Daily Digest

Daily Digest 8/12 - Worsening Economic Statistics, Quasi-Quantitative Easing, Slowing Alaska Pipeline Flow

Thursday, August 12, 2010, 9:51 AM
  • Kotlikoff: The IMF Says That the U.S. Is Bankrupt, and They're Right
  • For Those With Jobs, a Recession With Benefits
  • 15 Economic Statistics That Just Keep Getting Worse
  • Waiting for the Fed
  • Quasi Quantitative Easing By The Fed?
  • Watch Out For Federal-Debt Train
  • Deficit in July Totals $165.04 Billion
  • Shiller Sees Significant Likelihood Of Double Dip
  • The Flow Has Slowed Through The Trans-Alaska Oil Pipeline
  • Recycling Land for Green Energy Ideas
  • Portugal Gives Itself a Clean-Energy Makeover 

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Economy

Kotlikoff: The IMF Says That the U.S. Is Bankrupt, and They're Right (Davos)

I have not followed Kotlikoff closely and will attempt to read some of his more serious material in the near future. I did listen to a long discussion on Bloomberg television this afternoon, and he made some real sense to me, although he did not penetrate the miasma of corporate sloganeering that represents the minds of the anchors. They seem to lean to the 'cut everything that is not a subsidy to or a cashflow owned by the oligarchy' school of economic reform. And he takes that sort of supply side hoaxing to task, and harshly.

For Those With Jobs, a Recession With Benefits (jdargis)

Unemployment has been concentrated among a surprisingly small number of people, given how deep the recession has been. The nation’s pool of jobless workers has not been constantly changing. Instead, it’s been relatively stable — mostly because the hiring rate of new workers plunged in 2008 and still has not recovered. The drop in hiring has actually been steeper than the rise in layoffs.

15 Economic Statistics That Just Keep Getting Worse (Ben Johnson)

A little over a week ago, U.S. Treasury Secretary Timothy Geithner penned an article for the New York Times entitled “Welcome To The Recovery” in which he touted the great strides that the U.S. economy was making. But with unemployment still dangerously high and with foreclosures and personal bankruptcies continuing to set all-time records, should we really be talking about a “recovery”?

Waiting for the Fed (Ilene)

Looking at the pre-market - it looks like we lucked out and we’re getting a big dip (8am) as we race back to fill the gap we had hoped we were done filling on Friday. As we expected, the overseers have been driving the wage slaves too hard and the wheels are starting to come off the wagon as Q2 productivity dipped 0.9% after putting up a stunning (and unsustainable) 3.9% gain in Q1. Of course, no one was rewarded for their labor although the diminishing productivity raised the otherwise lower Unit Labor Cost by 0.2%, way up from the -3.7% in Q1 – when the whips were really cracking!

Quasi Quantitative Easing By The Fed? (Robert C.)

"The Desk will concentrate its purchases in the 2- to 10-year sector of the nominal Treasury curve, although purchases will occur across the nominal Treasury coupon and TIPS yield curves. The Desk will typically refrain from purchasing securities for which there is heightened demand or of which the SOMA already holds large concentrations."

Ummmm...Needless to say the bond market wasn't happy about where the buying will take place when it came to the 30 year bond.

Watch Out For Federal-Debt Train (Robert C.)

If we're in a period of sustained debt deflation, it's extremely likely the GDP deflator will shrink toward zero and real growth will struggle to make 2-3%. Hence, nominal GDP growth is almost certain to be even slower in the quarters ahead -- say 3% or $40 billion per month -- than it has been since last summer. This "realistic" outlook compares with the Office of Management and Budget forecast, which assumes double this level of nominal GDP growth of a 6% annualized rate, or about $75 billion per month.

Deficit in July Totals $165.04 Billion (Robert C.)

The government usually runs a deficit during July, which is the 10th month of the fiscal year. So far in fiscal 2010, the government spent $1.169 trillion more than it made. That figure is about $98 billion lower than during the comparable period a year earlier.

For all of fiscal 2009, the U.S. ran a record $1.42 trillion deficit. Fiscal 2010 might run a little higher—the Obama administration sees $1.47 trillion.

