Daily Digest

Daily Digest 6/8 - Workers Tapping 401(k)s For Cash, 'Loss Of Momentum' In Jobs Market, L.A. Goes After Deutsche Bank

Wednesday, June 8, 2011, 9:53 AM
  • CBO: U.S. Budget Deficit $929B Through 8 Months Of Fiscal 2011
  • Workers Too Often Tapping 401(k), Not A Piggy Bank
  • Chinese Could Alter Entire Forex Market in Next Few Weeks
  • Second-Mortgage Misery: Nearly 40% Who Borrowed Against Homes Are Underwater
  • World food prices set to remain high into next year: UN
  • Germany's Schaeuble warns of Greek insolvency: Media
  • Muni Riders React Angrily As July SFTMA Fare And Fee Increases Approach
  • Half Moon Bay will cut staff in half under new budget
  • Bernanke sees 'loss of momentum' in jobs market
  • Los Angeles, fighting blight, goes after Deutsche Bank
  • Police stepping up efforts to nab copper thieves
  • Greece sells 10% of telecom firm
  • Fed's Evans less rosy, but not warm to QE3: WSJ
  • Fed's Rosengren says too early for QE3 - CNBC
  • Budget chief says city facing $2.5 billion shortfall, sparking fears of TTC fare hike 
  • Annapolis property taxes to rise
  • Taiwan's average public debt rises in May
  • Tax Hikes On The Menu In U.S. Debt Talks

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CBO: U.S. Budget Deficit $929B Through 8 Months Of Fiscal 2011

The federal government was running a budget deficit of $929 billion through eight months of fiscal year 2011, $6 billion less than at the same point in fiscal 2010, the Congressional Budget Office said Tuesday in its monthly analysis of the government's finances.

Workers Too Often Tapping 401(k), Not A Piggy Bank

One key concern is that the recession has helped fuel a growth in 401(k) loans. Borrowing accelerated in 2009 as the recession took jobs and homes away from millions of workers who turned to their retirement accounts just to get by. The number of loans outstanding only grew further to a record level last year. More than 1 of every 4 workers with 401(k) accounts, some 27.6 percent, had a loan outstanding, according to human resources consultant Aon Hewitt. The rate had remained steady at around 22 or 23 percent through the mid-2000s.

Chinese Could Alter Entire Forex Market in Next Few Weeks

The People's Bank of China could increase the band the yuan trades in within the next few weeks, according to Bloomberg. That would allow the Chinese currency to float more freely, and perhaps appreciate against the U.S. dollar.

Last week, the Chinese signaled their plan to allow the currency to become convertible within the next five years.

Second-Mortgage Misery: Nearly 40% Who Borrowed Against Homes Are Underwater

Almost 40% of homeowners who took out second mortgages—extracting cash from their residences to cover everything from vacations to medical bills—are underwater on their loans, more than twice the rate of owners who didn't take out such loans.

World food prices set to remain high into next year: UN

Citing dwindling stocks and only small production increases for the majority of crops, a new United Nations report released Tuesday says world food prices are likely to remain high for the rest of this year and into 2012.The biannual Food Outlook published by the UN Food and Agriculture Organization (FAO) states that the next few months will be critical in determining how the major crops will fare this year, according to a news release issued by the Rome-based agency.

Germany's Schaeuble Warns Of Greek Insolvency: Media

Greece needs substantial fresh aid from the euro zone to avoid the currency bloc's first state insolvency and bondholders might have to wait seven years for repayment as part of a rescue, German Finance Minister Wolfgang Schaeuble was quoted as saying on Tuesday. "We are facing the real risk of the first uncoordinated state insolvency within the euro zone," Die Welt newspaper quoted Schaeuble as saying.

The paper said Schaeuble argued for a new bailout of Greece with a "substantial" expansion of European aid and with private creditor involvement. Separately, Sueddeutsche Zeitung newspaper said Schaeuble was proposing that private creditors, such as banks, should wait seven years for repayment of their debt.

Muni Riders React Angrily As July SFTMA Fare And Fee Increases Approach (San Francisco)

As Muni Diaries and Akit warned us in months past, next month "A" and "M" passes, as well as Interagency monthly stickers are all being increased by $2, while Disabled/Youth/Senior passes and fares and almost anything related to cable cars are going up by $1.

Needless to say, that doesn't include the sneaky $2 fee many commuter check users have tacked onto their monthly passes.

Half Moon Bay will cut staff in half under new budget (California)

And then there were 19. Or more accurately, 19.6.

That is the number of staff, or "full-time equivalent" employees, that will be left on the city payroll after the Half Moon Bay City Council votes Tuesday to outsource its police and recreation services. In so doing, it will lose more than half its employees -- from 38 down to 19 and change.

