Daily Digest

Daily Digest - March 9

Tuesday, March 9, 2010, 10:41 AM
  • Proposal for European Monetary Fund Wins EU Support
  • King World News - Jim Sinclair
  • King World News - Harry M. Markopolos
  • Gold Is Decade's Best Performing Investment
  • It Will Be Far Worse Than The Great Depression
  • Germany Considers The Creation of a European Monetary Fund, IMF Model
  • Europe Bars Wall Street Banks From Government Bond Sales
  • China's Zombie Growth
  • Officials: Stimulus helped NH retain jobs
  • Fed Audit Bitterly Opposed By Treasury
  • More School Districts Trying to Save Money by Shutting Down 1 Extra Week Day
  • Diesel Shortage Paralyzes Egypt's Highways
  • How Food And Water Are Driving A 21st-Century African Land Grab
  • Growing Low-Oxygen Zones In Oceans Worry Scientists

Economy

Proposal for European Monetary Fund Wins EU Support (Ben Johnson)

German Finance Minister Wolfgang Schäuble has suggested setting up a European monetary fund to enable the euro zone to tackle debt crises such as that seen in Greece without resorting to the IMF. EU Monetary Affairs Commissioner Olli Rehn has welcomed the idea.

German Finance Minister Wolfgang Schäuble has won support from EU Economic and Monetary Affairs Commissioner Olli Rehn for a proposal to set up a European monetary fund to tackle debt crises such as the one in Greece

King World News - Jim Sinclair (Davos)

In this interview JIm discusses the loss of confidence in paper, the 24 hours the Dollar was in doubt, gold, negative interest rates, the liquidation for the Hunts, what the Hunts believed and what their mistake was, another individual/entity with a large position in silver, the final pillar in the gold bull market, attacks on currencies and much more.

King World News - Harry M. Markopolos (Davos)

In this interview Harry discusses the SEC’s failure, goes after the SEC for what he terms their incompetence, how he, his family and his team’s lives were threatened, the fact that Bernie Madoff was a mob boss, Greenspan’s failure as Fed Chairman, he knew Madoff was a fraud, criminal banking syndicates, how ruthless Madoff was, the devastation and heartbreak in the wake of the fraud and much more.

Gold Is Decade's Best Performing Investment (joemanc)

The price of the precious metal rose 277 per cent during the past decade, with investors particularly attracted to gold during the recession as they sought a safe haven for their money.

Overall, gold, silver and platinum increased in value by 242 per cent between December 1999 and December 2009, the equivalent of an average annual return of 13.1 per cent. It means precious metals outpaced inflation which has increased by 30 per cent during the decade or by an average 2.7 per cent a year.

It Will Be Far Worse Than The Great Depression (pinecarr)

If the economy was a person, then the producing sector (agriculture, manufacturing, mining, etc) would be its “income”. If the service sector is much smaller than the producing sector (like China today or the US one hundred years ago), then a country is living below its means (net saver). If the service sector is much larger than the producing sector (like China today or the US one hundred years ago), then a country is living above its means (depleting savings and going into debt).

Germany Considers The Creation of a European Monetary Fund, IMF Model (Christian W.)

"We're not planning an institution that would compete with the IMF, but for the internal stability of the eurozone, we need an institution that has the experience and power of the IMF," Mr. Schaeuble told the paper on Sunday

Europe Bars Wall Street Banks From Government Bond Sales (Christian W.)

For the first time in five years, no big US investment bank appears among the top nine sovereign bond bookrunners in Europe, according to Dealogic data compiled for the Guardian. Only Morgan Stanley ranks at number 10.

Goldman Sachs doesn't make the table. Goldman made it to number five last year and in 2006, and number eight in 2007, the data shows. JP Morgan was in the top ten last year and in 2007 and 2006 but doesn't appear this year.

China's Zombie Growth (Christian W.)

Stimulus spending is a net negative in the US; what about in China? The China story is largely a stimulus story too. China’s stimulus, compared to GDP, is the world’s largest ever – four times the size of America’s stimulus program.

Officials: Stimulus helped NH retain jobs (woodman)

The stimulus was a boon for his company last year, but Charbonneau said he is worried about the next few years. The federal funding came just as private sector work in the paving industry dried up.

Unless the state boosts spending on road projects, these businesses will likely struggle once the stimulus money is gone, he said.

