Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Tues 07.07.2009
US lurching towards 'debt explosion' with long-term interest rates on course to double The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank In a 2003 paper, Thomas Laubach, the US Federal Reserve’s senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5pc. The impact would be devastating by making it punitively expensive to finance national borrowings and leading to what Tim Congdon, founder of Lombard Street Research, called a “debt explosion”. Mr Laubach’s study has implications for the UK, too, as public debt is soaring. A US crisis would have implications for the rest of the world, in any case.
World Bank tells G8: 2009 remains dangerous year The Group of Eight nations should not presume a global economic recovery is near, World Bank President Robert Zoellick said in a letter to G8 host Italian Prime Minister Silvio Berlusconi obtained by Reuters on Monday. The letter, dated July 1 and copied to all G8 leaders, said interventions by central banks and governments appeared to have "broken the fall in the global economy" by stabilizing financial markets and boosting demand.
Debt Burden Quickens Power Shift as G-8 Nations Lose Influence The world's most affluent nations will take decades to work off the biggest buildup in debt since World War II. The political costs may be permanent, laid bare at this week's Group of Eight summit of leading industrial powers. Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, more than triple the 35 percent of the main emerging economies including China, the International Monetary Fund forecasts.
China reassures on dollar before G8 China said the dollar will retain its global dominance for years to come, offering its assurances ahead of the Group of Eight summit just as it takes another step to boost the profile of its own yuan currency. Beijing has floated the idea of looking for an alternative to the dollar as global reserve currency and France and Russia on Sunday called for a debate on the matter at this week's G8 summit in Italy, expanded to include China and other developing nations.
Brown says no room for complacency on economy Prime Minister Gordon Brown will use next week's G8 meeting to urge continued action to boost the global economy, despite indications that the worst of the financial crisis has passed, government sources said. Brown will argue that rising oil prices and constrained bank lending remain threats to recovery and world leaders need to step up the fight against protectionism.
Treasury ready to twist arms over consumer agency The Treasury Department is warning the financial services industry that it will not back down from its proposal to create a new consumer protection agency, even while lobbyists build a warchest and strategy to defeat the plan. The new agency, part of a wider revamp of U.S. financial rules proposed by the Obama administration, would have the power to regulate products like mortgages and credit cards in what advocates have likened to a safety commission for financial products.
Policymakers express concern, urge banks to lend World economic leaders called on commercial banks on Monday to step up lending to revive an economy pitched into recession by failure of the global financial system. The World Bank, in a letter to Group of Eight nations due to meet this week, said interventions by central banks and governments appeared to have "broken the fall in the global economy," but 2009 remained a dangerous year.
Gold is still money when money is still not wealth Like a character that refuses to die in a bad horror movie, the U.S. job market posted some shocking June numbers. It has revived the dormant nightmare that this may be a long "L" shaped recession. Or even worse, a double-dipper, with the second dip just getting started. The U.S. Labor Department Reported that around 467,000 Americans lost their jobs in June. This was unwelcome news. The data had been getting less bad every month since January. Then the June numbers rocked up, fell out, and took stocks down with them. This is causing everyone with a pulse (and most with a brain) to have second thoughts. . . . . . . . . But there is more to wealth than money too! Peace of mind, having your assets in forms that can't be inflated away or won't suffer from debt deflation...we would count these as "wealth" at a time like this.
Gold, Little Changed, May Rise in Asia as Dollar, Oil Steady Gold, little changed in Asia, may gain from a two-week low as crude oil stemmed a decline and the dollar rally halted. Bullion fell to $920.75 an ounce yesterday, the lowest since June 23, as oil led a drop in commodities on concern the global economic recovery will falter, damping demand for the precious metal as an inflation hedge. "In the near term, gold will trade in a wide $880 to $980 range as concerns swing between inflation and deflation," Lin Haoxiang, analyst at Guotai Junan Securities, said from Shanghai today. "Gold's day-to-day moves will still be broadly influenced by the U.S. dollar."
