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Daily Digest - Jan 19

Sunday, January 18, 2009, 8:04 PM
  • More than half Americans say they are 'struggling': poll
  • The Growing Foreclosure Crisis 
  • US Economy in Depression, The US Economy to go into a Depression in 2009
  • Economists Expect a Grim 2009 (WSJ Video)
  • Obama hosting pricey party in a dicey economy 
  • American Attitudes (NY Times/CBS Poll)
  • Government Aggregator Bank for Toxic Assets
  • Florida Fund Manager Missing; Clients Say Money Gone
  • Orwell's 2009 - Big Brother is watching (Hat Tip Treah) 

Economy 

More than half Americans say they are 'struggling': poll 

WASHINGTON (AFP) - The number of Americans who say their lives are a struggle climbed steeply last year from less than half the population to nearly six in 10 people, a vast Gallup poll showed Friday. 

"In January of 2008, 49 percent of Americans were thriving, 47 percent struggling and four percent were suffering. In November and December, 38 percent were thriving, 58 percent struggling and four percent suffering," Gallup scientist Jim Harter commented on findings of the Gallup-Healthways Well-Being Index.

"The 11-point swing in struggling Americans represents more than 22 million people," Harter said on Gallup's website.

To compile the Index, Gallup surveyed at least 1,000 US adults each day last year, starting in January.

Respondents were asked to score six aspects of their lives, including how they rate their current lives and where they think they will be in five years -- the so-called life evaluation index.

That saw a "major drop off" in November and December, as the US economy plunged deeper into crisis, Gallup said. 

The Growing Foreclosure Crisis 

Before Robin Bohnen and her husband, Shane, bought a $1.16 million Mediterranean-style house in an upscale Southern California suburb two years ago, they were not cash-strapped, debt-ridden or credit-impaired. 

Now they are all of the above. Soon they also may qualify for one more distressing category: home lost to foreclosure.

"Wake me up, can this really be happening?" the 42-year-old Bohnen says. As she tries to describe how it feels to have the nation's financial crisis land in her living room, the phone rings. She ignores it. "It's probably the bank -- again," she says.

Bohnen once owed her comfortable lifestyle to the dizzying growth that transformed Southern California over the past decade, creating a boom that led many to believe their home values would keep climbing. As the owner of a furniture store born during the housing boom, she provided bean bag chairs and bedroom sets for the brand-new communities that easy credit built.

Now, she and husband just owe. They cannot afford their $6,400 monthly payment, and in this plummeting market, they wouldn't make enough on a sale to pay off their mortgage or recoup the 20 percent they put down to buy their Riverside County home.

They're "underwater," industry parlance for borrowers who owe more on their mortgage than their houses are worth. They have joined the growing line of homeowners seeking a break from their lenders. 

US Economy in Depression, The US Economy to go into a Depression in 2009

Economists Expect a Grim 2009 (WSJ Video)

Obama hosting pricey party in a dicey economy 

WASHINGTON - Unemployment is up. The stock market is down. Let's party.
The price tag for President-elect Barack Obama's inauguration gala is expected to break records, with some estimates reaching as high as $150 million. Despite the bleak economy, however, Democrats who called on President George W. Bush to be frugal four years ago are issuing no such demands now that an inaugural weekend of rock concerts and star-studded parties has begun. 

Obama's inaugural committee has raised more than $41 million to cover events ranging from a Philadelphia-to-Washington train ride to a megastar concert with Beyonce, U2 and Bruce Springsteen to 10 official inaugural balls. Add to that the massive costs of security and transportation - costs absorbed by U.S. taxpayers - and the historic inauguration will produce an equally historic bill.

American Attitudes (NY Times/CBS Poll)

Government Aggregator Bank for Toxic Assets

Florida Fund Manager Missing; Clients Say Money Gone 

Jan. 17 (Bloomberg) -- Arthur Nadel, a hedge-fund manager in Sarasota, Florida, has disappeared and clients are concerned they may have lost hundreds of millions of dollars, according to law enforcement officials. 

Nadel, 76, is president of Scoop Management Inc., which oversees funds including Valhalla Investment Partners LP. He was reported missing three days ago after he called his stepson, Geoff Quisenberry, and told him to go to his house where he had left a note, Lieutenant Chuck Lesaltato of the Sarasota County Sheriff's Office said yesterday in a telephone interview.

