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Tuesday 06.12.2012
Fundamentals for gold and silver are very strong
By Commodity Online
For the time being atleast, gold and silver bulls are having a tough time but some analysts are still bullish on precious metals suggesting that fundamentals are still strong thanks to massive bailouts.
The fundamentals for silver and gold are very strong, according to Hubert Moolman. " Until a significant portion of these debts is repaid or defaulted on, it would be foolish to talk about a top in precious metals," according to Moolman.
Gold Alert
By Eric Sprott & Shree Kargutkar - Sprott.com
There have been key developments in the physical gold market over the last few weeks which we feel are worth highlighting:
1) The Chinese gold imports from Hong Kong in April, 2012 surged almost 1300% on a YoY basis. Total gross imports for the month of April were 103.6 tonnes and the net imports were 66.3 tonnes1. It is not the data for April alone which has caught our eye. There has been a stunning increase of gold imports through Hong Kong for export into China over the past 2 years. Between May 2010 and April 2011, China imported a net 66 tonnes of physical gold through Hong Kong. Between May 2011 and April 2012, that number jumped to 489 tonnes. This represents an increase of 640%.
Gold's identity crisis: Safe haven or risky asset?
LONDON (Commodity Online): Gold prices have been pulled and pushed on the back of expectations of further quantitative easing. Gold once again attempted to re-establish its safe-haven status following weaker-than-expected US payrolls data, prompting a flight to safety amid concerns heightening over Spain and Greece while risky assets sold off.
Further, the lack of any direct signals of further quantitative easing last week triggered yet another sell-off in prices without much support from the physical market to limit the downward move. Gold prices are now firmer after European authorities agreed to support Spain's request for financial assistance to recapitalise its banks over the weekend.
Gold-Investment Demand In China To Advance 10%, ICBC Says
By Bloomberg News
Gold-investment demand in China may gain more than 10 percent this year as buyers seek a haven from Europe's debt crisis and the prospect of weakening currencies, according to the country's largest bullion bank.
"Investors here want to hold part of their assets in gold to hedge for the risks, especially now that the financial crisis has evolved into a sovereign crisis," Zheng Zhiguang, general manager of the precious-metals department at Industrial and Commercial Bank of China Ltd., said in an interview in Shanghai.
One billion Silver ounces and hundred billion owners
By Dr Jeffrey Lewis - CommodityOnline.com
When considering whether silver is a good investment for the future, you might want to take a closer look at the current above ground supply of silver.
A reasonable estimate is that roughly 1 billion ounces of silver currently exists above ground in investment grade form.
This does not include the ounces of silver that need to assayed, melted, and recovered from what little silver is left in jewelry, silverware or sequestered away in electronics.
But at least it's something.
Silver derivatives and JP Morgan Chase's recent $2 billion loss
By Incentivizing Debt,
We've Guaranteed Debt-Serfdom and Stagnation
Incentivize debt and you create
multiple overlapping death spirals.
By Charles Hugh Smith - OfTwoMinds.com
The incentives to take on debt are so ubiquitous that we underestimate their pernicious power to trigger self-destructive behavior. Want to go to college? Just borrow the money now, with no payments until you graduate. Need some consumerist-retail therapy to lift your sagging spirits? Just use plastic, and pay for the splurge later. Want to buy a house? Hey, the interest on that 30-year mortgage is all tax deductible. It's crazy to pay taxes when there's a big fat deduction for mortgage interest.
The Economic Collapse Is Not A Single Event
By Michael Snyder - TheEconomicCollapseBlog.com
Many people hype "the coming economic collapse" as if it is some kind of big summer Hollywood blockbuster. Many people out there write about it as if it is something that will happen in a single day or over a few weeks and that it will suddenly change how the entire world functions. But that is not how the financial world works. The financial world is like a game of chess - very slow and methodical. Yes, there are times when things happen very quickly (like back in 2008), but even that crisis played out over a number of months. Sadly, most Americans are not used to thinking in terms of months or years. These days, most Americans have the attention span of a goldfish and most Americans have been trained to expect instant gratification. They are simply not accustomed to being patient and to wait for things. Well, despite what you may have read, the economic collapse is not going to be a single event. It is going to play out over quite a few years. In some ways we are experiencing an economic collapse right now. When the next major financial crisis occurs, many will be calling that "an economic collapse". But if you really want to grasp what is happening to us, you need to think long-term. We are heading for a complete and total nightmare, but it is going to take some time to get to the end of the story.
