Daily Digest

Daily Digest - October 22

Thursday, October 22, 2009, 10:51 AM
  • Reducing deficit key to U.S. rating: Moody's
  • Qatar says dollar-oil debate is still on
  • The barefaced greed of bankers
  • Small firms face credit squeeze as crisis drags
  • Some credit card companies rush to act before new law
  • JPMorgan Chase profits surge to $3.59 billion
  • David Tice on King World News
  • Bail-outs created 'biggest moral hazard in history' 
  • Wake Up Washington! China Is Already Dumping the Dollar (Video)
  • 1 in 6 Americans Live Below the Poverty Line
  • The Speech Obama needs to give 
  • 7 Months After Stimulus: 49 of 50 States Have Lost Jobs
  • Goldman Sachs’s Griffiths Says Inequality Helps All
  • Goldman should be allowed to fail 
  • Oil soars despite fundamentals; gasoline prices might follow 
  • Counting the hidden ($120 billion) cost of US energy economy
  • Oil prices hit high but report warns of supply crunch
  • Environmental concerns delay solar projects in California desert
  • Buy & Sell Local Produce in your Area 

Economy

Reducing deficit key to U.S. rating: Moody's (saxplayer00o1)

The United States, which posted a record deficit in the last fiscal year, may lose its Aaa-rating if it does not reduce the gap to manageable levels in the next 3-4 years, Moody's Investors Service said on Thursday.

Qatar says dollar-oil debate is still on (saxplayer00o1)

Qatar’s oil minister said the debate was ongoing on using the US dollar for oil trade or shifting to a basket of currencies, the official Qatar News Agency reported yesterday.

The barefaced greed of bankers (M.W.)

London real estate agents say...the number of buyers from the financial services sector has risen by 48 per cent in the third quarter of this year, purely in the expectation of yet another ginormous Christmas bonus.... email after email from [employees] at Goldman Sachs. "We did our first Goldman's deal in June," he tells the FT, "and we are now doing five times as many for its employees as for any other bank."

Small firms face credit squeeze as crisis drags (M.W.)

Small companies create more than half of America's jobs, but the entrepreneurs who drive this part of the economy continue to complain that access to credit two years into the recession remains scarce.... Still profitable firms complain of a major pullback by banks, which many warn will leave a U.S. economic recovery stillborn.

Some credit card companies rush to act before new law (M.W.)

A Chase spokeswoman said ... that the company doubled the minimum payments for more than 1 million cardholders in August because it wants them to pay down more of their principal....Joe Ridout, an advocate with Consumer Action, said, "Truly, this is the the single most abusive credit card change in terms that I've ever seen.".... to change the terms when a cardholder pays on time and commits no infractions."

JPMorgan Chase profits surge to $3.59 billion (M.W.)

JPMorgan Chase.....America’s second largest by assets, said that profits rose from $527 million (£330 million) in the third quarter last year to $3.59 billion.... made record revenues of $28.8 billion in the three months to September 30, up 79 per cent on the same quarter last year.

David Tice on King World News (Norun T.)

In this interview David discusses the U.S. stock market, U.S. Dollar, gold, silver, the economy, real GDP, sentiment, the consumer, a coming funding crisis, threats to our freedoms, capital controls and much more. He also refers to Chris Martenson during the interview.

Bail-outs created 'biggest moral hazard in history' (M.W.)

The Governor of the Bank of England launched his fiercest attack yet on big banking on both sides of the Atlantic "It is in our collective interest to reduce the dependence of so many households and businesses on so few institutions that engage in so many risky activities. The case for a serious review of how the banking industry is structured and regulated is strong."

Wake Up Washington! China Is Already Dumping the Dollar (Video) (M.W.)

Harvard Professor Niall Ferguson says Washington D.C. is too complacent about China's ability to wean itself off the dollar. The accompanying video was taped last week at The Economist's Buttonwood Gathering.

1 in 6 Americans Live Below the Poverty Line (M.W.)

Today's numbers show that 7.1 million Americans 65 and older live in poverty. Additionally, 27 million people between the ages of 18 and 64 and 13.3 million children live in poverty.

The Speech Obama needs to give (Joemanc)

We, as a species, are now bumping up against -- slamming into, really -- some very immutable biophysical limits on a global scale. These limits and the mounting consequences for their continued violation have been predicted and well documented by our best scientists for many decades -- complete with dire warnings for the consequences of failing to change our course.  We have not heeded these warnings and we are now suffering the predicted consequences.