Nadel's wife, Peg, and Quisenberry, were "concerned about his welfare," Lesaltato said. Nadel had sounded "distraught," Lesaltato said, citing the note. Nadel's partner, Neil Moody, said today he believes Nadel is alive and has spoken to his wife since then.

Scoop may have managed as much as $350 million, although "that may be high because performance results were exaggerated," Moody said in an interview. He said he contracted with Nadel to manage three funds on his behalf, while Nadel alone had three others and did the trading for all six. Moody said he didn't know anything was wrong until Nadel was reported missing Jan. 14.

ORWELL'S 2009 - BIG BROTHER IS WATCHING (Hat Tip Treah) 

Troubled Asset Relief Program - This is also known as TARP or the Emergency Economic Stabilization Act of 2008. It's lucky they put a date at the end, so we can have another in 2009 and another in 2010. A better name would be WARP - Worthless Asset Reprieve Program. This catchy little acronym described assets as if they had a bad day at the office. I'm troubled by the bullshit that keeps being rammed down my throat by politicians and bankers. Assets aren't troubled. The "assets" on the books of the biggest banks in the world are worthless. They are fictitious pieces of paper backed by nothing. This $700 billion bad banker bailout was supposed to buy these assets from the banks and allow the banks to lend. Henry Paulson lied to Congress and used the first $350 billion to buy preferred stock in the banks. It has been a miserable failure. The second $350 billion will be thrown at these same banks and nothing will happen. No one knows how the money is being spent and Bank of America and Citicorp are on the brink again. The U.S. banking system is insolvent and is being propped up by the American taxpayer. 

Stable Prices - It seems the politicians running The Party these days like to pick and choose what they want from John Maynard Keynes. They prefer the goodies of increased government spending and ignore the other advice:

"The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens."

One of the key mandates of the Federal Reserve is price stability. This is a lie. The facts are that the Federal Reserve purposefully generates unending inflation which slowly lowers the standard of living of every American. The US dollar has lost 95% of its purchasing power since 1913 when the Federal Reserve was created by a Congress in the back pockets of bankers.

Foreclosure Mitigation - Barney Frank is demanding that the 2nd $350 billion of TARP funds be used for this purpose. It is a noble goal to reduce foreclosures. I'm sure Mr. Frank is a noble man. What this really means is that he would like to take your tax dollars and give them to people who bought houses with mortgages they could not afford. Rather than being properly kicked out of the house, you will make their mortgage payment for them, along with your own monthly mortgage payment. That is what mitigation means.

Quantitative Easing - This is a luminous term that 98% of Americans don't understand. It sounds so soothing. When Ben Bernanke uses the term in his speeches you can imagine blue birds singing on his shoulder. What it means is that the Federal Reserve will print as many dollars as it takes to generate inflation so that the country's enormous debt burden can be inflated away. Instead of one helicopter, picture thousands of B-52s dropping dollars over NYC. Japan tried the same thing in the 1990s with absolutely no success. Ben's motto is, when you earnestly believe you can compensate for a lack of skill by doubling your efforts, there's no end to what you can't do.

Economic Recovery Program - This is Barrack Obama's first contribution to Newspeak. His shrewd economic team didn't like the sound of stimulus program. It sounded too much like Bush's rebate checks, which didn't work. Of course, one of the key elements of this plan is a $500 rebate per person. The term investment is used quite often in this plan. Investment in infrastructure, education, green initiatives, and energy are the backbone of the plan. Ask yourself why we have 156,000 structurally deficient bridges, crumbling water pipes, antiquated power grid, urban decay, and dangerous schools. It is because we have relied on the Government to be responsible for these things with taxes we have already paid. Now we are supposed to support a program with future tax dollars to do what Government should have done in the first place. When you are stuck in a traffic jam next year and see six union construction workers standing on the side of the road all making $50 an hour watching one guy with a jack hammer working, know that your tax dollars have been spent wisely.

