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Thursday 07.24.2014

Social Security spent $300M on 'IT boondoggle'
Six years ago the Social Security Administration embarked on an aggressive plan to replace outdated computer systems overwhelmed by a growing flood of disability claims. Nearly $300 million later, the new system is nowhere near ready and agency officials are struggling to salvage a project racked by delays and mismanagement, according to an internal report commissioned by the agency. In 2008, Social Security said the project was about two to three years from completion. Five years later, it was still two to three years from being done, according to the report by McKinsey and Co., a management consulting firm. Today, with the project still in the testing phase, the agency can't say when it will be completed or how much it will cost. In the meantime, people filing for disability claims face long delays at nearly every step of the process — delays that were supposed to be reduced by the new processing system.

100 Years to the Day Since the Gold Standard Died
Gold Standard payments through London look awfully like US Dollar clearing a century later...GOLD loves nothing if not irony, writes Adrian Ash at BullionVault. And here, 100 years to the day after the approach of World War I killed the Gold Standard stone dead, the world's monetary system risks breakdown again. Again you could blame war in a poor corner of Europe. Again, that war could be cast as a big power demanding a small neighbor says "sorry" – then Serbia for the murder of a fat-necked Austrian prince, now Ukraine for ousting its fat-headed Moscow-backed president. If irony suits, it only tastes richer when you think this week also marks 70 years since the Gold Standard's replacement was put together as the war that followed the war to end all wars finally slaughtered itself to a close. But that shadow system...of invisible gold and all-too visible paper...didn't quite die when the Dollar-Exchange system lost its link to bullion.

David Stockman On The Real Evil Of Monetary Central Planning
The 2008 Wall Street meltdown is long forgotten, having been washed away by a tsunami of central bank liquidity. Indeed, the S&P closed yesterday at 1,983—or up by nearly 200% from its March 2009 low. Yet four cardinal measures of Main Street economic health convey nothing like a 2X pick-up from the post-crisis bottom. To wit, in June the count of breadwinner jobs was 68.5 million or 5% below where it stood as the crisis got underway. Likewise, business investment in real plant and equipment is still 5% below its late 2007 peak. So too with the real median family income at about $53k—its still down by 6%. And unlike past cycles where safety net programs like food stamps shed recipients as the recovery gained momentum, there are still nearly 47 million Americans in the program compared to 30 million in March 2009. This juxtaposition has been explained away by Wall Street stock touts under the heading that “this time is different”.

Jim Willie-We Got a Monster Recession of -6% or -7% Right Now

You can now pay someone’s delinquent Detroit water bill online
The Detroit Water Project, a platform to help donors pay the delinquent water bills of people in Detroit, started with a Twitter conversation. Tiffani Bell and Kristy Tillman have never met in person, but they've enjoyed a social media friendship that began with their mutual love for technology. Last week, their back-and-forth about the Detroit water crisis quickly evolved into a discussion about how to help pay people's overdue water bills. Emily Badger reported last week that half of the Detroit Water and Sewerage Department customers have not been paying their bills — equal to about 91,000 delinquent accounts. As of April 30, those past due owed an average of $540.01. Last week, the Detroit Water and Sewerage Department was poised to cut off water for those with delinquent accounts. Perhaps due to protests and even international pressure, the water company announced Monday that it's delaying the water turn-off until the end of July so residents in the hard-hit city can prove....

Why The Market Is Heading For A Fall
The 2008 Wall Street meltdown is long forgotten, having been washed away by a tsunami of central bank liquidity. Indeed, the S&P is up nearly 200% from its March 2009 low. Yet four cardinal measures of Main Street economic health convey nothing like a 2X pick-up from the post-crisis bottom. To wit, in June the count of breadwinner jobs was 68.5 million or 5% below were it stood as the crisis got underway. Likewise, business investment in real plant and equipment is still 5% below its late 2007 peak. So too with the real median family income at about $53k—its still down by 6%. And unlike past cycles where safety net programs like food stamps shed recipients as the recovery gained momentum, there are still nearly 47 million Americans in the program compared to 30 million in March 2009. This juxtaposition has been explained away by Wall Street stock touts under the heading that “this time is different”.

