Daily Digest

Daily Digest - December 11

Friday, December 11, 2009, 11:48 AM
  • Taxpayers face £2 trillion unfunded pensions liability
  • Bear Market Until 2018, Gold At $2,000-$3,000
  • The Employment/Equity Market Connection: Perfectly Correlated
  • China Eyes India's Spot As Top Gold Consumer
  • Jim Rogers: Life Lessons From A Legend
  • Loopholes Buried In Bank Reform Bill
  • AIG Making Huge Comeback Using Names Of Subsidiaries
  • AT&T Battles Growth In Wireless Traffic, May Curtail Data Usage
  • What Happens If The Internet Completely Breaks Down?
  • Just How Furious At Wall Street Are Americans?
  • Rising Violence Against Bankers
  • Dirty New Foreclosure Tactic: Garnishing Wages, Freezing Bank Accounts
  • Woman Sues Debt Collector Over Husband's Death
  • Get Ready: There'll Be A Price For Health Benefits
  • The New American Dream: Default, Then Rent
  • These Fund Managers Aced The Decade
  • $12,000 Per Home In Cash For Caulkers
  • Homelessness Myth #4: There's Room At The Inn
  • Need A Job? Head To Washington DC
  • IMF Study Says Banks Have Only Declared Half Their Losses
  • India's Growth Surge Joins China's

Economy

Taxpayers face £2 trillion unfunded pensions liability (SolidSwede)

A range of institutions, including the International Monetary Fund, the Organisation for Economic Co-operation and Development and ratings agencies such as Standard and Poor's, have warned Britain that unless it takes drastic action over a long period of time, these pensions costs could trigger fiscal crises in the future. The National Institute of Economic and Social Research has said that in order to fight the rising deficit and combat the added costs of the financial crisis, the Government ought to raise the retirement age for both men and women to 70, or increase the basic rate of income tax by as much as 15p.

The entire bill of around £2.2 trillion would more than triple the size of the national debt overnight. It is entirely unfunded, so will have to be paid directly by future generations of taxpayers, rather than out of a pot contributed to by the pensioners themselves.

Bear Market Until 2018, Gold At $2,000-$3,000 (M.W.)

U.S. stocks are in a bear market that may last until 2018 and benchmark indexes may set new lows, said Alan R. Shaw, the technical analyst who retired from Citigroup Inc. after 45 years. Stock benchmarks are likely to fall below this year's lows before the bear market is over. The prediction is at odds with the forecasts of Wall Street strategists. Aside from municipal bonds, Shaw said he's currently investing only in gold stocks, expecting bullion to rise to at least $2,000, perhaps $3,000, an ounce.

The Employment/Equity Market Connection: Perfectly Correlated (M.W.)

Just how important are jobs to the equity markets? If I didn’t know any better I’d think this chart was the S&P 500.

China Eyes India's Spot As Top Gold Consumer (M.W.)

It's taken all of recorded history, but this year China finally looks set to overtake India as the world's number one gold consumer.

Jim Rogers: Life Lessons From A Legend (M.W.)

Last night I took a trip down to Miami to visit with Jim Rogers at a book signing for his most recent book entitled 'A Gift To My Children: A Father's Lessons For Life And Investing.'

Loopholes Buried In Bank Reform Bill (M.W.)

Buried in a 239-page amendment to the U.S. House of Representatives' financial regulatory overhaul is a provision that appears to do just one thing: exempts financial-services company USAA from some of the bill's tougher provisions.The carve-out is one of a number of exceptions that allow companies to avoid fresh scrutiny envisioned by the White House, which is aiming to overhaul the nation's financial-regulatory apparatus.

AIG Making Huge Comeback Using Names Of Subsidiaries (M.W.)

Just months after dropping 'AIG' from its brochures, the company has leapfrogged its competitors as the top seller of fixed annuities to bank customers. People buying the annuities in bank branches may be surprised to know they are signing up with A.I.G. The contracts are being offered under the names of two subsidiaries, Western National Life and First SunAmerica.

AT&T Battles Growth In Wireless Traffic, May Curtail Data Usage (M.W.)

