Daily Digest

Daily Digest - April 8

Thursday, April 8, 2010, 9:58 AM
  • Interview with Rick Davis of the Consumer Metrics Institute
  • Australia's Stevens Raises Key Interest Rate To 4.25%
  • A "Bloodbath" In U.S. Bonds?
  • National Debt Seen Heading For Crisis Level
  • Did Fraud Boost Gold Coin Sales?
  • Mish: Food Stamp Usage Hits Record 39 Million, 14th Consecutive Monthly Increase
  • Phase 2 Starts Today! - Gold & Silver Bull Market - Mike Maloney
  • Consumer Borrowing Fell by $11.5 Billion in February
  • UK Needs 'Drastic Austerity Measures' To Prevent Debt Explosion
  • Hospital Closing Stirs Fear
  • Tata Air Car Powered Entirely by Compressed Air. Blow Me Down!
  • Peak Oil Production Predicted For 2014
  • Peak Oil Man Shifts Focus To Peak Price, Demand
  • Soaring Petrol Prices "Force Car Use Cutbacks" 


Interview with Rick Davis of the Consumer Metrics Institute (Ilene)

Ilene: So because the economy has changed, we need other more effective methods to accurately measure economic activity?

Rick: Yes, older methods measure what’s happening in production, and that was key to the economy in the past. In the 1930s, if production started moving that was a good sign. During FDR’s day the vast majority of urban jobs were in factories, and therefore the economic welfare of the vast majority of voters depended on factory production. Now the majority of Americans no longer work on an assembly line.

Australia's Stevens Raises Key Interest Rate To 4.25% (Christian W.)

Australia’s central bank raised its benchmark interest rate to 4.25 percent and signaled further increases, dismissing warnings that higher borrowing costs are already eroding consumer spending.

A "Bloodbath" In U.S. Bonds? (Christian W.)

In a further sign of market stress, the ten-year yield rose above the ten-year swap rate for the first time in living memory. The swap rate measures the cost of interbank borrowing. So this move implies the US government is a bigger credit risk than banks.

National Debt Seen Heading For Crisis Level (mhoop)

This year, the debt will reach 63 percent of GDP, a ratio that has ignited crises in smaller wealthy nations. Fiscal crises gripped Canada, Denmark, Sweden, Finland and Ireland when their debts were below where the United States is shortly headed.

Did Fraud Boost Gold Coin Sales? (mhoop)

The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. The gold cartel has accumulated a huge short position and the huge short positions are ‘naked’, which means these positions are not hedged. There is 100-times more paper-gold outstanding than physical gold.

Mish: Food Stamp Usage Hits Record 39 Million, 14th Consecutive Monthly Increase (mhoop)

Food stamp usage is up again except the program is now called SNAP Supplemental Nutrition Assistance Program. Inquiring minds are looking at a SNAP Participation Table that shows a record 39,430,724 receive SNAP benefits, a 22.4% increase from a year ago.

Phase 2 Starts Today! - Gold & Silver Bull Market - Mike Maloney (tomadkins)

Consumer Borrowing Fell by $11.5 Billion in February (SolidSwede)

Consumer borrowing fell again in February, reflecting weakness in credit cards and auto loans. It marks a setback to hopes that consumers are beginning to feel more confident and will start spending more.

UK Needs 'Drastic Austerity Measures' To Prevent Debt Explosion (SolidSwede)

Philip Hammond, shadow chief secretary to the Treasury, said: "The BIS just reinforces the warnings that Conservatives have been giving about the debt trap Britain now faces unless we take action: how risky debt means a growing proportion of our national income is going to be taken up by interest payments rather than financing public services."

Hospital Closing Stirs Fear (VeganD)

St. Vincent's has 3,500 employees, including physicians. "We'll be like everyone else in a bad job market, looking for places we can establish relationships under conditions that are far less optimal," said Bruce Zablow, a neurovascular surgeon. He said nervous patients had been calling all day, trying to find out if their procedures would still take place and whether they could get their medical records.