Biden: 'Businesses Are Hiring at Historic Rates'
On Tuesday, Vice President Joe Biden declared that America's jobs picture is brighter than ever. "Businesses are hiring at historic rates, with 52 consecutive months of net private sector job growth," said Biden in the newly released report supporting the reauthorization of the Workforce Innovation and Opportunity Act of 1998, which President Obama signed on Tuesday. The Workforce Innovation and Opportunity Act reauthorization will use a $1.4 billion "job-driven checklist" tool to "ensure that the $17 billion in federal training funds are used more effectively," said a senior White House official. The program will also feature a $25 million Department of Labor award to develop a web-based "skills academy" for adult learners. Obama and Biden's efforts to cast a positive light on America's jobs outlook, however, may face headwinds with voters. As the New York Times noted, "In fact, part-time jobs accounted for two-thirds of all new jobs in June."

Is fundraising interfering with President Obama's duties?

Puerto Rico debt crisis headed for U.S.-style bankruptcy resolution
Momentum is building toward a deal that would make painful losses inevitable for investors holding about $20 billion in bonds issued by Puerto Rico's highway, water and electricity authorities even as some big U.S. mutual funds launch a legal battle to squelch a new law that authorizes a restructuring. The Puerto Rican government and most of its creditors have hired U.S.-based bankruptcy experts to advise them through the Caribbean island’s efforts to solve its debt problem, and the resolution figures to look a lot like a U.S.-style bankruptcy. The crisis came to a head late last month when Governor Alejandro Garcia Padilla pushed through the Public Corporations Debt Enforcement and Recovery Act to create a bankruptcy-like process for restructuring the debt of commonwealth-run corporations. That’s caused prices on some of the bonds of the electric utility, known as PREPA, to fall to 40 cents on the dollar or below. PREPA is widely viewed to be in the weakest condition of the agencies.

The Fed Can't Lower Your Grocery Bill
American Enterprise Institute are arguing about inflation and what it means. Domenech points to rising food prices as evidence of bad government policy; Pethokoukis blames structural factors. This is a long-running and lively meme that’s current not just among Republicans, but also among moderates. Last weekend, I heard a two-time Barack Obama voter express the view that the government was deliberately excluding food and oil from its calculations in order to hide inflation and cheaping out on cost-of-living adjustments for federal workers and retirees. Because this is not true, I thought I should weigh in on what’s going on, how and why it matters, and what the government should do about it. First note: The cost of food really has risen quite a lot over the last 10 years. When you compare commodity prices to the summer of 2004, you’ll see that the price of pork has risen nearly 50 percent, chicken has risen by more than a third, and beef has roughly doubled, as has wheat.

Arizona Food Stamps and Unemployment Scammers Slapped With $2.1 Million in Fines
Arizona's Department of Economic Security is to be repaid $2.1 million by people caught gaming the food stamps and unemployment insurance programs. The agency's investigative units, with help from law enforcement, found 87 people in the last year who abused the Supplemental Nutrition Assistance Program (SNAP), along with 122 people who defrauded the Arizona Unemployment Insurance Program. According to a DES spokeswoman, those 87 participants in SNAP got a ban from the program for at least a year -- including four people who got lifetime bans -- and have been ordered to repay more than $1.02 million in restitution. Back in 2012, DES payed out nearly $1.7 billion in SNAP benefits, so these fraudulent payments account for a tiny fraction of the program's cost. In the unemployment insurance program, those 122 people were criminally prosecuted and convicted. According to DES, seven of those people have been sentenced to jail time, and 71 have been placed on probation.

