Daily Digest

Daily Digest - December 15

Tuesday, December 15, 2009, 10:48 AM
  • The Architecture Of The Scam
  • Probability For 2010 Hyperinflation Has Reached Critical Levels
  • US Needs Plan To Control Debt Or Face Market Meltdown
  • Pew Report: Federal Debt And The Budget Process
  • In Search Of Budget Sanity: A Dispatch From The Belly Of The Beast
  • Congress Likely To Pass Debt Ceiling Hike Before Holiday Break
  • Do You Support Raising The Federal Debt Ceiling?
  • US National Debt Clock
  • Obama Grades Himself B-Plus For First Year In Washington
  • 55% Of Americans Disapprove Of Obama's Job Performance
  • Can The Obama White House Change Course Before Hitting 2010 Iceberg?
  • Why Obama Won't Tax Bank Bonuses
  • Bankers Destroy $7 Of Value For Every $1 They Get Paid: Study
  • Goldman, Morgan, And Citigroup Are No-Shows At Obama's Bankers Meeting
  • Banker Calls Obama's White House Meeting With Bankers A "PR Stunt"
  • Taibbi To Mainstream Media: I Don't Have To Be Two-Sided Like You
  • How To Make The World's Easiest $1 Billion
  • Joblessness Causing Crisis, Cutbacks, And Stress For Unemployed
  • Meet The Long-Term Jobless


The Architecture Of The Scam (hucklejohn)

This is the fundamental scam in finance that has infested the banks and other institutions over the last 20 years - and which accelerated in the 2000s. The entire game rested on the premise of finding someone who would write insurance they could never pay on, or who would utter an "opinion" that the deal had less risk in it than it really did. In point of fact virtually all of the lending risk for all non-standard mortgage instruments written from 2003-2007 was predicated on one and only one thing - property values would never go down.

Probability For 2010 Hyperinflation Has Reached Critical Levels (M.W.)

John Williams (Shadowstats) concludes that the probability of a hyperinflationary episode in America over the next year has reached critical levels. What lies ahead will be extremely difficult, painful and unhappy times. The functioning and adaptation of the U.S. economy and financial markets to a hyperinflation likely would be particularly disruptive. Trouble could range from turmoil in the food distribution chain to electronic banking systems unable to handle rapidly changing circumstances.

US Needs Plan To Control Debt Or Face Market Meltdown (M.W.)

The government must craft a plan next year to get its ballooning debt under control or face possible panic in financial markets, a bipartisan panel of budget experts said in a report by the Peterson-Pew Commission on Budget Reform.

Pew Report: Federal Debt And The Budget Process (Video) (M.W.)

The Peterson-Pew Commission's report on the federal debt looks at ways to change the budget process. The commission includes several former members of Congress and two former directors of the Office of Management and Budget.

In Search Of Budget Sanity: A Dispatch From The Belly Of The Beast (M.W.)

Red Ink Rising! That was the title of a session on the looming debt crisis I just attended at the National Press Club. The panel discussion was built around a report created by the Peterson-Pew Commission on Budget Reform and featured presentations by commission members. Comprised of Republicans, Democrats, and others, one of the key findings of the group is that the "process is broken.".

Congress Likely To Pass Debt Ceiling Hike Before Holiday Break (M.W.)

Congress will likely increase the debt ceiling by $1.8 trillion to roughly $14 trillion before the year-end holiday recess. The House will act first, followed by the Senate. There's little chance the majority, led by the Democrats, will face any substantive opposition from the minority, the Republicans.

Do You Support Raising The Federal Debt Ceiling? (M.W.)

Democrats are poised to pass legislation before the end of this year that would increase the federal borrowing limit by $1.8 trillion, a number large enough to avoid revisiting the matter next year when Democrats will have to defend their majority in midterm elections. To make sure the legislation passes, House Speaker Nancy Pelosi, is planning on combining it with a bill that funds Iraq and Afghanistan. Do you think Congress should raise the debt ceiling higher than its current $12.1 trillion?

US National Debt Clock (M.W.)

The national debt has continued to increase an average of $3.82 billion per day since September 28, 2007. The estimated population of the United States is 307,469,348 so each citizen's share of this debt is $39,334.93. The outstanding public debt, as of Dec 15, 2009 at 05:02:46 AM GMT is: $12,094,286,617,157.07.

