Daily Digest

Daily Digest - February 22

Monday, February 22, 2010, 10:43 AM
  • The Incredible, Vanishing Greenback
  • Presenting A Scientific Theory For The Fair Value Of Gold
  • Citigroup Warns Customers It May Refuse To Allow Withdrawals
  • Here Come the State Bailouts
  • William Black Interview on PBS
  • Weird, Or Just Different?
  • Jim Sinclair's Mailbox
  • Governors Brace For More Economic Turmoil
  • Struggling Towns Printing Their Own Cash
  • The Euro Will Face Bigger Tests Than Greece
  • Wall Street Targets the Elderly: Looting Social Security


The Incredible, Vanishing Greenback (mhoop)

The ruling elite in Washington is going to try to inflate its way out of its debt conundrum, attempting to pay off the government's foreign creditors with greenbacks that lose value right before your eyes, like an ice cream cone melting on a hot summer day. The process is already well under way. If you could once buy a silver dollar for one greenback, but it now costs 15 greenbacks, then the dollar is now worth seven 1960 cents. If gold once cost $35 an ounce and it now costs $1,100 an ounce, than the greenback is now worth about three 1940 pennies.

Presenting A Scientific Theory For The Fair Value Of Gold (mhoop)

The greatest mystery in finance is and always will be what the fair value of gold is. Unlike stocks, where fair valuations are usually based on some multiple of cash income, earnings, or dividends, gold has no inherent dividend, nor a positive carry, and thus value is confined the realm of the intangible. Some pundits have considered the fair value for gold a price which covers the currency in circulation in a given country on a dollar for dollar basis. Others attribute a floating valuation to gold such that is convertible to any asset at a specific ratio, to account for inflation over the ages.

Citigroup Warns Customers It May Refuse To Allow Withdrawals (mhoop)

The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts for seven days.

Here Come the State Bailouts (Davos)

Where exactly in the rule of law does it allow for Medicare debt forgiveness? Is this not monetizing? This is not a little question or a minor detail, the rule of law and accounting standards need to be followed or confidence in the system will continue to deteriorate.

William Black Interview on PBS (Davos)

Weird, or just Different? (Davos)

Health Care: Japan Style at or about the 1:50 minute point.

Jim Sinclair's Mailbox (Davos)

A.) Devaluation, B.) Devaluation C.) Devaluation or D.) All of he above

Governors Brace For More Economic Turmoil (Nickbert)

States face budget holes totaling $134 billion over the next three years, according to the governors, who explained that tax collections keep declining as Medicaid costs soar. High unemployment persists. States cut 18,000 jobs in January alone and more job losses are anticipated. Because states are required to balance their budgets, shortfalls will be made up by raising taxes or fees or cutting services.

Struggling Towns Printing Their Own Cash (Nickbert)

In most cases, these communities are simply looking to boost local commerce. The currency has to be spent in town, obviously, because it's worthless anywhere else. But a growing distrust of the U.S. dollar is also at work.

The Euro Will Face Bigger Tests Than Greece (Christian W.)

The European Union was brought into existence by putting the cart before the horse: setting limited but politically attainable targets and timetables, knowing full well that they would not be sufficient and require further steps in due course. But for various reasons the process gradually ground to a halt. The EU is now largely frozen in its present shape.

Wall Street Targets the Elderly: Looting Social Security (pinecarr)

Social Security, formerly an untouchable "third rail of politics," is now "unsustainable," while the real unsustainables-a pre-1929 unregulated financial system and open-ended multi-trillion dollar Global War Against Terror-are the new untouchables. This transformation signals the complete capture of American democracy by an oligarchy of special interests.

Please send article submissions to: [email protected]


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Bank Lending Plummets As Wall Street Strangles Economy

Bank Lending Plummets As Wall Street Strangles Economy



Thus, at the same time that the U.S. government is dumping more supply onto the market than at any time in history, U.S. bond prices were (and are) sitting at their absolute, maximum possible price. As I observed before, elementary arithmetic/economics tells us that when you increase supply then prices must fall. Yet, all we see are more and more bonds being dumped onto the market – while the Fed keeps those bonds propped-up at their maximum, possible price by “buying” (almost) all of them.