Half Moon Bay already halved its staff in 2009, after the economy robbed the city of crucial tourist dollars and the city began paying off a costly legal settlement. Those cuts saved more than $500,000, but they weren't enough.

Bernanke sees 'loss of momentum' in jobs market

After a slew of wretched economic news, Federal Reserve Chairman Ben Bernanke warned Tuesday there had been a "loss of momentum" in the US jobs market. Two years into a slow and largely jobless recovery, Bernanke predicted employment growth would eventually pick up, but that a recent soft-patch needed to be carefully monitored, and that stimulative policies were still needed.

Los Angeles, fighting blight, goes after Deutsche Bank

The city of Los Angeles is suing financial giant Deutsche Bank for allegedly letting many of the 2,000 houses it obtained through foreclosures to fall into disrepair, leading to crime and lower neighborhood property values.

The city says it has repeatedly notified the company about the poor condition of the properties but the bank has not taken action to fix them.

Police stepping up efforts to nab copper thieves (Las Vegas)

Officer Marcus Martin says in an area plagued by foreclosures and falling home prices, copper thieves are making it more difficult to bounce back. The thieves are stripping appliances, like AC units outside vacant homes, and that is having a ripple effect on surrounding homes.

"The more rundown that home becomes, the lower your property value goes. Now the home starts to get stripped and vandalized. That means it's going to sit vacant longer," explained Officer Martin. When it comes to copper thefts with AC units, police say the thieves are actually cutting the freon line about a day or two before they move in to dismantle the unit.

Greece sells 10% of telecom firm

Greece took the first step to raise money from the sale of government assets yesterday while a top official at the European Central Bank argued that the country was not insolvent and should not be excused from paying its debts.

Greece exercised an agreement to sell a 10 percent stake in the state-owned telecommunications company, known as OTE, to Deutsche Telekom of Germany for about $585 million.

Fed's Evans less rosy, but not warm to QE3: WSJ

A top Federal Reserve official said on Tuesday a recent bout of economic weakness had prompted him to cut his forecasts for U.S. economic growth this year and next, but not to support additional monetary easing.

Charles Evans, president of the Chicago Fed and a strong supporter of the Fed's bond-buying stimulus program, told the Wall Street Journal in an interview he now sees U.S. gross domestic product expanding in 2011 between 3 percent and 3.25 percent, down from an earlier forecast of 4 percent.

Fed's Rosengren says too early for QE3 - CNBC

U.S. economic growth has been weaker than economists had expected, but it is still too soon for the Federal Reserve to consider additional bond purchases, Boston Fed President Eric Rosengren said on Monday. Rosengren also did not rule out a third round of quantitative easing of monetary policy, or QE3. "I think it's too soon to make that determination," Rosengren told CNBC Television.

Budget chief says city facing $2.5 billion shortfall, sparking fears of TTC fare hike (Toronto)

Toronto Budget Chief Mike Del Grande spent the day battling with fellow councillors, laying out the city’s financial woes. “I was very clear in this meeting. Our capital budget, which is an inheritance that is a poison pill to us, is that the debt is $2.5 billion at this time and this climbs to $4.3 billion at the end of this council term doing absolutely nothing,” he said.

“It also indicates on the operating side we’re just under $450 million dollars, which is the third-largest expenditure at the city of Toronto. Fifteen cents out of every dollar goes to service the debt. And that will climb, doing nothing, to about $630 million.”

Annapolis property taxes to rise

Not only will taxes go up next year, but so will bus fares and the fees for stormwater management and trash service.

Though many city officials said two weeks ago that the solid waste program would go untouched until they could study ways to make it more efficient, the council last night agreed to raise the fee an average of $46 per household.

Taiwan's average public debt rises in May

Every Taiwanese citizen now carries the equivalent of NT$211,000 (US$7,354.4) of the national debt, up NT$1,000 from the end of April, according to Ministry of Finance statistics released Tuesday.

Tax Hikes On The Menu In U.S. Debt Talks

Top US lawmakers will tackle the politically treacherous topic of tax hikes in their next round of debt-reduction talks, a Republican involved in the discussions said. "They (Democrats) want to talk about revenues, we want to talk about spending constraints," Jon Kyl, the No. 2 Republican in the Senate, said.

Kyl's comments suggest that negotiations led by Vice President Joe Biden are preparing to tackle one of the main stumbling blocks on Thursday in their effort to reach a deal that would allow Congress to increase the country's borrowing authority before an Aug. 2 deadline.

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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Greek unemployment rate hits 16.2 percent/new austerity

"The United States is "playing with fire" if it opts to briefly default on its debt, which could undermine the dollar, Li Daokui, an adviser to China's central bank said on Wednesday.

Speaking on the sidelines of a forum, Li said China needs to dissuade the United States from defaulting on its debt, but he believed China may hang on to its investment in U.S. Treasuries in any case."

