Daily Digest

Daily Digest - January 21

Thursday, January 21, 2010, 10:56 AM
  • A History of Oil In Pictures
  • Jeff Rubin At ‘The Business of Climate Change’
  • Have We Reached Peak Oil?
  • Russia Diversifies into Canadian Dollars
  • Proposal Set to Curb Bank Giants
  • Paul Volcker Prevails
  • Feeling Fiscally Savvy? Try Balancing Maryland's Budget
  • ABC Consumer Confidence at Three Month Low
  • McKinsey On Sovereign (De)Leveraging and Untenable Debt Loads
  • IRS to Expand Audits as Cash Runs Low
  • Illinois Enters a State of Insolvency
  • 2009 Airline Revenue: Worst drop Ever
  • Paterson's Budget Has $1 Billion In New Taxes
  • Surge in Inflation Set to Trouble Bank of England
  • ProPublica Predicts if Your State's Unemployment Insurance Fund Is About to Hit the Skids
  • Accepting Various Truths
  • GM Says Hasta la Vista to Hummer
  • Investors Add Spice to Rising Food Prices
  • Option ARM Recast Update


A History of Oil In Pictures

Edward Burtynsky – “Oil” at the Corcoran Gallery of Art.   This special exhibition surveys a decade of photographic imagery exploring the subject of oil by artist Edward Burtynsky.  Burtynsky photographs the effects of oil on our lives, depicting landscapes altered by its extraction from the earth and by the cities and suburban sprawl generated around its use.

Jeff Rubin At ‘The Business of Climate Change’ (Donna B.)

Jeff Rubin, the former Chief Economist of CIBC World Markets, speaks at The Business of Climate Change conference. Mr. Rubin predicts $225 per barrel oil by 2012 and with it the end of globalization, a movement towards local sourcing and a need for massive scaling up of energy efficiency.

Have We Reached Peak Oil? (Nickbert)

A look at the supply and demand side and what's likely to happen with oil prices.


Russia Diversifies into Canadian Dollars (Davos)

Russia’s central bank announced on Wednesday that it had started buying Canadian dollars and securities in a bid to diversify its foreign exchange reserves.

Proposal Set to Curb Bank Giants (nncita)

President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country's biggest banks, marking the administration's latest assault on Wall Street in what could mark a return, at least in spirit, to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials.

Paul Volcker Prevails (nncita)

Paul Volcker, legendary central banker turned radical reformer of our financial system, has won an important round.

Feeling Fiscally Savvy? Try Balancing Maryland's Budget (Brian C.)

According to the state constitution, you must prepare a balanced budget for the state. There’s a projected deficit of at least 1.7 billion dollars for fiscal year 2011, which begins July 1, 2010.

ABC Consumer Confidence at Three Month Low (Brian C.)

The decline in weekly consumer confidence as measured by ABC will not end. From -41 two weeks ago, this number has now fallen a dramatic 8 points to -49. And add another double-dip data point: after being respondents were evenly split between those who think the economy is getting better and those who saw deterioration on December 13, 2009, the spread has surged with 36% now seeing a worsening while those who think things are getting better is now 24% the worst reading since June 2009.  

McKinsey On Sovereign (De)Leveraging and Untenable Debt Loads (Brian C.)

McKinsey has released a very detailed report which focuses on the "final frontier" of the global credit bubble: the migration of private sector leverage over to the sovereign balance sheet, and the viability and sustainability of this process. This is not a new topic on Zero Hedge, and as Greece just experienced today, unless a country is well equipped with the dynamic duo of a reserve currency and a printing press, surging sovereign debt usually ends with just one outcome...

IRS to Expand Audits as Cash Runs Low (Nickbert)

The Internal Revenue Service, trying to recoup some of the estimated $14 billion that companies underpay in employer taxes each year, plans to wage a three-year campaign to audit 6,000 businesses. The cash-strapped government, which separately said it wants to put a levy on large financial companies that received bailouts, will zero in on worker classification, fringe benefits, reimbursed expenses and executive compensation. The selection of the audited companies will be random, and both big and small businesses will be scrutinized.