Who will buy the I.M.F. gold and when? At last, the U.S. Congress has permitted the U.S. representative at the I.M.F. to vote to sell the 403 tonnes of gold the I.M.F. bought from Brazil and Mexico. As it is not an individual member's gold we fully expect the members of the fund to OK its sale. The legislation will permit U.S. representatives to the I.M.F. to agree to its planned sale of 13 million ounces of gold, one-eighth of the organization's holdings. As the financial state of the I.M.F. has improved [due to the credit crunch], the purpose of shoring up the I.M.F. balance sheet appears to not be the issue any more. We believe that the continuing attempts to sell the gold has, as its purpose, a final attempt to confirm that paper money is more important than gold, irrespective of what the proceeds are used for. If we are right, the sale will follow the pattern of the Central Bank Gold Agreement sales coming to an end on 26th September 2009.
Bush’s Barrick Corps drops bombshell From Gold Anti-Trust Action Committee (GATA) Barrick Gold has confessed that it and its bullion banker, JP Morgan Chase & Co., are the direct agents of the central banks in the international control of the gold price. Barrick’s confession was filed in U.S. District Court in New Orleans as part of a legal maneuver to gain dismissal of the federal anti-trust lawsuit brought against it and Morgan Chase by Blanchard & Co., the New Orleans-based coin and bullion dealer. Barrick moved to dismiss the Blanchard lawsuit on the grounds that the suit had failed to include as defendants some “indispensable parties” whose vital interests are at stake, the central banks; that the central banks, having what is called sovereign immunity against suit, simply could not be included in the suit; and that the suit therefore had to be dismissed.
China may hike gold reserves If the advice from the leading industrialists in China, gold prices will further go up soon. According to news reports, a number of industrialists told China that the country should further increase its gold reserves to diversify reserve assets. China should boost its gold reserves, said Zhang Bingnan, vice-chairman and general secretary of the China Gold Association. An increase in holdings from both government and individuals are needed. In May, China said it had increased its gold reserves by 454 tonnes to 1,054 tonnes, the first such disclosure in six years. China is the world’s fifth-biggest gold holder, following the United States, Germany, France and Italy.
Korean central bank may buy gold to diversify reserves The bank of Korea is expected to buy gold as part of a review of its foreign exchange reserves, local media reports said on Saturday, quoting an unamed official. "The bank has begun to set up a plan to manage foreign exchange reserves for next year. It has also closely watched central banks in other nations and trends in the global gold market. Given the changing global financial environment, the bank's management plan is critical," a Bank of Korea official said. Experts said the comment implies that the bank plans to buy gold soon. Korea has the world's sixth largest foreign exchange reserves but ranks 56th in terms of gold holdings.
Glut of $4.5 Trillion Will Haunt Obama's Dollar It's not a job Barack Obama signed up for, but it's his nonetheless: Bond salesman-in-chief. Such is the lot of a U.S. president overseeing an historic increase in debt issuance. Cartoonists are busily churning out depictions of Obama, who partly nationalized automakers, standing on a car lot hawking Detroit's clunkers. It's time to begin picturing Obama shilling bonds few may soon want. His best customers? Asians, of course. Asia already holds about $4.5 trillion of currency reserves, most of them denominated in U.S. dollars. It's a product of Asia's "savings glut," of which the cash-strapped U.S. remains a major beneficiary. That is, if Asians don't pull the plug.
Traders criticise gold tax increase India, the world's largest consumer of gold, could face a drop in precious metal imports after the government announced plans to double import taxes on gold and silver. Customs duty on gold bars and coins is set to double to Rs200 ($4.12) per 10 grammes as part of India's interim budget. The move prompted an angry reaction from the Bombay Bullion Association, the traders' body. "Imports were down 50 per cent in the first half, and now even the remaining demand will evaporate," said Suresh Hundia, president of the BBA.
India's gold prices set to rise Gold traders in Mumbai said prices were set to increase slightly following a move by the government to double the customs duty on the import of gold as part of its interim budget for the financial year ended March announced on Monday. The government said the customs duty on gold bars and coins would rise from Rs100 per 10 grams to Rs200 per 10 grams while the duty on silver would also double from Rs500 per kilogram to Rs1,000.