The CBO Sees the Economic Cliff Ahead
By: Ron Paul - GoldSeek.com
Last week the Congressional Budget Office (CBO) issued its annual long-term budget outlook report, and the 2012 numbers are not promising. In fact, the CBO estimates that federal debt will rise to 70% of GDP by the end of the year-- the highest percentage since World War II. The report also paints a stark picture of entitlement spending, as retiring Baby Boomers will cause government spending on health care, Social Security, and Medicare to explode as a percentage of GDP in coming years.
While the mainstream media correctly characterized the CBO report as highly pessimistic, they also ignored longstanding errors of methodology in CBO estimates. And those errors tend to support arguments for higher taxes and government spending, when in fact America needs exactly the opposite.
Euro crisis: The good and bad for U.S.
With crisis rooted in Europe,
U.S. less vulnerable but has less flexibility to act
By Zachary A. Goldfarb - WashingtonPost.com
Frightened investors are piling their money into U.S. bonds for safety, governments are arranging huge bank bailouts and economies worldwide are slowing down.
These are worrisome echoes of the financial crisis that nearly sent the world into a depression four years ago.
But this time the perils are different — in ways that make the United States less vulnerable but make the task of calming financial markets and restoring economies to health more difficult.
Spooky parallels between Great Depression and euro crisis
Recent signs of global economic weakness have caused me to muse on the comparison between the world economy now and during the 1930s. The similarities are spooky.
By Roger Bootle - Telegraph.co.uk
In regard to the depth of the downturn, the comparison is very different between countries. In the US and Germany, the loss of output since 2008 of about 5-7pc hardly registers against the losses registered during the Great Depression, when output fell by 25pc.
But the recession here in the UK has been greater. Contrary to the folk memory of a disastrous decade, in the 1930s the UK did relatively well. Of course, unemployment at first rose alarmingly – and this counted for far more then as living standards were lower and there was less support for the needy. Yet output here only fell by about 8pc, and it subsequently recovered rapidly.
Will Globalization Go Bankrupt?
BY MICHAEL PETTIS - FinancialSense.com
Will Globalization Go Bankrupt?
"Only the young generation which has had a college education is capable of comprehending the exigencies of the times," wrote Alphonse, a third-generation Rothschild, in a letter to a family member in 1865. At the time the world was in the midst of a technological boom that seemed to be changing the globe beyond recognition, and certainly beyond the ability of his elders to understand. As part of that boom, capital flowed into remote corners of the earth, dragging isolated societies into modernity. Progress seemed unstoppable.
Eight years later, however, markets around the world collapsed. Suddenly, investors turned away from foreign adventures and new technologies. In the depression that ensued, many of the changes eagerly embraced by the educated young — free markets, deregulated banks, immigration — seemed too painful to continue. The process of globalization, it seems, was neither inevitable nor irreversible.
In Europe We Distrust
By Ana Palacio - Project-Syndicate.org
MADRID – For decades, critics of the European Union have spoken about a democratic deficit. I never accepted that reproach of the EU and its institutions, but I do see a new and dangerous deficit within the Union – a trust deficit, both among governments, and among the citizens of various member countries. Indeed, if today's euro banknotes included a motto, as dollars do, it could well be, "In Europe We Distrust."
This lack of trust has brought the eurozone to the cusp of implosion, and is calling into question the very future of European unity. The arc of EU history seems to be bending to catastrophe – the sort of periodic European disaster that integration was intended to prevent. Grandiloquent as it might sound, the disintegration of the euro and the disarray that would engulf the European project, not to speak of the global repercussions, would unleash comparable devastation.
Fed officials amplify concerns over Europe
By Jonathan Spicer
(Reuters) - Three Federal Reserve policymakers amplified their concerns over Europe's crisis on Monday, offering some praise for the weekend deal to bail out Spanish banks but warning that much is yet to be done to avoid global spillovers.
The euro zone's simmering financial and debt crisis is front and center as the Fed meets next week to decide whether it needs to take yet more policy action to insulate the weak economic recovery from slowing even more.
The ever-diminishing returns from Europe's bailouts
By Steven C. Johnson and Angela Moon
(Reuters) - So much for the relief rally.
After bouncing overnight on news that Europe had stitched together a $125 billion rescue for Spain's banks, gains for global stocks and the euro fizzled.
Bailouts for debt-strapped countries have provided a short period of comfort for investors, one that quickly gets eroded by fear about Europe's vicious circle of slow or no growth and growing debt burdens. On Monday, the speed of that reversal was quicker than ever.