Inflation: Another "False Alarm"?
From Gavyn Davies at the Financial Times: There have been a few false alarms about a possible upsurge in inflation in the US in the past few years, even as core inflation on most measures has remained extremely subdued. ... Another such scare has been brewing recently... It now seems probable that part of the recent jump in core inflation was just a random fluctuation in the data. ... But the main reason for the lack of concern is that wage pressures in the economy have remained stable, on virtually all the relevant measures. ... there has been yet another false alarm on US inflation. From Ron Insana at CNBC: Inflation is about to fall—and fall hard. I will make a bet with this country's leading inflationistas, who continue to warn that inflation is about to surge, that they are dead wrong. ... Agricultural commodity prices, excluding meats, have crashed. Corn, wheat and soybean prices have plummeted on expectations of bumper crops around the world — particularly in the United States.

Is Anything Obama's Fault?
President Obama blamed the recent influx of unaccompanied children crossing our southern border on violence in Central America. I expected the usual media suspects to support Obama’s narrative, as well as the ever-popular Blame-Bush excuse. I did not expect the usually more rational Wall Street Journal, and specifically Mary Anastasia O’Grady (whom I had admired), to support them. “Well, I think, Paul, what you have is a combination of factors, both push-and-pull factors. So from Central America, you have lots of crime and violence… the effect of the war on drugs in Central America has created chaos and a breakdown of institutions in Central America… And the pull factors, I think, are, first of all, most important, is an asylum opportunity that children have because of a law passed in 2008 during the Bush administration --” There they go again: violence in Central America and, of course, Bush. It’s everyone’s fault except Obama’s.

IMF sees US growth at weakest since recession
U.S. economic growth this year will likely be at the weakest pace since the Great Recession ended, the International Monetary Fund said, mostly because of a sharp, weather-related contraction in the first quarter. But the global lending organization said Wednesday that it still expects growth resumed in the April-June quarter and will remain healthy in the second half of this year and next. In its annual report on the U.S. economy, the IMF projects growth will be just 1.7 percent this year, down from a 2 percent estimate in June. That’s below last year’s 1.9 percent pace and would be the slowest annual rate since the recession ended in June 2009. The IMF’s outlook is more pessimistic than that of the Federal Reserve, which expects growth of at least 2.1 percent. But it is in line with most other private economists. The IMF says growth will rebound in the April-June quarter to a healthy 3 percent to 3.5 percent and remain in that range for the rest of this year.

Erdmann and Yellen will like this story
Janet Yellen has argued that the long term unemployed are not permanently out of the labor force, and that with faster growth in aggregate demand we can re-absorb many of those people. Kevin Erdmann has done a number of thoughtful posts arguing that the extended unemployment benefits, which ended at the beginning of this year, raised the jobless rate somewhat. This story caught my eye: It’s been a rough year for the long-term jobless, with Congress refusing to renew an extension of federal unemployment benefits and some states slashing already-meager safety net programs, but a new study by a pair of Federal Reserve Board economists offers some hope for the future. In a paper issued this week, Tomaz Cajner and David Ratner find that the percentage of the unemployed who have been jobless for more than 27 weeks – the definition of “long-term” unemployment – has been dropping sharply in recent months, and that there is strong evidence to suggest that it is because they are finding jobs....

Gold And Silver Have Still Not Found A Bottom: Elliot Wave Trader

Feds Spending $10 Million to Build Robot Companions for Children
The National Science Foundation has committed $10 million to build robots that will act as “personal trainers” for children, in an effort to influence their behavior and eating habits. The government has spent $2.15 million so far for the five-year project, which is being led by Yale University. The project, “Robots Helping Kids,” will ultimately “deploy” robots into homes and schools to teach English as a second language, and encourage kids to exercise. The project will develop a “new breed of sophisticated ‘socially assistive’ robots,” designed to help children “learn to read, appreciate physical fitness, overcome cognitive disabilities, and perform physical exercises,” according to a news release by Yale University when the grant was first announced in 2012. “Just like a good personal trainer, we want the robots to be able to guide the child toward a behavior that we desire,” said Brian Scassellati, a computer science professor at Yale and principal investigator for the study.

