Daily Digest

Daily Digest 9/2 - Bernanke And Deflation, Economists Question Growth Figures, Military Warns Of Oil Crisis

Thursday, September 2, 2010, 10:40 AM
  • What Bernanke Doesn't Understand About Deflation
  • The Fourth Turning: Skies Darkening
  • A Termite-Riddled House: Treasury Bonds 
  • Overdose: The Next Financial Crisis
  • Economists Question 8.8% Q1 GDP Growth Number
  • Ben “Willy-Nilly” Bernanke 
  • America Adds $210 Billion In Gross Debt In August, Rolls $620 Billion In Bills And Notes
  • New Zealand Budget almost shock-proof: IMF
  • Power Shortages Plague MENA
  • Morning Update/Market Thread 9/1
  • Russian oil exchange the way of the future
  • Military Study Warns of a Potentially Drastic Oil Crisis
  • Delays Plague Solar Energy On Fed Lands 

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Economy

What Bernanke Doesn't Understand About Deflation (hucklejohn)

Bernanke’s recent Jackson Hole speech didn’t contain one reference to the key force driving the American economy right now: private sector deleveraging (here’s the previous year’s speech for comparison’s sake). The reason the US economy is not recovering from this crisis is because all sectors of American society took on too much debt during the false boom of the last two decades, and they are now busily getting themselves out of debt any way they can.

The Fourth Turning: Skies Darkening (JimQ)

In their chapter on preparations for the Fourth Turning, Strauss and Howe essentially tell Americans to grow up. Give up the bad habits that had become part of our life during the Unraveling. We needed to prepare as if a blizzard was headed our way.

A Termite-Riddled House: Treasury Bonds (Davos)

When termites eat your house, you don’t notice a thing. You don’t hear a thing, you don’t see a thing—you’re house stands there, silent and staid, while you and your family happily go about your days, without a care in the world—until your house crashes on top of your head.

Right now, we are at a stage where Treasury bonds are as weakened as a termite-riddled house. They look fine: Nice glossy coat of paint, pretty shingles, bright clear windows, sturdy-looking plankings on the open-aired porch.

Overdose: The Next Financial Crisis (TG)

In times of crisis people seek strong leaders and simple solutions. But what if their solutions are identical to the mistakes that caused the very crisis? This is the story of the greatest economic crisis of our age, the one that awaits us.

Economists Question 8.8% Q1 GDP Growth Number (Deepak)

The value of all goods and services produced by India, or the gross domestic product (GDP), grew 8.8% in the first quarter of the current fiscal, according to the `supply-side’ growth estimate arrived from various sectors such as agriculture, industry and services. The numbers were 6% a year ago and 8.6% in the previous quarter.

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Ben “Willy-Nilly” Bernanke (pinecarr)

On November 21, 2002 Bernanke delivered a speech titled “Deflation: Making Sure "It" Doesn't Happen Here”. Despite saying he wouldn’t do a “willy-nilly” disbursement, he turned around and did exactly that. Dr. Bernanke missed the economic veins with his 14 trillion dollar willy-nilly injection, and created what he was fighting against - deflation.

America Adds $210 Billion In Gross Debt In August, Rolls $620 Billion In Bills And Notes (pinecarr)

At the current rate, we expect that the statutory, and completely irrelevant, debt limit of $14.3 trillion will be breached in the first two months of 2011. At that point total federal debt as a % of US GDP will be roughly 100% in its purest definition, and the inevitable greenlighting by Congress to raise the ceiling then will means that America is fully sliding into a debt-to-GDP ratio of >1.

New Zealand Budget almost shock-proof: IMF (NZSailor)

At one end, Japan had a 187.7 percent debt to GDP ratio at end-2007, rising to 217.7 percent at end-2009 and a projected rise to a staggering 250 percent by 2015.

At the other end of the scale, Australia had the smallest debt of 9.4 percent of GDP in 2007, 15.5 percent in 2009 and a projected 20.9 percent in 2015. The next smallest was New Zealand at 17.4 percent, 26.1 percent and 36.1 percent respectively.

Power Shortages Plague MENA (subscription required, pinecarr)

Record temperatures have exacerbated the annual summer power crunch across much of the Middle East this year.

Morning Update/Market Thread 9/1 (pinecarr)

For those who missed the economic reports and discussion in yesterday’s thread, the data was all BAD, but came in slightly better than expected and that got spun into something that it wasn’t. Consumer Confidence is still in the gutter, the Chicago PMI was down a very large amount, and the Case-Schiller Home data showed slow price growth, but that is based on sales that occurred PRIOR to the government stimulus ending and does not include sales that have fallen off a cliff since. The cheerleading only leads to larger disconnects from reality.

Energy

Russian oil exchange the way of the future (pinecarr)

If we had our own stock exchange where we could trade oil, I think that, firstly, we could trade not only in US dollars, but also in Roubles, especially for CIS countries, among others. I mean, we are talking about the possibility of the Rouble becoming a major trading currency, or even a reserve currency. This can only be done if the Rouble is fixed to serious material resources, such as gold, oil and gas.

