Daily Digest

Daily Digest - February 25

Thursday, February 25, 2010, 10:45 AM
  • Here's Why It's Different This Time
  • 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover
  • Read His Lips: Obama Calls for Increasing Payroll Taxes on ‘Households’ Earning Less Than $250,000 Per Year
  • Rasmussen Reports: Only 9% Say Most in Congress Interested in Helping People
  • The Dines Letter 
  • 21st Century Breakdown
  • Deathbed of Keynesian Economics Will Be in U.K.
  • Bad Credit Sidelines Some Jobless Workers
  • Jobless Recovery Gang Ignores Sobering Reality
  • The World Economy Has No Easy Way Out Of The Mire
  • GM to shut down Hummer business
  • The Economics of Higher Education
  • In An Age Of Unsustainable Global Debt, How Should You Invest?
  • U.S. Economy: New-Home Sales Decline to Record Low
  • Something Very Strange Is Happening With Treasuries
  • NYC 1975 = California 2010
  • Gasland
  • Eastern Europe Looks to Neighbors to Break Russia’s Energy Grip
  • Water Waste A Kink In New York Shale Gas Future
  • Oil Shortage Spills Into Water


Here's Why It's Different This Time (Chart) (Woodman)

Even if the recovery continues and the number of the long-term unemployed finally stops rising, it will likely take a decade or more for this group to shrink to normal levels.

20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover (Woodman)

Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression? Well, the "second wave" of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it.

Read His Lips: Obama Calls for Increasing Payroll Taxes on ‘Households’ Earning Less Than $250,000 Per Year (mhoop)

President Obama presented a new health care plan on Monday that calls for raising the Medicare payroll tax on some households earning less than $250,000, an apparent breach of his campaign pledge not to raise taxes on families earning less than that amount. The president’s plan also calls for increasing taxes on interest, dividends, annuities, royalties and rents.

Rasmussen Reports: Only 9% Say Most in Congress Interested in Helping People (mhoop)

The Dines Letter (mp3) (Davos)

Topic: Goldbug; The Second Great Depression, the Coming Currency Crisis - Hyperinflation? (ASX file here)

21st Century Breakdown (Jim Q., Davos)

Political leaders and the mainstream media have been blindsided by the sudden mood shift of the country in the last few years. The reason they have been blindsided is they believe world history is linear. Liberals have now begun referring to themselves as progressives. These people think the world only progresses. The facts indicate otherwise. History is cyclical. History is replete with grand empires like Rome, Spain and Britain. It is also replete with Dark Ages, depressions and wars. Strauss & Howe have established that history can be broken down into 80 to 100 year Saeculums that consist of four turnings: The High, The Awakening, The Unraveling, and the Crisis.

Deathbed of Keynesian Economics Will Be in U.K. (mhoop)

The U.K. has been in Keynes overdrive for the past 18 months. The budget deficit is already more than 12 percent of gross domestic product, on a par with Greece. And while the Greeks are cutting spending, the British deficit is widening. Figures for January showed another fiscal blowout. At the same time, interest rates have been slashed to 0.5 percent. And the pound has slumped in value, which is supposed to boost demand for British goods, and help close the trade gap.

Bad Credit Sidelines Some Jobless Workers (Nickbert)

Employers’ growing reliance on credit checks when screening new hires is turning out to be bad news for millions of jobless Americans. Losing a job can often mean trouble paying bills for many unemployed people. And the damage done to their credit history increasingly can become a barrier to finding another job, touching off a vicious downward spiral.

Jobless Recovery Gang Ignores Sobering Reality (Davos)

There is a reason that 702 American banks, nearly one in ten, were on the FDIC “problem list” as of the end of 2009. A large number of small and mid-sized banks are burdened with home and commercial mortgages that are in default and may even go into foreclosure.

New data from First American CoreLogic shows why the solution to the problem banks face is so difficult to find. Eleven million, three hundreds thousand homes had underwater mortgages as of the fourth quarter of last year.

The World Economy Has No Easy Way Out Of The Mire (anton95)

Unhappily, the result of what I call success would probably be a still bigger financial crisis in future, while the results of what I call failure would be that the fiscal rope would run out, even though reaching the end might take longer than worrywarts fear. Yet the big point is that either outcome ultimately leads us to a sovereign debt crisis. This, in turn, would surely result in defaults, probably via inflation. In essence, stretched balance sheets threaten mass private sector bankruptcy and a depression, or sovereign bankruptcy and inflation, or some combination of the two.

