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Daily Digest - Feb 26

Thursday, February 26, 2009, 1:03 PM
  • Latvia, Ukraine Downgraded
  • Poland Can't Delay Asset Sales, Treasury's Grad Says
  • Won't Work, Ron Paul (HatTip Nate and JoeManC)
  • Bernanke, "We're not making it up." "We're not COMPLETELY in the dark."
  • Where is Your Money Going? (Bubble Depiction)
  • Man Living in Cave Faces Foreclosure
  • Some Slightly Good News: Feds Trying to Engage in More Serious Oversight of Citigroup
  • Economies count the cost of derivatives
  • Handicapping the Bank 'Stress Test'
  • U.S. to Get Bank Ownership Stakes Only as Losses Rise
  • Obama Address: A Road Map Without GPS
  • Greeks shut airports, services to protest economy
  • Should You Put Gold into Your IRA?
  • Japanese Goods Exports
  • Charlie Rose, Morgan John J. Mack
  • U.S. Existing Home Sales, Prices Slumped in January 
  • Record 19 Million U.S. Homes Stood Vacant in 2008 (Repost)
  • Wave Two of Foreclosures, 60 Minutes (Repost)
  • Toyota Wants to Build Car From Seaweed 

 

Economy

 

Latvia, Ukraine Downgraded

The ball is officially rolling. Ed Harrison provides some Bloomberg links on what looks like a rerun of the 1997-8 Asian crisis writ larger. Ukraine's IMF bailout package is at risk of failure.

[Ukraine's] long-term foreign currency rating was lowered to CCC+, seven levels below investment grade, the rating company said in an e-mailed statement today, saying political turmoil poses growing risks to the country's International Monetary Fund loan. ...

The hryvnia has lost more than 50 percent against the dollar in the past six months as reduced demand for exports and a lack of foreign credit causes Ukraine's first economic contraction in a decade. The situation has been aggravated by a power struggle between President Viktor Yushchenko and Prime Minister Yulia Timoshenko, delaying decisions needed to revive the economy and putting the second installment of the IMF bailout at risk.

"Hopefully S&P's move will concentrate minds in the cabinet of ministers, the presidential palace and the central bank," said Timothy Ash, head of central Europe, Middle East and Africa research at Royal Bank of Scotland Group Plc in London, in an e- mailed note to clients.

Ukraine is not alone in its plight. East Europe as a whole will slide into a recession this year as demand for exports collapses, the IMF, which has also bailed out Latvia, Hungary, Serbia, and Belarus, said last month. The economies will shrink 0.4 percent, the IMF predicted.

Latvia's credit rating was cut to junk by S&P yesterday, the second European Union nation to receive such a grade, because of a "worsening external outlook" triggered by the global crisis.

The Baltic state's government collapsed this week, a month after street protests over the deteriorating state of the economy turned violent. Latvia's economy shrank an annual 10.5 percent in the fourth quarter.

Fitch Ratings cut Ukraine's ratings to B, the fifth-highest non-investment grade on Feb. 12 and kept the outlook "negative," indicating they may fall further. Moody's said yesterday it may cut Ukraine's ratings within three months.

Poland, meanwhile, is accelerating asset sales to boost public finances.

 

Poland Can't Delay Asset Sales, Treasury's Grad Says

Feb. 25 (Bloomberg) -- Poland plans to accelerate asset sales to help state companies raise funds and prop up public finances as the country faces its worst economic slowdown in almost a decade, Treasury Minister Aleksander Grad said.

The government seeks to raise 12 billion zloty ($3.4 billion) from asset sales this year, the most since 2000, even after Warsaw's stock indexes fell to five-year lows last week and the zloty dropped to a near record against the euro.

"One could always wait for better times, but the market is what it is, and companies need funds for investment now," Grad, 46, said in an interview in his Warsaw office late yesterday. "Some companies may lose value in two years if they stop investments or fail to acquire a private investor."

Poland, which has sold 96.4 billion zloty of assets since the 1989 collapse of communism, owns controlling stakes in power, coal-mining, transportation, chemical and financial companies.

State-owned Polska Grupa Energetyczna SA, the country's biggest power group, plans to raise as much as 5 billion zloty in an initial public offering in 2009 and coal producer Lubelski Wegiel Bogdanka SA may sell 500 million zloty of new stock. PKO Bank Polski SA, which started trading in 2004, may sell "several billion" zloty worth of shares, Grad said.

The proceeds from the sales of new shares will go to the companies, not the government.

Won't Work, Ron Paul
(HatTip Nate and JoeManC)

Bernanke, "We're not making it up." "We're not COMPLETELY in the dark."

Man Living in Cave Faces Foreclosure

You've heard plenty of stories about foreclosures, but the latest victims of this brutal recession are about to lose their cave.

The mortgage meltdown forces a family's cave to be auctioned off on eBay.

That's right. For nearly five years, Curt Sleeper and his family have lived in a cave. His mortgage is about to come due and, like millions of other Americans, he can't refinance.

Where is Your Money Going? (Bubble Depiction)

Some Slightly Good News: Feds Trying to Engage in More Serious Oversight of Citigroup

To be honest, I'm not quite sure how to read this Wall Street Journal piece, since this is a spat between two parties, with a "he said, she said" quality to it. However, the title, "Citigroup Chafes Under U.S. Overseers:" suggests a bias in favor of Citigroup."Overseers" is a weak word, suggesting Uncle Sam really doesn't have legitimate authority to take the actions it is demanding.

But that assumes both viewpoints are equally legitimate, when the case can be made that they aren't. Poor abused Citigroup is unhappy that the government is trying to leash and collar the behemoth company. They somehow seem unable to process the fact that if they had done the same lousy job with a smaller institution, it would already have been seized by the FDIC and put in to receivership.

