Daily Digest

Daily Digest - March 15

Monday, March 15, 2010, 9:46 AM
  • Peter Schiff: Dollar Bulls Beware
  • More Empty Posturing Out Of Moody's - Rating Agency Once Again Threatens With US Downgrade
  • Is China's Politburo Spoiling For A Showdown With America?
  • Welcome to the United States of Iceland
  • Goldcorp Inc. Shows Little Respect For Local People


Peter Schiff: Dollar Bulls Beware (mhoop)

As is often the case, an unforeseen event came along that made mincemeat out of the consensus' well-conceived strategy. Once some fiscal squabbling grabbed headlines in the eurozone, the negative sentiment that had built up on the dollar was suddenly diverted to the euro. Catalyzed by the Greek debt crisis, the greenback surged by about 8% in six weeks.

More Empty Posturing Out Of Moody's - Rating Agency Once Again Threatens With US Downgrade (Erik T.)

The rating agency, whose "objectivity" was recently fully exposed after it has been persistently the one rater who refuses to downgrade Greece, even after its peers S&P and Fitch have made Greek bond eligibility for ECB collateral contingent purely on Moody's lack of conscience, is pretending that it has some credibility after all, by doing a little extra posturing, and grumbling that if things get much worse, it may, just may, consider dropping the US AAA rating. This, of course, despite Tim Geithner's promise that the US would only be downgraded over his dead body, or something like that. Furthermore, as we have recently learned, the FRBNY has a "proactive" influence in rating agency decisions.

Is China's Politburo Spoiling For A Showdown With America? (nncita)

The long-simmering clash between the world's two great powers is coming to a head, with dangerous implications for the international system.

Welcome to the United States of Iceland (Jeff B.)

An Icelandic savings bank, Icesave, had attracted billions in deposits from hundreds of thousands of British and Dutch citizens, due to the phenomenally high interest rates it offered. Icesave collapsed in 2008, for much the same reason Lehman Brothers, WaMu, and hundreds of local savings banks did: its bankers used their cash to make complicated, bad, leveraged investments, mostly on real estate.


Goldcorp Inc. Shows Little Respect For Local People (mhoop)

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Re: Daily Digest - March 15

"Moody’s Investor Service, the credit rating agency, will fire a warning shot at the US on Monday, saying that unless the country gets public finances into better shape than the Obama administration projects there would be “downward pressure” on its triple A credit rating.

Examining the administration’s outlook for the federal budget deficit, the agency said: “If such a trajectory were to materialise, there would at some point be downward pressure on the triple A rating of the federal government.”

It projects that the federal borrowing is so high that the interest payments on government debt will grow to more than 15 per cent of government revenues, about the same by the end of the decade as the previous 1980s peak.

This time the servicing burden would be harder to reverse, however, because it would not be caused by high interest rates but by high debt levels."

.....................1A) Triple-A rated governments safe but risks grow-Moody's

"LONDON, March 15 (Reuters) - The credit ratings of the world's four largest triple-A sovereign debt issuers as well as Spain are safe but risks to their blue-chip status have grown, a report from Moody's Investors Service said on Monday.

For the United States, UK, France and Germany, as well as Spain and less fiscally-challenged Denmark, Finland, Norway and Sweden, the quarterly Aaa Sovereign Monitor report concluded that government ability to manage the debt was the deciding factor in keeping their Aaa status.

The report highlighted that Spain's long-term rating had deteriorated "significantly and is expected to deteriorate further, taking it close to the Aaa/Aa demarcation line, which would prompt us to reassess its rating.""

 "The war over mark-to-market accounting is about to get hot, again. In coming weeks, the Financial Accounting Standards Board is likely to propose that banks expand their use of market values for financial assets such as loans, according to people familiar with the matter. That departs from current practices in which banks hold loans at their original cost and create a reserve based on their own view of potential losses. "

"McDonough called Smith's promise of no firings or furloughs "an election year ploy."

"They are liars," McDonough said. "This is like discussing the Titanic and not mentioning icebergs."

How can Smith promise job security to employees this year and next, he asked. "Residents have a right to the truth. Revenues continue to drop. These lame ducks are moving on. How fair is this attitude to county employees?""

