Daily Digest

Daily Digest - June 8

Monday, June 8, 2009, 10:37 AM
  • GDP Tanks & Birth Death CREATES More Jobs? (Chart from The Big Picture Blog)
  • Why Weimar Ben Can't Put the Inflation Genie Back in the Bottle (A MachineHead Masterpiece) 
  • 1 of every 6 dollars of Americans' income is government check or voucher...
  • Green Shoots, Red Ink, Black Hole (H/T SteveS)
  • Foreclosure Starts Hit 1 Million For the Year (H/T TechGuy)
  • Treasury Secretary is renting out his home in a tony New York suburb after the property went unsold for months (H/T Cat233)
  • Market Reaction Hints At False Note In Jobs Report (H/T Mario Galante)
  • The Myth of the Rational Market
  • Video-o-rama: Figuring out the lie of the financial land
  • HR 1207 Call-a-thon Underway - We're already +1! (Up to 190 total - need 28 for majority) (Video)


GDP Tanks & Birth Death CREATES More Jobs? (Chart from The Big Picture Blog)

Why Weimar Ben Can't Put the Inflation Genie Back in the Bottle (A MachineHead Masterpiece)

An axiom of our current 'economic state of emergency' is that the Federal Reserve's balance sheet will be rolled back to its pre-crisis level after the storm passes, to prevent inflation. Holding at around $2.1 trillion in assets, the balance sheet is more than double its level of 12 months ago. I believe this promised rollback is a fantasy. Let's examine some of the previous outings.

Historically, the U.S. and Europe suspended the gold standard during wartime. Paper money is an instrument of war finance, removing the fiscal constraints imposed by gold. The U.S. suspended gold during the War Between the States, issuing its first greenbacks in 1863. Of course, prices inflated sharply during the war. Afterward, Congress voted in 1871 to reinstitute the prewar gold standard by 1879.

Our culture was different then, in a couple of ways. Financially, bonds were the mainstream investment, not stocks. Both the plutocracy and the upper middle class were primarily income-oriented rentiers. Check out Jane Austen's novels for a view of how deeply ingrained such thinking was in the U.K. Second, unlike today, gold ranked right alongside God as an obvious and obligatory source of goodness. Thus, after the war, the rentier class wanted its prewar purchasing power restored, regardless of the social cost.

That cost proved to be huge. Sweating out the wartime inflation provoked an 1873-1879 recession pegged by the NBER at 5-1/2 years, the longest in U.S. history. The word 'recession' is a retrospective 20th century label. Contemporaneously, 1873-1879 was called a Depression, and it was. Economic growth resumed in the 1880s, but mild 1 percent deflation lingered on into the Nineties. After a final panic in 1893, the deflation finally burned itself out around 1896. Overall, 25 years had passed, in an a-b-c pattern -- a severe initial panic and depression; a mild, deflation-tinged recovery; and then a final recession.

World War I saw another gold suspension, and another wartime inflation. The economy held up for a few months after the war ended in 1918. Then a savage deflation (wave 'a') took hold, which chopped the wholesale price level in half by 1921. A deflation-tinged recovery (wave 'b') took hold during the 1920s. Even during the great stock bubble, a land bubble collapsed in Florida in 1925, providing a clue as to what was coming.

The depressed 1930s (wave 'c') contained its own three-wave subdivision, for reasons that deserve attention: a deflationary stock bubble collapse from 1929 to 1932; a five-year recovery into 1937 after a revaluation of gold during 1933-34; and a final five-year slide after the Federal Reserve doubled the discount rate and reserve requirements in early 1937 to counter rising prices. Stocks made their final bottom in 1942, twenty-four years after the war ended in 1918. The opposite economic responses to the gold revaluation and the hike in reserve requirements both exhibited a roughly 4 to 5 year dynamic reaction to step-function changes in the effective monetary base.

But a different approach was followed in Germany after the disastrous Weimar inflation of 1923. Obviously, it would have been insane to restore the preinflation price level, when prices had been millions of times lower. Instead, twelve zeros were lopped off the inflated currency, to reestablish realistic units. Although bondholders were wiped out, the plan worked. What proved to be important was the credibility of stable prices going forward, not the reestablishment of some arbitrary pre-inflation price level.


 1 of every 6 dollars of Americans' income is government check or voucher...

By Dennis Cauchon, USA TODAY - The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher.

Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That's the highest percentage since the government began compiling records in 1929.

In all, government spending on benefits will top $2 trillion in 2009 — an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008.