This viewpoint is not an exaggeration of the facts on the ground. As former bank regulator William Black points out in "Why Is Geithner Continuing Paulson's Policy of Violating the Law?":
Whatever happened to the law (Title 12, Sec. 1831o) mandating that banking regulators take "prompt corrective action" to resolve any troubled bank? The law mandates that the administration place troubled banks, well before they become insolvent, in receivership, appoint competent managers, and restrain senior executive compensation (i.e., no bonuses and no raises may be paid to them). The law does not provide that the taxpayers are to bail out troubled banks.

Economies count the cost of derivatives

The world financial system is leveraged beyond comprehension. It is estimated that between $US500 trillion ($732 trillion) and $US700 trillion worth of derivatives are outstanding.

Compare this with the total economic activity (GDP) of the world, which is about $US50 trillion, and even a 5 per cent drop in the value of the derivatives is beyond the rescue capability of the world's central banks, according to financial author Bert Dohmen in his Prelude to Meltdown.

These exotic and opaque financial instruments, which a year ago were almost unheard of, have become household names, as politicians appear on radio and television bleating about the $US60 trillion in credit default swaps (CDSs) slinking around the system, along with their retail cousins, collateral debt obligations (CDOs), many of which were sold to unsuspecting Australian charities and local councils -- to their detriment.

The banks, in turn, are starting to come clean about their exposures, and more will be revealed when they release their results.

The latest Reserve Bank Bulletin reveals that Australian banks have more than $13 trillion in off-balance-sheet derivative exposures, compared with $5.4 trillion six years ago. If just 1 per cent of these blew up because third parties at the other end got into trouble, the whole shareholder wealth would be wiped out and the banks could be broke.

As total bank assets are $2.3 trillion, why do Australia's banks have exposure to $13 trillion of derivatives positions? All banks hedge to reduce risk, but this is a great deal of hedging.

To put it in perspective, Australia's GDP is about $1.3 trillion, our pool of investment fund assets is $1.2 trillion and the freely floated market capitalisation of the stock market is $1 trillion.

Handicapping the Bank 'Stress Test'

"The outcome of the stress test is not going to be fail or pass [for banks]," Benrnake told legislators, but to "get a clear estimate of their capital needs."

Thus far, the Treasury has only said that: a) the tests would be applied to banks with assets over a $100 billion, which is essentially the top 20; b) banks found lacking would be told they needed to raise private capital; c) if they were unable to do so, they could apply for government funds under the newly created Capital Access Program, CAP, which is replacing the Capital Purchase Program, of CPP, first administered under then-Treasury Secretary Henry Paulson; d) funding would come from the second tranche of TARP.

In responding to several lawmakers on the subject, Bernanke, however, was not very specific and appeared to answer the same question in different ways.

At other points he said the tests were "intended to make sure they [the banks] have enough capital to fulfill their function," which presumably means lending, and to make sure "there's enough capital to meet capital standards."

U.S. to Get Bank Ownership Stakes Only as Losses Rise

Bernanke also said the so-called stress tests that regulators will run on the 19 banks will look at potential losses over a two-year horizon if the economy worsens.

The stress tests "will look at the balance sheets and the capital needs of each of our 19 largest $100-billion-dollar-plus banks over the next two-year horizon," Bernanke said in response to a question from Senator Bob Corker, a Tennessee Republican.

Economic Scenarios

The assessment will use "both a consensus forecast -- where we think the economy is likely to be based on private sector forecasts -- and an alternative which is worse," Bernanke said.

In his semiannual testimony on the economy to Congress today, the Fed chief warned that the recession may last into 2010 unless policy makers can stabilize the financial system.

The economic forecasts Fed officials prepared in January suggest that "a full recovery of the economy from the current recession is likely to take more than two or three years," Bernanke said.

Obama Address: A Road Map Without GPS 

President Obama's speech to a joint session of Congress may be one of the best political speeches of the last few decades. It will certainly be remembered for its cadence, passion, and a degree of astute articulation which has been missing from the national debate recently.

What the speech did lay out is a road map for getting the economy back in shape and then keeping it expanding. What it did not do, despite its own claims, was say how it would be paid for.

The jury will be out for a long time about whether the federal government's plan to stimulate the economy and save banks will work. The very earliest indications will be if job loss begins to decelerate in the second half of this year and banks free up credit to consumers and businesses. If this is not interrupted by more trouble in the financial system or problems in large economies abroad, it may be successful.

In terms of paying for the packages, the president offered two major plans. The first was to increase taxes on those who make more than $250,000 a year. The second was to cut spending in Iraq. The two challenges to the success of those tactics depend on how many US citizens who are rich become poor due to the recession and how much military effort will have to be switched to Afghanistan. It would be premature to make a forecast about either.

The president also said that his advisers had found $2 trillion in spending planned over the next decade which is unnecessary. The Congress may not view it that way, but, even if everyone is in agreement, a spending reduction of $200 billion or $300 billion a year over the next two or three years will not make a substantial enough dent in the deficit to bring it down by half.

The most perilous assumption about driving down the budget deficit is that, if the number of people out of work over the next two years moves up to the level where unemployment stays above 10% for any period of time, tax revenue into the Treasury will be so badly impaired that cutting costs in some large programs will not be able to make up for it.

Paying for the plan to save the economy may work, if the economy reacts just as the Administration thinks it will. But, the chance of that is like making a basket at the buzzer from mid-court.

Greeks shut airports, services to protest economy

ATHENS, Feb 25 (Reuters) - Greeks disgruntled by their country's economic woes ramped up protests against the government on Wednesday, shutting down airports and disrupting many public services.

Public schools and tax offices shut down, and services at ministries and public offices were suspended, as hundreds of workers marched to parliament with banners reading "No to pension reforms, privatisations and job cuts".

"Government policy ... only burdens workers, the unemployed and the poor," public sector umbrella union ADEDY, which represents 500,000 members, said in a statement.