A Game of Euro Chicken
Playing Until the Germans Lose Their Nerve
by Jan Fleischhauer - Speigel.de
For Germany, being part of the European Union has always included an element of blackmail. France has been playing this card from the beginning, but now the Spanish and the Greeks have mastered the game. They're banking on Berlin losing its nerve.
France's newly elected Socialist government has just decided to lower the retirement age to 60. From now on, no Frenchman will be forced to work any longer just because it might help kick-start the country's flagging economy. And there's no way the French are going to work as long as their poor fellow Europeans in Germany, whose government is obliging them to labor and toil until age 67.
This latest euro fix will come apart in less than a month
Another day, another sticking plaster solution from beleaguered eurozone policymakers.
By Jeremy Warner - Telegraph.co.uk
Only this one may not even succeed in buying time – I give it less than a month before some such other piece of bad news comes along to fire the crisis anew. Like all the others, the latest fix seems to create as many problems as it solves. The euphoria in markets at Spain's rescue lasted all of a few hours; having bounded away at the opening, they ended broadly flat.
But please don't call it a bail-out. It may walk, talk and look like a bail-out, but to the Spanish premier, Mariano Rajoy, Spain's handout is completely different to the three rescues we've already seen, even though at €100bn (£81bn)– or some 10pc of Spanish GDP – it's quite a bit larger than that of Ireland and Portugal.
Lifeline to Spain falls short; European crisis rages on
Cash infusion to banks barely lifts market;
news bad in Italy, Cyprus
By Carlo Piovano, AP - WashingtonTimes.com
LONDON — The weekend plan to rescue Spain's ailing banks was supposed to boost confidence in Spain and the other 16 countries that use the euro. The skeptics said it would provide just temporary relief for the markets. In the end, it barely did even that.
Stocks and bonds surged in the first hour of trading Monday, a knee-jerk reaction to the weekend news that Spain would funnel up to $124.7 billion in loans to banks from its euro partners. But hours later, stock prices were back down, government borrowing costs were up, and bad economic news piled up across Europe.
Bank bailout is no cure for Spain's pain
Spain's bank bailout merely transfers more debt to its weak government balance sheet and it sets the stage for a full sovereign bailout.
By Cyrus Sanati - Fortune.CNN.com
FORTUNE -- Investors initially cheered the news that Spain reached a deal for a 100 billion euro bank bailout, but that enthusiasm may not last once the details are digested. The deal, concocted in Madrid and Brussels over the weekend, amounts to a kind of shell game, whereby bank property losses are simply transferred from the banks over to the Spanish government's weak balance sheet. Not only is this bailout likely to create public outrage in the streets of Spain, as it shamelessly socializes bank losses, but it will probably make it harder, not easier, for Spain to sell its debt at a low enough rate to fund itself.
The Bailout of Spain
by MIKE WHITNEY - CounterPunch.org
"The burden of recapitalizing insolvent banks or loss-making acquisitions of solvent banks will fall on Spanish citizens." – Karl Whelan, economist at University College, Dublin.
Before EU finance ministers approve the 100 billion euro bailout for Spain, they might want to ask themselves one question: Will it really help?
Sure, it'll keep the markets bubbly until mid-week when fears of the Greek elections set in, (June 17) but that's about it. It won't fix the eurozone's underlying problems, in fact, it doesn't even address them. The narrow purpose of the bailout is to keep insolvent banks propped up to avoid another Lehman Brothers-type catastrophe. That's it. In other words, the 100 billion will not boost competitiveness, spur growth, reduce unemployment, or increase fiscal and political integration. It doesn't do any of these things, in fact, Spain's debt-to-GDP ratio will widen even more due to the new burden its leaders have taken on. That means, Spain's working people will have to endure even harsher conditions for a longer period of time to repay the obligations assumed by Madrid. How does that help?
Global stocks, euro fall on Spain bank bailout uncertainty
By Rodrigo Campos
(Reuters) - Stocks slid and the euro fell against the U.S. dollar on Monday, while Spain's bond yields rose as investors worried about details of a $125 billion deal to shore up Spanish banks.
Wall Street tumbled sharply in a late sell-off after closing its best week of the year on Friday, as concerns over euro zone finances and global growth persisted.