Military Study Warns of a Potentially Drastic Oil Crisis (r.fuhrmann, pinecarr)

The study is a product of the Future Analysis department of the Bundeswehr Transformation Center, a think tank tasked with fixing a direction for the German military. The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the "total collapse of the markets" and of serious political and economic crises.

Delays Plague Solar Energy On Fed Lands (Deepak)

An Associated Press examination of U.S. Bureau of Land Management records and interviews with agency officials shows that the BLM operated a first-come, first-served leasing system that quickly overwhelmed its small staff and enabled companies, regardless of solar industry experience, to squat on land without any real plans to develop it.

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6 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4149
Re: Daily Digest 9/2 - Bernanke And Deflation, Economists ...

""Congress is where laws are written, they have the power of the purse strings, Dallas Federal Reserve President Richard Fisher told a group of business leaders in Houston. "We print money. They figure out who to take it from and where to spend it. And that's their job.""

 

Date Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
08/25/2010 8,834,183,612,860.18 4,527,170,829,387.77 13,361,354,442,247.95
08/26/2010 8,849,513,131,006.47 4,526,676,608,687.14 13,376,189,739,693.61
08/27/2010 8,849,570,008,347.77 4,525,652,702,637.31 13,375,222,710,985.08
08/30/2010 8,849,476,780,656.75 4,520,365,187,037.64 13,369,841,967,694.39
08/31/2010 8,927,061,238,060.48 4,522,591,298,974.57 13,449,652,537,035.05

 

"Sept. 1 (Bloomberg) -- Greece, Italy, Japan and Portugal are the advanced economies hovering closest to unsustainable levels of government debt, International Monetary Fund staff said in a research note today.

The four nations are most at risk of needing drastic budget cuts to avoiding facing uncontrollable increases in public debt because traditional budget cuts won’t suffice, IMF staff said in the paper. The U.S. and Spain are also constrained, the report said. Still, a separate IMF report said indicators of default risk by a wealthy economy reflect “some market overreaction.” "

"Declining equity markets and interest rates reduced the aggregate funding ratio for S&P 1500 companies' pension funds to 71% in August, four percentage points less than July, increasing the deficit by $76 billion to a combined $506 billion, according to a Mercer report.

The deficit is the largest ever recorded by S&P 1500 companies since Mercer began tracking them in 1999, “and is also more than double their 2009 year-end deficit of $247 billion,” according to a Mercer news release.

Gordon Young, integrated retirement financial management leader for Mercer, said in the news release that if the low funded status persists for the rest of 2010, companies' net balance sheet liabilities and income statement expense for 2011 will increase significantly.

“Some of this may be mitigated by various smoothing methods and pension funding relief, but nonetheless these market conditions will certainly grab the attention of plan sponsors,” he said.

Mercer's estimated the aggregate value of pension plan assets of S&P 1500 companies was $1.27 trillion, compared with aggregate liabilities of $1.77 trillion. The aggregated value of S&P 1500 companies' pension plans at Dec. 31, 2009, was $1.25 trillion, compared with aggregate liabilities of $1.5 trillion."

........................4A) Pension Deficits Hit Historic High: $506 Billion

"Sept. 2 (Bloomberg) -- California’s borrowing costs are rising, even as Governor Arnold Schwarzenegger says he’s not ready to call lawmakers into special session to eliminate a $19.1 billion deficit before the state runs out of cash.

The extra yield investors demand on 10-year California bonds rose to 124 basis points above AAA rated municipal securities yesterday, up 14 percent in a week, Bloomberg Fair Value Index data show. The increase comes as the state will need to borrow as much as $10 billion in short-term notes within four weeks of any budget agreement and more than $6 billion in longer-dated bonds by December for public-works projects."

"WASHINGTON — Departing White House economist Christina Romer called on Wednesday for further steps to stimulate the U.S. economy, saying high budget deficits should not be an excuse for allowing the unemployed to suffer.

"We have tools that would bring unemployment down without worsening our long-run fiscal outlook, if we can only find the will and the wisdom to use them," Romer said in excerpts from a speech she will deliver later at the National Press Club."

"DAYTONA BEACH -- Heads turned and eyebrows raised when WCI Communities purchased a vacant oceanfront tract for a then-record $23 million in early 2006.

Those same eyebrows crinkled with concern recently when that same 1.9-acre tract of open sand at 1751 S. Atlantic Ave. sold for $2.5 million, an 89 percent drop."

"Sept. 2 (Bloomberg) -- The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.

The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse, said Ethan Harris, head of developed markets economics research at BofA Merrill Lynch Global Research in New York. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 30 percent below five years ago.

“It doesn’t rule out a recession,” Harris said. “It just makes it less likely than otherwise.”"