AT&T plans to take steps toward curtailing excessive data usage by some iPhone customers as it battles growth in both wireless traffic and perceptions of network problems. The wireless industry has been wrestling with exponential growth in the use of data services such as video and Internet browsing, which require more bandwidth. The dilemma has been particularly acute for AT&T because of the millions of customers using Apple's smart phone.

What Happens If The Internet Completely Breaks Down? (M.W.)

It's been more than 20 yrs since the last system-wide overhaul, and Internet infrastructure is still based on 1970s ideas about computer networks. The Internet protocols that allow computers to communicate in networks have infiltrated every sector of our economy. Headline-making outages of YouTube and Twitter merely hint at the damage a full-blown failure could wreak.

Just How Furious At Wall Street Are Americans? (M.W.)

Banks that got taxpayer help through TARP shouldn't pay any bonuses, according to 75% of those polled. And this includes 39% of respondents who say they disapprove of bonuses even when the banks have paid the government back. "The fact that they're even in existence should be bonus enough."

Rising Violence Against Bankers (M.W.)

An LA lawyer who had represented a failed subprime mortgage lender is found dead outside his home, having been shot in the head. Three men invade the home of a former subprime lender, and are arrested after injuring 3 people inside. Vandals target the former CEO of the Royal Bank of Scotland, smashing windows in the banker's home and car. Those are just 3 notable incidents of violence aimed at people who were in some way linked to the financial crisis.

Dirty New Foreclosure Tactic: Garnishing Wages, Freezing Bank Accounts (M.W.)

Lawyers are hearing of clients who go to the bank to withdraw money and find that their accounts have been frozen or wiped out by other banks or debt collectors. Some are learning the lender or debt collector has already gone to court and secured a judgment to garnish paychecks. "It's a fast and dirty process that takes their money away so they can't afford a loan modification."

Woman Sues Debt Collector Over Husband's Death (Video) (M.W.)

Dianne McLeod is suing her mortgage company for the wrongful death of her husband. McLeod said her husband, Stanley, would be alive if not for the stress caused by debt collectors. They sometimes called 10 times a day and also called the neighbors. "He would begin to sweat; he would also get red in the face and complain about chest pains," McLeod said. "We were worried he was gonna have a heart attack right there on the phone."

Get Ready: There'll Be A Price For Health Benefits (M.W.)

Experts predicting ‘sticker shock’ for those buying coverage as individuals.

The New American Dream: Default, Then Rent (M.W.)

Thanks to a rare confluence of factors -- mortgages that far exceed home values and bargain-basement rents -- a growing number of families are concluding that the new American dream home is a rental.

These Fund Managers Aced The Decade (M.W.)

With many retirement accounts in tatters, plenty of Americans are content with the fund managers who managed to keep them from losing too much money during the worst market conditions since the Great Depression. But it turns out, a select few investing pros have done much better over a most challenging decade.

$12,000 Per Home In Cash For Caulkers (M.W.)

The program: contractors conduct home energy audits, buy the necessary gear and install it. Based on earlier bills, consumers might be eligible for a 50% rebate on both the price of the equipment and the installation, up to $12,000. There is no income restriction on who is eligible. That would mean a household could spend as much as $24,000 on upgrades and get half back for energy-efficient appliances and insulation.

Homelessness Myth #4: There's Room At The Inn (Video) (M.W.)

On December 7th, San Diego experienced one of the most powerful winter storms in several years bringing damaging winds, record-setting rainfall and several inches of snow to the mountains. My friend supplied me with the following video of the situation of homeless people in downtown San Diego. This video, as you will see, was filmed just outside the Emergency Winter Shelter which was filled to capacity.

Need A Job? Head To Washington DC (M.W.)

The increase in government jobs — courtesy of stimulus planning and spending — is turning Washington, D.C., into a boomtown.

IMF Study Says Banks Have Only Declared Half Their Losses (M.W.)

Baroness Vadera, adviser to the G20 Presidency, has warned that some of Europe's biggest banks have yet to "come clean" on the extent of their losses and could still provide shocks to the financial system.

