Daily Digest

Daily Digest - July 6

Tuesday, July 6, 2010, 10:50 AM
  • ProPublica Unemployment Insurance Tracker
  • Avertible Catastrophe
  • Property Bonds Slump Most Since March '09 on Default Risk: Credit Markets
  • China Objects To U.S. Sanctions Against Iran
  • European Banks’ Hidden Losses Threaten EU Stress Test
  • Post Office Plans To Announce New Rate Increase
  • With The U.S. Trapped In Depression, This Really Is Starting To Feel Like 1932
  • Bharat Bandh Causes Losses Of Several Thousand Crores
  • Day's Shutdown May Have Cost India Inc Up To Rs 13,000 Crore
  • 'Super-Giant' Oilfields Redraw Energy Map
  • Tar Balls In Texas Mean Oil Hits All 5 Gulf States

Economy

ProPublica Unemployment Insurance Tracker (Davos)

The unemployment insurance system is in crisis due to a combination skyrocketing unemployment and – in some cases – poor planning. A record 20 million Americans collected unemployment benefits last year, and twenty-six states have run out of funds and been forced to borrow from the federal government, raise taxes, or cut benefits

Avertible Catastrophe (Regina F.)

Some are attuned to the possibility of looming catastrophe and know how to head it off. Others are unprepared for risk and even unable to get their priorities straight when risk turns to reality.

Property Bonds Slump Most Since March '09 on Default Risk: Credit Markets (cmartenson)

Yield spreads are expanding as reports last week showed U.S. employment fell in June for the first time this year and pending home resales dropped 30 percent in May from the previous month. Growth in Europe’s services and manufacturing industries slowed for a second month in June, London-based Markit Economics said yesterday.

China Objects To U.S. Sanctions Against Iran (cmartenson)

"China supports the U.N. sanctions. China believes that countries should have correct implementation of the sanctions instead of expanding the sanctions," Foreign Ministry spokesman Qin Gang told a news conference.

European Banks’ Hidden Losses Threaten EU Stress Test (cmartenson)

“There won’t be a rebound in European banks unless we have stress tests,” said Dirk Hoffmann-Becking, a senior research analyst at Sanford C. Bernstein in London who tracks European banks including Barclays Plc, Deutsche Bank AG and UBS AG. “But stress tests won’t resolve the sovereign debt crisis.”

Post Office Plans To Announce New Rate Increase (cmartenson)

The boost comes as no surprise. Postmaster General John Potter said March 2 that a rate increase would be necessary for the agency, which does not receive tax funds for its operations. The current 44-cent first-class rate took effect May 11, 2009.

With The U.S. Trapped In Depression, This Really Is Starting To Feel Like 1932 (Jeff B.)

"The economy is still in the gravitational pull of the Great Recession," said Robert Reich, former US labour secretary. "All the booster rockets for getting us beyond it are failing."

Energy

Bharat Bandh Causes Losses Of Several Thousand Crores (Deepak)

More than 50 lakh trucks, autorickshaws and taxis remained off the road damaging perishable goods and causing nuisance to commuters. About 200 train services were disrupted and passengers were stranded in Mumbai and the New Delhi airports as scores of flights were suspended.

Day's Shutdown May Have Cost India Inc Up To Rs 13,000 Crore (Deepak)

"Today's Bharat Bandh has been rather widespread, excepting Tamil Nadu and Rajasthan, according to FICCIs own feedback from its state offices and state chambers. It is estimated to have cost the nation close to Rs 13,000 crore in terms of GDP at factor cost," the chamber said.

'Super-Giant' Oilfields Redraw Energy Map (ListentotheLion)

The rush to exploit Iraq's "super-giant" oilfields, of which it has the largest concentration in the world, has gathered impetus with unexpected speed in the wake of BP's disaster in the Gulf of Mexico which has raised fears over deep-sea drilling.

Environment

Tar Balls In Texas Mean Oil Hits All 5 Gulf States (cmartenson)

"Any Texas shores impacted by the Deepwater spill will be cleaned up quickly and BP will be picking up the tab," Texas Land Commissioner Jerry Patterson said in a news release.

The oil's arrival in Texas was predicted Friday by an analysis from the National Oceanic and Atmospheric Administration, which gave a 40 percent chance of crude reaching the area.

Please send article submissions to: [email protected]

28 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4149
Re: Daily Digest - July 6

"LOS ANGELES (MarketWatch) -- China has sharply increased its purchase of Japanese government bonds this year, making net purchases of 541 billion yen ($6.2 billion) during the January-April period when Europe was struggling with its sovereign-debt crisis, according to a report Tuesday. The buying marks a swing from a net sale of 80 billion yen during 2009, Japan's Nikkei business daily reported, adding that "since the start of this year, [the Chinese government's] buying has been frenetic," possibly while unloading euros from its vast foreign-currency holdings."