This means that there is no doubt whatsoever that the U.S. bond market is heading for a crash which will make the U.S. housing-collapse look like a tea-party. However, neither the Oligarchs, nor the Fed, nor their servants in the U.S. government care about what they are doing to the U.S. economy – all that matters is to prop-up their insolvent 'empire' as long as possible.

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Re: Daily Digest - February 22

"WASHINGTON — The total budget hole for state and local governments in fiscal 2011 is “approaching $150 billion,” Mark Zandi, chief economist and co-founder of Moody’s Economy.com, said in an interview Thursday.

But Senate Democrats on the same day said that legislation to provide more federal aid to states will be delayed until after the Senate approves a jobs bill without those provisions.

“If they don’t get more aid, there will be more serious job cuts and program cuts,” Zandi said.

Some states are already preparing for such cuts, he added, saying that he “would guess that a number of states are counting on that extra money” from federal legislation.

Zandi and other economists warned three months ago that state budget cuts would cause the gross domestic product to drop nearly one percentage point in fiscal 2011 unless the federal government swoops in with aid to states extending beyond what is currently provided by the American Recovery and Reinvestment Act, the vast majority of which expires this year."


"NEW YORK (AP) -- As landlords find themselves owing more than their properties are worth, some have simply walked away, leaving garbage to pile up. Others have disappeared into bankruptcy, with unpaid utility bills. Some have tried to reduce their losses by neglecting basic maintenance.

Harold Shultz of the Citizens Housing and Planning Council in New York City says the city alone has at least 100,000 apartments in disrepair and decay."

"Frenzied developers with access to cheap money are creating a glut of premium office space and luxury apartments, priced at about 80 times the average income of the city's residents. "

"The disturbing phenomenon extends beyond Beijing, where housing prices are far higher than in Dubai's overbuilt property market before that red-hot Persian Gulf economy imploded last year. In December alone, Chinese housing prices rose almost 8 per cent in 70 major Chinese cities, while housing starts leapt by 34 per cent nationwide.

Jim Chanos, the legendary U.S. short-seller who thrives on post-bubble bargain-hunting, claims the overheated Chinese housing market is "Dubai times 1,000 — or worse.""

"Corporate debts breached the 1,500 trillion (1.5 quadrillion) won mark in September for the first time in history, as local firms relied heavily on debt financing for business expansion. "

"SPRINGFIELD -- To become solvent, the state must enact the largest tax-increase package in Illinois history, whack another $2 billion from already starved government programs and wrest major financial concessions from the state's unionized work force, a nonpartisan government watchdog contends.

In a new analysis of Illinois' "horrific" finances, the Civic Federation lays out the painful choices awaiting Gov. Quinn and the Legislature as they stare down an epic $12.8 billion budget deficit that has choked the flow of state cash to public universities and schools, transit systems and social-service agencies to the point of economic collapse.

"Doomsday is here for the State of Illinois," said Laurence Msall, the organization's president."

"The state’s estimated revenue shortfall for the biennium ending in 2011 grew from $2.6 billion to $2.8 billion after the latest revenue forecast was released recently."

"Feb. 22 (Bloomberg) -- The U.S. will see borrowing costs on its debt rise ‘a lot’ if President Barack Obama fails to set out by May measures to bring the record budget deficit under control, former Federal Reserve Governor Randall Kroszner said.

“There’s been a lot of discussion about fiscal responsibility, but we haven’t had a clear plan yet and that’s going to be crucial,” Kroszner said today in a telephone interview during a visit to London. “If we do not get a clear plan in the next two months the markets are going to start to be much more wary and I think borrowing costs will go up a lot.”"

"RALEIGH, N.C. -- Top lawmakers say North Carolina will come up $500 million short of its $19 billion budget by the end of June.