India's Growth Surge Joins China's (M.W.)

In N Asia we have China booming, Japan stuttering, S Korea, perhaps heading that way, and Taiwan growing. In SE Asia, Indonesia is doing well, Thailand, Malaysia and Singapore are emerging from the slump. In SW Asia we have India surging, Pakistan in trouble, Bangladesh nowhere and Sri Lanka mired in a post civil war mess. But the strength of the Asian rebound is now firmly pinned on China in the north and India in the south west.

21 Comments

saxplayer00o1's picture
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Re: Daily Digest - December 11

"HONG KONG (Reuters) - The top sovereign credit ratings of Britain and the United States are not under threat of a downgrade right now, but a worst case scenario foresees a cut by 2013, analysts from Moody's Investors Service said on Friday."

"WASHINGTON — The federal deficit for the first two months of the new budget year is piling up faster than last year's record imbalance.

Economists worry the flood of red ink could push interest rates higher and raise the cost of borrowing for consumers and businesses, a potential drag on the fragile economic recovery.

The November deficit totaled $120.3 billion, the Treasury Department said Thursday. That's less than analysts had expected and down from a $176.4 billion imbalance in October. It was a record 14th straight monthly deficit.

Even with the improvement, the deficit is 5.7 percent higher than the first two months of the 2009 budget year when it hit a record $1.42 trillion. The Obama administration expects the 2010 deficit will set a new record at $1.5 trillion" 

"The purchases brought the U.S. central bank's purchase of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae to roughly $1.071 trillion since January." 

"Dec. 10 (Bloomberg) -- California’s revenue dropped 0.6 percent in November, or $33 million, from a year earlier as income tax collections declined, Controller John Chiang said."

"Dec. 11 (Bloomberg) -- Greece and Ireland are among countries in an “intolerable” economic situation that may lead to bailouts and exits from the euro region before the end of 2010, according to Standard Bank Plc." 

"Nearly 200 care providers face shutdowns, layoffs due to State's inability to pay overdue bills, leaving Illinois' seniors to fend for themselves AARP, advocates call on State to adopt urgent short-term measures or deal with the costly consequences -- Today, an alliance of advocate organizations sounded the alarm on the consequences that Illinois' social service agencies face due to the State of Illinois' failure to pay its bills. AARP and a statewide alliance of care providers called on the State to take urgent measures to prevent dozens of agencies from having to shut down, lay off hundreds of workers, and force thousands of older Illinoisans into costly and often unsafe institutional care - something that will burden the state finances even more.

The State owes $200 million to 175 social service agencies, providing critical home and community based programs and services to 60,000 older Illinoisans.

While calling for urgent measures - including short-term borrowing - to deal with the immediate crisis, the group also urged Governor Quinn and the General Assembly to work together on fiscally responsible measures that address the crisis that has depleted the state finances and created a budget deficit currently estimated at $11 billion."

"SAN FRANCISCO (Dow Jones)--Moody's Investors Service (MCO) downgraded on Thursday credit-enhancement programs run by two huge California pension funds, a move that led to downgrades of bonds issued by entities including the cities of Chicago and New York.

Moody's downgraded the municipal credit-enhancement programs of the California Public Employees' Retirement System, or CalPERS, and California State Teachers' Retirement System, or CalSTRS, to Aa3 from Aaa, citing declining market values in the investment portfolios of both funds.

"Today's rating action reflects our expectation that the cumulative back-to-back market value declines in the investment portfolios of both CalPERS and CalSTRS for the fiscal years ended June 2008 and 2009 will exacerbate long-term projected actuarial funding shortfalls," Martin Duffy, a senior credit officer at Moody's, said in a statement.

The downgrades come at the end of a difficult year for CalPERS and CalSTRS. CalPERS has lost much of a $500 million investment into a Manhattan apartment complex. Separately, both funds were allegedly overcharged by a major bank. " 

.....................7A) CalPERS, CalSTRS see long-term credit ratings lowered

"Moody's cites the pension funds' steep investment losses in downgrading them three notches to Aa3. The firm keeps their short-term ratings unchanged." 

