Treasury Auctions To Take US Over Debt Ceiling on Monday

The Treasury Department auctioned $56 billion in new debt Tuesday and Wednesday, enough to take the U.S. over its federal debt ceiling when the three- and 10-year notes settle on Monday.

Treasury officials last month flagged May 16 as the day the government would hit the $14.294 trillion debt limit.

The U.S. is selling $72 billion in new debt over three days this week. The Treasury auctioned $32 billion in three-year notes Tuesday and $24 billion in 10-year notes Wednesday, and will sell $16 billion in 30-year bonds Thursday. All of the auctions will settle Monday.

As of Tuesday, total debt subject to the limit was $14.274 trillion, according to the Treasury Department.

The Obama administration has asked Congress to raise the limit, warning that failure to act could lead the government to default by Aug. 2--and could spook investors even before then.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201105111542dowjonesdjonline000477&title=treasury-auctions-to-take-us-over-debt-ceiling-on-monday

Roubini: Jobless Rate Will Jump to Near 10 Percent as Economy Slows

Expect unemployment to return to nearly 10 percent within a year and for the economy to hit the brakes, slowing to 2 percent, says NYU economist Nouriel Roubini.

The U.S. economy faltered to 1.8 percent growth in the first quarter, although some Federal Reserve members still expect growth on the order of 3 percent or higher in 2011.

“Things are going to be much more difficult than they’ve been so far,” Roubini said at a panel debate on alternative investments taking place in Las Vegas, reported CNBC. The error being made is not taking into account the seriousness of the Europe’s debt problems, Roubini said.

http://www.moneynews.com/StreetTalk/Roubini-us-economy-fed/2011/05/12/id/396131

Housing crash is getting worse

Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow.

And the percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, a new crisis high.

Zillow now predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012.

http://www.marketwatch.com/story/housing-crash-is-getting-worse-2011-05-09?link=MW_latest_news

Smithfield CEO: Higher Food Prices Are Here to Stay

The CEO of Smithfield Farms, the largest pork producer in the US. Among other things he said:

“Maybe to someone in the upper incomes it doesn’t matter what the price of a pound of bacon is, or what the price of a ham, or the price of a pound of pork chops is,” he says. “But for many of the customers we sell to, it really does matter.” Workers can share cars when the price of oil rises, he quips, but “you can’t share your food.”

Mr. Pope also worries about the impact on farmers, who are leveraging up operations to afford the ever-rising price of land and fertilizer that has resulted from the increased corn demand. “There are record prices for livestock but farmers are exiting the business!” he exclaims. “Why? Farmers know they won’t make money.”

Weather is a factor, too. “We’ve had the luxury for the last three years of extremely good corn crops, with high yields and good growing conditions. We are just one bad weather event away from potentially $10 corn, which once again is another 50% increase in the input cost to our live production.”

…Not all companies will survive this economic whirlwind. Mr. Pope recalls what happened the last time there was a surge in corn prices, in 2008: “The largest chicken processor in the United States, Pilgrim’s Pride, filed for bankruptcy.” They “couldn’t raise prices, so their cost of production went up dramatically.” Could it happen again? “It darn well could!” Mr. Pope exclaims.

…Mr. Pope says the “losers” here “are the consumer, who’s going to have to pay more for the product, and the livestock farmer who’s going to have to buy high-priced grain that he can’t afford because he’s stretching his own lines of credit. The hog farmer . . . is in jeopardy of simply going out of business ’cause he doesn’t have the cash liquidity to even pay for the corn to pay for the input to raise the hog. It’s a dynamic that we can’t sustain.”

http://gainspainscapital.com/?p=309

Government Raids PRIVATE Pensions To Pay For Spending

The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its jobs program strategy, delivered today.

Without the ability sell debt due to soaring interest rates, and with severe spending rules in place due to its EU-IMF bailout, Ireland has few ways of spending to stimulate the economy. Today's jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt.

The tax on private pensions will be 0.6%, and last for four years, according to the report.

Read more: http://www.businessinsider.com/irish-bombshell-government-raids-private-pensions-to-pay-for-jobs-program-2011-5#ixzz1MIT8sFjP


http://www.businessinsider.com/irish-bombshell-government-raids-private-pensions-to-pay-for-jobs-program-2011-5

PIMCO raises bet against U.S. government debt

The increase, albeit small, follows Gross' move to ratchet up his bearishness in March by taking his initial short position in U.S. government-related debt, which includes Treasuries, TIPS, agencies, interest rate swaps, Treasury futures and options and FDIC-guaranteed corporate securities.