7 Months After Stimulus: 49 of 50 States Have Lost Jobs (Vinny A.)

According to the data, 49 States and the District of Columbia have lost jobs since stimulus was enacted. Only North Dakota has seen net job creation following the February 2009 stimulus. While President Obama claimed the result of his stimulus bill would be the creation of 3.5 million jobs, the Nation has already lost a total of 2.7 million – a difference of 6.2 million jobs.  

Goldman Sachs’s Griffiths Says Inequality Helps All (Update 1) (Vinny A.)

A Goldman Sachs International adviser defended compensation in the finance industry as his company plans a near-record year for pay, saying the spending will help boost the economy. “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”



Brian Griffiths, who was a special adviser to former British Prime Minister Margaret Thatcher, said yesterday at a panel discussion at St. Paul’s Cathedral in London. The panel’s discussion topic was, “What is the place of morality in the marketplace?”

Goldman should be allowed to fail (SolidSwede)

Goldman’s status strikes me as untenable. It may be better regulated by the Fed than the Securities and Exchange Commission but counting it as just another bank, with the same privileges and obligations as retail banks and credit card companies, makes little sense...not only does the fact that it may pay $23bn in bonuses this year upset people, but also its incentives are skewed...if Goldman Sachs took on more risk when its equity was held by outsiders than with its partners’ own money, what can we expect now that the government implicitly accepts that it is “too big to fail”? Goldman has an even bigger incentive to risk other people’s money.

Energy

Oil soars despite fundamentals; gasoline prices might follow (Livio S.)

Now Rozell says all bets are off in spite of several fundamentals, such as the facts that oil supplies are plentiful, demand remains weak and refiners have slashed production because motorists aren't driving enough to allow gasoline makers much of a profit. "You would think that this would drive the price of crude down, but what we have here is more of a financial play than market fundamentals. There is no reason for oil to be this high," said Rozell, retail pricing director of Oil Price Information Service in New Jersey. He added that the 10-week price slide that finally drove California gasoline back below $3 a gallon was probably over.

Counting the hidden ($120 billion) cost of US energy economy (Michel S.)

The National Academies of Science, in response to a request from Congress, has attempted to account for the costs of our energy habits that don't show up on our utility bills. The report says that these externalized costs totaled $120 billion in 2005, and that's almost certainly a low estimate.

Oil prices hit high but report warns of supply crunch (M.W.)

A report from the non-governmental organisation Global Witness – famous for its exposé of so-called "blood diamonds" – pointed to an impending supply shock that could be so severe that many of the world's poor countries would simply be shut off from the world of energy by sky-high prices. Two years in the preparation, Global Witness's report, Heads in the Sand, accused governments of ignoring the fact that the world could soon start to run short of oil. This would lead to huge consequences in terms of price shocks and much higher levels of violence around the world than last year's food riots. 

Environment

Environmental concerns delay solar projects in California desert (Livio S.)

Across the desert flatlands of southeastern California, dozens of companies have flooded federal offices with applications to place solar mirrors on more than a million acres of public land. But just as some of those projects appear headed toward fruition, environmental hurdles threaten to jeopardize efforts to further tap the region's renewable energy potential.

Buy & Sell Local Produce in your Area (David M.)

Do you grow your own fruits or vegetables, but harvest more produce than you, your family, friends and co-workers can eat? One can register to post free classified ads to sell, trade or give away your surplus backyard produce. Individuals and food pantries can also register to post wanted classifieds.

15 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4167
Re: Daily Digest - October 22

Owners of shopping malls, hotels, office space and apartment buildings — and the bankers who financed them — face a major crunch

  (related) FDIC seeks bailout ban, risk fees

"Oct. 21 (Bloomberg) -- New York Governor David Paterson said the state may not have enough money in December to pay all its bills, as he urged legislators to quickly agree to plans to close a $3.1 billion deficit and raise cash.

Bond rating companies will be watching the state, and may reduce New York’s ranking if it drew money from its $1.2 billion rainy day fund or created a financial plan with unrealistic revenue forecasts, Paterson said at an Albany meeting with leaders of the Senate and Assembly."

 

"In 2010, 43.3percent of the city's general levy, or $345 million, will be used to fund pension contributions for city employees. State lawmandates that the city contribute an amount to each pension fund based on payroll contributions made by employees."

