Daily Digest

Daily Digest - June 30

Wednesday, June 30, 2010, 10:44 AM
  • UN Report: Dollar Should Be Replaced As Main Reserve Currency
  • Roubini says Greece Needs Orderly Debt Restructuring To Avoid 'Inevitable Default'
  • State Schools Chief Jack O'Connell Announces Number of School Districts on Fiscal Early Warning List Growing in Midst of Budget Crisis
  • Derivatives group in $1 trillion warning
  • High Unemployment, Lower Stocks and Growing Worries. Is This 1930 All Over Again?
  • City Symbolizes Budget Crisis Facing Many Across US
  • Pensacola Beach Covered In Oil Again
  • Deliberate Oil Cover Up Pensacola Beach
  • Deliberate Cover Up Of Oil With Sand On Pensacola Beach
  • Louisiana Reports Oil Spill Illnesses
  • Despite an order to stop from the EPA, BP continues to spray toxic oil dispersants in the Gulf
  • Gulf Dead Zone Grows as No-Fishing Area Expands

Economy

UN Report: Dollar Should Be Replaced As Main Reserve Currency (Posted by cpkj)

"The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency," the U.N. World Economic and Social Survey 2010 said.

The report says that developing countries have been hit by the U.S. dollar's loss of value in recent years.

Roubini says Greece needs orderly debt restructuring to avoid 'inevitable default'

"It is time to recognised that Greece is not just suffering from a liquidity crisis; it is facing an insolvency crisis too," he writes in the Financial Times. Greek debt is being downgraded to junk levels, making it harder and more costly for the government to borrow.

State Schools Chief Jack O'Connell Announces Number of School Districts on Fiscal Early Warning List Growing in Midst of Budget Crisis (California)

Public education in California received $17 billion less in state funding than anticipated over the last two budget years. As a result, more than 20,000 teachers have received pink slips this year. Summer school has been eliminated, class sizes are increasing, and art, music, libraries, school nurses, and sports programs have been cut.

Derivatives group in $1 trillion warning

"If markets return to levels prevailing at the end of 2008, additional collateral needs would bring the total to $1 trillion," said ISDA in its report. The comprehensive financial reform bill is aimed at establishing standards for mortgage underwriting and strengthening bank capital among other measures.

High Unemployment, Lower Stocks and Growing Worries. Is This 1930 All Over Again? (Tech Ticker Video)

Last year, Dan Alpert, managing principal with Westwood Capital, described the huge stock market rally that followed the March lows as the "greatest sucker's rally in history." He also produced a fascinating series of news clippings from early 1930, a few months after the historic market crash of 1929, that showed that market participants in those days had no idea of what was about to hit them.

Specifically, Dan assembled headlines and commentary from the New York Times, Wall Street, Journal and other papers that showed vigorous debate about how strong the recovery would be--with almost no suggestion that the market crash of the previous fall might only be the beginning. The market rallied strongly in the spring of 1930 amid booming optimism. Then it crashed to the horrific lows of early 1932.

City Symbolizes Budget Crisis Facing Many Across US (CNBC on Harrisburg)

Thanks largely to a troubled incinerator project that has failed to generate the expected returns, Harrisburg will owe its creditors a total of $300 million in the coming years, as bonds it floated to help finance the incinerator come due. More immediately, the city has $68 million in obligations for this year—a sum that exceeds its annual budget. And Harrisburg has no clear mechanism for repaying its debts.

Environment

Pensacola Beach Covered In Oil Again (Video posted by pcolagregg)

Deliberate Oil Cover Up Pensacola Beach (Video posted by pcolagregg)

Deliberate Cover Up Of Oil With Sand On Pensacola Beach (Video posted by Derail07)

I was on the beach last night and it was covered in oil, this video shot before 6am shows heavy equipment that had been working through the night covering the oil, still at it. SOMEBODY has to put a stop to this - They are just covering the oil and toxins.

Louisiana Reports Oil Spill Illnesses

More people who have been exposed to the BP oil spill are falling ill. To date, reports CNN, 162 cases of sickness have been reported to the Louisiana state health department, citing a report released yesterday. Of the 162 cases, 128 involved workers who were either on oil rigs or who were involved in clean-up efforts.

