Saturday, March 6, 2010
‘Colbert Report’: Greece, Frightening
Sure, Goldman Sachs CEO Lloyd Blankfein once crowed that his firm was “doing God’s work,” but, as Stephen Colbert points out here, Blankfein never actually specified which God he was talking about. Perhaps it was Hades, Greek god of the underworld. Given the state of the Greek economy, that may not be too much of a stretch. —KA
Colbert Nation:
| The Colbert Report | Mon - Thurs 11:30pm / 10:30c | |||
| Greece’s Economic Downfall - Scheherazade Rehman | ||||
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UN to produce bullion coins as world currency
The announcement by the United Nations this week that it will license the minting of silver and gold bullion coins bearing the UN logo may be the button that launches metal prices into orbit.
In its wide-ranging report this fall, the UN Conference on Trade and Development (UNCTAD) stated that the system of currencies and international banking practices within today’s economies were inadequate, and responsible for the present economic crisis. The report advocates that the present monetary system, wherein the dollar acts as the global reserve currency be re-examined “with urgency”.
The UNCTAD Report was the first time a major multinational institution had forwarded such a suggestion or measure, although a number of countries, including Russia and Brazil have supported replacing the dollar as the world’s reserve currency. China’s central bank chief Zhou Xiaochuan has mentioned that the dollar could become a basket of currencies instead.
The UN commission dismissed such a widening, saying a multiple-country system “may be equally unstable, and not transparent.”
The panel is seeking more monetary balance for developing countries, and a means for them to retain their reserves and domestic savings independent of foreign agencies and arrangements.
Panel Chair US economist Joseph Stiglitz, a Nobel economics laureate, has made plain that there was “a growing consensus that there are problems with the dollar reserve system. Developing countries are lending the United States trillions dollars at almost zero interest rates when they have huge needs themselves,” Stiglitz stated.
“It’s indicative of the nature of the problem. It’s a net transfer, in a sense, to the United States, a form of foreign aid.”
A report contributor, Detlef Koffe, concluded that “Replacing the dollar with a bullion currency would solve some of the problems related to the potential of countries running large deficits and would help stability,”
US Fed spokesperson Patrick Paulsen acknowledged that there could be some strong reaction in the US to the global currency, and that it would “…be viewed as a step toward a New World Order. But those same people have probably lost patience with the money-changers as well.”
He clarified that he would “…nonetheless anticipate that the western currencies will continue to depreciate, given Asia’s ascendancy in trade and manufacturing, to find their own value and enable their economies to compete. This is a UN perogrative we cannot and should not control, it’s returning to what we had with Bretton-Woods.”
The UN decided to provide a “public option” savings currency, whereby currency mints will be licensed to mint two kinds of bullion coins the size of the 1€ coin – the Uno (silver ~$5) and the Oro (gold, ~$500). The names were adopted from the book “The Humanist”, which foresees the UN being better funded by 2015 via its licensing fees, expected to be 10-15%.
The coins have a marker chemical in them that enables their authentication and processing by modified retail ATM and exchange machines in Europe, which will be distributed globally. Any licensee, public or private, can produce such bullion coinage under contract. The United Nations is doing no more than what most countries do already, except that the value of its coins will reflect their bullion weight.
Armand Dufour of the European Bank welcomes their introduction. “People have enough Fiat currency options, government and banks cannot intrude on bullion coins – they will have their own inviolable value.”
He does have one concern, however. “If we see a dismounting from the US dollar, as is inevitable in the main view, there will be a strong move to the Oro, which may drive its price up to the point where governments will not allow its circulation; they will try to isolate it.”
“That’s when the fun begins.” he said.
Source: Before It’s News
Brits Pounded As Debts, Deficits Hit Home. Next Up: Us!
Boy are things getting ugly in the U.K. The British currency, the pound, is getting crushed. The price of long-term British debt securities, called gilts, is heading down. And the cost of default insurance on the country’s debt is rising steadily.
My takeaway: This is but a preview of what’s to come here in the U.S.
Why the Crisis Is Coming
To a Head in the U.K.
Britain’s finances are in shambles. The country’s budget deficit is running at more than 12 percent of gross domestic product, roughly the same as in Greece. In fact, for the first time, the country recorded a whopping $6.7 billion deficit in January … much worse than the $3.9 billion SURPLUS economists were expecting.
The U.K. government is planning to sell $349 billion in debt this year, the most ever, to cover its deficit. But demand is flagging, with foreign investors dumping the most U.K. sovereign debt in nine months in January and yields generally rising.