"Visteon Corp. has permission to eliminate health care benefits for most of its retirees, a bankruptcy judge ruled Thursday.

The cuts to company-paid medical, prescription and life insurance coverage will affect 6,550 current and future retirees as well as their spouses and dependents."

"In court documents filed Wednesday, Visteon said that it has not determined whether it would hand over its pension plans to the federal government's pension insurance agency, the Pension Benefit Guaranty Corp." 

"Many of the roughly 150 retirees have said they're struggling because they haven't received a pension check since September, when the plan was depleted. Funded by Prichard employees and matching contributions from the city, the pension takes in less money each month than it is supposed to pay out.

"If we don't get a December check, basically, I've already told my grandchildren not to expect Christmas from me," said one retiree, Mary Berg..."

"While only about $50,000 is paid into the pension each month, roughly $150,000 is needed make monthly payments to the pensioners, and elected officials were instructed in the previous bankruptcy to fund the plan with millions of dollars in order to keep it solvent. "

   Look at the last chart and then read this from Zerohedge:

Emergency Jobless Insurance Claims Surge By Most Ever In Prior Week

"The number you won't hear mentioned anywhere in the Mainstream Media: 327,729. That is how many people shifted to Emergency Unemployment Compensation programs in the last week alone, hitting an all time record high of 4.2 million! So as everyone is focused on the benign picture of initial claims in the last week which was "only" 474,000, the number of people rolling off continuing benefits has exploded and is now a stunning 592,579 only in the last two week. Look for this number to keep going into the stratosphere as the 6 month continuing claims cliff keeps getting hit by more and more people who are unemployed and keep looking not only for believable change, but actual jobs to go with it."

  • 11) Food Stamps

    Judge To Maryland: Send Food Stamps Faster

   Ore. food stamp climbs 36 percent since mid-2008 

Deleware: A total of 103,000 residents received benefits in November, marking a 35 percent increase from last year

In the Bronx for instance, more than 400,000 people use food stamps. That’s close to 30 percent of the borough’s entire population.

"“The number of plans reporting an endangered or critical status has almost tripled,” said Julie Stich, senior information/research specialist at the International Foundation of Employee Benefit Plans, in a statement.

Exactly 73% of multiemployer pension plans failed to meet the designation of safe status, which requires it be at least 80% funded, according to the August survey by IFEBP. This data from the 213 separate plans surveyed is a contrast to last year, when the survey revealed only 25% of plans failed to report a safe status."

"No wonder Gov. Martin O'Malley and the legislature are ignoring the $16.3 billion in liabilities Maryland has racked up to finance generous health plans for retired state employees.

By one measure, Maryland's burden for future retiree medical costs is the heaviest of any state in the country. A new report shows that the program's unfunded expense grew by $1.3 billion just in the past two years."

"Dec. 11 (Bloomberg) -- James B. Lockhart III, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency, said the U.S. housing decline may not be over.

Lockhart said at a conference in New York that “he’s concerned there may be another leg down” for housing due to the pace of foreclosures. Lockhart also said “hundreds of banks will be taken over.” "

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Gen X Saves The World

Rated PG-13 for strong language.

Author Jeff Gordinier talks about his book "X Saves The World" . 

Take that you Boomers...Tongue out

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The new American Dream

With the "reported" increase in holiday spending I can't help but wonder how much of it is from folks who have stopped making house payments (all though they are still employed) pocketing the savings for months and in some cases more than a year with the mortgage holder making no move to remove them from the house. And, as the story shows as well for those who lost their homes and are now renting at a much lower cost... that is, a cost more in line with where rent and home prices should be.

I know of folks who even though they have been living house payment free for months continue to live like they were in the "good old" MEW days, (mortgage equity withdrawal). Seems like they would realize that eventually the piper will come calling and there will be no more easy money...

So how much of this money plays a part in the economy today???

 

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The New American Dream: Default, then Rent

I have to say as a landlord, I would be very wary of taking on as a tenant someone who is blase about defaulting on his mortgage contract. If he is quite happy to stiff the mortgage company, he will be quite happy to do the same to me.

