Daily Digest

Daily Digest - December 2

Wednesday, December 2, 2009, 10:40 AM
  • Wither The US Dollar?
  • Iowa tax receipts continue to fall
  • New $100 billion safety net for jobless in works
  • Commodity Funds Top $1 Billion Inflows for Second Straight Week
  • Delinquencies in the commercial mortgage-backed securities market skyrocketed more than 500 percent
  • Bing seeks support for Detroit from state lawmakers
  • New Baltimore City Budget Figures Released
  • China's 'Rare Earths' Monopoly (Video)
  • US Rep.Hoyer: Debt Hike Vote Must 'Get Us Through Next Year'
  • Revenue Department Releases November Collections (Pennsylvania)
  • NC Justice Center: 9 eastern counties face 20% or higher poverty levels (Video)
  • Pennsylvania Bond Funds Are Drained, Officer Says
  • Half of Americans at risk for not having enough in retirement, survey says
  • DWP pay package could burden the utility's retirement system (Los Angeles)
  • Melted Russian Bombs Needed to Ease Uranium Pinch: Chart of Day


Wither the US dollar? (Al Jazeera)

Liquidity and the Fed The US Federal Reserve (popularly known as the Fed) is also unlikely to be defending the dollar any time soon. To prop up the currency, the Fed would have to buy back dollars which would require that the US offer euros, British pounds and Japanese yens in exchange. The Fed does not have much foreign currencies in stock because the US has been running trade deficits continuously for a long time now. The fact that the Fed does not have a war chest big enough to intervene credibly in the foreign exchange market on behalf of the dollar, paradoxically, discourages short and swift "shark attacks" - the massive selling of dollars by speculators in a very short span of time.

Iowa tax receipts continue to fall

The red ink continued to flow in the state treasury last month. The Legislative Services Agency’s monthly revenue report indicates that net state tax receipts fell by 7.9 percent in November. That marked the 11th monthly decline over the past 12 months and the 10th straight monthly decline. The nearly $2.32 billion collected so far this year in state taxes is 7.9 percent below the same five-month period a year ago when the treasury took in nearly $2.52 billion in net state tax receipts.

New $100 billion safety net for jobless in works

As unemployment spikes, the cost of compassion is going up too. By as much as $100 billion. That's the potential price of a push by Democrats in Congress to continue providing extra help to the jobless beyond the core 26-week unemployment insurance package provided under permanent law. The jaw-dropping numbers combine the approximately $85 billion cost of continuing emergency benefits through 2010 for the long-term unemployed — jobless more than six months — plus an estimated $15 billion to continue subsidies to help pay health insurance premiums.

Commodity Funds Top $1 Billion Inflows for Second Straight Week

Last week’s investments fell slightly from the $1.34 billion placed in commodity funds in the previous week, Cambridge, Massachusetts-based EPFR said in a report sent today by e-mail. Investors put money in the funds to hedge against dollar weakness and inflation, EPFR said.

Delinquencies in the commercial mortgage-backed securities market skyrocketed more than 500 percent

Delinquencies in the commercial mortgage-backed securities market skyrocketed more than 500 percent in October from a year ago, with California reportedly topping the U.S. Numbers released Monday by RealPoint Research show more than to $32.6 billion worth of loans are in default compared to $5.4 billion in October 2008. The total unpaid balance for the CMBS market for October 2009 was $810.9 billion, up from $805 billion in September, according to the Horsham, Penn.-based research firm.

Bing seeks support for Detroit from state lawmakers

Bing said he's seeking support for legislation to allow the city to use up to $250 million in fiscal stabilization bonds to bail the city out of its deficit. The cap is now $125 million..... Asked whether lawmakers understand the city could be bankrupt without the bond legislation, Bing said: "It's too soon to talk about financial management from the outside or whether the city will be bankrupt. I think they all understand ... we're at a very crucial point in the city of Detroit."

New Baltimore City Budget Figures Released

Figures have just been released for fiscal year 2011 and city leaders are calling it the worst budget crisis in recent memory. The projected deficit is over $190 million. Part of the reason is that housing sales are down over 67 percent. Income tax collection has also dropped because of rising unemployment.