Then a few days ago, the crisis came to a head. The catalyst: New polling data that threw the British political outlook into chaos. Polls showed that the Conservative Party’s lead over the Labour Party shrunk to its lowest level in more than two years.
It now appears that neither party could come out of spring elections with a clear majority, leaving the U.K. with a “hung” parliament. That would make it much more difficult for the government to reduce the nation’s debts and deficits.
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| Investors are becoming more afraid of British debt. |
With all of that, it’s no wonder …
- The British pound plunged six days in a row, its longest series of declines since October 2008.
- The yield on 10-year U.K. government debt recently hit 4.27 percent, compared with a low last fall of 3.44 percent.
- The cost of protecting against a British debt default in the credit default swap market surged to more than 101 basis points, or $101,000 per $10 million of debt. That’s up from around 44 bps in the fall.
Striking Similarities …
You don’t need a Ph.D. in economics to see the striking similarities between the situation in the U.K. and the situation here in the U.S. …
- Our debt situation is totally out of control, with the national debt on track to double over the next decade to almost $19 trillion.
- Our budget picture is a mess, with $8.5 trillion in deficits projected over the next 10 years.
- Our foreign creditors are starting to sell our bonds, with China alone dumping $34.2 billion of Treasuries in December, the most ever.
And politically, we’re facing the same gridlock and inaction as the U.K.
Just look at the deficit commission nonsense …
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| “The sovereign debt crisis is subprime all over again.” — Bill Gross, manager of the world’s largest mutual fund. |
President Obama had to create an 18-member panel by executive order because Congress voted down an earlier proposal. Since it’s a presidential commission, Congress can just ignore any findings. And those findings won’t even be released until December 1, for purely political reasons (that’s after the mid-term Congressional elections).
Lastly, just like the U.K., we have bailed out, backstopped, or otherwise taken over so many institutions and segments of the capital markets that our own balance sheet is getting shakier and shakier.
As PIMCO Chief Investment Officer and “bond guru” Bill Gross just noted in a monthly commentary:
“If core sovereigns such as the U.S., Germany, U.K., and Japan ‘absorb’ more and more credit risk, then the credit spreads and yields of these sovereigns should look more and more like the markets that they guarantee. The Kings, in other words, in the process of increasingly shedding their clothes, begin to look more and more like their subjects. Kings and serfs begin to share the same castle.”
Bottom line: We’re running this country’s finances off the rails. And just like in Greece … Ireland … Spain … and now the U.K., it’s going to come back to haunt us.
So consider dumping your long-term U.S. bonds, and buying some gold as a hedge against global debt and deficit problems. Or if you’re more aggressive, check out a service like my Crisis Opportunity ETF Trader, where my subscribers are positioned to profit from this unfolding fiscal nightmare.
Until next time,
Mike
GREAT PETROL RIP-OFF
THE massive scale of Britain’s petrol tax rip-off is revealed today in new research.
It shows that recent Government tax hikes have clobbered motorists here up to five times harder than those in Europe.
Tax on unleaded petrol has shot up 13.5 per cent since late 2008 at UK forecourts while drivers in Austria have seen their costs edge up by just 2.3 per cent as a result of taxes.
The UK’s petrol tax surge is more than double the average five per cent average increase seen across 10 countries on the Continent where governments have held off piling so much additional tax on their drivers, according to the AA.
Now Chancellor Alistair Darling is gearing up to hit motorists here with another fuel duty hike on April Fool’s Day. The rise will mean up to 3p a litre to the cost of both unleaded and diesel.
AA president Edmund King warned that another crippling duty hike would hit motorists hard as they struggled to cope with spiralling fuel costs.
“Most other European countries have resisted such fuel tax hikes over the past 15 months, and they have also had to deal with the fallout from the credit crunch,” he said.
The Government has already announced plans to ramp up fuel duty by another 1p a litre, plus inflation, from April 1.
Despite a recent bout of deflation the total tax hike could be as much as 3p a litre because the Treasury plans to use its own inflation forecast based on what it thinks the rate will be in late 2010.
Motoring groups are furious at the Government’s claim that it is raising petrol tax to tackle the country’s financial problems.
Association of British Drivers spokesman Nigel Humphries said: “They just see the motorist as a cash cow. It is time to say enough is enough.”
Drivers have suffered three fuel duty hikes since December 2008 which together have added nearly 9p to the cost of a litre of petrol once the additional VAT is taken into account.