The strikes are the latest in a wave of protests that have put pressure on Greece's conservative government, shaken by the worst riots in decades in December and struggling with a sharp economic downturn.

After years of 4 percent growth, Greece is seeing its economy sharply slowing down due to the global financial crisis. Workers accuse the conservative government, clinging to a one-seat majority in parliament, of only helping the rich.

"We will continue and intensify our struggle, until our demands are satisfied," ADEDY, which called the 24-hour strike, said.

National carrier Olympic airlines [OLY.UL] said 68 of its domestic and international flights were cancelled and four were rescheduled, while private rival Aegean Airlines (AGNr.AT) said 36 flights were grounded and 23 others disrupted.

The government, struggling with a huge public debt and fiscal deficits, has launched a 28-billion-euro ($36-billion) bank support plan, saying it meant to pour money into the slowing economy.

The strike was the latest in a series of public protests to hit the ruling conservatives. December riots were prompted by the police shooting of a teenager but fuelled by discontent over the economy and high youth unemployment.

In January, thousands of farmers protesting low product prices blocked border crossings, causing 11 days of travel chaos across Greece and hurting commercial transport. They ended the protest after securing a 500-million-euro aid package.

Truckers went on strike last week, demanding a crackdown on unlicensed transport companies and illegal economic immigrants, who they said were destroying goods and fighting drivers in their effort to stow away on board.

On Wednesday, they ended the five-day strike and blockades at the borders with Bulgaria and Greek ports, after transport ministry officials promised to start talks.

"Our strike is over, but only for now," said the president of Greek truck drivers federation, Apostolos Kenanides.

(Editing by Phakamisa Ndzamela)

Japanese Goods Exports

Should You Put Gold into Your IRA?

Within the last year, 401(k)s and IRAs have ceased to be a safe haven for Americans' nest eggs. In 2008, employees lost on average 14%, or about $10,000, of their retirement money. Those with more than $200,000 are even worse off - they lost more than a quarter of their savings. No wonder that more and more people are asking whether they can, or should, use an Individual Retirement Account (IRA) to hold physical gold. Our answer to the first part of the question is yes, indeed you can. The tax rules governing IRAs leave room for gold. But our answer to the second part is equivocal.

Background

In 1986, as the U.S. Mint began issuing gold coins for the first time since 1933, a tax rule against holding "collectibles" in an IRA was relaxed to allow gold and silver Eagles. Later, in 1997, the Tax Payer Relief Act opened the IRA door for a broad spectrum of precious metals (gold, silver, platinum, and palladium), whether in the form of bullion or coin. The easier rules now apply to all types of IRAs, including traditional, Roth, Simplified Employee Pension (SEP) and Simplified Incentive Match Plans for Employees (SIMPLE).

The only stipulation is that all bars and all coins other than Eagles must be .995 fine. Thus Canadian Maple Leafs and Austrian Philharmonics qualify, but the South African Krugerrand, minted with an alloy, does not. Numismatic coins are also impermissible for an IRA.

Charlie Rose, Morgan John J. Mack

U.S. Existing Home Sales, Prices Slumped in January

Feb. 25 (Bloomberg) -- Sales of previously owned U.S. homes unexpectedly declined in January even as falling prices made them more affordable, signaling that the housing slump is further from a bottom than previously estimated.

Purchases fell 5.3 percent to an annual rate of 4.49 million, the fewest since 1997, the National Association of Realtors said today in Washington. The median price dropped 15 percent from a year ago to a six-year low of $170,300. Distressed properties accounted for 45 percent of all sales.

Record 19 Million U.S. Homes Stood Vacant in 2008 (Repost)

Feb. 3 (Bloomberg) -- A record 19 million U.S. homes stood empty at the end of 2008 and homeownership fell to an eight-year low as banks seized homes faster than they could sell them.

 

Environment

Toyota Wants to Build Car From Seaweed

Toyota is looking to a greener future - literally - with dreams of an ultralight, superefficient plug-in hybrid with a bioplastic body made of seaweed that could be in showrooms within 15 years.

Fuel Use

Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

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Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

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37 Comments

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
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Posts: 929
Re: Daily Digest - Feb 26

Wow, that Recovery.gov site is pure propaganda! That bubble depiction is incredibly vague and biased...

"Protecting the vulnerable" - now this sounds pleasant. Care to guess what gets included in that?!?! Downright Orwellian!

I suppose I'm getting protected by the government when guns get banned and local police services are forced to downsize at the same time. I suppose I'm getting protected when my tax money goes to bail out the banks and the irresponsible borrowers...

This reminds me of Gerald Celente, when he mocked Bush's words by saying: "When a crazed meth attic breaks into my house at 3:00am, you mean you [George Bush] are going to protect me?! Barney Frank is going to protect me? Nancy Pelosi is going to protect me? Barack Obama is going to protect me?"

grl's picture
grl
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Posts: 188
Re: Daily Digest - Feb 26

Davos, thanks for all your posts - Always very informative and relevant. I wish we could read better news but it is what it is.

I haven't seen much said about the Treasury Bond market lately and I was wondering if anyone more knowledgeable than I cares to comment on the latest news on that front:

U.S. Treasuries Fall for Third Day on Supply, Spending Concern 
http://www.bloomberg.com/apps/news?pid=20601009&sid=a2t2Pc9Q1B50&refer=bonds

The article discusses the "Possibility of Default" quoting a bond trader in Seoul who states that “The U.S. is borrowing so much that it may have trouble paying the money back. <snip> Yields are headed higher.” and “More issuance will be needed to support the economy. The possibility of default is more and more as time passes.”

....and it ominously discusses China's future approach to buying more U.S. debt: "China’s top banking regulator said in comments today the country will pay attention to safety, liquidity and profitability when deciding whether to buy more U.S. debt."“How much we will invest in U.S. Treasuries will depend on the three elements,” said China Banking Regulatory Commission Chairman Liu Mingkang at a press conference in Beijing. 