GM to shut down Hummer business (Nickbert)

General Motors said today it will wind down its Hummer SUV line after failing to complete a deal to sell the brand to China's Sichuan Tengzhong Heavy Industrial Machinery Co.

The Economics of Higher Education (Davos)

... So, using these assumptions (feel free to use your own), the college graduate has to make $121,347 per year, every year of his career after college, to just to pay for the education.

In An Age Of Unsustainable Global Debt, How Should You Invest? (Doug S.)

It is reasonable to expect sudden changes in the investment weather requiring intuitively driven adaptations in investment strategy. This raises the question: How should one invest when past metrics for good investment may be misleading? The answer is this: When investment for private gain is so uncertain one can still invest with an eye toward furthering the public good.

U.S. Economy: New-Home Sales Decline to Record Low (Ben Johnson)

Sales of new homes in the U.S. unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand.

Purchases declined 11 percent to an annual pace of 309,000, below the lowest forecast in a Bloomberg News survey of economists, figures from the Commerce Department showed today in Washington. The median sales price dropped 2.4 percent from January 2009 and the supply of unsold homes increased.

Something Very Strange Is Happening With Treasuries (Robert C.)

There are times in life when one witnesses something so outside the scope of normal experience, that at first you don’t see it. Captain Cook’s diaries tell us that upon first seeing his ships offshore in Australia, the aborigines expressed “neither surprise nor concern.” Cook notes that it was not until he and his men approached the shore in smaller, more familiar vessels that the villagers reacted, arming themselves as “the sight of men in small boats was comprehensible to them: it meant invasion.” Well, I had a similar experience during yesterday’s bond auction.

1975 = California 2010 (Video) (Erik T.)

A great documentary of New City' fiscal crisis of the mid 70s.


Gasland (Davos)

When filmmaker Josh Fox discovers that Natural Gas drilling is coming to his area—the Catskillls/Poconos region of Upstate New York and Pennsylvania, he sets off on a 24 state journey to uncover the deep consequences of the United States’ natural gas drilling boom. What he uncovers is truly shocking—water that can be lit on fire right out of the sink, chronically ill residents of drilling areas from disparate locations in the US all with the same mysterious symptoms, huge pools of toxic waste that kill cattle and vegetation well blowouts and huge gas explosions consistently covered up by state and federal regulatory agencies. These are just a few of the many absurd and astonishing revelations of a new country called Gasland.

Eastern Europe Looks to Neighbors to Break Russia’s Energy Grip (Nickbert)

The Soviet Union, in building long natural gas pipelines from east to west in the 1960s, with spurs to their former East European satellites, ensured that none of these countries could easily diversify. All remain heavily dependent on Russia for their oil and natural gas today.

Water Waste A Kink In New York Shale Gas Future (Christian W.)

Technological advances that have unlocked natural gas from shale rock deep beneath the surface have outpaced advances in water waste disposal, meaning that gas drilling could begin in New York state before a waste disposal program is in place. "There is a shortage of treatment facilities that can handle this very salty water, so that's going to become a bit of a bottleneck for the industry when they do start issuing drilling permits," said hydrogeologist John Conrad, head of the environmental consulting firm Conrad Geoscience Corp.

Oil Shortage Spills Into Water

Looming oil and water shortages are interconnected and the world is only just waking up to the fact, says a leading proponent of the “peak oil” hypothesis.

Please send article submissions to: [email protected]


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Re: Daily Digest - February 25

"Feb. 25 (Bloomberg) -- Greece’s debt rating may be cut within months unless the country meets the objectives of its plan to reduce the European Union’s largest budget deficit, Moody’s Investors Service said.

“If the deviation is significant, we may even indeed downgrade by a couple of notches,” Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in an interview in Tokyo today. Standard & Poor’s said yesterday it may lower the rating by the end of March as a weak economy and political opposition threaten the country’s ability to cut the deficit. "

"Never before has so much government debt been raised against such an uncertain economic backdrop.

This year the Organisation for Economic Co-operation and Development forecasts $16,000bn will be raised in government bonds among its 30, mostly industrialised, member countries.

