Daily Digest

Daily Digest - February 9

Tuesday, February 9, 2010, 11:47 AM
  • The IndyMac Slap In Our Face
  • U.S. Government Stages Fake Coup To Wipe Out National Debt
  • Greek Tragedy
  • Cali-Greece-iya
  • Researching Social Security
  • Hydrogen Fuel At Home?

Economy

The IndyMac Slap In Our Face (Video) (Jeff B.)

You won't believe the sweetheart deal that the Indymac boys were given by the FDIC.

U.S. Government Stages Fake Coup To Wipe Out National Debt (Humor) (JKibbe)

Greek Tragedy (Davos)

It seems like 90% of the countries in the world are printing money and issuing debt in a desperate attempt to solve a crisis caused by too much debt. The problem is that if 90% of the countries are issuing debt and the 10% aren't willing to buy the debt, what happens? The danger is that most of this debt is being issued on a short-term basis, so rollover risk is huge.

Cali-Greece-iya (Davos)

With Greece getting all the imminent default attention, have we forgotten California? Jim Grant chimes in.

Researching Social Security (pinecarr)

The Washington Post reports that Social Security could be next to need a bailout.

Energy

Hydrogen Fuel At Home? (Davos)

CNN’s Kristie Lu Stout talks to Taras Wankewycz about a new hydrogen fuel-cell refueling station for the home.

Please send article submissions to: [email protected]

18 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - February 9

"The prospect of either the US or the UK defaulting on their debts is an 'absurd' idea, Nobel-prize winning economist Joe Stiglitz said last night, arguing both deserve to keep their top credit rating.

Speaking at an event at the London School of Economics, Mr Stiglitz said that “the likelihood of a default is so small, particularly in the US because all we do is print money to pay it back.”

The debt problems currently engulfing Greece have put the prospect of a sovereign default at the forefront of many investors' minds, but Mr Stiglitz, a former chief economist at the World Bank, said that the idea of a default by the US or Britain is "so absurd, it’s another reflection of the absurdities in the financial markets.”"

"Please note Moody's rare display of courage to downgrade Enron from investment grade to junk on November 8, 2001."

 

"Korea's national debt this year is expected to surpass 400 trillion won for the first time.

The finance ministry projects the nation's debt to reach 407.2 trillion won or about 348 billion US dollars by December about 36 percent of the GDP forecast for 2010.

Taking into account the debt of state-run enterprises the total debt level is expected to hit 584 trillion won or nearly 52 percent of this year's GDP.

But this is still far less than other G20 nations that hold an average sovereign debt of 75 percent of GDP.

Korea's current budget deficit is around 2.8 percent of its GDP also below the ten-percent level seen in Greece and the United Kingdom."

"Destatis said German exports fell 18.4% in 2009 as a whole, to a dollar equivalent of $1.121 trillion. By contrast, China's exports totaled $1.202 trillion." 

"The recovery of U.S. corporate pension plans hit a wall in January when the funding deficit climbed to $263 billion, according to estimates by Mercer, a unit of Marsh & McLennan Companies Inc."

"Mercer estimated that these corporate pension plans were 83 percent funded at the end of January, leaving a deficit of $263 billion. That compared with a $247 billion deficit at the end of December.

The estimated aggregate value of pension plan assets at S&P 1500 companies was $1.25 trillion at the end of 2009. Aggregate liabilities were estimated at about $1.5 trillion, Mercer said." 

"KUWAIT CITY - OPEC member Kuwait is projecting a 22.4 billion dollars budget deficit for the 2010-2011 fiscal year after raising spending by over 33 percent, according to a draft budget seen on Tuesday. "

"Feb. 9 (Bloomberg) -- Non-performing loans in the United Arab Emirates will probably increase to about 6.4 percent of all credit, from 4.4 percent in 2009, a senior central bank official said today."

"Feb. 9 (Bloomberg) -- Chancellor Angela Merkel’s government may have to raise spending by billions of euros after Germany’s highest court challenged the way it calculates social welfare to the long-term unemployed and their families."