Jim Rogers Sells Dollars, Plans to Short Treasuries The dollar and U.S. Treasuries are both likely to slide as soaring government debt in the world's biggest economy undermines confidence in its assets, according to Jim Rogers, chairman of Rogers Holdings. "The government is printing lots of money and borrowing even more; that's not the basis for a sound currency," he said in a telephone interview today from Singapore. "The idea that anybody would lend money to the U.S. government for 30 years at 3 or 4 or 5 or 6 percent interest is mind-boggling to me."
The Dollar: It’s an Overhang, not a Hangover Few things are more confounding to economists and traders as forecasting currencies. However, as I have come to realize, the approach each group takes is very different. Economists are never wrong, only early; traders are often wrong, but never in doubt. Economists look at interest rate differentials, growth differentials, current account positions, and other fundamental factors. It doesn’t always help much, but it is a defensible place to start. Traders, on the other hand, cognizant or not, focus not on the fundamentals, but on the “fundamental story”. These stories typically emerge to fit recent price action and are then coupled with what economists refer to as stylized facts. Unlike facts, stylized facts are not stubborn things. Some stories turn out to be true, others false, but whether they are true or not the most powerful ones share two characteristics: they are easy to explain and intuitively appealing. And once a good story takes root it can be very difficult to dislodge it—irrespective of how untrue it may be.
FIAT MONEY IN DEATH THROES Make no mistake about it: in this credit collapse we are witnessing the death throes of irredeemable currency. In vain have governments and their client banks tried, for hundreds of years, to graft this repulsive and degenerate bastard on the living organism of society. The result was always the same: the healthy organism rejected the unnatural implant in its own good time. The present episode is no different from earlier ones except, perhaps, in the degree of the conceitedness of the perpetrators, and in their contempt for the native intelligence of man.
Charlie Rose - Pete Peterson [short and to the point on excessive debt and the economy]
Race To Zero Acceleration A Certainty Just when you think you have it figured out - bang - something changes. And present circumstances are no exception to this rule. Last week it appeared conditions were forming to sponsor a significant sell-off in stocks / equities this summer / fall, where a combination of sentiment and internals were moving into alignment in this regard. Not out of character in a mature market environment however, speculators stepped up put buying at expiry late last week, which has materially altered the sentiment backdrop, and correspondingly the prognosis for stocks moving forward. Now, what is anticipated because of this is while stocks could still soften further in coming days and weeks, instead of more substantial losses a tighter consolidation pattern should emerge, where assuming the sentiment picture continues to push in this direction, eventually a secondary reaction higher in equities should be triggered, extending the present counter trend rally within the larger secular bear market.
Securitisation reinvented to cut costs Investment banks, including Goldman Sachs and Barclays Capital, are inventing schemes to reduce the capital cost of risky assets on banks' balance sheets, in the latest sign that financial market innovation is far from dead. The schemes, which Goldman insiders refer to as "insurance" and BarCap calls "smart securitisation", use different mechanisms to achieve the same goal: cutting capital costs by up to half in some cases, at the same time as regulators are threatening to force banks to increase their capital requirements. BarCap's structures involve the pooling of assets from several clients into a secured financial product that can be sold on to other investors and rated by a credit rating agency, potentially reducing the capital allocated against the assets by between 10 per cent and 50 per cent.
Will Ken Lewis Cave To Big Labor To Save His Job? We’ve been saying for a long time that probably the most important foreshadowing of what politicized banking will look like came just a few weeks after the TARP was passed. It happened in Chicago, when protesting workers backed-up by threatening politicians got Bank of America to agree to extend loans to a failing window-manufacturer. Very clearly, banks operating on government funding would find themselves unable to resist the demands of powerful special interests. Now it looks like Bank of America may have found itself in another labor mess. This time it is even more immediate: the powerful Service Employers International Union wants Bank of America to unionize its tellers and office workers. And now it is calling on Treasury Secretary Tim Geithner to oust Ken Lewis.
How Goldman Sachs and Citi Run the Show The Wall Street White House Robert Hormats, Vice Chairman of Goldman Sachs, is to be installed as Under Secretary of Economics, Business, and Agricultural Affairs. This comes as one more, probably unnecessary reminder of the total control exercised by Wall Street over the Obama administration’s economic and financial policy. True, Hormats is “a talker rather than a decider” according to one former White House official, but he will find plenty of old friends used to making decisions, almost all of them uniformly disastrous for the U.S. and global economy.