"According to the report, at the end of 2007, the plans of the 214 non-financial U.S. companies with pensions rated by Fitch were approximately 103% funded, but following the dismal performance of the equity markets in 2008 in the aggregate plans were underfunded at approximately 76% on a generally accepted accounting principles (GAAP) basis, and the median company was 71% funded."

"The city's pension plans - especially the interest payments on the unfunded liability - is "what's eating the city's lunch," according to John Keane.

Keane is the executive director of the Jacksonville Police and Fire Pension Fund, which accounted for about $789 million in unfunded liability after the stock market went south."

Treasury auction total next week expected to be record

By Chris Reese

"NEW YORK, Oct 22 (Reuters) - U.S. Treasury debt prices eased on Thursday, weighed down by persistent worries that massive amounts of pending government debt issuance will take a toll on bond prices.

The Treasury on Thursday will announce the size of next week's note auctions, with many analysts expecting the total weekly offering to exceed the record of $115 billion seen in July."

'

"Investors are worried that this could jeopardize the country's top-tier credit rating."

 

"NEW YORK: Thousands of parents in Hawaii have been scrambling to make childcare arrangements before today's closure of all state schools in an attempt by the education authorities to cut costs.

All 256 of Hawaii's state schools will be closed in the first of 17 ''furlough Fridays'' over the school year, bringing a drastic cut in school time for up to 171,000 children."

"As the Senate debates whether to extend unemployment benefits, more than 200,000 jobless Americans are set to see their checks stop in October."

......in other words

mpelchat's picture
mpelchat
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Re: Daily Digest - October 22
saxplayer00o1 wrote:

Treasury auction total next week expected to be record

By Chris Reese

"NEW YORK, Oct 22 (Reuters) - U.S. Treasury debt prices eased on Thursday, weighed down by persistent worries that massive amounts of pending government debt issuance will take a toll on bond prices.

The Treasury on Thursday will announce the size of next week's note auctions, with many analysts expecting the total weekly offering to exceed the record of $115 billion seen in July."

"Investors are worried that this could jeopardize the country's top-tier credit rating."

Rates go up, dollar goes down.   Not a good formula, but the medicine we need to get to true sustainability.

EndGamePlayer's picture
EndGamePlayer
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Posts: 546
Re: Daily Digest - October 22
mpelchat wrote:

Rates go up, dollar goes down.   Not a good formula, but the medicine we need to get to true sustainability.

I'm a little confused - why would we want to keep the dollar strong - when a weak dollar means JOBS as US products become affordable to the rest of the world. Think about it - isn't that what we want to see - people with jobs? so they can afford a house, pay their bills? Buy stuff? People with JOBS move this economy.not the jacka$$ on Wall Street.

I for one want to see the dollar drop and for so many reasons. Unfortunately, the snaffu is - as the dollar drops - oil gets higher since the 2 go hand in hand. And as gas goes up - that is a perfect vehicle to inflate the economy. China would be doing the US a huge favor if they got the ball rolling by dumping dollars. They just need to do it in a way that keeps their currancy devalued too.

Hand on to your hats - We're in a for a big slide ---wwweeeeee! ENDgamePlayer

jpitre's picture
jpitre
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Posts: 366
Re: Daily Digest - October 22

A Goldman Sachs International adviser defended compensation in the finance industry as his company plans a near-record year for pay, saying the spending will help boost the economy. “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”

 

I think my outrage gland is perilously close to exhaustion. I think I'll go dig in the garden.

 

Jim

jpitre's picture
jpitre
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Posts: 366
Re: Daily Digest - October 22

A Goldman Sachs International adviser defended compensation in the finance industry as his company plans a near-record year for pay, saying the spending will help boost the economy. “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”

 

I think my outrage gland is perilously close to exhaustion. I think I'll go dig in the garden.

 

Jim

mpelchat's picture
mpelchat
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Posts: 214
Re: Daily Digest - October 22

1) If the dollar crashes, we the people will be that last to know.  All the Wall Street boys with be prepared for this situation.  Result is, we the people will lose all our savings to inflation or god forbid hyper-inflation. 

2) If the dollar crashes, we as a country have mostly service or financial jobs, our manufacturing base is small.  Therefore we will have to put significant investment to start exporting more.  This will cost a lot since many manufacturers of machinery our outside the USA and where we have machinery makers may have to buy components from outside the USA to build the final machines. 

