Daily Digest

Daily Digest - July 23

Friday, July 23, 2010, 9:27 AM
  • Where Will Economic Indicators Lead Us?
  • In Crisis, Foreigners Turn to $100 Bill
  • Mortgage Securities It Holds Pose Sticky Problem for Fed
  • Export Price Surge Puts Heat On Reserve Bank To Raise Interest Rates
  • Britain No Longer Has The Cash To Defend Itself From Every Threat, Says Liam Fox
  • Jobless Numbers Are Worse Than You Think
  • Federal Report Faults Banks on Huge Bonuses
  • Pentagon Faces Growing Pressures to Trim Budget
  • Europe Shows Strength as U.K., German Indicators Top Forecasts
  • ECB Chief Calls For Global Tightening
  • Suggestions Of Iran Nuclear Sabotage
  • Tropical Storm Bonnie Accelerates Toward Florida Keys

Economy

Where Will Economic Indicators Lead Us? (Ilene)

This morning it looks like the markets are primed for another major flip-flop as the futures are up a whole percent at 8am. Why? Who cares? None of it matters until we get the jobs data at 8:30 and then we have our Leading Economic Indicators at 10 (and Barry Ritholtz has a good take on this here) and those are expected to be a depressing -0.4% so a lot to slog through before we can, once again, retest our levels.

In Crisis, Foreigners Turn to $100 Bill (rector)

Among the reasons for the slower demand over the past decade, Ms. Roseman said: “the value of the dollar decreased against many other major currencies; international markets gained trust in their own economies and national currencies; electronic payments displaced some cash usage; and the effect of the recent recession.”

Mortgage Securities It Holds Pose Sticky Problem for Fed (SolidSwede)

Keeping the securities could cost the central bank money and make it harder to fight inflation, while selling them could drain money from the economy.

But perhaps the greatest risk is that investors will begin to doubt the Fed’s willingness to raise interest rates, knowing that each increase will damage its own balance sheet. “It compromises their integrity and their inflation-fighting mandate, because fighting inflation would be a direct detriment to their portfolio,” Mr. Zervos said.

Export Price Surge Puts Heat On Reserve Bank To Raise Interest Rates (pinecarr)

The data produced a net 13.9 per cent increase in the country's terms of trade, representing a huge income stream for the commodity-rich economy and helping to ensure it will continue to be among the fastest-growing developed nations.

Britain No Longer Has The Cash To Defend Itself From Every Threat, Says Liam Fox (Jeff B.)

Since the Second World War, the nation has maintained a force that can conduct all-out warfare, counter-insurgencies such as in Afghanistan or medium scale campaigns like the Falklands or Sierra Leone.

But Dr Fox has given the strongest signal yet that it will have to give up one or more of these capabilities, which have been maintained at the same time as contributing to collective security pacts such as Nato. “We don’t have the money as a country to protect ourselves against every potential future threat,” he said. “We just don’t have it.”

Jobless Numbers Are Worse Than You Think (Will H.)

The problem is how the BLS counts the jobless. It defines the unemployed as those who are "out of work but have been seeking and are available for work." Those out of work but not "seeking work" are not considered to be unemployed—and are thus not counted in the labor force.

Federal Report Faults Banks on Huge Bonuses (cmartenson)

In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.

Pentagon Faces Growing Pressures to Trim Budget (cmartenson)

“We’re going to have to take a hard look at defense if we are going to be serious about deficit reduction,” said Erskine B. Bowles, a chief of staff to President Bill Clinton who is a co-chairman of the deficit commission. Senator Judd Gregg, a Republican from New Hampshire who is also on the debt commission, said that if the panel pushes for cuts in discretionary spending, “defense should be looked at,” perhaps through another base-closing commission.

Europe Shows Strength as U.K., German Indicators Top Forecasts (cmartenson)

The reports suggest two of Europe’s largest economies are being buoyed by slides in the pound and the euro just as factories step up production to meet global demand. At the same time, government efforts to cut budget deficits and a weakening U.S. economy may damp European growth, while publication of bank stress-test results today could weigh on market sentiment.

