Daily Digest

Daily Digest - March 25

Thursday, March 25, 2010, 10:55 AM
  • A World Worth Inheriting: Two Beers With Steve Interviews Chris Martenson
  • Pressure Grows To Overhaul Fannie Mae, Freddie Mac
  • Foreign Workers Sending Less Cash To The Folks Back Home
  • A Rounding Error In The Right Direction
  • Homeowners Facing Foreclosure Take Own Lives
  • The "Central Banks' Central Bank" says Bailouts Putting Nations at Risk, as Confirmed By Higher Credit Default Swap Spreads
  • Lehman Chief Warns Of More Big Bank Failures
  • Recession's Untold Story
  • Japan, Struggling With Debt, Approves a $1 Trillion Budget
  • Portugal Credit Rating Downgraded Over Debt Concerns
  • Fiat Reported To Cut 5,000 Jobs, Shares Rally
  • The Peak Oil Crisis: A Breakthrough?
  • Chavez Battered By Energy Crisis
  • Chavez Orders Extended Holiday to Save Electricity Amid Crisis
  • Is there Panic at the EIA?
  • World Oil Reserves At Tipping Point
  • New Oil Investments Need $60-$70 Oil Price: BP Head
  • China Coking Coal Imports May Near Record This Year, Teck Says
  • Non-OPEC Oil Production Hits the Wall
  • China Tops U.S. In Spending On Clean Energy

Economy

A World Worth InheritingTwo Beers With Steve Interviews Chris Martenson

In our second interview with Chris Martenson since we've begun this podcast we discuss Chris' recent travels; foreign and abroad. I ask Chris questions such as 'what new perspectives have you gained?' and 'what were the objections you faced?'. Chris also recalls the experience of giving his shortened Crash Course presentation to academia types at the London School of Economic, a place that Chris describes as the 'lions den' of economics.

Pressure Grows To Overhaul Fannie Mae, Freddie Mac (Christian W.)

"It's clear that Fannie and Freddie, as they currently exist, should be put out of existence, which means the important question is what combination of entities public and private will replace them," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Foreign Workers Sending Less Cash To The Folks Back Home (Christian W.)

About Dh45 billion (US$12.25bn) to Dh50bn was transferred by workers to their home countries through exchange houses and banks last year, a decline of 10 to 15 per cent from the previous year, said Mohammed al Ansari, the chairman and managing director of Al Ansari Exchange, one of the biggest providers of exchange services in the UAE.

A Rounding Error In The Right Direction (sjmvideo)

Leaving aside the murky problem of what future GDP will be, we should remember that regardless of the numbers, health care expenditures account for more and more of it. Health spending, which never goes down—not even during the "Great" Post-Housing Bubble recession—accounts for far more of U.S. GDP percentage-wise than it does in any other advanced (OECD) economy.

Homeowners Facing Foreclosure Take Own Lives (Davos)

On March 5, deputies arriving to post an eviction notice on Lynda Clark's South Philadelphia home found she had hung herself. "It's devastating for everyone. We're not even family members and it's just devastating to us," Captain Albert Innaurato of the Philadelphia Sheriff's Office said.

Less than three weeks later, owner Gregory Bellows shot and killed himself shortly before deputies arrived to evict him from his Roxborough home.

The "Central Banks' Central Bank" says Bailouts Putting Nations at Risk, as Confirmed By Higher Credit Default Swap Spreads

The report from BIS confirms the previous statement that central banks were watching credit default swaps as the single most important economic indicator.

Lehman Chief Warns Of More Big Bank Failures (Davos)

Handelsblatt: you are handling the largest bankruptcy in human history. Can anything like this happen again?

Bryan Marsal: It is even likely that a case like Lehman’s will repeat itself – in any event, as long as nothing fundamental changes in financial regulation and in financial institutions. Wall Street has not really learned a lot from the situation. There is still too much leverage in the market, and credit default swaps remain completely unregulated. Even with regulators and in the companies little has been done after the global catastrophe.

HB: But financial regulators around the world are now pulling in the reins …

Marsal: Oh, really? That’s just for show.

Recession's Untold Story (Mark S.)

Two weeks ago Palumbo posted a want ad on Craigslist for a part-time dog-kennel assistant. The ad does say that working with dogs can be fun but then goes into some gory detail about the hardships — including the poop.

So far, 260 people have applied.