Those quotes are troubling to me. Any comments?  

MarkM's picture
MarkM
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Re: Daily Digest - Feb 26

http://news.yahoo.com/s/ap/20090226/ap_on_go_pr_wh/obama_budget/print

Not to worry.  What's a little more spending?  3.5 trillion?  Buckle up.

joemanc's picture
joemanc
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Posts: 834
Re: Daily Digest - Feb 26
Quote:

The article discusses the "Possibility of Default" quoting a bond trader in Seoul who states that “The U.S. is borrowing so much that it may have trouble paying the money back. <snip> Yields are headed higher.” and “More issuance will be needed to support the economy. The possibility of default is more and more as time passes

There's no way we're ever going to default on our debt. Bernanke will print money until their are no trees left.(Jim Rogers)

That said, it's very interesting to hear a bond trader suggest that. Reminds me of the initial talk of nationalization, at first you had to dig deep to find mention of it and now it's mainstream(krugman, roubini, among others). I'm sure we'll hear more about default as we go along, but it will never happen.

CB's picture
CB
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Posts: 365
Re: Daily Digest - Feb 26

Mike, I think any other path than the one choosen by Obama & Co would bring on the crisis immediately. Real reform = radical change and cannot occur until the crisis is upon us in full force IMO. Perhaps there is some responsible planning going on for this, perhaps not...perhaps there is a great deal of irresponsible planning going on. I do feel sure that for the immediate future we will see more of the same - unworkable plans, crazy numbers, etc. Orwellian news speak has been par for the course for decades now.

I worked as a seasonal firefighter in a past life and remember a large fire in a dense Montana forest. Our crew worked night shift and each day there was a planning/strategy meeting at noon. A plan for the day was developed and delivered to us at 2 or 3pm. We left for our shift at 4 or so and every day, like clockwork, while enroute to our deployment we would get a call on the radio to through out the days plan and get new instructions. Each day in the afternoon the fire heated up and made a new run, burning like a demon, throwing out embers into unburned forest and seeding it for the next days run. It took until afternoon for the new spots to coalesce and build - and so by 4pm a new situation confronted the planners. Success was achieved only when political problems with the wisest strategy were resolved and this completely new plan was implimented - and when it was clear to those who had opposed the most reasonable course were convinced that attempts to simply put out "the fire of the moment" were bound to fail. As an aside - this fire was the only large fire I ever worked on where containment strategy was effective. In all other cases the weather - rain, cold weather, lack of wind - were the critical factors in stopping the fire. In the usual case the choosen strategy was ineffective in the face of the forces at work - or was simply stupid to begin with and never had a chance...

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Daily Digest - Feb 26

Obama forecasts biggest deficit since WWII

By Washington correspondent Kim Landers



US President Barack Obama

'This is just the beginning of the cuts we're going to make': US President Barack Obama (AFP : Chris KLEPONIS )

US President Barack Obama has forecast his country's
biggest deficit since World War II in a Budget that urges a costly
overhaul of the healthcare system and would spend billions to arrest
the economy's freefall.

The ($US3.5 trillion) $5.5 trillion spending plan includes $970
billion for healthcare reform and more money for education and energy.

Mr Obama says he will pay for it by raising taxes for the wealthy
and crack down on tax loopholes and the over-payment of benefits.

"This is just the beginning of the cuts we're going to make," he said.

"No part of my Budget will be free from scrutiny or untouched by
reform. We will end no-bid contracts that have wasted billions in Iraq
and end tax breaks for corporations that ship jobs overseas."

The Budget also includes provisions to impose pollution surcharges and cut farm subsidies.

"I am absolutely confident that, as messy as this process can
sometimes be, we are going to be able to produce a Budget that delivers
for the American people," he said.

The Budget predicts the US deficit will soar to $2.6 trillion by the end of this Budget year in September

The Budget forecasts that economic growth will contract 1.2 per cent
this calendar year, ahead of a 3.2 per cent expansion next year.

The Republican opposition in Congress was quick to condemn a budget
plan that underlined Mr Obama's intention to make good on campaign
pledges to expand health coverage for the uninsured and roll back tax
cuts for the wealthy.

Republicans condemned the plan as showing a dedication to "tax-and-spend" policies, indicating that the President will face major political fights getting the Budget passed.

"The American people know we cannot tax, spend and borrow our way
back to a healthy economy," said Representative Mike Pence, a member of
the Republican leadership in the House of Representatives.

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Daily Digest - Feb 26

GM posts $15b quarterly loss



US auto sales are expected to fall even more dramatically to between 10 and 11 million vehicles in 2009.

US auto sales are expected
to fall even more dramatically to between 10 and 11 million vehicles in
2009. (Reuters: Rebecca Cook, file photo)

General Motors has warned of a "challenging" year
ahead as it posted a $15 billion loss in the fourth quarter which
pushed its 2008 loss to $47 billion.

The 2008 results were nonetheless an improvement upon 2007, when GM
posted a $66 billion loss, even as annual revenues fell to $US149
billion from $US180 billion in 2007.

The struggling automaker, which last week asked the US Government
for billions more in emergency loans, said its dismal results reflected
the global economic crisis and industry-wide collapse in vehicle demand.

"2008 was an extremely difficult year for the US and global auto
markets, especially the second half," GM chairman and chief executive
Rick Wagoner said in a statement.

"These conditions created a very challenging environment for GM and
other automakers, and led us to take further aggressive and difficult
measures to restructure our business.

"We expect these challenging conditions will continue through 2009, and so we are accelerating our restructuring actions."

General Motors said last week it could need up to another $US22.6
billion in government loans in order to survive the current economic
downturn and announced plans to slash 47,000 jobs worldwide amid a
massive restructuring plan.