"TRENTON — Gov. Chris Christie is preparing to introduce a budget that suspends property tax rebates, cuts more than $1 billion in aid to schools and towns and skips a $3 billion contribution to the state pension system, legislative leaders said Sunday.

About 25 legislators and senior staff members were briefed on the governor's plans to close an $11 billion deficit. Several spoke to The Associated Press on condition of anonymity because they are not authorized to discuss the $29.2 billion budget before Christie introduces the proposal Tuesday."

"The fiscal plan he outlined Wednesday involves borrowing, postponing bill payments, slashing spending and raising taxes to close the estimated $13 billion budget gap. But he can do little without lawmakers’ aid."

"Borrowing nearly $5 billion, either by raiding state funds with surpluses or selling the state’s annual tobacco settlement proceeds, as Quinn suggests, also requires separate legislative backing as does the proposal to trim pension benefits for new hires.

Income tax increase

Then there’s the income tax increase, this time a 1 percent “surcharge” to prevent cuts in education funding."

"Advocates for teachers and other school staff say the cuts will eliminate tens of thousands of jobs."

"MONTGOMERY -- State lawmakers have yet to pass state budgets for next year, budgets that may not have enough money to prevent thousands of layoffs, especially among teachers and other public school employees. "

""After absorbing the deepest local aid cut in history last year, communities are struggling to balance their budgets, and a new local aid reduction of this size would certainly trigger widespread layoffs of thousands of teachers, police officers, firefighters and other key municipal workers, and it will force deep cuts in essential local services and programs," said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association."

"Upper Darby School District Superintendent Dr. Louis DeVlieger asked Rendell whether he is planning to reamortize the state pension funding plan for state employees.

“And he said that he is considering it,” DeVlieger said, after the governor’s address. “However, by lowering payments and extending them for a longer period, it appears that that impact will be upon our children instead of us.

“So it’s a difficult decision. However, with the current economic forecast, the perfect storm seems to be coming at us and I worry about both our local taxpayers and the state of the school district.”

He was referring to the fiscal nightmare facing the state’s two major public employees pension systems, which weren’t adequately funded since 2001 and were depleted by stock market investments."

"Virginia is taking away more than $620 million that would have been paid toward state employee and teacher pensions, but the state is leaving an IOU.

Beginning in 2013, the state will have to repay the money to the Virginia Retirement System over 10 years, with 7.5 percent interest.

The provision, sought by the state Senate and included in the joint budget adopted by the General Assembly yesterday, is aimed at easing jitters over the decision to defer state and local payments to pension plans for the portion of future retirement liabilities that aren’t funded by the system.

Sen. Walter A. Stosch, R-Henrico, called the provision the most important step taken by the assembly to protect the retirement system, even as it relies on deferred pension contributions for almost one-fourth of the money used to balance the two-year budget.

“I don’t want anybody to feel that their pension is in jeopardy, because it isn’t,“ Stosch said yesterday. “But we’re recognizing the unfunded liability and requiring it to be repaid.“"

"San Jose police officers and firefighters, whose pensions once topped out at 75 percent of their salaries like the rest of the city work force, can now collect pensions worth 90 percent of their pay. And all city retirees enjoy 3 percent annual pension raises, extra bonus checks in good market years, and free health care for themselves and their spouses.

Now the bills are coming due. Compounded by market losses in the 2008 crash, the city's pension costs next year will soar 39 percent.

2010-11 general-fund cost: $188 million, including $53 million in added costs to cover market losses"

"March 15 (Bloomberg) -- International demand for long-term U.S. financial assets weakened in January as China and Japan, the two biggest holders of Treasuries, reduced their positions.

Net buying of long-term equities, notes and bonds totaled $19.1 billion, compared with net purchases of $63.3 billion in December, according to Treasury Department data released today in Washington. Including short-term securities such as stock swaps, total investment flows show foreigners sold a net $33.4 billion after net buying of $53.6 billion the previous month.

