Daily Digest

Daily Digest - January 4

Monday, January 4, 2010, 11:55 AM
  • This Time is Different: Eight Centuries of Financial Folly
  • An Introspective Look at the Future of America
  • US Growth Prospects Deemed Bleak In New Decade
  • Why You Should Put Your Money In A Local Bank
  • Much Talk But Little Changed On Wall Street
  • The Future Of America: Systemic Fraud, Corruption And Financial Instability
  • The Banker's Guide To Owning It All
  • "Your Legal Right To Redeem Your Money Market Has Been Denied"
  • Top 1% Americans Control 42% Financial Wealth In America
  • Is The Fed Juicing The Stock Market?
  • The Scary Shadow Inventory Numbers
  • Structuring Prosperity In The Difficult Decades Ahead
  • Strings Attached To States' Stimulus Funds Will Cost States Even More
  • States Scrambling For Money As Dollars Dry Up
  • It Was The Worst Of Times: The Decade Of Deception
  • The Hidden Transition To Higher Systemic Risk
  • Judicial Watch: The Ten Most Corrupt Politicians In America
  • Did You Hear The One About Washington Lecturing Afghans On Corruption?
  • China's Investment Boom: The Great Leap Into The Unknown
  • Al Qaeda Threat Escalates As Embassies Are Closed In Yemen
  • U.S. Must Do More On Bioterrorism Threats

Economy

This Time is Different: Eight Centuries of Financial Folly (presentmoment)

Financial crises are not random events, say Carmen Reinhart and Kenneth Rogoff. Looking at the the data on boom and bust cycles that have occurred over the past 800 years, a clear pattern emerges. Why can't we learn from history?

How the unwinding of public debts, which were transferred from private sector is going to happen? Through taxes and inflation trauma. Most of these episodes were not resolved through growth. Emerging market resolved these through restructuring and downright defaults while the advanced economy resolved through painful restructuring of fiscal policies and inflation.

An Introspective Look at the Future of America (Davos)

The hypocrisy and fraud of the oligarch rule corporate media story line is now nearly impossible for an educated, informed adult to digest. As Jim Grant pointed out recently, according to Section 19 of the Coinage Act of 1792, the penalty prescribed for any official who fraudulently debased the people's money is death, yet in 2009 debasing the people's money resulted in a "man of the year" award from the self serving corporate media who will be next in line for a bailout from the people for their good service to the new oligarch rule.

US Growth Prospects Deemed Bleak In New Decade (M.W.)

Speaking at American Economic Association's mammoth yearly gathering, experts from a range of political leanings were in surprising agreement when it came to the chances for a robust and sustained expansion: They are slim.

Why You Should Put Your Money In A Local Bank (M.W.)

Individuals with accounts at banks like Citigroup or Bank of America should take their money and move it into a local bank or credit union, where they are likely to pay fewer fees and get better service. The facts are there to support such a move for consumers.

Much Talk But Little Changed On Wall Street (M.W.)

On the heels of the most harrowing period for financial markets since the Great Depression, politicians, regulators, investors and Wall Street executives shared a vow: never again. They would reform the system and change behavior to prevent another financial calamity. But more than a year later, it is striking how little on Wall Street has changed.

The Future Of America: Systemic Fraud, Corruption And Financial Instability (M.W.)

By any metric, the US is experiencing a rapid decline in the standard of living for Americans with fewer remaining civil and property rights, the antitheses of everything America represents. The people's representatives solely represent the special interests who have paid for their votes. Every American should be ashamed, embarrassed and sad that their country has been bought and sold to a group of self serving, morally bankrupt, corrupt officials and politicians, running unchecked by a complicit corporate media.

The Banker's Guide To Owning It All (M.W.)

To extort the maximum value from a population, when one has control of the monetary system, leverage the laws of supply and demand. Use deflation, inflation, and hyperinflation all as tools to transfer wealth. All have a place and a purpose.

"Your Legal Right To Redeem Your Money Market Has Been Denied" (M.W.)

The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, you may be told, "Sorry, your money is now frozen. Bank runs have become illegal." This is precisely the regulation now being proposed by the administration.

Top 1% Americans Control 42% Financial Wealth In America (M.W.)

If we break the data down further we will find that 93% of all financial wealth is controlled by the top 10% of the country. If we start looking at investment assets, the true wealth in the country, we start realizing why Wall Street is all giddy about the recent stock market government induced rally: Of investment assets, 90% of Americans own just 12.2%. The rest goes to the top 10%.

Is The Fed Juicing The Stock Market? (M.W.)