Fed Audit Bitterly Opposed By Treasury (Ben Johnson)

The Treasury Department is vigorously opposed to a House-passed measure that would open the Federal Reserve to an audit by the Government Accountability Office (GAO), a senior Treasury official said Monday. Instead, the official said, the Treasury prefers a substitute offered by Rep. Mel Watt (D-N.C.), and would like to see it enacted as part of the Senate bill. The Watt measure, however, while claiming to increase transparency, actually puts new restrictions on the GAO's ability to perform an audit.

More School Districts Trying to Save Money by Shutting Down 1 Extra Week Day (Ben Johnson)

More and more school districts are saving money by shutting down for one extra day each week. It's a controversial move. What will be the impact on children? There is no research that tells us that," noted the National School Boards Associations' Anne Bryant.

Energy

Diesel Shortage Paralyzes Egypt's Highways (Christian W.)

Diesel fuel shortages continued throughout Egypt on Sunday, causing cars and buses to form 500- meter-long queues at some gas stations, as supply quantities were cut by half in many areas of Cairo and the provinces. Several fights between drivers over limited supplies of diesel fuel were reported, with police having to intervene in some cases.

Environment

How Food And Water Are Driving A 21st-Century African Land Grab (Christian W.)

Ethiopia is only one of 20 or more African countries where land is being bought or leased for intensive agriculture on an immense scale in what may be the greatest change of ownership since the colonial era.

Growing Low-Oxygen Zones In Oceans Worry Scientists (Donald S.)

Areas of hypoxia, or low oxygen, have long existed in the deep ocean. These areas — in the Pacific, Atlantic and Indian oceans — appear to be spreading, however, covering more square miles, creeping toward the surface and in some places, such as the Pacific Northwest , encroaching on the continental shelf within sight of the coastline.

Please send article submissions to: [email protected]

12 Comments

saxplayer00o1's picture
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Re: Daily Digest - March 9

Benn Steil, director of international economics at the Council on Foreign Relations, said his analysis suggests entities that purchased US government debt in 2009 might cease to do so once the US central bank halts purchases of Freddie Mac and Fannie Mae mortgage-backed securities (MBS) – which could precipitate a debt crisis in the world's largest economy.

"Who owns US Treasuries? The Federal Reserve was the biggest net buyer of US government securities last year and it accounted for almost all the purchases or the financing of US government debt.

"The Texas budget shortfall for next session -- whether it's $11 billion or $15 billion -- just got bigger.

Health and Human Services Executive Commissioner Tom Suehs just told House budget writers that the recession has overwhelmed predictions for how many Texans would sign up for Medicaid, the nation's main health care program for the poor.

It's well known that last year, lawmakers low-balled caseload growth and health care inflation in Medicaid. Suehs said he got money to cover a 3.4 percent growth in the rolls in the current fiscal year, which ends Aug. 31. Instead, enrollment will increase by 11 percent, he said. Many more poor Texans who didn't turn to Medicaid in the past, even though they were eligible, are now enrolling, he said."

.............2A) $11 billion budget shortfall projected for Texas

"John O'Brien, director of the Legislative Budget Board, told a committee of House budget writers that the estimate is conservative and could grow to as much as $15 billion."

"March 9 (Bloomberg) -- German bunds rose for the first day in three as disappointing corporate earnings drove stock markets lower and Fitch Ratings said it may cut Portugal’s credit rating, stoking demand for the safest assets.

Portugal’s bonds erased gains, widening their yield spread over German debt, as Fitch said austerity measures announced yesterday may not be enough for the nation to avoid a downgrade."

"The budget outlook for D.C. remains bleak. This year's deficit has ballooned to over $200 million and is expected to triple the following year. The city is required to close the gap and difficult decisions lie ahead."

"March 9 (Bloomberg) -- Limits to trading of credit-default swaps on sovereign debt may help create a “government debt bubble,” according to UniCredit SpA.

Policy makers are proposing curbs to derivatives amid claims hedge funds and banks profited from Greek swaps, driving up the nation’s financing costs. Prime Minister George Papandreou will today press President Barack Obama to help combat “unprincipled speculators.”"

........................5A) Merkel: Need Fast Action On Credit Default Swaps

"Germany and France want the EU to introduce a directive restricting the use of credit default swaps and banning the short-selling of stocks"

"The percentage of American workers with virtually no retirement savings grew for the third straight year, according to a survey released Tuesday.

The percentage of workers who said they have less than $10,000 in savings grew to 43% in 2010, from 39% in 2009, according to the Employee Benefit Research Institute's annual Retirement Confidence Survey. That excludes the value of primary homes and defined-benefit pension plans.

Workers who said they had less than $1,000 jumped to 27%, from 20% in 2009."