"Sovereign Default Risk Climbs 30% in Quarter, CME Group Says

The cost of insuring sovereign debt against default climbed 30 percent on average last quarter amid Europe’s escalating fiscal crisis, according to CMA DataVision.

Credit-default swaps on 93 percent of the 70 governments tracked by CMA rose, with Greece temporarily overtaking Venezuela as the country with the world’s highest bond risk, the CME Group Inc. unit said in a report published today.

“The major widening action in European sovereign credits indicates that the Eurozone remains the hub and focus of the global debt crisis,” according to CMA’s Global Sovereign Credit Risk report. “None of the Western European sovereign credit- default swaps tightened.”"

"July 6 (Bloomberg) -- Citigroup Inc., State Street Corp. and U.S. Bancorp are among U.S. banks whose municipal bond holdings have reached a 25-year high just as state budget deficits swell to $140 billion, the most since the start of the recession."

"TEXAS CITY, Texas - Tar balls found over the weekend on a Texas beach were confirmed Monday as the first evidence that crude gushing from BP's ruptured Gulf of Mexico oil well has reached all the gulf states."

"HONG KONG (MarketWatch) -- Real estate prices in major Chinese cities are set to decline significantly in the coming months as developers grapple with bloated inventories and skittish buyers, according to recent research.

China's leading cities could see prices plummet 20% to 30% by year's end, while lesser-known cities could see declines of 10% to 20%, Standard Chartered Bank Ltd. said in a research note Tuesday. "

..................5A) Rogoff Says China Property Starting to 'Collapse'

"Here's another headwind for a sputtering job market: State and local governments plan many more layoffs to close wide budget gaps.

Up to 400,000 workers could lose jobs in the next year as states, counties and cities grapple with lower revenue and less federal funding, says Mark Zandi, chief economist for Moody's Economy.com."

"Like a cash-strapped home- owner planning a garage sale to help pay the bills, San Jose city leaders are studying a plan to sell off or lease the city's municipal water system to a private company.

The plan, although still in the early stages, could mean a windfall of $50 million or more for the city, although it almost certainly would result in higher water bills for some San Jose residents.

"I'm trying to be creative about balancing the budget. This is an obvious potential source of money, and I have to look at it seriously," said San Jose Mayor Chuck Reed on Friday."

"Vacant office space continued to accumulate in the second quarter, the latest indication that businesses aren't planning significant hiring in the near future.

Office buildings across the U.S. lost 1.8 million square feet of occupied space in the quarter, pushing the national office vacancy rate to 17.4%, the highest level since 1993, according to New York-based research firm Reis Inc.

While the drop in occupied space was much smaller than in previous quarters, analysts said companies' continued reduction of office space meant they still lacked confidence in economic recovery."

"BUCHAREST, July 5 (Reuters) - Romania sold fewer six-month treasury bills than planned on Monday and at higher yields than in a previous auction, indicating the European Union member may continue to have problems financing its fiscal deficit.

The finance ministry sold only 266 billion lei out of the 750 million on offer, setting the average yield at 6.99 percent from 6.74 at a previous tender on June 14. "

 

  • Other news and headlines:

Chances Of Greek Sovereign Default Rise, Says Study: FT

Euro Worst to Come for Top Analysts as TD Sees Parity

Players fear rising risk of US regional government defaults

Hungary Budget Gap at 119% of Full-Year Target in First Half

BP Oil Spill Loan Rises to $9 Billion

Protests Over Fuel Costs Idle Much of India

Bank of Korea Researchers Say Greece Default Is 'Inevitable'

Denninger on Market Manipulation… (Video)

Niall Ferguson: The US Has 6 Years Before Debt Payments Surpass Defense Spending

Devastation of BP Oil stained beaches (CNN Video)

One1776's picture
One1776
Status: Bronze Member (Offline)
Joined: Jan 24 2009
Posts: 52
6 Months Till the Largest Tax Hikes in American History

These tax hikes will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief
Second Wave: Obamacare
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

Read more here.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5734
Re: 6 Months Till the Largest Tax Hikes in American History

"These tax hikes will hit families and small businesses in three great waves on January 1, 2011:"

Well, I am little worried that this chart I am about to post has been prepared by someone with a political axe to grind, but with that risk noted, I will say that directionally nothing in it strikes me as overtly wrong.

If this chart is directionally true, and it seems politically impossible to get ourselves out of perpetual war in the ME, and we're powerless against bank lobbyists, then there's really not a lot of operating room left besides tax hikes.

