Daily Digest

Daily Digest - June 15

Tuesday, June 15, 2010, 10:46 AM
  • Martin Weiss: Glimpses Of The End Game
  • Ray Kurzweil: A University For The Coming Singularity
  • Currency Collapse May Stimulate Economic Expansion, BIS Says
  • BP’s Rating Cut by Fitch to Two Levels Above ‘Junk’
  • U.S. Targets $20 Billion BP Pay-Out
  • Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case
  • Kelly: New Jersey Refuses To Return Madoff Victims’ Overpaid Taxes 
  • Efforts to Repel Gulf Oil Spill Are Described as Chaotic

Economy

Martin Weiss: Glimpses Of The End Game (tomadkins)

Austerity can come in many forms: Governments may impose austerity strictly in reaction to market-driven forces … or by pro-actively taking the lead. Austerity may come with wild inflation … or without. It could trigger deep social upheaval … or merely sporadic protests. But regardless of how austerity finally arrives, it cannot happen without across-the-board cutbacks in government payrolls, severe reductions in unemployment benefits, massive cuts in pensions, big hits to social welfare programs, and invariably, NO MORE ECONOMIC STIMULUS!

Ray Kurzweil: A University For The Coming Singularity (Alan H.)

"The following presentation by Ray Kurzweil lifted from TED is one of their most highly rated videos and it sums up the techno-religious argument better than anything I've ever seen. Although this video is 12 mths old, its worth revisiting as Ray talks about the growth of technology approaching a "singularity" - a point at which computing power becomes infinite. He discusses exponential growth phenomena and Moore's Law extensively. In this talk Ray unveils his new project, Singularity University, to study oncoming tech and guide it to benefit humanity."

Currency Collapse May Stimulate Economic Expansion, BIS Says (cmartenson)

Currency collapses are associated with permanent output losses of about 6 percent of GDP, on average, though the drop tends to appear beforehand, the Basel, Switzerland-based BIS said in its quarterly review yesterday.

BP’s Rating Cut by Fitch to Two Levels Above ‘Junk’ (cmartenson)

President Barack Obama and U.S. lawmakers said this week that BP should suspend dividends and set aside funds now for legal claims against the company from the spill, the worst in U.S. history. Fitch said it would be “surprised” if BP didn’t suspend the quarterly payout until the full costs are known. The cost of cleanup and liabilities may reach $40 billion, Standard Chartered Plc. estimated last week.

U.S. Targets $20 Billion BP Pay-Out (cmartenson)

BP would not comment on the dividend, which is due to be announced on July 27. It also emerged on Monday that BP had hired Blackstone, Goldman Sachs and Credit Suisse to help it manage its liabilities.

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case (cmartenson)

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

Kelly: N.J. refuses to return Madoff victims’ overpaid taxes (cmartenson)

One of the little-known stories to emerge from the Madoff scandal is the fact that New Jersey's cut-the-budget government has so far refused to refund state income taxes paid by Madoff victims on investment income that turned out to be an illusion. Think of it as overpaying your taxes – but with this twist: You overpaid on income you never actually had.

Environment

Efforts to Repel Gulf Oil Spill Are Described as Chaotic (jdargis)

From the beginning, the effort has been bedeviled by a lack of preparation, organization, urgency and clear lines of authority among federal, state and local officials, as well as BP. As a result, officials and experts say, the damage to the coastline and wildlife has been worse than it might have been if the response had been faster and orchestrated more effectively.

Please send article submissions to: [email protected]

9 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - June 15

"Companies that offer health plans will see their costs jump 9% in 2011, and most employees will pay higher deductibles as a result, said a report released Monday.

Employers will try to offset cost increases by requiring their workers to shell out more cash before coverage kicks in, according to a survey of 700 employers by PricewaterhouseCoopers.

By 2011, more than 50% of workers will have a deductible of $400 or more. In 2008, only 25% of companies said they had plans with deductibles that high.

In 2010, 13% of companies said their primary plans were those with high-deductibles -- generally considered to be $1,100 or more. That's more than double the level of 6% in 2008."

"One of the most troubling social trends in recent years has been the pension gap between state and local employees (who can retire early — often very early — with instant, guaranteed, taxpayer-paid benefits) and the private sector workers whose taxes pay for those pensions. Their retirement benefits are largely self-financed and subject to market upheavals."

Unfunded pensions

"The Treasury issued just over 5 billion euros ($6.71 billion) in 12-month and 18-month bills. Average yields jumped more than 70 basis points from May's auction in a sign of the fears of contagion sparked by the Greek crisis."