America Is Still A Financial Train Wreck Throughout America's spending binge, which really got going in the 80s, ignoring the mounting deficit has become the standard course of action. We've never (and still haven't) paid a price for running up such a big tab. It's been all gravy so far. And as Morgan Stanley analyst Richard Berner notes (via Paul Kedrosky), that's the problem. The lack of consequences to our spending has hardened us to the belief (however much Obama or anyone else proclaims to "lose sleep" over the matter) that deficit spending can go on forever.
Harley-Davidson, Bank of America Market Debt for Fed's TALF Harley-Davidson Inc., Honda Motor Co. and Bank of America Corp. lead about $9.5 billion of debt offerings for the Federal Reserve's program to jumpstart lending, according to people familiar with the sales. Harley-Davidson plans to sell $700 million of bonds backed by loans for motorcycles and eligible for the Fed's Term Asset- Backed Securities Loan Facility, said one of the people, who declined to be identified because terms aren't set.
Microsoft Plans for Worst as U.S. Companies Show No End to Fear During the last week of May, treasurers representing America's bluest chip companies gathered at the Park Hyatt hotel in Philadelphia for a conference dubbed "Survival Skills." Instead of discussing ways to take advantage of the drop in borrowing costs to expand their businesses after the Federal Reserve cut interest rates to near zero, representatives of New York-based Colgate-Palmolive Co., International Business Machines Corp. in Armonk, New York, and dozens of other companies had other plans.
Campaign Asks Congress to 'Pledge to Read' Bills Before Voting on Them Members of Congress are being asked to pledge that they will read the bills that come before them before voting to enact them into law. "We think the American public expects their legislators to know what's in a bill before they support it and we're urging legislators to sign a pledge to that effect," Colin Hanna, president of Let Freedom Ring, told CNSNews.com. Let Freedom Ring, a conservative organization, recently kicked off a "Pledge to Read" campaign, which challenges congressmen to be loyal to their constituents before voting on the health-care reform bill.
Doc Offers Cure for GOP Republicans need Ron Paul's honesty Republican Congressman Ron Paul became a hero to many Americans last year when he ran for president against the political establishment. The 11-term Texas congressman is the most respected and admired American politician around the world after President Barack Obama. Rep. Paul is a vocal critic of what he calls reckless deficit spending, "welfare" for big finance, and America's foreign wars. Paul's voice has resonance: he sits on the powerful House Foreign Affairs Committee.
A History of Labor Unions From Colonial Times to 2009 "Those who tell you of trade-unions bent on raising wages by moral suasion alone are like people who tell you of tigers that live on oranges." ~ Henry George, 1891 Labor unions have been defined as "private combinations of workingmen" that try to increase wages and improve working conditions for members. But how? What means do labor unions use? As Henry George suggests, trade unionists are hardly known for their kindness to strangers and genteel ways. From colonial times trade unionists found the going difficult in North America. There was no prevailing ideology of "working class solidarity" and unions were far from respectable; in fact, they had a well-earned reputation for being antisocial, even criminal. Some unions were secret societies with secret oaths, and unionists engaged in intimidation, threats, vandalism and violence, especially against uncooperative workers denounced as subhuman "scabs" and "blacklegs." Private property, freedom of contract, competition, and freedom of movement among occupations (slavery and indentured servitude aside) were celebrated concepts, while government-granted monopolies and cartels were not popular at the founding of the American Republic.
Ron Paul 7/6/09 "Independence Celebration Should Include The Determination To Fight For Liberty!"
What The Bankers Know [you need to see these charts!] Two years ago, we began to note similarities to the beginnings of the Great Depression. Our thesis was built on financial history and circumstantial evidence. But now we can make a more substantial comparison with economic data. As you can see below, (from VOXEU.org) the world economy is either performing closely to or worse than the 1930s. For instance, the contraction in world industrial output is very similar. All assets go down in price when deflationary fear takes hold. This obviously occurred in 2008. But right now we are currently in the reflationary bounce which we forecast at the end of February. As we stated: "We expect an intense selling Panic in March, much like September's action. The sell-off should end with the failure of a significant institution. This temporary bottom will support a sharp bounce into the fall." While we didn't have the institutional failure at the bottom (we aren't perfect), we did get the sharp bounce. It could continue into the fall.
