US lurching towards ‘debt explosion’ with long-term interest rates on course to double

US lurching towards ‘debt explosion’ with long-term interest rates on course to double

Philip Aldrick
London Telegraph
Monday, July 6, 2009

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.

Using historical examples for his paper, New Evidence on the Interest Rate Effects of Budget Deficits and Debt, Mr Laubach came to the conclusion that “a percentage point increase in the projected deficit-to-GDP ratio raises the 10-year bond rate expected to prevail five years into the future by 20 to 40 basis points, a typical estimate is about 25 basis points”.

The US deficit has blown out from 3pc to 13.5pc in the past year but long-term rates are largely unchanged. Assuming Mr Laubach’s “typical estimate”, long-term rates have to climb 2.5 percentage points.

Full story here.

America’s Effective Unemployment Rate at 18.7%?

America’s Effective Unemployment Rate at 18.7%?


Steve Clemons
The Washington Note
July 2, 2009
Each month, I receive from Leo Hindery an update on “America’s effective unemployment rate” which includes not only the official unemployment figures but other data points showing off-the-books unemployed or underemployed people.

The numbers are staggering and are aggregates of official data. They matter because various Obama administration officials including the President himself started off calling for huge stimulus packages to help generate “jobs, jobs, jobs!”

But now, I have been hearing more and more from senior Obama economic team members about the jobs they hoped for coming at the very tail end of an economic recovery. Others are talking about a GDP recovery — but not a jobs recovery. They are admitting as well that they underestimated the severity of this recession and its impact on unemployment levels.

And all this while Goldman Sachs and other financial houses have seen their balance sheets get cleaned up and bonuses surge.

Hindery writes:

Here is a June 2009 version of the summary that calculates the Effective Unemployment Rate, which is now 18.70%, and the Effective Number of Unemployed, which is now 30,172,000.

There are currently 14,729,000 officially unemployed workers, as just announced. However, this figure does not include the combined 15,443,000 workers either (1) in the “labor force reserve” because they have abandoned their job searches (i.e., 4,278,000) or (2) underemployed because they are “part-time of necessity” (i.e., 8,989,000) or “otherwise marginally attached” (i.e., 2,176,000).

The effective unemployment rate is therefore 18.70%, instead of the official 9.51%.

Since the start of the recession in December 2007, the number of workers who are officially unemployed has increased by 7,188,000, while almost twice as many workers - 13,290,000 - have become effectively unemployed. And all the while, we should have been creating around 2,250,000 new jobs (i.e., 18 months times 125,000 jobs per month) just to keep up with population growth.

In June, the number of workers officially unemployed increased 218,000, while the number of workers effectively unemployed actually decreased 35,000.

It’s important to see the entire picture of America’s jobs profile — no matter how unpleasant.

I recognize that credit bubble related recoveries are hard to work out and are usually quite slow — with job growth at the back end. This all makes sense — but with Christina Romer out raising expectations again with giddy talk predicting a V-shaped recovery and given the “jobs, jobs, jobs” mantra of President Obama himself — the gap between the job figures expected and the disappointing economic realities generated may be politically consequential.


Seven More Banks Fail

Oh, the joys of not having to get up with the first ring of the alarm clock! But then, as I laid in bed this morning wondering what to write about, it came to me in a flash: There have been numerous alarming signs and portents in the markets this week, if one knows where to look.

The FDIC announced seven bank failures after the market closed Thursday, which brings the number of banks closed this year to 52. But, if you count the number of branch offices closed this week it’s 30 branches.

Founders Bank
Millennium State Bank of Texas
First National Bank of Danville
Elizabeth State Bank
Rock River Bank
First State Bank of Winchester
John Warner Bank

But what’s even more alarming is that if you look back over the last year of “We’re not in a Depression” bank numbers, you’ll see that the number of banks closed is nominally up to 75, but if you count up branches, the banking system has shuffled ownership of 2,969 branches.