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Shiller Sees Significant Likelihood Of Double Dip (podcast, Robert C.)

There's more than a 50% chance the economy is heading for a double dip recession. And noted economist and author Robert Shiller tells MarketWatch News Break that the Federal Reserve may now lack the power to end the gloom and doom. Shiller now wants Washington to pass a new job-creating stimulus package.

Energy

The Flow Has Slowed Through The Trans-Alaska Oil Pipeline (Jeff B.)

What this means for the continued delivery of oil to the rest of the U.S. from Alaska is significant. Engineers have warned that the pipeline — the only means of delivery of North Slope oil — will develop potentially dangerous problems with corrosion and ice if flows drop below 500,000 barrels a day, as they are expected to within the next five to 10 years.

Recycling Land for Green Energy Ideas (jdargis)

The San Joaquin initiative is in the vanguard of a new approach to locating renewable energy projects: putting them on polluted or previously used land. The Westlands project has won the backing of groups that have opposed building big solar projects in the Mojave Desert and have fought Westlands for decades over the district’s water use. Landowners and regulators are on board, too.

Portugal Gives Itself a Clean-Energy Makeover (repost, Guardia)

Today, Lisbon’s trendy bars, Porto’s factories and the Algarve’s glamorous resorts are powered substantially by clean energy. Nearly 45 percent of the electricity in Portugal’s grid will come from renewable sources this year, up from 17 percent just five years ago.

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
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Re: Daily Digest 8/12 - Worsening Economic Statistics, ...

 

"BEIJING (Reuters) - China has been buying record amounts of Japanese government debt because it is less risky than U.S. debt, at least in the short term, a Chinese government economist said on Wednesday.Investing in Japanese bonds is safer because so much of the country's debt is held domestically, and the yen is on course to strengthen further, said Zhang Ming, an economist with the Chinese Academy of Social Sciences, a top government think-tank."Even though the difference in yields is big, China has been abandoning U.S. debt and picking up Japanese debt. This definitely shows that it believes the risks of U.S. debt far exceed those of Japanese debt," Zhang said in a report issued by his research institute."

"BERLIN (Dow Jones)--The bailout of Germany's banking sector may swell the country's public debt rate to 90% of gross domestic product, Die Zeit weekly newspaper reports Wednesday.The weekly based this estimate on a recent decision by Eurostat requiring Germany to include the balance sheets of public-owned bad banks--set up to help financial institutions offload toxic and non-strategic assets--into its overall debt ratio.State-owned WestLB AG bank has already offloaded EUR77 billion into such a rescue bank. Going by the Eurostat decision, EUR54 billion of WestLB's toxic assets transferred to the bad bank must be included in Germany's overall debt level.Finance ministry spokeswoman, Jeanette Schwamberger, said the "winding-down entity of WestLB has already been included in the government's recently published calculations of the debt level."In July, it forecast Germany's debt level will rise from 73.1% in 2009 to 79% of GDP in 2010, 80% in 2011, to 80.5% respectively in 2012 and 2013 before easing to 80% in 2014.Die Zeit said that if nationalized mortgage lender Hypo Real Estate is added to the equation, Germany's debt level could widen to 90%. "

"Home foreclosures are climbing in the Northwest and Midwest, areas that had earlier dodged the worst of the mortgage crisis, according to real estate data firm RealtyTrac Inc. With 14.6 million Americans out of work and consumer spending declining, further weakness in housing could push the economy back into recession, former Federal Reserve Chairman Alan Greenspan said Aug. 1.

Foreclosure rates in Utah, Idaho, Illinois and Colorado rose in the second quarter compared with a year earlier, and rank among the 10 highest in the country. The number of homes seized by lenders at least doubled in 19 states and more than tripled in seven of them, according to Irvine, California-based RealtyTrac. "

"Last month, 325,229 U.S. properties got a notice of default, auction or bank repossession, RealtyTrac said today in a report. While that’s an increase of 4 percent from June, the number was down almost 10 percent from a year earlier. One in 397 households received a filing. Lenders seized 92,858 properties in July, the second-highest monthly tally since RealtyTrac began records in January 2005.