China's 'Rare Earths' Monopoly (Video)

China is stockpiling, taxing and imposing ever-smaller export quotas on rare earths -- the 17 obscure chemical elements without which many industries would grind to a halt.

US Rep.Hoyer: Debt Hike Vote Must 'Get Us Through Next Year'

House Majority Leader Steny Hoyer said Tuesday that Congress should vote this year on a debt ceiling increase that gets "us through next year." .....Hoyer's comments indicate the House and Senate will vote on debt ceiling legislation this year that raises the ceiling well above the $13 trillion level.

Revenue Department Releases November Collections (Pennsylvania)

Secretary of Revenue Stephen H. Stetler today reported that Pennsylvania collected $1.6 billion in General Fund revenue in November, which was $56.8 million, or 3.4 percent, less than anticipated. Fiscal year-to-date General Fund collections total $10.4 billion, which is $217 million, or 2 percent, below estimate. Sales tax receipts totaled $609.1 million for November, $52.7 million below estimate. Year-to-date sales tax collections total $3.3 billion, which is $142 million, or 4.1 percent, less than anticipated.

NC Justice Center: 9 eastern counties face 20% or higher poverty levels (Video)

1.3 million North Carolinians live in poverty.

Pennsylvania Bond Funds Are Drained, Officer Says

Pennsylvania, the sixth-largest U.S. state by population, is running out of bond proceeds to fund capital projects and can’t make $375 million in payments owed to contractors, Budget Secretary Mary Soderberg said.  

Half of Americans at risk for not having enough in retirement, survey says

The numbers are dismal. But worse still is our reaction - actually, our lack of action. I’m talking about the latest reading of the National Retirement Risk Index, calculated by the Center for Retirement Research at Boston College. Battered by a lengthy recession, a record 51 percent of US households are now considered at risk of not having enough money to sustain their standard of living in retirement. 

DWP pay package could burden the utility's retirement system (Los Angeles)

The five-year plan could mean the agency's pension contribution could increase by more than 150% by 2014, according to a confidential report.....The DWP sets aside 30 cents for its pension expenses for every dollar it spends on salaries, City Administrative Officer Miguel Santana wrote in his report. By the end of the contract, that figure could reach 70 cents -- creating a "significant liability" for the agency, he wrote.

Melted Russian Bombs Needed to Ease Uranium Pinch: Chart of Day

The world’s atomic-power plants risk running short of fuel within a decade because uranium suppliers can’t build enrichment facilities or recycle Soviet-era warheads fast enough, according to the World Nuclear Association.


saxplayer00o1's picture
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Re: Daily Digest - December 2

National debt not long ago hit $12 trillion and now has already hit $12.1 trillion? Look here and here.

"The yen fell against all of its major counterparts after Japanese Prime Minister Yukio Hatoyama was cited by the Nikkei newspaper as saying the currency’s strength can’t be left as it is."

...........1A) Kamei Says Japan Should Seek Joint Intervention

“Japan has lent the U.S. about 200 trillion yen ($2.3 trillion), and that could become waste paper,” Kamei said. “It’s not just currencies. Each country has to take economic stimulus steps too.”

"Fifteen European banks now have assets larger than their home economies, compared with 10 lenders three years ago."

"TRENTON, New Jersey, Dec 1 (Reuters) - New Jersey's official state debt rose to $33.9 billion in the fiscal year ended June 30, from $31.86 billion in the previous year, according to an official report obtained on Tuesday.

The annual Debt Report by the state Treasury shows that when obligations such as pensions and health benefits are included, the state's total debt load increased to $51.25 billion at the end of fiscal 2009 from $44.5 billion a year earlier."

"By Q4 of this year, commercial mortgage defaults are expected to rise to 4%, nosing up further to 5.2% by the end of 2010, and then finally topping out at 5.3% in 2011. The report says that by ’11 and 2012, the larger share of commercial mortgages originated at the peak of the asset cycle in 2006 and 2007 will mature. Ultimately, that means those mortgages will require balance adjustments in larger numbers as a consequence of high loan-to-value ratios and weak debt service coverage that fails to meet prevailing criteria."