Euro-zone finance ministers struck a deal over the weekend to lend Spain up to 100 billion euros ($125 billion) to bail out its banks. Skepticism about the ability of the deal to stop the spread of the debt crisis in Europe was evidenced in renewed appetite for safe-haven U.S. Treasuries.
After Spain, Is Italy the Next Domino to Fall?
By Carol Matlack - BusinessWeek.com
The relief in Rome was short-lived. Italian bonds rallied early on June 11, the first trading day after European finance ministers' weekend agreement on a $125 billion bailout for Spanish banks.
But within hours, Italian borrowing costs were creeping back up again, reflecting persistent market fears that the Continent's third-largest economy could be the next to falter. "Contagion into Italy and other countries is a reality," Joachim Fels, chief global economist at Morgan Staley in London, said in a Bloomberg Television interview as the bond rally petered out.
Credit Suisse Explains "The Real Issue",
And Why There Is Two Months Tops
Until France Is In The Bulls Eye
Submitted by Tyler Durden - ZeroHedge.com
Credit Suisse's William Porter is strangely laconic and oddly brief in his latest issue of the European Credit Flash titled "The Real Issue":
"It's all about Spain", so now we are cutting to the chase. Recapitalization of the banks versus funding the sovereign is of course a semantic issue given the nature of the interplay. But it enables the attempted finesse we describe below.
"Portugal cannot rescue Greece, Spain cannot rescue Portugal, Italy cannot rescue Spain (as is surely about to become all too abundantly clear), France cannot rescue Italy, but Germany can rescue France." Or, the credit of the EFSF/ESM, if called upon to provide funds in large size, either calls upon the credit of Germany, or fails; i.e, it seems to us that it probably cannot fund to the extent needed to save the credit of one (and probably imminently two) countries that had hitherto been considered "too big so save" without joint and several guarantees.
Merkel Demands More 'Union' in the European Union
German Chancellor Angela Merkel is already planning for a single European superstate with more power.
theTrumpet.com
German Chancellor Angela Merkel said that Europe needs to forge a political union and give up more power to the EU, on German tvchannel ard on June 7.
Reuters pointed out earlier in the week that last year, these kind of ideas "seemed fanciful, a distant dream that would take years or even decades to realize if it ever came to be." Now the most powerful country in Europe is pushing for them.
Why bondholders are scared about Spain
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — One of the big questions making investors more nervous about the bank-bailout deal Spain announced over the weekend boils down to who will pay for it.
This is always the key issue, to some degree. But it merits repeating that in a debt crisis, what matters more is what holders of debt think and do, rather than what investors in other assets think.
On Monday, they sold Spanish and even Italian debt, pushing yields higher. Part of that stems from worries about exactly where the bailout for Spain will come from, since that'll have implications about bondholder seniority in the case of a default — like perhaps with Greece.
Euro Strength Seen By Stiglitz Removing Greek Debt
By Catarina Saraiva and David Goodman - Bloomberg.com
Rather than a euro failure, an orderly Greek exit from the currency has Nobel laureate Joseph Stiglitz and Nomura Holdings Inc. chief strategist Jens Nordvig predicting a stronger and more stable monetary union.
While Societe Generale SA suggests that the euro might break up because of the cost of Greece's departure, the nation accounts for just 2.3 percent of the 17-nation trading bloc's gross domestic product. It also has 356 billion euros ($449 billion), or 4.3 percent of the region's total debt, according to data compiled by Bloomberg. The area's trade deficit last year would have been a surplus without its weakest member, according to European Union data.
Nearing the End of the Eurozone?
By Eric Fry - DailyReckoning.com
06/11/12 Laguna Beach, California – "Europe is revolting against 'sameness,'" observes Dan Denning. "The French want to be French. The Dutch want to be Dutch. The Greeks want to be Greeks. None of them want to be German. And the Germans want to stay German. All these primal, tribal, political loyalties are in conflict with the sameness and conformity required by political and monetary union."
Fed's Williams says Europe presents global threat
by Timothy Ahmann
(Reuters) - The European debt crisis poses a "significant" threat to financial stability and could undermine progress made in recent years to strengthen the global financial system, a top Federal Reserve official said on Monday.
"While the global financial system is stronger than it was three years ago, it remains vulnerable," San Francisco Fed President John Williams said in remarks prepared for delivery at a conference on Asian banking sponsored by his regional Fed bank.