Any other landlords feel the same?

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Re: Daily Digest - December 11

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Re: Daily Digest - December 11

 

Economists analyzing a snail's pace.... HAHAHAHAHAHAHA

Thanks, jkibbe.  Keep 'em coming. 

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Re: The New American Dream: Default, then Rent

James:

I do not feel the same way. 

If the decision is a rational one for the prospective renter, I would probably respect him for having the courage to act in an economically intelligent manner. 

Walking away from something that is destroying you is better than letting it do so, and ending up in the same place anyway.

That said the interview and application process would be a bit more rigorous than usual as I try to determine whether the prospective renter acted logically or emotionally when piping his house.

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Re: Gen X Saves The World
JAG wrote:

Author Jeff Gordinier talks about his book "X Saves The World" . 

Meh.  Yeah, whatever....

(closed captioned for the Gen X sarcasm/indifference impaired Wink)

- Nickbert

 

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Re: Daily Digest - December 11

Raising the debt ceiling to $14 trillion. Surprised

Debt Limit to Be Increased By Up to $1.9 Trillion

"The debt limit increase, raising the legal cap on government borrowing to about $14 trillion, would be the fourth in 18 months. A $1.8 trillion boost would probably be enough to prevent lawmakers from having to raise the limit again before next year’s midterm elections.

Such an increase would be more than twice the size of each of the past three debt limit increases, each of which lifted the cap by $800 billion or less."

 

.....................At this rate it won't be long before the stimulus/bailouts/overspending/money printing will leave us all with money to burn.

 

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Re: Daily Digest - December 11

 

Mikey1052 wrote: So how much of this money plays a part in the economy today???

Hi Mikey. I was wondering about that too. I thought this was interesting.

http://seekingalpha.com/article/176490-u-s-economy-it-s-good-to-be-rich

It's Good To Be Rich

The top 10 percent of earners account for 22 percent of all spending, for instance, according to Moody's Economy.com. The top 25 percent of all earners account for 45 percent of spending. The bottom 50 percent of earners, by contrast, spend just 29 percent of all the money in the consumer economy....

"The question we're trying to answer," says Dennis Jacobe, chief economist at Gallup, "is whether the Wall Street rally has more of an effect on wealthy consumers."

It probably does. Gallup's data shows that job worries, for instance, account for 60 to 70 percent of the spending drop for middle- and lower-income Americans but just 30 percent of the drop among the affluent. So an awful job situation, with nearly 20 percent of Americans unemployed or underemployed, would spook the wealthy less than others.

We may actually be in the midst of a two-tier recovery in which life is getting better for a small minority of Americans at the top of the income chain, and they spend enough additional money to drive up spending and other stats and make it look like there's a real recovery.

 

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Re: Gen X Saves The World
nickbert wrote:

Meh.  Yeah, whatever....

(closed captioned for the Gen X sarcasm/indifference impaired Wink)

Nicely played nickbert.  Pretty freaking hilarious.

By far the best post of the day.

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the coming depression

Good Video

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Re: Gen X Saves The World
nickbert wrote:
JAG wrote:

Author Jeff Gordinier talks about his book "X Saves The World" . 

Meh.  Yeah, whatever....

(closed captioned for the Gen X sarcasm/indifference impaired Wink)

- Nickbert

 

 

I second that and add, yawn, plltthhhhh,and  paaaleeeeezzzze.

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Re: Daily Digest - December 11

Good laugh Nickbert, DIAP and FB! 