This is a sharp increase of $4,000bn in the space of just two years as governments around the world have turned to the capital markets to pay for fiscal stimulus packages and bank bail-out initiatives.

The consequences of this record amount of issuance are still playing out in the markets as countries with weak public finances are forced to pay big yield premiums to attract investors, who can afford to be more selective with the vast amount of bonds on offer."

"WASHINGTON (Dow Jones)--Federal Reserve Chairman Ben Bernanke warned Wednesday of negative consequences to the dollar and interest rates if investors lose confidence in the U.S. government's ability to bring the deficit back under control.

"There are a number of different channels through which large deficits, or unsustainable deficits, could affect the current economy," Bernanke told the House Financial Services Committee. "

"The department says first-time claims for unemployment insurance rose 22,000 to a seasonally adjusted 496,000. Analysts expected a drop to 455,000."

"NEW YORK (CNNMoney.com) -- Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.

The average home price in the United States will fall by about 6% by September 2011, according to Fiserv, a division of Moody's Economy.com. And that's after plunging more than 27% in the past three years."

"Over the last five years, crime rates in Santa Barbara County have soared, leaving law enforcement agencies and prosecutors scrambling to keep up with the onslaught.

The spike in crime is particularly intense with murders and attempted murders, which have risen 588 percent in the last decade, according to the number such cases filed by the district attorney’s office."

"County leaders are wrestling with a nearly $40 million budget deficit, a sum that threatens to knock the wind out of pretty much every county department.

If $3.9 million, the deficit in the district attorney’s office, is cut, the number of prosecutors in Santa Barbara County would drop to 34, a number so staggeringly low that Bramsen said she couldn’t recall if or when it had reached that mark.

If this comes true, Bramsen said individual case loads would explode from current record levels of 477 per attorney, to 576, a number that would leave prosecutors no choice but to pick and choose where justice was needed most, while allowing many cases to slide."

"Tuition at many public colleges and universities is skyrocketing, thanks to state budget deficits that have choked off funding for higher education.

The University of California, for instance, estimates a 30% increase in the 2010-2011 year. "California's $20 billion deficit will make it hard for the [state's] legislature to provide funding to the schools," said Patrick Lenz, UC Berkeley's budget administrator.

Next year's tuition numbers aren't final, since many states are still hashing out their budgets. But one thing is certain: Rates are going up, and the schools that will be hit the hardest are in the states that have seen the worst of the economic downturn.

For example, the Universities of Nevada, Florida, and Washington, each estimate that their tuitions will jump 10% to 15% next year."

"* China might aggressively sell US assets if provoked

WASHINGTON, Feb 25 (Reuters) - China's belief it now has the upper hand in the global economy creates a risky dynamic that makes it urgent the United States cut its mammoth debt, a former International Monetary Fund official said on Thursday.

At issue is China's vast holdings of U.S. Treasuries and growing concerns that China could wield its position as one of the country's biggest creditors as a club against U.S. policy."

"The state appropriations of local dollars is, in turn, supposed to be spent on "Educational Revenue Augmentation." The state's taking is being challenged in court through a suit brought by the League of California Cities, which insists the appropriation of local funds is illegal. But while that suit plays out, the Sonoma City Council was under deadline pressure to decide how it was going to pay the state its redevelopment agency funds. Three options were identified, involving various combinations of borrowing from existing city and redevelopment agency funds allowed by the state.

During its Feb. 20 meeting, the council made a decision on the most palatable option payment, to which it gave grudging ascent. But then, just as it was about to adjourn, Councilmember Aug Sebastiani made a bold motion. "I would like to move," he said, "that we not pay it.""

""Just imagine if everyone did this," mused Sanders."

"ALBUQUERQUE, N.M. -- It may well be one of the state's biggest bankruptcies, if not in dollar amount, in the number of people affected.

Long-time Duke City real estate powerhouse the Vaughn Company is the latest victim of the housing bubble.

It's currently hard to get many firm answers about the Vaughn Company bankruptcy.

Long a household name in real estate, the company filed for Chapter 11 bankruptcy protection Monday that will allow it to reorganize while protected from creditors by the court.