Japan, Struggling With Debt, Approves a $1 Trillion Budget (Nickbert)

The Japanese government on Wednesday pushed a record 92.3 trillion yen ($1 trillion) budget through Parliament aimed at stimulating growth in the long-stagnant economy. It means another round of spending and adding to Tokyo’s already substantial public debt.

Portugal Credit Rating Downgraded Over Debt Concerns (Christian W.)

"A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness," said Douglas Renwick from Fitch Ratings.

Fiat Reported To Cut 5,000 Jobs, Shares Rally (Christian W.)

The job cuts would affect car plants in Italy and represent 15 percent of the 30,000 workers employed on assembly lines in the country, the newspaper said. Shares in Fiat rose to a two-month peak and were up 4.15 percent at 9.79 euros at 0909 GMT, making it the lead gainer in the European auto Stoxx index (.SXAP).

Energy

The Peak Oil Crisis: A Breakthrough? (Christian W.)

For a major political leader to publicly acknowledge that world oil production is soon going into an unstoppable decline is a very dangerous undertaking for the implications are unpalatable to most. If a politician were to take the next step and start talking about remedies for falling oil supplies - conservation, fuel-efficient cars, mass transit, perhaps even rationing - it would be almost certain political suicide. Given our recent experience with global warming, in which a majority of the of the U.S. population now doubts that it is being caused by excessive burning of fossil fuels, one can only imagine the reaction if someone proposed taking serious and expensive steps to deal with peak oil.

Chavez Battered By Energy Crisis (Christian W.)

Chavez declared a national emergency in February as water levels in reservoirs for hydroelectric dams dropped to critical levels. The rainy season in Venezuela doesn't start till May, leaving more than 30 percent of the country at risk of lingering blackouts.

Chavez Orders Extended Holiday to Save Electricity Amid Crisis (Christian W.)

“The objective isn’t for people to be lazy, rather to save energy,” Chavez said today on state television. “Don’t forget to turn off the lights and close the faucet.”

Is there Panic at the EIA? (Christian W.)

On September 16, 2009, the EIA reported a loss of four million barrels of oil from the Cushing storage hub in Oklahoma. That day, oil futures climbed 2.2%.

Now, before grabbing your torches and pitchforks, remember that this isn't some malicious cover-up. Some of the errors were reported to the EIA by the companies that made them. According to the EIA, these errors are rare and mistakes are typically adjusted later on.

World Oil Reserves At Tipping Point (Christian W.)

The Status of Conventional Oil Reserves – Hype or Cause for Concern? published in the journal Energy Policy concludes that the age of cheap oil has now ended as demand starts to outstrip supply as we head towards the middle of the decade. The report also suggests that the current oil reserve estimates should be downgraded from between 1150-1350 billion barrels to between 850-900 billion barrels, based on recent research.

New Oil Investments Need $60-$70 Oil Price: BP Head (Christian W.)

If oil prices fall below $60 to $70 a barrel for an extended period of time, it will hurt investments in developing new energy supplies, BP (BP.L) Chief Executive Tony Hayward said on Tuesday.

China Coking Coal Imports May Near Record This Year, Teck Says (Christian W.)

BHP Billiton Ltd., the world’s largest exporter of the coal, this year won a 55 percent price increase from JFE Holdings Inc., Japan’s second-largest steelmaker, as the global economy picks up and Chinese purchases bolstered demand. Chinese imports surged fivefold last year after the government closed smaller unsafe mines.

Non-OPEC Oil Production Hits the Wall (Christian W.)

For the 1999-2004 period, much of the non-OPEC production rate increase was due to Russia (+2.726 mb/d) but Canada (+0.491 mb/d) and Mexico (+.477 mb/d) were significant contributors. During the same period, the North Sea oil production rate went into decline (-0.738 mb/d) while the U.S. production rate continued its decline (-0.462 mb/d).

China Tops U.S. In Spending On Clean Energy

Unless U.S. policies change to encourage more investment, the U.S. could miss its chance to lead the expanding clean-energy industry, says Phyllis Cuttino, project director at Pew. The USA's entrepreneurial tradition and strengths in innovation give it the potential to recoup leadership, the Pew report says.