Atlanta Fed President Emphasizes Fragile US Economy
247WallSt.com
In a speech today that reiterates remarks he made last week, Atlanta Federal Reserve President Dennis Lockhart said:
The indicators of economic strength so far in 2012 have been underwhelming. … I expect the recovery process to be slow and drawn out. I think the most reasonable expectation is moderate growth, a slow and possibly halting decline of unemployment, with inflation staying close to the FOMC's 2 percent target.
Given what we know about the US economic outlook, Lockhart had this to say about the Fed's accommodative policy and historically low interest rates:
I view this policy stance as appropriate for the outlook I depicted. However, as the employment report of last Friday illustrates, there continues to be a halting and tenuous character to the recovery.
Bond Bubble Dismissed As Low Yields Echo Pimco's New Normal
By Daniel Kruger and Anchalee Worrachate - Bloomberg.com
Mohamed El-Erian knows why bond markets from the U.S. to Germany to Brazil, where yields have dropped to record lows even though debt has ballooned to more than $40 trillion worldwide, aren't a bubble waiting to burst.
"We may be in a synchronized slowdown" in global economic growth, El-Erian, who as chief executive officer of Pacific Investment Management Co. oversees $1.77 trillion, said in a June 6 telephone interview. "We could stay here for a while."
Bond Bubble Dismissed As Low Yields Echo Pimco's New Normal
By Daniel Kruger and Anchalee Worrachate - Bloomberg.com
Mohamed El-Erian knows why bond markets from the U.S. to Germany to Brazil, where yields have dropped to record lows even though debt has ballooned to more than $40 trillion worldwide, aren't a bubble waiting to burst.
"We may be in a synchronized slowdown" in global economic growth, El-Erian, who as chief executive officer of Pacific Investment Management Co. oversees $1.77 trillion, said in a June 6 telephone interview. "We could stay here for a while."
Lockhart Says Lower Yields Bolster Case For No New Action
By Steve Matthews - Bloomberg.com
Federal Reserve Bank of Atlanta President Dennis Lockhart said falling Treasury yields take pressure off the central bank for further action as policy makers prepare for a meeting next week.
Lockhart, in a speech in Chicago, said recent U.S. economic data indicate the recovery may be losing steam, and that policy makers will need to take more steps to stimulate the economy if it becomes clear growth is slowing.
"I don't think any of the options should be taken off the table under the current circumstances," Lockhart told reporters after the speech. "But I am not convinced at this moment that the circumstances quite yet call for additional action."
Inequality, the crash and the crisis:
Part 1 "The defining issue of our times"
by Stewart Lansley - OECDInsights.org
Does inequality trigger economic instability? A few years ago this was a issue that did not register on the political Richter scale. Nor did it attract much attention amongst professional economists. As James Galbraith, the economist son of John Kenneth Galbraith, has put it, those few working in inequality research were in an economics "backwater". Proving his point, the academic Journal of Economic Literature has no section examining inequality and economic instability.
There is one key reason for this lack of interest. For the last thirty years, the economic orthodoxy has been that inequality is a necessary condition for economic success. We can have greater equality or faster growth but not both. That orthodoxy emerged out of the global crisis of the 1970s when, it was claimed, the move towards more equal societies in the immediate post-war decades had gone too far and had led to economic sclerosis. What was needed to put economies back on an upward and sustainable path was a stiff dose of inequality.
Peter Schiff on avoiding the brick wall
By George Smith - GoldSeek.com
Peter Schiff, who was famously ridiculed for calling the crisis of 2008, steps up as a prognosticator again in his new book, The Real Crash: America's Coming Bankruptcy - How to Save Yourself and Your Country. We had way too much government and cheap credit leading up to 2008, he says, and even more government and cheap credit since then, which is why the next crisis will be the real haymaker.
His book is divided into two main sections. Part I addresses the problems, while part II, which is by far the lion's share of his discussion, presents solutions. In a nutshell, the problem is government, and the solution is to take an ax to it - again and again. Since this view is currently unacceptable to policymakers and the public at large, we can only hope reality will win out before calamity hits.
Is Globalization Good for America's Middle Class? Part 1
by Kenneth Thomas - AngryBearBlog.com
In this blog, I have frequently documented economic trends that have been bad for the middle class: Declining real wages, steadily falling bang for the healthcare buck, stagnant educational attainment, the gigantic cost of tax havens, etc. With this post, I want to begin exploring one possible reason for the economic insecurity of the middle class, namely globalization. Today, we will look at who wins and who loses from international trade, one of the key elements of globalization.