When viewing this chart, just ask yourself "who has the worst lobbyists?" and that's where the money will first be sought by the political leadership.

(Source)

Again, I have no political intent in reproducing this chart, no axe to grind, no partisanship involved. 

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1325
Re: 6 Months Till the Largest Tax Hikes in American History

The real problem I have with this chart is it tries to predict deficits past 2011.  I think thats about as far out as we might even remotely be able to predict, much less 2019.  CaseyResearch had an article recently about how bad the projections from the CBO have been so far.  There are several things that lead me to believe this chart is fantasy and as you said, a political statement:

Economic Downturn - It's going to get better in the near future and not going to add substantially more?

Tarp/Fannie/Fredie - Really? That line is mighty thin despite recent reports Fannie/Freddie are going to cost 1T.

While I don't discount that the wars have substantially contributed to the deficit, the tax cuts I'm not so sure.  Without the tax cuts would revenue have fallen substantially due to less economic activity caused by higher taxes? 

daswafo's picture
daswafo
Status: Member (Offline)
Joined: Sep 24 2008
Posts: 6
Re: 6 Months Till the Largest Tax Hikes in American History

I had an opportunity to speak with some of the people who were handing this chart out as they held a convention in Portland several weeks ago.  The people who were demonstrating in front of the Oregon Convention Center and handing out these graphs were way out on the lunatic fringe.  It was difficult to hold any logical discourse with them even after spending 20 minutes talking to them.  I continued asking questions along their own line of reasoning and it finally lead them to the conclusion that we need to tax corporations 100% of their income to get out of this mess.  They considered me a right wing nut for believing that a 100% tax was absurd.  Then to my astonishment, the "accountant" that I was speaking with actually doubled down on that figure and suggested that we tax corporations $200% of their income. 

If the people who I spoke with are any indication of who put the chart out, an axe to grind is a bit of an understatement.

V's picture
V
Status: Platinum Member (Offline)
Joined: Dec 14 2009
Posts: 849
India Strike

This just in. Indians report that for the first time in decades they were able to breathe real air. Some report it is the first time in their entire lives they have had this experience. Raj Gupta in Mumbai said it made him feel rather uncomfortable to not be able to see the air he was breathing and looked forward to the strike ending and life returning to normal.

The strike turned into an economic boon for movie theatres as people flocked to watch movies instead of working.

V

LogansRun's picture
LogansRun
Status: Diamond Member (Offline)
Joined: Mar 18 2009
Posts: 1444
Re: 6 Months Till the Largest Tax Hikes in American History

In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:

Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%

This is the only link I could find to the story:

http://informationliberation.com/?id=31135

 

cmartenson wrote:

"These tax hikes will hit families and small businesses in three great waves on January 1, 2011:"

Well, I am little worried that this chart I am about to post has been prepared by someone with a political axe to grind, but with that risk noted, I will say that directionally nothing in it strikes me as overtly wrong.

If this chart is directionally true, and it seems politically impossible to get ourselves out of perpetual war in the ME, and we're powerless against bank lobbyists, then there's really not a lot of operating room left besides tax hikes.

When viewing this chart, just ask yourself "who has the worst lobbyists?" and that's where the money will first be sought by the political leadership.

(Source)

Again, I have no political intent in reproducing this chart, no axe to grind, no partisanship involved. 

osb272646's picture
osb272646
Status: Silver Member (Offline)
Joined: Mar 14 2010
Posts: 120
Re: 6 Months Till the Largest Tax Hikes in American History

It's easy enough to determine which political persuasion is behind the chart.  Perhaps the chart was made before ObamaCare?   

It's a given that tax increases of all sorts are coming.  Substantially increased income taxes on higher end earners and a VAT for everyone.   Social Security means testing too.  The sad thing is that the political class will not eliminate the deficit, let alone pay down our huge public debt.  They'll just take the extra revenue and spend it on stimulus, pork, and other national travesties, including maybe, some more wars.  The only hope is that they will not be allowed to, by either our Chinese lenders, or substantial American public outrage, or both.

Consumer consumption will decline, which is a good thing.  As people downsize and simplify their lives, they'll discover that all that "stuff" detracts from their quality of life.   

Higher wage earners will increasingly realize that their take home pay is not worth exposing themselves to the stress, neglect of family, and exposure to legal attacks from stakeholders, including trumped up criminal charges from Attorney's General.  They'll pull the plug in growing numbers, opting for less stressful, less "monocultural" lifestyles.