"The dire financial situation many states find themselves is embodied by efforts the state of Pennsylvania has made to secure additional Medicaid assistance funding, recent news items suggest.

Officials at Pennsylvania's Department of Public Welfare are seeking roughly $1 billion in additional Medicaid assistance from Washington. They hope to secure it through an extension of the temporary increase in the federal medical assistance percentage (FMAP) and a Medicaid drug rebate program, the Republican Herald reported. That state expects to see its medical assistance caseload increase by 3% in the next year, and without the federal assistance, state Medicaid spending will drain an extra $1 billion from a state taxpayer-funded General Fund, the newspaper noted."

"Florida home-building permits in 2008 fell 45 percent from 2007 to the lowest since at least 1980, U.S. Census Bureau data show. That’s pushed a record $3 billion of debt sold by 122 community development districts into default, according to Distressed Debt Securities, a Miami Lakes, Florida, newsletter. The bonds total almost half the $6.3 billion of tax-exempt debt from 183 issuers that failed last year, the publication said.

‘Default Wave’

“It’s the single biggest default wave in the history of municipal bonds,” said Richard Lehmann, the newsletter’s publisher, who defines default as failing to pay debt service or tapping reserves to do so. “There are about 78 more districts with $2.7 billion of bonds on our watch list that are likely to go into default this year.”"

"Burlington Telecom's outstanding debt is now affecting the city's credit rating.

Moody's Investors services knocked Burlington's rating down two notches after concerns over BT's inability to repay $17 million in debt which it borrowed from city coffers. If BT cannot repay the money, experts say the city may face long-term cash flow issues."

"NEW YORK, March 8 (Reuters) - New York state could run out of money in May or June, Governor David Paterson said on Monday, underscoring the state's perilous finances, which could force it to delay income tax refunds by a few weeks.

The Democratic governor, speaking at a broadcast town hall meeting, said: "We are crossing the Rubicon between recession and something else far worse if my colleagues and I in the legislature can't close a deficit that is something like $9 billion." "

"San Diego city is at odds with its pension board over who is responsible for covering hundreds of million of dollars in investment losses to its pension fund.

The city’s annual contribution to its pension fund this year will be close to $250 million, up almost 100 million from last year. That’s because of investment losses.

Investment losses may be even steeper this year. In fact the retirement fund has already lost $800 million this year. That could mean the city ends up paying a third of its General Fund in 2011, just to cover its pension obligations."

"HAVERFORD — School district officials are bracing for a 10-fold jump in their annual payments to the public school teachers’ retirement plan that would cost the average township homeowner more than $1,300 a year in taxes.

The increase, which will similarly affect school districts across Pennsylvania that are part of the Public School Employees Retirement System, would balloon the Haverford School District’s annual payment from $780,000 in 2010-11 to $7.36 million in 2014-15, according to numbers presented by school board member Larry Feinberg at a meeting last week."

"March 9 (Bloomberg) -- Greek tax increases designed to curb the European Union’s biggest budget deficit may fail to generate as much additional revenue as the government in Athens estimates, a draft EU report said.

That would hinder Prime Minister George Papandreou’s efforts to cut the deficit to 8.7 percent of gross domestic product this year from 12.7 percent in 2009."

German bankruptcies up

Pakistan External Debt Rises To $55.68 Billion On Higher IMF Borrowings

Goldman Sachs sued by big pension fund over pay

China Says Committed to US Debt, Wary on Gold

Schwarzenegger Vetoes Bill to Shave $2 Billion From Budget Gap

Ga. revenues continue to plunge for 15th month

Feb. tax revenue falls short (Nebraska)

480 Fulton County teacher positions on the chopping block

U.K. Banks May Need to Cut Assets by $792 Billion, Pierce Says

gregroberts's picture
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Re: Daily Digest - March 9

Williams: Expect Hyperinflation Within the Next 5 Years

"Pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations, yet the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out according to John Williams, founder of Shadowstats.com."

http://www.24hgold.com/english/news-gold-silver-williams-expect-hyperinf...

 

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Re: Daily Digest - March 9

On another note: Treasury released it's GAAP (Generally Accepted Accounting Procedures) deficit figures for 2009.