The tax element of a litre of unleaded soared from 64.17p on the date of the November 2008 pre-Budget report, when the Chancellor first announced measures to tackle the credit crunch, to 72.86p in mid- February this year. That is a 13.5 per cent rise in petrol tax over that period.
Meanwhile, drivers in 10 major European countries including the UK have seen their petrol tax rise just five per cent on average.
Motorists in France, Germany, Ireland, Italy and Portugal have all benefited from increases of less than four per cent. A Treasury spokesman insisted yesterday that the petrol tax hikes would help the wider economy.
Meanwhile, a steady rise in petrol costs has pushed UK unleaded up to an average 113.40p a litre at UK forecourts yesterday of which 73.08p was tax destined for Treasury coffers.
Iceland referendum 'to go ahead' as talks fail
Iceland has all but given up on agreeing a new deal with the UK and the Netherlands to repay more than 3.8bn euros ($5.2bn; £3.4bn) of debt.
It had hoped to avoid a referendum on the issue by agreeing a repayment plan before the weekend, but the vote is likely to go ahead on Saturday.
Opinion polls suggest Icelandic voters will reject a plan agreed last year.
A no vote could jeopardise billions of dollars of loans from the International Monetary Fund and other countries.
"The referendum is going to go ahead," said Iceland's Finance Minister Steingrimur Sigfusson.
"We have been trying to resolve the matter in another fashion but time has run out."
However, he did say that the referendum could, technically, be cancelled at any point up to Friday night.
High stakes
The UK and the Netherlands want Iceland to repay money that they paid out in compensation to customers of the Icesave online bank, which collapsed in October 2008.
The three countries have been negotiating a repayments package for months.
The country's parliament voted for a referendum on the original Icesave bill after President Olaf Ragnar Grimsson vetoed the repayment to the UK and the Netherlands.
Opponents say the repayment plan forces Icelandic taxpayers to pay for bankers' mistakes.
The stakes are high, because Iceland needs international loans to help it rebuild its economy, which was hit particularly hard during the global downturn.
Some of these loans are conditional on Iceland repaying its international debts.
The dispute has also overshadowed Iceland's application to join the European Union, which was submitted in July last year.
Debt, cuts and the ghost of Geddes
There are parallels between then and now
| By Finlo Rohrer BBC News Magazine |
Big cuts on the horizon, the media campaigning for an end to waste and those affected bitterly protesting. Sound familiar?
It might surprise a lot of people to think that 1921 and 2010 have a lot in common.
In 1921 public finances were looking shaky after years of rocketing expenditure during World War I and its aftermath.
The national debt had risen rapidly and many people - even outside the worlds of politics and business - weren't happy.
Agitation was led by Lord Rothermere, the Daily Mail owner, whose Anti-Waste League had started fighting by-elections on a manifesto of attacking excessive public spending.
At the same time cutting government spending was not a simple issue, with the Labour Party looking to use it rally people to its cause.
"The government of Lloyd George was being caught between Labour in the North and the Anti-Waste League in the south being led by the Daily Mail," says Martin Daunton, professor of economic history and author of Wealth and Welfare: An Economic and Social History of Britain, 1851-1951. " They were putting on candidates in this lower middle class attack on waste."
Shuffling responsibility
With this gathering storm in mind, at the start of August 1921 David Lloyd George announced the creation of an advisory committee of businessmen to advise him on departmental spending and the policy underlying that spending.
"Lloyd George, although a liberal, had a habit of calling on businessmen," says emeritus professor of history George Peden, author of The Treasury and British Public Policy, 1906-1959. "They had a reputation of being impartial, experts who knew how to get things done. It is politicians shuffling off the responsibility onto someone else."
The committee was led by businessman Sir Eric Geddes, who had joined the government in the war, before becoming minister of transport. He was not an uncontroversial choice, having presided over a ministry associated with lavish spending.
 Expenditure on WWI pushed the UK into debt |
But everybody knew which way the wind was blowing. The Times on 4 August 1921 had christened Geddes's new body the "Big Axe" committee, and coldly noted: "The Prime Minister has desired to set up the committee to take the sting out of the anti-waste agitation."
By 9 August, the Times was dubbing it the "Super-Axe" committee and asking questions about a body that seemed to bypass the chancellor, cabinet and even Parliament.
The need for action was clear to many. As Prof Daunton notes, the national debt had risen dramatically from a paltry £677.4m against a GDP of £2.233bn in 1910. By 1920 it was £7.809bn against a GDP of £6.23bn.
And the cost of servicing the debt was unpleasant with interest rates running at 5% in 1921, compared with 3% 10 years earlier.