That FDIC seems to be doing a smooth job of it - making depositors whole in each case (so far), one can’t help but wonder what’s the cost of all this to be in the longer term, especially since the real guts of the second leg down in financial markets isn’t expected till this fall.

When will FDIC have to go looking to recharge its coffers?

Meantime, at least the bad news was released after the markets were closed and has an extra day to contemplate what this all means. Answer to that should be apparent to anyone with half a brain (Depression 2.0 may be real and George may not be so crazy after all…).

If you divide the total offices closed (2,969) by 51 weeks (since July 11, 2008 is the IndyMac failure - 51 weeks back) closings have been averaging 58.21 offices per week, although admitted the data is skewed a bit by the WAMU and Downey Savings failures. Still, the count is the count.

Another one of the alarming stories this week to give ’cause to pause’ was the NY Fed Funds Rate which, if you look at the June 30th data, had someone paying 7% for overnight funds. The aberration, first caught on Karl Denninger’s “Market Ticker” site admittedly does leave one asking plenty of questions (Like: Who’d pay 7% for overnight money in this environment if they didn’t have a death-like financial mess to paper over quickly?), one can only pray that it was just someone needing quick cash for the end of Q2. The worst fear is that this is all a set up for the next collapse of the derivatives bubble which will be easily apparent as the Dow goes toward new lows in September, which is what I fear. Not to mention the possible banking and market holidays which could accompany that.

Make a note to self: Finish spreading money around to ’safe’ places. A bit more in the Treasury TIPS paper, a bit less in the Big National Bank - going instead to a couple of local banks which have weathered at least one Depression previously.

A third area where alarming developments are taking place is well-described under the headline “Financial lobby gears up for effort against Obama plan.” While it’s true that the Obama administration is trying to build a credible “Consumer Financial Protection Agency”, it’s more than equally true that the banksters are going to roll out all the big guns and pull out the stops since if this one goes through. it could have a Kondratieff cycle-long impact on the bankster coup - which means it could actually save America from financial interest/bankster domination for another 50-years. Why, who’d want to be shackled with interest rate caps and such when desperation of common folks can be turned into optimized yields on past-due accounts?

You won’t read much about this fight in the MainStreamMedia, however, since the banksters have brought most of the corpgov/ MSM media to heel by simple manipulation ad budgets: “Ya’ll either toe the line, or mother banker will slash advertising on your radio/tv/newspaper chain to zip and then where will you be? Need to roll over a credit line to keep your LBO roll-up together? Lay off on the coverage of interest rate caps, then…” Or some variant of this. never ’spoken”, but that’s how the complex system works when you step back from it a ways.

Ah, the joys of having the best ‘democratic republic’ money can buy.

Related? “Washington Post cancels lobbyist event amid uproar.” You tell me. I’ve filed it under “Cookie jars and fingers.”

But there’s another point of alarm, right there. Groups likewww.firecongress.org are popping up and they make it pretty clear that the world “revolution” which I’ve mentioned prominently ove rthe past year or so are starting to filter into the active area of language.

By the way, don’t forget to check out their poster - which you can print off on a good quality color printer and pass around:

economic crisis   Seven More Banks Fail

Ballots beat bullets any old time.

Along about here, you may be figuring out that the reason the market dropped 223 points in Thursday’s trading is that it’s occurred to more people than just yours truly that there is not much stimulating going on from the over-hyped and over-sold ’stimulus’ bill.

Well, duh.

Nassim Taleb - who wrote the famous book on statistical outlier events The Black Swan: The Impact of the Highly Improbableeconomic crisis   Seven More Banks Fail is being quoted by CNBC this morning as saying “The financial system is crashing and action must be taken by the US government to convert debt into equity to produce a more stable environment…”

Nice thought, that. But, in case you haven’t noticed, at the current ‘burn rate’ the only possible outcome for the economy is to have runaway inflation, which is fine from the standpoint of the powers-that-be, since the people who were marginally ready to lose their homes, are in many cases already in default and the homes owned by the bankster class, so when prices start to go wild, they ought to sell like hotcakes and new and much higher rates since the public will be retrained into the borrow and refi industries, which will be retooled to maximize profits once again.