Illinois Enters a State of Insolvency (Ben Johnson)

While it appears unlikely or even impossible for a state to hide out from creditors in Bankruptcy Court, Illinois appears to meet classic definitions of insolvency: Its liabilities far exceed its assets, and it's not generating enough cash to pay its bills. Private companies in similar circumstances often shut down or file for bankruptcy protection. "I would describe bankruptcy as the inability to pay one's bills," says Jim Nowlan, senior fellow at the University of Illinois' Institute of Government and Public Affairs. "We're close to de facto bankruptcy, if not de jure bankruptcy.

2009 Airline Revenue: Worst drop Ever (Davos)

The Air Transport Association of America said total passenger revenue for the major U.S. carriers fell 18% in 2009 versus the year before. It was the largest drop on record, exceeding the 14% decline in 2001.

Paterson's Budget Has $1 Billion In New Taxes (Davos)

Under plan, NYC aid would be slashed by $800 million; new soda and cigarette tax proposals already angering masses. "Our revenues have crumbled and our budget has crashed and we can no longer afford this spending addiction that we have had for so long," Paterson said.

Surge in Inflation Set to Trouble Bank of England (Atlas C./Ben Johnson)

Inflation is now at a nine-month high and has moved substantially above the Bank of England's target level of 2%

ProPublica Predicts if Your State's Unemployment Insurance Fund Is About to Hit the Skids (Brandon)

The unemployment insurance system is in crisis. A record 20 million Americans collected unemployment benefits last year, and so far twenty-five states have run out of funds and been forced to borrow from federal government, raise taxes, or cut benefits. In many other states the situation is deteriorating fast. Using near real-time data on state revenues and the benefits they pay out, we estimate how long state trust funds will hold up. Click on a state to find the latest, plus historical data, and details on tax increases and benefit cuts.

Accepting Various Truths (Ben Johnson)

As the American economy digs out from the debris of the Great Recession triggered by the collapse of the housing bubble, we should think about what could happen about another bubble that invisibly chugs through the American economy. I refer to our bloated defense spending.  ...  If the U.S. defense spending bubble were ever to deflate, domestic job losses would be catastrophic, a stunning fact that raises the question of whether we can ever afford peace.

GM Says Hasta la Vista to Hummer (Nickbert)

When General Motors' assembly plant in Shreveport, La., opened this morning, there was a 2.5-ton hole in the lineup left by the Hummer. GM has halted production of the H3 and H3T, the last two Hummers that were still being made. GM negotiated the sale of Hummer to a Chinese company in 2009, but the deal has yet to gain approval of the Chinese government, and analysts are skeptical the sale will go through. If the sale fails, the final Hummer will have rolled off the assembly line last week.

Investors Add Spice to Rising Food Prices (Ben Johnson)

Global food prices are rising again with the United Nations Food and Agriculture Organisation (FAO) food price index hitting 168 points in November, the fourth consecutive month of increase and the highest since September 2008.. Speculation in agricultural commodities may not have reached fever pitch yet but with food shortages expected in 2010, it could.

Option ARM Recast Update (Ben Johnson)

Laurie Goodman and others at Amherst Securities released a new research note yesterday: Option ARMs - Performance and Pricing. They make several important points (quoted section are from Amherst):   ...  Option ARMs have performed almost as poorly as subprime: "The cumulative default rate on option ARMs is higher than on any other category of loans except subprime. For 2006 securitized issuance, 61% of subprime loans have defaulted, as have 49% of the option ARMs, 39% of Alt-A loans, and 11% of prime loans.

Please send article submissions to: [email protected]


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Re: Daily Digest - January 21

"Of those who turn 50 this year, 41 percent say they will never be financially capable of retiring and 23 percent have not even started to save, Pulte revealed at the International Builders' Show, homebuilding's annual industry event, held here this week."

"SACRAMENTO — Public works projects worth hundreds of millions of dollars could be in jeopardy starting this summer — and possibly for years to come — because of California's continuing budget crisis, state financial officials warn.

Wednesday, the Treasurer's Office renewed its concerns that a long political squabble over the state's $20 billion deficit could keep California from selling enough bonds in time to pay for ongoing projects. Without a budget in place by July, officials say, the state will have little hope of enticing investors to purchase its debt.