In some circles, one is likely to see a variant of the claim that "everybody" is better off because of freer trade. Even according to the most mainstream economic theory, this is simply false. The workhorse theory for determining the distributional effects of trade (i.e., who wins and who loses) is called the Stolper-Samuelson Theorem, first enunciated in an article by Wolfgang Stolper and Paul Samuelson in 1941.
Foreigners Snap Up Properties in the U.S.
By NICK TIMIRAOS - WSJ.com
The six-year slide in U.S. home prices and the dollar's weakness against some currencies are driving a property-buying binge by Asians, Canadians, Europeans and Latin Americans eager to own a piece of America.
Plowing money into real estate may sound like a risky venture to many Americans. But to growing numbers of foreigners, U.S. housing has never seemed a smarter investment.
Great Recession Shrank U.S. Families' Wealth
to 1992 Levels, Says Fed
By MARTIN CRUTSINGER, AP - DailyFinance.com
WASHINGTON -- The Great Recession shrank Americans' wealth so much that in 2010 median family net worth was no more than it had been in 1992 after adjusting for inflation, the Federal Reserve reported Monday.
Median net worth declined from $126,400 in 2007 to $77,300 in 2010, a Fed survey of family finances found. The median marks the point where half had more and half had less. The recession officially began in December 2007 and ended in June 2009.
Net worth is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.
Americans' wealth plummeted 40 percent
from 2007 to 2010, Federal Reserve says
By Ylan Q. Mui - WashingtonPost.com
The recent recession wiped out nearly two decades of Americans' wealth, according togovernment data released Monday, with middle-class families bearing the brunt of the decline.
The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were back in 1992.
Recession crushed middle-class wealth: Fed survey
Median net worth fell by $49,100, erasing 18 years of gains
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — The recession crushed the net worth of middle-class families as real estate values tumbled, according to a survey released by the Federal Reserve on Monday.
The Fed's survey of consumer finances between 2007 and 2010, which is adjusted for inflation, showed median income fell 7.7% from $49,600 in 2007 to $45,800 in 2010 and that median net worth fell 38.8% from $126,400 in 2007 to $77,300 in 2010, approximately the level recorded in 1992.
How Americans Lost Two Decades of Wealth, in 1 Graph
By Derek Thompson - TheAtlantic.com
It's a two-year-old statistic, but it's the news of the day: The typical American family's net worth plunged by 40 percent between 2007 and 2010, from $126,400 to $77,300, wiping out two decades of gains and thrusting the typical family's wealth back to 1992 levels.
This news shouldn't be shocking to anybody following even the vaguest contours of economic news for the last few years. As we knew, median household wealth popped in the bubble and collapsed in the bust, as housing prices fell by 30 to 40 percent in the worst-hit metros, in California, Nevada, and Florida. In 2007, barely half of families surveyed by the Federal Reserve reported savings. Just as the boom made families feel richer, the financial shock made families feel poorer. And so falling housing prices led to falling wealth, which led to falling spending, which led to falling private sector revenue, which led to massive job cuts, which dragged down housing prices even further, and around and around we go.
The Pernicious Dynamics of Debt, Deleveraging, and Deflation
by Charles Hugh Smith - CollapseNet.com
At this moment, the news media is constantly clamoring about the "Three Ds" that are buffeting the markets: debt, deleveraging, and deflation. We intuitively sense that they're linked -- but how, exactly?
Understanding this linking is critical; as debt has fueled the global expansion, it will also dominate its contraction.
Debt and Deleveraging
To illustrate the forces of debt and deleveraging, let's consider a home mortgage.
Suppose a buyer of a $100,000 home qualifies for a mortgage that requires only a 3% down payment in cash. The buyer ponies up $3,000 in cash and obtains a $97,000 mortgage. The cash collateral is thus leveraged about 33-to-1: Each $1 in cash has been leveraged into $33 of borrowed money.
HUD Spending $70 Million to Teach Grant Recipients
How to Spend Money They Already Have
By Amanda Swysgood - CNSNews.com
(CNSNews.com) – At one federal agency, it takes money to spend money. The U.S. Department of Housing and Urban Development recently announced it is spending $70 million to improve the way its grant recipients spend billions in taxpayer cash.
Most of the $70 million will go to consulting companies that provide "technical assistance" to HUD-funded communities and non-profit organizations. The consultants will help the communities and nonprofits "improve their use of federal funds to revitalize neighborhoods, help the homeless and produce more affordable housing," a May 15 new release said.