"Higher welfare spending for the more than 6 million recipients of social welfare in Germany may widen the budget deficit. The government already expects the deficit to swell to 5.5 percent of gross domestic product this year, almost double the European Union’s 3 percent of GDP rule."

"As you know, the City of Los Angeles faces a budget shortfall of nearly $208 million, and we expect it to exceed $400 million next year. This is the most serious situation we have faced in 75 years and without drastic steps, the City is threatened with bankruptcy. We cannot allow that to happen."

"If we do not fill $208 million of the budget deficit by June 30, the City will be insolvent. Bond rating agencies will further downgrade the City's credit rating, making the cost of borrowing prohibitive. Essentially, the City will stop functioning. We can no longer afford to kick the can down the road – we have reached the end of the road." 

"LONDON (MarketWatch) -- The cost of insuring Spanish and Portuguese government debt against default via credit default swaps hit new records Monday, while the cost of insurance for Greek debt also rose, according to CMA DataVision. The spread on five-year Portuguese credit default swaps rose from 227 basis points late Friday to a record 244.06 basis points Monday. That means it would cost $244,060 a year to insure $10 million of Portuguese government debt against default for five years. The five-year Spanish CDS spread rose to a record 172.9 basis points from 166.5 late Friday. The Greek CDS spread widened to 426 basis points from 407.5 Friday."

"Feb. 9 (Bloomberg) -- European Union finance ministers were instructed last week to skirt questions on a possible bailout of Greece and emphasize their support for the government’s deficit- cutting measures, according to a draft document.

If asked about the risk of a Greek default, ministers were advised to say they were “fully confident” that the country “will rise to this challenge,” according to the confidential EU memo, which was dated Feb. 5. The note’s recommendation on sidestepping such questions was called a “defensive point.” " 

"Amid high unemployment and sliding home prices, a growing number of struggling consumers are doing what was once considered unthinkable: paying their credit card bills instead of their mortgages. A recent study developed by TransUnion found the percentage of Americans who were current on their credit cards but behind on their mortgage increased to 6.6 percent in the third quarter of 2009, up from 4.3 percent in the first quarter of 2008. Meanwhile, the share of consumers making mortgage payments on time but behind on their credit cards moved in the opposite direction, sliding from 4.1 percent to 3.6 percent over the same time period.

The data reflects a "fundamental paradigm shift" in the way consumers prioritize payment of debt obligations, says Ezra Becker, of TransUnion. "This is dramatically different," he says. "It is a clear manifestation of the dynamics that lead up to the recession and the recession itself.""

"With the city nearing bankruptcy, a key legislative committee will launch discussions today of a measure that would allow Lawrence to take out millions in loans to repair its tattered finances, while appointing an outside overseer to help the city stabilize its budget. Facing a deficit of close to $25 million, the city is in danger of running out of money this spring without a massive influx of cash."

"With their finances on the rocks, states that control the sale of liquor to the public are looking at handing the job to private enterprise, a move that could raise revenue, streamline government and prove a boon to the spirits industry. "

"PARIS, Feb 9 (Reuters) - France must urgently cut its public debt and deficit levels to allow room for manoeuvre in case of a new crisis and to prevent a downgrade of its AAA credit rating, the country's top audit body said on Tuesday."

"The U.S. government’s debt levels are “not consistent” with improving credit fundamentals, according to John Brynjolfsson, chief investment officer at Armored Wolf LLC in Aliso Viejo, California.

“By any metric, it would be hard to say that the U.S. Treasury deserves an Aaa rating,” Brynjolfsson said in an interview on Bloomberg Radio."

"NEW YORK (CNNMoney.com) -- Employers are getting hit with a massive tax hike at a time when they can least afford it.

Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.

The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.

Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems"

"Most of the proposals would affect new hires, not those already in the pension system. However, the measure requiring public workers to contribute toward their health care costs would take effect when their current contract expires.

The pension system is underfunded by about $34 billion and is in danger of becoming insolvent unless fixes are made."