Despite an order to stop from the EPA, BP continues to spray toxic oil dispersants in the Gulf

BP is still spraying the same stuff - under the brand name Corexit - that led to EPA concerns in May. Although it has decreased the total amount used, BP has exceeded the recommended daily level of 15,000 gallons sprayed beneath the surface of the Gulf of Mexico.



Meanwhile, federal scientists confirmed this week what University of South Florida researchers and others had found: plumes of tiny oil droplets that stretch for miles underwater, which ``is consistent with chemically dispersed oil.'' Some of it, they found, had oozed into more shallow waters close to shore. ``That's particularly troublesome,'' said Ernst Peebles, a biological oceanographer at USF. Contaminants in more shallow water - about 30 feet deep - can be blown around more easily by wind, spreading it along the gulf's biologically rich continental shelf, he explained.

Gulf Dead Zone Grows as No-Fishing Area Expands

The National Oceanic and Atmospheric Administration said it had decided to expand the fishing closure from its current northern boundary as a precautionary measure to make sure consumers don't eat seafood contaminated by the gulf oil spill. All told, a little more than 80,000 square miles, or 33 percent of Gulf of Mexico's federal waters, are now considered a closed area.

Because this remains an evolving situation, NOAA said that it will retest the area and reopen fisheries when they are deemed safe. Meanwhile, commercial fishermen in the Gulf, who harvested more than one billion pounds of fish and shellfish in 2008, face another threat to their livelihood: a growing "dead zone" with little or no oxygen in the water.

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13 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - June 30

"Reuters) - Nearly one out of every three U.S. home sales in the first quarter was a foreclosure property as steep price discounts boosted demand for distressed real estate, RealtyTrac said in a new report on Wednesday.

Foreclosure homes accounted for 31 percent of all residential sales in the first quarter of 2010, with the average sales price of properties that sold while in some stage of foreclosure nearly 27 percent below homes that were not in the process, Irvine, California-based RealtyTrac said.

"In a normal market, only 1 to 2 percent of home sales are foreclosures, so this is certainly a significant level," Rick Sharga, senior vice president at RealtyTrac, said in an interview."

"PARIS—France's general government debt, as defined under the Maastricht Treaty, rose €46.5 billion ($56.72 billion) in the first quarter to €1.54 trillion, reflecting a sharp increase in borrowing by the Treasury, French statistical agency Insee said Wednesday.

Public debt at the end of March represented about 80.3% of France's gross domestic product, up 2.2 percentage points from three months earlier and a whopping 10.8 points from a year before. France's external debt has been climbing at a fast pace due to last year's economic slowdown, which has caused a sharp deterioration in the country's public finances. "

"The Financial Crisis Inquiry Commission is turning its focus to derivatives at two days of hearings starting Wednesday. On the hot seat will be former executives of American International Group Inc., the insurance conglomerate saved from collapse by a $182 billion taxpayer bailout, and current officials of Goldman Sachs Group Inc., the finance powerhouse that has been one of Wall Street's biggest derivatives dealers.

Traded in an opaque global market valued at around $600 trillion, derivatives have caught a big part of the blame for the financial crisis that ignited in late 2008. "

"The number of California school districts that appear headed for financial trouble has increased dramatically since March, with five in Monterey County making the list.

King City Union, King City Joint Union High, North Monterey County Unified, Santa Rita Union and Washington Union were included in the list of 174 districts that must make significant cuts to remain solvent. The information is based on preliminary reports districts were required to submit to the state in April with information as of March 15. "

"The number of California K-12 districts that could face financial difficulties went from 108 in 2009 to 174 this year, a number that has statewide officials concerned, given the realities of California's budget woes.

"This report gives us an early sign that the districts may be heading for financial disaster," Jack O'Connell, state superintendent of public instruction, said at a news conference Tuesday. "We have never seen 160 qualified school districts in this list, and that's a real cause of concern. "

"DALLAS — After weathering one of the worst fiscal years in its history, Arizona starts the next one tomorrow without a short-term borrowing agreement.