GM, which lost its title as the world's largest automaker to Toyota
last year, noted that global industry sales in 2008 were down 5 per
cent, or 3.6 million vehicles, versus 2007 levels, while US industry
sales fell by 18 per cent, or nearly three million units.

After posting the sharpest decline in 29 years in 2008, US auto
sales are expected to fall even more dramatically to between 10 and 11
million vehicles in 2009.

That would be the lowest level on a per capita basis in at least 50
years and comes after nearly a decade of sales that topped 16 million
vehicles a year.

West Oz 9999's picture
West Oz 9999
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Re: Daily Digest - Feb 26

Gidday Spodgers

That interesting about the Australian banks.. Could be in some deep shit.. The term wanker bankers seems to be universal at the moment.. Any more info on this ide like to read..

The Aussie Bloke

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Soulmaster
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Re: Daily Digest - Feb 26

It is sad how in mainstream media we never even hear speculation on alternative ideas.  Why don't we at least consider the notion that there are just too many cars?  Maybe everybody who can afford a car already has one or ten.  I don't want another car so stop jamming them down my throat already!  I can't even watch TV for more than 5 minutes without seeing a car commercial; watching cartoons with my son I even see car commercials...

 

This goes along with the idea from the Crash Course that never-ending growth is just not a possibility (at least thats an opinion I got from it).  So wouldn't the same be true for houses, cars, or just about any item?  I refuse to believe that nobody at GM has though about the fact that there are too many car companies and too many cars for the amount of people willing or able to buy...

 

 

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Aurum Vir
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Re: Daily Digest - Feb 26

 

Record 19 Million U.S. Homes Stood Vacant in 2008 (Repost)

Feb. 3 (Bloomberg) -- A record 19 million U.S. homes stood empty at the end of 2008 and homeownership fell to an eight-year low as banks seized homes faster than they could sell them.

 

China

 

 

I

 

 

Is this the solution to the housing crisis?

http://www.cnbc.com/id/29406401

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jrf29
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Posts: 453
Jim Cramer Recommends Gold

 

Last night, I caught a few seconds of Mad Money.  I heard the word "gold," so I listened: Cramer was in the middle of an entire show devoted to gold.  He said,

Jim Cramer wrote:

I don't mind recommending a gold stock...but I think a better way is to buy the physical gold or the GLD or even go to the US Mint and buy gold coins.  I want gold as part of your portfolio, maybe as much as 15% . . . . . I want people to own gold...I prefer GLD, the bullion, or gold coins because I like the physical.

Of course many here would disagree with the assertion that GLD is equivalent to the metal, but it still seems incedible that Jim Cramer -- of all people -- is recommending holding physical gold bullion.

capesurvivor's picture
capesurvivor
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Posts: 963
Re: Jim Cramer Recommends Gold

Maybe that's the intermediate top some folks are talking about.

 

SG

Farmer Brown's picture
Farmer Brown
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Posts: 1503
Re: Jim Cramer Recommends Gold

I'm catching today's show as I type this, and he recommended gold again. 

He also had a great quote, "All the capital is in China, and the communists have moved to Washington."   Funny, sad, and true.

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - Feb 26

Christ:

With total dissrespect intended: When Cramer's mind calculates 2+2=3.1 (he is still at 15% of net portfolio value) I just know this insolvency crisis is reaching critical mass. My hunch: By the time this momo gets to 50% or better gold won't be for sale.

God, I just have NO respect for Cramer. None, nodda, zip.

Sorry for the rant, even seeing his name gets my bloodpressure over the top.

Take care 

Stephen Lark's picture
Stephen Lark
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Posts: 44
Re: Daily Digest - Feb 26
Quote:

It is sad how in mainstream media we never even hear speculation on alternative ideas. Why don't we at least consider the notion that there are just too many cars? Maybe everybody who can afford a car already has one or ten. I don't want another car so stop jamming them down my throat already! I can't even watch TV for more than 5 minutes without seeing a car commercial; watching cartoons with my son I even see car commercials...
This goes along with the idea from the Crash Course that never-ending growth is just not a possibility (at least that's an opinion I got from it). So wouldn't the same be true for houses, cars, or just about any item?

Watch the Consumption chapter (ideally watch from the beginning) of The Story of Stuff to learn about The Golden Arrow of Consumption.

SamLinder's picture
SamLinder
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Posts: 1499
Re: Daily Digest - Feb 26

I just sent an email to the White House asking:

"Why Is Geithner Continuing Paulson's Policy of Violating the Law?"

I can hardly wait for their response.

(Should I start looking for those black helicopters now?)  Foot in mouth

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Re: Daily Digest - Feb 26

Sam,

What email adrress do you use?  Do you happen to have Barry's personal blackberry account?

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Re: Daily Digest - Feb 26
Davos wrote:

My hunch: By the time this momo gets to 50% or better gold won't be for sale.

God, I just have NO respect for Cramer. None, nodda, zip.

Sorry for the rant, even seeing his name gets my bloodpressure over the top.

Yes, but he's very funny when he throws chairs and eats syrofoam.  I think you missed the boat, Davos: when he was at his hedge fund, you could have hired him to manage your money for you!

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Re: Daily Digest - Feb 26
Patrick Brown wrote:

Sam,

What email adrress do you use?  Do you happen to have Barry's personal blackberry account?

 

Hey Patrick,

Barry said I'm not allowed to give it out - sorry. Cry

However, you can use what the rest of the peasants have to use:  http://www.whitehouse.gov/contact/

Remember, any black helicopters become your own personal responsibility! Wink

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Re: Daily Digest - Feb 26

Sorry Stephen, but the "The Story of Stuff" was just not watchable, at least for me. I could barely stomach her presentation which looked and sounded as if she were presenting to a bunch of pre-schoolers watching Sesame Street. But when she said it is the government's job to watch out and take care of us, I had to turn it off. As far as I am concerned, thinking that it is the government's job to "take care of us" is the kind of thinking, which among other things, is ruining this country.

