Daily Digest

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Daily Digest 8/10 - The Merkel Memorandum, What To Do As The Planet Reaches Its Limits?

Friday, August 10, 2012, 11:13 AM


Elliott Management: We Make This Recommendation To Our Friends: If You Own US Debt Sell It Now (Phil H.)

Opaque, overleveraged and vulnerable Financial Institutions which need to be propped up by the implicit or explicit guarantee of sovereigns does not make for a solid financial plumbing system for the global economy...this is a formula for power entrenchment, favoritism and shady deals behind closed doors.

Northwood taking the law into its own hands? (Thomas C.)

He's Northwood's very own armed security patrolman, possibly the first in a Philadelphia residential area. Each homeowner that seeks his protection pays Mearing $40 a month to look after a home and keep an eye out for suspicious activity.

Doing It Ourselves (Theo)

So let’s look at how our banking system really works. It’s commonly believed that banks lend out money that they already have from invested savings. That would’ve encouraged a fairly stable system of banking. Instead, we have what’s called a fractional reserve banking system. This means that banks can loan out almost all the money that gets deposited with them. For example, when you put $100 in one bank, they lend $90 of it to someone else, who then puts that $90 in their bank. Now there’s $190 where there used to be $100. That $90 lent out will also be deposited and $81 lent again. In this way, money ends up being multiplied between ten and a hundred times. Sounds crazy right? Less than 1% of the money in the economy is actual notes and coins, the rest are just numbers on computers, created as debt. This system rapidly increases the amount of money in the economy, which fuels economic growth, allowing most of us the ability to pay back our debts with interest. But only so long as the economy keeps on growing.

Bond King Bill Gross: Inflation Coming Soon To A Developed Country Near You (David B.)

Next, Gross takes a stab at fixed income, an asset class which he is well-versed in and has long been considered an expert of. Investors, according to Gross, would be foolish to think that the last 30 years of bond returns can be replicated in the current environment. With bonds yielding an average of just 1.8% with an average maturity of six to seven years, stocks would have to do some heavy lifting by returning 7-8% after adjusting for inflation says Gross (this is all assuming a well diversified portfolio of fixed income, equity, and more).

Breaking up the euro area: The Merkel memorandum (jdargis)

The position is dangerously unstable. If capital flight from the peripheral economies gathers pace, it could trigger runs on entire banking systems. That would put the ECB—and thus, indirectly, the Bundesbank and Germany—on the hook for deposits worth trillions of euros. The domestic politics are already ugly in several countries, notably Greece. This is poisoning our position in southern Europe, where our help is increasingly seen as a new form of German tutelage. The situation is deteriorating in Germany, too, where your ability to act is being limited by a backlash against bail-outs and against the euro itself. If anything, the backlash in Finland and the Netherlands is even more vicious.

As the Planet Reaches its Limits, What Solutions are Available? (James S.)

I am not sure there are any entirely safe investments, but actual goods and land you own would seem more likely to hold value. Cash would seem to be safer than stocks or bonds. Things like tools you expect to need in the future would seem to be especially good investments.

Virtual Reality Is Addictive and Unhealthy (guardia)

In the distant past our tools improved slowly enough to allow our minds, our bodies, our family structures, and our political organizations to keep up. The earliest stone tools are about 2.6 million years old. As those and other tools became more refined and sophisticated, our bodies and minds changed to take advantage of their power. This adaptation was spread over more than a hundred thousand generations.Interactive technologies give us a quick fix, and that's not a good thing.

Nuclear waste issues freeze permits for U.S. power plants (Safewrite)

"We are now considering all available options for resolving the waste issue," the five-member NRC said in a ruling earlier this week. "But, in recognition of our duties under the law, we will not issue [reactor] licenses until the court's remand is appropriately addressed."

There are 14 reactors awaiting license renewals at the NRC, and an additional 16 reactors awaiting permits for new construction.

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