You wouldn’t call billionaire investor Wilbur Ross a bull on commercial real estate now. He says a “huge crash” has begun in the sector. “All of the components of real estate value are going in the wrong direction simultaneously,” Ross, CEO of WL Ross & Co, told Bloomberg. “Occupancy rates are going down. Rent rates are going down, and the capitalization rate – the return that investors are demanding to buy a property – is going up.”

"1. The residential housing market will dip again in mid-2010 before settling into a recovery in the back half of the year. "

"2. Foreclosure inventory will be a lot higher than some predict."

"3. No more historic lows on the 30-year fixed."

"4. Commercial real estate will continue to suffer the ills of low vacancy rates, low rents and high default rates."

"Average cost to lease space falls by 7.7 per cent in past year as companies around the world slash staff and consolidate offices"

"North Carolina is breaking the Medicaid budget lawmakers approved this summer because more people need health insurance coverage after losing their jobs and are getting treated for swine flu, an agency official said Tuesday.

State spending for the government health insurance program for low-income families and senior citizens — along with the disabled — is $160 million over budget so far this fiscal year as expenditures have surged nearly 9 percent compared to a year ago, Health and Human Services Secretary Lanier Cansler said."

"Revenues collected from the 10 major taxes which make up the General Fund totaled $665.8 million for July, August and September. They were budgeted at $722.4 million for that period.

The three largest revenue producers — the sales tax, gaming percentage collections and Modified Business Tax — were also the biggest problems, accounting for $41.5 million of that deficit.

Director of Administration Andrew Clinger said the first quarter of the fiscal year was expected to be the worst, but that the new numbers aren't showing signs of turning around as quickly as his economists had projected."

"HUNTSVILLE, Ala._ A new wave of formerly employed Americans, including many in Alabama, will soon join the growing ranks of people without health insurance.

Tuesday, many of the millions of laid off workers and their dependents who received federal subsidies to pay for extended health coverage began losing that help.

Without the assistance - a product of the American Recovery and Reinvestment Act that began in March - ationwide COBRA premiums for family coverage will consume the lion's share of their unemployment income. In nine states, including Alabama, COBRA premiums will exceed monthly unemployment income assistance, leaving most families no other choice but to drop health coverage.

That in turn will further strain state Medicaid programs as more and more families are forced to look for public medical services."

"Las Vegas faces $69 million shortfall in 2011

City of Las Vegas employees are being asked to accept 8 percent wage cuts in each of the next two fiscal years to help the city fill an ever-growing budget hole.

Without the concessions, city workers will be laid off, according to letters from City Manager Betsy Fretwell that were sent to the city's four collective bargaining units."

"There's no other way to avoid financial disaster than to layoff employees: City Councilman"

"The city faces a $408 million deficit next year and a $98 million deficit this year.

 "Everything we've done over the past few years have been one time fixes. They're not going to help this year," said Councilman Parks."

"The state Board of Equalization, relying on federal statistics, estimated this week that deflation could reduce what many property owners owe — a new twist for the annual formula that caps tax increases based partly on the rate of inflation.

For the owner of a home assessed at $400,000, that would amount to a savings of about $11 in next year's tax bills. Toss in the fact that rates usually rise by at least 2 percent a year, and the savings works out to nearly $100 on a $4,400 tax bill.

Although that may bring a small smile to the faces of home- owners, it's downright bad news for the local governments that rely on property taxes to fund everything from police services to holiday parades.

In Santa Clara County, the blow could translate to millions less for already-strapped cities, counties and school districts."

"At stake in the calculations is millions of tax dollars for deficit-riddled cities such as San Jose, which is struggling to close a $90 million budget gap by July. On Tuesday, Mayor Chuck Reed's office said it was too soon tell what the latest blow to city revenues might be.

But with reassessments due for big-dollar commercial and industrial properties, Stone wasn't shy about sounding the alarm: "There's not a possibility," he said, "the hit won't be a record.""

"The Minnesota state budget deficit for 2010-11 could mushroom to $5.4 billion in 2012-13, according to a revenue forecast that will be released later this morning."

"The state is facing a near $3 billion budget shortfall in the next fiscal year, as "rainy day" funds and federal stimulus dollars continue to dwindle."