Obama Grades Himself B-Plus For First Year In Washington (M.W.)

He claimed progress on economic and international fronts. And he said the only thing that stands in the way of giving himself a better grade is the fact that some elements of his agenda -- health care reform and putting more Americans to work -- remain undone.

55% Of Americans Disapprove Of Obama's Job Performance (M.W.)

And 42% "strongly disapprove." That’s a one point improvement from yesterday when Obama’s Approval Index rating fell to the lowest level yet recorded.

Can The Obama White House Change Course Before Hitting 2010 Iceberg? (M.W.)

The first step in correcting course is acknowledging that the course you're on needs to be changed. And it's not clear that the administration is ready to get out its compass and sextant. During the midst of the bank bailout, we heard a lot of concerned talk about Main Street. But since the government checks cleared, it's become obvious that it was just that -- talk. People know Main Street issues like jobs and foreclosures haven't been given the attention they require, and they also know when they're being condescended to.

Why Obama Won't Tax Bank Bonuses (M.W.)

Nobody has explained why the Administration and Congress are so skittish about doing something that would be highly popular, and also has sound economics behind it. As president of Washington-based Economic Strategy Institute said, a bonus tax is a “great idea” that is justified by the taxpayer-funded bailouts. “Goldman and the others are making tons of money but they wouldn’t be making anything without the bailout, which saved them. There’s a lot of pain and agony out there because of their malfeasance.”

Bankers Destroy $7 Of Value For Every $1 They Get Paid: Study (M.W.)

The research, carried out by the New Economics Foundation, says hospital cleaners create £10 of value for every £1 they are paid. Bankers are a drain on the country because of the damage they caused to the global economy. "Pay levels often don't reflect the true value that is being created. As a society, we need a pay structure which rewards those jobs that create most societal benefit rather than those that generate profits at the expense of society and the environment".

Goldman, Morgan, And Citigroup Are No-Shows At Obama's Bankers Meeting (M.W.)

Obama presses biggest banks to lend more. The heads of three of the biggest companies —Goldman Sachs, Morgan Stanley, and Citigroup — did not even make it to the White House meeting in person. They had waited until Monday morning to travel and were held up by fog.

Banker Calls Obama's White House Meeting With Bankers A "PR Stunt" (M.W.)

Obama vs the banks. With year-end bonuses soon to be handed out to financial executives, Obama and the White House need to be seen to be on the side of the little guy. Expect a healthy dose of political posturing before, during and after the President's meeting with top bankers Monday. "It's a p.r. stunt," says an executive at one of the banks. Even Administration officials privately admit that politics played a role in calling the meeting.

Taibbi To Mainstream Media: I Don't Have To Be Two-Sided Like You (Video) (M.W.)

Matt Taibbi gave a very good interview on CNN, discussing his recent Rolling Stone piece on Obama's sellout.

How To Make The World's Easiest $1 Billion (M.W.)

With all the banks paying back the TARP money, some folks are assuming that the great Wall Street bailout is finally coming to an end. But of course it isn't! Taxpayers are still guaranteeing all big bank bonds, and subsidizing huge bank earnings and bonuses with absurdly low interest rates. But instead of bellyaching about it, you might as well just smile and cash in. After all, that's what Wall Street's doing. So here's how to make the world's easiest $1 billion:

Joblessness Causing Crisis, Cutbacks, And Stress For Unemployed (M.W.)

Forty-six percent of Americans who have lost jobs say it has created a major crisis in their lives with 69% adding that it has increased their stress level. Fifty-five percent of unemployed Americans have had trouble sleeping, 48% reported bouts of anxiety or depression, and 48% have had more arguments with family and friends. Thirty-eight percent say they have seen changes in their children's behavior as a result of their joblessness.

Meet The Long-Term Jobless (M.W.)

There are now a record 5.6 million people who have been unemployed for more than six months. A few tell us what life is like for them now.


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Re: Daily Digest - December 15
  • 1) A couple of reasons for the dollar's strength today

S&P downgrades Mexican debt

"Ratings agency Standard & Poor's downgraded Mexico's sovereign debt to BBB status Monday on concerns about the country's fiscal outlook, sparked by the global economic crisis."

