Daily Digest

Daily Digest - July 13

Monday, July 13, 2009, 1:00 PM
  • The Fed Under Fire...(Video)
  • Pete Peterson on Charlie Rose (Videos short and long, repost)
  • Medvedev sees single currency dream in G8 coin gift
  • More on Unemployment: The "Exhaustion Rate" Underestimates the Issue (Chart on page)
  • Exhaustion Rate Enron Style (Chart)
  • About the best collection of Housing Charts I have yet to see (Seen on ZeroHedge)
  • Shadow Inventory
  • Bloomberg's Jonathan Weil On GoldmanGate (Video)
  • Obama Says Economic Stimulus Worked as Intended, Urges Patience
  • Government Spent $104,000,000,000.00 More Than it Took In - Table of the Haves and the Have-Nots
  • Chinese Handcuffs? No, Chinese trade deficit (H/T Fujisan)

Economy

The Fed Under Fire...(Video)

Pay attention to the comments of William Greider, author of “The Secrets of the Temple.” He is describing exactly what I was railing about all through the crisis last fall, namely that Jamie Dimon, CEO of JPM, HAD to buy Bear Stearns to save themselves and received $30 billion in guarantees from the Fed while Dimon also sat on the board of the New York Fed of which little Timothy Geithner was the head!

Here’s the real truth. JPM is the center of the derivatives universe and has already imploded. It is only a matter of time before the $90 trillion of derivatives [enphasis min] they hold, and hide, and obscure come crashing down.

Audit the FED? ABSOLUTELY. I fully support that, but I can almost guarantee you it will not happen in any real manner, for if it does, that will lead to the end of the Fed, a very good reason to support the REAL audit of which they are obviously so afraid. (again ht Glass!)

 Pete Peterson on Charlie Rose (Videos short and long, repost)

First video pegs dollar crisis possibility at 75%

Medvedev sees single currency dream in G8 coin gift

"This is the international currency."

Russia, along with China, has been a vocal proponent of diversifying the global currency system away from the dollar, which has dominated global finance and commerce since the end of World War II.

French President Nicolas Sarkozy at the summit joined the band in favour of dumping the dollar as the international currency of reference, insisting that "we cannot stick with just one single currency."

More on Unemployment: The "Exhaustion Rate" Underestimates the Issue (Chart on page)

There is some confusion out there as to what exactly the "exhaustion rate" is (I had been confused myself). The following definition has been commonly used by many blogs and media pundits alike:

The United States Department of Labor publishes statistics on the "exhaustion rate" - this is a measure of the number of people who have used up their benefits, and will no longer be receiving unemployment checks.
This definition had been correct. And if this were still true, the chart below would show just how large a crisis we were in with those that are no longer able to receive unemployment at almost 50% of their "unemployment" class.

Unfortunately, this equation misses a large change in the U.S. unemployment legislature which results in the figure actually being even worse.

Again, the definition HAD been true. The reason why it is HAD, rather than HAS is that the calculation for the exhaustion rate has not changed, even though benefits have been extended not once, but twice over the past year (first from 6 months to 9 months in July and then to 12 months in November).

Why is this important? Because the Department of Labor never changed their calculation. The calculation is as follows:
The 12 Month Average of those Receiving their Final Payment divided by...
The 12 Month Average of those Receiving their 1st Payment, with a 6 Month Lag

Exhaustion Rate Enron Style (Chart)

About the best collection of Housing Charts I have yet to see (Seen on ZeroHedge)

Shadow Inventory

This means in the last four months out of the 151,000 homes sold in California, some 75,000 to 80,000 homes that sold were distressed properties.

