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    Daily Digest 2/24 – CA Still Struggling with Unfunded Liabilities, Pension Costs To Rise Again

    by saxplayer00o1

    Wednesday, February 24, 2016, 3:34 PM

Economy

Atlantic City officials spurn proposed takeover by state

Without an infusion of cash, the city could run out of money within two months and would have no alternative but to ask the state’s Local Finance Board to let it file for bankruptcy protection, Guardian said. Christie, a Republican, and other state officials oppose allowing Atlantic City to make what would be the state’s first municipal bankruptcy filing since the Great Depression.

CA Still Struggling with Unfunded Liabilities

“It’s California’s debt and liabilities that are concerning financial analysts, particularly the state’s rapidly growing unfunded retiree health care costs, which grew more than 80 percent over the past decade. California has promised $74 billion more in health and dental benefits to current and retired state workers than the state has put aside,” the San Francisco Chronicle reported.

Emerging market bonds hit as foreign investors dump debt

“The currency volatility means investors are unwilling to stomach these bonds. And as growth slows in the countries and the bond yields go higher, the cost of servicing debt is getting more difficult for the countries.”

Singapore lawyers warn of 1998-like pain as debt defaults spread

Rajah & Tann Singapore LLP, Southeast Asia’s largest law firm, reckons the region’s rising bond defaults will inflict as much pain on creditors as the financial crises of 2008 and 1998.

Facing Default, Some Student Loan Borrowers Flee Abroad

Millions of Americans owe a collective $1.3 trillion in student loan debt, and roughly a quarter of them are behind in their payments. As they struggle to stay afloat, some have even sought refuge abroad, where it’s possible to escape student loan collectors – but only for those who plan never to return to the United States.

More Subprime Borrowers Are Falling Behind on Their Auto Loans

Rising delinquencies come as a warning sign that more loans may end up in default down the road, said John McElravey, an analyst at the bank. What may be most troubling, however, is that the default rate is already climbing, up to 12.3 percent in January from 11.3 the prior month. That is the highest rate since 2010, the data show.

Pension costs to rise for MBTA and its employees

Brian Shortsleeve, chief administrator of the Massachusetts Bay Transportation Authority, said Monday that the pension fund’s long-term liability will rise by $53 million to $868 million. That, in turn, will force the T to bump up its annual contribution to the fund by $8 million to $84 million for the year that starts July 1, he said.

Australia’s mortgage debt marches to $1.4 trillion

At $1.384 trillion total outstanding debt has risen 218% from APRA’s reported $635 billion as at March 2008 when its published data series begins.

Watch all of the government debt in the world grow in real time

The U.S. owes nearly one third of total government debt with $18.91 trillion. That is 105% of its GDP and with a population of 322.8 million, is equal to $58,576 for every American man, woman and child. Annual interest comes out to $545.93 billion, which means American taxpayers are paying the equivalent of Apple Inc.’s market capitalization in interest every year.

ECB risks running out of bonds to buy unless rewrites rules

The ECB is widely expected to cut its deposit rate by 10 basis points to -0.4 percent on March 10 and economists polled by Reuters say the size of the bond-buying scheme could also be extended by 10-30 billion euros a month.

Illinois governor eyes blocking Chicago school debt

Rauner, who has called for a state takeover of the school district, said the board has the legal authority to block borrowings by districts found to be in financial duress. “The state board has never chosen to do that for the city of Chicago. I hope that never becomes necessary. But we’ve got to be ready to take action,” Rauner told reporters.

Trudeau Drops Campaign Promises and Goes All In With Deficits (Canada)

The same document shows the nation’s debt-to-GDP ratio will be rising in the coming fiscal year, not falling. Morneau also reiterated that balancing the budget in the near term would be “difficult.”

The Junk Debt Funds Threatening to Create an $88 Billion Logjam

With debt markets showing the first signs of life in weeks, Wall Street banks are trying to break a logjam that could leave them with big losses on $88 billion of risky corporate loans. They won’t get much help from one of their most reliable buyers.

G-20 Central Bankers in China Seek Alternatives to Currency War

Further raising the stakes are negative interest rates in economies from Japan to the euro area that account for about a quarter of global output. That means officials at the Feb. 26-27 meeting have even less monetary leeway to deal with disinflationary pressures than in past years, fueling calls for greater fiscal oomph, something that may prove difficult to make reality.

Japan finmin won’t rule out chance of more fiscal stimulus

A senior U.S. Treasury official said Washington will call on G20 countries this week to use fiscal policy to boost global demand.

Helicopter drops might not be far away

The world economy is slowing, both structurally and cyclically. How might policy respond? With desperate improvisations, no doubt. Negative interest rates have already moved from the unthinkable to reality. The next step is likely to include fiscal expansion.

Get ready to be showered by helicopter money

The next likely option is “Hirp” – or helicopter money. And that is likely to involve some even crazier options, such as putting money into people’s banks accounts, mandating pay rises, or giving them the deposits for a house. None of it will work, of course – but that doesn’t mean we shouldn’t expect it to happen, or indeed position our portfolios to take advantage of it.

Venezuela’s Descent Into World’s Riskiest Sovereign Credit: Q&A

The country already tops measures of the world’s most miserable economy, with inflation of 181 percent last year, a currency that has collapsed on the black market to less than 1 percent of its official value and shortages of basic goods such as detergent and antibiotics. It’s a horrific turnaround for what was once one of the region’s most stable democracies, famous for its big cars, cheap gasoline and beauty queens.

Battered Brazil Carmakers Say Worst Isn’t Over as Job Cuts Loom

Halfway through a two-year recession that’s forecast to be the worst since at least 1901, Brazil finds itself stuck in a grinding cycle of job loss and falling consumer spending. National unemployment has climbed to 9 percent as retail sales tank and industrial production contracts for 22 straight months, government reports show.

Sovereign-wealth funds could pull another $404 billion out of stock market

Sovereign-wealth funds, many of which were established by oil-rich nations to manage their petroleum-related windfalls, have been aggressive sellers of stocks and other securities as crude prices have tanked, and they may be prepared to sell significantly more if oil doesn’t recover.

J.P. Morgan adds $500 million to reserves against bad oil loans in 2016

The move comes as crude-oil prices have fallen about 12% so far this year and have plunged 34% over the past 12 months, putting the finances of energy companies under pressure.

Gold & Silver

Click to read the PM Daily Market Commentary: 2/23/16

Provided daily by the Peak Prosperity Gold & Silver Group

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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