And beyond that immediate problem may loom an even larger one: Even if the state does make it to the market this spring, skittish investors may be less than eager to buy what the state is selling. Already, California doesn't have enough bond revenue to pay for all the projects voters have approved. "

"Mainstream credit analysts are worried. The U.S. has been able to sell vast amounts of debt because the Treasury market, with $500 billion a day in turnover, is considered safe and dwarfs all other debt markets. But Brian Coulton, head of global economics at Fitch Ratings in London, warns that once rock-solid economies like the U.S. and the U.K. could join shakier nations like Japan and Ireland in losing their aaa ratings if they don't get their bad habits under control. "While aaas can borrow in the short term, very high and rising government debt-to-GDP ratios are ultimately not consistent with aaa status," Coulton says.

Unchartered Waters

Governments around the world will issue an estimated $4.5 trillion in debt this year, triple the five-year average for industrial countries."

"China will look for new ways to invest the world's largest foreign exchange reserves this year to generate higher returns, a senior regulatory official said on Thursday."

""Making more efficient and diversified use of foreign exchange reserves is an important issue for China. We will explore this issue further this year," Guan said.

The currency composition of China's reserves is a closely held secret, but many economists assume the majority of it is held in U.S. dollar-denominated securities, likely Treasury debt.

China had been a net seller of $12 billion in Treasuries in the last six months, Alan Ruskin, Royal Bank of Scotland economist, said in a note, citing U.S. government figures."

"Jan. 21 (Bloomberg) -- The U.S. debt limit would be raised by $1.9 trillion to $14.29 trillion under an amendment proposed in the Senate.

The chamber began debate yesterday on raising the debt ceiling for the fifth time in two years after lower tax revenue from the recession and higher stimulus spending boosted the calendar-year budget deficit to an all-time high last year.

“If Congress does not enact this legislation, and soon, then the Treasury would default on its debt for the first time in history,” said Senate Finance Committee Chairman Max Baucus, a Montana Democrat.

The White House in a statement urged lawmakers to pass the measure. “Such an increase is critically important to make sure that financing of federal government operations can continue without interruption,” it said. "

"With warnings of another slowdown in the euro-zone economy and powerful head-winds in the U.K., policy makers this week appeared to be preparing consumers and investors for disappointment.

Juergen Stark, a member of the European Central Bank's policy council, said that the recovery in the 16-country euro zone could lose traction in the first part of this year. "

"Waiting too late to begin consolidating budgets risks credit ratings downgrades on sovereign debt and higher interest premiums on state borrowing.

Governments already are over their limits. The average government budget deficit in the euro zone is now over 6% of gross domestic product, twice the European Union limit. Ratings agencies already have warned on countries such as Greece and Spain.

The U.K. is also under intense pressure to cut spending, and will have a budget deficit at a massive 12.6% of GDP this fiscal year, rivaling Greece. "

"Perhaps the biggest unknown for 2010 is how smoothly the world's central banks can withdraw the monetary crutch that buoyed markets in 2009.

Beyond that, the worsening finances of both governments and individuals raises the spectre of sovereign debt defaults and may also mean the next leg of the crisis is social, Klaus Schwab, executive chairman of the World Economic Forum that organises the Davos gathering, said on Wednesday."

..................7A) Sovereign defaults top 2010 risk hitlist

"LONDON (Reuters) - The risk that deteriorating government finances could push economies into full-fledged debt crises tops a list of threats facing the world in 2010, according to a report by the World Economic Forum."

""Government debt levels of 100 percent of GDP -- which is where the United States and the UK are heading -- and higher are clearly not sustainable," said Daniel Hofmann, group chief economist at Zurich Financial Services, a contributor to the report.

"There is an inherent risk that investors may take fright, they may question the sustainability of these debt levels -- the result (would be) sovereign debt crises and defaults.

"Clearly Dubai and Greece were early warnings that should be heeded," he told a press conference"

"This is the continuation of the great financial crisis. The main economic event of 2009 was that various banks were busy fixing their balance sheets, but now the focus is on the risk associated with sovereign debt. This may be the beginning of a downward journey for sovereigns, evidence of which we have already seen,’ he said.

He thinks other countries may follow the likes of Greece, Ireland and Spain into trouble.

In the meantime, he is also worried about the prospects of government debt in an ageing society:"

"But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits customarily provided by states and are now receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

More than 5.9 million are receiving extended benefits in the week ending Jan. 2, the latest data available, an increase of more than 600,000 from the previous week. The data for emergency benefits lags initial claims by two weeks."

""There's nothing liberal about the bailouts. There's nothing liberal about standing by and watching banks use public money to get their executive bonuses. There's nothing liberal about giving insurance companies carte blanche to charge anything they want for health care... Since when did that become liberal?"