The recession caused about half of the increase, according to the report. Unemployment insurance nearly tripled in the past year. The other half is the result of policies enacted during President George W. Bush's first term.

Following the 2001 recession — when costs normally decline — social spending soared to pay for the Medicare drug benefit, expanded health care for children and greater use of food stamps.

The safety net is working, advocates say.

"We're not seeing the hunger we saw in the 1930s because the food stamp program is doing what it's supposed to do," says Florida food stamp director Jennifer Lange.

What's driving the $209 billion increase in benefit costs from a year ago:

•Unemployment insurance. One-fourth of the extra spending covers jobless benefits, a program started in the Depression. The stimulus law, passed in February, increased benefits.

• Social Security. The bad economy has prompted a 10%-15% jump in early retirements, the program's actuary says. A 5.8% increase took effect January 1. Bottom line: $55 billion in new costs.

• Food stamps. Enrollment hit a record 33.2 million people in March, up 5.2 million from last year. The stimulus law boosted the size of the benefit. Average March benefit: $114 per person.

"The increase in social spending is still relatively modest given the severity of the downturn," says economist Dean Baker of the liberal Center for Economic and Policy Research. "We're not France."

Adam Lerrick, economist at the conservative American Enterprise Institute, says the benefits' explosion will eventually lead to an economic crisis.

"We've seen this movie before in many countries. It always has the same ending," he says.

Green Shoots, Red Ink, Black Hole (H/T SteveS)

Truly terrifying data about the real state of the U.S. economy.
By Eliot Spitzer

I have an unfortunate sense that the "green shoots" in the economy that everyone is talking about are nothing but dandelions. Sure, forcing $1 trillion of taxpayer money—in direct capital, guarantees, and diminished cost of borrowing—into the banking sector has permitted the major banks to claim solvency for the moment. Yet we should not forget that this solvency has come not through a much needed deleveraging of the banking sector but rather from a massive transfer of the obligations of private banks to the public, with the debt accruing to future generations. And overall loan quality at U.S. banks is still the worst in 25 years and deteriorating at the fastest pace ever.

It's a terrible mistake to confuse the momentary solvency of the financial sector and the long-term health of our economy.

While we have addressed the credit collapse, we have not begun to tackle the far more daunting, and more significant, structural problems in the economy. Instead of focusing on the green shoots, let's examine the macro data that will determine our national prosperity in the next generation. These data are terrifying.

Start with the job front. Long term, nothing is more fundamental than good jobs to creating the middle-class wealth that must drive the economy. The creation of true middle-class jobs was the great success of our economy from 1950s through the mid-1990s. Consider the job data, in aggregate and by sector, from the past decade.


One-third of our manufacturing jobs have disappeared in a decade! And while population grew 12.1 percent over the decade, jobs grew by only 6.4 percent. The unemployment number, moreover, doesn't count those who are "marginally attached to the labor force," because even though they want to work and are available to do so, they have not sought a job in the past four weeks. In raw numbers, the total number of individuals counted as currently unemployed and those who are marginally attached is a staggering 15.8 million. That is an enormous mountain of job creation to climb.


Foreclosure Starts Hit 1 Million For the Year (H/T TechGuy)

A dismal milestone was reached over the last weekend in May: one million new foreclosures have been filed so far in 2009, according to estimates by the Center for Responsible Lending.

This comes on the heels of a new report from the Mortgage Bankers Association, the first quarter 2009 National Delinquency Survey, showing that 12 percent of all mortgages are now delinquent -- the highest level since the MBA started measuring 37 years ago.

Through 2012, those numbers will rise to at least 9 million foreclosures that will cost 92 million neighboring families $1.9 trillion in lost home value, according to CRL.

Treasury Secretary is renting out his home in a tony New York suburb after the property went unsold for months (H/T Cat233) 

NEW YORK (CNNMoney.com) -- Treasury Secretary Tim Geithner is struggling to unload his million-dollar manse located in a posh New York City suburb. And like so many other Americans, he'll probably lose money on it when he does.

Geithner and his wife Carole put their 5-bedroom Tudor-style home in Larchmont, New York on the market for $1.635 million in February, just days after he was tapped by the Obama administration to help lead the nation out of the worst economic crisis in a century

 Market Reaction Hints At False Note In Jobs Report (H/T Mario Galante)

Was there actually some hiccup - a statistical footnote, of sorts - in the better-than-expected jobs data? One that actually makes the report look not only not-as-constructive as initially interpreted, but one that would actually make the true picture of employment considerably worse than expected?