(Youtube video)

(Note: Since the chart at 2 minutes into the video is something that Nathan's Economic Edge has been posting about for a long time I put the link to this video on his message board. Scroll down to the comments and notice the chart he gives in reply)

 20) KPERS' funding crunch worsened in 2008 markets

"(KansasReporter) TOPEKA, Kan. - Kansas' unfunded pledges to teachers and public workers' future pensions grew by $2.4 billion following investment losses in 2008, the state Legislative Division of Post Audit reported Monday.

The gap, which increased from $5.3 billion in December, 2007 to $7.6 billion 12 months later, does not threaten any Kansas Public Employees Retirement System pension checks that teachers or other state and local government workers are receiving now or in the near future, said Brad Koehn, of the Topeka CPA firm Berberich Trahan & Co., which ran the regularly scheduled system audit for the legislature's audit arm.

"But it is like Social Security," Koehn told members of the legislature's Post Audit Committee.

"If somebody doesn't do something, there will be trouble," Koehn said.

Basically, KPERS' had enough money before markets tanked in 2008 to pay slightly less than 69 percent of the retirement money promised to workers over the 30-year planning horizon actuaries use, the report found. Investment losses shrank those assets to must less than 57 percent of the promised retirement obligations."

(Here's the report he refers to)

"SHANGHAI — Authorities in Shanghai will raise the city's retirement age to relieve pressure on the pension fund as they struggle to cope with an ageing population and falling birth rates, state media said Tuesday.

Vice Mayor Hu Yanzhao said the city's pension fund had fallen into a deficit as more than a fifth of the population had reached the end of their working lives, the Shanghai Daily reported, without giving a figure for the shortfall."

"Feb. 9 (Bloomberg) -- U.S. stocks trimmed gains after Fitch Ratings said the U.K. needs to pledge further measures to rein in its budget deficit and the medium-term outlook for Greece is “cloudy.” "

"The higher end of the US housing market continued to weaken in January as serious delinquencies U.S. prime jumbo loans rose for the 32nd consecutive month, according to Fitch Ratings.

“The new year has brought no relief from declining jumbo loan performance,” said Managing Director Vincent Barberio. “The trend line for delinquencies indicates the 10 percent level could be reached as early as next month.”

Although prime jumbo loan delinquencies began to rise in the second quarter of 2007, they accelerated in 2009 nearly tripling over the course of the year. Florida saw the biggest monthly jump of the five states with the highest volume of jumbo loans outstanding."

"BEIJING (Reuters) - Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan."

GrouchoMarxist's picture
GrouchoMarxist
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Re: Daily Digest - February 9

Investment options are getting so topsy-turvy and confusing here in the UK that now only young children can safely invest without worrying about getting it wrong.

Gillian Tett (of Financial Times) explaining how deep in the doo-doo we are and everyone else wondering who lost the paddle...

" ......Chocolate coins are a better bet than real coins..."  (video) just before end ca 3.15 mins.

Can't wait for next Christmas - I usually buy a little bag of 'em - delicious - and a good investment too.

Carry on eating cake, now you've had it.

Groucho "I Love The Smell of Chocolate In The Morning" Marxist

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How Goldman Sachs Helped Greece to Mask its True Debt

Sorry if this has already been covered-

http://www.spiegel.de/international/europe/0,1518,676634,00.html#ref=rss

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Re: Daily Digest - February 9

In his delusion of grandeur, the head of the german treasury Mr. Schäuble has just announced, if need to, Germany will bail out greek. Looks like the courts in germany will be rather busy soon.

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Ready
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Re: Daily Digest - February 9

Mono - got a link?

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mono
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Re: Daily Digest - February 9

http://www.ftd.de/

 

 

financial times germany

Ready's picture
Ready
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Re: Daily Digest - February 9

Ya, das ist gut.

mono's picture
mono
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Re: Daily Digest - February 9

haha,

 

for whom?

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mono
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Re: Daily Digest - February 9

sometimes i feel the governements we have in our world should be judged the amount of denial they´re capable of.

Currently that´s probably the biggest race that is on worldwide.

If it would´nt be so tragic, it´d be rather funny.

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'Death cross' threatens euro/dollar

'Death cross' threatens euro/dollar

#

A death cross only occurs once every 10 years - and each time traders can expect a "very aggressive sell-off," says James Hughes at CMC Markets.