The Working Group on Financial Markets, also know as the Plunge Protection Team, was created by Ronald Reagan to prevent a repeat of the Wall Street meltdown of October 1987. Its members include Geithner, Bernanke, Chairman of the SEC and Chairman of the CFTC. Recently, the team has been put on high alert because of increased market volatility and the systemic risk posed by hedge funds and derivatives.

The Scary Shadow Inventory Numbers (M.W.)

For illustrative purposes, let's try to understand what the effect would be if all these homes in foreclosure were to suddenly hit the market. This approach helps understand the scale of what lurks in the shadows.

Structuring Prosperity In The Difficult Decades Ahead (M.W.)

This guide to the next twenty years of transformation weaves the full spectrum of disciplines--history, political economy, ecology, energy, marketing, investing, health, and the psychology of happiness---into a comprehensive understanding that offers practical principles for not just surviving, but prospering in the difficult decades ahead.

Strings Attached To States' Stimulus Funds Will Cost States Even More (M.W.)

Remember how $200 billion in federal stimulus cash was supposed to save the states from fiscal calamity? Well, hold on to your paychecks, because a big story of 2010 will be how all that free money has set the states up for an even bigger mess this year and into the future. Stimulus dollars came with strings attached that are now causing enormous budget headaches.

States Scrambling For Money As Dollars Dry Up (M.W.)

If you thought state budgets were in bad shape last year, just wait: 2010 promises to be brutal. Federal stimulus dollars are about to dry up. Rainy day funds have been tapped. And demand for Medicaid, food stamps, and unemployment benefits is soaring.

It Was The Worst Of Times: The Decade Of Deception (M.W.)

Looking back, it's hard not to feel as W.H. Auden did one dreary day in 1939: "I sit in one of the dives on 52nd Street, uncertain and afraid, as the clever hopes expire, of a low dishonest decade." Still, if we're looking for a literary progenitor for the era now past, it would be "The Confidence-Man," for these were the years of the great con and the sweeping swindle.

The Hidden Transition To Higher Systemic Risk (M.W.)

The hidden transition to ever-higher systemic risk was the major story of 2009. Nothing's been fixed, and the risks of systemic failure are rising every day.

Judicial Watch: The Ten Most Corrupt Politicians In America (M.W.)

Judicial Watch, a public interest group that investigates and prosecutes government corruption, is a non-partisan educational foundation that promotes transparency, accountability and integrity in government, politics and law; advocates high standards of ethics and morality in our nation's public life, and seeks to ensure that political and judicial officials do not abuse the powers entrusted to them by the American people.

Did You Hear The One About Washington Lecturing Afghans On Corruption? (M.W.)

President Obama, who with his latest troop moves has taken ownership of the 8-year-old war in Afghanistan, has based at least part of his ongoing support on the government there erasing corruption as a condition for such expensive American aid. Good luck with that.

China's Investment Boom: The Great Leap Into The Unknown (M.W.)

Investment-driven growth cycles tend to overshoot and end in a destructive way. The capital spending boom in China will not be sustained and the chances of a hard landing are increasing. The coming slowdown has the potential to be a similar watershed event for world markets as the reversal of the US subprime and housing boom. The ramifications will be far-reaching across most asset classes.

Al Qaeda Threat Escalates As Embassies Are Closed In Yemen (M.W.)

The Yemeni government ordered an "unprecedented" number of troops into a region controlled by a branch of al Qaeda, as the U.S. and Britain, concerned about the threat of terrorism, both closed their embassies in the capital of Sana.

U.S. Must Do More On Bioterrorism Threats (M.W.)

The commission's report called bioterrorism the "most urgent threat" facing the United States and cited "missteps" that fell short of securing adequate funding for anti-bioterrorism programs and "appropriate disease surveillance." "The clock is ticking."

12 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - January 4

"Jan. 4 (Bloomberg) -- Pacific Investment Management Co., which runs the world’s biggest bond fund, is cutting holdings of U.S. and U.K. debt as the two nations increase borrowing to record levels."

"TOKYO, Jan 4 (Reuters) - Japan's tax revenues for November fell 25.6 percent from the same month a year earlier, hit by a slump in corporate earnings after the global financial crisis and underscoring the fiscal dilemma the country's new government is facing.

Japan's tax revenues are set to come to 37 trillion yen ($399 billion) for the fiscal year ending in March, 9 trillion yen short of initial estimates and driving new debt supply up to a record 53 trillion yen, the government announced in December."

"WASHINGTON - Record US budget deficits may intensify pressure for higher taxes should the government fail to reduce spending, Harvard University economics professor Martin Feldstein said.

