Daily Digest

Daily Digest - January 22

Friday, January 22, 2010, 11:59 AM
  • Jobless Claims in U.S. Unexpectedly Rise on Backlog
  • Initial Claims Misses Estimate By 42K, Emergency Compensation Explodes By 652K Over Last Week
  • AIG Timeline Of Events
  • Theft! Were the US & UK Central Banks Complicit in Robbing the Middle Classes?
  • On Financial Advisors Watching TV
  • Economy in Shock Struggles to Restart

Economy

Jobless Claims in U.S. Unexpectedly Rise on Backlog (Ben Johnson)

More Americans than anticipated filed claims for unemployment benefits last week, reflecting a backlog of applications from the year-end holidays. Initial jobless claims rose by 36,000 to 482,000 in the week ended Jan. 16, the highest level in two months, from 446,000 the prior week, Labor Department figures showed today in Washington. The jump was due to an “administrative” accumulation from late December and early January holidays, and did not reflect “economic” reasons, a Labor Department spokesman said.

Initial Claims Misses Estimate By 42K, Emergency Compensation Explodes By 652K Over Last Week (Brian C.)

After the double dip in new home sales and NAHB confidence, we are starting to see the beginning of the end of the improvement in firings: initial claims in the week ended January 16 came in at 482,000, higher than the estimate which expected a number of 440,000, which was supposed to be an improvement from the prior week's 446,000. The combination of initial, continuing claims and EUC for the most recent period is a record 10,701,794 Seasonally Adjusted or a whopping 12,021,880 Non-Seasonally Adjusted. The double dip is here, and unfortunately for Obama, he is all out of stimulus bullets.

AIG Timeline Of Events (Brian C.)

For all who want to get up to speed on next week's political theater involving AIG, Tim Geithner, Goldman Sachs' Stephen Friedman, Goldman Sachs' Bill Dudley, Goldman Sachs' Lloyd Blankfein, and the endless taxpayer bailouts, here is a terrific timeline for everything relevant to the AIG soap opera.

Theft! Were the US & UK Central Banks Complicit in Robbing the Middle Classes? (Brian C.)

Mr Bernanke’s in-house Fed economists have found that the Fed wasn’t responsible for the boom which subsequently turned into the biggest bust since the 1930s. Are those the same Fed staffers whose research led Mr Bernanke to assert in Oct. 2005 that “there was no housing bubble to go bust”? The reasons for the US and the UK central banks inflating the bubble range from incompetence and negligence to just plain spinelessness. Let me propose an alternative thesis. Did the US and UK central banks collude with the politicians to ‘steal’ their nations’ income growth from the middle classes and hand it to the very rich?

On Financial Advisors Watching TV (Davos)

“Isn’t it funny when you walk into a investment firm, and you see all of the financial advisors watching CNBC — that gives me the same feeling of confidence I would have if I walked into the Mayo-clinic or Sloan Kettering and all the medical doctors were watching General Hospital…"—Senior portfolio manager, UBS

Economy in Shock Struggles to Restart (Nickbert)

The price of candles in the teeming La Saline market here has climbed 60 percent since last week’s earthquake. A box of matches is up 50 percent. A package of Perdue Chicken Franks has gone up 30 percent. As Haitians begin to turn their attention to rebuilding a crippled economy, the rapid surge in prices of crucial products is just one of the many challenges they face.

Please send article submissions to: [email protected]

13 Comments

saxplayer00o1's picture
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Re: Daily Digest - January 22

"Ben Bernanke's confirmation for a second term as Federal Reserve chairman will go down to the wire and could be a closer vote than seemed likely just a few weeks ago."

.............1A) Senate Dems Not Sure They Can Get Enough Votes to Reconfirm Bernanke (Blog)

""The American people are disgusted with the greed and recklessness of Wall Street," Sen. Bernie Sanders, I-Vt., said in an interview with The Associated Press last month. "People are asking, 'Why didn't the Fed intervene at the appropriate time to stop the casino-type activities of large financial companies?'"

