Daily Digest

Daily Digest 10/19 - Sewer Bills Double, Spain Hit By Downgrade, Greece Jobless Rate Nears Record High

Wednesday, October 19, 2011, 10:54 AM
  • Sewer Bills Could More Than Double
  • Moody's: CMBS delinquencies up to 9.36% in September
  • France, Germany agree to boost rescue fund: report
  • French credit review threatens euro zone rescues
  • Illinois backlog adds to schools' money problems
  • National debt passes $14.9 trillion
  • Spain Hit by Downgrade, Falling Home Prices
  • Greek union warns of austerity “death spiral”
  • Los Angeles, Wooed by Occupy Protest, Faces Higher Debt Cost
  • Greece Jobless Rate Nears Record High
  • Greece uses emergency powers to end garbage strike
  • S&P Downgrades Italian Banks
  • IRS: Budget cuts would hurt service, raise deficit
  • U.S. Postal Service lifts stamp price by 1 cent
  • US adopts limits on speculative commodity trading
  • UK inflation hits highest rate in 3 years
  • Brooksville City Council considers uses for red-light cameras money

Watch Chris speak at the Casey Research Center about how "without energy, the economy is meaningless." A must see video.

Economy

Sewer Bills Could More Than Double (Los Angeles)

Los Angeles families could see their sewer bills increase by as much as 77 percent over the next ten years if the Los Angeles City Council approves a new fee increase Wednesday. The proposal, unanimously approved Monday by the Budget and Finance Committee, seeks to raise $2 billion in revenue to improve the city's aging 6700 mile sewer system and water treatment plants.

Moody's: CMBS delinquencies up to 9.36% in September

The delinquency rate of loans in commercial mortgage-backed securities rose in September while total issuance fell as more seasoned loans left CMBS than new deals came into the sector, according to Moody's Investors Service.

Analysts said the rate of delinquent loans increased to 9.36% from 9.01% in August. The rate has stayed higher than 9% for all of 2011.

France, Germany agree to boost rescue fund: report

France and Germany have agreed to boost a euro zone financial rescue fund to two trillion euros ($2.6 trillion) as part of a plan to resolve the bloc's debt crisis that should win support at Sunday's EU crisis summit, Britain's Guardian newspaper said on Tuesday.

The paper, citing senior European Union diplomats, said the euro zone will endorse a five-fold increase in the 440-billion-euro bailout fund, giving it some two trillion euros to use to help troubled governments and banks withstand the impact in the event a troubled country defaults.

French credit review threatens euro zone rescues

Doubt cast on France's triple-A credit rating by Moody's raised uncertainty over Europe's hopes of drawing a line under its sovereign debt crisis, five days before a crucial EU summit.

The U.S. ratings agency said late on Monday it may slap a negative outlook on France's Aaa rating in the next three months if slower growth and the costs for helping bail out banks and other euro zone members stretch its budget too much.

Illinois backlog adds to schools' money problems

Illinois schools are getting less money from the state this year and they'll have to wait a long time to collect it. As the school year got under way, state government was already more than $449 million behind in education payments.

Rockford schools, for instance, were waiting on nearly $7 million. Schools in the western Illinois town of Avon were due $47,800. The Chicago backlog dwarfed everything else - $112 million. Schools have cut teachers, dipped into cash reserves, postponed purchases, slashed training and delayed paychecks. Tremont Superintendent Don Beard says it has become the "way of doing business."

National debt passes $14.9 trillion

$14,936,592,327,091.37

Spain Hit by Downgrade, Falling Home Prices

Spain was hit by a double whammy Tuesday when Moody's Investors Service downgraded the country's government-bond rating, citing fading growth prospects, and the government said housing prices fell further in the third quarter, a concern for embattled banks.

Moody's action to cut Spain's debt by two notches followed Fitch Ratings' own downgrade of Spanish debt this month, and comes at a time when investors are growing increasingly worried about the health of the euro zone's financial sector. ....Moody's reduced Spanish debt to A1, which is four steps below the highest possible grade for credit quality. The ratings agency maintained a negative outlook on Spanish debt because of the risk the European crisis could escalate, but removed it from review for a possible downgrade.

Greek union warns of austerity “death spiral”

Greece risks sliding into a “death spiral” if the government continues to slash salaries and lay off workers instead of cracking down on tax evasion and raising money from the rich, the head of the biggest public sector union said on Tuesday.

