Daily Digest

Daily Digest - May 24

Sunday, May 24, 2009, 10:55 AM
  • Obama: 'WE'RE OUT OF MONEY'
  • Why you have never heard of the great depression
  • Put another way, Dr. Al Bartlett: "Solutions Create More Problems - article about Al Bartlett"
  • Question Everything
  • Fed Open to Buying More Securities
  • BankUnited: 2009's Biggest Bank Failure
  • Week #22 Bank Failures 35 and 36
  • The mother of all debt clocks (Seen on The Big Picture)
  • Recession Turns Malls Into Ghost Towns
  • Fed’s Plosser Says Inflation to Increase, Warns of Complacency
  • Video-o-rama: Wall Street slumps on economic fears
  • Barron's: Greens Shoots = Ganga
  • Bailout Nation

Economy

Obama: 'WE'RE OUT OF MONEY'

at May 23 2009 10:32:18 ET

In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: "We are out of money."

C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on health care so far. This is a consequence of the crisis that we've seen and in fact our failure to make some good decisions on health care over the last several decades.

So we've got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it's putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don't reduce long-term health care inflation substantially, we can't get control of the deficit.

So, one option is just to do nothing. We say, well, it's too expensive for us to make some short-term investments in health care. We can't afford it. We've got this big deficit. Let's just keep the health care system that we've got now.

Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything...

SCULLY: When you see GM though as “Government Motors,” you're reaction?

OBAMA: Well, you know – look we are trying to help an auto industry that is going through a combination of bad decision making over many years and an unprecedented crisis or at least a crisis we haven't seen since the 1930's. And you know the economy is going to bounce back and we want to get out of the business of helping auto companies as quickly as we can. I have got more enough to do without that. In the same way that I want to get out of the business of helping banks, but we have to make some strategic decisions about strategic industries...

SCULLY: States like California in desperate financial situation, will you be forced to bail out the states?

OBAMA: No. I think that what you're seeing in states is that anytime you got a severe recession like this, as I said before, their demands on services are higher. So, they are sending more money out. At the same time, they're bringing less tax revenue in. And that's a painful adjustment, what we're going end up seeing is lot of states making very difficult choices there...

SCULLY: William Howard Taft served on the court after his presidency, would you have any interest in being on the Supreme Court?

OBAMA: You know, I am not sure that I could get through Senate confirmation...

Developing...

Why you have never heard of the great depression (Video)

Put another way, Dr. Al Bartlett: "Solutions Create More Problems - article about Al Bartlett"

Question Everything

To prove to you that timing doesn’t work, you’re shown various scenarios where “if you missed the X best days in the market, your rate of return would have been Y%,” something like this chart below from Paul Gire’s article in the Financial Planning Journal:

Missing in Action
The fact is, if you missed the 10 WORST days, your RoR jumps to an astounding 24.17%.

Even if you’re a long-only investor in mutual funds (the true weapons of mass destruction), this can be achieved by having Stop Orders or liquidation points entered at all times.

Fed Open to Buying More Securities

WASHINGTON -- Some Federal Reserve officials are open to raising the amounts of mortgage and Treasury securities purchase programs beyond the $1.75 trillion that they have already committed to buying, according to minutes from the Fed’s April meeting.

Officials, meanwhile, projected an even deeper recession than they expected three months earlier and a more sluggish recovery over the next two years as labor markets remain under pressure.

“Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery,” according to the minutes of the April 28-29 meeting, released Wednesday with the usual lag. (Read the full minutes.)

As widely expected, the Fed kept the target federal funds for interbank lending in a range near zero at that meeting. In a statement, officials said rates will stay “exceptionally low...for an extended period” suggesting rates could stay where they are into next year.

Policymakers also said in the policy statement three weeks ago that the economic outlook had improved “modestly” in the weeks since their March meeting, fanning hopes that the recession is in its final stages. Economic data have been mixed since late April, though, with some signs of stability in consumer and business surveys offset by ongoing weakness in spending and employment.

Data since the March FOMC meeting “provided some tentative evidence that the pace of contraction in real economic activity was starting to diminish,” according to the April minutes, citing “strengthened” financial conditions and indications of a pickup in household and business confidence.

Fed staff economists, meanwhile, revised up their projections for the economy in the second half of this year and 2010, “with real GDP expected to edge higher in the second half and then increase moderately next year.”

Still, quarterly economic projections included in the April meeting minutes highlight just how much the economic outlook had eroded since the beginning of the year. Fed officials see the economy contracting between 1.3% and 2% this year, versus forecasts for only a 0.5%-1.3% decline in January.

Gross domestic product is only expected to advance 2% to 3% next year, which is below what officials thought in January. They also downgraded their 2011 forecasts, though they are still centered around a solid 3.5% to 4.8% rate of growth.

The unemployment rate is expected to end 2009 between 9.2% and 9.6%, significantly higher than what officials expected in January. One official expects it to reach 10% this year. It’s expected to stay above 9% in 2010, too.