Sanders, Sen. Jim Bunning, R-Ky., Sen. Jim DeMint, R-S.C., and Sen. David Vitter, R-La., have all put holds on Bernanke's nomination, requiring 60 votes to proceed to a vote."

"The state's current operating budget deficit is $2.6 billion, a situation that has state lawmakers scrambling to find program cuts and tax increases to balance the ledger. But Republicans in the Legislature are sounding the alarm about another billion-dollar problem looming for Washington - the unfunded liability in the state's pension system. That number now stands at about $6 billion, they say. "

"ATLANTA -- Georgia faces a huge gap in Medicaid funding in

the coming fiscal year.

State Health Commissioner Rhonda Medows told a legislative

budget panel on Thursday that the state is projecting a $506

million gap in state moneys for the health program for the needy. The recession has caused enrollment in the program to soar. Medicaid rolls jumped 7.7%from June 2009 to 2010.

The state will also see hundreds of millions of dollars in

federal stimulus dollars and tobacco money evaporate. "

"Iowa Gov. Chet Culver is looking for more help from the federal government to patch up education and health care spending.

Culver asked a Senate appropriations subcommittee on Thursday for a second round of economic stimulus money. Later, he appealed to the Obama administration to ease rules for existing aid that could force the state to reverse some spending cuts.

The governor told the Senate panel that Congress should extend federal unemployment benefits and provide more aid to states for education, Medicaid and other needs."

"With nearly three-quarters of their seats up for election this year, the nation’s governors are setting the stage for 2010 by warning that the economic downturn is far from over in the states, where tax collections are weak, unemployment is surging and the likeliest outcomes will be unpopular tax hikes and sharp budget cuts."

"Illustrating the depth of states’ fiscal troubles, five governors already have proposed tax hikes, including Illinois Gov. Pat Quinn (D), who must face the voters in a Democratic primary in less than two weeks. Four more have looked to the federal government for more money, including California’s Arnold Schwarzenegger (R), who has presented a budget plan that relies on $7 billion in as-yet-unapproved federal help. And almost every governor who has delivered a speech has prioritized job creation, wary that an unemployed electorate is an unhappy one."

"A common challenge for states this year is the dwindling of federal stimulus dollars, including $87 billion for Medicaid — the joint state-federal program providing health care to the poor — that will run out in December. Governors in some states are predicting that the toughest times may, in fact, lie ahead."

"San Francisco schools are facing a $113 million budget shortfall over the next two years - a staggering figure that would mean layoffs, cuts to popular programs like summer school and increases in class size. "

"He was alluding to a state takeover of the city's operations.

An Ohio city that defaults on its debts or payroll or can't control its deficit can be brought under the supervision of a seven-member commission reporting to the Ohio auditor.

The commission would have the power to enforce its recommendations by preventing a city from borrowing money.

"What I am saying, if we get into a fiscal emergency or we go bankrupt, it will be fixed and … there will not be a whole lot of discussion to it," Mr. Bell added."

"Because the city has failed to submit the required balanced budget and three-year financial plan, the city has no spending authority in 2010, which means the city cannot pay it's Jan. 29 payroll or other necessary 2010 obligations, said Katie Wright, chairwoman of the Financial Advisory Authority."

"California and states in the Northeast and Midwest are piling up debt, and the economic outlook for many of these states is weak. Roll over the map to see how your state stacks up."

"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. "

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Bernanke: history?

This from zerohedge about Helicopter Ben's future (or lack thereof) at the Fed:

http://www.zerohedge.com/article/tide-has-turned-barbara-boxer-joins-fei...

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Re: Daily Digest - January 22

Why Deflation Is Good for Precious Metals

http://seekingalpha.com/article/183323-why-deflation-is-good-for-precious-metals

With the general fundamentals now explained, it's time to apply those fundamentals to current parameters. More specifically, it's time to analyze how gold (and silver) will react as the hopeless insolvency of the United States becomes obvious to more and more people.

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Re: Daily Digest - January 22

This is hilarious but a warning that the following clips are adults only due to the language. 