And here is where the major data discrepancies begin for the California housing market. Let us look at the distress inventory for this same timeframe:

In the same time that California was selling an average of 38,000 homes a month, an average 47,000 homes were being foreclosed on. So even looking at this basic data set for 4 months, we know that in March 20,787 homes that sold were foreclosure re-sales. But during March, we know that California had 48,927 actual foreclosures (we aren’t counting the 58,959 notice of defaults that will become foreclosures in 6 to 9 months). This pattern holds for April and May and I would assume June as well. So what is the bottom line? Some 23,000 to 28,000 homes per month that are foreclosed or now owned by the bank don’t make their way to the public MLS! That is why in this short time frame, we see the actual public data dwindle because organic sales from non-distressed properties are accounted for, but the building distress market is kept off the books and this is enormous. In fact, the MLS data is well accounted for:

Bloomberg's Jonathan Weil On GoldmanGate (Video)

Obama Says Economic Stimulus Worked as Intended, Urges Patience

President Barack Obama said his $787 billion stimulus bill “has worked as intended” as he pushed back against Republican criticism that his recovery program has failed to rescue the economy.

Government Spent $104,000,000,000.00 More Than it Took In - Table of the Haves and the Have-Nots

Richard Karn, good discussion on Cap and Trade Tax, Interesting views on dollar decoupling/derivative. 

Chinese Handcuffs? No, Chinese trade deficit (H/T Fujisan)

This means that the need for China to buy our treasuries will have largely gone away.

13 Comments

cannotaffordit's picture
cannotaffordit
Status: Gold Member (Offline)
Joined: Jun 12 2008
Posts: 273
Re: Daily Digest - July 13

  When we listen to an interview with someone like Pete Peterson, let us not forget that he is the recently retired head of CFR, AND his interviewer, Charlie Rose, and the one to whom he referred, Fareed Zakarias, are both members of the Tri Lateral Commission.  (We just have to listen VERY carefully to their words. For example, Rose made a very positive comment about the stimulus, that would blow right past someone if they weren't listening carefully.  But it still goes to the subconscious)

These guys, along with the elected politicians, are getting better and better at talking about the same things that bother us, but in highly covert ways, and we can easily be mislead if we are not listening carefully for what they are REALLY saying.
 

hucklejohn's picture
hucklejohn
Status: Gold Member (Offline)
Joined: Dec 13 2008
Posts: 281
Interview with Jim Sinclair

Here is an interview with Jim Sinclair on gold and the dollar:  http://www.summit.co.za/video/face2face/20090710

cannotaffordit's picture
cannotaffordit
Status: Gold Member (Offline)
Joined: Jun 12 2008
Posts: 273
Re: Unemployment Exhaustion Rate

 Interestingly, this is something we have not heard much about.  Yet, the time is coming soon when millions of those who have lost their jobs, and many of whom have lost their homes, will be without any further financial assistance.  Don't you just wonder what the attitude, and actions, of these folks will be, as this begins to unfold.  Can't be a pretty scene!

dps's picture
dps
Status: Martenson Brigade Member (Offline)
Joined: Jun 27 2008
Posts: 442
Re: Daily Digest - July 13

Here's some real data from:  Broomfield Colorado Scientific & Cultural Facilities District

begin quote:

The May 2009 SCFD sales and use tax revenue was $3,121,401.32. 

This compares to May 2008 tax revenue of $3,616,875.79. The variance is ($495,474.47), which is a 13.7% DECREASE over May 2008. 

The 2009 year-to-date (YTD) total is $14,498,981.32 compared to YTD 2008 $16,984,534.14. The variance is ($2,485,552.82), which is a 14.6% DECREASE in 2009 over (YTD) 2008.

end quote.

Don's comment:  the happy talk is working.  we were down 18% at the end of the first quarter.  now we're down only 14% YTD.  therefore, people in Broomfield, CO are spending a little more now than they were during the first quarter of the year. this is a clear indication of how out of touch with reality the general public is.

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - July 13

Interestingly, this is something we have not heard much about.  Yet, the time is coming soon when millions of those who have lost their jobs, and many of whom have lost their homes, will be without any further financial assistance.  Don't you just wonder what the attitude, and actions, of these folks will be, as this begins to unfold.  Can't be a pretty scene!

Ben your first post I really agree with & the one above made me really think how right you will be that "can't be a pretty scene" will really be true. I have spend a lot of time outside the USA which has been a real eye opener in my life. For one I realized how brain washed I was & how every country brainwashes it's people also. I sure hope the Internet will help break these barriers down in our future while chasing all the "little wizards of Oz's" out from behind their BIG curtains they hide behind to do their "dirty work".

