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Daily Digest 8/13 - Student Debt Threatens Social Security, U.S. July Budget Deficit $94.6B

Wednesday, August 13, 2014, 9:14 AM

Economy

Student Debt Threatens the Safety Net for Elderly Americans

Until his Social Security check arrived nearly $300 lighter last June, Eric Merklein, 67, had no idea that he was carrying outstanding student debt. Merklein eventually learned that the government was taking money from his Social Security payments to repay loans he took out roughly four decades ago; he had thought they were paid. Merklein was unemployed, and the garnishment amounted to one-sixth of his total monthly income. “You gotta be making this up,” Merklein says he thought, at first.

Lake Mead, water source for Southwest, drops to historic lows, region braces for possible cuts

The lake is expected to drop to 1,080 feet above sea level this year — down almost the width of a football field from a high of 1,225 feet in 1983.

A projected level of 1,075 feet in January 2016 would trigger cuts in water deliveries to Arizona and Nevada.
At 1,000 feet, drinking water intakes would go dry to Las Vegas, a city of 2 million residents and a destination for 40 million tourists per year that is almost completely dependent on the reservoir.

Audit shows $40 million loss for NOFD pension fund (New Orleans)

The New Orleans Firefighters' Pension and Relief Fund is approaching $500 million in liability, according to a new audit released Monday by the Louisiana legislative auditor.

SEC Charges Kansas With Failing to Disclose Pension Risks

As the Sunflower State prepared to issue $127 million of bonds in 2009, a draft actuarial report provided to Kansas’s public pension found that the gap between its liabilities and assets had grown to $8.3 billion in 2008, from $5.6 billion the previous year, lowering the pension’s funding level to 59 percent, the SEC said. The gap was the result of years of insufficient contributions by the state and school districts to cover the cost of benefits earned by public employees and their accumulated liabilities, the SEC said.

Welcome to the World of 'Pension Smoothing'

Companies have struggled to keep up with mounting pension bills since 2008.

The present-day value of those promises increases when interest rates decline. Currently, the largest pensions have a $252 billion funding deficit, which has increased by $66 billion since the beginning of the year, according to Milliman.


Nigeria's Lagos now has 10 Ebola cases: health minister

Sawyer has faced fierce criticism for traveling to Nigeria despite being ill and being under surveillance by Liberian authorities because his sister had died of Ebola.

"It is unfortunate that one mad man brought Ebola to us, but we have to contain it," Nigerian President Goodluck Jonathan said on Monday. "As a government we promise we will do everything possible to contain Ebola."

For Aging Inmates, Care Outside Prison Walls

Of the 2.3 million adults in state and federal prisons, about 246,000 are 50 or older, according to the National Institute of Corrections. The U.S. currently spends more than $16 billion annually caring for these aging inmates, and their numbers are projected to grow dramatically in the next 15 years.

Panicky U.S. junk bond investors flee funds despite good returns

The outflows from junk bond funds, which were the biggest since Lipper records began in 1992, underscore growing investor concerns of stretched valuations in the securities after the sector's multi-year rally.

Diabetes prescriptions soar to 45m (UK)

In little under a decade, the number of prescriptions for the treatment of diabetes has risen by 66.5%, according to the Health and Social Care Information Centre (HSCIC).

In 2013/14, 45.1 million prescription items - including insulin, anti-diabetic drugs and monitoring devices for the condition - were handed out to patients in England, an 18 million rise on the number prescribed in 2005/6.

U.S. July budget deficit $94.6 billion: Treasury

The U.S. budget deficit was $94.6 billion in July, the Treasury Department reported Tuesday. That is a decrease of $3 billion, or 3%, from the shortfall posted in July 2013.

Gold & Silver

Click to read the PM Daily Market Commentary: 8/12/14

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."

11 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4066
Insurers look to hike Obamacare premiums by an average of 8%

Headlines:

  1. L.A. weighs plan to press banks to renegotiate rate swaps
  2. Japan suffers biggest economic slump since 2011 quake as tax hike bites
  3. Slump in Japanese GDP stirs talk of more stimulus
  4. Insurers look to hike Obamacare premiums by an average of 8%
  5. Chinese home sales fall 10.5% as market weakens
  6. Euro-zone industrial production falls again
  7. Ukraine's Currency Hits a New Low
  8. Crisis stalks Europe again as deflation deepens, Germany stalls
  9. Japan pension fund review could set yen on slippery slope
  10. Little Improvement Seen from China's Economic Stimulus Measures
  11. Italian Prime Minister Renzi Struggles to Find Funds for Economic Plan
  12. Homebuyers in Japan seen at risk amid floating-rate loan rush
  13. Atlantic City Faces Downward Spiral With Revel’s Demise
  14. Stockton, Calif., amends bankruptcy plan, but pension issue hovers
  15. The coming storm: Unfunded pension liabilities (Opinion)
  16. Indian Central Banker Urges Cash for Poor to Dilute Power of Oligarchs
  17. China Credit Gauge Plunges as Expansion in Money Supply Slows
  18. South Korea's smaller firms eye rate relief as credit tightens
  19. Europe’s Green Energy Rules Cost U.K. $156 Billion
  20. Puerto Rico creditor group swells to $300 billion in assets
  21. Wall Street Faces Pushback on CMBS Deals as Supply Booms
  22. Default-Swap Traders Rattled by Rousseff Re-Election Odds (Brazil)
  23. Kentucky's Teacher Retirement System May Become One of The Worst-Funded In The U.S.
  24. India Gold Imports Seen Dropping as Rajan Protects Rupee
  25. China developer Shui On Land issues profit warning
  26. Bond Insurer Syncora Claims Mediator Favors Detroit’s Retirees

 

Mike Dill's picture
Mike Dill
Status: Bronze Member (Offline)
Joined: Nov 8 2009
Posts: 28
The U.S. budget deficit was $94.6 billion in July

That is a 1.1 Trillion run rate. Definitely sustainable...(/Sarcasm) Good thing that pension smoothing is here and that the federal government does not have to account for the future liabilities the same way Kansas and everyone else does.

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2768
Headlines
saxplayer00o1 wrote:

Headlines:

  1. ...
  2. ...
  3. ...

The list never seems to get shorter crying.

phecksel's picture
phecksel
Status: Silver Member (Offline)
Joined: May 24 2010
Posts: 204
If FED is tapering and

If FED is tapering and slowing the QE, where is the money coming from to fund the deficit?

james_knight_chaucer's picture
james_knight_chaucer
Status: Silver Member (Offline)
Joined: Feb 21 2009
Posts: 160
This should explain:

This should explain:

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4066
How Health-Care Costs Gobbled Up Wages

How Health-Care Costs Gobbled Up Wages

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1517
Currency devaluation, bank holiday?

Uh oh!  Isn't this what it would like in advance if POTUS was going to announce a currency devaluation or bank holiday on Sunday night?

http://thehill.com/blogs/blog-briefing-room/news/215054-why-is-obama-returning-to-washington

Cue scarey music...

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4066
Nigeria ebola cases (Misleading headlines)
  1. Some misleading headlines. Look at quarantined vs having the disease. Google search link.
  2. Argentina slams U.S. judge, holdouts see no private debt deal
  3. Puerto Rico Power Authority Faces Thursday Deadline to Extend Credit
davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
US budget deficit - No Context = Wrong Impression

You can't calculate the annual run rate of the deficit from just one month.  The cash flow for the US government is highly variable.  Here are two charts, one that does what you did - annualizes the run rate from the most recent month, and another that does the same thing, but using a 12 point moving average to smooth out the seasonal variability.

For instance, in April, US was in surplus.  Annualizing April's run rate yields a 1.25 trillion dollar surplus.  In May, it reverses.  -1.5 trillion dollar deficit.  But what we care about is the trend.  Is the deficit increasing, or decreasing?  You can't tell that from just one month's data point.

Viewing that same data through the lens of a moving average, we can finally see the trend clearly.  The deficit has been shrinking for a while now, which is the exact opposite impression the article was trying to persuade you of.  This is how media manipulation works - by presenting you data without context.  "HORRIBLE OBAMA DEFICIT" - and indeed, since the cash flow is so variable, if they simply provide articles with headlines presenting the actual data but only every other month, they are precisely correct, yet lying to you at exactly the same time.

We do see a slight increase in the deficit over the past two months; will this become a new trend?  You can really only tell if you use a smoothing function.

Always Demand Context.

phecksel's picture
phecksel
Status: Silver Member (Offline)
Joined: May 24 2010
Posts: 204
James, Thank you for the

James,

Thank you for the link.  It firmed up what I understand... however, the QE factor is still not covered.  How does that get carried on the Fed's balance sheet, which if I understand correctly, by charter can't be there.

james_knight_chaucer's picture
james_knight_chaucer
Status: Silver Member (Offline)
Joined: Feb 21 2009
Posts: 160
I guess you'll have to take

I guess you'll have to take that up with the Fed. :)

The Bank of England explains QE as follows:

http://www.bankofengland.co.uk/monetarypolicy/Documents/pdf/qe-pamphlet.pdf

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