A new car for the 2010 economy.....the 1993 Ford Taurus.

http://www.theonion.com/content/video/ford_unveils_new_car_for_cash

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Re: Daily Digest - January 22

'How Bad For The Environment Can Throwing Away One Plastic Bottle Be?' 30 Million People Wonder

This one is too close to reality....

http://www.theonion.com/content/news/how_bad_for_the_environment_can

 

 

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Re: Daily Digest - January 22

One quarter of US grain crops fed to cars - not people, new figures show

New analysis of 2009 US Department of Agriculture figures suggests biofuel revolution is impacting on world food supplies

One-quarter of all the maize and other grain crops grown in the US now ends up as biofuel in cars rather than being used to feed people, according to new analysis which suggests that the biofuel revolution launched by former President George Bush in 2007 is impacting on world food supplies.

The 2009 figures from the US Department of Agriculture shows ethanol production rising to record levels driven by farm subsidies and laws which require vehicles to use increasing amounts of biofuels.

"The grain grown to produce fuel in the US [in 2009] was enough to feed 330 million people for one year at average world consumption levels," said Lester Brown, the director of the Earth Policy Institute, a Washington thinktank ithat conducted the analysis.

Last year 107m tonnes of grain, mostly corn, was grown by US farmers to be blended with petrol. This was nearly twice as much as in 2007, when Bush challenged farmers to increase production by 500% by 2017 to save cut oil imports and reduce carbon emissions.

Graph - US grain used to make ethanol

More than 80 new ethanol plants have been built since then, with more expected by 2015, by which time the US will need to produce a further 5bn gallons of ethanol if it is to meet its renewable fuel standard.

According to Brown, the growing demand for US ethanol derived from grains helped to push world grain prices to record highs between late 2006 and 2008. In 2008, the Guardian revealed a secret World Bank report that concluded that the drive for biofuels by American and European governments had pushed up food prices by 75%, in stark contrast to US claims that prices had risen only 2-3% as a result.

Since then, the number of hungry people in the world has increased to over 1 billion people, according to the UN's World Food programme.

"Continuing to divert more food to fuel, as is now mandated by the US federal government in its renewable fuel standard, will likely only reinforce the disturbing rise in world hunger. By subsidising the production of ethanol to the tune of some $6bn each year, US taxpayers are in effect subsidising rising food bills at home and around the world," said Brown.

"The worst economic crisis since the great depression has recently brought food prices down from their peak, but they still remain well above their long-term average levels."

The US is by far the world's leading grain exporter, exporting more than Argentina, Australia, Canada, and Russia combined. In 2008, the UN called for a comprehensive review of biofuel production from food crops.

"There is a direct link between biofuels and food prices. The needs of the hungry must come before the needs of cars," said Meredith Alexander, biofuels campaigner at ActionAid in London. As well as the effect on food, campaigners also argue that many scientists question whether biofuels made from food crops actually save any greenhouse gas emissions.

But ethanol producers deny that their record production means less food. "Continued innovation in ethanol production and agricultural technology means that we don't have to make a false choice between food and fuel. We can more than meet the demand for food and livestock feed while reducing our dependence on foreign oil through the production of homegrown renewable ethanol," said Tom Buis, the chief executive of industry group Growth Energy.

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Re: Daily Digest - January 22

Debt burden now rests more on U.S. shoulders

By Floyd Norris
The New York Times
Friday, January 22, 2010

The United States government borrowed more money than ever before in 2009, but its largest lender -- China -- sharply reduced the amount it was willing to lend.

The U.S. Treasury estimated this week that during the first 11 months of last year China raised its holdings of Treasury securities by just $62 billion. That was less than 5 percent of the money the Treasury had to raise.

That raised its holdings to $790 billion, leaving it the largest foreign holder of Treasury securities -- Japan is second at $757 billion and Britain a distant third at $278 billion. But China’s holdings at the end of November were lower than they were at the end of July.

Not since 2001, when China was still a relatively minor investor in Treasury securities, had the country shown a decline in holdings over a six-month period.

