the dollar, a senior official at the State Administration of Foreign Exchange said in comments published on Tuesday.

"We must be alert of economic and political risks in excessive holdings of U.S. dollar assets," Guan Tao, head of the international payment department at the foreign exchange regulator, said in an article."

"A failure by European regulators to make banks raise enough capital to withstand a sovereign default is complicating efforts to resolve Greece’s debt crisis.

The “fragilities” of Europe’s banking industry mean a Greek default isn’t an option, European Union Economic and Monetary Affairs Commissioner Olli Rehn said in New York last week. By delaying a decision some investors consider inevitable, policy makers risk increasing the cost to European taxpayers and prolonging Greece’s economic pain."

........................2A) EU Banks' Capital Deficit Means Greek Default Not an Option

"Jefferson County, Ala., struggling with the fiscal fallout of a failed sewer bond financing, is considering whether to lay off nearly one-third of its work force in an effort to stave off what would be the largest municipal bankruptcy in U.S. history, a county official said Monday.

The county's finance committee will meet Tuesday to discuss the possibility of $12.3 million in budget cuts, which would include 697 layoffs, Commissioner Jimmie Stephens said. He said the five-member county commission could vote by the end of the week on the cuts, which would affect all of the county's departments."

...........................3A) Troubled Alabama County May Cut One-Third Of Staff - Official

"Lender forbearance, where loans are extended or payments reduced, “may, in some cases, have masked the extent of risks, given the high indebtedness of the household and commercial real estate sectors,” said the Fund.

Just last week it emerged that the Financial Services Authority has accused banks of moving mortgage customers on to less strenuous terms to conceal bad debts. "

......................4A) UK banks may have 'masked' risks with forbearance

"Medicare: $24.8 trillionObligation per household: $212,500"

"The first of 77 million Baby Boomers turn 65 this year and qualify for Medicare. Enrollment will grow from 48 million in 2010 to 64 million in 2020 and 81 million in 2030, according to Medicare actuaries. That 33-million increase in the next 20 years compares with 13 million in the last 20."

  • Other news, headlines and opinion:

 

Illinois highway construction halt could mean 52000 layoffs

Exposed ECB at risk of 'bankruptcy'

Ukraine's Sovereign Debt Increased 3.1% in April, Ministry Says

Spanish Parties Clash Over Charges of Regional Finance 'Chaos'

Global Food 2011 Imports May Climb 21% to Record $1.29 Trillion, FAO Says

China Must Consider Selling Municipal Bonds to Cut Platform Debts – C.Bank

Looming power crisis could cost electric firms 2 trillion yen

EU must make tough decisions on Greek rescue: IMF

California urged to sell its unpaid tax bills

Greek government faces revolt over second wave of austerity measures

South Korea warns euro zone troubles could hit here

Beijing home prices feel the chill of city's cooling measures

SC to cut Medicaid payments to docs

Most states proposing FY 2012 Medicaid cuts

Extending Greek Maturities Is a 'Sticking Plaster': Analysts

Belarus Hikes Gas Prices By More Than 30% After Devaluation

Australia banks may face two-notch S&P downgrade

Sacramento fire, police and parks-rec departments on budget block tonight

Greece: 2 week protest against gov´t cuts CCTV News (Video)

US Military Has New Threat: Health Care Costs

Arizona May Cut Federal Jobless Aid to 15,000 by Failing to Change a Word

Food Prices Stay Near Record as Meat Costs Rise

Portuguese Two-Year Notes Fall on Debt-Crisis Concern

New Jersey Worker Retirements Surge

Lagarde Says Size of Greek Rescue Package Hasn't Been Decided

Ukraine on brink of default and impoverishment

Moody's Says Greek Debt Rollover Would Be a Default

Poet's picture
Poet
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Posts: 1891
U.S. Owes $62 Trillion

I saw a headline article on the front fold of today's USA Today when I was at a gas station this morning.

The title was different, though. I think it was something like "U.S. Owes $62 Trillion." Had some really nice charts.

Online, this is what I could find...

U.S. Funding For Future Promises Lags By Trillions (June 7, 2011)
"The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for."
http://www.usatoday.com/news/washington/2011-06-06-us-owes-62-trillion-i...

Government's Mountain of Debt
"That $25 trillion is likely an underestimate, Medicare's actuaries say, because it counts on 165 cost-saving changes in the health care reform law. Many of these are unlikely to occur - such as cutting physician payments 30% by 2012."
http://www.usatoday.com/news/washington/2011-06-06-us-debt-chart-medicar...

Poet

rjs's picture
rjs
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Posts: 445
the trouble with the USAToday article

the trouble with the USAToday article is that it counts unknown & imaginary future obligations as "debt" ...

it's possible i might get cancer 20 years hence and will need chemo; could you say that i'm in debt for the cost of that possible chemo today?

if one can say the US is in debt $61 trillion today, then by the same logic one could say our current GDP is over $300 trillion...

 

phecksel's picture
phecksel
Status: Silver Member (Offline)
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Posts: 204
rjs wrote: the trouble with
rjs wrote:

the trouble with the USAToday article is that it counts unknown & imaginary future obligations as "debt" ...

it's possible i might get cancer 20 years hence and will need chemo; could you say that i'm in debt for the cost of that possible chemo today?

if one can say the US is in debt $61 trillion today, then by the same logic one could say our current GDP is over $300 trillion...

 

So, why shouldn't the govt have to account for future obligations the exact same way they force publically traded companies acount for their obligations.  If you follow the same accounting rules, that 61T is actually light.

Also, there's a ton of current debt that is off the books, that 14T isn't a real current obligation either.

Plus, we're spending money at the rate of 1.5T faster than the revenue.

Hang on, it's going to get wild!