“The numbers are exploding due to unemployment and economic displacement,” said Rick Sharga, senior vice president of marketing at RealtyTrac. “We will see them get a lot worse unless we see some job creation.” "

"California’s $19.1 billion deficit and past-due budget could defer or delay dozens of highway projects across the state, including $99 million to repair portions of Highway 101 in Ventura County, Caltrans announced Wednesday.

Funding for transportation projects worth more than $2.1 billion that are contingent on the approval of the state budget — now 42 days past a July 1 deadline — might either be deferred or delayed, Caltrans Director Cindy McKim said in a conference call."

"The pension fund as of June 30 totaled about $8.3 billion. During the last fiscal year its pension plan was funded to 49.8 percent, meaning it has a $9.5 billion unfunded liability. Most experts prefer pension plans to be funded at 80 percent.

"If that's not a cry for help and legislative action, I don't know what is," Meacham said. "I can't leave this office in good conscience without doing all I can do to try to get the Legislature to bite the bullet and address this system and to a lesser extent our other systems once and for all.""

"One in every 269 homes in Illinois received some sort of court filing related to the foreclosure of their home last month, making the state one of the worst in the nation for foreclosure activity.

The 33 percent increase in foreclosure filings since June was the biggest monthly increase among the 10 states with the top foreclosure rates, RealtyTrac reported Thursday. A total of 19,602 Illinois homes received a filing, including 4,614 homes that were repossessed by banks.

In a bad sign of what’s ahead for the local home market, another 8,491 homes received notices of default in July, the first step in the foreclosure process."

"Aug. 12 (Bloomberg) -- More Americans unexpectedly filed applications for unemployment insurance last week, signaling firings stepped up as the economy slowed.

Initial jobless claims rose by 2,000 to 484,000 in the week ended Aug. 7, the highest level since mid February, Labor Department figures showed today in Washington. The number of people receiving unemployment benefits dropped, while those getting supplemental benefits surged by 1.34 million reflecting the government’s extension of eligibility."

  • Other news and headlines:

Debts Rise, and Go Unpaid, as Bust Erodes Home Equity

Public pension liabilities spooking investors

Debt woes sap Europe's big-dream investments

Russian Bond Sale Rocked by Bernanke as Investors Flee Moscow, Yields Rise

Pension fund debt soars higher (Greece)

Spanish Crisis Threatens Second Front as Catalonia Rates Rise

Americans Owe More In Student Loans Than Credit Cards

Italian Inflation Hits 19-Month High

Calif. borrows from budget to build new death row

One quarter of Russian crops lost

LA Will Be Bankrupt by 2014: Former Mayor

Foreign firms helped by US bailouts: panel and Congressional Panel: US AIG Aid Strongly Benefited Foreign Banks

Camden's Mayor Cuts Spending in Poorest U.S. City

Government jobs on chopping block as budgeting deadlines loom in area (Florida)

rjs's picture
rjs
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Re: Daily Digest 8/12 - Worsening Economic Statistics, ...

IEA: China overtakes the United States as world’s largest energy user - Preliminary data from the International Energy Agency (IEA) indicate that China has become the largest energy consumer in the world, having overtaken the United States in the top spot. An IEA chart shows China using roughly 2.25 billion tons of oil last year, while the United States used roughly 2.2 billion tons of oil in 2009. China rose to its top ranking faster than expected because the country was much less affected by the global financial crisis than the United States. The IEA notes that China’s energy use would be even higher today had the government not made significant progress in reducing the energy intensity of the nation’s economy, that is, the amount of energy used per unit of output. China has also become one of the world’s leaders in renewable energy, particularly wind and solar energy, and is planning a major expansion of its nuclear power industry.

r's picture
r
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Re: Daily Digest 8/12 - Worsening Economic Statistics, ...

Smart Planet news:

Why Electric cars are bad for highways:
http://www.smartplanet.com/business/blog/smart-takes/how-electric-cars-c...

Becoming minimalist:  when having fewer possessions means living a better life:
http://www.smartplanet.com/people/blog/pure-genius/becoming-minimalist-w...

