Daily Digest

Daily Digest - June 9

Wednesday, June 9, 2010, 9:47 AM
  • Exclusive to Transition Culture: an Interview with Chris Martenson
  • U.S. Debt To Rise To $19.6 Trillion By 2015
  • Democrats Restore State Medicaid Funds to Jobs Bill ($24.2 billion)
  • Chinese Steel Drill Pipe Faces U.S. Tariffs on Commerce Ruling
  • City Finance Crisis Study Recommends Considering Bankruptcy
  • Once Considered Safe, Municipal Bond Defaults May Rise
  • IMF Says Risks to Global Economy Have Risen ‘Significantly’
  • West Virginia Unemployed On Track To Drain Jobless Fund By December
  • UK Corporate Failures Set To Rise
  • Quinn To Sign Bill Aiding SIU, Other Universities
  • As Nebraska Budget Woes Mount, So Do Piles Of Trash In Offices Across The State
  • German Unions ‘Mobilize’ Resistance to Merkel’s Budget Cuts
  • 2 Million Public Servants On Strike In Spain
  • Franco-German Relations Cool Over Eurozone Crisis
  • Rome Hotel Tax Plan Pressures Italy Credit Rating
  • Slide in Kansas Revenues Continues
  • Greek Default Seen by Almost 75% in Poll Doubtful About Trichet
  • IMF Stops Loans To Pakistan Till Imposition Of VAT
  • German Tax May Cost Airline Industry 1 Billion Euros, IATA Says
  • China’s PBOC Says Debt Crisis, Trade to Affect Growth
  • Euro Debt Crisis to Slow Gulf Currency Plans, Al-Khalifa Says
  • Bond Investors Offer Most-Ever Debt to BOE Amid Deficit Crisis
  • Deepwater Drilling Moratorium Threatens Texas' Tax Revenue
  • Gulf Oil Spill Could Cost Florida Up To 195,000 Jobs, Economist Says
  • Scientist Awed by Size, Density of Undersea Oil Plume in Gulf


Exclusive to Transition Culture: an Interview with Chris Martenson (cmartenson)

The chief lesson is, don’t be complacent. Be aware of the risks. You should be asking yourselves if these risks are getting larger, or are they getting smaller. One of my chief criticisms on the way in which this economic bailout was handled on both sides of the Atlantic, was to increase the level of indebtedness of the public sector, and it’s therefore increased the threat of a Greece-like event. I really believe individuals should trust themselves, look at the numbers, read them, say, ‘Does this make me feel better or worse about our future prospects?’

U.S. Debt To Rise To $19.6 Trillion By 2015

The U.S. debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015, according to a Treasury Department report to Congress. The report that was sent to lawmakers Friday night with no fanfare said the ratio of debt to the gross domestic product would rise to 102 percent by 2015 from 93 percent this year.

Democrats Restore State Medicaid Funds to Jobs Bill ($24.2 billion)

U.S. Senate Democrats restored $24.2 billion of Medicaid payments many states counted on to balance their budgets, as part of legislation intended to create jobs.... Economic stimulus measures in 2009 extended payments for services under the health program to offset rising expenses. States, which split Medicaid costs with the federal government, confront deficits projected to reach $127.4 billion through fiscal 2012, according to the National Governors Association and the National Association of State Budget Officers.

Chinese Steel Drill Pipe Faces U.S. Tariffs on Commerce Ruling

The U.S. Commerce Department issued preliminary duties of 15.72 percent on Chinese steel drill pipe to compensate for subsidies American companies say their competitors receive.

City Finance Crisis Study Recommends Considering Bankruptcy (San Diego)

The San Diego County grand jury recommended Tuesday that portions of Mission Bay, Torrey Pines and Balboa parks be leased out to help bail out a $7 billion pension and debt liability crisis that plagues the City of San Diego.

A municipal bankruptcy should also be examined, the grand jury said. But the citizens commission said it did not know if such a filing would mean a federal judge could reduce the city's pension obligations.