Los Angeles, Wooed by Occupy Protest, Faces Higher Debt Cost

Los Angeles faces tens of millions of dollars in additional borrowing costs after the City Council told anti-Wall Street protesters it intends to cut ties with banks involved in financial wrongdoing, Administrative Officer Miguel Santana said.

The city may have to pay $27.8 million in termination fees and replacement costs if it’s prohibited from doing business with banks providing letters of credit for just one infrastructure program, Santana said yesterday in a memo to Mayor Antonio Villaraigosa. Debt service would climb $14.9 million a year if it has to refinance commercial paper into long-term debt at higher rates, Santana said.

Greece Jobless Rate Nears Record High

Unemployment in Greece has risen to a near-record high, even as workers prepare for a two-day general strike to protest the latest government plan to cut salaries and eliminate 30,000 civil service jobs.

Greece said Tuesday that its jobless rate hit 16.5 percent in July, just a shade below the record set in May. Young workers were the hardest hit, with more than two of every five of them left without a job.

Greece uses emergency powers to end garbage strike

Greece used emergency powers to order garbage crews back to work Tuesday to remove 17 days worth of rotting trash from the streets of Athens, as a campaign of strikes escalated against austerity measures to be voted on this week.

Socialist Prime Minister George Papandreou issued the civil mobilization orders, generally used for national emergencies and rarely required to solve labor disputes, as the country braced for the protests to culminate in a general strike on Wednesday and Thursday.

S&P Downgrades Italian Banks

Standard and Poor's Ratings Service on Tuesday cut the ratings on three key Italian banks as part of a broad sector downgrade, reflecting last month's lowering of the country's sovereign rating on the basis of weaker economic growth prospects. S&P cut Banca Monte dei Paschi di Siena to triple-B-plus from A-minus; Banco Popolare to triple-B from A-minus; and UBI Banca to A-minus from A.

IRS: Budget cuts would hurt service, raise deficit

Legislation that would trim hundreds of millions of dollars from the Internal Revenue Service budget would force significant cuts in the services it provides taxpayers and cost the government $4 billion annually in lost revenue, the agency warned Congress on Monday. In a letter to lawmakers, IRS Commissioner Douglas Shulman said the budget cuts "would lead to noticeable degradation of both service and enforcement and would have a serious detrimental impact on voluntary compliance for years to come."

U.S. Postal Service lifts stamp price by 1 cent

The cash-strapped U.S. Postal Service announced on Tuesday a one-cent increase in the cost of mailing a letter, starting in January.

The new prices lift the cost of a first-class stamp to 45 cents starting on January 22, 2012, the first increase in more than two years.

US adopts limits on speculative commodity trading

Trading in commodities futures will be capped under a federal rule adopted Tuesday that seeks to clamp down on speculative trades, which some have blamed for driving up food and gas prices in the past year.

UK inflation hits highest rate in 3 years

Britain's inflation rate jumped to a three-year high of 5.2 percent in September, a bigger than expected increase driven by rising costs for electricity and gas, official data showed Tuesday.

Brooksville City Council considers uses for red-light cameras money

No one knows just how much of a financial windfall Brooksville's reinstated red-light cameras will bring. But there is no shortage of ideas on how to spend the money. Brooksville City Council members all championed their personal wish lists Monday night, tossing out ideas such as using the extra revenue to improve roads and other infrastructure, stepping up marketing and advertising efforts, and even paying for teen driver education programs.....Under the new program, motorists who are caught running a red light will be mailed a $158 citation. Of that amount, $75 would be split between the city and Sensys. The remaining money would go to the state.

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8 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4149
SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2237
German bond sale failure

Can somebody who knows more about bond sales tell me if this is serious? It *sounds* serious. I believe one of Dr. Chris' big red flags is the event of a US Bond sale failure... Thanks, Sager

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3159
Another bail out?

This one sounds about as serious as it gets unless I'm missing something:

http://www.zerohedge.com/contributed/federal-reserve-and-bank-america-initiate-coup-dump-hundreds-billions-dollars-losses-ame

Quote:

This changes the picture completely. This move reflects either criminal incompetence or abject corruption by the Fed. Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositaries pretty much guarantees a Dodd Frank resolution will fail. Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. [Background.] So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.

