Daily Digest

Daily Digest - July 2

Friday, July 2, 2010, 9:46 AM
  • How Not To Re-Inflate A Bubble
  • Can We Be Saved?
  • Struggling and Faltering to Manage Economic Recovery
  • Housing's Powerful Lobby Surges Ahead
  • Spain May Need Financial Rescue, says Merrill
  • Michael Klare: Grappling With The Age Of 'Tough Oil'
  • The Return Of Wheat Rust: The Disease Eating Away Our Daily Bread


How Not To Re-Inflate A Bubble (pinecarr, Davos the Narcissist)

How can someone be brilliant enough to teach themselves calculus and at the same time be foolish enough to continue pumping capital into a ripped bubble, trying to re-inflate it? This is beyond comprehension. It defies logic, especially when the capital/"air" going in is borrowed money and puts the value of our currency (or what is left of it) in harms way.

Can We Be Saved? (Ilene)

Greenspan’s nonsense is more effective in Europe these days as most Americans realize his policies did nothing more during his 20-year tenure (’87-2006) than debase the dollar and transfer the wealth of this nation from the middle class the the economic elite in one of the greatest cons in human history. “This recent decline is more international than it is a domestic affair,” said Greenspan, adding that “there is an inherent instability in the euro system.”

Struggling and Faltering to Manage Economic Recovery (hucklejohn)

The Fed Chairman Ben Bernanke tells us the American recovery is struggling because of European austerity. Does he really expect us to believe that? There is no question austerity in Europe will lead to a deflationary depression. Unemployment will rise quickly, which means major cuts in government spending and lessened revenues. Beside the public those affected the most will be towns, cities and states, many of which are on the edge of insolvency surprisingly even in Germany.

Housing's Powerful Lobby Surges Ahead (SoldSwede)

I can't tell you how many calls we got here in the CNBC DC bureau from Realtors claiming there would be "rioting in the streets" (I'm not kidding—and that was a Connecticut Realtor) and PR reps for industry types offering endless "experts" to discuss the "vital" need for the extension.

Spain May Need Financial Rescue, says Merrill (pinecarr)

Spain's debt crisis may force the country to tap the EU-IMF rescue fund over the next two to three months and set off a political storm, according a confidential report by the Bank of America Merrill Lynch.


Michael Klare: Grappling With The Age Of 'Tough Oil' (woodman)

"Tough oil is deep underground, far offshore, in complex geological formations like shale rock or in the Arctic. Or in unfriendly, dangerous countries," he explains. "That's what I mean by tough oil. That's all that's left on the planet, so that, to the degree to which we remain dependent on oil, that's what we're going to have to go after."


The Return Of Wheat Rust: The Disease Eating Away Our Daily Bread (jdargis)

To go from identifying a disease to developing a new generation of seeds in a decade is remarkable. Plant breeders and the Gates Foundation financing them deserve credit, especially for acting before an epidemic, not during one. Alas, out in the fields of the emerging world, farmers do not have the same foresight. Profoundly conservative, most are reluctant to change the seeds they have been using for years unless they can see the threat. That alas is the road to famine.

Please send article submissions to: [email protected]


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Re: Daily Digest - July 2

"Illinois Gov. Pat Quinn has signed a state budget that cuts spending and has warned that further cuts are likely.

The new budget includes $1.4 billion in cuts to schools, hospitals and prisons as the state grapples with a roughly $13 billion deficit — the biggest deficit in its history.

But Quinn postponed a decision that could lead to far more painful cuts. The Chicago Democrat didn't say how he'll make $3.7 billion in payments to government pension systems. He hopes that legislators will reverse themselves and vote to borrow the pension money.

Lawmakers gave Quinn authority to paper over the deficit by taking money out of special funds, borrowing against future revenue and simply letting bills go unpaid until the next fiscal year."

.............................1A) Another round of pension bonds for Illinois possible

"Illinois hopes to issue pension obligation bonds to raise the $3.7 billion required contributions to the five state retirement systems for the fiscal year that began Thursday, Gov. Pat Quinn said in a teleconference.

The pension borrowing plan, which was approved by the Illinois House, is pending in the state Senate, he said.

The bond issue “will accelerate revenue into the state to pay the pensions,” Mr. Quinn said.

Last January, Illinois sold $3.466 billion in pension obligation bonds, priced at an interest rate of 3.854%, to finance its contributions to the five systems for fiscal year 2010. Illinois still has outstanding almost all of the $10 billion in taxable pension obligation bonds it issued in 2003.

Kelly Kraft, spokeswoman for the Illinois Office of Management and Budget, said the state has no proposed date for selling the pension bonds, which could be priced at an interest rate of 4% to 4.5%."

"July 2 (Bloomberg) -- The Metropolitan Transportation Authority, which runs New York City’s subways, buses and commuter trains, shrank a $555 million taxable debt offering by 16 percent as it struggled with a deficit and as investors sought to avoid risk."

