Daily Digest

Daily Digest - March 7

Sunday, March 7, 2010, 10:52 AM
  • An Unholy Trinity: Congress, The Federal Reserve, And Wall Street
  • America’s Commodity Crisis – 2010 Edition
  • 15,000 San Francisco Workers Given Layoff Notices (And Re-Hired At Lower Wages)
  • SnowJob: Revising the Non-Farm Payrolls Report
  • The Scary New Rich
  • Iceland Voters Reject Payback Plan
  • Graph: All the Money Went to the Richest Americans
  • Elizabeth Warren Discusses The Global "Enron": From Wall Street To Greece And Back
  • It Isn’t Easy Being Clean


An Unholy Trinity: Congress, The Federal Reserve, And Wall Street (Doug S.)

Fed officials are guilty of unsustainable redistributive monetary policy just as the welfare state is guilty of unsustainable redistributive fiscal policy. So how is Wall Street any less guilty of unsustainable redistributive policy than the Fed or the Congress? Wall Street pumps up the paper value of stocks to set the stage for disequilibrium cycles. Once the widespread expectation of further price momentum has passed, a new cycle of winners and losers is created quite independently of the ability of Corporate America to generate profits.

America’s Commodity Crisis – 2010 Edition (Ilene)

Commodities are a TAX. They are the worst kind of tax because they flatly (not progressively) charge every man woman and child in this country more money for the same food, fuel, shelter and clothing that they had to have last week in order to live. It doesn’t matter if those people are trying to save or trying to tighten their belts or trying to get out of debt – high commodity prices are a shake-down that rips money out of the pockets of the middle class and funnels it to the very, very small class of commodity producers, commodity speculators and the people who finance them and collect the fees.

15,000 San Francisco Workers Given Layoff Notices (And Re-Hired At Lower Wages) (Ben Johnson)

Emotions ranged from disbelief to despair to downright anger Friday as 15,000 San Francisco city workers received pink slips. But Mayor Gavin Newsom reiterated that his controversial plan to rehire them under shortened workweeks would wind up saving thousands of jobs.

Newsom ordered the layoff notices be sent to most of the city's 26,000 workers and said the overwhelming majority of them will be hired back within two weeks to work 37.5 hours a week instead of their current 40 - meaning they'll see a 6.25 percent cut to their paychecks.

SnowJob: Revising the Non-Farm Payrolls Report (mhoop)

It appears as though the concerns expressed by the Administration about the snow storms and their impact on lost employment was overdone, if not misplaced. The market is pleasantly surprised with this -36,000 jobs number, since the expectations had been calibrated lower so effectively.

The Scary New Rich (Bill S.)

The middle classes have always been the bulwark of society. Aristotle believed they were democracy's secret weapon—the protectors of social values, the moderators of political extremism, ramparts of reason over fiat, and believers in a society run by laws instead of by strongmen. They have also been the engines of economic growth, setting the stage centuries ago for the expansion of capitalism and global trade, and continuing through the ages to snap up every new gadget or service in sight. Now, with the Western middle classes sinking into debt and distress, many economists look to a new emerging-market middle class as the potential foundation for a new age of global safety and prosperity.

Iceland Voters Reject Payback Plan (Ben Johnson)

Voters in Iceland have overwhelmingly rejected proposals to pay the UK and the Netherlands in the wake of collapse of the Icesave bank. With a third of results counted, 93% of voters said "No" in a referendum. Iceland's prime minister says her government will remain in office and continue to seek a deal.

Graph: All the Money Went to the Richest Americans (mhoop)

Elizabeth Warren Discusses The Global "Enron": From Wall Street To Greece And Back (pinecarr)

The appearance of the Chair of the Congressional Oversight Panel, Elizabeth Warren, on Charlie Rose is a must watch. In addition to an in depth discussion of the the consumer protection agency, which despite all valiant attempts to the contrary, will likely end up under the Fed's jurisdiction, thereby making the world's most powerful cabal even more powerful, Warren touches on a variety of other issues, including the sovereign debt situation, commercial real estate, and the one concept at the heart of it all: the lack of impairments by stockholders (and certainly by debtholders) in what was a bankrupt financial industry.