ECB Chief Calls For Global Tightening (cmartenson)

Firing a shot at the US administration and the International Monetary Fund, Mr Trichet criticises last year’s global push for budgetary stimulus.

“With the benefit of hindsight, we see how unfortunate was the oversimplified message of fiscal stimulus given to all industrial economies under the motto: ‘stimulate’, ‘activate’, ‘spend’.”

Suggestions Of Iran Nuclear Sabotage (cmartenson)

In May 2009, the International Atomic Energy Agency said there were 4,920 operational centrifuges. Twelve months later the IAEA stated that Iran was running only 3,936, a reduction of 20 per cent.

Environment

Tropical Storm Bonnie Accelerates Toward Florida Keys (cmartenson)

“Bonnie is expected to move over the southern Florida peninsula later today and move over the eastern Gulf of Mexico tonight and Saturday,” the statement said. “Bonnie is forecast to approach the northern Gulf coast late Saturday or early Sunday.”

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

7 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - July 23

"July 23 (Bloomberg) -- U.S. cities and states may need more than $1 trillion of federal assistance in the next three years to stave off financial failure, former Los Angeles Mayor Richard Riordan said.

Local governments are in a “race to the bottom” and U.S. taxpayers will inevitably be called on to bail them out, Riordan said in an interview at Bloomberg News’s Los Angeles office. The federal government should make pension, health-care and school reform a condition of receiving the aid, he said yesterday.

“It’s not just L.A., it’s not just California, it’s all over the country, you’re going to see all these entities become totally insolvent,” Riordan said. “I think the federal government has to come in and have a list of what the states have to do to be saved.”"

"In a take-it-or-leave-it gesture, the Senate voted Thursday night to reject more than $20 billion in domestic spending the House had tacked on to its $60 billion bill to fund President Barack Obama's troop surge in Afghanistan."

"The Senate measure blends about $30 billion for Obama's 30,000-troop surge in Afghanistan with more than $5 billion to replenish disaster aid accounts, as well as funding for Haitian earthquake relief, and a downpayment on aid to flood-drenched Tennessee and Rhode Island.

The war funding would bring the amount of money appropriated for the wars in Iraq and Afghanistan above $1 trillion. "

"NEW YORK (MarketWatch) -- The Treasury Department will sell $104 billion in bonds next week, it said Thursday. Next Tuesday, it will auction $38 billion in 2-year notes /quotes/comstock/31*!ust2yr (UST2YR 0.58, +0.01, +2.13%) , followed by $37 billion in 5-year debt /quotes/comstock/31*!ust5yr (UST5YR 1.71, +0.04, +2.28%) the next day. On Thursday it will sell $29 billion in 7-year notes /quotes/comstock/31*!ust7yr (UST7YR 2.39, +0.04, +1.57%) . "

"The Irish government looks set to sell off many state assets to relieve the budget crisis and pay down the $115 billion national debt.

Airports, railroads, ports, the national television service, RTE and the Electricity Supply Board (ESB) are all among the assets that may well be on the block.

The Minister for Finance Brian Lenihan announced on Thursday that he has appointed economist Colm McCarthy, who led the body that advised on €5 billion in public service cuts last year, to chair a new group called the Review Group on State Assets companies."

"SACRAMENTO, Calif. — Finance officials with the cash-strapped state of California will consider Friday whether to grant a multimillion-dollar loan to a county considering bankruptcy because it illegally funded a new hospital and now has to repay the debt.

Modoc County is asking the state for a bailout, hoping to secure a loan for between $4 million and $12.5 million so it can continue to provide services to county residents.

An audit last year by the state controller's office determined that the county was violating state law by shifting dollars away from their intended purpose, prompting the current financial crisis. The county has hired a bankruptcy attorney in case it needs to declare itself insolvent, said Dan Macsay, chairman of the Modoc County Board of Supervisors."

"Failure To Save Irresponsible conduct by state officials could require a huge taxpayer bailout

For years, Connecticut lawmakers and governors have offered generous retirement benefits to state workers but have often shortchanged the pension fund by making smaller annual contributions than experts recommend and pushing more employees out the door through early-retirement deals.

Now the chickens have come home to roost.