Inflation should remain “subdued,” the Fed said, although many officials thought the risk of deflation “had diminished.”

The suggestion in the minutes that some officials think more asset purchases may be in the offing should cheer those on Wall Street that were disappointed when the Fed kept the size of their mortgage-related and Treasury security purchase programs unchanged last month at $1.45 trillion and $300 billion, respectively.

The FOMC “discussed its strategy for communicating the anticipated path of its asset purchases and the circumstances under which adjustments to that path would be appropriate,” according to the minutes.

“All members agreed that the statement should note that the timing and overall amounts of the Committee’s asset purchases would continue to be evaluated in light of the evolving economic outlook and conditions in financial markets,” the minutes stated.

Officials also signaled that while they are open to more transparency, they are also unlikely to name names when it comes to the banks that use the Fed’s lending facilities.

“It was noted that disclosing the identities of individual borrowers would very likely discourage use of the Federal Reserve’s liquidity and credit facilities,” the Fed said.

BankUnited: 2009’s Biggest Bank Failure

As they round the clubhouse turn, moving up on the inside post, its Florida’s BankUnited FSB.

We have a new winner for the biggest bank failure this year: Expect this debacle to cost the FDIC’s insurance fund $4.9 billion.

BankUnited moves into the 2nd place position in recent years, behind only IndyMac Bank, which cost the FDIC $11 billion. (Schumer!)

WSJ:

BankUnited’s failure is a stark reminder of how fragile many banks in the country remain. The U.S.’s 19 biggest banks this month performed better than expected on government “stress tests” and several large and midsize banks in recent weeks have successfully raised capital through public stock offerings. Government officials say they are still concerned, though, about dozens of banks across the country that made bad bets on real estate, and these troubles will likely continue to ripple through the financial system.

Bloomberg:

BankUnited Financial Corp., the ailing Florida lender, was shut by federal regulators and its assets were sold to private-equity firms including WL Ross & Co. and Carlyle Group in the largest U.S. bank failure this year. The group’s purchase of the bank, deemed “critically undercapitalized” by the Office of Thrift Supervision, was the “least costly” resolution, the Federal Deposit Insurance Corp. said today in a statement. The closing will cost the insurance fund $4.9 billion, pushing the total cost of 34 seizures so far this year to more than $10 billion.

Week #22 Bank Failures 35 and 36

Strategic Capital and Morton Community Bank were seized by the FDIC tonight. Below are the FDIC announcements on the matter. The FDIC estimates a cost to taxpayers of $173 million (nearly 30% of assets) for Strategic Capital and $106 million for Citizens, for a total of $279 million.

Here is the Strategic Capital FDIC e-mail:

Strategic Capital Bank, Champaign, Illinois, was closed today by the Illinois Department of Financial and Professional Regulation, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Midland States Bank, Effingham, Illinois, to assume all of the deposits of Strategic Capital Bank.

Due to the Memorial Day holiday weekend, the office of Strategic Capital Bank will reopen on Tuesday, May 26, 2009, as a branch of Midland States Bank. Depositors of Strategic Capital Bank will automatically become depositors of Midland States Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Midland States Bank can fully integrate the deposit records of Strategic Capital Bank.

Over the weekend, depositors of Strategic Capital Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of May 13, 2009, Strategic Capital Bank had total assets of $537 million and total deposits of approximately $471 million. In addition to assuming all of the deposits of the failed bank, Midland States Bank agreed to purchase approximately $536 million of assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and Midland States Bank entered into a loss-share transaction on approximately $420 million of Strategic Capital Bank’s assets. Midland States Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-866-954-9527. The phone number will be operational this evening until 9:00 p.m., Central Time (CT); on Saturday from 9:00 a.m. to 6:00 p.m., CT; on Sunday from noon to 6:00 p.m., CT; and thereafter from 8:00 a.m. to 8:00 p.m., CT. Interested parties can also visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/strategiccapital.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $173 million. Midland States Bank’s acquisition of all the deposits was the "least costly" resolution for the FDIC’s DIF compared to alternatives. Strategic Capital Bank is the 35th FDIC-insured institution to fail in the nation this year, and the fourth in Illinois. The last FDIC-insured institution to be closed in the state was Heritage Community Bank, Glenwood, on February 27, 2009.

Here is the Citizens FDIC e-mail:

Citizens National Bank, Macomb, Illinois, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Morton Community Bank, Morton, Illinois, to assume all of the deposits of Citizens National Bank, excluding those from brokers.

Citizens National Bank will reopen on Saturday, May 23, 2009, as branches of Morton Community Bank. Depositors of Citizens National Bank will automatically become depositors of Morton Community Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Morton Community Bank can fully integrate the deposit records of Citizens National Bank.

Over the weekend, depositors of Citizens National Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of May 13, 2009, Citizens National Bank had total assets of $437 million and total deposits of approximately $400 million. Morton Community Bank agreed to purchase approximately $240 million of assets. The FDIC will retain the remaining assets for later disposition.