Some traders certainly seemed to think so. While the S&P 500 (GSPC) opened to a brisk 9-point gain, the early advance faded relatively quickly. At its lows, the index dropped 8 points below Thursday’s close, a 17-point pullback off the highs.

There’s been some suggestions that the payrolls report had been distorted by the way the Bureau of Labor Statistics accounts for business births and deaths. There’s been talk that the birth/death model, a little-noted detail in the monthly report, came in with a huge statistical discrepancy for this month, effectively adding as many as 220,000 jobs to the reading.

Anybody who made the purely mechanical assumption that the birth/death data distorted the overall reading, and added the 220,000 to the 345,000 job losses reported for May would have concluded that the economy actually shed 565,000 paychecks in the month. That would have meant the May labor report wasn’t much better than expected - it actually would have been a disappointment versus the 525,000 job losses economists expected.

There’s some problems with this conclusion. According to Michael Feroli, JPMorgan economist, it’s ”incorrect on many levels to subtract the non-seasonally adjusted birth/death adjustment factor from seasonally adjusted payrolls to get a truer picture of payrolls.”

Start with the manner in which the birth/death statistics are compiled. Feroli noted that the adjustment is a two-stage process. Only the second stage is reported each month, and anybody analyzing the data, including traders, has seen only that part of the adjustment. They’re not only leaving out the other part of the adjustment, they’re leaving out the most-important part. Feroli described the unreported first stage of the adjustment as being ”usually quantitatively more important.” He’s argued to the BLS that it should stop including the unseasonally adjusted number to a seasonally adjusted total because of the confusion it fostered.

The market seemed to have digested and adjusted its reaction to the statistical anomaly relatively quickly. After the knee-jerk decline into negative territory, market averages erased the losses, and moved back into postiive territory.


The Myth of the Rational Market

In this morning’s NYT, Joe Nocera takes on one of my favorite subjects: Why the market is neither rational nor efficient.

He does a nice job, interviewing both Jeremy Grantham and Burton Malkiel. Along the way, he mentions Justin Fox’s new book, The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street.


“In the last decade, the efficient market hypothesis, which had been near dogma since the early 1970s, has taken some serious body blows. First came the rise of the behavioral economists, like Richard H. Thaler at the University of Chicago and Robert J. Shiller at Yale, who convincingly showed that mass psychology, herd behavior and the like can have an enormous effect on stock prices — meaning that perhaps the market isn’t quite so efficient after all. Then came a bit more tangible proof: the dot-com bubble, quickly followed by the housing bubble. Quod erat demonstrandum.

These days, you would be hard-pressed to find anybody, even on the University of Chicago campus, who would claim that the market is perfectly efficient. Yet Mr. Grantham, who was a critic of the efficient market hypothesis long before such criticism was in vogue, has hardly been mollified by its decline. In his view, it did a lot of damage in its heyday — damage that we’re still dealing with. How much damage? In Mr. Grantham’s view, the efficient market hypothesis is more or less directly responsible for the financial crisis.

I prefer Res Ipsa Loquitur, but hey, its all Latin to me.

I am about halfway through The Myth of the Rational Market, and so far, its good wonky fun. (Justin, there’s your pull quote: good wonky fun“). When I’m finished, I will post a review, though I expect my experience in writing a book to have eliminated all objectivity when it comes to reviewing other books.

Video-o-rama: Figuring out the lie of the financial land

HR 1207 Call-a-thon Underway - We're already +1! (Up to 190 total - need 28 for majority) (Video)


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Re: Daily Digest - June 8

A good read was posted on the NYTimes site yesterday - didn't see it highlighted today....



The Economy Is Still at the Brink


Published: June 7, 2009

WHETHER at a fund-raising dinner for wealthy supporters in Beverly Hills, or at an Air Force base in Nevada, or at Charlie Rose’s table in New York City, President Obama is conducting an all-out campaign to try to make us feel a whole lot better about the economy as quickly as possible. “It’s safe to say we have stepped back from the brink, that there is some calm that didn’t exist before,” he told donors at the Beverly Hilton Hotel late last month.

Mr. Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided. We are sympathetic to the extraordinary challenge the president faces, but if we’ve learned anything at all two years into the worst financial crisis of our lifetimes, it is that a capital-markets system this dependent on public confidence is a shockingly inadequate foundation upon which to rest our economy.