"There's nothing liberal about letting coal and oil write climate change legislation," he added. "Are you kidding me?"

The 13-year congressman lamented the lack of change in economic policies, tying it to the major problems Democrats are facing.

"The minute the president appointed Tim Geithner and Larry Summers to key policy positions, and the minute that [Ben] Bernanke was named to head the Fed again, we're looking at people who participated in the decline of the economy," he said. "This group has done us a disservice."

"Every area of the economy is still about taking wealth from the great mass of people and putting it into the hands of a few. If you don't have a economic democracy, you don't have a political democracy.""

"Los Angeles Mayor Antonio Villaraigosa and City Council leaders have begun laying the groundwork for the elimination of 1,000 more jobs by July 1 in an attempt to eradicate a budget shortfall that has now ballooned to nearly $200 million."

"The proposal calls for limiting growth of state government spending and would require all surplus revenue to go toward the annual state contribution to the pension system. "

J"ohn Tillman, chief executive officer of policy institute, said pension reform is not an option. It’s a necessity.

“The state of Illinois has not been making its end payments for many, many years, starting in the late ‘90s but really accelerated in the 2000s,” he said at a press conference Tuesday. “And as a result of not making those early payments we now have an $83 billion unfunded liability that we need to make up for no later than 2045.”"

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Re: Daily Digest - January 21

2010 Jan 18 from Ted Tuna
Heidi is the proprietor of a bar in Detroit . She realizes that virtually
all of her customers are unemployed alcoholics and, as such, can no
longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit. By providing her customers' freedom from immediate payment, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi. Heidi then demands payment from her alcoholic patrons; but, being unemployed alcoholics, they cannot pay back their drinking debts. Since, Heidi cannot fulfill her loan obligations, she is forced into bankruptcy. The bar closes, and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS, and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and while losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now, do you understand?


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Re: Daily Digest - January 21

Why are there still rating agencies that are rating government debt?  Look what happened to us in the first place when we listened to them.  I just ignore the articles because it is common sense that these rating agencies are a fraud.  It's obvious that the U.S. can never pay back it's obligations...

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Re: Daily Digest - January 21
gregroberts wrote:


Oh my god Greg, that was great.  Hate to admit it, but I actually learned from that- I could not understand how anybody, let alone financial "experts" could be stupid enough to buy derivatives.  But yeah, I suppose anything that is selling well does look good on paper.

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State's Unemployment Insurance in the Red

"The unemployment insurance system is in crisis. A record 20 million Americans collected unemployment benefits last year, and so far twenty-five states have run out of funds and been forced to borrow from federal government, raise taxes, or cut benefits. In many other states the situation is deteriorating fast. Using near real-time data on state revenues and the benefits they pay out, we estimate how long state trust funds will hold up." (ProPublica Unemployment Insurance Tracker)

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Re: Daily Digest - January 21

GregRoberts that was awesome. I am laughing so hard I am crying. Thanks for the crystal clear explaination.

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Re: Daily Digest - January 21

Anyone watching the market today? It's down nearly 200 right now but the interesting thing is that the Powers That Be are pushing PM's down hard. Gold is down $17.00 and silver is down $2.00.

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Re: Daily Digest - January 21

Most Cities Still Won in Housing Boom



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Re: Daily Digest - January 21


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Re: Daily Digest - January 21

I wonder if theBejingput willholdat1K may be time to buy a bit.



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Re: Daily Digest - January 21

U.S. Faces Extended Power Outages, Largest Grid Builder Says

By Katarzyna Klimasinska

Jan. 21 (Bloomberg) -- The U.S. faces longer power outages resulting from storms this year after utilities cut spending on maintenance by as much as 50 percent, according to Quanta Services Inc., the world’s largest builder of transmission lines.

“Because they haven’t been doing maintenance for a few years, we will see longer outages and we will see more frequent outages as storm season approaches,” Chief Executive Officer John R. Colson said yesterday in an interview in Bloomberg’s Houston office. “It’s a frequent, very frequent occurrence that cities are affected by storms that shouldn’t really affect their distribution systems, and they are devastated and they are out of electricity for days and days.”

Quanta, based in Houston, expects 2010 revenue from maintaining power lines and providing other electricity- distribution services to be little changed following a decline in 2009 because of the spending slowdown.

