Daily Digest

Daily Digest - March 11

Thursday, March 11, 2010, 10:52 AM
  • Food Stamp Recipients Up To Record 39 Million
  • After Financial Ruin, Plotting America's 'Comeback'
  • Analysis: Greece's Crisis Could Presage America's
  • 2,600 people show up for 100 railroad jobs
  • Consumers Not Making Dent In Debt
  • PIMCO's El-Erian On The Inability To Grasp The Seismic Changes Currently Occurring In The Developed World
  • The Myth Of The Recovery
  • Peak Oil Demand Is Coming, But Here's Why It's Not Good News
  • DJ IEA Economist Predicts 'Era Of Cheap Energy Is Over'
  • Oil Traders Stop Work With Iran
  • Welcome To The Permanent Recession: Food And Transportation Prices Rising
  • South Korea Unveils "Re-Charging Road" For Eco-Friendly Buses
  • Fuel Bills Will Pay For Eco-Upgrades


Food-stamp recipients up to record 39 million (mhoop)

Almost 39 million Americans received food stamps in December, the most ever, as the jobless rate hovered near a 26- year high, the government said.

Recipients of the subsidies for food purchases climbed 23 percent from a year earlier and rose 2.1 percent from November, the U. S. Department of Agriculture said Thursday in a statement on its Web site. The number receiving the benefit has set records for 13 straight months.

After Financial Ruin, Plotting America's 'Comeback' (woodman)

Interview with David Walker on NPR Fresh Air

There are three key points with regard to spending. Spending more money than you make on a reoccurring basis is irresponsible. Irresponsibly spending someone else's money is unethical; and if you're a fiduciary, a fiduciary breach. And irresponsibly spending someone else's money when they're too young to vote and not born yet is immoral. And all three of those things are going on right now, and they threaten America's future.

Analysis: Greece's crisis could presage America's (Christian W.)

As with Greece, America's national debt has been growing by leaps and bounds over the past decade, to the point where it threatens to swamp overall economic output. And in the U.S., as in Greece, a large portion of that debt is owed to foreign investors.

2,600 people show up for 100 railroad jobs (Christian W.)

They started waiting in line as early as Friday afternoon. In all, some 2,600 job seekers applied for work with the RJ Corman Railroad Company.

In all, about 100 jobs will be filled for about 12 to 18 months. Those hired will work on repairing and renovating five different railroad lines in the states of Kentucky, Tennessee, and West Virginia. The jobs pay between $25 and $35 per hour with benefits.

Consumers Not Making Dent In Debt (Robert C.)

With unemployment high and personal wealth diminished, how was it that strapped consumers were paying down their credit card debt last year? It turns out they probably weren't.

PIMCO's El-Erian On The Inability To Grasp The Seismic Changes Currently Occurring In The Developed World (Erik T.)

The Pimco executive has written another very relevant Op-Ed in the Financial Times, "How to handle the sovereign debt explosion" which does not so much disclose new things, as capture the essence of the groundbreaking transformation that is currently occurring within the entire "developed" world, and more specifically, the denial that the vast majority of "experts" are exhibiting when faced with a previously unseen process of unprecedented significance.

The Myth Of The Recovery (Ben Johnson)

Overall, government support accounts for roughly 77 percent of economic growth in the third quarter of 2009, according to my analysis of Commerce Department statistics. This means that non-Washington GDP growth was closer to 0.34 percent from July to September 2009, instead of 2.2 percent.


Peak Oil Demand Is Coming, But Here's Why It's Not Good News (Ben Johnson, Samuel A.)

Very simply, when oil got to $120 a barrel it cut into real productivity, and forced the world’s most developed economies to shrink. At $147, it wreaked serious damage.

DJ IEA Economist Predicts 'Era Of Cheap Energy Is Over' (Christian W.)

Fatih Birol told the National Association for Business Economics that China will be the main driver of global oil demand, which he sees increasing by about 1.5 million barrels a day this year.

Oil traders stop work with Iran (Christian W.)