European stocks, euro slip on Austria bank worries

"European stocks and fell Tuesday and the euro slid to a two and a half month low against the dollar on worries about the Greek government's debts and the financial health of Austria's banks."

"As if Greece's problems weren't enough, investors are also beginning to fret about the exposure of Austria's banks to Eastern Europe, where the recession has been particularly acute.

On Monday, Austria nationalized Hypo Alpe Adria, a unit of German public-sector bank BayernLB — the move was designed to prevent the bank from sliding into a bankruptcy fueled in part by bad loans, much of them in Eastern Europe."

"Airline losses in 2010 will total $5.6 billion, 47 percent wider than an earlier forecast, as oil prices rise while carriers compete for passengers with lower fares, the International Air Transport Association said. "

"Dec 15 (Reuters) - The U.S. Federal Housing Finance Agency, may ask the U.S Treasury before the end of the year for an increase in the $400 billion lifeline provided to Fannie Mae (FNM.N) and Freddie Mac (FRE.N), Bloomberg said, citing people familiar with the talks."

"WASHINGTON, Dec 14 (Reuters) - California, the largest borrower among U.S. states, may see its debt interest costs nearly double to over $10 billion in 2020, the state treasurer reported on Monday."

"China has outstripped the U.S. in the amount of money raised from stock listings, underscoring the region's stronger economy and a resurgence in investment.

Companies have raised nearly $52 billion from initial public offerings on exchanges in Hong Kong and mainland China so far this year, according to financial research firm Dealogic. That's about twice as much as the some $26.5 billion in American IPOs. "

"The researchers say that by 2050 Americans may live as much as eight years longer than government forecasts and that spending by Medicare and Social Security could rise by $3.2 trillion to $8.3 trillion above current projections.

Advances in medical care will accelerate, stretching out lifespans, the MacArthur Research Network on an Aging Society wrote in the report, published in The Milbank Quarterly."

"Dec. 15 (Bloomberg) -- California, the most-populous U.S. state, may begin seeking to sell its bonds to overseas investors after the sale of $36 billion of debt this year has made it more difficult to raise money, Treasurer Bill Lockyer said.

California’s bond sales this year paid for projects from roads to stem cell research, and included $8.8 billion of short-term securities due next year that closed temporary gaps in the state’s tax collections. The sales came as its credit rating, now the lowest among U.S. states, was cut because of budget deficits resulting from the recession.

“We are running out of tricks,” Lockyer told a committee of the state Assembly at a hearing in Sacramento. “Shortly we are going to have to go international to sell California bonds. I don’t know how expensive that is going to be.” "

"* 2010 will be tumultuous for sovereign debt

* US, UK top ratings losing altitude, global head says

* Response needed or loss of altitude will be "inexorable"

* Must draft a credible plan or face rating threat

By Walden Siew

NEW YORK, Dec 14 (Reuters) - Sovereign debt risk is rising globally, particularly in the United States and United Kingdom, which must outline plans to manage public debt or face ratings deterioration as soon as 2011, Moody's global head of sovereign ratings said on Monday.

"2010 is probably going to be a tumultuous year for sovereign risk," Pierre Cailleteau, Moody's global head of sovereign ratings, said in a phone interview from London. "Long-term interest rates will rise globally, which will reveal the real costs of the financial and economic crisis.""

"San Francisco voters may soon have the opportunity to decide major changes to the city's pension and retiree health care systems - both of which have seen their costs skyrocket as the city grapples with consecutive years of major budget deficits."

"Ten years ago, the city paid $383.7 million to health insurance for active and retired workers, retirement contributions and Social Security. This year's tab is $890 million, a 132 percent increase. In fiscal year 2013-14, the projected amount is $1.4 billion.

Driving the rise is the overall increase in health care costs and the poor performance in investments during the economic downturn.

"It's alarming growth, and this just underscores the magnitude of the problem," Newsom told The Chronicle's editorial board Monday. "We have to do something dramatic.""

"Houses with dreary urban facades covered in polka dots. A traveling dollhouse made from the remnants of abandoned homes. A dilapidated residence covered in ice.