Once Considered Safe, Municipal Bond Defaults May Rise

According to 90 percent of survey respondents polled by AlixPartners LLP, a consulting firm specializing in bankruptcies and restructuring, U.S. cities, towns, or other municipalities may experience increased bankruptcies.

“Amid the economic turmoil in Greece, more restructuring experts believe that a major U.S. municipality default is more likely than is a sovereign debt default at some point in 2010 or 2011,” according to a recent AlixPartners press release.

IMF Says Risks to Global Economy Have Risen ‘Significantly’

Risks to the global economic outlook have “risen significantly” and policy makers have limited room to provide support to growth, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said....“After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility,” Shinohara said. “The global outlook remains unusually uncertain and downside risks have risen significantly.”

West Virginia Unemployed On Track To Drain Jobless Fund By December

West Virginia officials remain worried that by year's end, continuing unemployment will deplete the fund that supports jobless residents while they seek new work, lawmakers learned Tuesday....But West Virginia remains among a dwindling minority of states that have avoided borrowing federal funds to cover jobless benefits as damage from the Great Recession persists.

Thirty-one states, including all five of West Virginia's neighbors, owed a total of $38 billion as of Friday, the U.S. Labor Department reports.

UK Corporate Failures Set To Rise

Corporate insolvency specialist Begbies Traynor said today that the number of corporate insolvencies in the UK was relatively flat in the six months to the end of April 2010 compared to the previous six months. However, the company believes there are a great number of UK companies which are effectively "zombie businesses" and dead on their feet at the moment. It is these companies which are highly likely going under in the short to medium term and lead to a potentially significant rise in corporate insolvencies.

Quinn To Sign Bill Aiding SIU, Other Universities (Illinois)

State government owes universities hundreds of millions of dollars. Some schools report they're so broke that they can barely make payroll each month.

The legislation would let them borrow the same amount the state owes them. The money would have to be repaid in a year or within 10 days of the state paying its bills.

As Nebraska Budget Woes Mount, So Do Piles Of Trash In Offices Across The State

In state government office buildings across Nebraska, thousands of workers have received a motherly suggestion in the name of saving money: clean up after yourself. Since the beginning of June, the state has been taking out the trash just two days a week instead of each workday in offices occupied by about 6,000 workers in Scottsbluff, North Platte, Lincoln and Omaha. If workers want their trash emptied the rest of the week, they must do it themselves using large trash bins provided by the state. There's less vacuuming of carpets, too, and windows won't be cleaned as often.

German Unions ‘Mobilize’ Resistance to Merkel’s Budget Cuts

Germany’s main labor federation said it will mobilize protests against Chancellor Angela Merkel’s planned budget cuts, which it criticized as unfair to the poor and jobless.

Opposition parties, led by the Social Democrats, also denounced the four-year program to trim 81.6 billion euros ($97.6 billion) in federal spending between 2011 and 2014, presented by Merkel yesterday in a bid to bolster the euro.

2 Million Public Servants On Strike In Spain

Nearly 2 million Spanish state employees have stopped work in anger over government spending cuts that will see them lose about 5 per cent of their salary. It is the first time civil servants have gone on strike since the government announced $22 billion worth of austerity measures last month.

Franco-German Relations Cool Over Eurozone Crisis

Minutes before President Nicolas Sarkozy was to leave to fly to Berlin for a Franco-German summit, Chancellor Angela Merkel telephoned to postpone the meeting.

The Merkel-Sarkozy meeting was supposed to agree a joint position on the deficit crisis threatening the European single currency before a European summit in Brussels next Thursday. Officials in both France and Germany say that the two countries were so deeply divided that a meeting on Monday would have been pointless and failure might have caused a further market backlash against the euro.

Rome Hotel Tax Plan Pressures Italy Credit Rating

Rome is planning a hotel tax on the 9 million visitors to the Eternal City each year, a revenue-raising measure that may hurt tourism in the Italian capital and put further pressure on its credit rating.