Becoming minimalist:
http://www.becomingminimalist.com/

SagerXX's picture
SagerXX
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Gold's popping today

Up about 1.5% (2:22 p.m. EST), and Kitco says only a wee bit o'that is due to dollar weakening.  

cmartenson's picture
cmartenson
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Re: Gold's popping today
SagerXX wrote:

Up about 1.5% (2:22 p.m. EST), and Kitco says only a wee bit o'that is due to dollar weakening.  

I suppose it would have to be a wee, wee little bit based on the fact that the dollar is up today.

 :)

SagerXX's picture
SagerXX
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Re: Gold's popping today
cmartenson wrote:
SagerXX wrote:

Up about 1.5% (2:22 p.m. EST), and Kitco says only a wee bit o'that is due to dollar weakening.  

I suppose it would have to be a wee, wee little bit based on the fact that the dollar is up today.

 :)

<grin>

Somebody better tell Kitco...

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Poet
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Japan's Elegant Suicide - Article from 1998

 

Insightful and interesting article from 1998 (after the Japanese real estate bubble and economic/stock market bust) to go with the article from yesterday's Daily Digest that One In Six People In Japan Are Now 'Poor'. It's sad, about loss of dreams, loss of social and familial support. Reminds me also of the Peggy Noonan article and quote Dr. Martenson pointed out yesterday.

Japan's Elegant Suicide (originally appeared in Time magazine in 1998):
"Michiharu Shimada is 64 and homeless. He scrabbles for construction jobs at $60 a day (half of which goes to his gangster recruiters) and at night sleeps in a cardboard box on the steps of Osaka station, along with a growing number of other casualties of the recession. He wears a jacket and tie at all times: 'I was born in Osaka, and I might meet someone who knows me.' But Shimada takes off his shoes before getting into his cardboard shelter. In Japan you always remove your shoes before entering your home. Even if you are homeless."
http://www.ne.jp/asahi/bluemoon/earth/19990208/19990208.html

Poet

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scrappy coco
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Re: Daily Digest 8/12 - Worsening Economic Statistics, ...

Ron Paul video from yesterday

 

http://vinceseconomicblog.wordpress.com/2010/08/11/ron-paul-lew-rockwell...

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Bogdan
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GM seems to be recovering...

GM seems to be recovering: http://www.latimes.com/business/autos/la-fi-autos-gmearnings-20100812,0,1377502.story

Bogdan.

Farmer Brown's picture
Farmer Brown
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Hindenburg Omen

Not good.

http://www.zerohedge.com/article/hindenburg-omen-here

Easily the most feared technical pattern in all of chartism (for the bullishly inclined) is the dreaded Hindenburg Omen. Those who know what it is, tend to have an atavistic reaction to its mere mention. Those who do not, can catch up on its implications courtesy of Wikipedia, but in a nutshell: "The Hindenburg Omen is a technical analysis that attempts to predict a forthcoming stock market crash. It is named after the Hindenburg disaster of May 6th 1937, during which the German zeppelin was destroyed in a sudden conflagration." Granted, the Hindenburg Omen is not a guarantee of a crash, and the five criteria that must be met for a Hindenburg trigger typically need to reoccur within 36 days for reconfirmation. Yet the statistics are startling: "Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days." The last Hindenburg Omen occurred during the lows of 2009. Today, we just had another (unconfirmed) Hindenburg Omen. It is time to batten down the hatches - something big is coming.

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scrappy coco
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Doug
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Re: Daily Digest 8/12 - Worsening Economic Statistics, ...

OK, I'm confused again.  My understanding of the economic E says that banks loan money into existence, and when the principal is repaid the debt is extinguished and the money disappears, leaving only the interest payment.  If that understanding is correct, how is the fed using the repayment of the principal of the mortgages they hold to buy Treasury securities?  Didn't that money disappear when paid to the Fed?

Doug

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Bogdan
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Re: Daily Digest 8/12 - Worsening Economic Statistics, ...

I'm not sure, but I guess not all loans are made of brand new money. E.g. when the government borrows money by issueing bonds, no new money is created, the loan is from the existing money supply. Just a guess...

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