"The Geddes committee was a piece of political rhetoric saying we are going to slash public expenditure," says Prof Daunton.
Defence cuts
"It was an incredibly tense period. The lower middle class really felt they had been hammered [through taxation]. There had been a big rise in trade union membership and militancy."
In February 1922 the recommendations of the first two-thirds of the report were made public, totalling £75m of annual cuts. The first part dealt with cuts in the armed forces, and the defenders of the Navy, for example, were quick to rail against some of the measures. The third part followed a short while later and covered another £15m in cuts.
 |  The next government is going to have many challenges, but tackling a public sector that has become obese and poor value for money is going to have to be a priority  The Times, 2010 |
"The bigger cuts were in defence. More controversial were the cuts in social services," says Prof Peden. "The then government under Lloyd George had promised a 'land fit for heroes' and then began to cut back on those promises."
Speaking in the Times after the release of the report, Sir Daniel Stevenson of Glasgow attacked the "cheeseparing" planned for the vital field of education.
But George Terrell, MP and president of the National Union of Manufacturers, probably gave some indication of the mood of business in response to the report.
He told the Times: "When the history of the war is written I am firmly convinced that Sir Eric Geddes will rank as a superman who not only performed great work in the war but who, by his Report, has indicated reforms which are necessary if we are to overcome the evils of unemployment and to recover financial stability."
| There are signs of an astonished realisation of the alarming bill for civil pensions that in a few years will be a millstone on the taxpayer's neck The Times, 1922 |
The overwhelming feeling was that something had been done and cuts were being made. "They were pretty severe at the time," says Prof Peden.
Apart from defence where there were widespread reductions, the blade of the Geddes Axe fell primarily on education and social housing.
Geddes scalpel
But the effect was not permanent. After cuts in the financial years between 1921-1924, expenditure again began to creep back up.
"After a couple of years the onward march of public expenditure resumed," says Prof Peden.
And for some, the Geddes Axe was not really that sharp at all.
 The report was well received by business but did draw protests |
"My argument is that it was not a Geddes Axe - it was a Geddes scalpel," says Prof Daunton. "It didn't slash expenditure as much as expected. It wasn't very rigorous. The level of government spending does not go down."
Instead, the real story is successive British governments quietly steering towards calmer fiscal waters.
"Compared with Germany and France, in Britain the government very carefully moves through this. It doesn't introduce a sales tax, it doesn't put up the income tax rate - but it does keep up the taxation on business.
"You gradually work your way out without cutting government expenditure."
It's certainly possible to find echoes of 2010 in 1921.
"The parallel you might make is the tremendous effort made by whoever's in power to win the confidence of the markets," says Prof Peden.
And the idea of taxpayers getting exercised over the national debt is also familiar. The idea of a taxpayers' revolt has certainly come up since.
"That's comparable to the feeling that brought Margaret Thatcher to power," says Prof Peden.
 Lord Rothermere's Anti-Waste League helped spur the cuts |
There are other echoes. The Times noted in 1922: "There are signs of an astonished realisation of the alarming bill for civil pensions that in a few years will be a millstone on the taxpayer's neck."
Perhaps the most extraordinary thing about the Geddes Axe was that it seemed to work as a political tool. The Anti-Waste League wound down. People were largely satisfied by the cuts, says Prof Daunton.
Lloyd George's political career was ended, but not by the issue of the national debt. The government continued to operate.
"Looking back the finances of the period look very sound and conventional compared with where they are now," says Prof Peden.
The 2009 Financial Report Of The U.S. Government Is Out - America's Economic Goose Is Cooked
The 2009 Financial Report Of The U.S. Government has finally been released, and the news is not good. It basically confirms much of what we already know - that the United States government is a complete financial mess. The U.S. government budget deficit for 2009 was a record-setting 1.417 trillion dollars. The total liabilities of the U.S. government rose from 12.178 trillion dollars at the end of 2008 to 14.123 trillion dollars by the end of 2009. At their present rates of growth, the interest on the national debt and spending on entitlement programs will gobble up almost every single dollar of federal revenue by the end of the decade. Throughout the report, the word "unsustainable" is repeatedly used. The authors of the report understand that the U.S. government simply cannot keep spending and borrowing like it has been recently. But if the U.S. government slows down this reckless spending even a little bit it could literally plunge the U.S. economy into a deflationary depression. In fact, even with all of the "bailouts" and "stimulus packages" there are many who would argue that we are already in a depression. In any event, the authors of the report make it clear that the United States government is facing a financial crisis of unprecedented magnitude.