Prime Minister Silvio Berlusconi's government proposed the levy to reduce the 500 million euros (Dh2.19 million) it contributes annually to help Rome control 9.6 billion euros of debt. Italy authorised the initiative in its 24.9 billion-euro budget-cutting plan, prompting Standard & Poor's on May 27 to change the outlook on Rome to negative, saying the government was scaling back its commitment to bolster the city's finances.

Slide in Kansas Revenues Continues

Sharply reduced income tax receipts plunged Kansas revenues nearly $82 million below already-lowered expectations for fiscal 2010, the Kansas Legislative Research Department reported Tuesday.

Analysts at the research arm that is an arbiter of official state revenue projections said that total state general fund receipts of $369.4 million during May fell $19.3 million below estimated levels, which puts the total $4.59 billion collected since July 1 more than $81.5 million, or 7.9 percent, below the projected $4.67 billion total for the fiscal year to date.

Greek Default Seen by Almost 75% in Poll Doubtful About Trichet

Global investors have little confidence in Europe’s efforts to contain its debt crisis or in European Central Bank President Jean-Claude Trichet, with 73 percent calling a default by Greece likely.

Only 23 percent say they expect the region’s almost $1 trillion rescue package to both keep the European monetary union together and prevent a debt default by a government, according to a quarterly poll of investors and analysts who are Bloomberg subscribers. More than 40 percent say Greece is likely to abandon the euro.

IMF Stops Loans To Pakistan Till Imposition Of VAT

The IMF has told Pakistan not to expect the release of loans unless VAT is imposed, Online news agency reported, quoting sources. Sources in the finance ministry said Pakistani officials were scheduled to hold talks with IMF in the first week of August but this had now fallen through.

German Tax May Cost Airline Industry 1 Billion Euros, IATA Says

The German government’s plan to impose a flight-departure tax as part of its budget-deficit reduction effort may cost the airline industry an extra 1 billion euros a year, the International Air Transport Association said.

The policy is a “cash grab by a cash-strapped government” reflecting “the worst kind of short-sighted policy irresponsiblity,” IATA Chief Executive Officer Giovanni Bisignani said today in an online statement released at the trade group’s annual meeting in Berlin.

China’s PBOC Says Debt Crisis, Trade to Affect Growth

China’s economic growth will be affected by the international sovereign debt crisis and trade frictions, the People’s Bank of China said....Economic growth in China may slip to between 10 percent and 11 percent this quarter as industrial production and investment expand at a slower pace, a researcher for the nation’s cabinet said yesterday.

“The 11.9 percent growth rate in the first quarter won’t be sustained and the outlook for investment and export growth is uncertain,” said Zhang Liqun, a researcher at the State Council’s Development and Research Center

Euro Debt Crisis to Slow Gulf Currency Plans, Al-Khalifa Says

The four Persian Gulf states planning a single currency will temporarily halt their preparations because of the debt crisis facing the euro region, said Sheikh Mohammed bin Essa al-Khalifa, chief executive of Bahrain’s Economic Development Board.

Bond Investors Offer Most-Ever Debt to BOE Amid Deficit Crisis (UK)

Corporate bond investors tried to offload the most bonds ever under the Bank of England’s debt purchase program as Europe’s fiscal crisis roiled credit markets....“It’s very worrying,” said Gary Jenkins, head of credit research at Evolution Securities Ltd. in London. “If you’re not prepared to hold corporates which have strong balance sheets and positive cashflow generation, are you going to be putting that same money into government bonds? Pretty unlikely.”


Deepwater Drilling Moratorium Threatens Texas' Tax Revenue

"You're talking about not just a loss of revenue for six months, you're talking about a loss of revenue for years," said Rick Slemaker, publisher of Energy Magazine.

The state’s comptroller’s office collected $2.3 billion in oil and natural gas production taxes in the 2009 fiscal year. In 2008, the office collected $4.1 billion. That tax money is used to repair roads and fund schools, among other state services. State lawmakers might have to do without it when they try to balance the state budget next year.