Obama and the Market's Carnival Ride We probably don't have to tell you that being in the stock market in 2009 has been like spending six months on Coney Island's Cyclone roller coaster-turn by turn a terrifying and exhilarating ride. In the graphic below, the blue line shows the performance of the S&P 500 since Barack Obama became president on January 20, while the red line is the average performance of that index for each presidential term going back to Dwight Eisenhower's first term in 1953.
Home foreclosures expected to surge in coming months Moratoriums from banks, government to expire, setting off new wave of default actions Just as the nation's housing market has begun showing signs of stabilizing, another wave of foreclosures is poised to strike, possibly as early as this summer, inflicting new punishment on families, communities and the still-troubled national economy. Amid rising unemployment and falling home prices, mortgage loan defaults have surged to record levels this year. Until recently, many banks have put off launching foreclosure action on many troubled properties, in part because they had signed up for the home-stability plan from President Barack Obama's administration, which required them to consider the alternative of modifying loans to make it easier for borrowers to make payments.
Economic stress up in much of nation California, Michigan and South Carolina suffered the most financial pain in May as unemployment, home foreclosures and bankruptcies rose, according to The Associated Press' monthly analysis of economic stress in more than 3,100 U.S. counties. The latest results of the AP's Economic Stress Index show the worst financial crisis since the 1930s causing lingering damage even as other signs suggest the recession is winding down. The average county's Stress score, fueled by worsening unemployment, foreclosures and bankruptcies, rose to 10 in May, from 9.7 in April.
Colin Powell On Obama's Spending
Yes, We're Still in a Recession In the words of Maxwell Smart…missed it by that much! The jobs report came in much worse than expected and forced investors to review their "green shoots" thesis and pushing down stocks by 200 points in the process. One of the more interesting points about the jobs data is in the past seven recession since WWII, this one has shown the greatest percentage loss of jobs and unless it bottoms right now, will be the longest decline in jobs, beating the '73-'74 recession. Little better news came from the manufacturing sector, where their index improved, however remained below the "sector improving" level. Finally, the weekly reports on jobless and housing remain near extreme levels. The weekly jobless data is still over 600k, an indication that jobs continue to be lost at a rapid rate. The housing data, as e have mentioned in the past, remains very low, even with near historic lows in interest rates, home purchase activity also remains near historic lows. Would you believe, were still in a recession!
Unemployment Worse with Stimulus than Without Unemployment hit 9.5 percent in June, according to the Department of Labor, putting the figure 2.5 percent higher than the White House had predicted it would be if a government stimulus spending program went into place. Moreover, the new figure is nearly one percent higher than where the White House said it would be without any stimulus spending at all. In fact, the White House never predicted that unemployment would rise above nine percent regardless of whether Congress spent the nearly $800 billion in so-called economic stimulus spending it recommended at the time.
Social Security Numbering System Vulnerable to Fraud, Experts Say The nation’s Social Security numbering system has left millions of citizens vulnerable to privacy breaches, according to researchers at Carnegie Mellon University, who for the first time have used statistical techniques to predict Social Security numbers solely from an individual’s date and location of birth. The findings, published Monday in The Proceedings of the National Academy of Sciences, are further evidence that privacy safeguards created in the era before powerful computers and ubiquitous networks are increasingly failing, setting up an “architecture of vulnerability” around personal digital information, the researchers said.
White House Won't Reveal How Much Michelle Obama's European Vacation Cost Taxpayers America may be in the midst of a deep recession, and the nation may be facing unprecedented deficit spending and debt, but the White House will not reveal the cost to taxpayers of the European vacation that first lady Michelle Obama and the president's two daughters, Malia and Sasha, took last month. Travel by an American first lady typically includes the military passenger jet that carries her and the children, Secret Service personnel to provide security, and a separate cargo plane to haul official vehicles. First Lady Michelle Obama's tour of Paris with her children included a convoy of 20 vehicles, according to news reports. She also moved by "motorcade" through London.