Calif. public-employee pensions face cuts
By Elliot Spagat - AP - WashingtonTimes.com
SAN DIEGO (AP) — For years, companies have been chipping away at workers' pensions. Now, two California cities may help pave the way for governments to follow suit.
Voters in San Diego and San Jose, the nation's eighth- and 10th-largest cities, overwhelmingly approved ballot measures last week to roll back municipal retirement benefits — and not just for future hires, but for current employees.
Entitlement Programs Are Bankrupting Our Country
And Our Character
By Charlie Daniels - CNSNews.com
The truth is that America is already bankrupt, the papers have just not been served yet, but if our course is not drastically altered that will happen very soon and when it does the boat will rapidly begin to sink and the people who caused it will run away and enjoy the pensions and benefits they voted themselves while the rest of America is left to swim or drown.
But even more than the disastrous fiscal mess, the foolish alliances, the wasteful foreign aid and the foreign policy goof ups, in my book, the most cruel and destructive thing we have allowed our government to do is the institution of entitlement programs that have made three generations of Americans dependent on the government for their every need.
Senior Boom: 11,000 New Seniors
Become Eligible for Medicare--Every Day
By Melanie Hunter - CNSNews.com
(CNSNews.com) - Health and Human Services Secretary Kathleen Sebelius said Monday that 11,000 new seniors become eligible for Medicare every day.
"About 48 million Americans [are] relying on that program and 11,000 Baby Boomers a day become eligible for Medicare," Sebelius said.
"We have the biggest group ever in the history of this country coming in on a daily basis as the Baby Boomers age," she said at an event billed by the administration as a senior health care town hall on the Patent Protection and Affordable Care Act, also known as Obamacare.
The Last Best Chance for Stemming the Tide
of Big Money in Politics
Montana Citizens United and the Eleventh Amendment
by RUSSELL MOKHIBER - CounterPunch.org
In 2010, the Montana Supreme Court dealt a blow to the United States Supreme Court decision in Citizens United. The Montana Supreme Court, in Western Tradition Partnership v. Attorney General, challenged the validity of the Citizens United decision as applied to state elections, and upheld Montana's law banning corporate spending on elections.
Western Tradition Partnership has since changed its name to American Tradition Partnership (ATP) and is now asking the Supreme Court to reverse the Montana Supreme Court decision. Montana's Attorney General Steve Bullock, in response, is asking the Supreme Court to reject the company's request for a hearing.
If You've Ever Sold a Used iPod,
You May Have Violated Copyright Law
The Supreme Court will decide whether secondhand items copyrighted abroad can be legally sold within the United States.
By Marvin Ammori - TheAtlantic.com
The Supreme Court will soon hear a case that will affect whether you can sell your iPad -- or almost anything else -- without needing to get permission from a dozen "copyright holders." Here are some things you might have recently done that will be rendered illegal if the Supreme Court upholds the lower court decision:
1. Sold your first-generation iPad on Craigslist to a willing buyer, even if you bought the iPad lawfully at the Apple Store.
2. Sold your dad's used Omega watch on eBay to buy him a fancier (used or new) Rolex at a local jewelry store.
3. Sold an "import CD" of your favorite band that was only released abroad but legally purchased there. Ditto for a copy of a French or Spanish novel not released in the U.S.
4. Sold your house to a willing buyer, so long as you sell your house along with the fixtures manufactured in China, a chandelier made in Thailand or Paris, support beams produced in Canada that carry the imprint of a copyrighted logo, or a bricks or a marble countertop made in Italy with any copyrighted features or insignia.
The U.N. Seeks to Tax the Internet
By Charles C. W. Cooke - NationalReview.com
The U.N. recently revived its long-held desire to take control of the Internet. It is unlikely to get its way. So, led by European nations — who else? — it has hit upon another means by which to exercise its influence: Taxes. CNET reports:
The United Nations is considering a new Internet tax targeting the largest Web content providers, including Google, Facebook, Apple, and Netflix, that could cripple their ability to reach users in developing nations.
The European proposal, offered for debate at a December meeting of a U.N. agency called the International Telecommunication Union, would amend an existing telecommunications treaty by imposing heavy costs on popular Web sites and their network providers for the privilege of serving non-U.S. users, according to newly leaked documents.