The pension fund is on a fast train toward insolvency. In its last full actuarial valuation, the fund had $19.2 billion worth of obligations but held just under $10 billion in assets, or about 52 percent of its liability."

"Office vacancy rates in the Sacramento region crept higher in the second quarter to a modern-day record 22 percent, offering little hope for improvement in 2010, commercial real estate brokers say.

While tenants have been eager to sign new deals at more favorable terms, many are contracting or reserving the right to downsize under their new leases."

"New Jersey's largest city is cutting workers' hours and even eliminating the purchase of toilet paper to close a $70 million budget deficit. Newark Mayor Cory Booker has proposed a $600 million budget, which includes the possibility of laying off as many as 350 police and firefighters.

Booker announced on Wednesday 1,450 non-uniformed city workers will begin a four-day work week on Sept. 27 that would represent a 20 percent pay cut. The mayor, in a City Hall briefing today, said he also would seek to eliminate 600 other jobs and scale back trash pickup and park maintenance."

""Newark has 2,500 homeowners that are behind on mortgage payments, Booker said. A sharp rise in property taxes may cause many to fall further behind, he said. The council hasn't passed the mayor's $600 million budget, which calls for a 7 percent increase in taxes.

Without the MUA, the budget is left with a $70 million hole the mayor said he must attempt to fill. Booker told wcbstv.com that he doesn't want to resort to huge tax increases to offset the deficit. The mayor fears higher taxes would cripple the city's economy.

"In the meantime, I'm going to shut down as much of city government as I can," Booker said. "We're going to stop buying everything from toilet paper to printer paper. Call me Mr. Scrooge, if you want, but they'll be no Christmas decorations around the city.""

"Annapolis will not be able to pay employee salaries for the next three months if new revenue isn't generated, the city's finance director said.

Annapolis is poised to run a $3.8 million deficit by the end of September, Finance Director Tim Elliott told the city council at a budget briefing.

"It's very stressful right now figuring out our cash flows," Elliott said, just one month into the new fiscal year's $75.1 million budget. "It's very tight. I'm sorry I don't have better news, but I think we need to be honest about it and deal with it.""

"President Obama signed a six-month extension of emergency jobless benefits for the long-term unemployed on Thursday, restoring aid to nearly 3 million people whose checks have been cut off since the program expired in early June.

The White House signing ceremony came barely three hours after the House approved the $34 billion measure on a vote of 272 to 152. The Senate passed the measure Wednesday after a months-long stalemate."

..........................10A) For Growing Ranks of 99ers, No Help Coming

  •  Other news and headlines:

Ukrainian bonds shelved after tough pricing

Forint Drops as Moody's Puts Hungary's Sovereign Debt Ratings on Review

Japan Close to Intervening to Stem Yen's Rise, Macquarie Says

More Cities To Depend On Gov't Tax Grants (Japan)

Spill may cost Gulf Coast $22.7 billion in tourism, study estimates

Obama to Sign Law Limiting $110 Billion in Erroneous Government Payments

ICBC's Wang warns on eurozone debt contagion and Chinese property fears

Several Spanish banks set to fail stress tests

Spain: Budget Woes Hit Regional Governments (Almost $200 billion in debt)

Spain's Housing Market Slide Adds to Europe's Economic Troubles

Pittsburgh's meter rate could lead US

Gaming well is drying up (Nevada)

India Faces Coal Deficit of 50% of Expected Power Plant Demand, KPMG Says

MA bankruptcy filings up 25% in 2010

City Grapples with Possibility of Losing $600 Million in Federal Funding (NY)

Several Downtown Pittsburgh landmarks up for sale

S&P expects 25% restructured loans to slip into NPLs (India)

US commercial purchases face double-dip slump

Gregoire warns of special session if Medicaid money doesn't come (Washington)

Michigan may lose $560M in Medicaid funding

Mayor to Crowd: “If the Truth is Painful, I'm Sorry” (Omaha...Tax hikes of $44 million and a deficit of $ $34 million)

Milwaukee County faces a deficit on health care costs in 2010

'Catastrophic' -- Officials say cuts would touch all aspects of LSU AgCenter

Two Major Retirement Funds Plagued by Instability (NM)

ECB chief calls for global tightening

North Korea threatens "physical response" to U.S. moves

Beijing Considers Plan To Move Its Currency Further From Dollar

idoctor's picture
idoctor
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Re: Daily Digest - July 23

Surprise LOL   

  • Portuguese Banks Pass Stress Test, as Do All German Banks Except HRE, France Top 4 Banks Pass (Story Developing)
printfaster's picture
printfaster
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Posts: 52
Re: Daily Digest - July 23

On Riordan saving the states and local govs:

“I think the federal government has to come in and have a list of what the states have to do to be saved.”"

