Conspiracy Blog : Learn Off Grid PREPPING & GARDENING For SURVIVAL , Live Off The Grid Survive and Thrive
By Nicole Bullock in New York
Published: July 20 2009 20:39 | Last updated: July 20 2009 20:39
Sharply falling tax revenues across the US have left states facing fresh budget shortfalls and threatening further painful spending and service cuts following previous multiple rounds of belt-tightening.
In the first quarter of the calendar year, tax collections dropped by 11.7 per cent, the largest fall on record, according to the Rockefeller Institute of Government. Of 50 states, some 45 reported declines.
Early figures for April and May show an overall decline of nearly 20 per cent for total taxes, “a further dramatic worsening of fiscal conditions nationwide”, says the institute.
Billions of dollars of federal stimulus funds, combined with cuts to state employee jobs, school districts, healthcare and even the US prison system, have so far failed to close the budget gaps.
“The states are constantly trying to recalibrate their budgets to deal with a shrinking revenue base,” said Susan Urahn, managing director of state policy initiative at the Pew Center on the States.
By Vincent Del Giudice
July 13 (Bloomberg) -- The U.S. budget deficit topped $1 trillion for the first nine months of the fiscal year and broke a monthly record for June as the recession subtracted from revenue and the government spent to rejuvenate the economy.
The shortfall for the fiscal year that began Oct. 1 totaled $1.1 trillion, the first time that the gap for the period surpassed $1 trillion, Treasury figures showed today in Washington. The excess of spending over revenue for June was $94.3 billion, the first deficit for that month since 1991, according to data compiled by Bloomberg.
Individual and corporate tax receipts are sliding even as the worst recession in five decades shows signs of easing because the jobless rate continues to rise -- reaching a 26-year high in June -- and companies have yet to see a sustained increase in demand. The shortfall is also widening as the government ramps up spending from the $787 billion stimulus program President Barack Obama signed into law in February.
“This is a difficult pill to have to swallow,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “The economy and banking system need these funds to recover, yet it will ultimately hit Americans’ wallets hard. It’s a necessary evil.”
Treasuries Drop
Treasuries fell to their lows of the day after the figures, with yields on benchmark 10-year notes rising to 3.35 percent at 3:29 p.m. in New York from 3.30 percent late yesterday.
Economists surveyed by Bloomberg News forecast a June deficit of $97 billion, according to the median of 30 estimates. Projections ranged from deficits of $109.3 billion to $70 billion.
The June deficit compares with a surplus of $33.5 billion in the same month a year earlier. Spending last month surged 37 percent to $309.7 billion and revenue fell 17 percent to $215.4 billion, the Treasury said.
The Congressional Budget Office estimates the federal budget shortfall for the first nine months of the fiscal year was also $1.1 trillion, while saying the budget deficit for June was $97 billion. For the fiscal year that ends Sept. 30, the Office of Management and Budget forecasts the deficit to reach a record $1.841 trillion, more than four times the previous fiscal year’s $459 billion shortfall.
For the fiscal year to date, the interest expense on the government’s outstanding debt was $320.7 billion, according to Treasury data released July 7. Total public debt outstanding exceeds $11.5 trillion, according to the Treasury’s July 9 statement on the government’s cash balance.
Tax Receipts
Corporate tax receipts totaled $101.9 billion through June versus $236.5 billion, a decline of 57 percent, the Treasury’s budget statement said today. Individual income tax collections were down 22 percent so far this fiscal year to $685.5 billion compared with $877.8 billion in the year-earlier period.
Among other reasons for this assessment were rising unemployment, flight of capital worth billions of dollars, depletion of its foreign exchange reserves and growing internal dissent, Verma said in an editorial in the forthcoming issue of the premier defence journal. In addition to this, “The growing irrelevance of Pakistan, their right hand that operates against India on their behest, is increasing the Chinese nervousness,” he said, adding that US President Barak Obama’s Af-Pak policy was primarily Pak-Af policy that has “intelligently set the thief to catch the thief”.
Verma said Beijing was “already rattled, with its proxy Pakistan now literally embroiled in a civil war, losing its sheen against India.” “Above all, it is worried over the growing alliance of India with the US and the West, because the alliance has the potential to create a technologically superior counterpoise.
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July 6 (Bloomberg) -- It’s not a job Barack Obama signed up for, but it’s his nonetheless: Bond salesman-in-chief.
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.
The trouble is that the U.S. seems to be taking Asia’s money for granted. That’s a grave mistake for a White House that needs to offload record amounts of debt to fund a $787 billion stimulus package -- not to mention spending plans yet to be announced. Assuming Asia’s perpetual devotion is a mistake.