 

But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.

Here's a concrete target for the OWSers.

Doug

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1988
Germany?

What jumped out at me was Germany not being able to sell all of their bonds.  I mean, holy mackrel.

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3159
Geeze, I must be psychic

http://www.zerohedge.com/contributed/occupy-wall-street-may-address-looting-bank-america-and-federal-reserve

Quote:

Many people are furious that the Federal Reserve and Bank of America have initiated a coup to dump billions of dollars of losses on the American people (and see this).

Many are suggesting that the “Occupy” protesters rally to stop this robbery.

One of the top stories currently on Reddit (one of the top social media sites), is:

OWS and 99%: Please pay attention to this and stop it from happening (BofA and Fed socializing losses)

I understand that the Occupy protesters are, in fact, currently debating making a statement on this theft.

Currently, there are two competing draft statements. This one is from someone very savvy on understanding how the average American thinks:

A portion of the 53 trillion dollars of derivatives (yes that’s with a t, about the size of the entire global economy) transferred to Bank of America’s parent company from Merrill Lynch in 2008 has recently been transferred to Bank of America.

 

Derivatives contracts in a bank are paid before anyone else gets paid.

 

Therefore, these derivatives contracts would be paid before depositors receive their money. These people just cut in front of you.

 

It's very simple, the reason that banks and trading houses were originally separated was to prevent this sort of thing. What’s really going to happen is that the government is going to end up bailing out the FDIC … so this will end up being a government bailout.

 

You’ll end up getting shafted, either by derivatives holders cutting in front of you or by your having to bail out the FDIC so it can bail out banks depositors. Either way, this is yet another instance of looting by the big banks and big government.

 

Just say no … don’t let this stand.

And this one is from two people who are experts on the technical issues involved:

We denounce Bank of America’s transfer of high risk derivatives to its federally insured accounts. This is yet another example of systemically dangerous institutions, big banks like BofA and JPM, once again attempting to shift potentially substantial losses onto the backs of hardworking Americans. The fact that the Federal Reserve supports this action demonstrates Ben Bernanke’s complicity and/or gross incompetence in supporting the Wall Street elite at the expense of tax paying citizens.

Updates as they develop …

Doug

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
sewer and water rates.

 I think the reporter got some things wrong in the The Los Angeles Sewer rate increase article; for instance the title says sewer rates could double but the test says only a 77% increase over 10 years, and $20k for the private part of a sewer connection sounds too high for a family home.  However, the new rates aren't bad compared to the NH city I work in.  Utilities need to start passing on the real costs to rate payers to take of these systems and wean themselves off Federal grants, funded by unsustainable borrowing.  The key is educating the public on the need for rate increases while making the most cost effective decisions for the best long term investments in capital improvements.

Saxplayer included a link on the Chicago water rate increase - same thing- their current rate is extremely low compared to communities in New England here.

Compared to bottled water, tap water is still about 1000 times cheaper!

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Jim Rickards on King World News

 

This podcast is interesting.  Jim Rickards suggests the Fed will use financial supression and the banks to purchase treasuries and keep servicing our debt and future borrowing needs and inflate to reduce the debt burden. 

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/10/16_...

 

 

 

frobn's picture
frobn
Status: Silver Member (Offline)
Joined: Nov 28 2010
Posts: 184
Doug
Doug wrote:

http://www.zerohedge.com/contributed/occupy-wall-street-may-address-looting-bank-america-and-federal-reserve

Quote:

Many people are furious that the Federal Reserve and Bank of America have initiated a coup to dump billions of dollars of losses on the American people (and see this).

Many are suggesting that the “Occupy” protesters rally to stop this robbery.

One of the top stories currently on Reddit (one of the top social media sites), is:

OWS and 99%: Please pay attention to this and stop it from happening (BofA and Fed socializing losses)

I understand that the Occupy protesters are, in fact, currently debating making a statement on this theft.

Doug

WOW!!!!!! Isn't it amazing that within a few weeks OWS has been transformed  from an ignored group characterized in various ways as a ragtag bunch of malcontents to a perceived political force that is now being challenged to STOP the FED from further destroying taxpayers.

It's good to see that OWS is considering the challenge. Would the Tea Party be comfortable to stand in solidarity with OWS on this?

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