Insolvent and Going Deeper

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Insolvent and Going Deeper
Share46EmailWednesday, April 13, 2011, 6:45 pm, by cmartenson
The US budget process is entirely out of control. By extension, its fiscal future is rather bleak.

All one has to do is back up two steps, entirely ignoring the meaningless budget scuffles currently ongoing in DC, to see that the federal government's fiscal situation is in complete shambles. In fact, as things currently stand in terms of spending and revenues, the US government is insolvent - its liabilities vastly exceed its assets on a net-present-value basis.

Yes, Obama has just laid out a plan that calls for cutting some $4 trillion of new, incremental deficit additions over the next 12 years, but this merely obscures the fact that the deficit will still grow by a rather hefty amount nonetheless. Plans from both sides of the aisle call for adding more debt but at a slower pace. True, that's progress of a sort, but not the type of progress you want to bring home to meet your mother.

http://www.chrismartenson.com/blog/insolvent-and-going-deeper/56407

World Bank: Food prices have entered the 'danger zone'

Food prices have entered the “danger zone”, threatening to condemn a generation to extreme poverty and malnutrition, the World Bank has warned.

Robert Zoellick, World Bank president, said food prices are at “a tipping point”, having risen 36pc in the last year to levels close to their 2008 peak. The rising cost of food has been much more dramatic in low-income countries, pushing 44m people into poverty since June last year.

http://www.telegraph.co.uk/finance/economics/8451684/World-Bank-Food-prices-have-entered-the-danger-zone.html

Toxic Dollar: Why Nobody Seems to Want US Currency

Traders are warning of a dramatic change in dollar selling. They fear central banks from the Middle East may force their Asian rivals to more aggressively drive the dollar down.

In 10 months, the Dollar Index has lost 14% because the world keeps accumulating dollars it doesn’t want and sells them. Asian central banks are key.

Many Asian central banks have been forced into waging wars to keep their currencies from appreciating because of the influx of investors to emerging markets. They sell waves of their own currencies into the market in an attempt to keep exports competitive.

http://www.cnbc.com/id/42479791

Treasury may borrow federal retirement funds in debt emergency

The government could temporarily tap tens of billions of dollars from two federal employee retirement programs if Congress fails to raise the federal debt ceiling next month, Treasury Secretary Timothy Geithner told lawmakers.

The government expects to hit a $14.3 trillion debt ceiling on May 16 or before, Geithner said in a Monday letter.

Geither implored Congress to extend the debt ceiling by that deadline and said that if Congress does not, Treasury will be forced to borrow money from the Civil Service Retirement and Disability Fund, and the Thrift Savings Plan's Government Securities Investment Fund, or G Fund, both of which are invested in U.S. Treasury securities. Those two moves could free up $142 billion through early July.

The government has taken similar steps before with no effect upon federal retirees. If the debt ceiling is extended by Congress within a couple months of the deadline, retirees and TSP participants should have nothing to worry about, several experts said. By law, both funds have to be repaid with interest, said Susan Irving, director for federal budget analysis at the Government Accountability Office.

http://www.federaltimes.com/article/20110405/BENEFITS02/104050306/

Sales of wholesale goods slip in February

Wholesale businesses boosted inventories for the 14th consecutive month but sold fewer cars, pieces of furniture and petroleum products in February.

Sales at the wholesale level slipped 0.8 percent in February, the first setback since June 2010, the Commerce Department reported Friday.

Inventories rose 1 percent and have been rising for more than a year. The string of inventory gains pushed them to $438 billion, up 13.4 percent from the low reached in September 2009.

The drop in sales is likely temporary, given expectation for gains in consumer demand in coming months, supported by tax cuts and stronger employment growth.

Auto sales at the wholesale level dropped 2.2 percent, furniture sales fell 2.2 percent, and sales of petroleum products declined 1 percent. Sales of petroleum products had surged 10.8 percent in January, a rise that was heavily influenced by a spike in oil prices.

http://finance.yahoo.com/news/Sales-of-wholesale-goods-slip-apf-1004846056.html?x=0

PIMCO goes short US government debt, raises cash holdings

PIMCO has shifted to a short position in U.S. government-related debt in the world's largest bond fund, while also raising cash holdings in a sign of the asset manager's serious concerns about the U.S. fiscal outlook.

http://www.reuters.com/article/2011/04/11/pimco-bonds-short-idUSL3E7FB10S20110411

$5 Fees May Be Coming to an ATM Near You

J.P. Morgan Chase [JPM 46.35 0.25 (+0.54%) ] and other banks are trying to recoup approximately $30 billion a year in lost overdraft fee income by testing $5 ATM fees, Consumer Action spokesman Joe Ridout told CNBC.

These banks have "historically been reliant on overdraft fees," he said, so they're "coming up with new ways to make up the difference." He said higher ATM fees and other rising costs penalize small depositors.

http://www.cnbc.com/id/42357880

Jim Rogers Predicts Soaring Oil Prices

“The price of oil is going to go much higher over the next decade,” said Jim Rogers, Chairman of Rogers Holdings. He added the demand for oil and natural gas will rise in the next few years as nuclear demand falls in response to Fukushima, but “we need nuclear whether we like it or not.”

http://www.prisonplanet.com/jim-rogers-predicts-soaring-oil-prices.html

Dimon Says a Hundred Municipalities in U.S. Won’t ‘Make It’ Out of Debt

JPMorgan Chase & Co. (JPM) Chairman and Chief Executive Officer Jamie Dimon said some municipalities will need to renegotiate debt and a hundred may not “make it.”