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Re: Daily Digest - Feb 26

Hello Jrf29:

Money mouth Take care! 

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Re: Daily Digest - Feb 26

Hungary on the verge of bankruptcy:

http://www.telegraph.co.uk/news/worldnews/europe/hungary/4808111/Hungary...

 

You could almost cover your eyes, and throw darts at a map of Europe and determine the next Iceland.

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Re: Daily Digest - Feb 26

Hello JoeManC:

I out this on the blog of the 27th, but 50-60% got my attention, especially with all the EU authorities issuing assurances like Ben prints money. Take care

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Re: Daily Digest - Feb 26

The Bubba Comunity?!?!?!

2014?!?!?!?

 

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Re: Daily Digest - Feb 26

Sam,

Be very careful.  I wrote the Whitehouse during the Clinton administration about an issue.  I got a phone call that night.  They will track you and you will be on THE LIST.  I kid you not.

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Urban Training Exercises

Watching the video of Glenn Beck, the topic of which is disturbing, and his brief mention of the Iowa training exercises reminded me of the Saturdays a couple years ago here in Toledo when I would hear M16 rifle fire echoing throughout the downtown while I worked in my office.  Then, the military was conducting urban training exercises in preparation for deployment to Iraq.  I never really thought much of it at the time and, to be honest, felt somewhat proud (I know) that our military was preparing right here at home for deployment overseas.  I will say, it was a bit strange to be walking to the parking garage to head home right past soldiers moving through the streets seeking and providing cover as if I wasn't even there.  I suppose I don't fit the profile of an Iraqi insurgent.

http://www.toledoblade.com/apps/pbcs.dll/article?AID=2004412290352

The reason I share this now is because when I hear about such exercises taking place in Iowa under the current Administration, I don't feel pride in my country, or our military (yes, I know), but fear of my government and our military.

My apologies for getting off on a pseudo political issue.

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Re: Daily Digest - Feb 26

Thank you, Davos, I enjoyed watching that video.

A while back, I had never been a big Glenn Beck fan, but lately he is starting to show the type of divergent thinking that I think we need to start seeing in our mainstream media. I do feel as though he is far more "honest" in this respect than a Wolf Blitzer (puke).

I found it interesting to hear the former CIA bin Laden hunter support the right of Americans to revolt against an Unconstitutional government.

Also interesting was the former Army leader's opinion that all American soldiers would never turn on their own people. He further asserted that military members truly know and cherish the Constitution. Unfortunately, I personally don't have quite the confidence that he does, but maybe that's just me.

Goal Digger:

This is disturbing to hear. While it is probably not a de jure violation of posse comitatus, we seem to be getting closer week by week. And this is now, after we've eliminated bad-cop Bush and replaced him with a nice-cop. I won't be able to trust my government until it can show that it has faith in the People. This administration has not definitively ended torture, has not overturned the Patriot Act or the Military Commissions Act, and we watching more and more infringements on states' and personal liberties by the day, it seems. I hold no allegiance to either of the main parties, but I just call it like I see it. If and when I start to see substantive, positive change in this country, I will heap praise upon whoever effects it. Democratic statists and Republican statists are statists all the same.

"When the people fear the government, there is Tyranny; when the government fears the people, there is Liberty."       --- Thomas Jefferson, author of the Declaration of Independence of the United States of America

Now, close your eyes for a minute and attempt to envision what the world would be like if our politicians truly had a healthy amount of fear of and respect for the People that they "governed."

 

 

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Re: Daily Digest - Feb 26
ao wrote:

Sam,

Be very careful.  I wrote the Whitehouse during the Clinton administration about an issue.  I got a phone call that night.  They will track you and you will be on THE LIST.  I kid you not.

 

Thanks for the warning, ao, but I'm not too concerned. I've written them a few times before and the only response I've ever gotten was an official letter in the mail thanking me for writing. Needless to say, they never addressed my complaints.

Either you're on a "no-fly" list or they know I'm just too cantankerous to deal with! Wink

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Re: Daily Digest - Feb 26
Davos wrote:

The Bubba Comunity?!?!?!

2014?!?!?!?

<snip>

 

Davos,

Too bad it ended after only 10 minutes - I was really getting into it!

Glenn Beck raises some interesting questions. Like Mike P., I had given up on Glenn Beck as a rabid Bush supporter. However, maybe I'll start listening in again.

Keep up the good work, Davos - you have us all spell-bound every day!  Smile

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Re: Daily Digest - Feb 26
Quote:

As envisioned by President Barack Obama’s budget proposal unveiled Thursday,
the federal government will soon begin tapping into a huge new source
of revenue by requiring companies to pay for the permission to emit
so-called greenhouse gasses linked to global warming.

I have a couple of problems with this little $300B / year "new revenue" scheme. 

First, corporations don't really pay tax.  This is how it works (and if you don't believe me I would be glad to play the "follow the money trail" with you to prove the point):  The government raises taxes on the corporation, the corporation raises prices to pay for the taxes.  Folks, there is one and only one entity that can actually "pay taxes" and that is a person who earns money (or more correctly, generates value).  Everything else is just a pass through to the individual via some circuitous route.  The more subtle the route the better it is for the tax man because you don't realize you are getting screwed.  You think they're screwing someone else while they pick your pocket. Corporations are no more capable of actually paying a tax than the chair I am sitting in.  In all cases it is people, either directly or indirectly, who do the productive work that generates value and therefore are the only entity capable of actually passing some of that value to the government in the form of taxes.  So while you may cheer the fact that they are going to stick a $300B per year to the corporations, just remember that you will ultimately be paying for it.  The point is that laying a new tax burden on everyone is the last thing we need to help us get out of the current crisis.