America The Divided: Everyone Knows We Have Problems But There Is Very Little Agreement On Solutions
A house divided against itself will surely fall. America is more divided today than it has been in decades, and the deep divisions that are tearing us apart continue to get even worse. In fact, a newly released Rasmussen Reports national survey discovered that 67 percent of voters believe that America is even more divided now than it was four years ago. We are angry, we are frustrated and we love to fight with one another, but none of this strife and discord is getting us anywhere. What most Americans can agree on is that we are facing tremendous problems as a nation. One average of recent polls found that only 26 percent of Americans believe that this country is heading in the right direction and 63.8 percent of Americans believe that this country is heading in the wrong direction. Unfortunately, there is very little agreement on what the solutions to our problems are. That is where the division is.

RadioShack CEO joins American Apparel board
The saga surrounding embattled clothing retailer American Apparel took another interesting turn Wednesday when it announced that it was adding current RadioShack CEO and Director Joseph Magnacca to its board of directors. Magnacca has served as CEO of the struggling electronics retailer since February 2013. The move was just part of an overhaul of the American Apparel board, which includes the replacement of all members except for current Co-Chairmen David Danziger and Allan Mayer, both of whom have served in that role since June 18 of this year. That was when the board removed founder Dov Charney as chairman, president and CEO of the company amid allegations of sexual harassment and misappropriation of corporate funds. According to regulatory filings, the new board will consist of four new members who will join Danziger and Mayer. They include David Glazek, who works for Standard General, which is the hedge fund that has voting control over much of American Apparel's stock.

Jane Fonda: I'll Be Mad If Murdoch Acquires Time Warner
Jane Fonda says she'll be "so angry" at federal regulators if they approve an acquisition of Time Warner by Rupert Murdoch's 21st Century Fox, blasting the media mogul's news outlets for "unconscionable" coverage. "I think it would be a catastrophe," said the 76-year-old actress, former wife of CNN founder Ted Turner and onetime anti-war activist who was derided as "Hanoi Jane" for a controversial 1972 visit to North Vietnam. "If [the acquisition] happens, I'm going to be so angry at the [Federal Communications Commission]. They cannot let that happen," she told The Wrap. "It's no secret that Rupert uses his media outlets for political reasons," she added. "And he is not neutral. And he, you know, his new outlets do things that are unconscionable. And it just cannot happen that he becomes that much of a dominant force in American media." Murdoch – whose media empire includes Fox News – and 21st Century Fox submitted an $80 billion bid in June to acquire rival media conglomerate Time Warner...

StubHub caught in global cyber crime ring

Interminable Degrees
It’s part “Hotel California,” part schlock horror movie, but with way more synergy: A business school where once you matriculate, you can never leave. Alas, this is not my pitch for the world’s least-interesting new reality series (well, second-least interesting: I also have a pitch for “Dissertation Emergency!”). No, it’s serious: Some professors at the top-ranked business school in the country see the eternal recurrence of the MBA as a foregone conclusion. According to a recent post on the Chronicle of Higher Education’s Wired Campus blog, two faculty members at the University of Pennsylvania’s Wharton School envision an MBA of the future—one you never finish. Sort of, this is sheer genius. Sort of, it’s the most terrifying development in higher education since a hilariously tone-deaf provost insisted that universities should be run more like international luxury cruises.

S. Korea unveils $40 bln economic stimulus package
South Korea unveiled a $40 billion stimulus package Thursday as the finance minister warned of a risk of recession after the economy grew at its slowest rate for more than a year in the second quarter. Citing sluggish domestic demand in the wake of a devastating ferry disaster in April, the finance ministry cut its forecast for economic expansion in 2014 to 3.7 from 4.1 percent. The stimulus plan of 41 trillion won ($40 billion) includes 11.7 trillion won in expanded fiscal spending and 29 trillion won in extra financing support. The lion's share will be spent in the remainder of this year, with 3.0 trillion won earmarked for the beginning of 2015, the ministry said in a statement. "Our economy now stands at a critical crossroads between making a leap forward and falling into a recession," Finance Minister Choi Kyung-Hwan was quoted as saying by the Yonhap news agency.

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