 

 

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21 Comments

RJE's picture
RJE
Status: Diamond Member (Offline)
Joined: Aug 31 2008
Posts: 1369
Re: Daily Digest - Jan 19

I must admit, I'm a little bit scared...Now what to do? Fight like hell. This is one of a couple of sites I trust. I think!...?%$#*** 

Damnthematrix's picture
Damnthematrix
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California insolvent

http://www.latimes.com/news/local/la-me-budget17-2009jan17,0,5517766,full.story

John Chiang announces that his office will suspend $3.7 billion in
payments owed to Californians starting Feb. 1, because with no budget in
place the state lacks sufficient cash to pay its bills.

By Evan Halper and Patrick McGreevy
January 17, 2009

<snip>

But California is projected to be $346 million short of the funds it
needs to pay all its bills in February. By March, the state would be so
far in the red that even continuing to suspend payments would not cover
the shortfall. California would be insolvent, making the issuance of
IOUs likely.

<snip>

The last time the state issued such IOUs -- the only time since the
Great Depression -- was in 1992.

<snip>

The state has also halted payments of bond money for more than 5,300
public-works projects.

<snip>

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Orwell's 2009 - Big Brother Is Watching

"Foreclosure Mitigation - Barney Frank is demanding that the 2nd $350
billion of TARP funds be used for this purpose. It is a noble goal to
reduce foreclosures. I'm sure Mr. Frank is a noble man. What this
really means is that he would like to take your tax dollars and give
them to people who bought houses with mortgages they could not afford.
Rather than being properly kicked out of the house, you will make their
mortgage payment for them, along with your own monthly mortgage
payment. That is what mitigation means."

So....  what's the alternative?  Kick them all out in the streets?  So they can go on social security instead?  The people who "bought ... mortgages they could not afford" were SOLD those mortgages.  The lender could, and should have, said NO.

" Ask yourself why we have 156,000 structurally deficient bridges,
crumbling water pipes, antiquated power grid, urban decay, and
dangerous schools. It is because we have relied on the Government to be
responsible for these things with taxes we have already paid."

I'll tell you why your infrastructure's crumbling: out of control growth, and taxes spent on idiot wars...

Mike 

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - Jan 19

Hello Robert:

Hey, I hope I didn't post something that eroded your trust of this site? I read your post a few times and would appreciate some clarification. Thanks in advance, take care

RubberRims's picture
RubberRims
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Re: Daily Digest - Jan 19

 

A news story that got my attention, the impact the recession could have on migrant labour in a variety of different industries.

http://www.24dash.com/news/Communities/2009-01-19-Councils-sound-alarm-over-exodus-of-UKs-migrant-workers

 

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GDon
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Re: California insolvent
Damnthematrix wrote:

John Chiang announces that his office will suspend $3.7 billion in
payments owed to Californians starting Feb. 1, because with no budget in
place the state lacks sufficient cash to pay its bills.

 

Damnthematrix -

Note that the article also went on to say that; 

"...State Controller John Chiang announced today that his office would suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1st, as a result of the state's cash crisis."

The loss of all further welfare checks and student grants, would have very direct and immediate consequences in places like Los Angeles and Oakland, where a large segment of the population is very dependent upon government assistance, for both basic sustenance, as well as education.

It seems likely then, that the Federal Government will become the fiat-currency backstop for States like California, very very soon.

In the USA, this has large implications on the marginal and dwindling status of the US as a Republic of separate States.

Further, it seems that the State of California (with perhaps Michigan and others), cold very well be the first "experiential" observation (i.e., in a "State" microcosm) of what broader civil conditions will become in the US, once government defaults become too much to manage.

Even if the Federal Gov comes to the "rescue" before Feb 1, you can be sure that these are becoming successively larger tremors of fiscal instability, and it's possible that the advance of unstable civil conditions, via default & insolvency, could arrive at a faster pace than expected.

I predict this will become headline material in the next week or so, and Obama's first 2 weeks in office could be a very "noisy" one.

 

Trad's picture
Trad
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Re: Daily Digest - Jan 19

In response to the article, "Obama hosting pricey party in a dicey economy" It appears that the Democrats and Repulicans both believe in "trickle down economics.

I am sure that the Obama party thinks that they are putting people to work and therefore they, the workers will run out and spend all of the money they made and it will trickle down and save the universe.