"It would not surprise me if it hit $600 [million] or $700 million," said Sen. David Hoyle, a Gaston County Democrat and co-chairman of the Senate Finance Committee. "But $500 million seems like a given."

Revenue at the end of January was $35 million behind estimates. The state would be in a $300 million hole if not for a special Revenue Department program that settled dozens of business tax disputes, bringing in a flood of money.

But income and sales tax collections continue to trail what the legislature's fiscal staff projected."

"South Carolina and other cash-strapped states borrowed a total of about $31 billion from the federal government over the last two years to provide their unemployed workers with benefit checks, and now as the country climbs out of recession the states must find a way to pay it back.

John Rainey, South Carolina's chief economic adviser, said the state needs to take calculated steps to repay its $800 million debt, while some others hold out hope that the federal government will forgive the loans."

"German tax revenue fell 7.8 percent in January from a year earlier, the ministry said, led by an 11.7 percent drop in intake at federal level. Revenue at Germany’s 16 states dropped 9.1 percent in January from a year earlier, it said.

Merkel’s government plans to borrow a record 85.8 billion euros ($115.9 billion) this year. In January alone, borrowing amounted to 9.1 billion euros, the ministry said. Germany’s overall budget deficit will swell to 5.5 percent of gross domestic product this year, almost twice the European Union’s ceiling of 3 percent, it said.

“The measures taken against the crisis” have made a “deep impact on Germany’s public coffers,” Deputy Finance Minister Hans Bernhard Beus said in the report’s editorial."

"This year the state faces a $32 million dollar deficit, and there is a projected deficit of more than $100 million for next year's budget."

"LISBON -- Unions representing Portugal's public-sector workers are preparing a national strike to challenge a wage freeze that is key to government efforts to cut a towering budget deficit. But will the unions prevail?

The March 4 strike highlights political challenges faced by the government of Socialist Prime Minister Jose Socrates. In seeking to close a budget gap worth 9.3% of gross domestic product in 2009 - more than three times the European Union's 3% limit – the government is running headlong into union culture."

"Most of Kuwait's multibillion- dollar investment company industry could be wiped out by debt repayments on the finance houses' leveraged investments made before the recession, senior international and local bankers have warned."

"Two of the largest investment companies defaulted on international loans last year. While no other finance house has publicly collapsed, bankers and analysts say almost all are struggling to meet debt repayments in the face of crippling losses - some of them on investments in Dubai, the troubled Gulf emirate. There are 100 investment houses in Kuwait but "you will not see half of them still operating in 2011", said Jasem Al-Sadoun, chairman of Alshall Investment.

Many investment companies are in effect insolvent but are allowed to totter on by local banks reluctant to push them into bankruptcy - preferring to reschedule or renegotiate loans to avoid writedowns, say international bankers."

"WASHINGTON (Reuters) - Many teachers and educators across the United States are at risk of losing their jobs in the next few months, the nation's education secretary told a meeting of the National Governors Association on Sunday.

"I am very, very concerned about layoffs going into the next school year starting in September. Good superintendents are going to start sending out pink slips in March and April, like a month from now, as they start to plan for their budgets," said Arne Duncan, referring to the slips of paper included in some paychecks to notify a person of being fired."

"The cash-starved State of Illinois is months late and more than $700 million behind in paying its education bills, and at some school districts, taxpayers don't have to go far to find out exactly how much their schools are owed.

Districts stretching across Naperville, Carpentersville and Rockford have posted signs outside their schools announcing how much the state owes them.

Elgin, home to the state's second-largest school district, was dotted last week with school signs declaring: "The state owes U-46 $12.4 million.'' "

"New York City public hospitals say they are seeing a rise in the number of uninsured patients, as state funding continues to drop.

The New York City Health and Hospitals Corporation announced Sunday that the number of uninsured New Yorkers who sought health care services at HHC hospitals, nursing homes and health centers in 2009 continued to increase for the third year in a row.

The number of patients with no health insurance grew to nearly 453,000.