According to bankruptcy filings, there are hundreds of creditors who are owed as much as $10 million. Many of them are local firms, but Action 7 News has learned there are hundreds of individual investors who purchased promissory notes from Vaughn as investments. Some said they've put their life savings in the notes, but they said last fall, Vaughn stopped interest payments and they can't get any answers why."

"The new Great Depression is far from over, especially for municipalities.

 Both high school chemistry and history students know the meaning of flashpoint. In chem lab, the flashpoint is the lowest temperature at which the vapor of a combustible liquid will ignite. To history students, flashpoint has another meaning entirely. It is the point at which mob action erupts into violence. With these concepts firmly in mind--chemical and historical--it seems to me that America's debt implosion is rapidly heading toward a flashpoint.

Greece's irresponsible debt will be papered over [saved] by the Germans and French. They have little choice. The U.S. is at the flashpoint with our weakest states, cities, school districts and communities. The largest vapor bubbles ready to explode are California, New York, New Jersey, Illinois, the New York MTA, the City of Los Angeles--the list continues. "

(Scroll to page 12)

(This was posted along with other news at pensiontsunami)


Budget "Catastrophe" Predicted for Schools (Illinois...$1 billion deficit)

Daube Says Any EU Bankruptcy, Exit Would End European Union

"Dire" NY MTA finances may mean another fare hike ($750 million of revenue lost since December)

Fitch, Moody's downgrade Kansas City's credit rating

Audit: Birmingham faces $77M budget deficit

Worst. Budget. Ever. (Sacramento)

Tax revenue drops sharply for 2 districts (Milwaukee County....down around 17%)

Tempers boil as MMWD jacks up rates (Marin Water District...after a 9.8% rate hike)

Michigan lawmakers hear debate on inmate release plan (7,500 prisoners. State deficit is $1.7 billion)

Millionaires leave Montgomery, causing budget woes (Lost $4.6 billion in revenue after starting their "millionaire tax")

Montgomery County public employees may get raises Surprised

Hawaii excise tax breaks may be cut to help ease budget deficit ($1.2 billion deficit)

Ill. Gov. Quinn considers $2B in budget cuts

Squeezed by ballooning pension costs, charters cut programs

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The Dirty-Little-Secret of the Filthy-Rich

The Dirty-Little-Secret of the Filthy-Rich


It is criminal that the people running our economies (along with private-sector "experts" and media talking-heads) are so abysmally ignorant of a concept as important as taxation, since a fair and efficient tax-system costs nothing but produces more and healthier stimulus for our economies than recklessly spraying-around billions (and trillions) of new debt, like a fire-hose (or "helicopter-drop"). It should surprise no one that the only people who benefit from these (literally) bankrupt, economic policies are the banksters.

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Nomura Plans First Public Sale of U.S. Dollar Bonds

Nomura Plans First Public Sale of U.S. Dollar Bonds


“Nomura’s aim is to raise awareness overseas,” said Yasuhiro Matsumoto, an analyst at Shinsei Securities Co. in Tokyo. “They’ll be able to finance in Japan cheaper, but publicity is more important as they need to catch up with Goldman Sachs or Morgan Stanley.”

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Re: Daily Digest - February 25

"Feb. 25 (Bloomberg) -- The funding deficit in New Jersey’s pension system climbed by more than a third to $46 billion last year because of investment declines and a failure to make full contributions, annual financial reports released today show.

The value of the pension fund assets fell to $66 billion as of June 2009, from $83 billion a year earlier, the state treasury department reported. At the same time, the estimated value of the benefits New Jersey has promised to working and retired teachers and government workers grew to $135 billion from $126 billion.

New Jersey would have to pay $3 billion into the system, or more than 10 percent of its current budget, during the fiscal year that starts July 1 to adequately finance the benefit costs, the reports say. The state has put nothing into the pension systems for two years, and contributed a total of $2.3 billion since 2004, financial information included in recent state bond documents shows.

“This is insanity,” said Ned Thomson, a Wall Township councilman who serves on the Public Employee Retirement System board of trustees, which received their report at a special meeting in Trenton today. “It’s ridiculous. A kindergartener could figure this one out; you don’t pay, you go broke.” "

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Re: Daily Digest - February 25



Feb. 25 (Bloomberg) -- California’s Assembly passed a bill allowing the state to delay payments to programs including schools to avoid running out of cash, a move aimed at boosting confidence in bonds sold by the most-populous U.S. state.