The $240 billion Total Return fund also raised its cash position to 37 percent in April from 31 percent in March, added Pacific Investment Management Co, which oversees $1.2 trillion in assets.

The Total Return fund took down its mortgage exposure to 24 percent in April from 28 percent the previous month.

The fund also decreased its allocation in investment-grade credit to 17 percent in April from 18 percent in March and junk bonds to 5 percent in April from 6 percent the previous month.

http://www.reuters.com/article/2011/05/09/us-investing-pimco-fund-idUSTRE7486LU20110509

China May Buy $1 TRILLION of Gold: Bloomberg

In an otherwise quiet article about central banks today, Bloomberg quoted an analyst who says China may use up to a third of their $3 trillion in foreign reserves to purchase gold.

China has been moving away from the dollar, and into alternative stores of wealth for years now.

But $1 trillion into gold? If it happens, such a large move would further threaten the dollar's status as reserve currency. It would also provide further buying pressure in gold for years to come (as the dollar crumples into a pitiful heap on the floor).

http://www.wealthwire.com/news/headlines/1090

Our taxes barely cover our social-welfare programs; everything else is on credit.

All federal revenues—from income taxes, Social Security and Medicare payroll taxes, corporate taxes, excise taxes, customs duties, estate and gift taxes and user fees—are consumed to pay Americans myriad federal benefits. These include Social Security, Medicare, Medicaid, veterans' benefits, food stamps, farm subsidies and the many other forms of social insurance and welfare, including economic stimulus and job-creation.

Put another way: The federal government borrows everything it needs to operate what we ought to think of as the government as an institution, such as defense (including the support of troops in Afghanistan and Iraq); highway construction; foreign aid; aid to states and localities; land management and pollution control; regulation of this, that and all the other things; scientific research; payment of federal employees' salaries; and payment of interest on the national debt.

http://online.barrons.com/article/SB50001424052970203703404576291230749135162.html

10 States Where Pensions Are Running Out of Money

Corporate pensions, municipal pensions, state pensions — each category has funds that have run out of money and certainly many are running low. The fate of the UAW pensions was a critical part of the US bailout of the auto industry. Eventually, the unions received equity in Chrysler and GM, among other things. They are not the only large American companies with underfunded pensions; they are just the most recent and visible examples.

http://finance.yahoo.com/retirement/article/112640/states-pensions-public-sector-247

World Food Prices Rise to Near-Record High as Inflation Speeds Up, UN Says

An index of 55 commodities rose to 232.1 points from 231 points in March, the United Nations’ Rome-based Food and Agriculture Organization said in a report on its website today. The gauge climbed to an all-time high of 237.2 in February before dropping 2.6 percent in March.

The cost of living in the U.S. rose at its fastest pace since December 2009 in the 12 months ended in March, the same month in which Chinese consumer prices rose by the most since 2008. The European Central Bank raised interest rates on April 7, joining China, India, Poland and Sweden in a bid to control inflation partly blamed on food costs. Costlier food also contributed to riots across northern Africa and the Middle East that toppled leaders in Egypt and Tunisia this year.

http://www.bloomberg.com/news/2011-05-05/food-prices-approach-record-high-as-grain-prices-fuel-inflation-worldwide.html

Obamaflation Arrives

President Obama's approval numbers in a state he carried by over ten points in 2008 has him with a disapproval rating of 52% -- and within the margin of error with three potential Republican presidential candidates.

http://spectator.org/archives/2011/04/26/obamaflation-arrives/1

U.S. States Pension Fund Deficits Widen by 26%

The deficits, or the difference between the retirement and health-care benefits states have promised their employees and the assets set aside to fund them, grew to $1.26 trillion by the end of the 2009 budget year from $1 trillion a year earlier, the Pew Center on the States said in a report released today. The fiscal year ends in June for all but four states.

The gaps are straining governments that have yet to fully recover from the recession and are stoking political fights in states such as New Jersey, Ohio and Wisconsin over the workers’ benefits. They have also drawn scrutiny in Congress, where Republicans have held hearings into the risks posed by underfunded pensions and backed legislation that would bar the federal government from bailing out any ailing funds.