3) If the dollar crashes, oil/fuel prices for transporting items to Asia or Europe would increase significantly, and problems that we had coming form Asia would be effecting out exports (below). 

This was a problem in the 90's with Asia that few wanted to talk about, importing did not work out that well:

a) quality not as good (materials and workmanship)

b) long supply chains (not to mention all the damage due to rust during shipping for 8 weeks over salt water and make a change lose about 12 to 16 weeks worth of product and you get to air ship product to fill your manufacturing lines). 

We can make quality parts but if they had transportation problems so well we (I was involved with these concerns in my job shipping small mechanisms from china in the 90's, result was never do it again).

4) If the dollar crashes, all food prices would sky rocket (especially in a time when the Central Valley in California failing severely).

As stated before, this is the medicine we need to become stable however we will have many issues to overcome and our lifestyles will change drastically before stability can be reached.  

wawawa's picture
wawawa
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Re: Daily Digest - October 22

This week treasury auctions $111B and next week $180B.  So it comes to more than a quarter of a Trillion dollars in just two weeks.    Look at Auction Results and Upcoming Auctions.

How far and for how long this insanity will continue?

http://www.treasurydirect.gov/RT/RTGateway?page=institAnnceRes

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
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Posts: 562
Re: Daily Digest - October 22

Dont be confused with the total of 250billion. Lots of the notes we sell are 30 day, 90 day, 6 month, etc. So we have to resell debt from time to time.

The question we need to ask ourselves is: can the bond market and foreign central banks absorb 1 trillion per year for the next 2 years?

Dorrian's picture
Dorrian
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Re: Daily Digest - October 22

The correct link to "Wake Up Washington!" article & video is this.

dcm's picture
dcm
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Posts: 216
Intolerance

"We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”

Hmmmm

Didn't Marie Antoinnette say the same thing?

Hey jpitre!  pass the pitchfork........

dcm's picture
dcm
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Posts: 216
"Environmental concerns delay solar projects "

2009 Oxymoron Award

angle's picture
angle
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Posts: 6
Re: Daily Digest - October 22

RE: "Goldman Sach's Griffiths Says Inequality Helps All"

Marie Antoinette couldn't have said it better.

speakcat's picture
speakcat
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Re: Daily Digest - October 22

I just read the Goldman Sach'sGriffith article.  In that article Brian Griffiths is quoted as saying that we should tolerate the inequity (of bloated pay for executives) as a way to achieve greater prosperity and unity for all.  He further states that recievers of those bloated salaries should boost their cheratable giving to improve their images.  WOW!!   What BS!!  Griffiths obviously believes in the Ann Rand philosophy of business....personal greed and selfishness above all.  Let them eat cake?  Hell, let them eat crackers.  Griffiths attitude is absolutely outragious.  Maybe crackers are too good for us peons.  What's next..............grazing on my lawn??  I am trying to do this with no obsenities but Griffiths attitude is obscene!!  And I am #$#$%^&& at his attitude!

The American Revolution was not just about "taxation without representation" and the notorious Stamp Act.  It was also about social and financial inequities in the colonies.  In 1690, the richest 5% of the population owned 30% of taxable assets and the bottom 50% owned 9%.  By 1770, the richest 5% owned 49% of taxable assets and the bottom 50% owned 5%!  WOW! 

Can you guess how much of taxable assets the bottom 50% of Americans own now?  IT IS 1%.  Don't believe me? Look it up: U.S. wealth distribution on Wickipedia. My source for the older figures is "A Peoples History of the American Revolution" by Ray Raphael. 

IceViking's picture
IceViking
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Posts: 15
Re: Daily Digest - October 22

Dollar hegemony for another century

By Ambrose Evans-Pritchard

The dollar will still be the world’s dominant reserve currency in 2030, sharing a degree of leadership in uneasy condominium with the Chinese yuan. It will then regain much of its hegemonic status as the 21st century unfolds. It may indeed end the century even stronger than it was at the start.

Japan is about to go bankrupt. It is on the cusp of a fiscal crisis that will change perceptions of Asia dramatically. The IMF says gross public debt will reach 218pc of GDP this year. This is compounding very fast. It will be 246pc in 2014.

The Hatoyama government is spending as if there is no tomorrow. It plans to issue ¥50 trillion or $550bn in fresh bonds....................................................

It's an interesting read...

idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest - October 22

Bill Fleckenstein

http://www.cnbc.com/id/33436132/site/14081545

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