The passage comes a day after Treasurer Bill Lockyer told lawmakers the bill was needed to send a signal to investors that California is taking steps to adequately manage its cash as it faces budget deficits through June 2011. Lockyer postponed a $2 billion bond sale that was initially scheduled for next week.

"Feb. 25 (Bloomberg) -- New York faces a cash squeeze in March and expects to delay $1.4 billion of payments, almost twice as much as it temporarily withheld two months ago, state budget director Robert Megna said.

New York, the third most populous U.S. state, held back $750 million of payments to schools and local governments when its general fund ended December with a record deficit of $577 million. The state paid bills that month by borrowing from other accounts.

Delays in March will be needed “to continue orderly operation of government,” Megna said today at a hearing in Albany. Postponements may affect income tax refunds as well as payments to schools and not-for-profit organizations, he said. The state hires outside agencies to provide services, such as aid to the blind or mentally ill, on behalf of the state.

New York faces a $1.4 billion deficit during the remainder of the year that ends March 31, according to budget documents. The figure increased from $500 million estimated in January as income tax revenue fell short of projections and spending on Medicaid health services for the poor were more than expected. "

"Feb. 25 (Bloomberg) -- The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”

She confirmed the authenticity of the document, which hasn’t been made public. "

"Feb. 25 (Bloomberg) -- Iceland walked out of talks with the U.K. and Netherlands on how to settle foreign claims, after both sides failed to reach an agreement on the terms of a loan the north Atlantic nation needs to cover depositor losses."

........................4A) Fears grow of Icelandic default

"The breakdown in the talks dashed hopes of avoiding a March 6 referendum in Iceland, in which an original repayment deal is expected to be resoundingly rejected. A no vote would plunge Iceland into fresh turmoil, threatening the survival of the government and its flow of international financial support."

"Feb. 25 (Bloomberg) -- New Jersey Governor Chris Christie proposed cutting benefits to the state’s more than 400,000 out- of-work residents to blunt a rise in business taxes that may be triggered by a shrinking unemployment trust fund.

Christie, 47, seeks to reduce the maximum weekly payment by $50 as joblessness stands at a 33-year high of 10.1 percent. Businesses may face tax increases averaging 52 percent if lawmakers don’t support the plan, Christie said. "

"Emergency Issue’

The governor said he also plans to call on the federal government to continue helping states so they can avoid payroll tax increases. Twenty-eight states have insolvent unemployment funds and are receiving federal loans; that number may reach 40 by the end of this year, Christie said."

"At the moment, however, there is no U.S. state which epitomizes the economic catastrophe currently confronting most U.S. states as does Illinois. The state which Barack Obama abandoned when he was nominated by Wall Street to be the next U.S. president is confronting numerous, extremely unpopular policy options – as the only means of the state avoiding bankruptcy this year.

The dire straits through which Illinois is attempting to navigate were summed-up well at the beginning of a recent article in the Chicago Sun-Times:

“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 workforce...”"

........................6A) Take a look at illinoisisbroke.com/

"HARTFORD — As rain fell outside Wednesday, state Comptroller Nancy Wyman told more than 350 business executives gathered inside the Legislative Office Building that the state's rainy day fund is empty.

"We did have a rainy-day fund," Wyman said. "We had the fund, but there's nothing in it. I'm the only one in the world that can write a check and have no money in the bank. And the attorney general is not even going after me, because it's his paycheck.""

"A Minneapolis-based bank should be forced to turn over $27.4 million it holds in an ac­count for Jefferson County, the county contends in a lawsuit filed Wednesday in state court.

U.S. Bank refuses to release the money the county needs by Satur­day to make a tax rebate payment to the Internal Revenue Service, according to the 11-page com­plaint.

Commission President Bettye Fine Collins said Wednesday, "The county should have access to that money in order to meet our re­sponsibilities to the IRS. They need to release the $27 million so we can do that."

Jennifer Wendt, a spokeswoman for U.S. Bank, declined to say why the bank won't release the money.

Jefferson County owes the money to the U.S. Treasury for ex­cess interest earned on a total of $1.1 billion borrowed in 2004 and 2005 for school construction work.

Excess interest was generated on the borrowed money as the county waited for lawsuits against the project to be settled in court. Federal tax rules require that the excess interest be paid to the U.S. government and not used by a borrower, such as Jefferson County.