Please send article submissions to: [email protected]

9 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - March 25

"March 25 (Bloomberg) -- The U.S. and China are on a “collision course” over the value of the Chinese currency and investors are underestimating the disruptions for global financial markets, according to Nouriel Roubini. "

.............1A) US Lawmakers Consider Import Duties on Chinese Goods

..............1B) US Lost Over 2.4M Jobs From Trade Gap With China-Study

 

"Growing concerns about sovereign debt found a significant mouthpiece on Thursday, when a senior Chinese central banker warned that the Greek crisis was just the beginning.

“We don’t see decisive actions telling the market we can solve this,” Zhu Min, a deputy governor of the People’s Bank of China, was reported as saying."

"Indeed, Simon Derrick, chief currency strategist at Bank of New York Mellon, thought that Mr Zhu’s comments “might well signal the point that we stop talking about a “Greek debt crisis” and start talking about a “Eurozone structural crisis” instead”.

But there is a potentially more important issue emerging. The poor reception given to the auction of $42bn of US five-year notes on Wednesday points to fatigue among buyers of US government debt. If this continues, yields will rise, but not for the good reason – faster growth – but for the bad reason – too much supply. This could knock the nascent economic recovery and hit asset markets, particularly cycle-peak equities, hard.

And who buys most of the US debt? Why, Mr Zhu and his colleagues of course."

"The growing struggle of governments to cope with their deficits is enveloping Portugal and threatening to sap confidence in Spain and Britain.

Portugal's debt downgrade by ratings agency Fitch sent tremors through markets, reminding investors that concern about sovereign debt is not limited to Greece, which still is struggling to convince the rest of the European Union to fund a bailout. Fitch took action after Portugal revealed its 2009 deficit was much bigger than expected.

North America is not immune to bad budget news. U.S. states are fighting losing battles to keep their budget gaps to a minimum. California is loosening its parole supervision to reduce the number of people returning to prison, in hopes of cutting a penal system budget that eats up more of the state's resources than education.

In Canada, Ontario confirmed that its budget deficit in the current fiscal year topped $21-billion. The province's budget for the coming fiscal year, which will released Thursday, is expected to forecast another deficit on the same scale."

"Britain's budget gap is even larger, forecast at 11.1 per cent in the coming fiscal year, according to the budget unveiled by the Labour government yesterday. Facing an election, the government put off drastic changes to reduce the deficit and used economic forecasts that are much more optimistic than private sector expectations to cast a better light on its deficit outlook.

Given the state of its balance sheet, Britain is at risk of a ratings downgrade, said Ian Beauchamp, a London-based strategist at Royal Bank of Canada's securities arm.

“The U.K. may be even more vulnerable [than Portugal],” he said, given that it's got a triple-A rating, which comes with high expectations. "

"AUSTIN – Lawmakers passed a tax swap four years ago that has turned out to be a tax swamp.

The Legislature's top budget-writing staff member told a panel Wednesday that the built-in fiscal gap the state faces is nearly $5 billion a year. While they knew that a reworked business tax meant to make up for a large chunk of property tax cuts has sputtered, legislators hadn't been told in such precise – and stark – terms how big the problem was.

"We expected that of the $7.1 billion a year in property tax relief that the state paid for, that the revenue increases would cover about 60 percent of that," John O'Brien, director of the Legislative Budget Board, told a newly created House panel. "As it turned out ... the new revenue covers about 36 percent of the change in state spending.""

"The Department of Water and Power on Wednesday threatened to withhold $73.5 million from the cash-strapped city of Los Angeles unless the City Council approved its proposal to increase rates between 8.8 percent and 28.8 percent."

""I regret to inform you that if the Energy Cost Adjustment Factor (ECAF) is not modified by March 31, 2010, the DWP's own fiscal stability will be so adversely affected that it will not be in a financial position to recommend to its Board of Water and Power Commissioners that they make a further surplus declaration,'' DWP Chief Operating Officer and acting General Manager Raman Raj wrote in a letter to the City Council.

"Without a further surplus declaration by the board, the DWP will not be able to transfer the previously identified $73.5 million to the city of Los Angeles general fund by the end of this fiscal year,'' Raj added."

......................5A) Villaraigosa warns of bankruptcy if L.A. City Council blocks electricity rate hike (From March 23)

"Torrential March storms can make it seem like the sky is falling down, but the Associated General Contractors want New Yorkers to know it’s really the bridges. Their new project NYBridgesAreFallingDown.com uses NYSDOT data to identify 163 bridges throughout the state that are “very dangerous,” in worse condition than the Lake Champlain Bridge was before it was closed for safety reasons in October (it proved unsalvageable and was blown up in December). New York has also fallen down on the job, without a plan to invest sufficient money in keeping bridges safe."