Just consider the following chart below. This chart comes straight out of the 2009 Financial Report Of The U.S. Government, and it shows how explosively federal deficits have grown in recent years....
The reality is that deficits of three or four hundred billion dollars per year were catastrophic enough.
But a deficit of 1.4 trillion?
That is national financial suicide.
In fact, the chart below from the White House Office of Management and Budget shows just how dire the financial position of the U.S. government has become. The government has dramatically increased spending at a time when government revenues are actually falling....
But this was supposed to be a time when the federal government would be running surpluses to prepare for the massive growth in entitlement spending that everyone knew would come when the Baby Boomers retire.
But that is not happening.
Instead we are already running record-setting deficits.
So what is causing these deficits?
Rampant, out of control spending. Just check out this chart of federal net outlays....
What would happen to your own personal finances if your household spending kept increasing like that?
But things are not going to get any better any time soon.
As interest on the national debt piles up and as spending on Social Security and Medicare explodes it will be extremely difficult to control the U.S. federal budget deficit.
The report projects that the rapidly growing interest costs on the national debt together with spending on major entitlement programs will absorb approximately 92 cents of every dollar of federal revenue by 2019.
That is before anything is spent on defense, education, homeland security, job creation or anything else.
In particular, the growth of interest on the national debt promises to absolutely crush U.S. government finances if something is not done. Just consider the following chart pulled right out of the report....
Take a moment and let the implications of that chart sink in.
Are you prepared to saddle future generations with interest payments that gobble up 30 percent of GDP?
But wait, there's more.
According to the report, the present value of projected scheduled benefits exceeds earmarked revenues for social insurance programs such as Social Security and Medicare by about $46 trillion over the next 75 years.
So either the U.S. government is going to have to radically cut back Social Security and Medicare benefits or they will have to come up with tens of trillions of extra dollars from somewhere.
And remember, the 46 trillion dollar figure is just the "present value" of those future payments.
Because of inflation, the actual value of those future payments will be far, far, far greater.
In a section about Social Security and Medicare, the authors of the report freely admitted that "it is apparent that these programs are on a fiscally unsustainable path".
Well, can't we just "grow" our way out of these problems?
Hardly.
The truth is that the U.S. economy is caught in an economic death spiral.
Sometimes words just cannot express how bad things have gotten.
Sometimes it takes charts.
The following chart shows changes in our national income since 1950....
This next chart shows changes in our exports of goods and services since about 1930....
Are you starting to get the picture?
America's economic goose is cooked.
We are drowning in a sea of debt at the same time our once mighty economic machine is sputtering to a stop.
Meanwhile, the financial powers that be are not about to let a good crisis go to waste. Just like during the Great Depression, the sharks are using hard times as an excuse to gobble up the smaller, weaker fish. In fact, there are persistent whispers that the financial elite see this current economic crisis as the perfect opportunity to consolidate the U.S. banking industry.
In any event, it does not look like things are going to get back to "normal" for most of us any time soon.
Lastly, one interesting tidbit in the 2009 Financial Report Of The U.S. Government can be found in footnote 2 on page vii of the report. In that footnote it tells us why the financial results for the Federal Reserve are not included in the report....
The Federal Reserve is an independent organization and not considered a part of the Federal reporting entity. As such, their financial results are not consolidated into the Government’s financial statements.
Very interesting.
Anyone have any comments?
Largest Private Refinery Discovers Gold-Plated Tungsten Bar
Recently, the German television station ProSieben ran a news story covering W. C. Heraeus in Hanau, Germany, the world’s largest privately owned refinery. In the story, Wilfried Hörner, the head of the gold foundry, shows a 500 gram bar (16.0755 troy ounces) received from an unidentified bank. The bar had the right physical dimensions to be an authentic gold bar, but one of the Heraeus employees suspected something funny. After the bar was cut in half, you can see that the inside is tungsten, with only a coating of gold on the outside.
You can watch this news story on You Tube, where it was posted February 28, at http://www.youtube.com/watch?v=ZKczs-7BFRI.
Last fall, Rob Kirby of Kirby Analytics in Toronto reported that China’s central bank had discovered some 400-ounce gold-plated tungsten bars among those it had recently received from bonded warehouses. It was later learned that at least four counterfeit bars were found and that all had come from sources in the United States. As suspicions grow about counterfeit bars among those held in bonded warehouses for delivery against either COMEX or London Bullion Market Association contracts or shares of exchange traded funds, investors could panic. So, you can understand that there has been almost a total blackout on news coverage on this story.