In what has evolved into a political showdown, Treasurer Dean Martin is blaming Gov. Jan Brewer for allowing a $700 million line of credit agreement with Bank of America to lapse effective today. Also gone is the state’s ability to issue IOUs for state services, a form of internal borrowing.

“At this point right now, the state cannot borrow funds to meet cash flow needs,” Martin said. “There’s only sufficient cash for two months spending. Starting in September, the state is going to have serious cash-flow problems.”"

"Pennsylvania lawmakers have reached a tentative budget agreement.

Tuesday, negotiators worked out a $28 billion budget for the next fiscal year, which begins Thursday, July 1.

It increases funding for public schools by $250 million, with no bump in sales or income taxes. But to do that, it makes sharp cuts in other areas.

Governor Ed Rendell said those cuts could mean up to a thousand layoffs for state employees. "

"Thousands of government workers throughout Los Angeles could begin losing their jobs this week with the start of the new fiscal year, even as officials make last-minute bids to save positions through further service cuts, tax hikes and union concessions.

Up to 4,300 jobs could be cut next fiscal year from local government agencies, including the city, county and schools, if officials and unions fail to reach deals to slash spending.

Los Angeles Unified School District alone could shed up to 2,500 jobs this year, although that number is expected to fluctuate through the fall as officials negotiate with unions and monitor the state revenue picture."

"Detroit -- The budget deficit for Detroit Public Schools has ballooned from $219 million last year to $363 million, according to budget documents released Tuesday by the district.

The 66-percent spike in the debt occurred during the first full year of leadership under Robert Bobb, the state-appointed emergency financial manager. Bobb was appointed by Gov. Jennifer Granholm to help eliminate the district's deficit. His term expires in March.

A year ago Bobb pledged to end overspending and expected a $17 million surplus that would help whittle the $219 million deficit accumulated from previous years. In March, The Detroit News reported the district's deficit was projected to instead grow to $317 million for the year, but in less than four months it has added $46 million. "

"(Reuters) - New York's "broken" unemployment trust could cost the state $1.265 billion in interest penalties over the next eight years because it has a $3.2 billion deficit, Governor David Paterson said Wednesday.

By driving up unemployment, the recession has drained many state unemployment trusts, forcing them to rely on federal loans."

"WASHINGTON (MarketWatch) -- U.S. private-sector firms created 13,000 more jobs in June, according to the ADP employment report released Wednesday.

Job growth was "disappointingly weak," said Joel Prakken, chairman of Macroeconomic Advisers, which produces the report from anonymous payroll data supplied by ADP.

Private-sector employment has increased five months in a row, averaging a "lethargic" 34,000, Prakken said.

Private-sector job growth was revised higher in May to 57,000 from 55,000 earlier, ADP said.

Economists surveyed by MarketWatch had been expecting the ADP report to show a 65,000 increase in private payrolls."

"Banks around the world must refinance more than $5 trillion of debts in the coming three years, a massive rollover that poses threats to financial stability and growth.

The need to replace these debts, which are medium and long term, will place pressure on bank profit spreads and in turn may either prompt deleveraging, where banks sell assets that they can no longer economically finance, or simply lead to a bout of credit rationing, where borrowers must pay more to borrow, thus crimping investment and economic growth."

  • Other news and headlines:

ECB Lends Less Than Forecast in Three-Month Tender

Romania plans July tenders, yields seen rising

Europe's poorest send less money home

Ill. to begin new fiscal year with deficit, debt

UAE banks face Dubai World losses of 10%-20%, says Moody's

Egypt's Budget Deficit Widens On Lower Revenues, Grants -Report

Hungary Seeks New IMF Loan in 2011, Orban's Aide Says

Downtown Baltimore office vacancies surpass 20 percent

New proposal would push retirement age to 70 for Social Security benefits

As new budget year approaches, the news is not good in Georgia (Opinion)

Florida faces big challenges

Stockton shuts down station fire truck company

The day of budget reckoning in Baltimore County

Foreclosure sales total 68% in S.J. (California)

Bankers Who Broke Big Dig With Swaps Gone Awry Get Paid for Fix

Investors nervous about ECB deadline (Video)

LA supervisors OK increased pension contributions ($200 million)

McAlvany (Audio...."There is no double dip because there was no recovery"......sovereign debt defaults....inflation vs deflation.......debt to GDP)

djhester1940's picture
djhester1940
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Re: Daily Digest - June 30

Can someone please comment on this article? I am having a rather heated argument with a friend about this.

http://www.nextenergynews.com/news1/next-energy-news2.13s.html

"America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant"

I have a very hard time believing that if this exists that it has not been exploited.