"The 12-month Spanish bill, which paid an average yield of 2.303 percent after 1.59 percent in the same auction in May, and the 18-month, which gave 2.837 percent, up from 1.951 percent.

"(This) begs the question how Moody's can rate Spain triple-A when you have an auction result like this. While Spanish 12-month yield was 2.30 percent, France's equivalent is 0.4 percent and below the ECB's policy rate of 1.0 percent. This must now put pressure on Moody's to downgrade Spain," said bond strategist at Monument Securities in London, Marc Ostwald. "

..................3A) Spain Says Banks in Credit Crunch

"MADRID—Spanish officials acknowledged that the country's banks and companies are having difficulty finding credit, underscoring the pressure Madrid faces to pursue deep structural changes to win back investor confidence.

Investors are particularly concerned that Spain would be unable to supply its banks with more capital, if needed, without emergency aid from the European Union and the International Monetary Fund. "

"Citigroup said on Monday it is preparing to remove Greek government debt from its World Government Bond Index, a key benchmark for sovereign credit, after Moody's Investors Service cut its rating to junk status. "Greece no longer meets the minimum credit criteria of BBB-/Baa3 by either S&P or Moody's for the World Government Bond Index (WGBI)," Citigroup said in a memo obtained by Reuters."

..................4A) Greek Swaps Show 48% Probability of Default Within Five Years

"“This is the biggest crisis capital markets have ever faced,” said Gary Jenkins, head of credit strategy at Evolution Securities Ltd. in London. “There will be more downgrades.”"

.................4B) Greek Bonds to Be Removed From Citi, Barclays Indexes (More info)

.................4C) Greece says market speculation could derail austerity

"June 15 (Bloomberg) -- Ireland sold 1.5 billion euros ($1.83 billion) of debt at an auction as the euro-area debt crisis continues to push up the relative cost of borrowing for the region’s so-called peripheral nations.

Ireland sold 750 million euros of 4.5 percent debt maturing in 2018 to yield 5.09 percent. That compares with a yield of 4.55% in August, when it last sold that debt. It also sold 750 million euros of 4.6 percent six-year bonds to yield an average 4.521 percent. That’s higher than the 3.663 percent yield at the previous auction of those bonds in April."

"June 15 (Bloomberg) -- Spain and Portugal need additional budget cuts to meet deficit targets announced a month ago even as their efforts to tame their shortfalls threaten to choke growth and produce a “snowball” effect on their debt levels, according to a draft European Commission document.

The deficit reduction measures announced by the two countries as part of a European Union agreement on May 10 to create a 750 billion-euro ($920 billion) financial backstop for indebted countries aren’t sufficient, the report obtained by Bloomberg News said. "

"The Obama administration has delayed a deep pay cut for doctors treating Medicare patients. The 21% cut was scheduled to take effect tomorrow.

The cut technically took effect June 1, but the Centers for Medicare and Medicaid Services has delayed claims until Friday. The administration is expecting Congress to intervene this week.

The House has passed legislation to provide a fix through 2011 but Republicans have blocked action in the Senate, saying there are no offsets for the $23 billion cut, The Hill writes. Majority Leader Harry Reid said he hoped to have the bill passed by the end of the week."

"CalPERS lowered its estimate of how much it expects to earn in the 10 years ended 2021.

Return estimates discussed at Monday’s investment committee meeting calculate an annualized return of 7.54% for the 10-year period.

This compares to the 8.3% fund officials previously concluded they could earn. They attributed the drop to changes in the global economy and their increased inflation estimate of an average 3% per year over the period vs. last year’s estimate of 2.5%.

Given inflation, CalPERS real returns for the 10-year period are estimated to be an annualized 4.54%, vs. last year’s estimate of 5.8%."

"The city council is feverishly passing tax hikes on everything from parking meters to your income, but the millions of dollars still will not cover the city's budget deficit. Kelly McPherson spoke with city leaders and angry workers.

The city council is scrambling to fill a massive budget gap with two weeks to do it. City workers who have received pink slips are angry that the mayor's idea of adding a four cent tax to bottled drinks is not being discussed by city council.

"We've been saying for the last month `four cents makes sense' when it comes to saving jobs and saving those essential services that we provide," said Glen Middleton.

Some tax increases have passed--a $5.9 million increase on local income tax, a $2.5 million increase on property tax discount, a $1 million vacant structure fees and $1.9 million on simulated slots.

"The deficit is $121 million. We can't find $121 million and the budget put before us--with $50 million in revenue--still has layoffs of city workers," said Councilmember Helen Holton."

"Sheriff's deputies and other San Bernardino County law enforcement employees said no to a concessions package that would have required them to give up a pay raise and reduce pension benefits for future hires.