It’s no coincidence that China is pushing for a new international currency at a time when it wants to diversify its almost $2 trillion of reserves. Such mutterings from Venezuela are one thing. They’re quite another coming from the biggest foreign holder of Treasuries, with about $764 billion.
“It would be important for the U.S. not to take its position for granted,” World Bank President Robert Zoellick said last week. “My guess is what you will see over time, just as the euro has developed over time, you may have some other currencies develop as an alternative.”
Prime Time
Not that the yuan is ready for prime time. Besides, say analysts like Marc Chandler of Brown Brothers Harriman & Co. in New York, China’s desire for the yuan to become a global invoicing currency doesn’t outweigh its need to maintain control and help exporters. Ultimately, China’s ambitions are hemmed in by the realities of a currency that still isn’t convertible.
China speaks out of both sides of its mouth on the issue. One day, a top official says China wants an alternative to the dollar. The next, someone like Vice Foreign Minister He Yafei tells reporters that “we hope that as the main reserve currency the U.S. dollar will be stable” and that he’s “not aware” of China pushing to put the subject on the agenda of the Group of Eight’s agenda this week.
The other BRICs nations -- the acronym refers to Brazil, Russia, India and China -- all have made noises about the dollar’s stability. Some more than others, of course, yet their concerns have been well reported.
Replacing the Dollar
Replacing the dollar as a long-term goal is fine. Doing it while the global financial system the dollar anchors is in tatters is ill-advised. Not surprisingly, folks in Washington are worried about a sudden move against the currency.
It hardly seems a coincidence that while Managing Director Dominique Strauss-Kahn has called China’s yuan “substantially undervalued,” the International Monetary Fund has toned down criticism over the disconnect from economic fundamentals. The softer rhetoric removes a sticking point between China and the IMF, as Asia’s second-largest economy seeks a larger role at the lender and the fund tries to increase China’s contributions.
Could the quid pro quo be that China avoid pulling the rug out from under the dollar? It’s possible. Still, Obama and Treasury Secretary Timothy Geithner shouldn’t assume Asia’s continued support. Not with the Federal Reserve holding interest rates near zero and untold waves of fresh debt flowing into uncertain markets. Rumblings about the U.S. losing its triple AAA credit rating have further raised the stakes.
Blame All Around
Granted, Asia deserves some of the blame here. Over the past decade, the region was the site of a currency-reserve arms race. While the clear winner in this game of monetary one- upmanship is China, economies like Taiwan and South Korea are holding more dollars than they would like.
It’s become the world’s biggest Ponzi scheme, really. The dollar isn’t crashing because those invested in it are propping it up and adding to their holdings. After all, the magnitude of Asia’s foreign-exchange holdings means it can’t dump the dollar without shooting its economies in the foot.
Asia should indeed be plotting how to reduce its dollar holdings. Those trillions of dollars would be better used in Asia to pay for better roads, bridges, airports and power grids and improved education and health care.
Until then, the U.S. needs to reassure Asians they won’t suffer massive losses on their dollar holdings. It can start by circulating a credible exit strategy from today’s massive stimulus efforts.
The White House also needs to convince Asia that devaluing the dollar at some point to boost U.S. exports isn’t on the table. Obama and Geithner should plan to increase financial diplomacy efforts, traveling to Asia often.
Asia has a $4.5 trillion dollar decision to make, and it’s up to the U.S. to help the region make the right one. Taking Asia’s money for granted would be a disastrous way to go.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
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.
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.
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 like “www.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:
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 Improbable
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
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.
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.”
400,000 school and university students graduate this week. Many will go straight into the ranks of the unemployed. The head of the national jobs agency warned RT now is the worst time for young people to look for work.
When finance whizzkid Dmitry Marinchenko got into MGIMO University 5 years ago his future seemed made. Banks needed talent and were ready to offer a 170000 dollar starting salary, before bonuses. Today he graduates, to a different scene.
“It's a really tough job to find a job. I visited about 20-25 companies and most said I lacked job experience. Problem – a lot of layoffs, and experienced people on the market with same. I know about 10 people from my Uni’ who tried to find a job just as me… but a lot of them, well, have no response.”
The bloodiest carnage is among bankers and lawyers. But Yury Gertsiy, Head of the Federal Employment Service, says jobless numbers will rise across the board.
“This is the worst time to join the job market. Employers are most hostile to twenty somethings who have yet to prove their abilities. That's why by September the jobless rate will go up.”
In a year Russia’s official unemployment rate soared from 6 to 10%. Add those who don't register and the real rate is even higher.
These fresh-faced teens will now have to do battle with veteran barristers and financiers who've just got the sack.