Morton Community Bank will purchase all deposits, except about $200 million in brokered deposits, held by Citizens National Bank. The FDIC will pay the brokers directly for the amount of their funds. Customers who place money with brokers should contact them directly for more information about the status of their deposits.

The FDIC and Morton Community Bank entered into a loss-share transaction on approximately $200 million of Citizens National Bank’s assets. Morton Community Bank will share in the losses on the

asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-866-954-9529. The phone number will be operational this evening until 9:00 p.m., Central Time (CT); on Saturday from 9:00 a.m. to 6:00 p.m., CT; on Sunday from noon to 6:00 p.m., CT; and thereafter from 8:00 a.m. to 8:00 p.m., CT. Interested parties can also visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/citizensnational.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $106 million. Morton Community Bank’s acquisition of all the deposits was the "least costly" resolution for the FDIC’s DIF compared to alternatives. Citizens National Bank is the 36th FDIC-insured institution to fail in the nation this year, and the fifth in Illinois. The last FDIC-insured institution to be closed in the state was Strategic Capital Bank, Champaign, earlier today.

The mother of all debt clocks (Seen on The Big Picture, Repost)

Recession Turns Malls Into Ghost Towns (Charts on page)

CHARLOTTE, N.C. -- Malls, those ubiquitous shopping meccas that sprang up in the 1950s, are dwindling in number, with many struggling properties reduced to largely vacant shells.

On the low-income east side of Charlotte, N.C., the 1.1-million-square-foot Eastland Mall recently lost a slew of key tenants, including a Dillard's and, next month, a Sears. Sales per square foot at the venue fell to $210 in 2008 from $288 in 2001.

Fed’s Plosser Says Inflation to Increase, Warns of Complacency 

May 22 (Bloomberg) -- Federal Reserve Bank of Philadelphia President Charles Plosser said prices may rise 2.5 percent in 2011, a rate well above central bankers’ preferred range, and cautioned against complacency on inflation.

“The economy may be at greater risk of inflation than the conventional wisdom indicates,” Plosser said in a speech yesterday in New York. “While inflation expectations appear to remain anchored, we should not become sanguine about our credibility. It can be easily lost.”

The bank president’s inflation forecast for 2011 exceeds central bank officials’ long-run preferred range of 1.7 percent to 2 percent, and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

Fed officials will need to raise the U.S. benchmark interest rate and reduce the central bank’s balance sheet when financial and housing markets improve, Plosser said. The Federal Open Market Committee is committed to price stability and will act in a “prompt way” to ensure it, he said.

“The economy is probably not strong enough and not ready for increasing” the main rate, Plosser said after his speech.

Minutes of policy makers’ April 28-29 meeting in Washington suggest they’re not convinced that recent signs of economic stabilization will remain in place. Plosser echoed that uncertainty yesterday, saying the U.S. may grow below potential “for some time” as unemployment rises and the shock to financial markets persists.

‘Bumps and Setbacks’

“To sum up, I am optimistic that the economy and the financial system will recover,” Plosser, 60, said during the speech to the New York University Money Marketeers Club. “That does not mean the path to recovery will be smooth. There are plenty of opportunities for bumps and setbacks along the way.”

“Both our district and the nation are beginning to see some signs that the severity of the recession is beginning to wane,” said the regional bank chief, who joined the Fed in 2006 and doesn’t vote on monetary policy this year. Still, “the economy’s potential output may be lower than previously estimated for some time,” and the effects of the credit crisis are “likely to persist for a while.”

Policy makers left open the possibility of increasing the amount of assets they’ll purchase to revive the economy, beyond the $1.75 trillion already committed, according to the minutes released on May 20.

Deeper Contraction

They are also forecasting a deeper U.S. contraction than they expected three months earlier, with a 9 percent or higher unemployment rate through the end of 2010, according to the minutes. The economy should shrink this year between 1.3 percent and 2 percent, based on officials’ central tendency, the minutes said.

Plosser’s near-term economic forecasts are generally more sanguine than his colleagues. He said he expects unemployment to peak at more than 9 percent early next year, before “falling gradually.” Growth should return in 2010 at a rate of 3 percent, the upper end of Fed officials’ central tendency, and at 2.7 percent in 2011, the Philadelphia Fed president said.

“While I see somewhat more economic growth over the next 12 to 18 months than some private-sector forecasters, I also see less deflationary pressure in the near term,” Plosser said. “And I see greater risk of higher inflation over the intermediate to longer term.”

Inflation Target

Reiterating his call for an inflation target, the regional bank chief also said the Fed has potentially put its independence at risk with its responses to the crisis, by directly lending to non-financial institutions and buying asset- backed securities.

“We need to draw a bright line once again between monetary policy and fiscal policy,” Plosser said. “The recent crisis has muddied that separation considerably and we must restore it. The Fed must not be seen by the public or the Congress as a piggy bank that can substitute for difficult fiscal policy decisions.”

