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    Daily Digest 12/24 – Debt Crisis Threatens American Cities, Banks Best Basel, Gas Demand Decline

    by DailyDigest

    Friday, December 24, 2010, 4:00 PM

  • $2tn Debt Crisis Threatens To Bring Down 100 US Cities
  • Pensions Push Taxes Higher
  • Pimco Says ‘Untenable’ Policies Will Lead To Eurozone Break-Up
  • US Takes Greek Path
  • Is JP Morgan Shifting Its Silver And Gold Shorts To Non-US Domiciled, And Thus Unregulatable, Banks?
  • Banks Best Basel as Regulators Dilute or Delay Capital Rules
  • Gold Prices And Output To Go Higher In 2011, PwC
  • U.S. Demand For Gas At Start Of Long-Term Decline

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Economy

$2tn Debt Crisis Threatens To Bring Down 100 US Cities (solidswede)



Meredith Whitney, the US research analyst who correctly predicted the global credit crunch, described local and state debt as the biggest problem facing the US economy, and one that could derail its recovery. “Next to housing this is the single most important issue in the US and certainly the biggest threat to the US economy,” Whitney told the CBS 60 Minutes programme on Sunday night. “There’s not a doubt on my mind that you will see a spate of municipal bond defaults. You can see fifty to a hundred sizeable defaults – more. This will amount to hundreds of billions of dollars’ worth of defaults.”

Pensions Push Taxes Higher (CMartenson – Follows above; squeezing the taxpayers)



Cities across the nation are raising property taxes, largely citing rising pension and health-care costs for their employees and retirees.

In Pennsylvania, the township of Upper Moreland is bumping up property taxes for residents by 13.6% in 2011. Next door the city of Philadelphia this year increased the tax 9.9%. In New York, Saratoga Springs will collect 4.4% more in property taxes in 2011; Troy will increase taxes by 1.9%.

Pimco Says ‘Untenable’ Policies Will Lead To Eurozone Break-Up (pinecarr)



Andrew Bosomworth, head of Pimco’s portfolio management in Europe, said current policies are untenable in the absence of fiscal union and will lead to a break-up of the euro. “Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments,” he told German newspaper Die Welt. He said these countries could rejoin EMU “after an appropriate debt restructuring”, adding that devaluation would let them export their way back to health.

US Takes Greek Path (pinecarr)



With dollar interest rates generally declining and Chinese and other foreign investors happily piling in to fund budget deficits of $1.3-$1.4 trillion, this had appeared a purely theoretical problem. However, with commercial and industrial loans (including small business, but also including the relatively active leveraged buyout sector) declining by 25% to $1.22 trillion in the two years since 2008, the problem has been a real one.

Is JP Morgan Shifting Its Silver And Gold Shorts To Non-US Domiciled, And Thus Unregulatable, Banks? (jamie davis)



Going through recent bullion bank shorting information, Adrian Douglas has stumbled across a nugget that may explain the sudden willingness of JPM to admit to the FT, via proxies as obviously the bank would never expose itself to even remote market manipulation claims, that it has collapsed its silver short. The reason: even as US bank silver (and gold) shorts by US banks have been gradually declining, those positions established by non-US bank, and thus entities not under the CFTC’s control, have seen their silver shorts surge, increasing by orders of magnitude over the past several months. Is there a stealthy transfer of precious metals market manipulation taking place, one that exonerates the domestic, and therefore regulatable, suspects, while making foreign banks carry the burden of suppressing silver and gold prices?

Banks Best Basel as Regulators Dilute or Delay Capital Rules (solidswede)



What’s not in the documents published by the Basel Committee on Banking Supervision, and the escape hatches that are, may have more impact on how financial institutions will operate following a global credit crisis that led to $1.8 trillion in bank losses and writedowns. The committee’s most significant achievement, members say, an agreement to increase the amount of capital banks need to hold, won’t go into full effect for eight years. Other measures that regulators had hoped would prevent future crises — liquidity standards, a capital surcharge on the biggest lenders and a global resolution mechanism for failing firms — were postponed, allowing banks to escape the toughest rules that would force them to change the way they do business.

Gold Prices And Output To Go Higher In 2011, PwC (stephen wood)



“Given the high demand for gold, it will be interesting to see if companies that have located marginal deposits of gold will kick-start their production and move faster than they would under normal circumstances,” says John Gravelle, Canadian mining leader, PwC. The survey found 70% of gold producers plan on using their additional cash influx to look for new projects or expand existing ones to replace or replenish reserves. The top three strategies are brownfield exploration (78%), greenfield exploration (54%), and mergers and acquisitions (37%).

Energy

U.S. Demand For Gas At Start Of Long-Term Decline (sammy)



The country’s thirst for gasoline is shrinking as cars and trucks become more fuel-efficient, the government mandates the use of more ethanol and people drive less. “A combination of demographic change and policy change means the heady days of gasoline growing in the U.S. are over,” said Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and author of a Pulitzer Prize-winning history of the oil industry.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the “3 Es.”

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