Tungsten is the only lower value metal that has a specific density close enough to gold to fabricate passable counterfeit pieces of the same size and weight as genuine coins and ingots. Over the years, there have been a few isolated reports of smaller coins and bars found to have been drilled to remove some of the gold which was replaced with tungsten. However, it is far more profitable to fabricate larger original bars of tungsten that are then gold-plated.
Thus far, the commodity exchanges have disclaimed of any responsibility for the purity of the gold bars they are delivering against contracts. As stories of gold-plated tungsten bars in bonded warehouses continue to appear, I expect the commodity exchanges are going to be forced to modify their business practices to provide a guaranty of purity for any bars they deliver.
The process of non-destructive testing of bars to check for counterfeits involves very expensive equipment and is time consuming. It is beyond the means of almost all investors and coin dealers. For maximize safety, I recommend purchasing only smaller size coins and ingots, say two ounces of gold content or less, and only deal with a company that has a lengthy track record and in-house staff expertise (unlike the bank that took in this counterfeit 500 gram bar). If you have purchased coins and ingots from unknown sources, you may want have them checked out by an experienced independent third party.
In contrast, the last things I would want to invest in are large gold bars stored in bonded warehouses in unallocated storage. If it turns out that the warehouse holding your bars has too many counterfeit bars in their inventory, it could go bankrupt. That would leave holders of unallocated inventory as unsecured creditors of the bankrupt company, and not as owners of gold.
Because the existence of counterfeit gold-plated tungsten bars could have such a huge impact on the financial markets, there is a huge potential for deception and misinformation to be passed around. Be very careful about automatically believing any story you may hear. For your own protection, it would be better to take physical possession of the smaller sizes of gold coins and bars now, and know that what you own genuine solid gold.
Iceland's Voters About to Tell Global Banksters to Shove It
A vote is set for Saturday in Iceland on a referendum that would require Iceland to pay funds to the U.K. and the Netherlands based on U.K. and Netherlands investors who lost money because of the collapse of an Icelandic bank.
As I reported earlier:
The IMF and the EU are trying to muscle Iceland's voters. The IMF has been holding up aid to Iceland. The EU would likely kill the potential of membership for Iceland in the EU. Those muscle moves have obviously not gone over well with Iceland's voters.
An Icelandic negotiating team remained in London, according to WSJ,i n a last-ditch bid to seal a pact that could—at least temporarily—eliminate the need for a referendum on the older agreement. But Iceland's finance minister, Steingrímur Sigfússon said it was "highly unlikely" the referendum would be called off.
As I reported earlier:
The EU (based on some complicated rules) wants the residents of Iceland to bailout depositors in the United Kingdom who deposited money in an Icelandic bank that opened a subsidiary in the UK and then failed.The tab is £3.5 billion. The population of Iceland is only 320,000.A Capacent Gallup survey conducted over the last weeks of February showed 74% of those who had decided to vote planned to vote "no", reports WSJ.
The IMF and the EU are trying to muscle Iceland's voters. The IMF has been holding up aid to Iceland. The EU would likely kill the potential of membership for Iceland in the EU. Those muscle moves have obviously not gone over well with Iceland's voters.
An Icelandic negotiating team remained in London, according to WSJ,i n a last-ditch bid to seal a pact that could—at least temporarily—eliminate the need for a referendum on the older agreement. But Iceland's finance minister, Steingrímur Sigfússon said it was "highly unlikely" the referendum would be called off.
How ABC News' Brian Ross Staged His Toyota Death Ride
Brian Ross, America's Wrongest Reporter, has been credited with owning the Toyota recall story, including one memorable report with Ross behind the wheel of an out-of-control car. He did it by splicing in staged footage to make it look scarier.
UPDATE: ABC News "fixed" the video by making it even faker.
Last month, Ross paid a visit to David Gilbert, a professor of automotive technology at Southern Illinois University who claims to have diagnosed a Toyota design flaw and found a way to reliably recreate uncommanded acceleration in its cars. To prove it, he let Ross drive around a car he'd rigged to suffer from the defect, and sure enough, it took off without warning! Scary. Here's the video:
One of the things that makes it look scary is that when the acceleration occurs, Ross' piece cuts to a close-up shot of the Toyota's tachometer spiking up to 6,000 RPMs in the course of a second—the whole car is outfitted with cameras, and it looks like they planted one right on top of the dashboard to record the RPMs. Wow! That's fast.