FPL Group Inc., which was fined a record $25 million for a Florida power failure, halted some projects targeting improvements in reliability in the state after it got a lower- than-requested rate increase on Jan. 13.

The Florida Public Service Commission also turned down a request for an increase in a storm-damage reserve from Raleigh, North Carolina-based Progress Energy Inc. earlier this month.

The biggest blackout in North American history started when a power line, owned by Akron, Ohio-based utility FirstEnergy Corp., touched a tree limb in August 2003. U.S. and Canadian investigators blamed its spread on Carmel, Indiana-based Midwest Independent Transmission System Operator, the utility-owned non- profit that oversees that part of the power grid.

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Re: Daily Digest - January 21
Three Senate Democrats Join Effort to Block EPA Carbon Rules

By Simon Lomax

Jan. 21 (Bloomberg) -- Three Senate Democrats today joined a Republican effort to stop the Environmental Protection Agency from regulating greenhouse gases under existing law.

Democrats Blanche Lincoln of Arkansas, Mary Landrieu of Louisiana and Ben Nelson of Nebraska said they co-sponsored a motion that seeks to overturn the EPA’s finding that greenhouse gases are a threat to public health and should be regulated. The agency has proposed regulations for new cars, power plants, oil refineries and factories that could begin in March.

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Re: Daily Digest - January 21

"WASHINGTON—The Treasury on Thursday announced auctions to sell a total of $166 billion in securities in a range of offerings next week. "

"Japan Holds No. 2 Spot for Now, but Beijing's 2008 Revision May Have Pushed It Ahead; It's All in the Measure"



"Since the inception of the program in January 2009, the Fed has spent $1.148 trillion in the agency MBS market, or 91.91 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010. This leaves $101 billion left to purchase MBS coupons in the TBA market."

"Jan. 21 (Bloomberg) -- California Governor Arnold Schwarzenegger said his conversations this week with Capitol Hill lawmakers may help win some of the $6.9 billion in federal aid he’s seeking to bridge a $19.9 billion deficit.

“Everyone was interested in working together with us,” Schwarzenegger told reporters inside the Capitol in Washington. “We’re not looking for a handout, or anything like this. We’re just looking for money that we deserve.”

His plea for help for the most-populous U.S. state may become a test case for the Obama administration. U.S. states have bridged or still face a combined $193 billion in deficits this fiscal year as the worst recession since the Great Depression crimps revenue, according to the Center on Budget and Policy Priorities in Washington. "

"Jan. 21 (Bloomberg) -- U.S. life insurers, a group led by MetLife Inc. and Prudential Financial Inc., may face $15 billion in additional commercial real estate losses, most of which will be recognized in the next two years, Fitch Ratings said.

The life insurers have already booked about $5 billion in such losses since the economic crisis began, bringing the expected total to $20 billion, Douglas L. Meyer, a Fitch analyst, said today in an interview. Most future losses will be taken this year and in 2011, he said."

"Life insurers suffered almost $60 billion in aggregate investment losses during the financial crisis through September, with $30 billion to $35 billion more to come, Fitch said. Meyer said commercial real estate will account for a bigger portion of those losses. "

"New numbers from the Texas Comptroller's Office show Texas sales tax revenues are still going down.

In December 2009, collections were down more than 11 percent compared to December 2008, and that makes December the tenth straight month of declines in sales tax revenue.

They haven't gone up since February 2009.

According to Texas Workforce Commission Chairman Tom Pauken, Texas is already “more than $1 billion behind Controller Susan Combs’ original budget estimate” just two months into the 2010 fiscal year. "

"The bad financial news just keeps coming at Los Angeles City Hall, where the top budget analyst reported this morning that tax revenue has come in at $186 million below estimates for the current year.

The report from City Administrative Officer Miguel Santana comes one day after The Times reported that Mayor Antonio Villaraigosa and City Council leaders want to deal with the budget crisis by eliminating at least 1,000 jobs.

Sales tax revenue declined by 16% last summer, instead of the 6% drop expected by city budget officials, the report states. And overall tax revenue has declined by double digits for four quarters straight, Santana said in an e-mail to The Times.

“The city hasn’t seen this since the Great Depression,” he wrote."

"This charts shows the rapid deterioration of the Massachusetts Trust Fund balance with insolvency only six months away."


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Chinese banks told to stop lending!