Energy Bill Text Says It Will Cost Americans Money; Targets Help Only to Low-Income Families The text of the "cap-and-trade" energy bill, which passed the House of Representatives late last month, contains a frank admission that all Americans will experience "loss in their purchasing power" -- meaning a rise in electricity and energy costs. The bill also lays out an Energy Refund Program to offset the higher energy costs, but only for low-income households. The American Clean Energy and Security Act of 2009 would create a scheme to force companies to purchase permits that enable them to emit a certain amount of greenhouse gases into the atmosphere.
Cap and Trade Legislation Nightmare The global banking cartels are engaged in a total hostile takeover of everything right before our eyes. They see that we are waking up at record rates and they know their rule is about to end if they don't commit to a total takeover now. It's said that the best way to expose a tyrant is to make them act like a tyrant. Well folks, the members of Congress and the people they really work for are being forced to act like the tyrants they really are and have been all along. We must take control of our government and monetary system away from them before it's too late. If we allow their the tyrannical police state they are putting in place right now to succeed, it will become exponentially that much harder to regain our Constitutional Republic. We must ACT NOW to stop them.
Cap & Trade bill
Too Precious for a Recession In a different economy, Billy Mitchell and Nicole Drucker of San Francisco might have splurged on a $10,000 engagement ring. But Ms. Drucker is out of work and they need to save for a house. So in April, Mr. Mitchell got down on one knee on the Golden Gate Bridge and proposed with a $4,000 diamond ring he had bought on the Internet. "We had to decide, where do we want the money?" Mr. Mitchell said. "On her finger?" In this economy, many consumers would rather keep their money in their wallets than on their fingers, necks or ears. As people re-examine their budgets, jewelry is turning out to be one of the easiest places to cut back - or trade down.
Feds taking GM, bigger bite of economy Broad intervention continues Capping a series of bold government actions to rescue failing corporate giants, the White House has won approval of its restructuring plan for General Motors Corp., putting the government on track to take ownership of the storied automaker by the end of the week. The takeover, which is the most extensive federal intervention into the operations of a major industrial company, follows in quick succession a government-assisted bankruptcy reorganization of Chrysler LLC, the assumption of partial ownership of two of the nation's biggest banks -- Citigroup and Bank of America -- and the seizure of mortgage giants Fannie Mae and Freddie Mac as well as insurance goliath American International Group Inc.
How the Press Helped Destroy the Auto Industry Detroit's Collapse: the Untold Story For decades East Asian competition has played a controversial role in the decline of the American car industry. Both Japan and Korea have long been accused of unfair trade and closed markets. For their part Japanese and Korean officials have argued that their markets are open and that an incompetent and heedless Detroit doesn't make the sort of cars their consumers want.
Fiat and Chinese Carmaker Form Alliance The Fiat Group announced a 50-50 joint venture on Monday with the Guangzhou Automobile Group to make cars and engines for the Chinese market, the latest move by the Italian automaker to expand outside its home market. The companies said they would build a 173-acre plant in Changsha, in Hunan Province, at a cost of more than 400 million euros, ($556 million), with production set to begin by the end of 2011. Upon completion of the first phase of development, the venture will have the capacity to make 140,000 cars and 220,000 engines a year. The companies said capacity at the plant, which will make fuel-efficient, low-emission vehicles, could eventually be increased to 250,000 cars and 300,000 engines a year.
China's elderly will overwhelm the nation The one-child rule imposed 30 years ago has created too few young people to support the quickly expanding aging population. Reporting from Shanghai -- For three decades China's one-child policy helped power this nation's economic rise. With fewer mouths to feed, families saved. Poverty fell. Living standards improved. But a social experiment that worked well in some respects is now threatening the country's hard-won gains. China's working-age population -- the engine behind its prolific growth -- will start shrinking within a few years.