Second, this is once again an incredibly regressive tax (don't let either party convince you that they are the champions of the poor).  It will punish the poor much more harshly than the wealthy and they are the least able to afford the lower energy consumption devices, vehicles, etc. because those technologies, at least for now, have a higher initial cost than their big carbon footprint (BCF) equivalent.  Along this line is the problem that if you happen to be stuck with a BCF car or house it is generally pretty difficult to just up and switch if you are currently just getting by.  

A much better option would be to heavily tax all NEW carbon emitting devices or assets that do not meet a certain level of efficiency which efficiency level would be ramped up over a number of years.  For existing carbon emitting devices or assets, provide incentives, grants, and tax credits (funded exclusively by the big taxes on the new stuff that doesn't come up to snuff) to improve their carbon foot print.  This would give people the chance to make better choices without punishing them because you decided to change the rules of the game post ipso facto.

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Re: Daily Digest - Feb 26

Hello Mike and Sam:

Oh, I was not in the Fox News fan club.

For me to watch Fox is really a statement. I never thought I'd be posting clips from Fox.

Really! And please, let me elaborate here. Trips to ATL to visit family were dreaded because they had cable, Fox and poor hearing. I guess I could deal with Fox but Fox on maximum volume, was for me, a trip to Gitmo ATL. The only difference is I did the driving and could only wish I was hooded while on I-85 down there. Seriously, I thought 85 was a route number, not the minimum speed limit. I've flown planes down runways slower than cars that were passing me down there.

When they came up here to visit if I heard one streaming Fox video from a laptop my firewalls access restrictions were instantly enabled. (We have no dish, cable or reception - I hate TV. As the late Kurt Vonnegut said in "Timequake" 'Booblings.')

I watched the documentary "Out Foxed."


That said, I see a huge turn in the mainstream media that "leans right." I'm not bashing Fox or Drudge, I'm just making an observation and that is: I saw very few articles on Drudge while our debt doubled. Everyone on this site knows we didn't go from 5.7 trillion to 10.8 trillion overnight (two simotanious wars and a tax cut). Now Drudge, which I have read everyday since it hit the web, looks like the Daily Digest. Drudge, even though I don't lean quite lean like they lean, is in my opinion, the best mainstream media outlet online, it is always 2 weeks early.

Seriously though, it looks like some economic website lately.

Even the best of the best financial blogs that I scour each day now have pictures from Drudge. Heres, one such headline, from one such economic blog titled Wow is the Word.

And here is the graphic that was on Drudge all day yesturday.

Dc

For me, Wow is The Word. Not the deficit, we have seen that, the wow for me was the best economic blogs getting economic data from Drudge?!?!

Okay, I know from past news events that we are close to realization when this occurs. 

Also, as far as liberties go, or maybe I should say, as far as liberties went - then would have been a good time to address or at least mention the erosion of liberty. Signing statements? 1:24 minutes to at or about 5:00 minutes, if I recall correctly, been a year or so. Never a whisper from the right, and a LOT of bills have these things which enable what which was passed into law, to to be revocated.

Many acts that were passed to make us safer from terrorism took away a lot of Constitutional freedoms.

My take: Many media outlets closed their eyes to this, I get the feeling they now regret doing so.

I also get the feeling that to get the news you have to look opposite the party. What I'm saying, Bush leaned right, Frontline left. Now Oboma leans left so we can go right to see unfiltered bias.

My friends can bash blogs for not being credible but I have seen more intelligence on blogs than in a lot of other places. Chris's site is keeps away from politics. Also, with blogs I have noticed that they will bash both sides, it doesn't matter if they are left, right, Democrat or Republican, just matters if they are right or wrong.  

Take care

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Re: Daily Digest - Feb 26

http://www.abc.net.au/news/stories/2009/02/27/2503430.htm?section=features

China syndrome: buying TVs does zero for Aust jobs

By Quentin Dempster

…Dr West is not an advocate for rebuilding the tariff wall to protect
Australian industry and jobs. He said that the GFC - global financial
crisis - had occurred because an unsustainable $US66 trillion debt
bubble accumulated since 1992 had finally burst.

He directly challenged Professor Gregory's analysis.

"What is happening is a fundamental structural deleveraging of the
global capitalist system and it's a deleveraging of historic
proportion. That will demand a different policy response than the ones
we've seen from the Federal Government.

"The scale of the deleveraging? We reached an historic average level
of debt in the global economic system in 1992. Since that time we have
added to the global capitalist system an amount of additional debt in
constant dollars of roughly $US66 trillion.

"Now if we consider that the US economy is around $US10 trillion to
$US12 trillion, depending on which day you're counting it, $US66
trillion is a gigantic amount of additional debt above the average
level of debt. And what's happening is we're bringing that debt level
down to an historic average. We have too much lending, too much
borrowing, and not enough productive capacity to balance it.

"Unfortunately over the last 18 months $US23 trillion in assets -
productive assets - to balance that debt have been destroyed by the
decline in bond markets in particular but also equity markets and
property markets.

"If the crisis is a deleveraging crisis it's very important to
understand the implications of that. One implication is it is
extremely difficult to predict what will happen next because leverage
multiplies the impact of apparently small events.

"How is it that some of the biggest banks in the world can go broke in
a few weeks because of a 1 or 2 per cent increase in defaults? How can
that happen? The answer is leverage. The Bank of America which is
currently fighting for its life - one of the largest banks in the
world, one of the largest banks in the United States - is leveraged 47
times. It's estimated that the appropriate level of leverage - debt -
for a commercial bank of that type is nine times."

Dr West said that with this bank's debt exposure a one percent
increase in defaults therefore did not produce a one percent impact.
It produced a 47 per cent change.

"What's happening in our economy will be overwhelmed by these global
forces. You take out of the global economy $US66 trillion in
purchasing and investment power then you have a structural change that
will not go away in a year or two."

Australians seemed to be viewing the GFC as tremors on the surface of
the lilypond in their backyards "when the radio is reporting a tsunami
is coming"….