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Re: Daily Digest - January 22

 Request:

That little sax icon on my profile sort of says what I'm up to today. Since I need to leave and today's digest isn't up yet can I get someone who sees this to post it under the comments section under Saturday's Daily Digest news?

 Don't miss the talk that Ron Paul gives.

  Thanks

(Most of Marc Faber's comments are at around 5 minutes into the video)"When you look at the US… it's a total disaster, we're all doomed, we're doomed!" Marc Faber, author of the "Gloom, Doom and Boom Report," told CNBC Friday. Faber and Anthony Thomas from Moody's discuss the global economic outlook.

"A state budget review conducted by a Chicago economic think tank pegs the Illinois deficit at $12.8 billion.

The total, compiled by the Civic Federation in a report released Friday, shows the hole in the current budget has grown nearly $2 billion to $5.7 billion. The next budget, which needs to be approved in the coming months and takes effect July 1, will not only carry that hole over, but will be written without billions in federal stimulus money and bear the responsibility of paying back loans used to try to balance current spending.

Added all up, the deficit reaches $12.8 billion, the federation says."

"Tulsa, OK - Layoffs are never easy and Friday night 155 Tulsa Police Officers are dealing with that reality along with 14 civilian co-workers.

Some were given notice this afternoon, while the rest were notified this weekend.

Officer Ross Williams heads into tonight's meeting somewhat bewildered.

"Once again, I think it's unbelievable. Five and half years and i'm gone," Officer Williams says.

Williams is one of 155 officers laid off due to budget cuts"

............................3A) 350 Tulsa workers get notice jobs are history

"TULSA — They knew what was coming and still couldn’t believe it.

More than 350 city employees handed layoff notices Friday were stunned by the enormity of what could become the largest single action of its kind in the city’s history."

"The $580 million reduction in revenue projections ordered by the Nevada Economic Forum on Friday is just the first shoe to drop on the state's beleaguered budget.

The other shoe, the statute guaranteeing public school funding, will add well over

$200 million to that total.

......................4A) NEVADA GOVERNMENT: Revenue projected to plunge

"CARSON CITY -- With Nevada at least two years away from emerging from the worst recession in generations, the Economic Forum determined Friday that state government will have $580 million less in tax revenue to spend than what was put in the state budget last June."

Under Nevada Revised Statutes, state government must protect K-12 education from unanticipated reductions in sales tax revenues that school districts depend on to pay for teacher salaries and educational programs. "

"A letter from two Salinas Council members regarding budget cut solutions:

WHY DOES THE CITY OF SALINAS HAVE A $9.6 MILLION DEFICIT?

BASED ON THE PUBLIC DATA AS OF DECEMBER 16, 2009, THE CAUSE OF THE STRUCTURAL BUDGET INCLUDES:

1) TOTAL ANNUAL REVENUES DOWN 18.8% or $17.6 MILLION FROM PROJECTIONS MADE PRIOR TO THE RECESSION/HOUSING DOWNTURN;

2) SALES TAX ESTIMATES DOWN $7.9 MILLION (-30.1%);

3) MEASURE V TAX ESTIMATES DOWN $2.2 MILLION (-21.1%);

4) PROPERTY TAX ESTIMATES DOWN $6.7 MILLION (-25.1%);

5) BUILDING LICENSE RELATED FEES DOWN $500,000;

6) VEHICLE LICENSE FEES DOWN $300,000"

"L.A. County transit officials are forecasting the largest operating deficit in their history, prompting them to consider cuts to bus and rail service as well as fare increases."

"The MTA faces a projected shortfall in operating funds of at least $251.3 million at the end of the 2011 fiscal year."

"Above: Why is the City of San Diego now facing a $19 million budget gap a week after the mayor praised the council for passing a balanced budget in December? We speak to Scott Lewis, from voiceofsandiego.org, about what is causing the projected deficit to grow."

"CARL DeMAIO (San Diego City Councilman): Well, the city budget was never balanced in the first place, that's why I voted against it in December. It relies on $100 million in one-time monies, accounting shifts, and loans. It did not book $60 million worth in the cost of retiree health care benefits. So that's $160 million of debt right there that was being run in this year's budget. On top of that the city just got a pension payment from the city's pension system.