Where are the weakest lobbys?  Here's three: 

1.  Seniors.  They can't turn to AARP, which hung them out to dry in Obamacare.  They're increasingly villianized as the source of profiglacy that led to the bubbles.  They'll lose when it comes to cuts to Social Security and Medicare.  Not that they shouldn't have seen this coming and prepared better for it.  I'll say right now that I'm within three years of qualifying for Social Security.  However, my retirement planning has never anticipated a penny from that program.  It has been obvious since at least 1972 that this ponzi scheme would collapse, and that it would be high risk to count on anything from it for my living expenses in retirement.   Anybody who reads anything besides Oprah or People magazine should have seen this coming a long time ago.   

2.  Savers.   They're outnumbered, outvoted,  by the profligate.  Our society speaks with forked tongue.  We are raised with the admonishments to live below our means.  To  save for a rainy day, to put something away for retirement, pay back our loans, etc, etc.  But then if someone does follow those tenets, they are raped by the profilgate.  Their savings are eroded by inflation.  And for the privelige, they pay tax on the inflation that's robbing them.  They are forced to assist in the bailout of the banks by lending money to the banks at zero interest, so the banks can re-establish their reserves that were wiped out by the profligate who defaulted on their loans.   They'll get taxed again on the same money they already paid taxes on, via the VAT.   These Savers have to take matters into their own hands, carefully deploying their assets into inflation protected holdings, while keeping an eye out for deflation.  The ONLY hope that I can find for these people is if our society makes a massive shift to increased personal savings, so that the savers outnumber the profligate in terms of voting power.  Such a shift would require a massive PR campaign of the magnitude of the one waged against smoking over the past 25 years.  Except in this case, our government would be fighting the effort instead of helping it along.

3.  Small Business.    Again, their votes are outnumbered.  Somehow over the last few decades, the public perception of Government and Employers has merged, so that both are considered to be the only places where money grows on trees.   The costs of growing social welfare are increasingly dumped directly on business.  Obamacare is an example.  Family leave act.  ADA.  Nuisance taxes and bureaucratic red tape galore.   Sure, many would argue that these are all good causes.  But, the question is, with each "loading on", how many more employees lose their jobs?  How many small businesses are not started?  How many  investments are not made?  How many small enterprises shut down due to these burdens?   How many jobs go to Mexico, China? 

 

  

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5734
Re: Daily Digest - July 6

Okay, I think that chart is too hokey to use then so let's get on firmer ground.  How do we close the deficit?  Easy, by cutting spending or raising revenue:

Step 1:  What do you cut? (Difficulty:"Mandatory" is probably off the table for the next cycle)

 

Step 2:  Which taxes or sources of revenue do you raise?  (Difficulty: Try and make the revenue match the outlays)

I think most people underestimate the severity of the gap.  There's no possible way to close this up by raising taxes on corporations alone or any other such "soak the rich" schemes.  Favorite programs are going to have  to get cut.

And I really don't see how we can do this with defense off the table - it's the largest discretionary piece of the pie.

pwoody82's picture
pwoody82
Status: Bronze Member (Offline)
Joined: Sep 26 2008
Posts: 51
Re: Daily Digest - July 6

The chart has a false assumption, it assumes that the tax cuts resulted in no new economic activity and hence tax receipts did not increase after the cuts were put in place. All one needs to do is to look at the federal tax receipts after the second year of the cuts and one can see that tax receipts actually increased dramatically. Economic activity increases actually made up all the tax cuts and more. We are about to learn what happens when the cuts expire and within two years tax receipts will actually decline.

If one looks at the Laffer curve the reason why is clear. At a tax rate of zero, there are no tax receipts. At a rate of 100%, tax rates approach or are zero also. Since there is income between these two points, there must be some point at which tax receipts are maximized. Past history shows that point is around 35% so an increase over that will actually produce a drop in revenue. Since states also tax, if the state rates average 10%, then a federal rate over 25% is likely to cause a decrease in tax revenue.

pwoody82's picture
pwoody82
Status: Bronze Member (Offline)
Joined: Sep 26 2008
Posts: 51
Re: Daily Digest - July 6

The chart has a false assumption, it assumes that the tax cuts resulted in no new economic activity and hence tax receipts did not increase after the cuts were put in place. All one needs to do is to look at the federal tax receipts after the second year of the cuts and one can see that tax receipts actually increased dramatically. Economic activity increases actually made up all the tax cuts and more. We are about to learn what happens when the cuts expire and within two years tax receipts will actually decline.

If one looks at the Laffer curve the reason why is clear. At a tax rate of zero, there are no tax receipts. At a rate of 100%, tax rates approach or are zero also. Since there is income between these two points, there must be some point at which tax receipts are maximized. Past history shows that point is around 35% so an increase over that will actually produce a drop in revenue. Since states also tax, if the state rates average 10%, then a federal rate over 25% is likely to cause a decrease in tax revenue.

grl's picture
grl
Status: Silver Member (Offline)
Joined: Nov 30 2008
Posts: 188
Re: Daily Digest - July 6

I just saw Chris Martenson has a post on the front page of Yahoo Finance. Congratulations Chris! I hope the posting brings many more to this site and its important message. http://finance.yahoo.com/retirement/article/110001/stocks-and-bonds-are-...