The central bank’s minutes indicate policy makers may be ready to build on their plan in March to buy $300 billion of Treasuries should the economy or financial markets not improve. Some officials said an increase “might well be warranted at some point to spur a more rapid pace of recovery” from the worst recession in five decades, the minutes said.

The Fed has held the benchmark U.S. interest rate near zero since December.

Boston Fed President Eric Rosengren told a Worcester, Massachusetts, audience in a speech yesterday that “a rather slow recovery is likely,” an outlook implying a continued weak labor market and an unemployment rate rising through this year.

Video-o-rama: Wall Street slumps on economic fears(Videos, many)

Barron's: Greens Shoots = Ganga

Randall Forsyth elicits chuckles via his clever phrase-turning. He turns his poison pen on the ubiquitous nonsense known as “green shoots” that has been so in vogue amongst the perma-wrong crowd:

“So, why the attraction of green shoots? One can only speculate that they must be in some ways intoxicating. Perhaps not the shoots exactly, or the stems or seeds, but the leaves of a certain plant. Those might be smoked or otherwise ingested to bring about a euphoric effect. From what I’ve read, the current crop is far more potent than the commodity available in years past. How else to explain the mind-bending notion that an economy that is declining less quickly is somehow improving?”

Like all great inventions, it obvious in hindsight.

Once someone else has invented it, everyone says (or at least thinks to themselves) “How on earth did I not come up with that myself . . . ?”

Bailout Nation

"Do you find yourself wondering: How did we get here? How did the United States of America get into such a predicament whereby in one year, 2008, the financial system nearly vaporized, the stock market crashed, real estate tanked, and major corporations were being bailed out. . . .How did our great country, a bastion of capitalism, devolve into a Bailout Nation where the gains were privatized, but the losses were socialized?"

24 Comments

Will's picture
Will
Status: Bronze Member (Offline)
Joined: Oct 27 2008
Posts: 81
Re: Daily Digest - May 24

 RE:  Green Shoots = Ganga

It's obvious that our political leaders and the MSM are pushing us hard to smoke those little green shoots.  If we smoke those green shoots they are offering, are we going to get high or stoned (there is a BIG difference).  More than likely, their green shoots are of the variety that give you a nice soaring cerebral and euphoric head high for the first hour that has you dancing and giggling and talkative and seeing rainbows all around you.  Then later you find yourself unexpectedly and helplessly couch lock body stoned in front of the TV unable to speak or move as you numbly watch this real life horror movie take a plot turn for the worse right before your drooping, glazed and bloodshot eyes.  Suddenly you yearn for more fresh green shoots to smoke you back to that initial euphoric high, but the new green shoots they sell you seem to be increasingly smaller and are infested with mold, fungus and spider mites.  

You're faced with a dilemma:  Do you risk smoking more of the tainted greens shoots and risk a serious or possibly fatal respiratory infection?  Or do you come to your senses, refuse to partake of any more of these tainted green shoots and instead settle into doing the hard work of seeking something closer to reality and patiently work and wait for real and substantial green shoots to sprout that induce a truly euphoric and natural high?

idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest - May 24

http://markettalk.newswires-americas.com/?p=2121#more-2121

http://zerohedge.blogspot.com/2009/05/mass-layoff-events-pick-up-faciliate.html

 Green shoots or yellow weeds is moot…the question on many traders’ minds lately is “yeah, but can you smoke it?”

maveri's picture
maveri
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Re: Daily Digest - May 24
idoctor wrote:

...

 Green shoots or yellow weeds is moot…the question on many traders’ minds lately is “yeah, but can you smoke it?”

Perhaps they could use the Clinton line and 'not inhale'  ;-)

I think 'the' green shoot in the movie WALL-E is closer to the mark on the size of the recovery etc.

tx_floods's picture
tx_floods
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Re: Daily Digest - May 24

In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: "We are out of money."

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on health care so far. This is a consequence of the crisis that we've seen and in fact our failure to make some good decisions on health care over the last several decades.

So we've got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it's putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don't reduce long-term health care inflation substantially, we can't get control of the deficit.

So, one option is just to do nothing. We say, well, it's too expensive for us to make some short-term investments in health care. We can't afford it. We've got this big deficit. Let's just keep the health care system that we've got now.

Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything...

So, if I understand President Obama correctly, America's biggest financial problem is Government health-care programs? And the solution is MORE Government health care programs?

Is that correct? Surely, I must be missing something here.

VeganDB12's picture
VeganDB12
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Posts: 731
Re: Daily Digest - May 24

tx-floods

If I may respond to your good question.  My read on this is that government control of healthcare will lead to cost cutting and denial of care for the average person while, best case, may provide more care for the many millions of uninsured.  It ultimately will be costly I think.  For example, as I have said before, I am skeptical of a computerized medical record.  IF the database is centralized, the government or other payors can access the record anytime. That is the case now with medicaid/medicare records but this prerogative is mostly exercised with inpatient records.  So the government can and does review notes and deny care based on picayune non-clinical criteria like "the length of the meeting wasn't documented" or "the note does not contain at least 3 items of mental status and 4 items of history and...." very arbitrary at best.  The only reason I have ever seen for this type of audit to occur has been to deny payment for care. period.

