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Daily Digest 12/25 - More Water Leaks Detected At Fukushima, China's Cash Crunch

Wednesday, December 25, 2013, 2:56 PM

Economy

Report Faults Increase in China’s Local Government Debt

Two years after analysts began raising concerns about municipal borrowing, Chinese local governments appear to have piled up even more debt, about $3.3 trillion by the end of 2012, perhaps double the level in 2010.

Ruling Says San Jose Cannot Cut Employee Pensions

Reed had pointed out to KQED in May 2012 that the city’s pension costs have tripled in the last decade, forcing San Jose to cut services; if the pension plans were left unchecked, the city could face billions of dollars in unfunded liabilities.

Fidelity to Amundi Seek Euro Shelter as Treasuries Swoon

Yields on 10-year Treasuries (USGG10YR), which have surged more than a percentage point this year, are projected to end the year at 2.83 percent and then rise to 3.38 percent in 2014, data compiled by Bloomberg show. The increase would translate into a loss on the notes next year and add to this year’s decline of about 7 percent, Bank of America index data show.

Detroit bankruptcy threatens benefits of families of fallen cops

Since the city was ruled eligible for bankruptcy, emergency manager Kevyn Orr has said he plans to cut pension benefits as part of his financial plan to stabilize Detroit. According to Orr, the city has about $18 billion in debt and liabilities, including about $3.5 billion in projected pension shortfalls and nearly $6 billion in unfunded retiree health care costs.

IMF: Cyprus’ growth may be hampered for a decade

Cyprus shut down one insolvent bank and confiscated deposits to boost the capital buffers at another when the IMF and the EU refused to use taxpayers’ money to recapitalise the lenders. It was the euro zone’s first such ‘bail-in’ process, in which depositors were forced to help bail out their banks. The €10 billion euros in aid is mainly for fiscal purposes.

More water leaks detected at Fukushima No. 1

Tokyo Electric Power Co. said Tuesday it has detected leaks of radioactive water from two more storage tank areas at the Fukushima No. 1 nuclear plant.

Water levels have dropped inside walled areas in which storage tanks for radioactive water are located, indicating that up to 225 tons of tainted water may have seeped into the ground, Tepco officials said.

Japan's record budget spending highlights balancing act

The International Monetary Fund estimates Japan's general budget deficit at 9.5 percent of GDP in calendar 2013, among the worst in the developed world, and narrowing to a still-elevated 6.8 percent in 2014. Public debt already exceeds 240 percent of GDP, by far the highest among major economies.

China's cash crunch threatens Shadow Banking shock

Growth in lending has been 20pc to 30pc a year since the Lehman crisis, when China ramped up credit to cushion the global trade shock. Rating agencies says this is far above the safe speed limit.

The drama is no longer a local Chinese issue. Credit has grown from $9 trillion to $24 trillion in five years. It is now equal to the entire banking systems of the US and Japan combined. Any misjudgment will have global ramifications.

Gold & Silver

Click to read the PM Daily Market Commentary: 12/24/13

Provided daily by the Peak Prosperity Gold & Silver Group

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