Sad for me to say but so many Americans I have found in general to be far less happy than many of these so called impoverished third world places (IMHO these so called "third worlders"had better sense of family values). Now if people here are cynical now & not friendly enough to just say good morning etc. how will they be when it gets to the point you point out? Really badI am afraid.

The one thing that always impressed me about a lot of the natives of some of the out of way spots in this world were these people could care less about the economy of the world or stock markets (don't worry be happy). They have their well functioning little communities & knew how to get all that was needed to sustain their happiness & health.

cannotaffordit's picture
cannotaffordit
Status: Gold Member (Offline)
Joined: Jun 12 2008
Posts: 273
Re: Daily Digest - July 13

 idoctor,

I'm so glad you pointed out your observations about other people in the world who, supposedly, are so much worse off than are we, and yet they show up on poll after poll as being far happier.  Wehave observed the same thing.  Surely it couldn't be because they don't try to get their happiness from buying and consuming?  Do you mean to tell me that having genuine relationships with family and friends, living simply, taking good care of the earth, having some basic productive skills and the like can actually make a person more content?  Surely not.    I'm thinking that if we have to go to "their" way, this could be the best thing that comes from any type of collapse we might face.  Maybe we can get our priorities straight for a change.

Thomas Hedin's picture
Thomas Hedin
Status: Platinum Member (Offline)
Joined: Jan 28 2009
Posts: 815
Re: Daily Digest - July 13

Except for the fact that the government creates no money.

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - July 13

 idoctor,

I'm so glad you pointed out your observations about other people in the world who, supposedly, are so much worse off than are we, and yet they show up on poll after poll as being far happier.  We have observed the same thing.  Surely it couldn't be because they don't try to get their happiness from buying and consuming?  Do you mean to tell me that having genuine relationships with family and friends, living simply, taking good care of the earth, having some basic productive skills and the like can actually make a person more content?  Surely not.    I'm thinking that if we have to go to "their" way, this could be the best thing that comes from any type of collapse we might face.  Maybe we can get our priorities straight for a change.

Ben Thank you for refreshing my memory on what is truly more important than just racking up more dollars in my life. This is what I believe Chris Martenson has been trying to make people realize also.  No place is pure utopia is one thing I have learned & we all tend to want to believe the grass is greener somewhere else. I am happy in the USA & love my country but I am not blind either. If it ain't broke don't fix it but the way the US is changing & Constitution is being distorted it maybe becoming broke in more ways than one.

We only live once so health & happiness has to be #1. I have to remind myself constantly of this. We have so many subliminal controls brought to bear on us from TV to our culture pushing all of our emotional buttons making us feel inadequate if we are not with the bleedist crowd. It is truly amazing how one needs to get out of your backyard to really take a different look at things & clear your thinking.

It may sound uncool to many who need a stadium of 100,000 maniacs under the influence all being crazy at a Super Dome to have fun.  But to have native people take you in as one of them, just having a soccer ball & basic food at a picnic, all laughing & enjoying being alive & in touch with reality but better yet their children.

Ben I am happy you have experienced this also.

PS My daughter just arrived telling me that she went with her boyfriend to apply to a local College. The administration explained all the details etc. about the College but this just blew me away! They were told that they offered free counseling & free antidepressants......WTF??? Sorry...but....do they know something bad is coming??? Whats up with this? You see we all have these problems & we just don't realize it but they do & they can fix it for you.

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - July 13
By Rik Kirkland, Fortune


(Fortune Magazine) -- Just how red-hot is the current worldwide expansion? "This is far and away the strongest global economy I've seen in my business lifetime," U.S. Treasury Secretary Hank Paulson declared on a recent visit to Fortune's offices.

fujisan's picture
fujisan
Status: Gold Member (Offline)
Joined: Nov 5 2008
Posts: 296
Re: Daily Digest - July 13

Robert Reich's Blog: When Will The Recovery Begin? Never.

...

My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.