There is no money for nationalized healthcare, is there?  So the only alternative I see is to reduce costs.  Just the same way managed care does.  Or print, print, print........  I truly hope I am wrong.

Denise

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sensei
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Re: Daily Digest - May 24

tx_floods, 

No, you're not crazy.  That is exactly the thought I had when I saw this on Drudge the other day.  I wish the answers to my problems were as simple as government solutions.  If I am having trouble paying the mortgage on my house, obviously the solution is to get rid of that house and GET A BIGGER HOUSE WITH A BIGGER MORTAGE!!!???  

 

 

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Farmer Brown
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Re: Daily Digest - May 24

At first I was pleasantly surprised to see Obama publicly recognize that the US has no money.  Not that I think recognizing it matters anymore, as I believe it is way too late.  However, it was nice to hear the President pointing this out to the American people.

Unfortunately, after reading just a little further, I was stunned to see him using our insolvency as an argument to increase government spending!  This is just ludicrous!  If he truly believes this, he is incompetent.  And if he doesn't believe it, he is a master manipulator and a liar.

Now let's see if the media challenges him on this.  I'm not holding my breath.

 

that1guy's picture
that1guy
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Posts: 333
Re: Daily Digest - May 24

The 'Lost Vegas' video is sad to watch....we all know, whats coming...I have accepted it, I guess being born and raised there makes that much sadder for me to watch....

http://current.com/items/90026412_lost-vegas.htm 

Added this link for all those outside the USA....the other link didn't work for me...

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Davos
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Posts: 3620
Re: Daily Digest - May 24

 The Vegas video was sad, but I had to laugh when the dancer said going from selling mortgages to her current job was a step up?!?!

that1guy's picture
that1guy
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Posts: 333
Re: Daily Digest - May 24

ya, that is true....especially how she said it.

Even though it is bad everywhere, and gonna get much worse, still sucks to see home go to crap....it was bad when I was  home in August 2008......looking back, it was earily like the calm before the storm, or as I like to call ROUND 1

idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest - May 24

The whole problem with the healthcare system is there is already to much Govt involvement. The working people get 2nd rate medicine & do without while the welfare people take their kids to the ER for something as simple as chigger bites. People use to be able to be self sufficient when Govt was small but now look at it.

Really look at these clowns runny this country....how many of us would have them running our own business???

At first I was pleasantly surprised to see Obama publicly recognize that the US has no money.  Not that I think recognizing it matters anymore, as I believe it is way too late.  However, it was nice to hear the President pointing this out to the American people.

Unfortunately, after reading just a little further, I was stunned to see him using our insolvency as an argument to increase government spending!  This is just ludicrous!  If he truly believes this, he is incompetent.  And if he doesn't believe it, he is a master manipulator and a liar.

Yes Patrick I agree. Not trying to be political just looking at what is said & all I can say is he talks well but I think it will come out overtime that he doesn't know what he is talking about or that he understands economics at all.

Farmer Brown's picture
Farmer Brown
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Posts: 1503
Re: Daily Digest - May 24

 The importance of this article, IMO, comes at the very end where it suggests China will start lending its excess dollars to Chinese companies so they can acquire competitors in the world markets (they would not be likely to be able to do that using Yuan, but that's a great use of excess dollars).  

It's also interesting that supposedly China is still buying lots of Treasury bonds.  Of course, there is no way to know for sure since neither China nor the US will release the official numbers.  But, we are supposed to beleive they are still buying them.  OK, enough from me, here is the article: http://www.ft.com/cms/s/0/5b47c8f8-488c-11de-8870-00144feabdc0.html

 

China stuck in ‘dollar trap’

By Jamil Anderlini in Beijing

Published: May 24 2009 23:30 | Last updated: May 24 2009 23:30

China’s official foreign exchange manager is still buying record amounts of US government bonds, in spite of Beijing’s increasingly vocal fear of a dollar collapse, according to officials and analysts.

Senior Chinese officials, including Wen Jiabao, the premier, have repeatedly signalled concern that US policies could lead to a collapse in the dollar and global inflation.

But Chinese and western officials in Beijing said China was caught in a “dollar trap” and has little choice but to keep pouring the bulk of its growing reserves into the US Treasury, which remains the only market big enough and liquid enough to support its huge purchases.

In March alone, China’s direct holdings of US Treasury securities rose $23.7bn to reach a new record of $768bn, according to preliminary US data, allowing China to retain its title as the biggest creditor of the US government.

“Because of the sheer size of its reserves Safe [China’s State Administration of Foreign Exchange] will immediately disrupt any other market it tries to shift into in a big way and could also collapse the value of its existing reserves if it sold too many dollars,” said a western official, who spoke on condition of anonymity.

The composition of China’s reserves is a state secret but dollar assets are estimated to comprise as much as 70 per cent of the $1,953bn total and China owns nearly a quarter of the US debt held by foreigners, according to US Treasury data.

The collapse of Fannie Mae and Freddie Mac, the US mortgage financiers, last summer prompted Safe to adjust its strategy and start buying far more short-term US government securities, instead of longer-maturity bonds and notes.

This approach is widespread in the market because of expectations that the US will have to raise interest rates in the medium term to deal with rising inflation, as a result of all the money that it is printing.

But Safehas not fundamentally changed its strategy of allocating the bulk of its burgeoning foreign exchange reserves to US Treasury securities, a western adviser familiar with Safe thinking told the Financial Times.

He said Safe traders were “very negative” on sterling because of expectations of renewed weakness of the UK currency but Safe was neutral on the euro and bullish on the Australian dollar.

The pound ended last week at its strongest since December, shrugging off a warning over the UK’s soaring public debt from Standard & Poor’s, a rating agency.

The US dollar fell to its lowest level of the year against major currencies last week. Treasury yields spiked to six-month highs as investors focused on the willingness of creditors to fund a deficit that was expected to be about 13 per cent of gross domestic product this year.

China’s determination to keep buying US government debt is helping Washington fund its soaring budget deficit and there is no indication that Beijing will shy away from continued purchases, the Obama administration’s budget chief told a congressional sub-committee last week.

As its reserves soared in recent years, Safe began trying to diversify away from the dollar, It has been adding to its gold stocks and taking small equity stakes in publicly listed companies all over the world.

Over the long term, Beijing hopes to reduce the size of its enormous reserves and cut exposure to US Treasury bonds by encouraging state-owned enterprises to use foreign exchange to acquire competitors abroad.

Chinese outbound foreign direct investment nearly doubled from 2007 to $52.2bn last year. Beijing announced a plan last week to ease restrictions on domestic companies to make it easier to buy and borrow foreign exchange for offshore investment.

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Re: Daily Digest - May 24

Vegas should never have been built, a monument to human stupidity that was always going to fail, right from the start....

Mike

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Re: Daily Digest - May 24

The whole problem with the healthcare system is that we expect and take for granted that such a complex system, which can ONLY EVER operate in an environment of surplus cheap energy, will last forever.  It can't and it won't, and we will all start dying earlier again as we have done for thousands of years....

The best medicine is the preventative kind.

Mike

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Re: Daily Digest - May 24
that1guy wrote:

The 'Lost Vegas' video is sad to watch....we all know, whats coming...I have accepted it, I guess being born and raised there makes that much sadder for me to watch....

http://current.com/items/90026412_lost-vegas.htm 

Added this link for all those outside the USA....the other link didn't work for me...

Very sad indeed - these are real people - it's awful to watch.

Australia is starting to see the property decline now - although our stupid government keeps throwing money for the first home buyers to keep prices high - they know the whole economy is leveraged off property.

Australia keeps thinking that now China will save it's ar*se but I think China will force bargain prices deals upon the beggars and will look after itself first before anyone else...

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Re: Daily Digest - May 24
This is how governments disintegrate.
We must balance that budget, mustn't we ?
 
3:58 PM | May 21, 2009

Gov. Arnold Schwarzenegger is proposing to completely eliminate the state’s welfare program for families, medical insurance for low-income children and Cal Grants cash assistance to college and university students.

The proposals to sharply scale back the assistance that California provides to its neediest  residents came in testimony by the administration this afternoon at a joint legislative budget committee hearing. It followed comments by the governor earlier today that he would be withdrawing a proposal to help balance the budget with billions of dollars of borrowing and replacing it with program reductions.

The proposals would completely reshape the state’s social service network, transforming California from one of the country’s most generous states to one of the most tightfisted. The proposals are intended to help close a budget deficit estimated at $21.3 billion.

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Re: Daily Digest - May 24

 Billionaire club in bid to curb overpopulation - Times Online

Billionaire club in bid to curb overpopulation
America's richest people meet to discuss ways of tackling a 'disastrous' environmental, social and industrial threat
John Harlow, Los Angeles

SOME of America’s leading billionaires have met secretly to consider how their wealth could be used to slow the growth of the world’s population and speed up improvements in health and education.

The philanthropists who attended a summit convened on the initiative of Bill Gates, the Microsoft co-founder, discussed joining forces to overcome political and religious obstacles to change.

Described as the Good Club by one insider it included David Rockefeller Jr, the patriarch of America’s wealthiest dynasty, Warren Buffett and George Soros, the financiers, Michael Bloomberg, the mayor of New York, and the media moguls Ted Turner and Oprah Winfrey.

...

Why all the secrecy? “They wanted to speak rich to rich without worrying anything they said would end up in the newspapers, painting them as an alternative world government,” he said.

Ask yourself: Aren't these the very same who speculated over agriculture products last summer?


Sep 08 - Population | Greenpeace International

Rex Weyler from Green Peace

Some people fear that talk of stabilising or reducing population invokes totalitarian oppression, the China policy, or worse. Politicians cower at the thought of challenging religious taboos against contraception. However, the best, proven means to stabilise population are simple and offer other humanitarian benefits:

1. Achieve women's rights worldwide, and 2. Make contraception available.

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Re: Daily Digest - May 24

 A Driving Force in the Downturn - washingtonpost.com

A Driving Force in the Downturn
For Montgomery, Auto Industry's Crisis Hits Home

Ed Montgomery is so new to his job that the only things on the wall of his sparse office at the Department of Labor are a couple of unemployment charts and a pair of color-coded maps highlighting the communities hardest hit by the collapse of the American auto industry.

The Midwest is a blotch of dark purple.

The maps show the challenge Montgomery, 53, is up against as Obama's point man to help auto workers and communities that depend on the sector. A month into the job and in between a recent trip to Michigan and a two-day tour of Ohio yesterday and today, Montgomery said a plea in Warren, Mich., reminded him of just how serious the crisis is for some cities. A United Way director told Montgomery the No. 1 request on a help line is food.

"That reminds you this is real. People are hurting . . . You look at numbers. You can look at statistics. You look at unemployment rates," he said, but hearing that example stuck with him.

"Until you actually confront the fact of what it means to try to live on and try to feed a family of four on the benefits that are out there . . . in some cases people don't have that or in some cases multiple family members have lost their jobs," he said. "It's palpable."

...

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Re: Daily Digest - May 24

 NO NEW LEASE ON TRILLIONS IN DEBT - New York Post

A trillion-dollar storm is gathering over the commercial real estate landscape that's threatening to add further pain to an already bruised US economy.

At the center of the worries is some $3.5 trillion in debt backed by everything from strip malls to offices and apartments across the nation -- the lion's share of which is badly underwater because this recession followed a five-year commercial property boom fueled by easy money and loose underwriting standards.

Now the owners of the less-than-full malls, apartment complexes and office buildings are succumbing to the worst economic collapse since the Great Depression -- because they can't refinance the debt.

The commercial debt securitization market is dead.

"Because there is no securitization the system cannot process the wave of maturities coming due," said Scott Latham, commercial property broker at Cushman & Wakefield.

"This is arguably the most important fact we're going to be dealing with. If there's no mortgage market that can feed the machine you're just not going to have deals," he said. "It's going to be years before we recover and even when that happens we're going to discover that we're in a new paradigm," Latham added.

About $1.4 trillion in real estate debt is set to mature over the next four years, with some $204 billion coming due this year alone.

...

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Re: Daily Digest - May 24
Damnthematrix wrote:

Vegas should never have been built, a monument to human stupidity that was always going to fail, right from the start....

Mike

Couldn't agree with you more that Vegas is and has always been a sad example of human achievement.  However, It's sincerely heart wrenching to watch the film and see the innocent victims scrambling to try to adapt and survive in the rapidly changing landscape, but it was a train wreck waiting to happen sooner or later.  A shiny, shameful example of the unsustainable that will now begin to slowly shrink back into the earth from which it came (along with many other examples of the unsustainable around the world).

It makes sense that Vegas is on the forefront of the unfolding collapse as it is one of the weakest components of our economy that everyone but the gambling and sex addicts can live without no problem.  Therefore, it is a weak satellite of the economy that produces little or nothing and consumes far too many resources and is the first to go down on the outer perimeter of usefulness.  I think we all know that there is a strong probability that the images of the Lost Vegas documentary will become all too familiar in the future as the systemic cancer spreads to other healthier parts of the country and economy over the coming months and years.  Lost Vegas is simply the opening act to this tragic real life epic stage play and it's giant cast of characters...

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The US will run out of soybeans by the end of this summer.

Below is snipped from a much longer technical piece about soybean futures (which I just skimmed through to get down to the "My reaction..." bit)

http://www.marketskeptics.com/2009/05/soybean-shortage-sets-time-frame-for.html

<snip>
My reaction: The US will run out of soybeans by the end of this summer.

1) The USDA is manipulating data on soybean inventories to hide an enormous shortage.

"Simply stated USDA was able to discover an extra 113 million bushels of soybean supply within its "residual use" accounting column to possibly ensure soybean end stocks would not slide below 100 million bushels.

2) Demand from China is largely responsible for the US soybean shortage.

"The Xinhua, the official Chinese news agency, says unnamed Chinese experts want the government to use some of its massive foreign currency reserves to build up a Chinese bean stockpile of 50 million metric tons."

"In fact if Chinese purchases continue at this kind of level then we are potentially looking at the tightest US ending stocks in many years, possibly on record. This is a situation that should not be underestimated, with late plantings and therefore maturity & harvesting, coupled with the dramatic crop reductions in Argentina, the US is in very real danger of running out of soybeans this year."

3) Wednesday night, China's beans settled at $14.88 per bushel, which is three dollars above the US's Friday closing price of $11.84.