Graceful, ain’t it?

Source Infowars.com

Payrolls Fall More Than Forecast, Unemployment Rises

Shobhana Chandra
Bloomberg
July 3, 2009
Employers in the U.S. cut 467,000 jobs in June, the unemployment rate rose and hourly earnings stagnated, offering little evidence the Obama administration’s stimulus package is shoring up the labor market.

The payroll decline was more than forecast and followed a 322,000 drop in May, according to Labor Department figures released today in Washington. The jobless rate jumped to 9.5 percent, the highest since August 1983, from 9.4 percent.

Unemployment is projected to keep rising for the rest of the year just as the income boost from the stimulus package fades, undermining prospects for a sustained rebound in household purchases, analysts said. As companies from General Motors Corp. to Kimberly-Clark Corp. cut costs, the lack of jobs will restrain growth.

Read entire article

Home foreclosures expected to surge in coming months

Home foreclosures expected to surge in coming months



Moratoriums from banks, government to expire, setting off new wave of default actions

By Don Lee | Washington Bureau
July 6, 2009

WASHINGTON - -- 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.

But with many government and self-imposed foreclosure moratoriums expiring, the biggest lenders indicate they are likely to move more aggressively to clear a backlog of troubled mortgages.

Home sales have been steadying nationally, thanks largely to an abundance of cheap foreclosed properties, government incentives and record low mortgage rates. Housing construction starts have flattened out, helping to bring supply into balance with demand. The rate of housing price declines has slowed as well, even turning up again in some communities.
Read entire article :

Shanghai Companies Sign First Yuan Settlement Deals

July 6 (Bloomberg) -- Three Shanghai companies agreed to settle import and export contracts in yuan for the first time, as China seeks to reduce the role of the dollar in global trade.

Shanghai Silk Group, Shanghai Electric Group Co. and Shanghai Huanyu Import & Export Co. signed contracts worth 14 million yuan ($2 million) with customers in Hong Kong and Indonesia, Fang Xinghai, director general of the municipal government’s financial services office, said at a press conference today. Bank of Communications Co. and Bank of China Ltd. offered transaction services.

China, Russia and India have said the world economy is too reliant on the dollar and called for changes in how $6.5 trillion in foreign-exchange reserves are managed, before Group of Eight leaders meet this week. The settlement program and sales of yuan-denominated debt overseas are designed to make the currency more attractive for central banks to hold.

“This is a first step on the long road towards that target of making the yuan a global reserve currency,” said Nizam Idris, a strategist in Singapore at UBS AG, the world’s second biggest foreign-exchange trader. “That’s probably going to take five years or more.”

The central bank on July 2 allowed companies in Shanghai and four cities in the southern Guangdong province to settle trade in yuan with businesses in Hong Kong, Macau and Association of Southeast Asian Nations. Outside of special border trade zones, companies previously had to convert yuan into dollars or other currencies to settle international trade.

Exchange Rate Risks

“The yuan settlement program will help boost bilateral trade with Hong Kong and Asean nations,” People’s Bank of China Deputy Governor Su Ning said at the signing ceremony. “The yuan is stable compared with other major currencies. A stable yuan will help companies control exchange-rate risks.”
Read Entire article :

Russia, India Question Dollar Reliance Before Summit

July 6 (Bloomberg) -- Russia and India said the world economy is too reliant on the U.S. dollar and called for changes in how $6.5 trillion in currency reserves are managed, as Group of Eight leaders prepare to meet this week.

“The dollar system or the system based on the dollar and euro have shown that they are flawed,” Russian President Dmitry Medvedev said in an interview with Corriere della Sera, repeating his proposal for a new international reserve currency.

Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said in a July 3 interview that he is urging his nation to diversify its foreign holdings away from the dollar.

The challenge to the dollar, a linchpin of world finance and trade since 1945, underlines the shift in relative economic power toward emerging markets and away from the developed nations that spawned the global crisis.

French Finance Minister Christine Lagarde, speaking yesterday at a conference in Aix en Provence, France, said that “we must explore better coordination of exchange-rate policy.”

Questions need to be asked about “the balance of currencies and the role of currencies in a world that has changed because of the crisis and the growing role of emerging countries,” she told reporters.

Bank of France Governor Christian Noyer said at the same conference, “We really need to make sure there is a greater stability between the big currencies in the period to come.”

Read more :

College Loan Crisis

Crushing College Debt


Lawyers tells $400,000 student loan horror story. (Bloomberg News)
Category: News & Politics
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“Control oil and you control nations; control food and you control the people.” Henry Kissinger


once a standing army is established, in any country, the people lose their liberty.”
George Mason

“Military men are dumb, stupid animals to be used as pawns for foreign policy.”
Henry Kissinger

“If you are an ordinary person, then you can prepare yourself for war by moving to the countryside and building a farm, but you must take guns with you, as the hordes of starving will be roaming. Also, even though the elite will have their safe havens and specialist shelters, they must be just as careful during the war as the ordinary civilians, because their shelters can still be compromised.”
Henry Kissinger

"We don't let them have ideas. Why would we let them have guns?" Joseph Stalin

The people who cast the votes decide nothing. The people who count the votes decide everything.
Joseph Stalin

Governments keep a lot of secrets from their people . . .
Why aren't the people in return allowed to keep secrets
from the government?

PHILIP ZIMMERMAN, DER SPIEGEL

“Some call it Communism, I call it Judaism.”

Rabbi Stephen Weiss

“Anti-Communism is Anti-Semitism.”
Jewish Voice, July - August 1941

Taxing People is Punishing Success
UNKNOWN

There's the rich, the poor, and the tax payers...also known as the middle class. Robert Kiyosaki

The Tax you pay is The Bill for Staying Stupid

Stefan Molyneux


“The modern banking system manufactures money out of nothing. The process is, perhaps, the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and un-mint the modern ledger-entry currency.” Major L L B Angus

The few who understand the system will either be so interested in its profits or so dependent on its favours that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system will bear its burdens without complaint and perhaps without even suspecting that the system is inimical to their interests.
The Rothschild Bros

"Debts must be collected, bonds and mortgages must be foreclosed as rapidly as possible. When, through a process of law, the common people lose their homes they will become more docile and more easily governed through the influence of the strong arm of government, applied by a central power of wealth under control of leading financiers.

This truth is well known among our principal men now engaged in forming an imperialism of Capital to govern the world.

By dividing the voters through the political party system, we can get them to expend their energies in fighting over questions of no importance. Thus by discreet action we can secure for ourselves what has been so well planned and so successfully accomplished."

USA Banker's Magazine, August 25 1924


Cutting Tax Rates stimulates Economic Growth creates more Profit , more Jobs and therefore The Treasury ends up with more Tax Money
UNKNOWN

Taxation is legalized Theft
UNKNOWN

"The Objective of the Bank is not the control of a conflict , it's the control of the debt that a conflict produces . The real value of a conflict , the true value is in the debt that it creates . You control the debt , you control everything . this is THE VERY ESSENCE OF THE BANKING INDUSTRY , to make us all , whether we be nations or individuals , SLAVES TO DEBT " An UNKNOWN Banker

Patriotism is the last refuge... to which the scoundrel clings .... Steal a little and they throw you in jail ..steal a lot and they make you king ....