Artists across the Detroit area are using the city's blight as their canvas, transforming abandoned homes into high-concept projects to draw attention to the homelessness, poverty and urban decay plaguing Detroit. They hope the ongoing experiment will shed some creatively inspired light on what Detroit was, is and could be again."

"For the second consecutive year, New Jersey towns could skip half of their required pension payments under a bill proposed by Sen. Sandra Cunningham, a Hudson County Democrat.

The deferred contributions would have to be paid back to the state's beleaguered pension system over 15 years. The plan would provide short-term savings, but increase the fund's long-range deficit and add to future municipal-budget costs.

The idea would be to give towns and counties some immediate budget relief, alleviating the pressure on them to cut services or hike taxes as state and local governments cope with depressed revenues and falling levels of aid. Gov. Corzine recently held back $20.6 million in aid to towns as state revenues fell below projections, adding to the strain on municipal finances."

"The state's seven pension funds had a $34.4 billion deficit as of June 30, 2008, the last date evaluated by actuaries. That's more than the annual state budget.

The shortfall has undoubtedly grown since then, because towns were allowed to defer half of their required pension payments in the previous budget, and Corzine provided only a small fraction - less than 10 percent - of what the state owed in the current spending plan.

"If you continue not to make the payments, [the pension system is] going to go bankrupt," said Senate Majority Leader Stephen Sweeney, a Gloucester County Democrat. The state's substantial pension deficit "only gets larger each year when you don't make the payment, and someone somewhere has to say 'stop,' " he said."

"The two University of Toledo professors who correctly predicted a nosedive in income tax collections for the city have once again lowered their estimates for 2009 municipal revenues and are warning officials to brace for an even bleaker 2010.

Professors David Black and Oleg Smirnov, who were hired by Toledo City Council to forecast income tax collections, now say the city will end 2009 with $140 million to $138.4 million - which would deepen the deficit the city will carry over to 2010."

"The report also holds no hope that Toledo's economy will rebound next year."

"City Manager Mike Letcher told every Tucson department head this week to cut 15 percent of their budgets to help fill a $32 million budget deficit for this fiscal year, which ends June 30. The city also faces a more than $45 million budget deficit next fiscal year, which begins July 1."

"Phoenix Mayor Phil Gordon is in Washington, D.C., today, pressing Obama administration officials and members of Congress to loan his AAA-bond-rated city hundreds of millions of dollars to build sewers, bridges, educational facilities and other capital projects.

Phoenix, Arizona's largest city, closed a record $270 million general-fund budget deficit earlier this year, but the current-year shortfall has widened again by another $105 million because of falling tax revenue. Funding for capital projects also has plunged as well."

"The Democrats say Gov. Rell's plan to plug the current $337 million state budget shortfall by slicing services and aid to municipalities would mean the loss of 5,000 jobs. They'll take no action today when the legislature meets in a special session called by Rell."

"But Gov. Rell is right about this much: Everyone must be a part of solving this mess.

"Everybody has to sacrifice in this. I don't mean just towns and cities — I mean every single agency," Rell told me Monday afternoon, reminding me that state revenues will likely not improve until 2011. By 2012, the budget deficit is projected to be $3 billion.

"We all have to say we can't afford this and we must figure out what we can afford and start to prioritize."

Structural change is already here. We are losing jobs that pay solid middle class salaries and replacing them with service job incomes. Since 1969, we've lost 300,000 manufacturing jobs — 15,000 this year alone.

How different will things be once Connecticut emerges from the Great Recession? While manufacturing jobs pay an average of $70,000 per year, the average customer service representative's job a predicted fast-growing occupation — pays about half that."

"While the nation's fourth-largest city has outperformed others in the now two-year-old recession, even Houston is showing signs of financial wear and tear. With sales tax and other revenue falling, the city has virtually depleted its reserves. Parker projects a budget deficit of $146 million in the fiscal year ending June 30.

With growing pension obligations, the city has been issuing about $20 million of bonds annually to cover the costs. Under Texas law, cities can issue bonds without taxpayer approval to cover pension costs, but Houston still had more than $1.8 billion of unfunded pension liabilities at the end of October."

"If the proposed cut of fair funds becomes a reality, it could be fatal for the Jefferson County Fair, said Sue McIntyre, county fair board treasurer and office manager at the fairgrounds in Port Townsend."