"In fact, a 2009 report by State Comptroller Tom DiNapoli pointed out that only 34.9% of the Fund’s resources have been used to repair and improve roads and bridges since 1991. Because of this, New York has had to transfer money from general taxes into the Fund to keep it solvent in recent years. But the state’s budget crisis has put that funding source at risk as well."

"A growing number of schools are in financial trouble after the Illinois State Board of Education released its annual report on the financial health of school districts.

Education officials say deficit spending has grown. Part of the problem is the state owes schools $894.2 million in unpaid bills. That amount could reach $1 billion by the end of the school year.

Based on 2009 financial reports, 44% of school districts are expected to overspend, compared to 40% last year and 32.5% in 2008.

29 schools are on this year's list compared to 22 last year.

Below is the complete financial watch list which is reserved for the most cash-strapped school systems. "

"Idaho's health insurance program for the poor will have to squeeze providers for savings, under a $1.55 billion budget passed by the House.

Wednesday's 38-30 vote backed a total 2011 Medicaid budget that's 3.5 percent below the previous year's original levels, at a time when the number of public-assistance recipients is rising."

"A European bank Wednesday seized $5.5 million left in trusts related to a disastrous $200 million investment in subprime-related securities made by five Wisconsin school districts.

The school districts have lost most of the $35 million of taxpayer money they had invested, and they could be on the hook for an additional $150 million as a result of the continuing fallout.

The districts’ predicament is the latest example of how cities, states and other municipalities across the U.S. are still reeling from exotic investments they bought before the financial crisis."

"BRUSSELS — Spain and Greece are calling for the European Union to extend an existing euro50 billion ($67 billion) bailout fund to eurozone nations."

  • Some other headlines:

Tenn. to send 853 state layoff notices this week

California Taxable Bond Sale Increased To $3.4 Billion

NYSE short interest rises to 14.1 billion shares

Newspaper ad revenue plummets to 1986 level

US Is Riskier Than Euro Zone; So Says CDS Market

City's deficit swells (Reno)

Illinois State Police may cut almost one-third of its staff

Pennsylvania considers taxing textbooks

WA gov warns of 20 percent cuts if budget stalls

Students may soon say goodbye to Cal Grants

Retirement Markets Lose Population

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Re: Daily Digest - March 25

"(RTTNews) - The federal government announced Thursday that it has auctioned $32 billion in 7-year notes, with a decrease in demand.

The auction saw a bid-to-cover ratio of 2.61. It also saw a stop-out rate of 3.374 percent.

The previous 7-year notes auction took place on February 25. It saw the sale of $32 billion of the security, a bid-to-cover ratio of 2.98 and a stop-out rate of 3.078 percent.

A bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold. "

"Treasurys are continuing to sell off after yet another weak auction, underscoring the fact that supply concerns are absolutely starting to weigh on activity.

The U.S. Treasury sold $32 billion in seven-year bonds Thursday, which rounds out the Treasury’s $118 billion issuance this week. The reaction isn’t pretty: The 10-year yield (which moves inversely to its price) briefly hit its highest point in 2010 of 3.91% after the auction.

Direct bidders - investors who buy directlyfrom the Treasury rather than going via primary dealer banks - took just 8% of new 7-yr notes compared to record 17.2% they took at Feb. auction and the 11.3% four auction average.

Indirect bidders - a proxy for foreign demand - took 42%, better than the 40.3% in Feb. but not as good as the 49.7% four auction average.

This is capping a pretty ugly week for Treasurys, which are being hit by the massive looming supply - this year alone, the Treasury Dept. is expected to sell some $1.6 trillion in debt - as well as the appeal of higher-yielding alternatives in other parts of the bond market."

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Re: Daily Digest - March 25

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Second 'Revolution' Now Underway in U.S.?

Second 'Revolution' Now Underway in U.S.?

http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=10049:second-revolution-now-underway-in-us&catid=47:us-commentary&Itemid=132

With the U.S.'s federal politicians gleefully playing their game of sabotaging the government of whatever party is in power, U.S. citizens now truly have “taxation without representation”. With the U.S. hurtling toward bankruptcy, and with the U.S. middle-class facing its imminent extinction, I (and many others) have called upon Americans to shrug off their self-destructive apathy and stand up to their government.