The storm is not over, not by a long shot. Huge structural flaws remain in the architecture of our financial system, and many of the fixes that the Obama administration has proposed will do little to address them and may make them worse. At another fund-raising event, for Senator Harry Reid, President Obama said: “We didn’t ask for the challenges that we face. But we are determined to answer the call to meet those challenges, to cast aside the old arguments and overcome the stubborn divisions and move forward as one people and one nation .... It will take time but I promise you, I promise you, I’ll always tell you the truth about the challenges we face.”

Keeping that statement in mind — as well as an abiding faith in the importance of properly functioning capital markets — we have come up with a set of questions meant to challenge a popular president, with vast majorities in Congress, to find the flaws in the system, to figure out what’s being done to fix them and to get to the truth about the difficulties we face as we set out to restore the proper functioning of our markets and our standing in the world.

Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo? Nearly every new program emanating these days from the Treasury Department — the Term Asset-Backed Securities Loan Facility, the Public Private Investment Program, the “stress tests” of major banks — appears to have been designed to either paper over or to prop up a system that has clearly failed.

Instead of hauling out the new drywall to cover up the existing studs, let’s seriously consider ripping down the entire structure, dynamiting the foundation and building a new system that rewards taking prudent risks, allocates capital where it is needed, allows all investors to get accurate and timely financial information and increases value to shareholders and creditors.

As a start, the best-compensated executives at the top of these big banks, hedge funds and private-equity firms should be treated like general partners of yore. If a firm takes prudent risks that pay off, this top layer of management should be well compensated. But if the risks these people take are imprudent and the losses grave, they should expect to lose their jobs. Instead of getting guaranteed salaries or huge bonuses, they should have the bulk of their net worth completely at risk for a long stretch of time — 10 years come to mind — for the decisions they make while in charge. This would go a long way toward re-aligning the interests of these firms with those of their shareholders and clients and the American people, who have been saddled with their risks and mistakes.

Why is so much effort being put into propping up those at the top of the economic pyramid — the money-center banks, the insurance companies, the hedge funds and so forth — when during a period of deflation like the one we are in, any recovery will come only by restoring the confidence of the people down at the bottom of the pyramid?

Confidence will return only when jobs can be found and mortgage payments are made. Even if Mr. Obama’s claim is true that his $780 billion stimulus package “saved or created” some 150,000 jobs, we seem a long way away from the point where those struggling to get by will feel like spending again. What happens when people buy a car once every 10 years instead of once every two or three, especially now that we taxpayers own such a big percentage of the American auto industry?


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Re: Daily Digest - June 8

In "Truly terrifying data about the real state of the U.S. economy. By Eliot Spitzer" I love the charts and numbers that show how bad things are, but then his "government funded" train goes off the tracks.   He suggests the government guarantee an order of 500K electric vehicles and fund high speed rail.  This is so wrong because it probably means that the wrong decision is being made.  

Just as more debt isn't the solution to too much debt, more government interference in markets is not the solution to all ready horribly manipulated markets.   Who says that electric cars are the proper thing to be investing in?  Perhaps one of the many microbe based liquid fuels (Amyris, LS9)  are the best solution to our energy needs.  Perhaps one of those liquid fuels will power a plane that would be a better solution than a train.  But we may never know when the government picks a solution with no market feedback and kills off the other solutions to funnel government funds to those who are politically well connected.


-- Rob

Disclosure: I'm invested in one of the liquid fuel companies listed above.


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Re: Daily Digest - June 8

Peter Schiff this morning (Argentina).

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from [email protected]
Just when you might think that the UK Government was going to implode,
and Sterling/UK banks to suffer a collapse in confidence,
a US job report showed job losses increased by 345,000,
putting unemployment at 9.4% (fictionally),
which was not as bad as expected,
starting rumours of the recession being over ( ! )
and interest rate increases being necessary soon to reign in inflation.
As a result, US bond yields rose dramatically (biggest since the TARP was announced)
US$394 billion being traded
the 10-year yield jumping 19points ( ! ) to 3.90% temporarily
and the price of gold plunged from US$980 /oz to 957 (-2.25%) in half an hour ( ! )
and the US Dollar Index rose 1.9%, 2.4% against the Yen
So that means all the money stampeding out of gold and bonds
was charging back into the stock market, right ?
Er, no - the DJI fell 130 points at the same time, although it bounced back
WTF ?  Where did all the money go ?
There's something seriously wrong here, or is it me ?
The entire system is lurching around like a drunken sailor,
all based on a bunch of unemployment statistics that are probably faked anyway.
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Re: Daily Digest - June 8
rhare wrote:

In "Truly terrifying data about the real state of the U.S. economy. By Eliot Spitzer" I love the charts and numbers that show how bad things are, but then his "government funded" train goes off the tracks.   He suggests the government guarantee an order of 500K electric vehicles and fund high speed rail.  This is so wrong because it probably means that the wrong decision is being made. 