Vitol, the world's largest oil trader, joined Glencore and Trafigura in their halt on the shipment of gasoline to Iran, the Financial Times reports. U.S. lawmakers have pressured oil traders to stop working with Iran as part of an effort to persuade Tehran to abandon its nuclear ambitions.

Welcome to the permanent recession - food and transportation prices rising (Christian W.)

If employment is inversely proportional to oil prices (it is), and oil prices are only going to trend up…then employment by necessity is going down. Because oil is so fundamental to our economy, oil price increases ripple through the entire economy.

South Korea Unveils "Re-Charging Road" For Eco-Friendly Buses (Christian W.)

The Korea Advanced Institute of Science and Technology (KAIST), which developed the system, says OLEV needs a battery only one-fifth the size of conventional electric vehicles and eliminates the need for major recharging. It also avoids the need for overhead wires used to power conventional trams or trolley buses.

Fuel Bills Will Pay For Eco-Upgrades (mhoop)

Mr Miliband also announced a Pay As You Save Scheme (PAYS) that will enable homeowners to pay for energy efficiency measures through their fuel bills. The 'green loans' will be availabe through supermarkets or DIY chains and will be attached to the house rather than the owner so costly work can be paid back over a period of up to 25 years.

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Re: Daily Digest - March 11

"SPRINGFIELD -- Uncorking a risky election-year gambit, Gov. Quinn on Wednesday proposed a 33 percent increase in the state income tax to avoid "sacrificing the future of a generation of children."

Quinn's push to hike the tax on Illinois workers' paychecks from 3 percent to 4 percent came with a promise to devote all of the $2.8 billion in new annual revenues to education, staving off the $1.3 billion in cuts the governor aimed at the state's schoolchildren and university students if the tax hike doesn't materialize.

"I believe this 1 percent for education makes sense, and I think the people of Illinois will understand," the governor said during a 20-minute budget address to both chambers of the General Assembly.

The tax hike would deal with only a portion of the historic $13 billion budget deficit that has made Illinois one of the least-solvent states."

"WASHINGTON (AP) -- The Treasury Department sank billions into auto finance giant GMAC Inc. without an exit strategy or proof the company was viable -- a decision that could cost taxpayers $6.3 billion, a new watchdog report says."

"The dollar's dominant role as global reserve currency hasn't been challenged by the global credit crunch, Standard & Poor's said in a report published Thursday. But the ratings firm warned that the U.S. can't take the dollar's role for granted. Unless it addresses its fiscal deficit and debt, foreign investors could start to reduce dollar holdings, sending rates sharply higher and undermining the economy, which in turn could threaten the U.S.'s triple-A rating.

"The will isn't there yet, but we think it will come," said John Chambers, the chairman of S&P's sovereign-ratings committee, referring to the U.S. government's commitment to rein in its deficit. Mr. Chambers said the 2010 budget, presented last month, was disappointing, but he expects a "more-robust fiscal consolidation plan" to emerge after this year's midterm congressional elections."

................3A) US Dollar Still Rules, but Debt Level a Risk: S&P ABC News

"Mohamed El-Erian, whose company runs the world’s biggest mutual fund, said deteriorating public finances around the world may affect the global economy more than is currently realised.

“The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” El-Erian, co-chief investment officer at Pacific Investment Management Co, wrote in an article on the Financial Times website."

"Governments may have to raise taxes and slash spending to cope with swelling deficits after nations including the US borrowed unprecedented amounts to stave off the global financial crisis, said El-Erian, who shares his job title with Bill Gross.

A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said."

"BEIJING (MNI) - China's banking regulator warned domestic lenders Thursday of increasingly complicated global economic and financial conditions, in part the result of problems western countries are having with their sovereign debt issues as well as the timing of exit strategies from stimulus policies.

China Banking Regulatory Commission director Liu Mingkang said in a release that banks need to tighten up their risk management as a result of the increasing difficulties facing the world.

"Sovereign debt problems with developed western countries, high unemployment rates, international trade protectionism and exits from economic stimulus are complicating world economic and financial conditions," Liu told major banks in a meeting. "

"March 11 (Bloomberg) -- European government borrowing will probably rise to a record 1.45 trillion ($2 trillion) euros this year to fund fiscal stimulus measures designed to revive growth, Standard & Poor’s said.