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Re: Daily Digest - July 6

 

What I see as kinda interesting is how tiny our Fannie and Freddie liabilities are made out to be the "blue" line graph chart when we know it ain't true and we're likely in for at least a trillion of mortgage losses that we're backing. And where's the Fed's purchase of $1.5 (or roughly) trillion in mortgage-backed securities?

And in the "bue" pie chart, notice how large a component Social Security and Medicare "taxes" are when it's really money collected towards paying out Social Security and Medicare - but our government spends any left over on everything else rather than invests it - and we're now at or around the time of equal flow now, soon to be negative flow where these taxes won't amount to anything because they and all other taxes will join borrowings in servicing those obligations.

 

I feel like we're living in a time of SHTF.

Poet

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5734
Site Swamped by Yahoo! Traffic

I just want to let you know that the Yahoo! article today caused us a few interesting moments on the server traffic front and swamped us for a good bit of the afternoon. 

Trust me, this performance is something we will be seeking to remedy.  Sorry for any difficulties you may have experienced.

In the scheme of things, this is a good problem to have.

Best,
Chris Martenson

barrt's picture
barrt
Status: Silver Member (Offline)
Joined: Aug 25 2008
Posts: 171
Re: Site Swamped by Yahoo! Traffic
cmartenson wrote:

I just want to let you know that the Yahoo! article today caused us a few interesting moments on the server traffic front and swamped us for a good bit of the afternoon. 

Trust me, this performance is something we will be seeking to remedy.  Sorry for any difficulties you may have experienced.

In the scheme of things, this is a good problem to have.

Best,
Chris Martenson

-1

Even Weimar Ben could have predicted that one Cheif

Just teasing really, great to see your reach extending Chris, long may it continue to expand exponentially Wink

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Site Swamped by Yahoo! Traffic
cmartenson wrote:

I just want to let you know that the Yahoo! article today caused us a few interesting moments on the server traffic front and swamped us for a good bit of the afternoon. 

Trust me, this performance is something we will be seeking to remedy.  Sorry for any difficulties you may have experienced.

In the scheme of things, this is a good problem to have.

Best,
Chris Martenson

I was wondering what happened. I had trouble getting on the site for some time. Pretty clear it was because all the new traffic caused by the Yahoo article. Congratulations.

 

Ken

 

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Re: Site Swamped by Yahoo! Traffic
cmartenson wrote:

I just want to let you know that the Yahoo! article today caused us a few interesting moments on the server traffic front and swamped us for a good bit of the afternoon. 

Trust me, this performance is something we will be seeking to remedy.  Sorry for any difficulties you may have experienced.

In the scheme of things, this is a good problem to have.

Best,
Chris Martenson

How about a link Chris?  I'd like to read their commments to your article.

plato1965's picture
plato1965
Status: Platinum Member (Offline)
Joined: Feb 18 2009
Posts: 615
Re: Daily Digest - July 6

  minutes later...

 Yahoo overloaded by CM referrals..

 *grin*

 

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5734
Re: Site Swamped by Yahoo! Traffic
Travlin wrote:
cmartenson wrote:

I just want to let you know that the Yahoo! article today caused us a few interesting moments on the server traffic front and swamped us for a good bit of the afternoon. 

Trust me, this performance is something we will be seeking to remedy.  Sorry for any difficulties you may have experienced.

In the scheme of things, this is a good problem to have.

Best,
Chris Martenson

How about a link Chris?  I'd like to read their commments to your article.

.

Sure.  And you'll notice a few edits in there with your mark on them as I managed to finagle a last-minute version.  Thank you for your assistance!

Link to article

 

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Re: Daily Digest - July 6

Chris

Thanks for the link.  I had finally found it on my own and was dissapointed that they don't allow comments, as I was curious about how the public would react.  I'm glad my suggestons were useful to you.  Rearranging a few words is nothing compared to having the knowledge to write a sound article.  It was a pleasure to be able to help in some small way. 

TechGuy's picture
TechGuy
Status: Gold Member (Offline)
Joined: Oct 13 2008
Posts: 420
Re: Daily Digest - July 6

China Buys Japanese Bonds:

China always seems to be putting its money in the wrong place. First it was the US, and then the dollar tanked. Then it became the Euro and the Euro took a dive. Now its betting in Japan. However, since the Japan sells yen and buy US dollars, China is indirectly investing back in the US. I think in the next 18 months a sovergn debt crisis is coming back to Asia. China with its over leveraged economy, and Japan with a aging work force and a mountain of public debt higher than Mt everst and primed to implode like Mt St Helen in 1979. All it needs is a good spark to trigger the crisis.