I agree mostly. I thought the first part of the column was very Chris-like in style. (Sorry Chris, don't take the comparison to Eliot Spitzer too personally).  Simple facts with explanations. In the last part, I'm not sure I agree with his specific fixes though. However, I had thought of the same electric car idea earlier in the year. My thought was instead of bailing out GM, give them a contract to deliver some number of electric (or other efficient) vehicles for government use next year. Actually it could be almost anything that is ready (or almost ready) for manufacture; wind turbines, solar trackers, etc. Somehow GM converted from cars to tanks in a short time during WWII; it's all a question of having the will and providing the incentive. At least we'd end up with something. Just throwing money at them with virtually no strings attached obviously won't (and didn't) work.

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Re: Daily Digest - June 8


I'm firmly convinced there's an ongoing concerted effort by the banksters to drive down gold and silver every time the price gets too high for their liking. I've seen this happen before and even posted about it on the "The Definitive GOLD's Near-Term Outlook Thread" thread.

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Re: Daily Digest - June 8
Michael Pollan asks the question "Which well known critic of the American food system said this?"

"Our entire agricultural system is built on cheap oil. As a consequence our agriculture sector actually is contributing more green house gases than our transportation sector and in the mean time it’s creating monocultures that are vulnerable to national security threats that are also now vulnerable to sky high food prices or crashes in food prices - huge swings in commodity prices and are partly responsible for the explosion in our health care costs because they’re contributing to type two diabetes and heart disease, obesity all the things that are driving our huge explosion in the health care costs."

President Obama said this.

See the whole talk by Michael Pollan at

It includes the quote "...we are eating oil and spewing green house gas" 

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Re: Daily Digest - June 8

People assume if we didn't do anything we would just loose GM, which is totally false.  They would go bankrupt and either reorganize or be split apart and pieces bought by those companies that might make good use of them. 

I know one thing, if the Chrysler deal goes through with the Supreme Court approval and ignoring the rights of the secured creditors, then I seriously doubt I will ever invest in a US company again.  I mean the worry about investing in foreign stocks is political risk due to the government seizing assets.  That is exactly what happened with the Chrysler bankruptcy, assets were seized from secured creditors to win political points with the unions for the Obama administration. 

At least within the last hour, the Supreme Court has delayed the sale, perhaps they will do the right thing.

-- Rob


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Re: Daily Digest - June 8
Russia, China Should Dump Dollar in Trade - Medvedev
By Reuters

June 05, 2009 -- MOSCOW (

Reuters) - Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia's president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

"I think that we can think about such positions, for example the rouble against yuan," Medvedev was quoted by Kommersant as saying. Russia's own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

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Re: Daily Digest - June 8

The failure of a bond auction in Latvia is making bankers in Sweden quake in
their boots.

Shares in Swedbank, the biggest lender to Latvia, dived 15.9%, to 38 Swedish
Kronor ($4.92) after the Latvian government failed to sell any of its government
debt securities on Wednesday. Skandinaviska Enskilda Banken–better known as
SEB–fell 11.0%, to 30 Swedish kronor ($3.88). The Swedish kronor meanwhile fell
to 10.91 against the euro, from 10.71.

The failed auction has raised fears that Latvia may have to devalue its
currency. That could have a major impact on Scandinavian lenders who had flooded
the Latvian market with euro-dominated loans that let borrowers take advantage
of better interest rates. A devaluation of the kroon essentially makes it harder
for them to repay their debts, sending the number of bad loans higher.

Swedish banks are deeply entangled in the sliding Latvian economy: total lending
to the region makes up 19% of Swedish gross domestic product, according to the
Bank of International Settlements.


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Calls for U.S. Government to Start Issuing Bonds in Yuan

The head of China's second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency.

Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars.

Mr Guo said the issuing of yuan bonds in Hong Kong and Shanghai would help to develop the debt markets in China and promote the yuan as a major international currency.

It was the first time the head of a major Chinese bank has called for the wider use of the yuan, although a chorus of senior government officials have already voiced their concerns about the stability of the dollar and have said the yuan should be used more widely.