Borrowing will probably climb about 52 billion euros, or 4 percent, from 1.39 trillion euros in 2009, which was also a record, S&P said in a statement today. The cost of raising the cash will also rise as the phasing out of stimulus measures and central bank purchases reduce demand for bonds and push yields higher, according to the ratings company."

"Arizona exports dropped by $5.8 billion in 2009 with the recession taking a toll on cooper, computer and semiconductor trade.

Arizona exports totaled just over $14 billion in 2009, according to U.S. Department of Commerce. That is down 30 percent from $19.8 billion in 2008. It’s also the lowest level since 2003."

"California exports fell to $120 billion in 2009 from $145 billion in 2008 — a 17 percent drop, according to the commerce department.

U.S. total exports went from $1.3 trillion in 2008 to $1.1 trillion in 2009.

Foreign imports to the U.S. came in at $1.6 trillion in 2009 compared to $2.1 trillion in 2008."

"BERLIN (Dow Jones)--Germany's total public debt climbed 7.1% to EUR1.69 trillion in 2009, federal data showed Thursday, the highest yearly increase in 15 years.

The federal statistical office in Wiesbaden said EUR36 billion in stimulus funding deployed to combat the economic crisis led the federal government's 6.9% debt increase over 2009, pushing its total to just over EUR1 trillion.

The debt of Germany's 16 states last year climbed even more drastically last, by 8.5%, to EUR526 billion, the office said.

In the 20 years since German reunification, the total public debt increase for 2009 was surpassed only by a EUR171 billion yearly bump in 1995. "

"The US government's monthly budget deficit rose to a record $220.9 billion in February 2010, the treasury department said today.

This brings the total US government deficit for the first five months of the current fiscal (October-February 2009-10) to $651 billion, compared with a $589 billion deficit in the similar period of the previous fiscal.

The February budget deficit is up 14 per cent year-on-year and is the biggest monthly shortfall in US history."

"MOSCOW, March 10 (Reuters) - Russia is struggling to balance next year's budget, and even with strict spending cuts looks unlikely to cut its deficit to the planned 4 percent of gross domestic product (GDP), sources told Reuters on Wednesday. Russia dipped into the red for the first time in a decade last year, as high spending to help the economy out of recession and sharp fall in budget revenues caused a 5.9 percent deficit."

"March 11 (Bloomberg) -- Detroit, the largest U.S. city whose debt is rated below investment grade, will ask investors today to buy $250 million of its debt without having filed annual financial reports on time for five years.

The city, which warned investors in its preliminary official statement of the possibility of filing for Chapter 9 bankruptcy protection, is providing a June 30, 2008, financial statement, its most recent, to investors. A fiscal 2009 report is expected to be complete by May 31, said city spokesman Dan Lijana, in an e-mail.

“This issue is not for the faint of heart,” said Richard Ciccarone, chief research officer of Oak Brook, Illinois-based McDonnell Investment Management, which oversees $6.8 billion of municipal debt. “It certainly raises eyebrows.”"

"South Carolina must quickly take steps to stop the billion-dollar bleeding within its bankrupt Unemployment Insurance fund, lawmakers were told Wednesday, or the consequences could be great.

For one thing, the state risks losing control of the unemployment insurance system to the federal government, due to its unpaid debt to Washington, which now stands at more than $773 million, and counting.

The Lucas Group, a Boston-based consultant, warned members of the Senate Labor, Commerce, and Industry Committee that a federal takeover, made possible when the state's unemployment insurance system is indebted to the federal government for two consecutive years, would likely mean an across the board hike in employment taxes on S.C. employers.

Each week, the state's debt to the federal government grows by $16 million due to the state's inability to afford unemployment benefits."

"In 2007, before the recession started, less than $1 billion was paid to the unemployed in Wisconsin who were eligible for up to 26 weeks of benefits.

In 2009, benefits could be tapped for up to 93 weeks and the state paid out $3.1 billion, more than triple what it did two years prior.