Gulf Oil Spill Could Cost Florida Up To 195,000 Jobs, Economist Says

University of Central Florida economist says the Gulf oil spill could cost Florida as much as 195,000 jobs and $10.9 billion in lost economic activity in a worst-case analysis of the hit on tourism.

Sean Snaith, director of UCF's Institute for Economic Competitiveness said he looked at a 50 percent loss in tourism for the state's 23 Gulf Coast counties and projected out the ripple effects to come up with that "nightmarish scenario." With a 10 percent hit to tourism in the Panhandle and Florida's west coast, the state would drop 39,000 jobs and $2.2 billion in spending.


Scientist Awed by Size, Density of Undersea Oil Plume in Gulf

Vast underwater concentrations of oil sprawling for miles in the Gulf of Mexico from the damaged, crude-belching BP PLC well are unprecedented in "human history" and threaten to wreak havoc on marine life, a team of scientists said today, a finding confirmed for the first time by federal officials.

Researchers aboard the F.G. Walton Smith vessel briefed reporters on a two-week cruise in which they traced an underwater oil plum 15 miles wide, 3 miles long and about 600 feet thick. The plume's core is 1,100 to 1,300 meters below the surface, they said. "It's an infusion of oil and gas unlike anything else that has ever been seen anywhere, certainly in human history," said Samantha Joye of the University of Georgia, the expedition leader.

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Re: Daily Digest - June 9

"Palm Beach County property owners for the second year in a row face the possibility of a double-digit tax rate increase to head off a looming budget shortfall.

The county's proposed tax rate would go up about 13 percent — just one year after a nearly 15 percent tax rate boost — to help cover a $100 million projected shortfall, according to the county's 2010-11 budget proposal released Tuesday.

The struggling economy continues to lead to declines in property values. Those declines, coupled with past county government spending decisions, put the county in another budget hole.

Business leaders and anti-tax advocates say that in a recession, Palm Beach County government spends too much for taxpayers to afford."

"June 9 (Bloomberg) -- Kenya, Uganda and Tanzania are turning to financial markets to finance their budgets, including the sale of sovereign bonds, as the European debt crisis forces governments to slash spending and curtail aid to Africa."

"June 9 (Bloomberg) -- Edinburgh’s two biggest fund companies have a warning to investors: don’t overlook the U.S. when scouring the world for nations with too much debt.

Standard Life Investments is questioning when President Barack Obama’s administration can reduce borrowings, said Andrew Milligan, the company’s head of global strategy. Scottish Widows Investment Partnership sold U.S. stocks in March on concern an eventual reduction in spending would weigh on economic growth. The amount of total marketable U.S. debt outstanding has risen to $7.96 trillion from $4.4 trillion in mid-2007.

“I don’t know how long the U.S. can afford not to focus on the issue and take action,” Ken Adams, the top strategist at Scottish Widows, said in an interview. “It’s like Greece. It’s very hard to pick the point at which confidence suddenly goes.”"

"KANSAS CITY, Mo., June 8 (Reuters) - Kansas City Federal Reserve Bank President Thomas Hoenig said on Tuesday U.S. fiscal deficits are not sustainable.

The "very serious" problem would become more difficult to address the longer it goes unattended, Hoenig told a forum sponsored by the regional Fed bank he oversees."

"The United States will have to adopt austerity measures similar to the ones taken in Europe, because the problems faced are largely the same, Timothy Scala, macro-strategist at Sophis Investments, told CNBC.com."

"In the US, a Treasury Department report sent to Congress shows that public debt will rise to 102 percent of gross domestic product by 2015 from 93 percent this year, to $19.6 trillion.

"We can't kick this can along the road forever," Scala said about the US debt problem. "If we continue to stimulate by issuing more debt or by printing, it's going to make it worse."

"This debt balloon has arrived. You will ultimately see it in the US," he said in a telephone interview."

"Chinese labour protests that have forced shutdowns at foreign factories have spread beyond south China’s industrial heartland, posing a dangerous new challenge for Beijing.