"Unemployment in debt-ridden Greece hit new record highs in March as government officials wrangled over tough new austerity measures required to tap the country's rescue funds.

The jobless rate increased to 16.2 percent in March from 15.9 percent in February, the country's statistics agency said Wednesday. The total number of Greeks out of work was 811,340, up 40 percent from a year earlier, when the unemployment rate was 11.6 percent.

March's is the highest level of joblessness recorded since the statistics agency began issuing figures in 2004. The government had projected an overall unemployment rate of 14.5 percent for this year in its 2011 budget.

The situation is expected to get worse as the government imposes yet more austerity measures to meet targets set out in the agreement for Greece's euro110 billion ($161 billion) package of rescue loans."

  • Other news, headlines and opinion:

Belarusians Protest Fuel-Price Increase With Minsk Car Blockade

BP report raises doubts about global oil supply

IMF urges Japan to triple sales tax to steady finances

India face tough times to meet FY12 revenue target

French Budget Deficit Widens

Euro zone eyes private sector role in Greek debt deal

European banks not rushing to help Greece

Japan's current account surplus down 69.5% in April

Bankruptcy issue raises questions from city council (Compton)

Indebted Alabama County Now Considering Nearly 1000 Layoffs (Jefferson County)

EURO GOVT-Greek, Portuguese CDS rise further

Low Yields on US Treasuries No Guarantee Against Fiscal Crisis

Russia may cut electricity supplies to Belarus over $54 mln debt

Pound Weakens After Moody's Says U.K.'s Aaa Credit Rating Might Be at Risk

Romanian Junk Rating Affirmed at S&P on Growth Outlook, Debt

New Jersey Workers Receiving $200000 Retirement Checks Impoverish Towns

Calif. to reveal plan to cut inmate population

Report: China overtakes US as top energy consumer

LA County To Pay Out Another $157 Million To Fund Pensions

An Interview With Bert Dohmen: Being Prepared for the Possibility of Impossibility 06.08 (McAlvany audio)

Corn-Crop Delays in U.S. Signal Tight Supply

Japan may have no nuclear reactors running by next April

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Fitch may cut US to "restricted default" in August


"The United States probably wouldn't be able to maintain its prized AAA sovereign ratings status if it suffered even a "technical" default on its debt, Fitch Ratings said on Wednesday.

The rating agency also warned it would downgrade the U.S. sovereign ratings to "restricted default" in August if the government fails to honor Treasury notes and some coupon payments on Treasury securities due on August 15.

"Even a so-called 'technical default' would suggest a crisis of 'governance' from a sovereign credit and rating perspective and though such an event (such as a short-lived Treasury bill default) may not permanently impair the capacity of the U.S. government to service its obligations, it is unlikely that its 'AAA' status would be retained in the short to medium term," Fitch said in a statement."

1A) US risks downgrade from AAA to B+, says Fitch


"Lawmakers may not reach an agreement to tackle the ballooning federal debt until financial markets indicate they are losing confidence in the United States' ability to pay its obligations, former heads of the Congressional Budget Office warned Tuesday.

The four former CBO directors, who spoke on a panel sponsored by the University of Maryland School of Public Policy, agreed that the U.S. would eventually come to a long-term plan to reduce the federal debt. But Robert Reischauer, who directed the nonpartisan agency from 1989 to 1995, said it would be "very hard" for lawmakers to agree to a plan without an "external crisis of some kind."

The remarks come as lawmakers are negotiating an increase to the $14.3 trillion federal debt ceiling, which Republicans insist must be coupled with immediate spending cuts. The U.S. hit the debt ceiling last month and will begin to default on its obligations by Aug. 2 unless the ceiling is raised, Treasury officials have said. "



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Faded Malls Leave Cities In The Lurch

Talk about overbuild.

Faded Malls Leave Cities In The Lurch (June 8 ,2011)
"American cities, long reliant on sales-tax revenue from retailers to support municipal budgets, are facing a harsh reckoning as the era of the shopping center as municipal cash cow appears to be at an end... The vacancy rate has reached 9.1% for malls, the most since 1990, and 10.9% for smaller, outdoor strip centers, which is expected to hit a 21-year peak this year... While the number of Americans grew 52% from 1970 to 2010, the amount of store space jumped 126% according to real-estate research firm CoStar Group Inc., which estimates the country has 50 square feet of retail per person."
http://online.wsj.com/article/SB1000142405270230443230457637169260259329... (if needed, search for the title via Google)


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How Germany dealt with the recession-jobs conundrum

Interesting approach that may keep consumer spending up during a recession

Germany’s economy, which is heavily dependent on world trade, did suffer during the recession, said John Schmitt, an economist with the CEPR who prepared the report.  What differed was how the two countries responded to that economic weakness.

In the United States, most employers cut jobs. In Germany, they cut hours.

“There was widespread shift from full-time to fewer hours,” Schmitt said.


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