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Re: Daily Digest - February 9
mono wrote:

sometimes i feel the governements we have in our world should be judged the amount of denial they´re capable of.

Currently that´s probably the biggest race that is on worldwide.

If it would´nt be so tragic, it´d be rather funny.

+1 !

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nickbert
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Re: 'Death cross' threatens euro/dollar
Johnny Oxygen wrote:

'Death cross' threatens euro/dollar

#

A death cross only occurs once every 10 years - and each time traders can expect a "very aggressive sell-off," says James Hughes at CMC Markets.

'Death cross'?  With a cool name like that I'm envisioning a sporting event involving dirtbikes, alligator-filled pits, and hand grenades. 

(maybe I just won't click that link after all... the reality can't possibly live up to my expectations Wink)

- Nickbert

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Re: Daily Digest - February 9

In times of economic crisis weath is not destroyed, only transfered.  Qui bono?

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Eye
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Re: Daily Digest - February 9

“Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works. “..John Stuart Mills, Political economist, 1806-1873

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Dorrian
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Re: Daily Digest - February 9
DurangoKid wrote:

In times of economic crisis weath is not destroyed, only transfered.  Qui bono?

Wealth can be destroyed.

Just think of the stock market. Example: If a stock is worth 100 $ today, then all existing 1.000.000 of them provide a net worth of 100.000.000 $ to a number of shareholders. But if the market crashes, to let's say 50 $ per share, that doesn't mean everyone has to actually "pay" the loss to someone else. In fact, ALL shares lose 50 $ of value, and most of them probably weren't even traded on that very day.

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Re: Daily Digest - February 9

http://www.bloomberg.com/apps/news?pid=20602099&sid=aTW6o3sDK1rM
Chavez Declares ‘State of Emergency’ on Energy Crisis

By Jose Orozco and Steven Bodzin

Feb. 9 (Bloomberg) -- Venezuelan President Hugo Chavez declared a national emergency in the electricity sector as the country’s worst drought in 50 years dries up water supplies in hydroelectric dams.

“It’s a true emergency,” Chavez said yesterday on his state radio show. “Some opposition parties are determined to blame the government for the lack of rain in more than a year. The fundamental cause is the ill-named El Nino phenomenon, a product of climate changes that are hitting the world.”

The government is scrambling to avoid a power-grid collapse by buying generators from Brazil to China after nationwide rolling blackouts failed to prevent dam-water levels from dropping. Chavez fired his electricity minister and retracted an electricity conservation plan for Caracas last month after the measures left traffic lights without power, prompting protests.

The Guri dam is 46 percent full, down from 60 percent at the beginning of the year, according to the National Administration Center, which operates the power grid. Guri holds water used to generate more than two-thirds of the South American country’s power.

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Damnthematrix
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Re: Daily Digest - February 9

http://www.reuters.com/article/idUSTRE6183KG20100209
China PLA officers urge economic punch against U.S.
Chris Buckley
BEIJING
Tue Feb 9, 2010 12:00pm EST

BEIJING (Reuters) - Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.

The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China's National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.

The interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.

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Re: Daily Digest - February 9

Dorrian wrote:

Just think of the stock market. Example: If a stock is worth 100 $ today, then all existing 1.000.000 of them provide a net worth of 100.000.000 $ to a number of shareholders. But if the market crashes, to let's say 50 $ per share, that doesn't mean everyone has to actually "pay" the loss to someone else. In fact, ALL shares lose 50 $ of value, and most of them probably weren't even traded on that very day.

er...maybe. If someone bought the stock for $100.00 a share then they paid someone $100 for that share so if it goes to $50 then they did lose $50 and they the other guy gained $50 because he hold undervalued stock plus the $50.

Now if you bought the stock for $25 and it went to $100 then down to $50 you could argue no transfer of wealth but there was also no real loss either.

Also take into account that people plan their portfolios with a group of stocks, bonds, etc. so taking a loss on one stock could influence the holder to move wealth out of another stock to compensate for his loss and that would be a type of wealth transfer.

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