Workers at a Taiwanese machinery factory outside Shanghai clashed with police on Tuesday, leaving about 50 protesters injured. The confrontation represented an escalation of recent industrial action in the country, which until this week had been largely peaceful and concentrated in the southern province of Guangdong."

"The Mendocino County Grand Jury's latest report criticizes the county's retirement system and calls for citizens to intervene.

The update, titled "Unfunded Liability - Our Children's Inheritance," published June 3, says the Employee Retirement Association board of directors uses faulty assumptions about the market value of its investments, understates its debt, doesn't have an adequate plan to repay the debt and may have violated state law by diverting pension funds to pay for retiree health care.

The county's investment advisors forecasted an 8 percent return on investments through 2026 "when economic experts have said that the 30-year rolling average for a stock-bond portfolio is 4.4 percent," the grand jury states in its report.

The report says the retirement association's debt figures don't match those of analysts in the community, with outside critics claiming the county's unfunded liability is double the $66.9 million figure the retirement board reported in 2009."

"The county's unfunded health care liability is about $130 million, according to the grand jury report. It additionally criticizes the Board of Supervisors for not addressing the lack of retiree health care funds when it stopped offering health care benefits in 1998."

"Senator Bill Nelson says that oil is now leaking from the seabed floor and that the casing used in the well may be broken or shattered."

"LONDON, June 8 (Reuters) - UK bullion dealers are struggling to source enough gold sovereign and Britannia coins to keep up with surging demand ahead of an expected hike in capital gains tax (CGT) in the new government's emergency budget on June 22.

Dealers are reporting a backlog of orders for bullion coins recognised as UK legal tender, which are exempt from CGT.

Anthony Baird, managing director of gold dealer Baird & Co, says the company cannot deliver any Britannia coins until August due to lack of supply.

"We buy directly from the public," said Linda Warner, sales manager at bullion merchant ATS Bullion. "In the last couple of weeks, supply has been drying up because people hold on to what they've got in a situation like this.""

.........................9A) Gold-Coin Haven Demand Saps Supply, Raises Premiums


"NEW YORK (Reuters) - Home buying applications sank for a fifth straight week to a fresh 13-year low, the Mortgage Bankers Association said on Wednesday, suggesting that tax credits had robbed more from future sales than expected.

Demand for loans to purchase houses fell 5.7 percent in the week ended June 4 to the lowest level since February 1997, even after adjusting to account for the Memorial Day holiday.

Home buyers have been on hiatus since many rushed to sign purchase contracts ahead of the April 30 deadline for up to $8,000 in federal tax credits.

"It's very worrying," said Paul Dales, U.S. economist at Capital Economics in Toronto, said of the degree of payback from more than a year of federal buyer tax incentives."

  •  Other news stories and headlines:


NBU will support economy by printing money, says cenbank official (Ukraine)

Marc Faber Says Cash, Bonds Will Be 'Very Dangerous'

Women Prefer Men Holding State Bonds, Japan Ad Says

Worries increase along with Arizona's debt

EU: Bulgaria statistics are worrisome

NJ Cop Layoffs Nearing 700, and Counting

Broward County Public Schools Cuts 1300 Employees (Florida)

France joins Germany in wanting to ban naked short selling

UK Property Swaps May Cost Banks $14.5 Billion, Savills Says

Russia banks face $33-45 bln of new provisions--Moody's

Polk City Water, Sewer Bills Will Rise 50 Percent  (Florida....."to avoid running out of money in 60 days")

Study foresees Nash water shortages by 2040 (NC)

CBO Projects “Beach House Bailout” Cost at $1.7 Billion

Clark County would be 'flat broke' if tax hike ends, official says (Illinois)

Administration Advances Plan to Federalize Private Pension System

Chilton seeks mandatory circuit breaker rules

Photo gallery: Ripple effects of the BP oil spill

Devastation: You Can Smell The Oil From A Helicopter And Birds Are Frying! (Video)

britinbe's picture
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Re: Daily Digest - June 9-humour for the day

Monolithic Oil Corp


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Smile or Die

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Re: Smile or Die


Now here's a useful application of that video:

It's not "junk"  Frown

It's diversity Smile


"June 9 (Bloomberg) -- Moody’s Investors Service plans to grant top ratings to U.S. commercial-mortgage bonds with less investor protection and potentially riskier underlying loans than in the market’s previous sale.