  • 90 days late
  • GAAP now stands for Geithner Accepted Accounting procedures because they actually profess that our deficit shrank from GAAP 5.1 trillion to GAAP 4.3 trillion at a time when federal expenses went parabolic and federal revenues tanked
  • John Williams of Shadow Statistics figures/estimates GAAP 2009 deficit to be 9 trillion

People made money betting against Enron. People will make a LOT of MONEY betting against the USA -imo

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Re: Daily Digest - March 9
Davos wrote:

GAAP now stands for Geithner Accepted Accounting procedures because they actually profess that our deficit shrank from GAAP 5.1 trillion to GAAP 4.3 trillion at a time when federal expenses went parabolic and federal revenues tanked

  • lol. Turbo Tax Timmy!
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Re: Williams - Expect Hyperinflation Within the Next 5 years

Good article, Greg!

For those trying to assess if/when the hyperinflation scenario may happen, you may want to read the fine print in the article.  Per the article, John Williams (Shadowstats.com) states:

"...risks are particularly high of the hyperinflation crisis breaking within the next year." [bold mine]

Chris also made a statement in his recent blog "Nowhere To Run - A Monetary Crisis", that hit home for me:

"It is my contention that we are past the elbow on an exponential chart.  The future is going to change suddenly, rapidly, and without asking for permission."  [bold mine]

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Re: Daily Digest - March 9

<http://www.nytimes.com/2010/03/09/business/global/09pemex.html>

Mexico Oil Politics Keeps Riches Just Out of Reach

By CLIFFORD KRAUSS and ELISABETH MALKIN

VENUSTIANO CARRANZA, Mexico — To the Mexican people, one of the great achievements in their history was the day their president kicked out foreign oil companies in 1938. Thus, they celebrate March 18 as a civic holiday.

Yet today, that 72-year-old act has put Mexico in a straitjacket, one that threatens both the welfare of the country and the oil supply of the United States.

The national oil company created after the 1938 seizure, Pemex, is entering a period of turmoil. Oil production in its aging fields is sagging so rapidly that Mexico, long one of the world’s top oil-exporting countries, could begin importing oil within the decade.

Mexico is among the three leading foreign suppliers of oil to the United States, along with Canada and Saudi Arabia. Mexican barrels can be replaced, but at a cost. It means greater American dependence on unfriendly countries like Venezuela, unstable countries like Nigeria and Iraq, and on the oil sands of Canada, an environmentally destructive form of oil production.

“As you lose Mexican oil, you lose a critical supply,” said Jeremy M. Martin, director of the energy program at the Institute of the Americas at the University of California, San Diego. “It’s not just about energy security but national security, because our neighbor’s economic and political well-being is largely linked to its capacity to produce and export oil.”

Mexico probably still has plenty of oil, especially beneath the deep waters of the Gulf of Mexico, but Pemex lacks the technology and know-how to get it out. Inviting foreign companies into the country to help is one of the touchiest propositions in Mexican politics.

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Re: Daily Digest - March 9 David Walker

David Walker, former US Comptroller General who is frequently referenced by Chris, was interviewed today on Fresh Air.

Listen to podcast on iTunes or here:

http://www.npr.org/templates/story/story.php?storyId=124460237

He tells the cold hard facts about the threats of our structural deficits clearly and simply.  Some good quotes...

"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."

One amazing he said was President Bush would not meet with him to discuss deficit issues, but Chinese officials requested to meet with him to confirm the true financial state of the US - The Chinese get it more than we do!

Tom

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Re: Daily Digest - March 9

Negative interest rates?? My God, that fantasy sometimes comes to my mind, but I didn't actually think people were considering such follies!!!

Samuel

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Re: Daily Digest - March 9 David Walker

David Walker, former US Comptroller General who is frequently referenced by Chris, was interviewed today on Fresh Air.

Listen to podcast on iTunes or here:

http://www.npr.org/templates/story/story.php?storyId=124460237

He tells the cold hard facts about the threats of our structural deficits clearly and simply.  Some good quotes...

"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."

One amazing he said was President Bush would not meet with him to discuss deficit issues, but Chinese officials requested to meet with him to confirm the true financial state of the US - The Chinese get it more than we do!

Tom

 

Excellent catch, thank you!

 

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guardia
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Re: Daily Digest - March 9

"prefired"!! ROTFLOL! Thanks Christian, that made my day :)

Samuel

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Re: Daily Digest - March 9 - Past the Elbow

 

"It is my contention that we are past the elbow on an exponential chart.  The future is going to change suddenly, rapidly, and without asking for permission."  [bold mine]

Does this mean that the time is now 12:44 at Fenway Park (ch. 4)?  

When people advise to have 2/3 gold and 1/3 silver allocation, does it mean 20 oz gold and 10 oz silver or is it $20 and $10 worth?

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