Tata Air Car Powered Entirely by Compressed Air. Blow Me Down! (Maria & Walt)

Although the body styles can be more subdued, the compressed air engine has become a reality in India and will soon be marketed in Europe and Mexico by TaTa Motors. Compressed air engines run on air. One tank fill can take a vehicle about 70-100 miles (+or-). The holding tanks beneath the vehicle are "non-explosive." They are being fitted into various industrial vehicles as well.

Peak Oil Production Predicted For 2014 (Jamie D.)

Some have said production already peaked. One earlier model by Swedish researchers suggested that oil would peak sometime between 2008 and 2018. And other researchers have argued there are decades to go before oil production goes into irreversible decline. The only thing they all agree on: Oil is a finite and very valuable resource.

Peak Oil Man Shifts Focus To Peak Price, Demand (Christian W.)

Peak oil drives prices up in the first place. It has its own mechanism. We're sort of at peak demand right now," Campbell told Reuters from his home in the village of Ballydehob, West Cork. "I think presently the price limit is about $100."

Soaring Petrol Prices "Force Car Use Cutbacks" (Christian W.)

AA president Edmund King said: "Soaring pump prices have fuelled inflation in recent months and UK petrol sales were down almost 10% in the last quarter of 2009."

Please send article submissions to: [email protected]


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Re: Daily Digest - April 8

"The city council has considered everything from raising utility bills to cutting cultural programs in an effort help fill L.A.’s half a billion dollar deficit – but no firm plan has risen out of the fiscal crisis.

State worker furloughs have recently been shot down by courts in California, but L.A. mayor Antonio Villaraigosa has proposed a similar plan to help stem the crisis by temporarily closing down select non-essential departments. However, contractual agreements with those workers often prohibit the government from delaying or denying payment.

“Well if that is the case here then there will be a bankruptcy,” said Toebben."

"In response to a question on whether the rising fiscal deficits could bring higher inflation, Bernanke said his real concern was that budget imbalances could lead investors to lose faith in the U.S.'s ability to meet its debt obligations, leading to higher rates on U.S. Treasurys. In turn, that could drive up other key rates that can influence the economy, such as mortgage rates."

"The report by CMA Datavision is based on the default risk of countries as determined by the price at which their credit default swaps trade in the market."

"Norway led the list of safest sovereign borrowers. The USA fell three spots to rank as the 10th safest sovereign borrower. Analysts at CMA said in the report that spreads on US CDS had increased slightly since the successful passing of the healthcare bill, which commits the government to significant financial investment in health infrastructure and services.

But the UK failed to make the top 10 of the safest sovereign nations. It ranked 21st with a probability of default of 6.7 per cent, according to CMA."

"The Bank for International Settlements does not mince words. Sovereign debt is already starting to cross the danger threshold in the United States, Japan, Britain, and most of Western Europe, threatening to set off a bond crisis at the heart of the global economy.

By Ambrose Evans-Pritchard, International Business Editor

The aftermath of the financial crisis is poised to bring a simmering fiscal problem in industrial economies to the boiling point", said the Swiss-based bank for central bankers -- the oldest and most venerable of the world's financial watchdogs. Drastic austerity measures will be needed to head off a compound interest spiral, if it is not already too late for some.

The risk is an "abrupt rise in government bond yields" as investors choke on a surfeit of public debt. "Bond traders are notoriously short-sighted, assuming they can get out before the storm hits: their time horizons are days or weeks, not years or decade. We take a longer and less benign view of current developments," said the study, entitled "The Future of Public Debt", by the bank's chief economist Stephen Cecchetti.

"The question is when markets will start putting pressure on governments, not if."

"The global bond will be Russia's first in over a decade and is seen as a trophy credit by many dedicated emerging markets funds, who analysts reckon have set aside plentiful cash in order to snap up the paper when it goes on sale.

But the timing of the launch, when even U.S. Treasury debt prices are coming under some pressure, may well leave more troubled sovereign borrowers such as Greece struggling to raise cash as a result.