"The MTA, grappling with an $800 million deficit, paid 2.75 percentage points more than yields on 30-year Treasuries, according to Bloomberg data. Four months earlier, the so-called spread on the MTA’s 29-year Build Americas was 2.1 percentage points"

"The final numbers are in for South Florida's property values, and they promise the toughest budget-writing season for cities and counties in years.

Miami-Dade County property appraiser Pedro Garcia announced that property values fell 13.4 percent compared to last year. The news was sobering in Broward County, too, where appraiser Lori Parrish said taxable values were down 11.7 percent.

It is the third straight year taxable values have declined across South Florida, with this year being the worst so far. Indeed, the decreases are the worst anyone can recall.

The steep drops are putting leaders in the position of either slashing spending to correspond with lower tax revenues or increasing property tax rates, also called the millage rate. Neither is easy, particularly as a restive electorate grapples with a wobbly economy still encumbered by double-digit unemployment."


Latest Observations:

Date 2010-02 2010-03 2010-04 2010-05 2010-06
Value 19.4 20.0 21.6 23.2 25.5

27 weeks

Latest Observations:

Date 2010-02 2010-03 2010-04 2010-05 2010-06
Value 6133 6547 6716 6763 6751
Last Updated: 2010-07-02 8:16 AM CDT 


Latest Observations:

Latest Observations:

Date 2010-02 2010-03 2010-04 2010-05 2010-06
Value 4501 4496 4506 4508 4504
Last Updated: 2010-07-02 8:16 AM CDT 

"Yet the unemployment rate fell to 9.5% in June from 9.7%, the lowest level in nearly a year. Unfortunately, it dropped “for all the wrong reasons” says Nigel Gault, U.S. chief economist at IHS Global Insight. The unemployment rate is lower simply because the labor market shrank, as more than 650,000 people gave up on the job search last month.

More telling is the "real unemployment" rate, or U6. Including people working part-time and those who've given up looking, the real unemployment rate is 16.5%.

Gault says the lousy job market reflects an economy still weak and companies making due with less. At the current pace, the road to recovery will be long and bumpy."

"WASHINGTON (AP) -- Orders to U.S. factories declined broadly in May after nine straight months of gains.

The Commerce Department says orders for manufactured goods decreased by 1.4 percent in May. It was the biggest drop since March 2009.

Excluding the volatile transportation sector, orders fell by 0.6 percent. In April, orders grew by 1.0 percent.

The numbers cast a cloud over the manufacturing sector. Factories have been a rare bright spot, helping lead the country out of recession with increased hiring and productivity.

However, economists fear high unemployment and less demand for exports could cause them to slow in the coming months."

  • Other news and headlines:

Richard Suttmeier: Home Prices Could Fall Another 50% (Tech Ticker video)

Mexico's declining oil output worries planners

China End-March Outstanding Foreign Debt About 10% Of GDP

China Growth Forecast Cut by Goldman Sachs Amid Property Curbs

India foreign debt hits $261.4 billion

House Passes $80 Billion War Spending Bill ("with a provision that would include $10 billion to help school districts")

Moody's Says U.K. Will Keep Its AAA Credit Rating If Fiscal Plan Succeeds

State workers to receive minimum wage only in California

$14 Billion to Fix Hawaii

Romania to cut 53000 government jobs

Bankruptcy Filings Hit Record Levels (Florida)

Concerns rising that economic recovery is slowing

I LOSE it when I see a Caravan of Ticket Police Accompaning the Street Sweepers Today! ( InflationUS video)

maaa's picture
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Re: Daily Digest - July 2

"I think that would be a tragic mistake because the only chance we have to reverse the deterioration is if we act early and decisively."

"Today, manufacturing employment in the U.S. computer industry is about 166,000 -- lower than it was before the first personal computer, the MITS Altair 2800, was assembled in 1975. Meanwhile, a very effective computer-manufacturing industry has emerged in Asia, employing about 1.5 million workers -- factory employees, engineers and managers."

The largest of these companies ... revenue last year was $62 billion ... more than 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard Co., Intel and Sony Corp."

-- Andy Grove

I remember when a friend of mine told me he told her that the Intel board had decided to build a factory in China, even though they didn't know if it would be taken over by the Chinese. (It all turned out differently.)

Read AndyGroves'  thoughtful, insightful and troubling but certainly explanatory what-the-future-will-bring article...


Mary Kay at PersonalSecurityZone.com


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Re: Daily Digest - July 2

The Can We Be Saved video was quite good, he bought up a lot of super points. I think he missed the boat on Capitalism. Capitalism does not bail out failure, or people who blew up the economy by fraudulent lending and then fraudulent selling of that vehicle.

We have a Corprortacy where corporations yank the puppet strings and tell people like Hank Paulson to bail them out with our money for their failure and criminal acts.

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Re: Daily Digest - July 2


Dick Smith's $1m prize to curb our growth
By Olga Galacho and John Masanauskas 

Businessman Dick Smith says Australia can't sustain a bigger population.