Thanks,

Don

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Re: Daily Digest - June 30

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cmartenson
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Re: Daily Digest - June 30
djhester1940 wrote:

Can someone please comment on this article? I am having a rather heated argument with a friend about this.

http://www.nextenergynews.com/news1/next-energy-news2.13s.html

America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant"

I have a very hard time believing that if this exists that it has not been exploited.

Thanks,

Don

This comes up from time to time.  There's the equivalent of a hoax email that circulates through these threads now and then, but it looks like your friend has come across a website designed to sell investments around the idea of the Bakken formation.

Here's the thread where we deal with this a while ago: Link to thread.  In brief, there's real oil sitting in the Bakken formation, but it is in very narrow bands of shale with very low porosity (so it flows poorly and much will never be recovered).  Bottom line: there may be 200 Gb there but the best estimates are that somewhere around 3.5Gb is potentially recoverable and that's only if we drill thousands of horizontal wells.

And here are the conclusions of an OilDrum article that examined the Bakken prospect. 

Conclusions

1. The Bakken shale has produced about 111 million barrels of oil during the last 50+ years in Montana and North Dakota.

2. Total Bakken production is still rising, and producing at the rate of 75,000 BOPD in October 2007.

3. Because of the highly variable nature of shale reservoirs, the characteristics of the historical Bakken production, and the fact that per-well rates seem to have peaked, it seems unlikely that total Bakken production will exceed 2x to 3x current rate of 75,000 BOPD.

4. The latest boom in Bakken production is driven by the application of horizontal wells and hydraulic fracturing technology, which has added about 70 million barrels of production in 7 years. Ultimate recovery of the already-drilled wells should be at least double this volume.

5. The USGS estimates the mean volume of technically recoverable hydrocarbons to be 3,649 million barrels of oil. This is roughly 7 to 12 times the size of already known resources.

6. Based on current production and areas likely to be drilled, the USGS estimate of technically recovery resources seems optimistic.

7. The Bakken potential resource, while large by US onshore field standards, will have only a minor effect on US production or imports. Using 2006 US imports and consumption for comparison, the Bakken undiscovered resource of 3,649 million barrels of oil, if subsequently discovered and fully developed, would provide us with the equivalent of six months of oil consumption or 10 months of imports, spread over 20 or more years. In reality, the reserves developed are likely to be many times smaller than this value.

8. The October 2007 production rate of 75,000 BOPD amounts only 0.4% of US oil consumption, or 0.6% of imports.

9. Per-well Bakken production peaked in August 2005 at 116 barrels a day, and was down to 79 barrels a day in October 2007. If the Bakken production history in the 1990s can be used as a guide, the peaking of per-well production may portend a peak in total Bakken production.

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djhester1940
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Re: Daily Digest - June 30

Chris,

Thanks a million for your quick response. I really appreciate the information and now I think I can at least get the upper hand in my argument.

I really love this site - it is my main source of information.

Tomorrow I start teaching the Crash Course to retirees in our local Academy of Learining in Retirement (ALIR). I have 17 students registered (but we'll see how many actually show up tomorrow). I am planning on an introdution to the course tomorrow using the intro you provided on the 3-DVD se. Then I will provide each student with the DVD of the course. I will ask them to watch segments of the course at home and we will meet another 5 times (one 1 1/2 hour class per week) to discuss what they have seen and heard. I have tried this once before and it was well recieved.

I will let you know how this works out.

Thanks again,

Don

djhester1940's picture
djhester1940
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Re: Daily Digest - June 30

Duplicate Post

Sorry I need to be more patient.