That's a 14% increase from 2006, when HHC served some 396,000 patients who lacked health insurance coverage."

"The Senate began passing portions of the package on Friday, including plans to reduce the state government payroll by 5 percent and cut inmate health care costs by hundreds of millions of dollars.

Senate Democrats also pushed through a measure that would require out-of-state online retailers such as Amazon.com to collect sales and use tax on items sold to California residents. "

"Saudi Arabia’s oil exports to the US last year sank below 1m barrels a day for the first time in two decades just as China’s purchases climbed above that level, highlighting a shift in the geopolitics of oil from west to east."

"The measures cap the unused sick days retiring employees can cash at $15,000; require public workers to contribute at least 1.5 percent of their salaries toward their health insurance costs; and bar part-time workers from enrolling in the pension system.

Public worker unions oppose the changes; municipalities applaud the reforms for their future cost savings.

The pension system is underfunded by about $34 billion and at risk of becoming insolvent."

"Several hundred Delphi Corp. union retirees could have their retirement benefits slashed soon, joining thousands of retired salaried workers whose pensions also are being reduced as the federal government takes over the company's depleted retirement funds.

The retired union workers, some of whom worked at Delphi plants in Oak Creek that closed in November 2008, could have their retirement income cut in half in the next few months, union officials say.

"It was hard enough to find another job at age 55. Now I stand to lose about $100,000" in total retirement income, said Jeff Cieciwa, an Oak Creek plant employee for 24 years represented by the International Brotherhood of Electrical Workers.

His situation is similar to the previously reported plight of about 20,000 former salaried workers - shop-floor supervisors, engineers and the like - whose pensions also are being cut as the federal Pension Benefit Guaranty Corp. assumes control of Delphi's retirement funds."

"WASHINGTON (Reuters) - The already gloomy conditions of states' economies are set to worsen, according to preliminary survey findings from the National Governors Association released on Saturday.

"The situation is fairly poor for a lot of states around the country. In fact, most states," Vermont Governor Jim Douglas, who is chairman of the association, said at a press conference at its annual meeting.

"What we're finding out from a fiscal standpoint is that the worst is yet to come," Douglas said.

In a survey conducted last week of 45 of the 50 states, the group found that states have $18.8 billion of budget gaps yet to be closed in fiscal 2010. This comes after they have already imposed measures to eliminate budget imbalances totaling $87 billion in the fiscal year, which for most started last summer."

  •  Headlines and quotes

China' electricity consumption surges 40% in Jan

Total housing debt is set to reach $1 trillion within a year (Australia)

European banks need to issue $327 billion annually: Citi

Argentine Bond Exchange Threatened as Yields Rise: Week Ahead

Public debt increases as borrowing rises to £4.3 billion in January (UK)

22/02/2010German unions flex muscles as economy stutters

Recession Swells Medicaid Rolls, Shrinks State Treasuries

Number of homeless students skyrockets in local school districts (Michigan)

West Palm Beach pension gaps a 'time bomb' (Florida....$431 million "gap" in police, fire & other retiree pensions)

Local School Districts Lose Huge Amounts of State Aid (NJ)

Supervisors to face nightmare budget scenario (Santa Barbara)

Lufthansa cancels 800 flights amid 'biggest strike in German aviation history'

longevity swap market (Google search...related to pensions)

Bankruptcy filings at record high in 2009, despite law changes

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Re: Daily Digest - February 22

The dollar is worth 3 circa 1940 pennies - and with that great news we are all on our way to paying state taxes in 50 states in addition to our federal tax.

Okay, makes sense to me.


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Re: Daily Digest - February 22

How bad is the job market?


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Re: Daily Digest - February 22

Climate scientists 'under cyber attack'

By Thea Cowie


An organised cyber-bullying campaign, including abusive emails, is targeting Australian climate scientists who speak out on climate change, according to author Clive Hamilton.

The 2009 Greens candidate says the attacks are arranged by "denialist organisations" and are aimed at driving climate scientists from the public debate.