Federal Budget Deficit:

I see that serveral comments about cutting Defense, and non-defense spending. In  reality it won't make much of a difference since its the entitlement programs are sucking everything in like a black hole. In 1965 entitlements cosumed about 4% of the federal budget. Today, they now consume more than 50% of the Federal budget, and they will continue to grow much more rapidly as the boomers continue to retire. If you dumped the entire defense budget over the next five to seven years, it probably would not be fast enough to offset the growth rate of entitlements. It like trying to fill a bucket with no bottom. The water will leak out the bucket faster than you could ever fill it.

The end of the tax bush cuts also won't support the entitlement programs. they are simply growing too fast. I don't believe any politican will cut entitlements, as it would be instant politican suicide, if not resulting in real life death as the huge population is depending on entitlements for retirement as well as medical services as it would create worse civil disobedence than in Greece.. The Entitlement programs will keep on growing until the dollar (and the gov't) collapses.

Economic recovery:

Recovery never happened and never will. The reason why the economy stopped collapsing between second half 2009 and first half of 2010 was all of the stimulus spending. The gov't propped  the  US economy by spending trillions. Aother nations also contributed trillions more to support there economies too. Now that the spending bills are spent, the economy is slipping back into recession. Unemployment will go back to the 700K lost jobs per month unless the gov't starts spending again. However, the Republicans are blocking spending in order to make the Democrats look bad come Novemeber. I think if the Republicans take over in November, that they start spending since its the only option available to Washington. Perhaps they're put a spin on how they spend,  by giving big tax cuts and subsidies. FWIW: I am a conservative, but what we have a gov't of two sides of the same coin. The Titanic is sinking and it no longer matters which  captain in charge. One party wants to bail from the left side of the ship will the other wants to bail from the right side of the ship, while they endlessly argue on the type of buckets they should use to bail with.

FWIW: The US economy and much of the global economy is finished. It may take a decade or two for it to completely collapse, but its a sure thing. There is no way it can recover short of green or gray men from a distant world arriving to save our sorry excuse for a civilization. We have excessive debt saturation, decaying infrastructure, depleting clean water resources, over population, and collapsing energy reserves. Consider that during the 1930s, the world only faced one of these major crisis: debt saturation, and the debt crisis of the 1930's was far less extreme. The result of the 1930s era was fascism, ethic cleasing, resource conflicts, and World War II. Anyone taking bets on the outcome of World War III?

 

middleclassamerican's picture
middleclassamerican
Status: Member (Offline)
Joined: Apr 16 2010
Posts: 19
Re: Daily Digest - July 6

WHAT CHRIS'S CHARTS REVEAL...

1.  There is no way to cut the deficit, and that is probably the plan...no government in history has entered debt and repaid it.  Politicians are reactionary and all elected governments have been this way.  The only solution is to grow income tax and corporate tax receipts through growth, not direct tax increases, this only causes capital to flee and unemployment to rise.  If we focus our stimulus on true growth or wealth creation and cut taxes, we become more competitive in the global economy and ATTRACT investment and create higher paying lasting jobs which leads to long term growth in both corporate tax and income tax receipts.  Albeit it takes time to see the benefits, which is why politicians could care less.

2.  Who pays corporate taxes...the consumer, so a direct increase in corporate taxes is a hidden increase in income tax.  Very simple if we increase the tax on a computer chip maker, the price of the computer rises and the consumer pays.  This increase will ultimately decrease demand and the chip maker will...you guessed it will cut its work force or move overseas to make up for the increase in taxes.  NO benefit for America or our current situation.

3.  Cutting spending in defense...This will lead to significant unemployment.   I have not done the math but thousands business depend on this money, and it is not a mis-allocation of capital, think of how many technologies have been created through defense spending and spun off into the private sector and are in turn sold to other nations.  Not a solution in the current situation this will cut income tax and corporate tax receipts dramatically.

 

The only solution our current politicians have and all super powers with elected governments before them have had when they reach a sovereign debt crisis is to run the printing press (I realize this printing press idea is a more recent phenomena , but the concept of decreasing the amount of gold or silver in the currency was essentially the same before the fiat currency), which causes inflation, which is a hidden tax which lowers our standard of living the same as a direct tax would be.  THIS IS THE POLITICIANS FAVORITE TACTIC AND THE MOST DAMAGING. 

The conclusion...We will have a lower standard of living regardless of whether we increase taxes, cut spending or run the printing press.  NONE CREATE WEALTH FOR A NATION.