Wisconsin's debt to the federal government is expected to double from the roughly $1.2 billion that is owed now to nearly $2.4 billion by 2014, said Hal Bergan, administrator of Wisconsin's unemployment insurance program.

Paying that off will require both a reduction in benefits and higher business taxes, Gassman said."


""This is a completely unprecedented crisis," says Ethan Pollack of the Economic Policy Institute. "The budget cuts are going to get more and more severe."

The main trigger will be the winding down of the massive America Recovery and Reinvestment Act, better know as the federal stimulus plan. Tepid to modest economic growth will also hurt.

"A lot of states didn’t go through with the layoffs that were expected because of the stimulus," says Christian Weller, who specializes in economics and public policy for the University of Massachusetts and the Center for American Progress.

The federal government is spending more, not less, so its workers won't be affected by the end of the stimulus program. Still, federal employees represent a relatively small percertage of all government workers, with state and local workers making up the biggest portion."

"March 11 (Bloomberg) -- Investors should avoid Spain’s bonds as the euro region’s highest levels of joblessness stifle the country’s ability to cut its budget deficit, according to Invesco Ltd. and Bank of America Corp.’s Merrill Lynch unit.

Spanish debt isn’t yielding enough to compensate investors for buying the bonds of a country with the euro region’s third- largest budget deficit, according to Axel Blase, a fund manager in Frankfurt at Invesco. Investors receive a 68 basis-point yield premium for holding Spanish 10-year bonds rather than German bunds, compared with 309 basis points for Greek debt."

"A federally funded ticketing blitz in the state of Virginia landed a total of 6996 traffic tickets this weekend. The blitz, dubbed “Operation Air, Land & Speed” coincided with frantic efforts by state officials to close a$2.2 billion budget deficit. Supervisors ordered state troopers to saturate Interstates 81 and 95 to issue as many tickets as humanly possible over the space of two days."

"“The things I’m going to propose next week are going to anger people,” Christie said yesterday at a town hall meeting in Haddon Heights. “But I will tell you that it’s going to be fair. We will cut everyone. I’m just trying to fix the problems we have. I would love to play Santa Claus, but I can’t.”"

"Christie’s plan for next fiscal year may eliminate or scale back the state’s $1.1 billion property-tax rebate program, which gave more than 1 million New Jersey homeowners checks averaging $1,000 last year. The state’s highest-in-the-nation real estate levies averaged $7,281 last year, up from $7,045 in 2008, according to data released Feb. 26.

The new governor has also warned New Jersey’s almost 600 school districts to plan for a 15 percent cut in state aid and told municipalities they also face a reduction in funding. The governor also will seek a reduction of charity care reimbursements to hospitals, one of the people familiar said. New Jersey’s constitution requires a budget that balances spending with projected revenue.

“New Jersey has never seen a challenge like it’s seeing this year. It’s stunning,” said Senator Kevin O’Toole, a Republican from Wayne on the budget committee. “Forget the one about a camel through the eye of a needle. We’re dealing with a Mack truck.”"

"The FDNY is bracing for doomsday.

The department will be forced to close a staggering 62 fire companies and lay off more than 1,000 firefighters if the bad-news state budget becomes reality, Commissioner Salvatore Cassano told the City Council Wednesday.

"We would be very, very taxed," warned a grim-faced Cassano. "Our operations would be impacted and every neighborhood in this city would feel the effect."

Even if lawmakers in Albany - already facing an April 1 deadline and a $9 billion budget gap - find a way to pump in more cash, the city's fiscal woes may still force the FDNY to shutter 20 companies, Cassano warned.

"We're going to try not to close a single company or a single firehouse," Cassano told the Fire and Criminal Justice Services Committee, "but if we have to, we will.""

"370 teachers and 67 managers to get layoff warnings

Salary reductions of about 16 percent were proposed Wednesday by Modesto City Schools trustees as they began what undoubtedly will be tough negotiations with the district's employee unions.

The initial bargaining proposals were greeted with dismay by employees, especially because the schools started handing out 370 layoff notices to teachers Wednesday.