The mayor's office was off by $20 million on the pension payment, and that's going to require that the city come back and find out where we're going to find those monies. This is a budget that really is not good for San Diego taxpayers."

(The speech is posted by a blogger and he has some comments first, so scroll down to see the transcript. Click here  for the videos of Ron Paul giving the speech)

" The concerted effort to prevent the correction the market demands, guarantees a prolonged agonizing crisis. Every effort to reverse the tide will depend on spending, higher deficits, increased taxes and money creation. This effort is now providing another grand bubble: the dollar/bond bubble.

The next event will be a dollar crisis. A full-blown dollar crisis will be worse than our current financial crisis. The extent of a dollar crisis depends on whether or not the Washington politicians wake up and change their ways-a dubious hope.

More likely, the insanity will continue until some not yet known event will undermine the confidence of the dollar worldwide. Signs of less desire by foreigners to hold our dollars are already present. I'm certain our Treasury and Federal Reserve are pulling out all stops to prevent a massive run on the dollar. At present the "orderly" retreat from the dollar is working. But it won't last."

It is impossible to predict the time when confidence will be lost, but it can come quickly. Resorting to buying other paper currencies will not be of much help. When the dollar crashes, most likely the purchasing power of all currencies-since all countries hold dollars as a reserve-will go down as well.

This means that dollars and other currencies will go into buying consumer items, precious metals and other physical properties. Consumer prices will soar, as well as interest rates. The central bank will lose control; and the more they inflate, the worse the confidence becomes. The interest rates will respond to these efforts by rising sharply.

If the Fed tries to reverse the run on the dollar, interest rates will also soar, and the pain on the American citizens will be of such proportion that political chaos will result. Either scenario leads to political and social chaos-the third event, and the most dangerous.

With no ability of the federal government to fund its commitments, international or domestic, major changes will occur in our system. The social unrest will elicit cries for government to exert unusual force to head off a complete breakdown of law and order. The ultimate trap will be set for a system of government claiming to protect a free society. If more power and police authority are not given to the federal government, it will be argued that only anarchy will result. If more government policing power is given, it will mean a lethal threat to civil liberties. Already we have permitted the notion that a single person, the Attorney General or President, can decide who is an "enemy combatant", thus denying that individual the right to habeas corpus, permitting indefinite detentions without charges made. This attitude toward civil liberties has changed significantly since the fear built around 9/11.

 

"“According to my projections, California will drop below its $2.5 billion prudent minimum cash balance on March 30 by $1.3 billion. On April 1, the state will be in the red by $197 million, and our resources to pay bills are not expected to return to safe levels until April 21,” Chiang continued.

The state is facing a $19.9 billion budget deficit over the next 18 months. That amount includes a $6.6 billion shortfall in the current fiscal year, a $12.3 billion projected shortfall for 2010-11 and money needed for a $1 billion reserve."

"Perry’s message was grim. The mounting budget deficit will force layoffs, and this clearly troubled a lawmaker who started in city hall as an aide during the prosperous days. Now she favors a halt to hiring police officers even though her downtown-through-South L.A. includes crime heavy areas. She fears the threat municipal bankruptcy. “I have to laugh when people say it isn’t real,” she said."

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Re: Daily Digest - January 22

Damnthematrix's picture
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Re: Daily Digest - January 22

This caught my eye.... (thanks sax)

"L.A. County transit officials are forecasting the largest operating deficit in their history, prompting them to consider cuts to bus and rail service as well as fare increases."

If this is happening before Peak OPil bites us on the bum for real, exactly how will anyone get to work, if they have a job...?

Mike

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The Day ObamaCare Died - Sung by Barack Obama.avi

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Re: Daily Digest - January 22

Hi laly_c

Welcome.

You can't just make up jobs. You must have a healthy economy to have jobs and you must have jobs to have a healthy economy. The way to get back to this loop is to let the market sort itself out. To do that the government has to stop interfering, let prices seek their own level.

I'm sure its much more complicated than that but that is the general idea.

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