Doug's picture
Doug
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Posts: 3125
speculative
Quote:

So, why shouldn't the govt have to account for future obligations the exact same way they force publically traded companies acount for their obligations.

Because those future obligations are theoretical at this point.  We're talking about a set of assumptions that are little better than speculative.  The variables include changes in the law, which we know will happen, just not exactly what they will be.  We're also talking long time periods and assuming things will just keep going on pretty much as they currently are.  If you come to this site, you probably don't believe that's even possible.  I know I don't.  Life expectancies are likely to shorten up a bit when energy becomes more expensive and/or harder to get, thereby giving some relief to SS and Medicare.  Although we have been pretty lucky for quite a while, the four horsemen of the apocalypse are still ready to ride.

Bottom line is, trying to guess what life is going to be like 20-30-50 years down the road is a fool's game.  We just don't know.

Doug

Damnthematrix's picture
Damnthematrix
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Bank of Ireland to Impose Up to 90% Losses on Bondholders

Bank of Ireland to Impose Up to 90% Losses on Bondholders

By Joe Brennan
May 31, 2011
 
Bank of Ireland Plc will seek to impose losses of as much as 90 percent on 2.6 billion euros ($3.7 billion) of subordinated debt as it offers bondholders an exchange for cash or equity.

The lender, ordered to raise 5.2 billion euros of capital, said in a statement it expects to offer to pay cash of 10 percent of nominal value for Tier 1 securities and 20 percent for Tier 2 debt, with no settlement of accrued interest. The Dublin-based bank said it may also offer an equity-swap alternative at a premium to the cash offer with a payment of accrued interest.

Woodman's picture
Woodman
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Posts: 1028
rjs wrote: the trouble with
rjs wrote:

the trouble with the USAToday article is that it counts unknown & imaginary future obligations as "debt" ...

it's possible i might get cancer 20 years hence and will need chemo; could you say that i'm in debt for the cost of that possible chemo today?

if one can say the US is in debt $61 trillion today, then by the same logic one could say our current GDP is over $300 trillion...

 

You might not get cancer, but insurance companies can project a certain percentage of the total insured group that will, and so they must plan for paying those benifits in the future.

The projected future obligations are not unknown or imaginary.  The people who will grow old and retire in the future have already been born, and entitlements under current laws are known.  The point is, those future obligations will not be paid under current entitlement levels because the math doesn't work; we can't afford it even with overly optimistic projections of future revenues.  The government's own financial statements show this clearly at the Treasury website. The future obligations will be reduced through various rule changes and types of default. 

SingleSpeak's picture
SingleSpeak
Status: Gold Member (Offline)
Joined: Nov 30 2008
Posts: 496
Woodman Wins
Woodman wrote:
rjs wrote:

the trouble with the USAToday article is that it counts unknown & imaginary future obligations as "debt" ...

it's possible i might get cancer 20 years hence and will need chemo; could you say that i'm in debt for the cost of that possible chemo today?

if one can say the US is in debt $61 trillion today, then by the same logic one could say our current GDP is over $300 trillion...

 

You might not get cancer, but insurance companies can project a certain percentage of the total insured group that will, and so they must plan for paying those benifits in the future.

The projected future obligations are not unknown or imaginary.  The people who will grow old and retire in the future have already been born, and entitlements under current laws are known.  The point is, those future obligations will not be paid under current entitlement levels because the math doesn't work; we can't afford it even with overly optimistic projections of future revenues.  The government's own financial statements show this clearly at the Treasury website. The future obligations will be reduced through various rule changes and types of default. 

Can't really sugar coat it. We're screwed until we unravel these obligations.

SS

SagerXX's picture
SagerXX
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Posts: 2219
Federal SWAT team looking for student loan defaulter...

If this is a sign of the future, EGAD.

Federal SWAT team busts down the door at 6 a.m. Looking for the estranged wife of the resident because...wait for it...she has defaulted on her student loans!

http://www.news10.net/news/article/141072/2/Dept-of-Education-breaks-dow...

MarkM's picture
MarkM
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Posts: 837
SagerXX wrote:If this is a
SagerXX wrote:

If this is a sign of the future, EGAD. Federal SWAT team busts down the door at 6 a.m. Looking for the estranged wife of the resident because...wait for it...she has defaulted on her student loans! http://www.news10.net/news/article/141072/2/Dept-of-Education-breaks-dow...

Sager,

This type of attitude and this type of action has been on the rise for several years now. It is at all levels and with all "types" of law enforcement. It is chilling, frightening and quite frankly, infuriating. SWAT was brought about for special high risk situations and has morphed into this.

This trend is an ominous sign and, in my opinion, should not be taken lightly.

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
SWAT Busts Down Door Over Student Loan Default

Sager

This is frickin' scary, dude! I think I'm gonna message the link to Subprime JD in case he didn't see it.

Poet

SagerXX wrote:

If this is a sign of the future, EGAD. Federal SWAT team busts down the door at 6 a.m. Looking for the estranged wife of the resident because...wait for it...she has defaulted on her student loans! http://www.news10.net/news/article/141072/2/Dept-of-Education-breaks-dow...

 

phecksel's picture
phecksel
Status: Silver Member (Offline)
Joined: May 24 2010
Posts: 204
Doug wrote: Because those
Doug wrote:

Because those future obligations are theoretical at this point.  We're talking about a set of assumptions that are little better than speculative. 

Still doesn't answer my question, why should U.S. corporations be required to account for future obligations, and the govt not account for their future obligations?

While it may be theoretical, we have a great understanding of how long people are likely to live and how much the composite average is going to need medical care.  It's a simple mathmatical projection to calculate a very very serious debt level.

The govt can't pay all it's current obligations, aka deficit, they most certainly can't pay their future obligations, whether on or off books.

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