What is more, strategists say it may also draw a line under the boom in emerging market bond issuance, which hit a record $74 billion in the first quarter of this year."

"April 8 (Bloomberg) -- China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos.

The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV.

China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.”"

...........................6A) China Inflation Seen at 15% With Wen Jiabao Losing Boom Control

"April 8 (Bloomberg) -- “Look at the scale of this,” said Li Chongyi, an engineer, as he watched a 4-kilometer line of trucks and earth movers busy quadrupling the size of Chongqing’s Jiangbei International Airport. “This will take years.”

Jiangbei, which begins work on a third terminal when the second is done next year, is one of 15 trillion yuan ($2.2 trillion) in projects begun in 2009, almost twice the economy of India. Most were started by local governments as China’s stimulus package sparked a record 9.6 trillion yuan of loans.

The projects and their loans are stymieing efforts by Premier Wen Jiabao to curtail investment as inflation rose to 2.7 percent in February, a 16-month high. Failure to rein in local government spending could push inflation to 15 percent by 2012, said Victor Shih, a political economist at Northwestern University who spent months tallying government borrowing."

"The average price of steel products in the international market may increase by about 50 percent to US$900 per ton in June from $600 in January due to higher production costs.

Irvan Kamil, the marketing director of state steel company PT Krakatau Steel said that steel producers had no choice but to pass the higher production costs on to consumers to cope with the sharp increase in the prices of raw materials.

According to him, the price of raw materials had increased by about 90 percent during the past several months although demand is still relatively stable.

“The price of steel products rose to $700 per ton in March from about $600 in January. It is expected to further increase to $900 per ton in June,” he told reporters."

"SPRINGFIELD -- The volume of Illinois' unpaid bills will likely increase by $1 billion in the next three months, according to a new report.

By the end of June, the backlog of unpaid bills could exceed $5.5 billion "absent any other developments," noted Comptroller Dan Hynes, in a quarterly report on the state's finances. Now, the state's 200,000 unpaid bills total $4.5 billion.

The report warned the increase in unpaid bills could lead to "further erosion of the state service infrastructure." Many providers will be unable to continue at current state funding, affecting vulnerable citizens across the state.

"The ability to operate state programs for children, seniors, and the disabled will become increasingly impaired," the report said.

At least one vendor is already cutting their contract with the state because of it's inability to pay its bills. Two weeks ago, a state ammunition vendor refused to ship bullets to the Illinois Department of Corrections unless the company was paid up front. The vendor, Shore Galleries Inc., was owed $6,000 by the state.

The department was forced to make an emergency purchase of bullets from an out-of-state vendor."

"The Natomas Unified School District paid $300,000 in interest this school year – enough to have saved three counselors from being laid off – on a $12 million loan to keep its lights on and staff paid.

It took out the loan because the state of California has failed to send money in a timely fashion, deferring payments to the school district until the state can come up with the money it owes Natomas Unified for operations for the current school year.

The state in general sends fewer dollars to California schools these days – a total of $18 billion less over the last two years. And much of the money districts do receive is coming late – sometimes as much as five months after the payments originally were scheduled."

"April 8 (Bloomberg) -- U.S. mortgage rates jumped to the highest level in almost eight months, increasing borrowing costs for buyers and signaling a threat to the housing market’s recovery as government efforts to spur demand end.

Rates for 30-year fixed loans rose to 5.21 percent for the week ended today from 5.08 percent, mortgage finance company Freddie Mac said in a statement. That’s the highest rate since the week ended Aug. 13. The average 15-year rate was 4.52 percent, according to the McLean, Virginia-based company. "

"(Reuters) - Dubai's special tribunal, set up to hear cases against indebted state firm Dubai World, could throw efforts to restructure $26 billion in debt into disarray if just one creditor files a claim, legal experts say.