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Damnthematrix
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Re: Daily Digest - Feb 26

"The point is that laying a new tax burden on everyone is the last thing we need to help us get out of the current crisis."

YOU are missing the point entirely....  The idea of the tax is for YOU to reduce your emissions.  So if your energy doubles in cost (to use simple numbers) but you then reduce your consumption by half, you are no worse off.

We have reduced our energy consumption by 80%!

We now save so much money, I no longer 'work' , and my wife earns maybe 1/3 of what we used to earn as a team just a few years ago.  In fact, were it not for the fact she has a habit (no, not drugs...!) we could live on HALF what she currently makes.

As I explained in another thread, TPTB of course don't want you all to live 'the simple life', because if a 1 or 2 percent contraction in the economy causes this much grief, just imagine how much pain 60%+ contraction would cause!

Mike 

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China syndrome: buying TVs does zero for Australian jobs

http://www.abc.net.au/news/stories/2009/02/27/2503430.htm?section=features

Quote:


Hand grenade

 

But one summiteer threw in what looked like a hand grenade to disrupt the group think. This is where the China syndrome as a major flaw in current Australian strategy emerged.

Dr Jonathan West, director of the Australian Innovation Research Centre and just back after 18 years as Harvard University's graduate school of business administration, said there was always one person who disagreed with the flow on the conversation. "I find myself in that position today".

Dr West spoke off the cuff and I've transcribed his remarks from Stateline NSW's camera tape.

"My disagreement rests on a simple proposition. What is the right thing to do about a crisis depends on what's causing the crisis. So it's very important to be clear about what's causing the crisis.

"If, as our federal treasury believes, the crisis is caused by a transitory passing downturn in demand, which is usually driven as Bob (Gregory) pointed out by central bank or government-driven increases in interest rates, then the appropriate reaction is for government to support demand, including by borrowing. And that's what our federal government is doing. It's borrowing money.

"And since we're a net debtor nation internationally it means we're borrowing money internationally ... read, in short hand .. from China. It's borrowing money to support consumption. What is that consumption?

"By and large it's buying goods from China. So we're borrowing money from China ... (I'm using short hand of course. We're borrowing money from a lot of places) ... to give to consumers who use it to buy goods that are no longer made (can no longer be made) in Australia ... from China.

"So we're left with the plasma TV and the debt and China has the jobs and the credit. Now that would be the right policy if the problem, as stark as it sounds, was a transitory contraction of credit due to rising interest rates and therefore a need to support demand. But that is not what's happened."

 

Historic proportions

 

Dr West is not an advocate for rebuilding the tariff wall to protect Australian industry and jobs. He said that the GFC - global financial crisis - had occurred because an unsustainable $US66 trillion debt bubble accumulated since 1992 had finally burst.

He directly challenged Professor Gregory's analysis.

"What is happening is a fundamental structural deleveraging of the global capitalist system and it's a deleveraging of historic proportion. That will demand a different policy response than the ones we've seen from the Federal Government.

"The scale of the deleveraging? We reached an historic average level of debt in the global economic system in 1992. Since that time we have added to the global capitalist system an amount of additional debt in constant dollars of roughly $US66 trillion.

"Now if we consider that the US economy is around $US10 trillion to $US12 trillion, depending on which day you're counting it, $US66 trillion is a gigantic amount of additional debt above the average level of debt. And what's happening is we're bringing that debt level down to an historic average. We have too much lending, too much borrowing, and not enough productive capacity to balance it.

"Unfortunately over the last 18 months $US23 trillion in assets - productive assets - to balance that debt have been destroyed by the decline in bond markets in particular but also equity markets and property markets.

"If the crisis is a deleveraging crisis it's very important to understand the implications of that. One implication is it is extremely difficult to predict what will happen next because leverage multiplies the impact of apparently small events.

"How is it that some of the biggest banks in the world can go broke in a few weeks because of a 1 or 2 per cent increase in defaults? How can that happen? The answer is leverage. The Bank of America which is currently fighting for its life - one of the largest banks in the world, one of the largest banks in the United States - is leveraged 47 times. It's estimated that the appropriate level of leverage - debt - for a commercial bank of that type is nine times."

Dr West said that with this bank's debt exposure a one percent increase in defaults therefore did not produce a one percent impact. It produced a 47 per cent change.

"What's happening in our economy will be overwhelmed by these global forces. You take out of the global economy $US66 trillion in purchasing and investment power then you have a structural change that will not go away in a year or two."

Australians seemed to be viewing the GFC as tremors on the surface of the lilypond in their backyards "when the radio is reporting a tsunami is coming". 

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Re: Daily Digest - Feb 26

I just finished reading this and it is eye opening. Please read it and forward it if you see fit. CM and this site is also mentioned.


http://www.rense.com/general85/des.htm 

 

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SamLinder
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Posts: 1499
Re: Daily Digest - Feb 26
mvalley wrote:

I just finished reading this and it is eye opening. Please read it and forward it if you see fit. CM and this site is also mentioned.


http://www.rense.com/general85/des.htm 

 

This has previously been discussed a number of times. For one relatively recent thread, see: http://www.peakprosperity.com/forum/worldwide-shipping-grinding-halt/11239

Also, enter Baltic Dry Index in the Search box at the top of this page for other links.

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West Oz 9999
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Posts: 53
Re: Daily Digest - Feb 26

Gidday Spodgers

Wow ok. Its like that.. This is all a bit of an eye opener for me also.. The above comments are a fast track to up to date info which is still new to me... Australia is as vunerable as anywhere.. Our PMs comments that our banking system is "different" and we should not fear the worst case senarios as seen in America and the UK is misleading and deceptive.. On the contrary..... With that sort of leverage its only a matter of time as our defaults increase as a result of rising unemployment.. The first domino has fallen... Thanks mate for providing that info..

The Aussie Bloke

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