China's growth accelerates to 10.7 percent in 4Q

China's growth accelerates but inflation up as attention turns to preventing overheating

, On Wednesday January 20, 2010, 10:52 pm EST

BEIJING (AP) -- China declared Thursday it has recovered from the global crisis after fourth quarter growth jumped to 10.7 percent. But inflation picked up, adding to pressure on Beijing to prevent overheating and keep its economic recovery on track.

Analysts said it is time for Beijing to start winding down its stimulus and focus on controlling inflation. Quarterly growth exceeded most forecasts and raised 2009's expansion to 8.7 percent, up from a low of 6.1 percent in the first quarter.

"China has become the first, on the whole, to achieve recovery and stabilization in its economy," said Ma Jiantang, commissioner of the National Bureau of Statistics, at a news conference. But he said China still faces "uncertainties" and a weak global outlook so the government will avoid major changes in economic policy.

Chinese leaders say stimulus spending will continue but worry about rising prices and have ordered banks to curb lending after a record surge in 2009. Economists expect an interest rate hike to cool demand for credit, tamp down inflation and prevent bubbles in real estate and stock prices, which are up sharply.

Reflecting the new pressures on the government, Ma said consumer prices picked up in the fourth quarter after falling for much of the year. Prices rose 0.6 percent in November from a year earlier and the rate rose to 1.9 percent in December.

"That's a huge jump," said Citigroup economist Ken Peng. He said it was the sharpest one-month rise in inflation since February 2008, when China was suffering record consumer price hikes.

"Stimulus definitely should end," Peng said. "The authorities are absolutely right to be intensifying tightening efforts at this moment."

Inflation is especially politically sensitive in China, where rising prices erode economic gains that underpin the ruling Communist Party's claim to power.

China's total 2009 gross domestic output was 33.5 trillion yuan ($4.9 trillion), bringing it closer to overtaking Japan as the second-largest economy after the United States.

Still, Ma stressed that China sees itself as a poor country. He said average income for city dwellers in 2009 was 18,858 yuan ($2,700), while in the populous countryside it was just 5,153 yuan ($752).

"Despite the increase in our GDP and economic strength, we still have to recognize that China is a developing country," he said. "We have to be keenly aware of that."

Among other positive signs, Beijing reported earlier this month that exports in December grew for the first time in 14 months, rising by a robust 17.7 percent. Consumer spending also is growing at double-digit annual rates, driven by a 45 percent surge in auto sales in 2009 that saw China overtake the United States as the biggest car market.

But the flood of bank lending and stimulus spending last year helped to fuel speculation in real estate and stocks. Chinese leaders worry that housing prices are rising too fast for the country's poor majority and could lead to a dangerous bust that might leave banks with a burden of bad loans.

China's main stock index rose 80 percent last year, while newspapers are filled with stories about eye-popping prices being paid for luxury apartments.

"The price of assets is probably growing too fast," said Ma, the statistics official.

Banks were ordered last week to increase the amount of reserves they hold in an effort to prevent a surge in lending. The top bank regulator said Wednesday the government will closely monitor credit.

"Turning the taps off might be a bigger challenge than turning them on," Tom Orlik, an economist in Beijing for Stone & McCarthy Research Associates, said in a report. "The challenge for China's government will be to manage the withdrawal of the stimulus without scaring the markets or pulling the rug out from under the recovery."

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Re: Daily Digest - January 21

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and I thought you were all freezing...?


Winter Games bosses sweat over no-snow

January 22, 2010

With the Winter Olympics set to begin in British Columbia in about three weeks, Canadian Olympic organisers have run into an unusual problem - a lack of snow.

Vancouver is basking in spring-like weather with mild 12 degree Celsius temperatures and no snow in the forecast.

And that may be a problem for the Olympic venue at Cypress Mountain, the site of the snowboarding and freestyle ski events.

There are also worries about fog and visibility.

Organizers say there is no time to use snow-making equipment to make enough of the white stuff, so they may have to haul it in.

They say they are confident they will be able to bring in enough by truck, moving it down the mountain, or even using helicopters.

A back-up plan is in place with thousands of cubic yards of snow stockpiled under tarpaulins since November for just such an eventuality.

The tough job now is to keep it all from melting.

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Re: and I thought you were all freezing...?
Damnthematrix wrote:

The tough job now is to keep it all from melting.

I know! I know! We'll bury refrigerated pipes in the snow we shovel in! :0


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