“I wouldn’t panic about what I’m about to say,” Dimon, 55, said today at a U.S. Chamber of Commerce event in Washington. “You’re going to see some municipalities not make it. I don’t think it’s going to shatter America, I just think it’s a part of the credit cycle.”

Speculation about widespread municipal-bond defaults intensified in December when bank analyst Meredith Whitney predicted that “hundreds of billions” of dollars of municipal bonds may default in 2011 amid pressure to balance budgets.

http://www.bloomberg.com/news/2011-03-30/dimon-says-hundreds-of-municipalities-in-u-s-won-t-make-it-out-of-debt.html

Foreign Banks Tapped Fed’s Secret Lifeline Most at Crisis Peak

U.S. Federal Reserve Chairman Ben S. Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya.

Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request. Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion.

http://www.bloomberg.com/news/2011-04-01/foreign-banks-tapped-fed-s-lifeline-most-as-bernanke-kept-borrowers-secret.html

Food inflation kept hidden in tinier bags

'It's sneaky, because they figure people won't know'

Chips are disappearing from bags, candy from boxes and vegetables from cans.

As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages.

With unemployment still high, companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most visible at the grocery store, where shoppers are paying the same amount, but getting less.

http://www.msnbc.msn.com/id/42317990/

Oil climbs to highest since 2008 on Libya conflict

The price of oil rose to a 30-month high on Thursday as fighters loyal to Moammar Gadhafi pushed back rebels from key areas in eastern Libya.

Benchmark West Texas Intermediate crude rose $2.45, more than 2 percent, to settle at $106.72 a barrel on the New York Mercantile Exchange. At one point it hit $106.83, the highest it's been since September, 2008. In London, Brent crude rose $2.25 to settle at $117.20 per barrel.

http://finance.yahoo.com/news/Oil-climbs-to-highest-since-apf-1947152419.html?x=0&sec=topStories&pos=main&asset=&ccode=

Fed Official Sees Rates Inching Up This Year

The president of the Minneapolis Federal Reserve Bank said Thursday the Fed may need to increase short-term interest rates by year's end if underlying inflation rises as he anticipates.

In a interview, Narayana Kocherlakota said he expected "a big upward movement" in core inflation—inflation excluding volatile food and energy prices—from about 0.8% late last year to about 1.3% by year-end.

As a result, he said, it's "certainly possible" the Fed's target for short-term interest rates, now near zero, would be lifted by more than half a percentage point late this year.

http://online.wsj.com/article/SB10001424052748703806304576235033771422402.html?mod=googlenews_wsj

Wal-Mart CEO Bill Simon expects inflation

U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday.

The nation's largest retailer needs to get back to its roots as the lowest priced one-stop shop for consumers, Walmart CEO Bill SImon said.
The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm

Traders Worry That April 27 Could Derail the Bull Market

Traders are saying the scariest moment of the second quarter will be on April 27, when Federal Reserve Chairman Ben Bernanke will hold the first ever press briefing following a monetary policy decision by the central bank.


http://www.cnbc.com/id/42362299

Private Corporation Official Admits Impending U.S. Bankruptcy

http://www.opinion-maker.org/2011/03/private-corporation-official-admits-impending-u-s-bankruptcy/

The Dollar Will Collapse Within 3-4 Months

The US Dollar's inflationary death spiral continues. We've now taken out the 2010 low leaving only two more lines of support before we're in completely uncharted territory.

At its current rate of collapse, the US Dollar will do this within the next 3-4 months. This means the greenback will break into a new all-time lows by 2H11, which will precipitate the coming inflationary collapse.

http://www.zerohedge.com/article/dollar-will-collapse-within-3-4-months

End of the Dollar?

In this new monetary world, moreover, the U.S. government will not be able to finance its budget deficits so cheaply, since there will no longer be as big an appetite for U.S. Treasury securities on the part of foreign central banks.

Nor will the U.S. be able to run such large trade and current-account deficits, since financing them will become more expensive. Narrowing the current-account deficit will require exporting more, which will mean making U.S. goods more competitive on foreign markets. That in turn means that the dollar will have to fall on foreign-exchange markets – helping U.S. exporters and hurting those companies that export to the U.S.

http://www.economics21.org/blog/end-dollar

Unsustainable budget threatens nation

Divided government is no excuse for inaction. The bipartisan National Commission on Fiscal Responsibility and Reform, under co-chairmen Erskine Bowles and Alan Simpson, issued a report on the problem in December supported by 11 Democrats and Republicans — a clear majority of the panel’s 18 members.

http://www.politico.com/news/stories/0311/51864.html

Moody's warns Britain over triple-A credit rating

Moody's, the ratings agency, said Britain's triple-A credit rating could be at risk if slower growth makes it harder for the government to rein in its budget deficit.

http://www.telegraph.co.uk/finance/economics/8403896/Moodys-warns-Britain-over-triple-A-credit-rating.html#