Don

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Re: Daily Digest - June 30

Secretary of Energy Steven Chu Confirms that Some of BP’s Oil Well Casing Has Been Demolished - Oil industry expert Matt Simmons has said for many weeks that the well casing was destroyed by the initial explosion at the Deepwater Horizon rig. He said that when oil wells blow out, the casing often shoots up above ground. He has been ridiculed by many because no one has seen well casing on the seafloor. But the Department of Energy has just partly exonerated Simmons. As the Los Angeles Times notes today: A team of scientists from the Energy Department discovered a new twist: Their sophisticated imaging equipment detected not one but two drill pipes, side by side, inside the wreckage of the well's blowout preventer on the bottom of the Gulf of Mexico. The discovery suggested that the force of the erupting petroleum from BP's well on April 20 was so violent that it sent pipe segments hurtling into the blowout preventer, like derailing freight cars.

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Re: Daily Digest - June 30

here is a copy of the water study for bakken; you will note that in that arid region, frack water has to be trucked in from the missouri river)

 (www.ndoil.org/.../Bakken_ Water_Optimization_Study_-_ John_Harju.pdf).

 
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Re: Daily Digest - June 30

Moody's: Possible Downgrade of Spain Due to Deteriorating Growth Prospects (Story Developing)

idoctor's picture
idoctor
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Re: Daily Digest - June 30

Govt spending solved all the problems in the USSR, Cuba and North Korea. So why shouldn't we simply follow the same model........Welfare and poverty for all, the new liberal motto.

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Re: Daily Digest - June 30

From SaxPlayers Headline Links:

New proposal would push retirement age to 70 for Social Security benefits

Article states that the change would only effect people that aren't going to retire more than 20 years, However thats like closing the barn doors after all the cows have left the building. This wouldn't do squat since SS is already in the red, and it will run out of red ink before the 20 years are up. I doubt that SS will last even the next five years, even if they raised SS miniumum age to 70 for everyone tommorow. There are already too many SS recipients. Raising the payroll tax won't work since it would just create higher unemployment and less consumption as workers must pay an even higher porporton of their income, which leaves less money to to by goods to support demand.

 

 

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Re: Daily Digest - June 30

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7841961/Gold-reclaims-its-currency-status-as-the-global-system-unravels.html

Gold reclaims its currency status as the global system unravels

We already know that the eurozone money markets seized up violently in early May as incipient bank runs spread from Greece to Portugal and Spain, threatening the first big sovereign default of our era.

By Ambrose Evans-Pritchard
Published: 5:43PM BST 20 Jun 2010

 

Recent protests in Greece over austerity measures. The country's public debt will rise from 120pc to 150pc of GDP under the IMF-EU plan Photo: AFP

Jean-ClaudeTrichet, the president of the European Central Bank (EC), talked days later of "the most difficult situation since the Second World War, and perhaps the First".

The ECB’s latest monthly bulletin gives us some startling details. It reveals that the bank’s "systemic risk indicator" surged suddenly to an all-time high on May 7 as measured by EURIBOR derivatives and stress in the EONIA swaps market, exceeding the strains at the height of the Lehman Brothers crisis in September 2008. "The probability of a simultaneous default of two or more euro-area large and complex banking groups rose sharply," it said.

This is a unsettling admission. Which two "large and complex banking groups" were on the brink of collapse? We may find out in late July when the stress test results are published, a move described by Deutsche Bank chief Josef Ackermann as "very, very dangerous".

And are we any safer now that the EU has failed to restore full confidence with its €750bn (£505bn) "shock and awe" shield, that is to say after throwing everything it can credibly muster under the political constraints of monetary union? This is the deep angst that lies behind last week's surge in gold to an all-time high of $1,258 an ounce.

The World Gold Council said on Friday that the central banks of Russia, the Philippines, Kazakhstan and Venezuela have been buying gold, and Saudi Arabia’s monetary authority has "restated" its reserves upwards from 143m to 323m tonnes. If there is any theme to the bullion rush, it is fear that the global currency system is unravelling. Or, put another way, gold itself is reclaiming its historic role as the ultimate safe haven and benchmark currency.