“Unless there are major actions, we’re going to face unprecedented deficits,’’ Feldstein said yesterday during a panel discussion in Atlanta sponsored by the Allied Social Science Associations.

He said at another panel that he sees a “significant risk that the economy could run out of steam in 2010 and we could see a further downturn’’ as the level of fiscal stimulus wanes.

The loss of 7.2 million jobs since the recession started in December 2007 and takeovers of failing banks have strained federal finances."

"Sinking prices have banks tightening equity credit lines

Hocking the house for quick cash is a lot harder than it used to be, and it's causing headaches for homeowners, banks and the economy.

During the housing boom, millions of people borrowed against the value of their homes to remodel kitchens, finish basements, pay off credit cards, buy TVs or cars, and finance educations. Banks encouraged the borrowing, touting in ads how easy it is to unlock the cash in their homes to "live richly" and "seize your someday."

Now, the days of tapping your house for easy money have gone the way of soaring home prices. A quarter of all homeowners are ineligible for home-equity loans because they owe more on their mortgage than what the house is worth. "

"ATLANTA - If you thought state budgets were in bad shape last year, just wait: 2010 promises to be brutal for lawmakers - many facing reelection - as they scramble to find enough money to keep their states running without raising taxes.

Tax collections continue to sputter. Federal stimulus dollars are about to dry up. Rainy day funds have been tapped. And demand for services - like Medicaid, food stamps and unemployment benefits - is soaring.

As lawmakers head back to state capitols this month, budget woes range “from bad to ridiculously bad,’’ said David Wyss, chief economist at Standard & Poors in New York. “There are some states, those hit particularly hard by the recession, that I don’t think can cut spending enough. They’re running out of things to cut.’’"

"Ten years ago, about 23 percent of city workers’ salaries were benefit costs. By fiscal year 2013-14, that percentage could grow to about 52 percent, according to a report from the Department of Human Resources."

"Ten years ago, San Francisco spent $383.7 million on health insurance for active and retired workers, retirement contributions and Social Security. In the current fiscal year, that bill has risen to $890 million, a 132 percent increase. Three years from now that bill could skyrocket to $1.4 billion."

"James Heintz: 900,000 state workers across the US could lose jobs as state deficits explode"

"Cash-strapped transit agencies across the Bay Area are bracing for a financial blow this month that could ax state funds, adding to the already dour budget situations.

The region’s two biggest providers — Muni and BART — first reported projected shortfalls of $47 million and $26 million, respectively, just three months into the fiscal year, which runs from July to June. Those projections come despite the agencies raising fares, reducing service and laying off workers to reconcile huge deficits heading into this fiscal year."

"The Obama administration expects the federal budget deficit to add up to more than $10 trillion through 2019, or about 6% of the decade's gross domestic product, a broad measure of economic activity. Under those forecasts, Mr. Auerbach estimates, by 2026 the U.S. public debt will exceed 108.6% of GDP -- a record it set in 1946. To make matters worse, the "trust funds" the government has set aside to pay Medicare and Social Security benefits will be exhausted in 2017 and 2037, respectively, after which a big chunk of benefits will have to be paid from current taxes."

Fannie Mae and Freddie Mac

Federal Housing Administration

AIG

Citi and State

Pension Benefit Guaranty Corporation

"Redding's pension rates will climb rather steeply over the next few years as the city copes with a curtailed budget.

The higher rates reflect California Public Employees' Retirement System (CalPERS) efforts to meet pension obligations after suffering unprecedented market losses in the financial meltdown of late 2008 and early 2009.

CalPERS investments pay most of the annual costs for funding the pensions promised employees under labor contracts. Taxpayers, who cover the rest of those obligations, pay a larger share when the CalPERS portfolio takes a hit."

"Together, government units and school districts in Lucas County spent $168 million in 2008 to satisfy their pension obligations to their employees.

That's an increase of 15 percent from four years ago, when pension costs were $145.2 million.

And those costs could continue to go up as state pension boards look for ways to overcome losses suffered in the stock market declines of 2008.

If the increase in pension costs from 2007 to 2008 is maintained, by 2013 local public pension costs are on track to rise more than 18 percent, to nearly $200 million for Lucas County governments and educational institutions."

"Just 60 percent of 2009 graduates had full-time jobs within six months of graduation, compared with a placement rate of 75 percent in recent years, according to the National Association of Colleges and Employers, which recently polled 10 colleges across the country. Entry-level salaries were also down, averaging $48,633, off 1.2 percent from the previous year."