Muni bonds feel US states' fiscal stress California's high-profile budget crisis and the fiscal woes of states throughout the US are taking their toll on the public finance markets, sending borrowing costs higher for states, cities, counties and other municipal issuers. The Golden State and its gaping $26bn deficit have caught the headlines, but a handful of other states have also failed to agree on balanced budgets, even after federal stimulus. Even the states that have passed budgets have been forced to make dramatic cuts such as closing schools and laying off staff to compensate for plunging tax receipts.
As California struggles, Fitch cuts debt rating California suffered a new setback in its financial crisis on Monday when Fitch Ratings cut its rating on the state's general obligation debt to just two notches above junk status. Fitch cut its rating on California's long-term bonds to "BBB," two notches above speculative grade, citing the state's budget and cash crisis. The state last week started issuing "IOU" promissory notes to pay for some bills in order to conserve cash.
Wall Street gears up to trade California IOUs Amid the vacation rentals and used cars for sale, browsers of the website Craigslist will now find a unique offer: for California IOUs. "If you are receiving a California IOU and you need cash immediately, please contact me. I may be of assistance," reads one posting. Wall Street, quick to spot an opportunity, is also gearing up to trade the payment promises. "We have a whole team working on it," said Barry Silbert, chief executive of Second?Market, a company that trades illiquid assets such as bankruptcy claims, private company stock and toxic assets.
California's Nightmare Will Kill Obamanomics Last week, we discovered that the state of California will gladly pay you Tuesday for a hamburger today. With California mired in a budget crisis, largely the result of a political impasse that makes spending cuts and tax increases impossible, Controller John Chiang said the state planned to issue $3.3 billion in IOU's in July alone. Instead of cash, those who do business with California will get slips of paper.
EPA Suppresses Climate Report
Dems To Tax Health Benefits … Unless You Join a Union Don't ask, for the moment, why Congressional Democrats need to find an extra trillion dollars to pay for a socialized medicine scheme they insist will "reduce costs." We're WAY too far into Wonderland to worry about that. As Democratic senators including Max Baucus of Montana and Ted Kennedy of Palm Beach - whoops, "Massachusetts" - struggled to make their unnecessary and vastly expensive government scheme more attractive, they quickly realized the first thing they needed to do was to make America's existing private health care plans - with which 89 percent of Americans say they're perfectly happy - LESS attractive.
Congress returns to health-care issue Congress returned Monday from its July Fourth break trying to make significant progress on health-care reform before the August recess. The Democrat-controlled House and Senate have separate plans and are attempting to hold floor votes before the break. House Majority Leader Steny Hoyer attempted this weekend to reaffirm the House's commitment to swift action. "We're going to pass significant reform before the August recess," Mr. Hoyer said on the Fox News Sunday show. The House adjourns July 31, and the Senate leaves Aug. 8. President Obama has made health care a priority in the early stages of his administration and says reforming the system is essential to the country's economic recovery and "one of the most important challenges of our time."
Co-op Health Plans Run by Consumers May Offer Obama Compromise A compromise that may take decades to work A network of health insurance plans run by the customers they serve, proposed in the U.S. Congress to offset opposition to a government-run system, may take a generation to pay off, even with $10 billion in seed money. The cooperatives would follow the model of decades-old credit unions and farming co-ops, fixtures in the home state of Senator Kent Conrad, the North Dakota Democrat who floated the idea on June 8. The proposal gained interest after Health and Human Services Secretary Kathleen Sebelius said on June 26 that President Barack Obama is "open" to the idea, though he prefers a new government-backed health plan.
It's All About the Money Obama's False Friends of Health Care Reform I'm hoping President Obama realizes that some of the folks who've been currying favor with him are not, as they claim, bringing "solutions" to the health care reform table. Most Americans -- especially those who voted for him -- want nothing to do with the kind of "reforms" they are peddling. If you watched the president's televised Q&A on ABC last Wednesday night, you probably noticed that one of the people in the audience was Ron Williams, the chairman and CEO of Aetna, Inc., the nation's third largest health insurer, and currently one of the most profitable. But there are a few things that you should know about Williams.