A NOVEL IDEA MAY BE TO LOOK AT WHERE MOST OF OUR WEALTH GOES, OR WHAT CREATES OUR LOSS OF WEALTH (Besides the growing number of Government employees).  THE BIGGEST CONTRIBUTOR TO OUR TRADE DEFICIT IS ENERGY.  WHY DON'T WE START HERE AND MAKE IT A GOAL TO BECOME ENERGY INDEPENDENT.  WE HAVE THE INGENUITY AND RESOURCES TO MAKE IT HAPPEN, I DON'T CARE WHAT FORM THE ENERGY IS, SOLAR, WIND, NAT GAS, OIL, NUCLEAR OR SOMETHING NEW OR NOT MENTIONED.  IT WILL POTENTIALLY SAVE US HUNDREDS OF BILLIONS IF WE CAN FIND A WAY TO CREATE IT FOR LESS THAN WE ARE IMPORTING IT FOR  AND IT WILL CREATE LOTS OF HIGH PAYING JOBS.  INCREASING BOTH CORPORATE AND INCOME TAX RECEIPTS WITHOUT INCREASING TAXES.  IF THIS IS NOT AN OPTION, WE MUST CUT INCOME AND CORPORATE TAXES TO ATTRACT INVESTMENT AND CREATE JOBS. AS I SEE IT THESE ARE OUR ONLY TWO OPTIONS.  WE BETTER ACT QUICKLY, BECAUSE CHRIS'S GRAPH'S ASSUME A NORMAL RATE OF INFLATION.  IF WE HIT A POINT OF HIGHER INFLATION IN THE FUTURE KEEP IN MIND SOCIAL SECURITY RISES WITH INFLATION AS DO THE THOUSANDS OF PENSION PLANS OUR GOVERNMENT GUARANTEES AND THE LARGEST PORTION OF OUR CITIZENS IN HISTORY ARE SOON TO ENTER.  I WILL LEAVE THE INFLATIONARY ASPECT OF MEDICARE AND MEDICAID OUT, THIS IS SIMPLY A DISASTER NO MATTER WHAT HAPPENS.

 

 

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Re: Site Swamped by Yahoo! Traffic
cmartenson wrote:

I just want to let you know that the Yahoo! article today caused us a few interesting moments on the server traffic front and swamped us for a good bit of the afternoon. 

Trust me, this performance is something we will be seeking to remedy.  Sorry for any difficulties you may have experienced.

In the scheme of things, this is a good problem to have.

Best,
Chris Martenson

I noticed it was today! The article was dated July 1, but it was posted today on Yahoo! Finance. As soon as I saw it on Yahoo! Finance and I came to this site, I realized there must have been a major web traffic hit a la Slashdot, Digg, etc.

Great article, and great way to get the investment community piqued!

I believe this and other events around this time may mark the inflection point of getting that critical mass of awareness. I hope this web site becomes even more of an easy-to-navigate resource and welcome center when even MORE ordinary people, not just investors, start coming here in massive droves looking for guidance.

Poet

tylerjordan's picture
tylerjordan
Status: Member (Offline)
Joined: Jul 29 2009
Posts: 10
Re: Daily Digest - July 6

How about we just privatize all government programs and agencies, sell off all government assets and then shut it down.

Why do we have such a difficult time seeing that it's all just a big joke (scam)?

 

http://libertariananarchy.com/   (yes, amazingly, it can work.  we lived on this earth without big government for a vastly longer time than with it)

http://earthsociety.org/   (my website)

thelorax's picture
thelorax
Status: Member (Offline)
Joined: Aug 24 2008
Posts: 14
Re: Daily Digest - July 6

I was struck by the article in today's DD called "'Super-Giant' Oilfields Redraw Energy Map."  It focused primarily on how the "new Iraqi oil rush" (which I hadn't heard of)  will change the balance of power in the Middle East.  However,  I found myself wondering about the impact of the increasing Iraqi production on the bumpy plateau of peak oil that we are currently in or near.  All that increased oil supply over the next 10 years (if it happens) combined with the general deleveraging of debt bringing down demand, and oil prices could stay down for long time dampening investment in alternative fuels.

Here is a thorough discussion of the possible effect of the Iraqi oil rush on peak oil scenarios for anyone who's interested:

http://earlywarn.blogspot.com/2009/12/iraqi-oil-production-history.html

It is a pretty thorough discussion, but if you just want the gist of it, I'll quote the last 2 paragraphs below.