Being used for "Homeland Security " mentioned at about 2:25

"According to the Center for Retirement Research at Boston College, in December 2008, the nation's public pensions had total liabilities of $2.9 trillion and assets of $2 trillion, largely a result of stock markets' losses.

Plus, local obligations increase over time as workers retire at higher levels of pay. A decade ago, West Hartford's pending pension obligations were $13 million. Now, officials say, the figure is closer to $25 million."

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Dorrian
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Re: Daily Digest - January 4

Great Britain:

Five-year-olds to be given compulsory lessons on money, savings and debt

Children aged five will be given compulsory lessons on managing their finances from next year as part of a range of new measures for primary schools.

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DavidC
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Re: Daily Digest - January 4

Hi Dorrian,

Ironic, given that the UK Government has no cenception of management of money, savings or debt.

DavidC

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Sam
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Re: Daily Digest - January 4

The link titled "Structuring Prosperity In The Difficult Decades Ahead" leads to one of the finest reads I have had in a long time. I recommend this to everyone here. Thanks to the folks who put toghter the dd!

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TechGuy
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Re: Daily Digest - January 4

To make matters worse, the "trust funds" the government has set aside to pay Medicare and Social Security benefits will be exhausted in 2017 and 2037, respectively, after which a big chunk of benefits will have to be paid from current taxes."

 

What Trust Fund? There is no money set aside in a trust fund. All of the money collected has been spent long ago. Medicare has been running deficits for nearly a decade, and Social Security has just started running a deficit this year.

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Damnthematrix
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Re: Daily Digest - January 4
If you Google "gulf stream" it suggests further common search terms are:
gulf stream collapse
gulf stream slowing
gulf stream climate change
gulf stream global warming
 

Sea change: why global warming could leave Britain feeling the cold

James Randerson, science correspondent

The Guardian, Friday 27 October 2006
 
Scientists have uncovered more evidence for a dramatic weakening in the vast ocean current that gives Britain its relatively balmy climate by dragging warm water northwards from the tropics. The slowdown, which climate modellers have predicted will follow global warming, has been confirmed by the most detailed study yet of ocean flow in the Atlantic.

Most alarmingly, the data reveal that a part of the current, which is usually 60 times more powerful than the Amazon river, came to a temporary halt during November 2004.

The nightmare scenario of a shutdown in the meridional ocean current which drives the Gulf stream was dramatically portrayed in The Day After Tomorrow. The climate disaster film had Europe and North America plunged into a new ice age practically overnight.

Although no scientist thinks the switch-off could happen that quickly, they do agree that even a weakening of the current over a few decades would have profound consequences.

Warm water brought to Europe's shores raises the temperature by as much as 10C in some places and without it the continent would be much colder and drier.

Researchers are not sure yet what to make of the 10-day hiatus. "We'd never seen anything like that before and we don't understand it. We didn't know it could happen," said Harry Bryden, at the National Oceanography Centre, in Southampton, who presented the findings to a conference in Birmingham on rapid climate change.

Is it the first sign that the current is stuttering to a halt? "I want to know more before I say that," Professor Bryden said.

Lloyd Keigwin, a scientist at the Woods Hole Oceanographic Institution, in Massachusetts, in the US, described the temporary shutdown as "the most abrupt change in the whole [climate] record".

He added: "It only lasted 10 days. But suppose it lasted 30 or 60 days, when do you ring up the prime minister and say let's start stockpiling fuel? [ Ha ha ha ] How can we rule out a longer one next year?"

Prof Bryden's group stunned climate researchers last year with data suggesting that the flow rate of the Atlantic circulation had dropped by about 6m tonnes of water a second from 1957 to 1998. If the current remained that weak, he predicted, it would lead to a 1C drop in the UK in the next decade. A complete shutdown would lead to a 4C-6C cooling over 20 years.

The study prompted the UK's Natural Environment Research Council to set up an array of 16 submerged stations spread across the Atlantic, from Florida to north Africa, to measure flow rate and other variables at different depths. Data from these stations confirmed the slowdown in 1998 was not a "freak observation"- although the current does seem to have picked up slightly since.