It Isn’t Easy Being Clean (mhoop)

In 2008, Syncrude became Canada’s first oil-sands operator to receive government reclamation certification for a former mine, meaning that the company had demonstrated the site could support the same vegetation and wildlife as before the land disturbance. That has not saved it, however, from facing legal action over the deaths that same year of 1,600 ducks in a single incident at one of its tailings ponds, where mining waste is dumped

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saxplayer00o1's picture
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Re: Daily Digest - March 7

"As the jobless rate hovers at its highest level in decades, employers statewide are seeing unemployment insurance taxes rise.

Record claims have exhausted unemployment funds in many states, forcing them to seek loans from the federal government.

The situation has triggered automatic increases in unemployment insurance rates in states like New York that can't generate enough money to cover jobless benefits.

"We are insolvent," said Nancy Dunphy, deputy commissioner for employment security with the state Department of Labor. "We don't generate enough revenues to cover benefits."

In 2009, the state paid $5.1 billion in claims - much of which came from loans. As of March 1, New York owed $2.62 billion to the Federal Unemployment Account - the third-highest balance in the nation.

California leads with an outstanding balance of $7.54 billion, followed by Michigan with $3.55 billion.

More than 30 states have had to draw $33.66 billion from the fund - a figure that is expected to rise to $40 billion by the end of the year."

"TOKYO — It is too early for Japan to end its massive stimulus spending because the world's second biggest economy is still slowly recovering from a severe recession, the finance minister said Sunday.

"We actually want to move to an exit strategy soon but it would make things worse," Finance Minister Naoto Kan said in a programme on the public broadcaster NHK.

"I think it is too early to take steps towards fiscal belt-tightening in the immediate future," he said."

"SPRINGFIELD, Ill. -- Gov. Pat Quinn's plan to fill the biggest deficit in Illinois history includes cuts so severe that 17,000 teachers could lose their jobs, thousands of poor families would get less help with child care and fewer state troopers would patrol the roads, a top Quinn aide said Saturday.

Such cuts will be necessary even if lawmakers agree to the governor's call for an income tax increase, said Quinn budget director David Vaught.

"This is the reality budget. This is what's really happening," Vaught said in an interview with The Associated Press."

"Unless there is a fundamental change in the way Toledo's government operates, the city will likely be unable to pay its employees before the year is through, a top official in the Bell administration warned.

That looming financial disaster leads people such as Mayor Mike Bell and Councilman D. Michael Collins to throw out words like "bankruptcy" or "receivership," two feared terms but ones that are not likely to become reality.

The truth is that receivership or bankruptcy is probably not an option for the city anytime soon. But being slapped by the state as a "fiscal emergency" municipality is a real threat - a label some dislike but others advise Toledo to embrace given its $48 million deficit.

"If you cannot make payroll for 30 days, you are there. You are in fiscal emergency," said Deputy Mayor of Operations Steve Herwat, Mr. Bell's right-hand man."

"The Greek debt tragedy currently unfolding -- the country's on-balance-sheet debt is 13 times its gross domestic product -- may be just the tip of the iceberg.

More troubling, according to a report out last week, is the off-balance-sheet debt owed by the country, and its fellow, over-indebted nations Portugal, Italy, Ireland and Spain, the so-called PIIGS, representing the five-nation acronym.

The off-balance-sheet debt, where countries guarantee the debt of private developments, many of which had gone bust, could multiply the problem many times -- putting further pressure on the euro, the report said.

Gordon Long, founder of a private venture-capital fund, said in an investor note that there is more than $600 trillion in notational value in the global derivative market, with $437 trillion of it tied to interest rate swaps.

"Any credit event could trigger a cascading event," Long wrote in the report. "It does not have to be default; it could be a downgrade in swap contracts that would do the trick for a collateral call. Something is going to cause it to topple, whether it's a situation in Dubai, Greece or New Jersey." "

"SACRAMENTO — With even well-managed counties, cities and schools finding themselves in the same budget hole that has swallowed state government, California now confronts a financial crisis that may be unrivaled — though it is also maddeningly difficult to quantify.

In fact, the problem is so expansive that several experts contacted by the Mercury News wouldn't even hazard a guess. So just how broke is California?