The union's vote to reject concessions and enforce their contracts increases the likelihood that sworn law enforcement officers will be laid off as the county scrambles to close a budget shortfall of nearly $90million for the coming fiscal year, a county spokesman said. "

"The U.S. Supreme Court will review an order that would require California to reduce its prison population by 46,000 within two years to ease overcrowding."

"Under a plan submitted by the state in January, California would use county jails and home detention to alleviate the overcrowding. California, the nation's most populous state, is facing a $19 billion budget deficit.

Two groups of prisoners, along with the union that represents the state's prison employees, said the order was necessary to relieve crisis conditions in the state's prisons. The three-judge panel found that some institutions have populations approaching 300 percent of their intended capacity, leading to increased violence and disease within the facilities."

  • Other news and headlines:

EU attack on Moody's over latest Greece downgrade

Greece rejects Moody's downgrade of bonds to "junk" status

China's bank regulator sees growing real estate risks

US Households' Lower Income Could Hurt Housing Demand

Oil spill cost to US: Ocean. To BP investors: $90-billion

BOJ warns of Europe debt, wants Japan fiscal plan

France Cancels Auction For Medium-, Long-Term Bonds In August

Philippine Deficit May Widen on Plan to Lift Spending (Update1)

Illinois Downgrade, Tax Decline Weigh on $500 Million Bond Sale

German HSH Nordbank to ditch ratings agency S&P: bank

LA College District Bringing Record $1.2 Billion to Market

Euro Turmoil Sends Borrowers to Loonies, Francs: Credit Markets

Taxpayers to face £18 billion bill for public sector pensions (UK)

Public pensions to cost you £4000 a year (UK)

Public sector pension costs 'to double in five years' (UK)

FHA Insurance Premiums to Triple

Extension of Tax Credit Closing Deadline in the Works

Slovakia’s Finance Ministry says public debt reaches nearly 36 percent of GDP for 2009

California Committee Defeats Pension-Reform Bill

Senate Debates $50 Billion More in Economic Stimulus Funding

Senate Proposal to End $35 Billion in Oil & Gas Tax Breaks

Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show

Fitch Downgrades Kentucky Appropriations Bonds to 'AA-'

French pensions system deep in the red-FACTBOX

Budget cuts would have dire effects, Sacramento County supervisors told

States Squeeze Local Schools

Home builders' index dives after tax break expires

britinbe's picture
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Re: Daily Digest - June 15

From BBC, how the banks have won 2010

!

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Poet
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Re: Daily Digest - June 15

 

That article:

California Committee Defeats Pension-Reform Bill
http://cbs13.com/wireapnewsca/California.legislative.committee.2.1751445...

Wow, a total combined $397 billion in unfunded pension liabilities. Ouch!

And it doesn't count the $62 billion in unfunded lifetime retiree health care liabilites. And that's not counting individual counties or cities that aren't in the California state workers or teachers funds. The city of Huntington Beach, California, alone, has some $1 billion in unfunded pension liabilities.

And this is ONLY California.

This huge timebomb is also made with the assumption that investments will grow 8% per year. If that were so, the Dow of the 1950s would have become Dow 17,000 to 20,000 by now. We're barely at 10,000 today.

Poet

 

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rhare
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Re: Daily Digest - June 15
Quote:

The following presentation by Ray Kurzweil lifted from TED is one of their most highly rated videos and it sums up the techno-religious argument better than anything I've ever seen.

His take on solar is whacked.  In the presentation he talks about solar being an exponentail growth and spits out a comment about nano-tech.  Power efficiency increases have not been exponential and can't be.  After all, we are at about 18% efficient for a good solar panel, and the most you can get is 100%.  This isn't something you can change - only so much sun hits the earth surface. You can make it cheaper and you can cover more of the surface, but this exponential growth quickly hits some hard limits.

So,  I wonder how the rest of his exponential growth will turn out when we have a decreasing ene"rgy supply?  Will we see a sudden breakdown in this exponential growth of technology?  After all, his examples are all using data from this time in history where we have had essentially as much power as we wanted.  This kind of makes me think of the Nassim Nicholas Taleb comment in "The Black Swan", paraphrased: "There is no evidence of a Black Swan, is very differnt than "There is no Black Swan". That is the empirical evidence may be leading us to believe that this exponential growth in information technology will continue because it always has.  Just because we haven't seen evidence of a game changing event, doesn't mean it can't happen.

 

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Poet
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Re: Daily Digest - June 15
rhare wrote:
Quote:

The following presentation by Ray Kurzweil lifted from TED is one of their most highly rated videos and it sums up the techno-religious argument better than anything I've ever seen.