It is certainly not inflation as such that is worrying big investors, though inflation may be the default response before this is all over. Core CPI in the US has fallen to the lowest level since the mid-1960s. Unlike the blow-off gold spike of the Nixon-Carter era, this rally has echoes of the 1930s. It is a harbinger of deflation stress.

Capital Economics calculates that the M3 money supply in the US has been contracting over the past three months at an annual rate of 7.6pc. The yield on two-year Treasury notes is 0.71pc. This is an economy in the grip of debt destruction.

Albert Edwards from Societe Generale says the Atlantic region is one accident away from outright deflation - that 9th Circle of Hell, "abandon all hope, ye who enter" . Such an accident may be coming. The ECRI leading indicator for the US economy has fallen at the most precipitous rate for half a century, dropping to a 45-week low. The latest reading is -5.70, the level it reached in late-2007 just as Wall Street began to roll over and then crash. Neither the Fed nor the US Treasury were then aware that the US economy was already in recession. The official growth models were wildly wrong.

David Rosenberg from Gluskin Sheff said analysts are once again "asleep at the wheel" as the Baltic Dry Index measuring freight rate for bulk goods breaks down after a classic triple top. The recovery in US railroad car loadings appears to have stalled, with volume still down 10.5pc from June 2008.

The National Association of Home Builders’ index of "future sales" fell in May to the lowest since the depths of slump in early 2009. RealtyTrac said home repossessions have reached a fresh record. A further 323,000 families were hit with foreclosure notices last month. "We’re nowhere near out of the woods," said the firm.

It is an academic question whether the US slips into a double-dip recession, or merely grinds along for the next 12 months in a "growth slump". For Europe, nothing short of a sustained global boom can lift the eurozone out of the deflationary quicksand already swallowing up the South.

Spain had to pay a near-record spread of 220 basis points over German Bunds last week to clear away an auction of 10-year bonds, roughly what Greece was paying in March. Leaked transcripts of a closed-door briefing to the Cortes by a central bank official revealed that Spanish companies have been shut out of the capital markets since Easter. Given that the Spanish state, juntas, banks and firms have together built up foreign debts of €1.5 trillion, or 147pc of GDP, and must roll over €600bn of these debts this year, this is a crisis unlikely to cure itself.

By their actions, investors show that they do believe the EU can be relied upon to back its rescue rhetoric with hard money, and for good reason. Germany’s coalition risks breaking up at any moment, fatally damaged by popular fury over the Greek bail-out. Far-Right populist Geert Wilders is suddenly the second force in the Dutch parliament. Flemish separatists have just won the Belgian elections in Flanders. The likelihood that an ever-reduced group of German-bloc creditors facing disorder and budget cuts at home will keep footing the bill for an ever-widening group of Latin-bloc debtors in distress is diminishing by the day.

Fitch Ratings said it will take "hundreds of billions" of bond purchases by the ECB to stop the crisis escalating. Since Bundesbank chief Axel Weber has already deemed the first tranche of purchases to be a "threat to stability", it is a safe bet that Germany will fight tooth and nail to prevent such a move to full-blown quantitative easing. The blood-letting along the fault-line between Teutonic and Latin Europe will go on, as the crisis festers.

Yet the markets are already moving on, in any case. They doubt whether the EU’s strategy of imposing of wage cuts on half of Europe without offsetting monetary and exchange stimulus can work. Such a policy crushes tax revenues and risks tipping states into a debt-deflation spiral, as if everbody had forgotten the lesson of the 1930s.

Greece’s public debt will rise from 120pc to 150pc of GDP under the IMF-EU plan. There is a futile cruelty to this. As Russia’s finance minister Alexei Kudrin acknowledges, a Greek "mini-default" has become inevitable.

EU president Herman Van Rompuy confessed that EMU lured countries into a fatal trap. "It was like some kind of sleeping pill, some kind of drug. We weren’t aware of the underlying problems," he said.

What he has yet to admit is that the North-South imbalances built up since the euro was launched - indeed, because the euro was launched - cannot be corrected by further loans from the North or by pushing the South in depression. The political fuse will run out before this reactionary and self-defeating policy is tested to destruction.

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kokeshi
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Re: Daily Digest - June 30

Hello, green-planet-solar-energy.com/bakken-oil explains nicely :-)

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