 

  • Other news and headlines:

Trichet May Keep ECB in Crisis Mode as Global Economy Slows

Sovereign Debt Worries Will Last 10 Years: Strategist

Bankruptcy on horizon for Pennsylvania capital and Harrisburg Bankruptcy Is 'Real Option,' Council Says and Harrisburg can be sued over debt

Local Government Construction Projects Defaulting on Payments (China)

Soaring bad debt hits credit card lenders (UK)

Agent Orange cases may cost billions more

Venezuela's public deficit at USD 4.88 billion in five months

Hungary Fails to Meet Debt-Sale Goal as Interest-Rate Bets Drive Up Yields

Toxic Debt Returns to Fashion

Bofa Merrill Lynch Raises Junk Issuance Forecast to $240 Billion

High city salaries to be cut to fill budget gap  (El Segundo...lists employees making over $300,000)

Property tax hikes in New Jersey will hit 23.5 percent factoring in loss of rebate

Deposits Drop as Greeks Use Up Savings After Salaries Fall

Low interest rates squeeze pension funds

Why are Alabama schools going broke? (Watchdog)

REOs Put New Pressure on Prices

Loan Modifications Surpass One Million Mark for 2010

China's world factory: little Christmas order cheer

Food inflation fears (UK...video)

House Prices Are Still 10% Too High, Says Barry Ritholtz (Tech Ticker video)...(NAR) "happy spin is making homeowners too optimistic"

crash_watcher's picture
crash_watcher
Status: Silver Member (Offline)
Joined: Aug 12 2008
Posts: 146
Re: Daily Digest 9/2 - Bernanke And Deflation, Economists ...

from, “Military Study Warns of a Potentially Drastic Oil Crisis” cited above:

 According to the German report, there is "some probability that peak oil will occur around the year 2010 and that the impact on security is expected to be felt 15 to 30 years later."

 If only it was true that the impact will not be felt unitil 15 to 30 years later.

 Relapse into planned economy: Since virtually all economic sectors rely heavily on oil, peak oil could lead to a "partial or complete failure of markets," says the study. "A conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis."

 Oh yeah.

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest 9/2 - Bernanke And Deflation, Economists ...

WOW!! and I bet this young woman has a college degree LOL.....amazing!

dave s's picture
dave s
Status: Bronze Member (Offline)
Joined: Feb 20 2009
Posts: 56
Re: Daily Digest 9/2 - Bernanke And Deflation, Economists ...
saxplayer00o1 wrote:

"Sept. 2 (Bloomberg) -- The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.

The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse, said Ethan Harris, head of developed markets economics research at BofA Merrill Lynch Global Research in New York. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 30 percent below five years ago.

“It doesn’t rule out a recession,” Harris said. “It just makes it less likely than otherwise.”"

 

I love this!

DOCTOR:  I have good news and bad news.

WIFE:  Gimme the bad news.

DOCTOR:  Your husband is dead.

WIFE:  That's terrible!  What could possibly be the good news?!

DOCTOR:  He is not likely to get any worse at this point.

 

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest 9/2 - Bernanke And Deflation, Economists ...

http://www.businessspectator.com.au/bs.nsf/Article/Abandoning-a-treacherous-market-pd20100903-8WSTX?OpenDocument&src=kgb

Abandoning a treacherous market

Karen Maley

Published 7:39 AM, 3 Sep 2010 Last update 10:00 AM, 3 Sep 2010


Anyone reading Paolo Pellegrini's farewell letter to investors hoping to find sweet, soothing words about the challenges of investing will be disappointed. Instead, the high-profile hedge fund manager has issued a grim warning of impending calamity.

A fortnight ago, Pellegrini – who rose to fame as the former Paulson & Co executive who helped the firm make more than $3 billion by masterminding a bet on the US housing crash – announced that he intended to wind down his hedge fund, PSQR Capital, and return money to investors. The fund, which gained 40 per cent in 2008 and 62 per cent last year, fell by almost 11 percent in the first seven months of this year. The July rally was particularly harmful for PSQR, causing the fund to drop almost 8 per cent.

In his latest report, Pellegrini points out that investors are caught in a tricky dilemma. They’ve lost confidence in the rally that’s been fuelled over the past year and a half by massive fiscal and monetary stimulus. At the same time, they can’t bring themselves to ignore the boost to corporate earnings that’s largely the result of that same monetary and fiscal expansion. Even worse, they know that governments may once again decide on extraordinary intervention. This leaves investors trapped between risks to the upside, and risks to the downside. “Realising that the positives are largely unsustainable, though, they stay ready to bolt for the exits at any moment. The result is a particularly treacherous and volatile market,” he says.

But while Pellegrini concedes that buoyant corporate earnings could prop up the market for a little while longer, “I remain convinced that the party has come to an end and equities will retrace further.”

george hunt's picture
george hunt
Status: Member (Offline)
Joined: Sep 4 2010
Posts: 1
Re: Mortgages

Mortgages
===========
george hunt

Mortgage

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