No.

The evil that was TARP opened the door for everyone holding out a hand who has a better claim than the idiotic banks who above all are supposed to know how to balance books.  Just where does Riordan think the money will come?  It really is time to halt all demands for more debt and liquidate debt that cannot be repaid.

 

sammy's picture
sammy
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Posts: 35
Re: Daily Digest - July 23

 Six more banks failed and closed today. The closures seem to be coming at a faster pace, even though the economy is in a recovery (snicker-snicker). http://www.fdic.gov/bank/individual/failed/banklist.html

Spill's picture
Spill
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Re: Daily Digest - July 23
sammy wrote:

 Six more banks failed and closed today. The closures seem to be coming at a faster pace, even though the economy is in a recovery (snicker-snicker). http://www.fdic.gov/bank/individual/failed/banklist.html

7 banks.

Actually bank-closings are good for an economy, banks don't have any productive capacity, so all they do is feed off the rest of the economy, servicing their debt. When a bank is closed, the debt is liquidated (most of it anyway), depositorinsurance keeps some of it, but it removes a hindrance to the flow of capital in the economy. I'm not arguing that there's a recovery (there isn't), just that failing banks aren't a bad sign.

Article on the dailycapitalist blog got me thinking about and around it.

http://dailycapitalist.com/2010/07/23/friday-bank-closings-7/

pinecarr's picture
pinecarr
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Posts: 2259
Re: Daily Digest - July 23

Saxplayer, thanks for the great articles on individual states' struggles with debt and (for some) insolvency. I think the story these articles tell presents a much truer picture of the current condition of the US economy.  Looking at the individual states' budgetary situations/struggles seems akin to what Chris says about looking at tax data: it is rawer, less manipulated; data, so you get a clearer picture of what's really going on.  I know my eyes have been opened to  just how serious our situation already is by reading about the economic stress individual states are struggling under.  Thanks!.

dave s's picture
dave s
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Posts: 56
Re: Daily Digest - July 23
pinecarr wrote:

Saxplayer, thanks for the great articles on individual states' struggles with debt and (for some) insolvency. I think the story these articles tell presents a much truer picture of the current condition of the US economy.  Looking at the individual states' budgetary situations/struggles seems akin to what Chris says about looking at tax data: it is rawer, less manipulated; data, so you get a clearer picture of what's really going on.  I know my eyes have been opened to  just how serious our situation already is by reading about the economic stress individual states are struggling under.  Thanks!.

+1

http://www.infowars.com/stealth-austerity-already-hitting-the-u-s/

Money printing and austerity are not simply about choosing one or the other. I think both will happen, more or less, at the same time. Like it or not, what I call stealth austerity is already hitting America. Just look at individual state budgets that are covered in red ink. Last Friday, a Bloomberg headline read: “States of Crisis for 46 Governments Facing Greek-Style Deficits.” California alone has a budget shortfall of more than $19 billion, and that does not include the state’s under funded pension liabilities.

 

http://www.businessinsider.com/18-states-facing-the-most-painful-austeri...

Even the sober Center on Budget and Policy Priorities says 46 states are facing a Greek-like crisis. These state governments must inaugurate an austerity regime to cut spending by $112 billion for FY2011.

FY2011 begins on Thursday.

States have already cut over $300 billion from budgets in the past two years to make up for rising costs and disappearing revenue. For California and New York, this means some of the bloodshed is over. For other states, it's getting much worse.

Unlike the Federal government, states can't just print their way out of a crisis. Except for Vermont, all states MUST balance the budget.

 

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