MILLIONAIRE former electronics guru Dick Smith will give $1 million cash to a young person who designs the best population plan for Australia.

The businessman yesterday was "delighted" that new Prime Minister Julia Gillard had announced she opposed a "Big Australia" and had created a ministry of sustainable population.

Mr Smith, fiercely opposed to immigration, said he would devote the rest of his life to educating other Australians, including politicians, about the need to keep the nation's population from exploding.

"When we design an aircraft, it is built for 25 years of safety," Mr Smith said.

"But if we don't have a safety plan for allowing the population to grow to 36 million by 2050, then we will all come crashing down.

"That is why I am announcing a $1 million award for a person less than 25 years old to design a sustainability plan for our population," he said.

The ABC will screen Mr Smith's documentary on population in August, and the businessman said he would make other announcements at that time about incentives to limit the size of the nation.

There are now 22 million Australians and Mr Smith said if that number grew beyond 26 million, the nation could struggle to feed its own people.

plato1965's picture
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Re: Daily Digest - July 2

(homebrew post alert)

 ethanol v oil...


 Gis a job..

 I could do that....

 Hicks.. The world is like a ride...


 Dante.. the world is like a cosmic joke...



Poet's picture
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Re: Daily Digest - July 2
aufrance wrote:

"I think that would be a tragic mistake because the only chance we have to reverse the deterioration is if we act early and decisively."

-- Andy Grove


I suspect it is already too late. Or, if not too late, the entrenched interests aren't interested.

Worse, the money to spend is already gone towards keeping banks and government spending afloat. And the money to be borrowed already borrowed to do the same, and future money to borrow will only be used for social welfare spending and further bank floating.

So even if politicians finally become courageous, there won't be the money, it may already be too late.



rwitty's picture
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Re: Daily Digest - July 2

Bubbles are created by money chasing actual value. (Value itself is a fluid definition, comprising both psychological hype and fashion and substantive improvements in experience.)

I would conclude that most bubbles are speculative bubbles, that the terms go hand in hand. So, in homes that applies to the mix of purposes of spending money on a home. 1. For one's use and enjoyment. 2. As a leveraged speculative "investment" for gain.

There remain many bubbles in the domestic and even local economies. In 2007, there were speculative bubbles in housing and commercial real estate, in financial and "main st" equity sectors, most commodities (those that serve in some respect as inflation hedge, and those that serve dual purposes: real and speculation).

The largest bubble grouping that I see, that has been a growing bubble for a very long time, and that the monetarist view ignores, is the bubble in business to business transactions.

Ultimately value derives from two skew sources.

1. Experience or welfare, suggesting a democratic universal prosperity with a limited range of distribution of income and wealth, in which transfers (even through taxation) to maintain the limited distribution of wealth is useful and not destructive.

2. For those with capital seeking to multiply it, from fundamental valuations of discounted cash future cash flows.


The trend in the US and the west, is away from value derived/measured as improvements in social welfare, in cumulative experience value. The economy is regarded as an undifferentiated whole, and not comprised of people, and/or communities. (Urban life suggests that that is rational. Cities are larger than within any individual's control or even direct influence. Rural life suggests the oppossite, that economic activity is constructed of human work in transactions with actual neighbors.)

So, those that are seeking financial gains, rather than personal improvement in one's experience or helpful improvement in others' experience, find the most profitable path to do so. In the modern economy that is in business to business transactions.

In a sustainable economy, business to business transactions are an overhead. Necessary to deliver goods and services for trade ultimately to end user, but also necessary to operate frugally, efficiently, if not minimally.

That is not the case in the US. The largest billing rates and profits are in business to business trade, and that is where money has been attracted - to the highest profits.

In contrast to the assertion that in a free market economy, capital is attracted to its optimal use, enormous sums of capital have been directed to business to business, and business to government uses (a form of business to business, not to individual end users).

So, in the economy, that ends up as a bubble, the counter-logic of continually increasing the capital invested in non-productive overhead.

We've still got a long way to fall.

maaa's picture
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Re: Daily Digest - July 2

Poet, I agree with you 9 thousand percent maybe more.

Andy Grove's article put it all into clear view re: the current size of the US tech industry and how he and his buddies (and some of mine too) exported the guts of the industry to Asia.

Smaller than it was at the time of the Altair, before any of us ever even heard of a personal computer! Oh boy.

And a country full of old techies who are retiring into expensive decrepitude due to their mouse clicking overconsumptive (in every way) lifestyles. Does this sound anything like any of my prior posts which were so pollyanna let's go beekeepers and preppers? hA!

My husband and I rode that bubble up and were glad we jumped off just before that one burst. (But myGawd did the most recent bubble took us by suprise and we changed forever like the depression did to our folks.)

Have a HAPPY 4th OF JULY WEEKEND!!! Hug those you love!

Mary Kay at PersonalSecurityZone.com



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