But, as some commenters at various message boards have discovered, the tachometer footage is faked. Take a look at these screenshots of the shot of the RPMs surging, one taken at the beginning of the acceleration and one at the end, just before Ross' piece cut back to a shot of him at the wheel:
As you can clearly see, the dashboard lights indicate that the car's doors are open and its parking brake is on. The first shot shows the tachometer beginning at below 1,000 RPMs—or idling speed, as opposed to the 20 mph that Ross said he was driving when the acceleration began. On the right of the images, the speedometer appears to show a reading of zero miles per hour. And to top it all off, the transmission indicator shows that the car is in park. In other words, Ross took footage of a parked Toyota's RPMs taking off and falsely portrayed the shot as having taken place while he was driving the car.
ABC News spokesman Jeffrey Schneider confirmed to Gawker that the tachometer shot was indeed taken from the parked car and spliced into Ross' death ride. But he says the shot wasn't just taken while someone stepped on the gas pedal—it was filmed while Gilbert performed the same test that caused the acceleration while Ross was driving. "We isolated the tachometer during tests while the car was parked, in neutral, and driving," Schneider says. "The shot of the car while driving was very shaky, so a choice was made in the editing suite to use the shot of the parked tachometer."
Schneider says ABC News is re-editing the online version of Ross' piece to sub in the shot of the tachometer while Ross was driving, which he says shows the car's RPMs going from "2,000 to 6,000 or 7,000," and will post the following editor's note explaining the decision:
We have changed a two second insert shot in this video report, showing the tachometer meter during Professor Gilbert's demonstration.The original insert shot was taped when Professor Gilbert demonstrated how an induced short circuit could cause the acceleration as the car was in park. As you will see, the insert shot of the tachometer taped as the car is rolling is extremely shaky, which is why it was not originally used. The readings of the induced surge are comparable. A question about the original shot (which clearly shows it was taped while the car was parked with the doors open) was brought to our attention by a writer at the Gawker.com website, John Cook.
We got credit and everything! Schneider claims that the editing trick didn't undermine the point of Ross' piece, which was to show that Gilbert was able to recreate the flaw, prove that Toyota's failsafe brake override system didn't work, and that the glitch didn't generate an error code that mehcanics could use to diagnose the problem. "The tachometer shot of the car driving as an even more accurate portrayal," he says. "But they're both accurate." If it's true that the swapped shot actually took place while Gilbert was performing the same test he performed while Ross was driving, then we could conceivably be inclined to believe that this was a careless error rather than a deliberate attempt to deceive viewers by using the most damaging shot of the tachometer Ross had. And maybe if he didn't have a lengthy and documented history of shamelessly hyping cooked stories—from the Iraqi connection to the 2001 anthrax attacks to former CIA agent John Kiriakou's lie that the agency only waterboarded one person one time to Nidal Hasan's attempt to "reach out to Al Qaeda" to the Yemeni terrorist who plotted the Christmas bombing attack from Saudi custody and so on—we would believe that.
Idaho tax revenue is $41M behind estimates
BOISE, Idaho (AP) - Idaho has missed its tax revenue forecasts by a combined $41 million since December.
House leaders confirmed that revenue fell more than $15 million short of February's targets.
If revenue through June 30 falls short of forecasts by more than $69 million, it would put Idaho's already-austere spending plan for 2010 into a deficit.
The Idaho Constitution requires the state to balance its budget every year, but it still could tap reserve funds like the one created with the massive 1998 settlement with tobacco companies.
House Assistant Majority Leader Scott Bedke and Majority Leader Mike Moyle said discussions are under way to address how Idaho should tackle the possibility of revenue collapsing in April.
The state missed December and January forecasts by a combined $25 million.
Wayne Hammon, Gov. C.L. "Butch" Otter's budget chief, didn't immediately return a message seeking comment.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Jan. foreclosures near record high
In terms of home foreclosures, Scrooge took a holiday in December, but in January, he came back strong.
The state saw 352 foreclosure deeds in January, a record for that month and the second most ever, just seven behind the 359 of last October, according to statistics compiled by the New Hampshire Housing Finance Authority.
“This level of foreclosure activity may reflect the possible deferral by lenders of foreclosure proceedings during the holiday period, and it certainly offers evidence of the continued economic distress of many New Hampshire home owners,” according to the authority’s report, released Wednesday.
Banks frequently hold off on foreclosing homes until after the Christmas holiday season for logistical reasons as much as human kindness and decency, it seems.
Banks will hold off on foreclosing in December for two reasons: They’re hesitant to foreclose during the holidays, and December can be a tough month for scheduling, said Jane Law, director of communications for the New Hampshire Housing Finance Authority.