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Neil Howe On Generation X

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Re: Gen X Saves The World

C'mon everybody, let your "inner X'er" express itself.  No reason my generation should have a monopoly on being sarcastic and indifferent 'non-team players'.  Everyone repeat after me... "pffftt!... whatever" UndecidedLaughing

I didn't really agree too much on what he said about Boomers always waxing on about their accomplishments and glory days.  Very few boomers I've known have been like that... in fact just about the only time I hear such things are by mass media.  But most of the other things he said I'm in agreement with.  I think above all those things he mentioned though, the one thing that will make Gen X pivotal in the coming decade is that we will soon be at the age where more will move into positions of political power as most of the Boomers retire (either voluntarily or by public demand).  Of course if the tough times most of us here expect do come, then GenX will largely be taking the reins just as things will probably be at their worst.  Don't know if they'll do any better than current group of political hacks, but one can hope.  If the country was a car, it might be like getting handed the keys to the family car right after it's been wrapped around a tree....
.... Hey, I always thought it was supposed to be the kids that wreck the parents' car  Tongue out

Seriously though, I've always thought the generational differences had been overplayed.  Perhaps it's more of the whole 'divide and conquer' mindset that's used to maintain the status quo.

- Nickbert

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Re: Gen X Saves The World

thats right Nickbert.  Just remember that 'team' is 'meat' spelled sideways.

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Re: Daily Digest - December 11

http://www.renewamerica.com/columns/baldwin/091211

"Is Obama really preparing for civil war?

According to an obscure report in the European Union Times (EUTimes.net), "Russian Military Analysts are reporting to Prime Minister Putin that US President Barack Obama has issued an order to his Northern Command's (USNORTHCOM) top leader, US Air Force General Gene Renuart, to 'begin immediately' increasing his military forces to 1 million troops by January 30, 2010, in what these reports warn is an expected outbreak of civil war within the United States before the end of winter."

[Ed: Do not cut + paste entire articles.]

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Re: Daily Digest - December 11

Here is a quote by Congressman Chaffetz from Beck's program today.  How long can the charade go on?

 

'CONGRESSMAN CHAFFETZ: Yeah. I mean, it's I don't know how to put enough descriptors about how insane this process is, but they took six agencies, their appropriations, meshed them into one big, bad omnibus bill, I mean, this is seriously this is bad government at its worst. When the bill was originated, it was 1,088 pages, and it has to go to the rules committee before we as members of congress in the rank and file here can actually see it. It ended up being more than 2500 pages, and we voted on it roughly 24 hours after we got it. It represents half of the entire discretionary budget for the entire federal government, $446 billion, 2500 pages. There are 5,000 earmarks and at its baseline represents a 12% increase in spending for their base budgets, not counting the stimulus and all the other crap, a 12% increase over the base budget from just last year'.

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Re: Gen X

Pandering to sell a book. Nothing to see here. Move on.

 

Back to substance: Mikey said:

"With the "reported" increase in holiday spending I can't help but wonder how much of it is from folks who have stopped making house payments (all though they are still employed) pocketing the savings for months and in some cases more than a year with the mortgage holder making no move to remove them from the house. And, as the story shows as well for those who lost their homes and are now renting at a much lower cost... that is, a cost more in line with where rent and home prices should be.

I know of folks who even though they have been living house payment free for months continue to live like they were in the "good old" MEW days, (mortgage equity withdrawal). Seems like they would realize that eventually the piper will come calling and there will be no more easy money...

So how much of this money plays a part in the economy today???"

Great question; I posed this possibility to some friends when Peter Schiff originally noted that the "sign  it over and rent it back" program would inspire people to stop paying. It made perfect sense to me (what Schiff said) that people would stop paying their mortgages. Thus, it seemed a no-brainer that they would then have some disposable income--and most importantly, that THAT is exactly what the Obama adminstration was attempting to achieve; that is to say, a desperate, last ditch effort to inspire "recovery" confidence by creating retail sales numbers with another non-obvious bailout. Imagine that: What seemed a nonsensical program; a program that Peter Schiff criticized as stupid economics, was actually a plan to deceive average Americans into spending. If anything, Schiff is not cynical enough, or he is overly bound by his role as future politician, and thus has boxed himself in from the truth that is slamming itself against every reasonable rampart of self preservation and sense.

Or am I just being overly conspiratorial and unduly pessimistic about your government's willingness to stoop and steal?

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Re: Daily Digest - December 11

Finally we see some evidence of those green shoots.

http://www.theonion.com/content/news/labor_dept_available_labor_rate

Now perhaps we can put to rest the argument that there is nothing positive in the news about the economy.

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