China has been a net seller of Treasuries for three straight months, the longest such stretch since the end of 2007. Chinese officials have questioned the dollar’s role as a reserve currency and recently sought assurances about the safety of American government debt, as the U.S. budget deficit widens to a projected record $1.6 trillion this year. "

Ukraine's New Finance Minister Says Country "on Brink Of Financial Disaster"

Raum: Greece's crisis could presage America's

UK taxpayer 'WILL pay tens of billions of euros for Greek rescue'

Tax rises hit Greece as EU meets on debt crisis

NC budget gap likely to require more spending cuts

Health plans bleeding The City amid deficit woes (SF...notice projected costs at the bottom)

SC legislators to use bailout cash to fix budget

Hundreds of city workers to receive layoff notices (Toledo...310 workers)

Hundreds of Inland teachers again get pink slips (CA)

Commercial loan losses a rising storm: Wave of foreclosures would hammer banks

Medicaid puts Missouri governor in a bind

Unemployment Rate Doubles For Older Women

Record cold sends utility bills soaring, putting consumers in a bind (unemployed and bills nearly double)

Rocklin gives sweetheart deal to retirees -- then rehires them (This is about "double dipping")

Some fear for public safety if 57 Flint police layoffs take effect this month ("One cop for every 900 residents in a city with one of the highest crime rates in the country")

OC schools feel pain of 2219 teacher pink slips (Orange County)

idoctor's picture
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Re: Daily Digest - March 15

gregroberts's picture
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Re: Daily Digest - March 15

Daylight Savings time again,

Last time I posted an Indian saying about it, "only the govt can think it can cut a foot off one end of a blanket and sew it on the other end and make the blanket longer"

A friend of mine was working at Paint Mart on Saturday so I took a 1 ounce maple leaf in with me to show the customers, only one out of twelve had ever seen a gold coin before and with the exception of one customer no one would give me the $50 face value for the coin.

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Re: Daily Digest - March 15

Re:  Rocklin article

The feds can get away with this kind of crap because they are so far removed from the taxpayer.  I predict that this type of activity on a local level will eventually result in a firestorm of protest.  It is only a matter of time.

Thanks sax for your continued coverage, I really think you give us a clear picture of a shoe about to drop that is not even on the radar screen of most people.

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Re: Daily Digest - March 15

Three thousand gallons of water per oz. of gold. 4 grams of gold per ton of rock. Current price of gold $1104

What happens when gold goes to $2000 per oz.?


joemanc's picture
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Re: Daily Digest - March 15
V wrote:

User's posting privileges have been suspended.

That is an odd signature line.

Woodman's picture
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Re: Daily Digest - March 15

This news tidbit was on Yahoo homepage today, among the usual pop culture junk.  I wonder how many folks realize the seriousness of the SS and Medicare unfunded liabilities:

"Social Security to start cashing Uncle Sam's IOUs"



joemanc's picture
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Re: Daily Digest - March 15

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

I think we were supposed to run surpluses until 2017. We're 7 years early, and already going to have to borrow $29 billion. Yes, borrow, because we don't have a Trust Fund...says it right here:


Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors.

It's amazing, and sad really, that only we can see this train wreck.

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Re: Daily Digest - March 15

 1)  Ambrose Evans Pritchard    Moodsy fears Social Cohesion as AAA states retrench     http://www.telegraph.co.uk/finance/economics/7450468/Moodys-fears-social-cohesion-as-AAA-states-retrench.html)

2) LA becomes test case in battle to undo interest rates swaps 


3)  the country's credit card statement  


4) Ex-Park Avenue Bank Chief First To Be Charged With Stealing Bailout Funds  http://www.huffingtonpost.com/2010/03/15/charles-antonucci-ex-park_n_499598.html 

5) From ZEROHEDGE- IS The US Preparing For  the Total destruction of IRAN?



Damnthematrix's picture
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Re: Daily Digest - March 15
V wrote:

Three thousand gallons of water per oz. of gold. 4 grams of gold per ton of rock. Current price of gold $1104

What happens when gold goes to $2000 per oz.?


Water will be worth its weight in gold...?


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Banana Ben
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Re: Daily Digest - March 15

Uhhhhhh . . . ..  .  I'll buy it from you for $50!!!!!!!  I

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