"New revenue estimates say South Carolina will take in less than was expected when lawmakers passed the state's $5.3 billion spending plan in June. The cut, expected to take an equal percentage from all state agencies, will be at least $120 million. What the cuts mean for state government:"

"SAN DIEGO — If city leaders are unwilling or unable to fix San Diego’s ongoing budget deficit, then voters will have to do it for them by adopting ballot measures to force the city to fire workers or drastically cut services, according to a report being released today by a citizen task force.

The report, which recommends 12 actions to avoid municipal bankruptcy, is critical of “budgetary gimmicks” proposed by Mayor Jerry Sanders and given final approval yesterday by the City Council to close a $179 million budget deficit. More than 50 percent of that gap was filled by using one-time solutions, such as skipping reserve payments and delaying projects."

"The report identifies pension benefits as the driver of the city’s financial woes — a sharp departure from the mayor’s view that the economic recession is largely to blame for the deficit. It depicts San Diego as a city living beyond its means for years by deferring expenses and underfunding obligations such as employee pensions and retiree health care. It blames union heads, past city leaders and pension officials for approving unsustainable benefits without identifying a way to pay for them."

"GRACE data reveal groundwater in these basins is being pumped for irrigation at rates that are not sustainable if current trends continue," Famiglietti said. "This is leading to declining water tables, water shortages, decreasing crop sizes and continued land subsidence. The findings have major implications for the U.S. economy, as California's Central Valley is home to one-sixth of all U.S. irrigated land and the state leads the nation in agricultural production and exports."

"The Milwaukee School Board has spent 20 years ignoring a "fiscal time bomb" in the form of generous and unfunded health insurance benefits for retired MPS teachers and staff that will cost the district $5 billion by 2016, according to a new report by the Wisconsin Policy Research Institute."

"UNITED STATES – A US pension fund has filed a lawsuit against investment banking giant Goldman Sachs which could act as a test case for investors concerning bonus payments and remuneration to staff.

The Security Police and Fire Professionals of America Retirement Fund is suing Goldman Sachs through the New York Supreme Court for alleged excessive bonus packages as pension fund officials believe the recent $22bn in payouts was in fact public money derived from the US TARP bailout fund."

"Newton said an alarming trend has been emerging over the past 10 years. The state has gone from more than fully funding its retirement systems to funding it at about 75 percent of its liability. And he said actuaries predict that funding could fall to 50 percent of its liability in the next five to seven years. The trend has emerged at the same time that the state has been increasing the money spent on these benefits."

"Dec. 15 (Bloomberg) -- The Federal Deposit Insurance Corp., overseeing the dissolution of failed banks at the fastest pace in 17 years, today will vote on boosting its 2010 budget 56 percent to $4 billion to manage further shutdowns.

The total budget would increase from $2.6 billion and the budget for handling bank failures would double to $2.5 billion from $1.3 billion this year, according to an agency memo released today before a board meeting in Washington. The agency plans to boost staff to 8,653 next year from 7,010. "

"International demand for long-term U.S. financial assets rose less than economists projected in October as investors abroad sold agency and corporate debt, a Treasury Department report showed.

Net buying of long-term equities, notes and bonds totaled $20.7 billion for the month, compared with net purchases of $40.7 billion in September, the Treasury said in Washington. Including short-term securities such as stock swaps, foreigners sold a net $13.9 billion in October, compared with net buying of $127.6 billion the previous month. "

"Foreign purchases of Treasury notes and bonds were $38.9 billion in October compared with purchases of $44.7 billion in September. "

"NEW YORK (Reuters) - Most U.S. credit card companies reported charge-offs rose in November after two months of declines in a sign that consumers remain under stress, sending shares down industrywide."


...............................So, the Fed is meeting again to decide about their money printing and on interest rates this week.

gravelpit's picture
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Posts: 4
report in the local news

Britain and other countries with fast-rising government debts must steel themselves for a year in which “social and political cohesiveness” is tested, Moody’s warned


Damnthematrix's picture
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Re: Daily Digest - December 15
Perhaps not the prettiest of charts, but concentrate on the green line -
this is the measure that causes inflation/devaluation of the US Dollar.

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