His take on solar is whacked.  In the presentation he talks about solar being an exponentail growth and spits out a comment about nano-tech.  Power efficiency increases have not been exponential and can't be.  After all, we are at about 18% efficient for a good solar panel, and the most you can get is 100%.  This isn't something you can change - only so much sun hits the earth surface. You can make it cheaper and you can cover more of the surface, but this exponential growth quickly hits some hard limits.

So,  I wonder how the rest of his exponential growth will turn out when we have a decreasing ene"rgy supply?  Will we see a sudden breakdown in this exponential growth of technology?  After all, his examples are all using data from this time in history where we have had essentially as much power as we wanted.  This kind of makes me think of the Nassim Nicholas Taleb comment in "The Black Swan", paraphrased: "There is no evidence of a Black Swan, is very differnt than "There is no Black Swan". That is the empirical evidence may be leading us to believe that this exponential growth in information technology will continue because it always has.  Just because we haven't seen evidence of a game changing event, doesn't mean it can't happen.

"It started early in the twenty- first century, with the birth of artificial intelligence, a singular consciousness that spawned an entire race of machines.  At first all they wanted was to be treated as equals, entitled to the same human inalienable rights.  Whatever they were given, it was not enough.  We don't know who struck first.  Us or them.  But sometime at the end of the twenty-first century the battle was joined.   The war raged for generations and turned the face of our planet from green and blue to black and red.  It scorched and burned the sky.  Without the sun, the machines sought out a new energy source to survive.  They discovered a new form of fusion.  All that was required to initiate the reaction was a small electric charge.

"Throughout human history we have been dependent on machines to survive.  Fate, it seems, is not without a sense of irony.  The human body generates more bio- electricity than a 120-volt battery and over 25,000 B.T.U.'s of body heat.  We are, as an energy source, easily renewable and completely recyclable, the dead liquified and fed intravenously to the living.  All they needed to control this new battery was something to occupy our mind.  And so they built a prison out of our past, wired it to our brains and turned us into slaves."

Oh, wait. That's from the Matrix, sorry. Not the future of solar as we envision... :-)

Poet

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Damnthematrix
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'global oil supply crunch and price spike'

http://peakgeneration.blogspot.com/2010/06/business-leaders-predict-global-oil.html

MONDAY, JUNE 14, 2010
Business leaders predict 'global oil supply crunch and price spike'
The Chief Executive Officer of insurance giants Lloyds is warning that the world is facing a "period of deep uncertainty" over the decline of fossil fuels – and may soon be coping with $200-a-barrel oil.

It may be hard to believe now, writes Dr Richard Ward in his introduction to a "stark" report just published by Lloyds and an influential UK think tank, but that's because "the bad times have not yet hit." He warns business managers to
be ready for "dramatic changes" as oil, gas and coal supplies will soon be "less reliable and more expensive." The world "has entered a period of deep uncertainty in how we will source energy for power, heat and mobility, and how
much we will pay for it," he states.

And that's just CEO Ward's introduction. The rest of the report does not disappoint.

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Loren
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Re: Daily Digest - June 15

I've been following the Singularity movement closely for 7 years now.  In my opinion, the most level-headed and rational people in this movement are Michael Annisimov and Eliezer Yudkowsky.  They both give a more appropriate emphasis to the dangers of new technologies such as AI, robotics, nanotech, and biotech.  Kurzweil does mention the dangers, but he seems to think there's only a negligible chance something will go horribly wrong.  Annisimov and Yudkowsky have convinced me otherwise.  It may be that humanity is not yet mature enough to be playing with these advanced technologies, and a collapse of society is the only thing stopping us from implementing them.  Also, Annisimov and Yudkowsky seem to realize the chances of a long-term collapse are not insignificant, whereas Kurzweil dismisses any economic problems as only a temporary setback.

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V
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BIS

So if I read this correctly currency collapse is a good thing? Since the BIS is the Central Bank of the Central Banks does this mean they are centrally planning a currency collapse? What does this bode for the Euro beyond Greece and the USD beyond Europe?

As Bill O'Reilly says " Who' s looking out for you" Is the BIS looking out for us?

V

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mainebob
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Singularity U: John Mauldin - The End Game

While I was virtually wandering around the Singularity U campus I found this:

"John Mauldin, best-selling financial author, discusses his view of the debt cycle,
and the coming de-leveraging recession. Filmed during the Executive
Program March 2010 at Singularity University, NASA Ames, Silicon Valley.

http://singularityu.org/videos/2010/04/john-mauldin-the-end-game/

-Bob O

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