Caught in the middle; the sandwich generation Coping as caregiver tougher in hard times Many times during my workday, I've been jolted by a call from my mother or grandmother who needed me to track down a doctor or make a financial decision. Those calls alternate with interruptions from one of my kids who needs help with a math problem. I'm a member of the sandwich generation, the increasing population of people who are caring for older relatives in addition to their children. The recession has been particularly hard on the sandwich generation. People squeezed by pay cuts have had to stretch further to give financial help to parents. And asking the boss for time off to take mom to the doctor causes more anxiety when layoffs loom. Thinly spread, the sandwich generation is overwhelmed trying to balance it all.
Mexico's Peso, Stocks Fall as Calderon's Party Loses Election Mexico's peso and stocks fell to a two-week low after President Felipe Calderon's party lost congressional seats in midterm elections, adding to concern the government will struggle to implement tax increases that economists say are needed to narrow a budget gap. The peso weakened 0.1 percent to 13.24 per U.S. dollar at 5 p.m. New York time. It touched 13.3755, the weakest since June 23. Mexico's Bolsa, the nation's benchmark stock index, tumbled 1.3 percent to 23,742.49.
The Racism of Minister Atias Israel Calls on Ultra-Orthodox Jews to Stop "Arab Takeover" Israel’s housing minister called for strict segregation between the country’s Jewish and Arab populations last week as he unveiled plans to move large numbers of fundamentalist religious Jews to Israel’s north to prevent what he described as an “Arab takeover” of the region. Ariel Atias said he considered it a “national mission” to bring ultra-Orthodox Jews -- or Haredim, distinctive for their formal black and white clothing -- into Arab areas, and announced that he would also create the north’s first exclusively Haredi town.
Iran Warns West Against Interference Iran's supreme leader, Ayatollah Ali Khamenei, warned foreign governments on Monday that Iranians would react as a "united fist" to meddling in domestic affairs, after officials in the elite Revolutionary Guards had warned Iranians that they would be treated as enemies of the state if they did not line up behind the leadership. Speaking before a supportive audience of Basij militia members, prayer leaders and students gathered at a mosque in Tehran, Ayatollah Khamenei aimed his remarks at his home audience, seeking to heal his sharply divided nation by promoting unity in the face of what he insisted was a foreign enemy.
With Wounded Pride, Unemployed Koreans Quietly Turn to Manual Labor KUNGHANG, South Korea — With his clean white university sweatshirt and shiny cellphone, Lee Chang-shik looks the part of a manager at a condominium development company, the job that he held until last year’s financial panic — and the one he tells his friends and family he still holds. But in fact, he leads a secret life. After his company went bankrupt late last year, he recently relocated to this remote fishing village to do the highest-paying work he could find in the current market: as a hand on a crab boat.
Obama Resets Russian Ties With Arms Cuts, Afghan Deal Presidents Barack Obama and Dmitry Medvedev agreed to slash their nuclear arsenals and cooperate on military action in Afghanistan as the U.S. and Russia seek to "reset" ties at a Moscow summit. The two leaders called for a reduction of nuclear warheads by as much as a third from current limits in a Kremlin meeting. Russia also agreed to allow the transit of U.S. arms shipments to troops fighting the Taliban in Afghanistan.
Obama signals backing for Medvedev Barack Obama used an interview with a Russian opposition newspaper on the eve of Monday's US-Russia summit to back President Dmitry Medvedev's promises to boost freedom and the rule of law. His comments to the newspaper Novaya Gazeta appear to be part of a carefully calibrated move to signal support for Mr Medvedev over Vladimir Putin, the conservative Russian prime minister.
China Locks Down Restive Region After Deadly Clashes The Chinese government locked down this regional capital of 2.3 million people and other cities across its western desert region on Monday and early Tuesday, imposing curfews, cutting off cellphone and Internet services and sending armed police officers into neighborhoods after clashes erupted here on Sunday evening between Muslim Uighurs and Han Chinese. The fighting left at least 156 people dead and 852 injured, according to the state news agency.
A Bloody Crackdown in China It is now estimated that at least 156 people have been killed, more than 800 injured and some 700 arrested as the Chinese government cracks down on protesters who are demanding justification for the death of two Uighur workers in restive Xinjiang province. Here is some video footage of the protests taking place.
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