The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - July 13

http://neweconomicperspectives.blogspot.com/2009/07/schwarznegger-to-obama-watch-and-learn_12.html

Schwarznegger to Obama: Watch and Learn

Sunday, July 12, 2009
By Marshall Auerback
According to the San Diego Union-Tribune, Republicans and Democrats alike embraced legislation last Friday that would make California IOUs legal tender for all taxes, fees and other payments owed to the state.

Effectively, California is using its IOUs to create a currency. If this bill passes it would allow California to deficit spend just like the Federal Government and with the IOU's acceptable as payment of state taxes, it instantly imparts value to them (see here and here). In effect, what you have is a state of the union creating a sovereign currency right under the noses of Treasury, Fed. They are stumbling their way into it, and as they do so, some of the true nature of contemporary money is being revealed. It will be viewed as a stop gap measure at first, and then could very well become entrenched as states realize they have a way to escape balanced budget requirements.

Contrary to most conventional economic thought, whereby people think we pay taxes to create revenue, in fact, it works the other way around under a fiat currency system. The government doesn't need money to spend, but in fact uses tax to manipulate aggregate demand, not raise funds to "pay" for government. The tax is what gives the currency its value insofar as taxes function to create the demand for federal expenditures of fiat money, not to raise revenue per se. Value has been given to the money by requiring it to be used to fulfill a tax obligation, but the money is already in existence, not "created" by the revenue.

Most significantly, the Federal government retains this monopoly under our existing monetary arrangements. If California is successful here in allowing its IOUs to pay tax, it has profound constitutional ramifications. It certainly means considerably less muni bond issuance in the first instance, if the proposal passes constitutional muster.

It will be interesting to see what the exchange rate is between California IOU and US currency - the IOUs do offer a yield, so should be less than par by design. I wonder if NY is next.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - July 13

Four in ten Australians living on the edge

By Online business reporter Michael Janda and staff

More than a third of Australians are planning to cover essential household expenses with their credit cards (ABC News - file photo)

A survey has found that four out of ten Australians have no more than a month's worth of living expenses in savings.

In a climate where unemployment continues to rise, albeit more slowly than was generally forecast, the new figures are further evidence that many Australians are living close to the edge of financial oblivion if they lose their job and cannot immediately find another one.

The figures were worse for the young and those on average incomes: 51 per cent of those earning between $30,000-69,999 said they would only last up to 30 days on their savings, and only around half of respondents aged between 18 and 34 said they would be able to last out more than a month with no income.

The Dunn and Bradstreet Consumer Credit Expectations Survey focuses on savings, credit use, spending and debt performance over the September quarter.

Credit card reliant

The survey of 1,200 people also found that more than a third of people (38 per cent) anticipate they will be forced to use their credit card to cover household expenses in the months ahead.

It also found that 14 per cent expect to apply for a credit limit increase on their credit cards in coming months.

The credit card figures stand in contrast to recent official personal finance data that show a decline in credit card use after the financial crisis took hold.

However, Dunn and Bradstreet's chief executive, Christine Christian, says the economic climate is making it increasingly difficult for certain demographics to manage their budgets.

"Australians are feeling challenged by the current economic conditions," she said.

"It's mainly in the middle income household segment, that is people earning between $30,000 and $69,000 a year, they are feeling it particularly hard."

However, there is some good news for retailers - 32 per cent of those surveyed said they intend to make a 'major purchase' during the three months to September.

fujisan's picture
fujisan
Status: Gold Member (Offline)
Joined: Nov 5 2008
Posts: 296
Re: Daily Digest - July 13

Healdsburg Housing Bubble: Reset Chart from Credit Suisse has a Major Error

Versions of the Credit Suisse reset graph have been featured in the Financial Times, used by the International Monetary Fund, and are a staple of web sites like these that are dedicated to the housing bubble. It’s fairly shocking then to see what appears to be a major error in their calculations.

Last week (here and here) I noted that something didn’t make sense about Wells Fargo’s estimates that only one third of one percent of their Option-ARM loans would recast before 2012. Reader’s comments and an email from CalcualtedRisk helped me to get my head around what was going on. In fact, Wells Fargo’s numbers are technically correct.

...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments