Daily Digest

Daily Digest - November 13

Friday, November 13, 2009, 10:32 AM
  • Gold Finger - A New Take On Operation Grand Slam With A Tungsten Twist
  • The American Economy in One Chart 
  • Online bank gets unfair advantage
  • White House Aims To Cut Deficit With TARP Cash
  • A Look At TARP One Year Later
  • Monetizing The Housing Debt
  • Fannie, Freddie Warn Of More Losses
  • FHA Reserves May Go "Below Zero And Stay There"
  • FDIC Orders Banks To Prepay $45 Billion
  • October Deficit: $176 Billion, Monthly Interest: $22.8 Billion
  • When Banks Use Capital Made Of Sand
  • The Great Shrinking American Dollar
  • How Private Equity Will Cause Credit Crisis II
  • Nuclear Scars: A Sea Of Tainted Water Beneath Nevada Desert
  • The Movie Chevron Doesn't Want You To See

Economy

Gold Finger - A New Take On Operation Grand Slam With A Tungsten Twist (pinecarr)

I’ve already reported on irregular physical gold settlements which occurred in London, England back in the first week of October, 2009. Specifically, these settlements involved the intermediation of at least one Central Bank [The Bank of England] to resolve allocated settlements on behalf of J.P. Morgan and Deutsche Bank – who DID NOT have the gold bullion that they had sold short and were contracted to deliver.

The American Economy in One Chart (SolidSwede)

They say a picture paints a thousand words. Well this picture paints very clearly the American Economy for the last 30 years. Ever decreasing Bond Yields which = EVER EXPANDING DEBT. "

Online bank gets unfair advantage (Joemanc)

The online bank is Ally Bank. Its vigorous ad campaign on the nation’s airwaves and Internet sites attacks unnamed banks for “bait and switch” tactics that “aren’t consumer friendly.” But peel off Ally Bank’s warm purple “a” logo and the populist ad campaign and you’ll discover a re-branded GMAC Bank, which received more than $12.5 billion in TARP funds. And GMAC recently bellied up to the federal bar to ask for more. With taxpayer funds securely in hand, Ally has set out to “save” GMAC’s sinking hulk by luring depositors from community banks by offering higher interest rates and no-penalty CDs.

White House Aims To Cut Deficit With TARP Cash (M.W.)

On the $700 billion Troubled Asset Relief Program, the administration is considering a change that may appear to improve the fiscal situation. Agreeing not to spend a certain amount of TARP money will enable the White House to assume less money out the door and, therefore, less debt issued. The move could buy the Treasury Department time before it hits the so-called debt ceiling.

A Look At TARP One Year Later (M.W.)

The plan was supposed to save the economy, but did it end up merely enriching bankers?.

Monetizing The Housing Debt (M.W.)

Since the Federal Reserve decided to print money in order to buy $300 billion in U.S. Treasuries along with about a trillion and a half dollars in mortgage related debt, these two groups of purchases have been viewed quite differently. Is there really that big of a difference between these two?

Fannie, Freddie Warn Of More Losses (M.W.)

Fannie Mae and Freddie Mac, already reeling in red ink, are warning they could face additional losses from the weakening condition of mortgage-insurance companies. Fannie and Freddie together have, so far, required capital injections from the Treasury of $112 billion.

FHA Reserves May Go "Below Zero And Stay There" (M.W.)

The F.H.A.’s annual audit was scheduled for release last week, but was mysteriously delayed at the last minute. As recently as a few weeks ago, the F.H.A. had said that even under the bleakest economic forecast, its cash cushion would quickly recover. On Thursday, it abandoned that position.

FDIC Orders Banks To Prepay $45 Billion (M.W.)

U.S. lenders will prepay three years of premiums to replenish the government’s deposit insurance fund drained by the fastest pace of bank failures in 17 years. The FDIC had set aside $32 billion for 2009 failures expected through June 30, and estimates bank failures through 2013 will cost $100 billion.

October Deficit: $176 Billion, Monthly Interest: $22.8 Billion (M.W.)

October is the first month of the government's fiscal year, and at this reading, the Treasury is estimating that the annual deficit will hit $1.5 trillion. That would top the $1.42 trillion registered for 2009, which was the highest annual deficit since 1945.

When Banks Use Capital Made Of Sand (M.W.)

Citigroup’s capital position appeared much improved when the bank reported third-quarter earnings, but a look beneath the surface shows that much of its capital is of questionable value.

The Great Shrinking American Dollar (M.W.)

Our currency is down about 35 percent from it's peak in 2002. After strengthening slightly more than 10 percent during the global financial crisis of the past 18 months, the dollar is again falling back toward its pre-crisis lows, representing its weakest international value since 1967, and there is a definite possibility that the dollar could soon decline further or faster.

How Private Equity Will Cause Credit Crisis II (M.W.)

The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis warns that ten years of private equity deals generated more than $1 trillion in new debt, the balance of which will come due just when these businesses are least likely to be able to pay it off... half of all private equity-owned companies on both sides of the Atlantic are likely to collapse between now and 2015. It could lead to nearly two million people losing their jobs in the United States and perhaps 300,000 in the UK.

Energy

The Movie Chevron Doesn't Want You To See (M.W.)

Watch the Trailer for Joe Berlinger's stunning new documentary, "Crude".

Environment

Nuclear Scars: A Sea Of Tainted Water Beneath Nevada Desert (M.W.)

Nevada faces a water crisis and population boom, but radioactive waste has polluted aquifers. Over 41 years, the government detonated 921 nuclear warheads underground, leaving behind more than 300 million curies of radiation, and making the site one of the most radioactively contaminated places in the US.

19 Comments

saxplayer00o1's picture
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Re: Daily Digest - November 13

"Nov. 13 (Bloomberg) -- The German government’s five-person council of economic advisers said the country’s economic recovery may be threatened by “abrupt” changes in foreign- exchange rates.

“After the massive global increase in U.S. dollar reserves in the past years, an uncontrolled exit, especially in emerging economies, from the U.S. dollar as a reserve currency is a possible trigger of instability in currency markets,” the body said in its once-a-year report to the government.

Countries holding “high” dollar reserves should consider committing to selling their dollar holdings in a coordinated way over a longer period of time, the report said. The 1999 Washington Agreement on Gold, which limits gold sales by central banks, provides an example, the report said."

 

"'I think they should be more prepared to talk about their currency pricing because what we are having now is the dollar sliding and it is having an impact on the price of currencies linked to it,' Ibrahim al-Ibrahim told Reuters in an interview."....

"But Qatar's Oil Minister Abdullah al-Attiyah said in October the debate was ongoing on using the US dollar for oil trade or shifting to a basket of currencies."

"Brazil, South Korea and Russia are losing the battle among developing nations to reduce gains in their currencies and keep exports competitive as the demand for their financial assets, driven by the slumping dollar, is proving more than central banks can handle."....

“We have to be careful that our exchange rate doesn’t appreciate too much as to deindustrialize the country,” Marcos Verissimo, chief of staff at Brazil’s state development bank known as BNDES, said yesterday at a conference in Sao Paulo. “The capital goods industry has suffered tremendously.”

"The global economy may be poised for the creation of a massive and potentially explosive “dollar carry trade” — just like the pre-crisis yen carry trade, only more frightening and potentially much bigger.

The warning was issued today at a summit of Asia Pacific leaders in Singapore and comes as a diverse variety of assets have begun to display bubble-like patterns of inflation: everything from gold and copper to fine wine and Hong Kong penthouses."

.........4A) Fed May Cause Next Crisis, Hong Kong’s Tsang Suggests

"Nov. 13 (Bloomberg) -- The Federal Reserve’s policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis, Hong Kong’s leader said.

“I’m scared and leaders should look out,” said Donald Tsang, chief executive of the city, said in Singapore today. “America is doing exactly what Japan did last time,” he said, adding that Japan’s zero interest rate policy contributed to the 1997 Asian financial crisis and U.S. mortgage meltdown."

.......4B) Yuan ‘Straitjacket’ Risks Inflating China Bubbles

"Nov. 13 (Bloomberg) -- China is facing the biggest challenge to its currency policy since the start of the global recession as economists warn the peg to the dollar risks causing an asset bubble."

"The Commerce Department says the trade deficit jumped 18.2 percent in September to $36.5 billion. That was the largest deficit since January and more than the $31.7 billion imbalance economists had expected."

"Here's what makes it so tough. The state has to fund education. It must fund Medicaid. In fact, federal and state law protects 70 percent of the state budget.

The unprotected budget is just $9 billion.

"So we take about $2 billion out of $9 billion. What is that? Social services, health care, corrections. It's really very, very difficult," Gregoire said.

Here's the math. Budget available for cuts: $9 billion. Cuts needed : $2 billion.That's a 22-percent cut for prisons, health care and human services."

"Gov. Linda Lingle in July said she wanted to reduce the state's payroll by 1,100 workers. But state law allows certain workers to "bump" those with less seniority. Another process permits workers to keep their salaries even if they wind up in lower-level jobs.

Lingle has said that a second round of layoffs is possible. The state's budget shortfall is estimated to be more than $1 billion through June 2011."

"DETROIT, Nov 13 (Reuters) - Swedish carmaker Koenigsegg will terminate more than a third of U.S. Saab dealers when it completes its purchase of the premium brand from General Motors Co [GM.UL], GM said in a letter to dealers on Thursday."

"GHARIB: Everybody is so focused on the deficit and the government pouring more money towards the economy, so is there a magic dollar number that will be politically acceptable for any new jobs program?

PHILLIPS: We've assumed $250 billion in additional stimulus in our forecast, which is really spread over the next three years as we see it. I would say a couple of months ago that actually seemed pretty radical and probably more aggressive than where the politics were at the time. Now it actually seems pretty conservative and the risk is probably to the up side of that $250 billion. With that said, I really don't think that we see another stimulus package anywhere close to the size of the first one, so around $700 billion."

"While the Tribune was right to emphasize the Minority Report of the Pension Modernization Task Force ("Just send your $7,000," Nov. 8), even that report understates the full extent of the calamity now at hand. That report showed that unfunded liabilities of the five pensions that the state guaranties total $95 billion roughly $7,000 for every person in Illinois. In fact, the broader problem is over twice that size:

Illinois has over 600 other municipal pensions with at least $62 billion in unfunded liabilities, aside from the five pensions guaranteed by the state,. Those pensions are generally ignored and were not part of the task force report. Their deficits are reported biannually by the Illinois Department of Insurance and the reports are on their website. That $62 billion deficit figure is from the 2007 report before the markets tanked so the 2009 report will likely be much worse.

Retired state workers also get state-paid health care, which has also been mostly ignored. That's another $40 billion unfunded liability, based on an earlier study by the Civic Committee of the Commercial Club of Chicago, and $2 billion more per year is required just to cover the growth in this liability.

Add these two items to the $95 billion state-guarantied pension debt and you get $197 billion, which is roughly $15,000 for every person, or $60,000 for every family of four in Illinois. Most families don't have resources to pay off a debt that size and shifting an even higher burden to everybody else would spark a genuine tax revolt."

"The crux of the problem is this: A plummeting stock market left the Utah Retirement Systems with about $6.3 billion in unfunded, long-term liabilities. To make that up and pay for the benefits for new employees, the state will have to pay a bigger chunk of retirement benefits, creeping up by $400 million by 2016.

Liljenquist says that is unsustainable because it means that a huge chunk of a new employee's compensation -- salary, benefits and pension -- would be committed to the retirement benefits. As a result, school districts, police and fire departments and state and local governments wouldn't be able to pay the salaries to lure new workers."

"Morton said maintaining benefits at their current level will require an extra $238 million for health insurance in the 2010-2011 school year and $57 million more for retirement.

With the recession shrinking Alabama's tax collections, that kind of money won't be available, he said. Morton said the only way to maintain benefits without charging educators more is to cut classroom programs.

"We are in dire straits," he said."

"Hours of listening to numbers didn't add up to any solutions Thursday to the state retirement system's $6.5 billion shortfall, now expected to grow even bigger because of "double-dipping" by rehired retirees.

Members of the Legislature's Retirement and Independent Entities Committee offered no recommendations at what is expected to be their final meeting before the 2010 legislative session begins in January.

That despite sitting through four hours of testimony, including a lengthy analysis showing the retirement system could run out of money in under 30 years if the government's contribution isn't increased."

"Minnesota's long-term care facilities face a substantial gap between the rates paid by Medicaid for nursing home residents and the actual cost of providing care. This shortfall is not unique to Minnesota, but we struggle with a higher shortfall than most states. The national average shortfall between Medicaid reimbursement and actual cost of care is $12.48 per Medicaid patient per day, but Minnesota's shortfall is almost double at $23.26. If that number sounds fairly reasonable, perhaps the total will make more of an impression — for 2008 the estimated total was $156 billion."

"Both boards of education oppose any retreat from that funding level, in addition to any attempt to shift millions in teacher pension costs to the districts. They are currently covered by state funds.

State Sen. Nancy King, D-Montgomery, said that no one is certain yet where the money will come from to fund the $2 billion deficit, but that the pension costs likely will remain with the state

"That's a die on your sword issue," King said, explaining that to shift the cost could bankrupt some counties. "It's a big price tag, and there will be legislative staffers suggesting it, but none of us are for it.""

 

  • ......Sort of interesting seeing the headline "

Geithner Affirms Strong Dollar Policy" in the Wall Street Journal   and then reading the text saying:

  • "Lack of major changes in his tone indicates that, while he doesn't want any dollar freefall to shake the recovery in the U.S. economy, he may find it comfortable as long as the currency declines at a manageable pace."Laughing
  • Message to Mr. Geithner: Nice moves, but  

we aren't fooled

Davos's picture
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Re: Daily Digest - November 13

Watching the CB's and the dollar and gold and the markets fight out a loosing battle. I think these people think they are God and if they jumped out of a plane without a parachute they could defy the laws of gravity.

 

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Re: Daily Digest - November 13

If the FDIC anticipates that it will owe $100 billion in payments over the next 3 years, it seems to me that having the members prepay 3 years of dues to the tune of just $45 billion is not exactly a solution to the problem.  Where does the other $55 billion come from?

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Re: Daily Digest - November 13

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If you haven't read this yet.....

The American Economy in One Chart

by Ceri Shepherd, Trendinvestor.info | November 12, 2009

Print

They say a picture paints a thousand words. Well this picture paints very clearly the American Economy for the last 30 years.

Ever decreasing Bond Yields which = EVER EXPANDING DEBT.

The chart below shows that interest rates have been decreasing by approximately 0.5% every 2 years. Put simply, As the price of debt becomes cheaper more is created and then spent, and that effectively is the economy.

chart 

 

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Re: Daily Digest - November 13

Saxplayer, way to go on all the pension updates.  Our problem in a nutshell.  Bottom line, we have promised more than can possible be paid.   People are just going to have to settle for less.  Pensions will never pay what has been promised.  Sorry,  no money for you!  Us in the private sector already know this because most major corporations have phased out pensions all together, but you people in the public sector that think money will be there for you better wake up and plan accordingly.

This is why the stock market must be manipulated upwards.  Every percentage point drop means more pain on underfunded pensions.

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Re: Daily Digest - November 13

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Re: Daily Digest - November 13

I've been away

Ford Unveils New Car For Cash-Strapped Buyers: The 1993 Taurus

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Re: Daily Digest - November 13

Eurozone out of recession

By Europe correspondent Philip Williams

http://www.abc.net.au/news/stories/2009/11/14/2742785.htm?section=justin

The 16 nations of the Eurozone have officially grown their economies by 0.4 of a per cent, meaning the zone is officially out of recession.

The new figure means that on average Eurozone countries have emerged from recession faster than earlier predicted, but the powerhouse nations of Germany and France have recorded a recovery below expectations.

The German economy grew by 0.7 per cent and France just 0.2 per cent.

The Spanish economy is trailing and is still in recession.

Though not in the Eurozone, Britain too is lagging behind other European countries and is still in recession after recording six consecutive quarters of negative growth.

It is Britain's worst result since quarterly figures were first gathered in 1955.

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Has the Whole World Gone Enron Mad (Nate's Blog)

Killer article and video on Nate's blog today, adding serious doubts to the "China story":

 Has the Whole World Gone Enron Mad? 

Be sure to watch the accompanying video in the article:

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Re: Daily Digest - November 13
phredd wrote:

Where does the other $55 billion come from?

My guess would be that Obama and Congress will climb aboard the bailout express again.

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Re: Daily Digest - November 13

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Re: Daily Digest - November 13
idoctor wrote:

I like Max. No BS, blunt, boils it down to the important elements. 

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Re: Daily Digest - November 13

I like Max cause he often puts it in a criminal context

where it belongs

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Re: Daily Digest - November 13

Max, Chris and Zerohedge - I look forward to Max's 'On the Edge' every weekend and Chris and Zerohedge are always open in my browser. Have I missed anyone?

http://maxkeiser.com/

DavidC

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Re: Daily Digest - November 13
DavidC wrote:

Max, Chris and Zerohedge - I look forward to Max's 'On the Edge' every weekend and Chris and Zerohedge are always open in my browser. Have I missed anyone?

http://maxkeiser.com/

DavidC

Chris, Nate, Jim Puplava and and family and John, Barry, ZeroHedge, Max, Ron Paul Md., Jim Rogers, Marc Faber, Max Keiser, Clement, Grantham, Jeff Nielson, Michael Covel.

Then the rest I have to toss shovels of  junk over my shoulder while digging for nuggets only because they fail to grasp the meaning of what we are - insolvent.

Mike Panzer is okay and  Dr. Housing Bubble is good.

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Re: Daily Digest - November 13

Thanks Davos, you made me smile with there! Yes, OK, I missed a few! Smile

I always look forward to John Mauldin's stuff as well. I don't know anything about Warren Pollock but I like his stuff. I've only read a couple of Dr Housing Bubble's articles but thought they are very good. And Karl's Market Ticker is always excellent (I'm waiting for one of his fuses to blow though!).

Crikey, I shouldn't have said anything! Maybe I should have said that Chris, Max and Tyler are the main three I watch through the day!

DavidC

P.S. Just out of interest, are there any bloggers who DO think we're in any form of recovery as espoused by TPTB or mainstream media? When I read of the likes of Paul Krugman (well, he's got the Nobel...) saying we need MORE currency pumped into the system to stimulate it, and with the stock market continuing to rise (the inverse surrogate of the dollar index at the moment) I REALLY do sometimes wonder if I'm missing something.

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Re: Daily Digest - November 13
DavidC wrote:

P.S. Just out of interest, are there any bloggers who DO think we're in any form of recovery as espoused by TPTB or mainstream media? something.

Yes. Those are the ones that are specialized in banking and finance and good at that but don't look at the larger picture (overall debt/obligations and the 2 trillion in, 4 trillion out and the 2 trillion out deficit funded by a mad counterfeiter.) Basically they are the rest of the bloggers on my iReader that I have to shovel through 900#s of [email protected] to find one ounce of gold. They get it only on a micro level and are always optimistic that the recovery is right around the corner. 

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