A quick, unscientific look around the Golden State suggests that California's collective deficit may be double the state government's $20 billion budget gap. San Francisco must trim $522 million from its budget. San Jose's upcoming balance sheet is $116.2 million in the red. The Los Angeles Unified School District is staring at a $640 million shortfall. Even tiny Dorris, a few miles from the Oregon border (and home to the tallest flagpole this side of the Mississippi!) is contemplating cuts.

Now consider that California has 58 counties, 480 or so cities and nearly 1,000 school districts — plus dozens more special districts, like transit agencies and water boards. Amid California's harshest slump since the Great Depression, officials from one end of the state to another are preparing to close parks, fire teachers and police officers, and heave Hail Mary plans for tax hikes.

"2010-11 will be the worst year we've seen," warns Terry Anderson of the education policy advocate School Services of California. "That part is clear.""

"TRENTON -- When New Jersey announced that property taxes went up by an average of 3.3. percent last year — the smallest increase in a decade of rapid growth — some hailed it as evidence that a 3-year-old law capping annual increases at 4 percent had finally taken hold.

But a closer look shows the law is hardly a fire wall.

Nearly a third of the state’s 566 municipalities raised property taxes above the cap with the state’s permission last year, many because they were able to show they were facing virtual civic dysfunction, a Star-Ledger review shows. Through hundreds of pages of applications asking to exceed the cap, school and town officials spared no adjectives when describing what would happen without relief: The police force would be cut. Special education aides would be fired. Fire hydrants would not be installed.

"Impossible" one town said of the budget it would produce under the cap. "Catastrophic" disruptions to basic services, warns another.

Still others envisioned Armageddon scenarios:"

"Jefferson County and some of its Wall Street creditors are in talks that would have banks forgiving a portion of the county's $3.2 billion sewer debt and refinancing the remaining debt at a fixed interest rate for up to 40 years, county officials say. "

"How much off?

Bobby Humphryes, the only sitting commissioner who plans to run again for his seat, said he'll seek to become commission president and position the panel to file under Chapter 9 of the U.S. Bankruptcy Code.

However, Humphryes said Friday he's receptive to a settlement if creditors forgive enough debt.

"I see no reason to make these people whole," Humphryes said, because both the county and the creditors played roles in creating the county's financial mess. "It depends on how much of a haircut they are willing to take on it." "

Canada May Sell Some Government Assets to Raise Revenue to Pay Down Deficit

Defaults on student loans rising

Increased Medicaid usage spikes cost (Alaska)

Economy faces 'high' risk of relapse: BCC (UK)

mono's picture
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Re: Daily Digest - March 7

The_Elisabeth Warren_link does´nt seem to work.





j_d's picture
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Re: Daily Digest - March 7

it's been fixed!

mjsully999's picture
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All the Money Going to the Richest Americans

Would love to see what statistics this guy is using.  Seems pretty partisan - gave himself away by mentioning one political party.  Neither side of the aisle is exempt from our financial problems.

plato1965's picture
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70's nostalgia - back to the 3 day week ?

 back to the "3 day week" .. ?


 In the UK in the 70's it was due to strikes and power cuts after the oil shock..





Subprime JD's picture
Subprime JD
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Posts: 562
Re: Daily Digest - March 7

Hey guys and gals, national geograhic is having a special tomorrow night at 10PM eastern. Its called AFTERMATH: the end of oil. Im curious to see if they even mention the word "peak oil" even once. More importantly, will they show the chart of oil discoveries and how they peaked in the 60's. We will find out 2moro

Damnthematrix's picture
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Re: Daily Digest - March 7

Fake businesses are to be used to lessen the impact of the recession on high
streets in North Tyneside.

With 140 empty shops in the borough, council bosses think they have come up with
a unique way of ensuring shopping areas remain as vibrant as possible.

The first empty shop unit to be given a makeover with a "flat pack" shop front
is in Whitley Bay.

North Tyneside Council said the move was cost-effective and would help to
attract new investment...

..."We need to ensure that the remaining businesses continue to survive and that
means ensuring our high streets look attractive to both shoppers and potential
business investors...


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