 

 

SamLinder's picture
SamLinder
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Posts: 1499
Re: California insolvent
Damnthematrix wrote:

http://www.latimes.com/news/local/la-me-budget17-2009jan17,0,5517766,full.story

John Chiang announces that his office will suspend $3.7 billion in
payments owed to Californians starting Feb. 1, because with no budget in
place the state lacks sufficient cash to pay its bills.

By Evan Halper and Patrick McGreevy
January 17, 2009

<snip>

But California is projected to be $346 million short of the funds it
needs to pay all its bills in February. By March, the state would be so
far in the red that even continuing to suspend payments would not cover
the shortfall. California would be insolvent, making the issuance of
IOUs likely.

<snip>

The last time the state issued such IOUs -- the only time since the
Great Depression -- was in 1992.

<snip>

The state has also halted payments of bond money for more than 5,300
public-works projects.

<snip>

Interesting sidebar: In 1992 my wife was working as a credentialed Special Ed teacher at Fairview State Hospital in Southern California. When this problem occurred, she was issued a warrant instead of a paycheck. The banks were given the option of honoring them (or not), but the bank would have to hold the warrant until the state was able to pay the bank. We didn't even try to cash the warrant as it appeared no banks were honoring them. Fortunately, I was also working at the time, and we had some savings, so were able to cope with the lack of income for that brief period. Interesting experience, though.

Davos's picture
Davos
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Re: California insolvent

Hello Sam:

In response to your post, I thought you might appreciate this, though you probably know of it already.

I was catching up on the FSN News Hour broadcasts driving my kid home and we caught that a contractor in California mailed in warrents it had received as payments/IOU's. Who did they mail them to? The state tax office. This was back in the 80's if I recall. I posted that clip on the 20th Daily Digest. 

Trad's picture
Trad
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Posts: 25
Re: Daily Digest - Jan 19

Don't be scared Bob. Remember! we once lived a cave with nothing but a spear and fury long johns and we made it.

But seriously, I have been stocking food and survival stuff for quite some time. Look for cans that are dated, best if eaten by 2011-12. and not too bad after that. Vacuum pack beans, rice, flour and dry milk. Pick up some stuff to barter with.

Booze and cigs believe it or not, are items that will be good bartering tools.

Put some extreme cold weather gear aside. Buy a wood stove, good for cooking too. If you can afford it, move to a small town and buy a piece of land with plenty of hardwood and water near by. My water pipe broke this year and luckily I have a stream out back so I just would grab a five gallon bucket full to flush the toilet and stuff. Can't imagine what they will do in the city.

Don't Worry ! Chill Out. No Problem.

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bearing01
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Posts: 153
Re: Daily Digest - Jan 19

 

Asking Economists that are employed at big banks if it is wise for Gov't to use tax payers dollars to buy bad assets from big banks.  What a surprise that they believe it is a great idea. 

Maybe we should give the banks some extra tax dollars for their stress and hardship they've been going through.. their efforts in bankrupting their banks.

Oh.  Maybe Bernanke is just printing the money.  People seem to think that route is okay and won't hurt anyone.

RJE's picture
RJE
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Posts: 1369
Re: Daily Digest - Jan 19

    Dear Davos, nothing could be further from the truth. This site is one I trust above all. My end comment was because in Chris's recent Martenson Report he says to trust no one even himself. Do the work and trust your gut (in so many words). Truth be told I don't trust my gut entirely because I haven't the training to see the larger picture as most of the posters on this site...Sincerely... Bob

RJE's picture
RJE
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Posts: 1369
Re: Daily Digest - Jan 19

    BushMaster, a very kind and thoughtful response to my simple posting.

    When I speak of being scared it is because my mind see's the faces of so many people I have witnessed in my life who were down trodden. To imagine that I will see so many more is disheartening.

    While I was raised with 13 brothers and sisters, in a simple, hard working family in Detroit, the value of pulling together for the common good was a constant. I expect by this upbringing to be a sympathetic and pro-active member of society when the stuff hits the fan.

     It is my intention to leave this world having replaced all that I took, and hopefully more...Thank you BushMaster, and Davos for being concerned enough to respond to my post. Clearly you were concerned...Regards...Bob 

amitkeerti's picture
amitkeerti
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Re: Daily Digest - Jan 19

An anteresting news article...