Bob Dylan


"Corporations are stealing billions in tax breaks, while the confused, screwed citizenry turn on each other. International corporations have no national allegiance, they care only for profit." Robert Reich


There is NO political answer to a spiritual problem!
Steve Quayle


Po
litical Correctness is a Political Stand Point that does not allow Political Opposition , This is actually The Definition of Dictatorship
Gilad Atzmon

The modern definition of racist is someone who is winning an argument with a liberal
Peter Brimelow


When People lose everything and have nothing left to lose , They Lose It !

GERALD CELENTE

Your Greatest Teacher is Your Last Mistake
DAVID ICKE

The one who Controls the Education System , Controls Perception
UNKNOWN

"The world will not be destroyed by those who do evil, but by those who watch them without doing anything."

Albert Einstein

In The Left Nothing is Right & in The Right nothing is Left
UNKNOWN


No man escapes when freedom fails; The best men rot in filthy jails. And those that cried 'Appease! Appease!' Are hanged by those they tried to please
UNKNOWN

Freedom is not Free
UNKNOWN

Don't Steal The Government Hates The Competition

Ron Paul

"Buy The Rumor , Sell The Fact " Peter Schiff


You can love your Country and not your Government

Jesse Ventura


" The Government Works for ME , I do not answer to them They Answer to ME "
Glenn Beck

"Tyranny will Come to Your Door in a Uniform "
Alex Jones

"The Government is not The Solution to our Problems , The Government is The Problem "

Ronald Reagan


"The price good men pay for indifference to public affairs is to be ruled by evil men." Plato


The world is a tragedy to those that feel, and a comedy to those that think...Beppe Grillo

"The people should not fear the government for it is the government who should fear the people" UNKNOWN

"If You are looking for solutions to the world's problems , look in the Mirror , You Are The Solution , You have the power as a human being on this planet " UNKNOWN

"They don't control us , We empower them " UNKNOWN

"Serial Killers do on a Small Scale What Governments do on a large one..."

Serial Killer Richard Ramirez

There is a Class War going on in America, & unfortunately, my class is winning." Warren Buffet

"When the people fear their government, there is tyranny; when the government fears the people, there is liberty."

Thomas Jefferson

"College is a waste of Money"
Albert Einstein

Schools manufacture people who think that they're smart but they're not.
Robert Kiyosaki

Education is what you learn after you leave School
Robert Kiyosaki

" ‏Schools were designed to create employees for the big corporations."
Robert Kiyosaki


"If a law is unjust, a man is not only right to disobey, he is obligated to do so" Thomas Jefferson

Dissent is the highest form of patriotism
Thomas Jefferson

“True education makes you feel stupid. It makes you realize you have so much more to learn.” Robert Kiyosaki


"One day your life will flash before your eyes. Make sure it's worth watching." - Gerard Way

"Aspire not to have More but to be More "
UNKNOWN

The losers in life think they have all the answers. They can’t learn because they’re too busy telling everyone what they know.
Robert T. Kiyosaki ‏

"Failure is simply the opportunity to begin again. -This time more intelligently." Henry Ford

What You Own Owns You
UNKNOWN

If you expect the government to solve your problems, you have a problem. Robert Kiyosaki

"Those who give up their liberty for more security neither deserve liberty nor security." Benjamin Franklin

"None are more hopelessly enslaved than those who falsely believe they are free.” -
Johann Wolfgang von Goethe

"Always trust someone who is seeking the truth , never trust someone who found it" Jordan Maxwell

Be The Change you want to see in The World
UNKNOWN

Failure inspires winners but defeats losers
Robert Kiyosaki ‏

“If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people” A Chinese Proverb

"First they came for the Socialists, and I did not speak out--
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out--
Because I was not a Trade Unionist.
Then they came for the Jews, and I did not speak out--
Because I was not a Jew.
Then they came for me--and there was no one left to speak for me." UNKNOWN


Let me tell you why you're here. You're here because you know something. What you know you can't explain, but you feel it. You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad. It is this feeling that has brought you to me. Do you know what I'm talking about?


Morpheus The Matrix 1999