According to Wednesday's com­plaint, the county will face severe financial penalties if a $27,362,974 payment is not made to the In­ternal Revenue Service by Satur­day.

Another payment of $153,085 will be owed April 5, according to the filing.

"Failure to pay arbitrage rebate on the dates due will expose the county and its taxpayers, at a min­imum, to interest charges imposed by federal tax law," the filing states.

The interest on the money owed t­o t­he I­RS f­or t­he 2­004 w­ar-rants w­ould b­e $9­0,000 a m­onth i­f t­he c­ounty d­oesn't m­ake S­aturday's p­ayment, t­he f­iling s­tates.

"I­n a­ddition, i­f t­he c­ounty i­s d­etermined t­o h­ave f­ailed t­o p­ay r­ebate a­s a r­esult o­f 'w­illful n­eglect,' a p­enalty o­f 5­0 p­ercent o­f t­he r­ebate d­ue, i­n t­his c­ase, $1­3,700,000 c­ould b­e i­mposed o­n t­he c­ounty," t­he f­iling s­ays.

"T­he c­ounty d­oes n­ot h­ave s­ufficient f­unds o­n h­and t­o m­ake t­he r­equired r­ebate p­ayments f­rom a­ny s­ource o­ther t­han t­he f­unds h­eld b­y t­he t­rustee u­nder t­he i­ndenture," t­he f­iling s­tates."

"This week will be a critical one for millions of Americans surviving on unemployment insurance (UI). With national unemployment hovering just below ten percent, UI benefits will end for one million Americans on February 28th, and for four million more, in the months that follow if Congress fails to take immediate action."

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Latvian 'Robin Hood' hacker leaks bank details to TV

Latvian 'Robin Hood' hacker leaks bank details to TV

An alleged hacker has been hailed as a latter-day Robin Hood for leaking data about the finances of banks and state-owned firms to Latvian TV.

Using the alias "Neo" - a reference to The Matrix films - the hacker claims he wants to expose those cashing in on the recession in Latvia.

He is slowly passing details of leading Latvian firms via Twitter to the TV station and has its audiences hooked.

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Re: Daily Digest - February 25

We the Icelanders don't want to pay private debt, but the UK and the Dutch are terrified that the referendum will take place the 6th of march and vote NO.

So they have offered us 2.75% + LIBOR instead of the fixed 5.5% rate and not interest on the year 2009-2010.

This is outrageous how can they offer this!  interest rate will go up for sure!

We Icelanders don't want to pay this debt, period .

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Re: Daily Digest - February 25

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Re: Daily Digest - February 25
Double Dip Recession Risk Is Near: CIO
24 Feb 2010
By: Robin Knight
The global economy looks set to plunge back into recession as the sovereign debt pressure currently rocking Europe intensifies, Ashok Shah, CIO of London & Capital, told CNBC Wednesday. 
"There's a risk of a double dip recession round the corner," Shah said. "Given the sovereign debt crisis that is going around the Mediterranean countries, this is going to put a lot of pressure on Europe."
The economic outlook for Europe is deteriorating very rapidly and that is adding to the factors dragging on the economic recovery, Shah told CNBC. 
Concerns over the strength of Europe's power-house economy, Germany, deepened Wednesday after its gross domestic product growth was shown to have stagnated in the fourth quarter. German private consumption fell in the quarter, official data showed, suggesting the country's economic recovery may not be assured.
Shah also pointed out that other major European economies such as Italy have still not escaped the recession.
If the economy does slip back into recession, governments won't be able to tackle the problem with more stimulus measures because they are already doing everything they can in that direction, Shah said.
"Everything that the authorities can do is on the table right now. The key question is can they keep it going rather than increasing it because the room to increase is very limited," he said.
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Re: Daily Digest - February 25

AIG posts $10b loss


Insurer AIG, which was saved by the US government in 2008, has posted a $10 billion loss in the last three months of 2009.

The insurer said it made a net loss of $10 billion in the fourth quarter, compared with a $70 billion loss in the same period in 2008.

The loss came after two quarters of profits.

The insurer made a net loss of $13 billion for the whole of 2009.

AIG had to rely on massive federal assistance to avoid bankruptcy after credit default swaps left it with huge losses.

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