Since the whole system is driven by the mechanism of temperature gradients,
and we know Global Warming affects the poles more than lower latitudes,
and that the polar waters are warming rapidly,
it is hardly surprising that the Gulf Stream is affected.
Presumably this will be a seasonal phenomenon, at least at first,
hence Britain would get colder winters and warmer summers.
They deserve it. :-)
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ERODSTA
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No Rise of Airborne Fraction of Carbon Dioxide in Past 150 Years

No Rise of Airborne Fraction of Carbon Dioxide in Past 150 Years, New Research Finds

ScienceDaily (Dec. 31, 2009) — Most of the carbon dioxide emitted by human activity does not remain in the atmosphere, but is instead absorbed by the oceans and terrestrial ecosystems. In fact, only about 45 percent of emitted carbon dioxide stays in the atmosphere.

http://www.sciencedaily.com/releases/2009/12/091230184221.htm

 

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pinecarr
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Re: Daily Digest - January 4

Davos, incredible article!  

The only thing I wish he'd done differently would have been to better convey how jarring the impacts will be if the collapse unfolds as he describes.  The way he describes it, it almost sounds like it will be a gradual, peaceful decscent (except, I think, at the very end of the article). I don't think so.  I am afraid we may be in for a series of jarring landings on the way down.

Great article; thanks for sharing!

pinecarr

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pinecarr
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Re: Daily Digest - January 4

Hi Sam-

   I just got a hard copy of this book, Survival+.  Thanks for the enthusiastic recommendation!  I know I also heard a couple of other folks rave about it on a different thread.  I'm going to move it up in my stack of really-interesting-looking books I've bought to read! 

   Swt Melissa (M.W.) , another good catch!  (I just wish I had time to read them all!)

   best,

   pinecarr

guardia's picture
guardia
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Re: No Rise of Airborne Fraction of Carbon Dioxide in Past ...
ERODSTA wrote:

ScienceDaily (Dec. 31, 2009) — Most of the carbon dioxide emitted by human activity does not remain in the atmosphere, but is instead absorbed by the oceans and terrestrial ecosystems. In fact, only about 45 percent of emitted carbon dioxide stays in the atmosphere.

Oh please, guess what happens when oceans are full...

Samuel

Damnthematrix's picture
Damnthematrix
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Re: No Rise of Airborne Fraction of Carbon Dioxide in Past ...
guardia wrote:
ERODSTA wrote:

ScienceDaily (Dec. 31, 2009) — Most of the carbon dioxide emitted by human activity does not remain in the atmosphere, but is instead absorbed by the oceans and terrestrial ecosystems. In fact, only about 45 percent of emitted carbon dioxide stays in the atmosphere.

Oh please, guess what happens when oceans are full...

Samuel

BUURPP!!

Warmest decade proves Abbott 'got it wrong'

http://www.abc.net.au/news/stories/2010/01/05/2785897.htm?section=justin

Federal Environment Minister Peter Garrett says figures released by the Bureau of Meteorology prove the Opposition has got it wrong on climate change.

The Bureau says its annual climate statement for 2009 shows last year was the second-warmest since records began in 1910, while the past decade was the warmest in Australia as well as globally.

Mr Garrett says Opposition Leader Tony Abbott believes global warming has stopped and he cannot be trusted on the issue.

"With these important Bureau of Meteorology figures out, Mr Abbott must face up to the facts," he said.

"[He should] either show us that in fact the experts have got it wrong or admit that he's got it wrong."

Mr Abbott says the weather bureau's new figures will not change his mind about the Government's climate change policy.

He says the Bureau is entitled to say what is happening with the weather, but that does not mean an emissions trading scheme is the best way to combat climate change.

"My argument is against the Government's great big new tax," Mr Abbott said.

"If we are going to tackle climate change, let's take direct action, let's not raise the price of ordinary daily life.

"That's why I think the Government is dead wrong on this."

Record heatwaves

Climatologist David Jones says last year's annual mean temperature, 0.90 degrees Celsius above average, was driven up by three record-breaking heatwaves.

Temperatures soared in southern Australia during late January and early February, contributing to the Black Saturday bushfires in Victoria.

A winter heatwave over most of the inland resulted in the warmest August on record, while another heatwave in November across central and south-east Australia saw a record eight consecutive days of maximum temperatures in Adelaide.

Dr Jones also says each decade since the 1940s has been warmer than the previous one.

The weather bureau has found the average temperature over the past 10 years was 0.48 degrees Celsius above average.

ejanea's picture
ejanea
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Re: Daily Digest - January 4

It just keeps getting hotter and hotter..

Meteorologists have warned this weekend in Adelaide could be well above official forecasts. The Weather Channel experts say a very hot air mass is drifting into the state and could cause unusually high overnight heat and temperatures above 40C from Friday to Monday.   (Ind weekly,  Adelaide, South Australia)

But this is the best commentary that I've read on Copenhagen, the three E's... and the future...

  http://heinberg.wordpress.com/2010/01/04/212-the-meaning-of-copenhagen/

Jane

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