“The states dug themselves a big hole before the recession ever hit,” Susan Urahn, the managing director of the Pew Center in Washington, said in a conference call with reporters yesterday. “We can see how the Great Recession and states’ severe budget problems made a serious problem even worse.”

http://www.bloomberg.com/news/2011-04-26/u-s-states-pension-fund-deficits-widen-by-26-pew-center-study-says.html

S&P cuts Japan rating outlook to negative

Standard & Poor’s cut its outlook on Japan’s sovereign rating to negative from stable Wednesday to reflect the potential for a downgrade if the country’s fiscal situation deteriorates more than expected in the wake of last month’s disaster.

http://www.marketwatch.com/story/sp-cuts-japan-rating-outlook-to-negative-2011-04-26

The 9 places where inflation is crushing us

The Federal Reserve would have you believe that everything is fine, focusing on core inflation rates and ignoring broader measures of inflation as they affect food and energy. These commodity-driven prices, as our central banking overlords would have you believe, are naturally more volatile and shouldn’t be overstated.

High gas prices could hurt ObamaNeil King looks at whether soaring gas prices will hurt President Obama's chances for re-election in 2012 and how Republicans in Congress are trying to put the blame on Obama for consumers' pain at the pump.

You would think after Fed bureaucrat William Dudley was castigated for talking up the affordability of iPads while ignoring real family expenses, our Federal Reserve officials would have woken up to reality. But after the publicity stunt by Chairman Ben Bernanke on Wednesday, it’s clear that the Fed — and perhaps many Americans as a result — is in denial when it comes to the inflationary trends crippling U.S. households.

http://www.marketwatch.com/story/the-9-places-where-inflation-is-crushing-us-2011-04-28?link=home_carousel

China creeps toward a crisis

China's leaders have turned an economic problem -- rising inflation that is projected to go from 5.4% in March to 6% in April -- into a political problem. They now face increasing protests over higher prices for everything from cooking oil to diesel fuel.

http://money.msn.com/investing/china-creeps-toward-a-crisis-jubak.aspx

China should cap forex reserves at 1.3 trillion U.S. dollars: China banker

China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

http://news.xinhuanet.com/english2010/china/2011-04/23/c_13842843.htm

The Best and Worst Run States In America: A Survey of All Fifty

How well run are America’s fifty states? 24/7 Wall St. has taken several months to consider that question. Our writers looked at hundreds of data sets ranging from debt rating agency reports to violent crime rates, unemployment trends and median income. Of those, we chose what we considered to be the 10 most important ranking of financial and overall government management. The best run state is Wyoming. The Worst is Kentucky. The standing of each is supported by their ranking in the data sets we considered, as are the rankings of all fifty states.

http://247wallst.com/2010/10/04/the-best-and-worst-run-states-in-america-a-survey-of-all-fifty/

$6 Gas? Could Happen if Dollar Keeps Getting Weaker

A dollar plumbing three-year lows is hitting Americans squarely in the gas tank, and one economist thinks it could drive prices as high as $6 a gallon or more by summertime under the right conditions.

With the greenback coming under increased pressure from Federal Reserve policies and investor appetite for more risk, there seems little direction but up for commodity prices, in particular energy and metals.

Weakness in the US currency feeds upward pressure on commodities, which are priced in dollars and thus come at a discount on the foreign markets.

http://www.cnbc.com/id/42683030

A Frightening Satellite Tour Of America's Foreclosure Wastelands

RealtyTrac is out with the total foreclosure numbers for 2010. On the whole things are getting worse.

72 percent of major metro areas saw an increase in foreclosure volume. Although some of the worst hit areas in Nevada, California and Florida improved from 2009, the foreclosure rate in these areas remains shockingly high. If not for some foreclosure suspensions due to the robosigning scandal, these numbers would have been higher.

For a frightening way to visualize the foreclosure crisis,
http://www.businessinsider.com/satellite-tour-foreclosure-cities-2011-1?op=1

US government’s fiscal plight, the numbers say it all

As the Republican and Democratic leadership in Washington suit up for the battle that will be the 2012 budget, a battle that will have a lot to say about the fiscal fate of the U.S. government, we here at THE CONTRARIAN TAKE will be watching like a hawk.

http://blogs.forbes.com/michaelpollaro/2011/04/22/us-governments-fiscal-plight-the-numbers-say-it-all/