 

 

Rates: When Zero Is Way Too High

http://www.businessweek.com/bwdaily/dnflash/content/jan2009/db20090119_561565.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis

 

So inflation is on the anvil

Davos's picture
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Re: Daily Digest - Jan 19

Hello Robert:

Thank you for the answer. On a slightly positive note, at least this community has the knowledge of what is going on and that offers some time to prepare, I truly feel for those who this will take by total surprise. Take care 

RJE's picture
RJE
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Re: Daily Digest - Jan 19

Davos, I have a question. I have a simple IRA that I have have control of because of a merger. I want physical gold and called a company who says this is possible but would be held in trust by another company. He says in reality it is physical not paper. Is this to be believed? In advance...Thank you

SamLinder's picture
SamLinder
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Re: Daily Digest - Jan 19
amitkeerti wrote:

An interesting news article...

Rates: When Zero Is Way Too High

http://www.businessweek.com/bwdaily/dnflash/content/jan2009/db20090119_561565.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis

So inflation is on the anvil

I don't know whether to laugh uncontrollably or cry hysterically - nor do I know in which order!

Davos's picture
Davos
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Re: Daily Digest - Jan 19

Hello Robert:

I'm going to have to defer to Chris on that question, he had a post about this, I'll get it for you. I don't feel that I am qualified to answer your question.

I looked at it differently and still do. Here was my "logic": If the government can't even figure out what the problem is (insolvency and books as cooked as Enron's) then no solution they offer will not fix the problem, instead it will only make matters worse, ending in hyperinflation as the result of too much money or hyperinflation as the result of a worthless dollar.

Because of that, and because of my past career ending 15 years earlier than anticipated, I decided to get our equity out of all our real estate, rolled my 401Ks into an IRAs and took them out over 3 years, and we downsized. We paid taxes out the proverbial. We live a meager life as compared to before, and we are happier.

But if we hadn't done this we would have lost quite a bit, or put it at risk in the "dollar" or "treasuries" or some form of paper and watched it stagnate or be eaten by inflation.

Also I feel everything would still be at risk when this finally unwinds the rest of the way. Now my only worry is will I be able to get the metal out of the safe deposit box before the banks tank and to find a safe commercial vault to store it then.

Sorry I'm not more up to speed on alternatives, I just never believed that this thing is going to come in for anything even close to the landing they made in the Hudson River the other day and only because the crew on this flight we call the economy either has their head up their a$$ or is lying to the pax to avoid panic in the cabin. This is one flight I'd bail out of with just a reserve chute - or even no chute.

Time will tell if I made the correct decision or not. How long that will be, I haven't a clue. 

Take care, 

 

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Re: Daily Digest - Jan 19

This may not necessarily be a bad thing.  Bernanke exhausted his tools (more like tool?) but even if we try to inflate our way out of this things are going to be very different--the outcome I see includes more extended families living together (i.e. children, parents, and grandparents), and many people will start fishing or hunting again...though growing up I was the only one in my group of friends who ever learned these things from a parent.

It will also be interesting to see how things play out between the federal and state/local governments.  More states have budget shortfalls than just California.  I live in NY and Governor Paterson is raising taxes and implementing new taxes in many areas.  It is only a matter of time before the true condition of things starts to settle in.

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Re: California insolvent
Davos wrote:

Hello Sam:

In response to your post, I thought you might appreciate this, though you probably know of it already.

I was catching up on the FSN News Hour broadcasts driving my kid home and we caught that a contractor in California mailed in warrents it had received as payments/IOU's. Who did they mail them to? The state tax office. This was back in the 80's if I recall. I posted that clip on the 20th Daily Digest. 

Hey Davos,

I checked out today's Daily Digest but couldn't find anything about the warrants - even listened to the "Financial Sense News Hour 12/20/2008, 3rd Hour Year End Review (Possible Repost, Very Good)". Am I just looking in all the wrong places? Embarassed

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Davos
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Re: California insolvent

Hello Sam:

Eghhh, I hope I didn't put up the wrong clip, I renamed it when I put it on my iPod in iTunes, I'll dig it up or a transcript, sorry! Take care 

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