Almost $609 million of securities being sold by JPMorgan Chase & Co. with so-called credit enhancement of 15 percent will get Aaa grades from the New York-based ratings firm. In this year’s only other sale of such debt, the amount of protection against the underlying loans’ losses, such as by having junior- ranked notes lose principal first, totaled 22.3 percent.

The latest securities contain mortgages that are larger in relation to the properties’ values and the amount of income from tenants. At the same time, the bonds will be linked to 36 different loans, compared with only six in an April sale by Royal Bank of Scotland Plc. The greater diversity is the main reason Moody’s is allowing the lower credit enhancement, according to Nick Levidy, an analyst at the firm.

“The benefit of diversity is very significant in that range” of difference in the amount of loans, Levidy said yesterday in a telephone interview."

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Smile or Die
JAG wrote:


Thank you for posting, inspiring ...



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Re: Daily Digest - June 9

video: http://www.cnbc.com/id/15840232/?video=1518210242&play=1

Debt Spreading 'Like a Cancer': Black Swan Author

The economic situation today is drastically worse than a couple years ago, and the euro is doomed as a concept, Nassim Taleb, professor and author of the bestselling book "The Black Swan," told CNBC on Thursday.

Nassim Taleb
Nassim Taleb

"We had less debt cumulatively (two years ago), and more people employed. Today, we have more risk in the system, and a smaller tax base," Taleb said.

"Banks balance sheets are just as bad as they were" two years ago when the crisis began and "the quality of the risks hasn't improved," he added.

The root of the crisis over the past couple of years wasn't recession, but debt, which has spread "like a cancer," according to Taleb, who is now relived that public attention has shifted to debt, instead of growth.

The world needs to prepare itself for austerity, he warned. "We need to slash debt. Unfortunately, that's the only solution," Taleb said.

Other analysts warned about austerity programs spreading from the euro zone to the US where the growth in debt will become unsustainable over the longer term.

Obama administration's efforts to pull the US out of recession haven't succeeded, according to Taleb. "It's not that they make mistakes, it's that they almost get nothing right." Moreover, a second major stimulus package may be futile, he warned.

"Obama promised us 8 percent unemployment through stimulus. It hasn't worked." There are significantly more liabilities in the US than in other countries around the world, he said.

"Don't give a junkie more drugs, don't give a debt junkie more debt."

Hedge Against Inflation

Investors should avoid Treasurys and other bonds and place their money in instruments that will hedge them against looming inflation.

Commodities are one place where a bull market may form over the coming years, as people try to protect their cash from price rises, famous investor Jim Rogers told CNBC earlier Thursday.

The "Black Swan" metaphor is used to describe those rare, unexpected but consequential events that people cannot predict because they view the world through a sort of tunnel vision - as something structured, ordinary, and comprehensible.

"I want to live in a society that is robust to adverse events. We don't live in that world," Taleb said.

"A bridge that's very poorly constructed will eventually break. A white swan for the butcher is a black swan for the turkey," he added. The "Black Swan" reference has become ubiquitous within popular and business culture over the past couple of years.

As recently as Wednesday, a top authority on oil reservoir management and upstream technology called the BP

[BP-LN  379.40    -12.15  (-3.1%)]

oil spill in the Gulf of Mexico a "Black Swan" event that, however catastrophic, has the potential to improve drilling practices in particular and the industry in general.

Taleb expressed reservations about the future of BP, given the catastrophic fall in its market capitalization since the oil spill on April 20th.

He suggested that incentives in corporate culture are inherently flawed.

"Size is bad for companies," he said. "We shouldn't give a manager of a nuclear plant an incentive bonus. People are given bonuses to hide risk, to cut corners. The same thing happens with every large corporation. It permeates the entire economic system."

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