Dubai World DBWLD.UL is lobbying banks to sign up for the proposal, but even if the required supermajority of 66.66 percent of creditors endorses the plan, a claim at the tribunal could halt the restructuring plans and keep lenders locked in."

Treasury Direct shows it at $12.79 trillion 

100 to 1 leverage.

  • Other stories and headlines: 

UK government accused of failing to control consumer debt

UK national debt picture is unclear: Evercore

Greece plunges deeper into crisis, banks, euro hit

Greece's borrowing costs hit new record (7.423% for 10 year bonds)

Greece Yield Unattractive Even Over 7%, Clarida Says

Pimco's El-Erian: Greek's financial crisis will get worse

Greek shares plunge 5%

Pension crisis could hike Pottstown taxes $1500 (Pennsylvania)

S&P Downgrades DP World

This Is Progress? GM Loses $4.3B, Needs $12.3B to Fund Its Pension (Tech Ticker video)

Initial jobless claims increase unexpectedly

State of Emergency Declared in Bangkok Amid Protests

Medicaid, food stamp cases exploding (Georgia)

Indonesia Stocks in Bubble, Central Bank Study Shows

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Re: Daily Digest/JAG new video


I saw the video you made. Very good. The music was a good combination in conjunction with the fast moving images. What a captivating message especially with the fast moving images, all of which were relevant and carrying an implied message. The ending was good and the boost to the Chris Martenson site was big I would imagine. I like how you had the words at the end come together in half words and then move off the screen again. It took me awhile to get on to the  Chris Martenson site today, I imagine the server was at capacity. Excellent video once again.


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Re: Daily Digest/JAG new video

Thanks Tommy for the kind words. I think the increased traffic was due to Dr.M posting his latest report on Zerohedge, however.

Thanks again...Jeff

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Re: Daily Digest - April 8

The Pentagon also expects an imminent oil shock - A report from the American Joint Forces Command published March 15 predicts that in 2015, the world capacity for petroleum prouction could be 10 million barrels per day less than the demand. The report of the American Department of Defense (DoD), titled Joint Operating Environemnt 2010 indicates (page 29):"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015. the shortfall in output could reach nearly 10 MBD." 10 million barrels per day (MBD), that represents the production of Saudi Arabia, the world's leading petroleum producer. Such a shortfall, if it should come, would be more than 10 percent of the world demand for crude, which is today 86.5 MBD, and ought to reach 90 MBD in 2015.


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Re: Daily Digest - April 8


"With unemployment still at a severe high, a majority of states have drained their jobless benefit funds, forcing them to borrow billions from the federal government to help out-of-work Americans.

A total of 33 states and the Virgin Islands have depleted their funds and borrowed more than $38.7 billion to provide a safety net, according to a report released Thursday by the National Employment Law Project. Four others are at the brink of insolvency.

Debt-challenged California has borrowed the most, totaling more than $8.4 billion, followed by Michigan and New York, which have loans worth more than $3 billion. Nine other states have borrowed at least $1 billion from the federal government.

"The nation's financing system for jobless benefits is under unprecedented stress," said Andrew Stettner, deputy director of the New York-based advocacy group for the unemployed. "While the recession has certainly made things worse, this funding crisis has been developing for years.""



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Re: Daily Digest - April 8

That Telegraph article about Britain's debt crisis had this photo/caption in it:

Piggy bank - UK needs 'drastic austerity measures' to prevent debt explosion
The UK's debt will take generations to repay Photo: PA
As long as the media continues inferring that the debts CAN be repaid, they will have the wool pulled over 99% of the sheeples, and NOTHING will be done to retructure the debt economy....
Furthermore, I think that " Interest payments on the UK's public debt will double from 5pc of GDP to 10pc within a decade under the bank's "baseline scenario" before spiralling upwards to 27pc by 2040 – by far the highest among the OECD club of developed countries" is highly optimistic.  Seems to me they still don't understand exponential growth!  Unless of course this scenario was calculated with very very low economic growth models.
The proverbial "between a rock and a hard place" scenario.

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