Professor Hamilton says aggressive, abusive and sometimes threatening emails are being sent to distinguished scientists each time they speak out on the subject.

"Apart from the volume and viciousness of the emails, the campaign has two features - it is mostly anonymous and it appears to be orchestrated," he wrote in ABC's The Drum.

Professor Hamilton quotes an email received by University of Melbourne Professor David Karoly which compares the scientist's actions to those of Hitler, Stalin and Pol Pot.

"It is called treason and genocide," the email says.

"Oh, as a scientist, you have destroyed people's trust in my profession. You are a criminal. Lest we forget."

But some attacks are more personal.

Professor Hamilton says a young woman opened her email to receive threats against her children.

"Did you want to offer your children to be brutally gang-raped and then horribly tortured before being reminded of their parents' socialist beliefs and actions?" the email reportedly says.

"Burn in hell. Or in the main street, when the Australian public finally lynches you."

Journalists have also reportedly become targets of the cyber-bullying campaign.

"I have spoken to several, off the record, who have told of torrents of abusive emails when they report on climate change, including some sufficiently threatening for them to consult their supervisors and consider police action," he says.

Professor Hamilton's article is the first in a five-part series. Tomorrow he will explore who is behind the cyber-bullying campaign.

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Frustrated Owner Bulldozes Home

Frustrated Owner Bulldozes Home Ahead Of Foreclosure



Bank of America Foreclosed Wrong Home


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Re: Daily Digest - February 22.----european subject---

Wilhelm Hankel, ex President of the Province-Centralbank of Hessen/Germany, currently consultant to the iraque and syrian government for setting up their centralbanks, said in an interview with the german business newspaper " Handelsblatt " today: 

" If the german government decides to Bail out Greece, he and 3 of his collegues, Prof. Wilhelm Noelling, Prof. Joachim Starbatty and Prof. Karl Albrecht Schachtschneider will call the german federal constitutional court and probably the european court of justice for violation of the Maastricht Agreement."

The Maastricht agreement specifically and explicitly forbids any bailout of other sovereign countries of the european union.

He continues that the monetary union, which he opposed from the beginning, is unworkable because it is impossible to impose the same monetary politics, especially the setting of interestrates, to completely different types of economies.

He argues, it´s Harry Potter politics to believe, that structural weaker countries like Greece, Spain, Italy or Portugal would be ably to comply to the same tough criteria of convergency as structural stronger countries.

His believe is the euro will be history in less than 5 years time.


oopsy daisy….  ( I just saw -Gangs of New York- again, so i thought that expression is appropriate)


I have to admit, i was´nt very happy when i read that.





regards from germany

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Re: Daily Digest - February 22

Kunstler's latest:



The Tea Party appeals to the swelling numbers of the new former middle class angry at the sudden vanishing of their accustomed perqs and entitlements to a predictably comfortable suburban existence. They're mad at the government and hot for "liberty." But how do they propose to maintain the hyper-complexities of suburban life without taxes to pay for fixing the countless roads their lives depend on or to run the gold-plated central school districts that seem to exist solely to provide Friday night football? As for liberty, a handful of despotic corporations from McDonalds to WalMart have been granted the liberty to destroy the Tea-bagger's bodies and the economic fabric of their communities -- and they seem to want more of that kind of liberty, based on the recent decision of a "conservative" majority on the Supreme Court allowing corporations to buy elections. The Tea-baggers also apparently crave the liberty to push other people around, especially on questions of abortion and religion. That's an interesting kind of freedom.


Faced with the multiple threats of peak oil, the progressives are pounding billions into the automobile makers and shoveling tons of stimulus money into highway improvement projects, while the railroads we will desperately need in the future continue to be starved to death, and no effort is made to promote walkable communities -- including a federally-led reform of our insane zoning laws which mandate a suburban development outcome in every corner of the country.

:):):) The last gets a hearty huzzah!!! from this corner, but everybody gets a shot today.

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