Cheers!

thelorax

Last 2 paragraphs:

<quote>

 In general, the development of this Iraqi capacity, assuming it happens, seems to me likely to bring about an era a bit like the 1980s-1990s, in which energy issues retreat to the background for a while. I don't think prices are likely to fall as far or for as long as they did in those decades, but still I think there may be some qualitative similarities. From the perspective of the Iraqis obviously this plan is a good thing, and who can begrudge it to them? At the same time, in my view this is not really a good thing for the rest of us, as it allows us to postpone the inevitable for a little while longer. To use Richard Heinberg's party metaphor it's as though Dick Cheney and his crew managed to organize one last trip to the liquor store before everyone was too blind drunk to drive. Now the party can stagger on till everyone is really wasted. Sprawl in the US and Europe, sprawl-enabled-obesity, SUVs, growing Chinese auto-dependence, growing carbon emissions etc, all get a new lease on life.

In particular, just as the 1970s efforts at alternative energy were seriously damaged by the low oil prices of the mid 1980s and 1990s (as Alaska and the North Sea came on line), there is a risk that the current crop of biofuel and alternative energy companies, as well as hybrid and electric car efforts, will all suffer through an era of low oil prices, only to not be there when we really need them ten years from now.

I'm not saying for sure any of this will really happen. But it seems like a real risk, which I shall continue to track.

<end quote>

 

VeganDB12's picture
VeganDB12
Status: Platinum Member (Offline)
Joined: Jul 18 2008
Posts: 740
Re: Daily Digest - July 6

Chris

Congratulations on the great response to your yahoo article, no surprise but great to see :)

Re: tar balls and why the gov is slow to clean up

Random thought from a friend in the business world: when tar balls threaten the beaches of Greenwich CT and Miami Beach we may see a little more action from the powers that be-corporations who may have to answer to the super rich even if they don't answer to the federal government.   Makes sense to me.

 

Take care

Denise

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1325
Re: Daily Digest - July 6
VeganD wrote:

when tar balls threaten the beaches of Greenwich CT and Miami Beach we may see a little more action from the powers that be-corporations who may have to answer to the super rich even if they don't answer to the federal government.

You seem to be blaming the corporations for the clean-up mess.  However, it sure looks like the federal government made things much worse by refusing cleanup help early on when it might have done some good and doing really stupid things like not allowing an oil-skimer to operate because it might discharge water back that contains more oil than allowed by law (that one just amazes me).  So while I don't disagree that BP and Transocean are certainly responsible, the government appears to have made things much worse by not allowing cleanup to begin quickly.  What corporations do you think should have to answer for this besides BP and Transocean and their subcontractors?  I would like to see those that held up clean-up efforts be held responsible!

What really amazes me is the worry about tar balls on the beaches.  Bad for tourism but not near as bad as the environmental damage that the oil in the shallow ocean,  reefs, and marshlands is doing - and that is a much much harder problem to clean.  I have no doubt that we can effectively clean the beaches, the rest I think it's probably too late as the damage is already done. Cry

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Electric refueling: Doing the math

by Michael Dawson

Oilbama and what passes for a green movement talk breezily of “clean energy,” as if the only thing blocking a rapid and thorough transition to an alt-energy economy is oil-industry corruption and political indecision.

In the misleading verbiage of such false prophets, you never get any details. Why not? Because the facts are entirely contrary to the promises.

Leaving aside geology and EROEI, let’s examine the single point at which the fuel meets the car, shall we?

According to recent “good news,” “JFE Engineering claim[s] to have produced a quick charger which can replenish 50 percent of an EV’s battery level in just three minutes. The company also claims the system could recharge up to 70 percent in just five minutes.”

The news here is that this promises some relief from the fact that recharging an electric automobile is generally an overnight process, not a 5-minute pitstop.

The price of the speedy new charging unit? $120,000 per unit.

As of 2007, there were 117,908 gas stations in the United States.

$120,000 x 117,908 = $14,148,960,000.

So, putting one single electric car charger at each filling station in the USA would cost 14.1 billion dollars.

Of course, the average automobile fueling depot needs and has probably 6-10 gasoline hoses springing off its meters. This is for the obvious reason that motorists don’t want to wait half an hour to access a single hose.

So, re-fitting the nation’s gas stations for a fully electric fleet would actually cost more like $100 billion.

And, of course, we [read: the babysitters our overclass hires for us] love the free market and don’t begrudge gas station owners getting rich. Gas stations, in other words, are not owned by the public. So, this $100 billion expenditure would have to be done voluntarily by the nation’s fueling entrepreneurs, for whom such outlays represent deductions from their returns-on-investment.

And, of course, all this is merely the cost of the electron-dispensing units. It says nothing about the radical reconstruction of the underlying electrical generation and distribution system that such a conversion would require.

Bottom line: As the car capitalists know, electric cars are a minor diversion, a profitable trick on hoodwinked green shoppers and a crucial political psy-op against the general public.

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