U.N. PRESSES FOR GLOBAL INTERNET TAX ON U.S. COMPANIES
by BEN SHAPIRO - Breitbart.com
Apparently, the United Nations has been pressing for a global internet tax that would hit Google, Facebook, Apple, and Netflix. The International Telecommunication Union (ITU), a subset of the UN, wants to add a provision to a current treaty that would impose costs on popular websites and their network providers for non-U.S. users. Both the Obama administration and Republicans in Congress have raised the issue as a significant danger.
The Europeans essentially want a share of the pie they have done nothing to build. As CNET.com reports, "European network providers and phone companies have been bitterly complaining about U.S. content-providing companies for some time."
AMERICA'S CLASS WAR
Posted by John Cassidy - NewYorker.com
Barney Frank and Ed Rendell are right. In seeking to recall Wisconsin Governor Scott Walker, the public-sector unions and their allies on the progressive wing of the Democratic Party made a big mistake. "My side picked a fight they shouldn't have picked," Frank told The Hill. "People need to be more strategic about the fights they pick." In other places, such as Ohio, Democrats have successfully campaigned in state legislatures to roll back Republican anti-union initiatives. But rather than following such a strategy in Wisconsin, they tried to drive Walker out of office, alienating independent voters and bringing down upon themselves a deluge of conservative money.
This overreach may well embolden G.O.P. governors in other states to follow the Wisconsin example. But the tactical blundering of the anti-Walker forces shouldn't be allowed to obscure what is at stake here. Exploiting public concerns about debts and deficits that have resulted from an economic downturn largely brought on by Wall Street malfeasance, Republican politicians, backed by wealthy individuals and corporations, are looking to cripple the unions and balance local budgets on the backs of low- and middle-income workers.
Socialism in Practice: The Lethal Laboratory
Mises Daily: by Gary North
What is the longest-running socialist experiment? What has its success been?
If someone asked you to defend the idea that socialism has failed, what would you offer as your example?
Where did modern socialism begin?
In America.
That's right: in the land of the free and the home of the braves. On Indian reservations.
They were invented to control adult warriors. They had as a goal to keep the native population in poverty and impotent.
Did the system work? You bet it did.
Has the experiment been a failure? On the contrary, it has been a success.
When was the last time you heard of a successful Indian uprising?
Are the people poor? The poorest in America.
Are they on the dole? Of course.
Lee Warns On Swift S. Korea Riposte
To Any Provocation By North
By Brett Miller and Sangwon Yoon - Bloomberg.com
South Korean President Lee Myung Bak said his government has put North Korea on notice that it will issue a swift and powerful retaliation to any military provocation, and urged the totalitarian state to adopt Myanmar's example of political opening.
"It is now our government's clear policy to respond strongly and immediately in times of military provocation," Lee, 70, said yesterday during a discussion with journalists at his office in the Blue House in Seoul. "This policy has been officially communicated to North Korea throughChina."
Annan concerned about escalation of Syria violence
By Bassem Mroue - AP - WashingtonTimes.com
BEIRUT — International envoy Kofi Annan said Monday he was "gravely concerned" about the escalation of fighting in Syria, citing the shelling of opposition areas in central Homs province and reports of mortar, helicopter and tank attacks near the Mediterranean coast.
Violence has spiked in recent weeks, as both sides ignore a cease-fire brokered by Annan that was supposed to go into effect April 12 but never took hold.
Annan demands both sides "take all steps to ensure that civilians are not harmed," said his spokesman, Ahmad Fawzi.
THE SYRIAN TEST
Posted by Jon Lee Anderson - NewYorker.com
Last Wednesday, in the Sunni village of Al-Kubeir, Syria, not far from Houla, where a hundred and nine civilians were slaughtered on May 25th, there was a new sectarian massacre, this time of as many as seventy-eight civilians, including women and children. Once again, it appears to have been committed by so-called pro-regime Alawite thugs known as the Shabiha. Once again, there seemed to be no one capable of stopping it from happening. This time, however, the bodies were take away and concealed from the contingent of U.N. observers who tried unsuccessfully to enter the village soon after the massacre was reported, and found themselves under fire. By the time they got there, a day later, there was blood, a few body parts, and the smell of scorched human flesh.
Syria conflict: Fears of new massacre in Haffa
BBC.co.uk
The US has expressed fears that the Syrian government "may be organising another massacre" in the town of Haffa in Latakia province, where UN military observers have been denied access.
UN Secretary General Ban Ki-moon said it was vital that the observers should be allowed into the town.
He and peace envoy Kofi Annan expressed grave concern about violence there.
A BBC correspondent travelling with UN observers witnessed sustained and heavy shelling in the old city of Homs.
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