Trustees also voted to issue layoff warnings to 67 managers, and they're expected to hand out notices to perhaps hundreds of nonteaching staff members this spring.

The drastic measures are triggered by declining student enrollment and shrinking funding, forcing the district to slash $25 million from next year's budget.

"This district has been falling apart day by day, week by week, year by year. God help us all," said Aaron Castro, president of the union that represents the district's non-teaching staff. "

"March 10 (Bloomberg) -- New York developer Larry Silverstein, who teamed with the California State Teachers Retirement System to buy a 35-story skyscraper in 2006, now faces “imminent default” on debt tied to the property, Fitch Ratings said today."

"While WinnCompanies, and its former chief executive, Arthur Winn, have long been the local public face of the project, Calpers is the lead equity partner and has been making decisions on the project over the past several years. The development team previously estimated it had spent more than $120 million on the proposed project."

DC headed for another financial meltdown (Opinion...only 18 days of working capital?)

 DiNAPOLI: NYC Faces Budget Risks of $2 Billion

 Colo. public schools need $18 billion in construction and maintenance, report finds

 Violence erupts at Greek demonstrations

JPMorgan, Top US Banks May Charge Off $196 Billion: Moody's

 Ky. House passes budget after lengthy floor debate ($2.2 billion in borrowing)

 Rising debt a 'time bomb' (Canada)

 Moody's Says Many US Banks Will Remain Unprofitable in 2010

 California revenue jumps, tax refunds should be paid on time but Despite more good news for California's finances, state may delay $600 million in payments

 NewsLt. Gov. Richard Ravitch: New York budget mess too big to fix in one year

 US bankruptcy court filings rise 31.9% in 2009

 DB pension scheme deficits 'may be affected by further QE' (UK)

 Kansas City closes 26 schools to meet $50 million budget shortfall

 Metrolink Service To Be Cut (CA)

 Poway schools to cut more than 200 teachers

 Mt. Diablo school board cuts $48.8 million, OKs 200 layoffs, sets $348 million bond vote in June

 CU looking at hiking tuition by 9 percent (Colorado)

 NJ Gov. Chris Christie plans privatization of as many as 2000 state jobs

 Nonresidential Building Construction Drops 22% Since October 2008

 San Jose PL Could Lose 35% of Budget, Lay Off More than 100 Staff (public library)

 US foreclosures rise 6 percent in February, smallest yearly increase in 4 years

 Seabaugh proposes cutting 19 superior court judges (GA)

John99's picture
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Re: Daily Digest - March 11

Thanks, Saxplayer. Always appreciated.

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Re: Daily Digest - March 11

The chickens really do seem to be coming home to roost!!

good articles everyone!

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Johnny Oxygen
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Re: Daily Digest - March 11

mmmmmmm...chickens basted in humility.

saxplayer00o1's picture
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Re: Daily Digest - March 11

"March 11, 2010, 6:41AM

California Democrat George Miller introduced a bill in the House yesterday that would send cities $100 billion over the next two years to forestall predicted layoffs of hundreds of thousands of city workers, teachers and other local public employees.

Miller's "Local Jobs for America Act" was written with input from mayors across the country who have experienced a loss of revenue from property taxes and cutbacks from state government.

Miller predicted his bill would immediately create 1 million jobs, including indirect jobs at private businesses that sell goods and services to public sector employees."

"March 11 (Bloomberg) -- Fannie Mae sold $6 billion of debt, its biggest offering of benchmark notes in almost a year, as the company boosts borrowing and cuts holdings to fund about $130 billion of planned purchases of delinquent loans from the mortgage securities it guarantees."

"Shrinking Portfolio

Reducing its funding needs ahead of the buyouts, Fannie Mae’s portfolio of mortgage loans and securities shrunk by $37.3 billion in January, amid sales of $49.3 billion, the company said in a monthly statement released March 3. Fannie Mae ended that month with $764.8 billion of debt, including $586.4 billion maturing in more than one year, and guaranteed $2.79 trillion of mortgage securities. "

Texas sales tax revenue down 8.8 percent in Feb.

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