It appears that this is exactly what is beginning to take place in the U.S., and in a genuinely constructive manner: through the assertion of “state sovereignty” by a growing number of U.S. state legislatures. While U.S. state governments are also “contaminated” through the two-party duopoly of Republicans and Democrats, with many times the number of representatives (through all fifty states) than the total number of Washington politicians, U.S. Corporate Oligarchs 'own' a much smaller percentage of these members – meaning it is still possible in some state legislatures to see some semblance of a “democratic” government.

 

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Re: Daily Digest - March 25

http://www.heatingoil.com/blog/british-energy-minister-holds-closed-door-meeting-on-peak-oil323/

British Energy Minister Holds Closed-Door Meeting On Peak Oil

Posted by Zoe Macintosh on March 23, 2010 at 1:41 pm

As reported by the Guardian, the UK government is responding to the report released last month entitled “The Oil Crunch: A wake-up call for the UK economy” by holding a meeting between energy minister Lord Hunt and the British business leaders responsible for the headline-grabbing report.

“We do this all the time; it is just a normal stakeholder meeting,” a spokeswoman for the Department of Energy and Climate Change said Sunday night, denying that the “private and behind-doors” meeting with peak oil advocates represented any deviation from status-quo approach to energy. However, the decision to take into account an independent assessment on the future of cheap oil supplies would be a radical departure from the UK government’s policy of silence on the issue.

The report released by the business group known as the UK Industry Taskforce on Peak Oil and Energy Security made waves in February by stating an oil crunch was imminent within the next five years and that society was completely unprepared for the consequences. The report was not a scientific study, but rather a collection of “opinion” pieces written by global oil supply expert Chris Skrebowski and London School of Economics lecturer Dr. Robert Falkner. Unlike other, similar warnings from the UK Energy Research Centre in October, and the International Energy Administration, the Industry Taskforce’s report has prompted a faster response, possibly because it comes from the business community, a sector that typically has the most to lose when it comes to environmental awareness, and because the individuals involved are very powerful. The taskforce’s business leaders include billionaire Richard Branson, founder of global brand Virgin Group; Jeremy Leggett, CEO of Solarcentury; and Ian Marchant, CEO of Scotland’s largest company, Scottish and Southern Energy Group.

The Dept. of Energy and Climate minister Lord Hunt and other unidentified energy civil servants started meeting with the taskforce Monday. That the meeting is located at the Energy Institute, the UK’s more expansive version of the (oil industry-supported) American Petroleum Institute, demonstrates an interest in grappling with peak oil issues by understanding the needs of industry. Contrast that to the US, which is involved with energy-efficiency initiatives, but has yet to hear from any private sector leaders even though any adaptive project in transport, agriculture, power generation, or heating would inevitably encroach upon existing commercial structures.

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Hee Haw Inflation of Deflation Song

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Re: Daily Digest - March 25

Oh JAG, I love it! I think you've hit on a whole new approach to the Crash Course for Dr. M. Wonder if he can play the guitar?

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Damnthematrix
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Peak Debt in Australia

'Peak debt' approaching as house prices outstrip incomes

By economics correspondent Stephen Long

http://www.abc.net.au/news/stories/2010/03/25/2856323.htm


Michael Rennie says surging house prices are driving debt levels through the roof (ABC News: Giulio Saggin, file photo)

The growth in household debt and house prices in Australia is unsustainable and the nation must at some stage hit "peak debt', according to a senior partner in one of the world's biggest management consultancies.

"In the past ten years our household debt has grown much faster and to a much higher level than it is in places like the the UK and the US where we tend to look at them and say, 'my goodness, look at that incredibly high level of household debt'," Michael Rennie, managing partner of McKinsey and Co for Australia and New Zealand, told ABC Radio's PM program.

"You have to ask yourself, 'when does it become a problem?'"

Asked about predictions that house prices would double this decade, he said:

"They're saying they are going to double in the next ten years because of supply and demand: that there's a lack of supply, and demand is going to increase because of the increase in population in the cities, etcetera.

"But you have to ask yourself, if you look at the research that's been done over the past couple of years by APRA and others on the percentage of households paying more than 30 per cent [of gross household income on mortgage repayments] which is the comfort level for their mortgages, and incomes aren't going to double, you've got to say somewhere along the line that is all not going to add up.

"We hit peak debt at some point. We hit a level that is well above people's sustainability."

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Keensean economics

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