"Levy explained that California's unemployment insurance fund is now $7.4 billion in the red. California is spending an average of $20 million more each day than it is taking in. And those numbers are likely to get worse, climbing to an estimated $18 billion deficit next year, while ballooning to $27 billion in the hole by 2011. California is in fact, so broke, the state has had to borrow money from the federal government to pay unemployed workers. "

"But California's unemployment fund will continue sinking deeper into debt, until the Legislature comes us with a permanent solution. The state will have to pay the federal government $730 million in interest for the billions we've borrowed to keep the unemployment fund afloat. That loan comes due in 2011 and the state is already drowning in a sea of red ink. "

"To entice servicers to accept a sale on defaulted properties for less than the outstanding mortgage balance, Treasury is offering incentive payments of $1,000 per completed short sale. Servicers will also receive $1,000 for each deed-in-lieu of foreclosure.

Subordinate lien holders will be paid to release their claims on defaulted properties, up to $3,000 of the short sale proceeds as long as the primary investor agrees to share the earnings, and for this concession, the investor will also receive up to $1,000 from the Treasury."

"Geithner also said legislation to bring transparency to the global, unregulated $600 trillion derivatives market was needed soon to restore confidence in the U.S. financial system."

"The Federal Housing Administration is proposing to increase the up-front cash paid by borrowers as part of an effort to shore up the agency's finances, which have been staggered by rising defaults in its flagship mortgage insurance program, according to FHA officials."

"A recent audit shows that the FHA's financial cushion already has eroded below the level required by law."

"By requiring that borrowers bring more cash to the table, the agency is seeking to ensure they have "more skin in the game and a stronger equity position in their loans," Donovan says. But he does not specify the size of the proposed increase. FHA officials said they have yet to determine how much cash will be required.

"There are several ways to accomplish this, and so we are currently analyzing various options to determine which is the most effective and consistent with our mission," Donovan says.

Up-front cash can include down payments as well as other payments. For now, FHA borrowers can put down as little as 3.5 percent, a level that many FHA critics say is too low. One lawmaker has introduced legislation that would boost the minimum down payment to 5 percent." LaughingSurprisedLaughingSurprisedLaughing

------------------from page 2-------------------------

"To protect itself against the riskiest borrowers, the agency has decided "for the time being" to raise its minimum credit score requirements for new borrowers. Again, FHA staff are still analyzing what the new threshold should be, Donovan's prepared testimony says.

The minimum credit score requirement is now so low -- 500 out of a possible 850 -- that it's basically irrelevant."LaughingSurprisedLaughing

"These measures are meant to build on other actions the FHA has taken to curb its risk and beef up its eroding cash reserves.

An audit released last month found that the agency's cash reserves have shrunk to a level far below what is required by law, and the agency could need taxpayer funding if worst-case scenarios play out."


............Here's what happened to the writer of that  FHA article.

james_knight_chaucer's picture
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Re: Daily Digest - December 2

That's a good pun that Al Jazeera has come up with: Wither the US dollar?

Meaning 1): Where will the US dollar go?

Meaning 2): Will the US dollar wither?

Anyone else notice that?

Johnny Oxygen's picture
Johnny Oxygen
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Equity vs Debt Based System

This is really an educational read about an equity vs debt system. Very much worth the time.





GrouchoMarxist's picture
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Posts: 34
Re: #2 Wither the dollar

If it's a pun then Al Jazeera can't spell.

Just as well my brothers can't spell either...

The dollar will wither whether we wish it or not - whatever the weather.

We will weigh dollars - way before we lose count of them.

Whither the dollar once it has withered ?

Ah, that's the question to which we all know the answer...It will return from whence it came ... to zero ...

Money, money, money...

Pedantic Groucho

poisonivy113's picture
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Re: Daily Digest - December 2

Only half of Americans at risk for not having enough for retirement? I would have thought that figure to be much higher, more like in the 80% range!

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
Re: Daily Digest - December 2

I think the retirement myth strangely goes unchallenged. The amount of money you would need to retire is staggering. Lets say you have $1,000,000.00 for retirement, which very very few of us will. I work in health care and I can tell you from experience that if you get seriously ill, and most likely will at some point, you can blow through a million in one or two years easily.


Perhaps if everything you had was paid off and you lived a very spartan life you may last a decade. But as you get older its invariably that you will have to spend huge fees for healthcare. Unfortunately it just isn't plausable that most of us will be able to retire without concern.

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