"I think the US government and the World Bank can consider the issuing of renminbi bonds," he said, asking for a "mutual cooperation" between the US and China to promote Chinese financial services. He said bond issuance could be relatively small, at between 1bn and 3bn yuan (£100m to £300m).

HSBC and Standard Chartered have both said they are preparing to issue bonds denominated in yuan.

Mr Guo is a former head of China's foreign-exchange administration, which manages the country's $1.9 trillion foreign exchange reserves. He said he was confident the yuan would become a major currency in the medium-to-long term.


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Re: Daily Digest - June 8

 Whose the puppet and who is the puppet master?

"I think the US government and the World Bank can consider the issuing of renminbi bonds," he said, asking for a "mutual cooperation" between the US and China to promote Chinese financial services. He said bond issuance could be relatively small, at between 1bn and 3bn yuan (£100m to £300m).

PS: I'm about 1/3rd through it but this is a really, really, really good read

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Re: Daily Digest - June 8

I guess most people don't like Derringer but in his recent article "Ten thinks you must do" 

he encourages people to prepare for a "sudden stop" scenario. I didn't realize he thought it just might get that bad but I guess when he keeps seeing the government doing the opposite of what it should be doing then anyone would become pessimistic. I suspect that things will start to go real bad real fast when they can no longer hide just how bad things are.

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Re: Daily Digest - June 8
Monday, June 8, 2009
Behind on Car Payments? Torch it. Ditch it. Sink it.
Suspicious car fires or arson rise 27% in the first quarter compared with a year earlier as owners seek a payoff.

Reporting from Sacramento - Motorists unable to afford payments on pricey cars and gas-guzzling sport utility vehicles in this recession are turning to a time-tested financing solution: matches.

Insurance cheats are torching their vehicles in remote deserts. They're pushing them off cliffs. They're sinking them in lakes or ditching them in Mexico in the hopes of getting their policies to pay off, fraud investigators say.

Nationwide, suspicious vehicle fires or arson increased 27% in the first quarter of this year compared with a year earlier, according to the National Insurance Crime Bureau, an industry-supported agency that investigates all types of insurance fraud. So-called owner give-ups -- cars intentionally destroyed or abandoned -- jumped 24%.

Barbecuing a Beamer is one of the more dramatic types of suspected insurance fraud that's increasing in this economic downturn, the deepest in more than half a century. But it's not the only one. Suspicious personal injury slip-and-fall claims increased 60% in the first quarter; staged car accident cases were up 34% and commercial property fire/arson cases jumped 76%.

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Re: Daily Digest - June 8
> “we’re not going to run out of coal in the next 50 to 75 years,” he said.
Yes, but when will production peak ?
That is far more important than when it will run out.
High Cost May Limit U.S. Access to Coal, Geological Survey Says
By Mario Parker

June 8 (Bloomberg) -- The U.S. may be unable to access all of its estimated 240 years worth of coal reserves because of the cost of extraction, according to the U.S. Geological Survey.

The agency studied the Gillette coal field, in Wyoming’s Powder River Basin, the largest U.S. coal-producing region. Of the 201 billion short tons of coal in the field, only 77 billion is recoverable at a profit, Jim Luppens, who led the study, said in a telephone interview today.

“The most important thing is not what’s in the ground, but what is reasonably recoverable,” he said. “As you go a little deeper the cost goes up. We know we have these reserves, but we need to find out how much can be produced.”

Luppens said the study used an average price of $10.50 a ton for the coal and assumed that companies would mine it as long as it fetched at least an 8 percent rate of return. Extraction costs climb as companies employ more expensive technology to dig deeper, he said.

The Energy Department is re-evaluating Wyoming’s coal reserves based on the study, said William Watson, an energy analysis team leader. He said he expects the estimate to rise because Luppens’s study used better data and assumed that mining companies would dig much deeper to reach coal than the department had assumed.

The Geological Survey will study mines in the Appalachian region and in the Illinois Basin and doesn’t expect to have a full assessment for the next 15 to 20 years, Luppens said.

Still, “we’re not going to run out of coal in the next 50 to 75 years,” he said. “It’s way too early to say we’ve got less coal than we thought.”

The U.S., which holds the world’s largest reserves of coal, relies on the fuel for about half of its power generation. Peabody Energy Corp., based in St. Louis, is the biggest producer, followed by Arch Coal Inc., also in St. Louis.

To contact the reporter on this story: Mario Parker in Chicago at [email protected].

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