THIS IS EXACTLY WHAT I HAVE BEEN EXPECTING

I have been predicting hyperinflation would start in China, leading to the dollar's collapse. This is exactly what is happening. Stimulus efforts and money printing by Chinese authorities is creating massive upwards pressure on commodity prices, especially soybeans. This intense demand for physical commodities is bringing US future markets to their knees.

Conclusion: Now there is a clear time frame for the dollars collapse: it will happen this summer.

1) A default on soybean contracts would quickly lead increase demands for delivery on other contracts (especially gold/silver), leading to more defaults and the collapse of US futures markets.

2) The collapse of the COMEX would lead to an enormous spike in all commodity prices, as investors/end users scramble to secure limited physicals supply.

3) In order to keep domestic prices from spiraling uncontrollably upwards, nations around the world will start selling off their US reserves to boost their domestic currencies.

4) Considering the dollar holdings of foreign governments are about $5.4 trillion, this will rapidly destroy the dollar's worth.

Final thoughts

I can't believe I am writing about soybean manipulation…

I really, really hope the US runs out of gold before soybeans. It would be so terribly pathetic if the event which brings down the COMEX and the US financial system is a default on the US's obligation to deliver soybeans… Can you imagine it, having to read in history books, "It was a default on the US's obligations to deliver soybeans which set in motion a chain of events…"

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Re: Daily Digest - May 24

"The best medicine is the preventative kind."

Mike

Couldn't agree more.  I work in mental health so preventative care takes on a whole different meaning (good mental hygiene principles have more to do with managing your brain than the rest of your body I think) but you are right.  It is unsustainable and I see some on this site, including healthcare providers, are open to less expensive alternative forms of care.  Few medicines are miracle drugs (like penicillin for example) and I think the special interests of big pharma and insurance companies and medical corporations seem to have done much to drive up costs. I honestly don't think people deserve to die because of lifestyle decisions (I still agree with treating lung cancer caused by smoking for example) and letting people die earlier based on darwinian principles is not an acceptable option to me as a physician, but hard choices have to be made in healthcare and I worry that the interest of the patient (especially older adults) is going to be left out of the equation.   Unfortunately, as Michael Moore showed in Sicko, congress is pretty well owned by healthcare corporations.  Very sad to me but such is life.  I went into this business to help people like many others.

Regards

Denise

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Re: Daily Digest - May 24

This Fed statement from the "Fed Open to Buying More Securities" article is a real head scratcher.  In their comments about transparency, they said they do not want to disclose banks names that are borrowing.  Their reason:

“It was noted that disclosing the identities of individual borrowers would very likely discourage use of the Federal Reserve’s liquidity and credit facilities,” the Fed said.

That is all the transparency I need.  It says to me the Fed is begging the banks to borrow the money it prints while under a cloak of secrecy.  This says the Fed worries that running an open and honest lending window would be bad for their printing and lending business.

I keep coming back to one theme that I think sums up this economy.  We have a demand side problem and nothing but supply side solutions.  The Fed is no different.

 

Stu

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Re: Daily Digest - May 24

"I honestly don't think people deserve to die because of lifestyle decisions (I still agree with treating lung cancer caused by smoking for example) and letting people die earlier based on darwinian principles is not an acceptable option to me as a physician"

These days, with all the info available on smoking/cancer, I reckon if anyone is stupid enough to take it up, and they contract cancer, they're on their own as far as I'm concerned.  The world is already well and truly overpopulated, let's not make things worse...... we don't need stupid people!

The choice of whether to treat people or not, particularly using modern methods, will soon be taken out of your hands Denise because it will simply be impossible to do.  Most drugs, even the common Aspirin, are made with oil feedstock.  I was put on hypertension tablets last year, the medicos have no idea why my BP is high.  Because I'm on zero income, I qualify for a subsidy, and they cost me $5 a month.... but I was horrified to find out recently that they cost $300 a month!!!  Just how long do you think our government can keep this up?

Apparently more than half of baby boomers (in Australia) are on these tablets... and doctors are now sending people out for CAT scans for the most benign symptoms.  I know someone who's unemployed who was sent for one, paid nothing at all, and saw the bill was $600!  Worse, he was told his condition was due to aging and nothing could be done to improve it...  Is it any wonder healthcare is going broke?

My own father contracted a brain tumor some nine years ago.  He had brain surgery and afterwards they told him he had three months to live.  He died in agony.  The surgery, a friend of mine who worked at the hospital told me, cost $100,000.....  Of course my parents were pensioners and paid nothing at all.  He was a smoker, and I strongly suspect that had a lot to do with what occurred.

I don't believe humans are meant to live as long as they do today, pure and simple.  We do all the things we do today, only because we can, because we have all this surplus cheap energy to do it with, to feed the specialists who know how to do all this white man's magic.

This crash will put an end to it, I have no doubt.  But at least we now know about hygiene and healthy diets.  And we'll all have to work harder soon, putting paid to the obesity crisis!

Mike

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