“That has happened in the past, particularly by some of the larger lenders,” Law said.
Hillsborough led New Hampshire counties, with nearly a third of all foreclosures statewide, according to the NHHFA.
Nashua recorded 25 foreclosures in January, second to Manchester’s 31, for the county, according to the Hillsborough County Registry of Deeds.
Locally, Merrimack and Milford had seven foreclosures each, Hudson six, Litchfield, Mont Vernon and New Ipswich two each, and Amherst, Greenville, Hollis, Lyndeborough and Wilton one each, according to the registry.
Statewide, foreclosures began skyrocketing in 2006 – the 79 recorded in January 2006 represented an increase of 295 percent over the previous January, according to NHHFA statistics.
That was because of the sub-prime lending crisis, which precipitated the 2007 recession, Law noted.
Sub-prime lending is a thing of the past, and “now it’s likely to be more economic issues that factor into foreclosures,” she said.
Not only layoffs, but a reduction in work hours can be enough to cause a family to fall behind on mortgage payments, Law said.
“If you’re just squeaking by, and you have your hours reduced, that can be enough to fall behind,” she said.
Nashua Realtor Paul LaFlamme said he handled two foreclosures in January, which he called a “heavy” number for one month.
And there might be more coming, said LaFlamme, whose business real-estate business includes short sales, a program to avoid foreclosure.
Some banks have approached LaFlamme to get his opinion on the market value of properties, an indication that the lenders might be preparing to take ownership of the properties, he said.
Patrick Meighan can be reached at 594-6518 or pmeighan@nashuatelegraph.com.
North Carolina tax collections down $35M as consumers cut spending
State revenue collections were off by $35 million through the first seven months of the government’s fiscal year as consumers continued to sit on the sidelines, a new General Assembly economic forecast says.
The revenue gap on the state’s $11 billion collection target would have been wider had it not been for a special corporate income collections effort on the part of the Department of Revenue, which brought in $472 million, $272 million more than anticipated.
What lies ahead for North Carolina, says the report’s author, General Assembly fiscal researcher Barry Boardman, depends how fast “the sluggish economic recovery” is able to take hold.
Payroll withholding tax collections were down nearly 5 percent through January, and sales tax collections continue to come up short.
“Double-digit unemployment has eroded consumer confidence and with continued employment uncertainty, cautious consumer behavior continues.” Boardman says.
Consumers have been hit by a variety of things, tight credit, loss of household wealth and lower (inflation adjusted) wages than before the start of the recession. Wage and salary income fell 3.3 percent in 2009, he says.
Boardman adds that he doesn’t foresee much relief on the wage front anytime soon.
Wages and salaries are forecast to growth by only 1.3 percent in 2010, he says.
Florida's budget gap could be as high as $3.2 billion
House Speaker Larry Cretul formally started the state budgeting process today by telling legislative money managers there will be no new taxes or fee hikes -- and that they should use Florida's shrinking revenue pot to fund education, health services and public safety above everything else.
In releasing his allocations for various House appropriations panels, Cretul said the state faces a gap of $1.1 billion and $3.2 billion between expected revenues and projected spending. The precise figure will be known later in the just-started legislative session, when the Revenue Estimating Conference meets and fiscal forecasters know more about what the state can expect in federal revenues or sources like a Seminole casino compact that is pending before the Legislature.
In releasing his allocations for various House appropriations panels, Cretul said the state faces a gap of $1.1 billion and $3.2 billion between expected revenues and projected spending. The precise figure will be known later in the just-started legislative session, when the Revenue Estimating Conference meets and fiscal forecasters know more about what the state can expect in federal revenues or sources like a Seminole casino compact that is pending before the Legislature.
Cretul said the gap could grow as high as $5 billion when federal stimulus money runs out next year.
"Consequently, significant reductions to recurring state spending will be needed to achieve and maintain a balanced budget," Cretul wrote in a memo accompanying his fiscal allocations. "This will be more difficult than in previous years because the low hanging budgetary fruit has already been picked."
Gov. Charlie Crist's budget recommendations in late January depended on revenue from the Seminole compact and major federal funding. Cretul said in his opening remarks as the session convened on Tuesday that he was not counting any dollars not already approved or known to be coming in the form of taxes and fees.
He said House principles for building a budget will start with "no new or increased fees or taxes." The state will have to offset property tax revenue losses for public education, but he said there will still be "significant reductions in education services or programs."
Loss of federal stimulus funding for Medicaid must also be offset, while continuing mandatory programs, Cretul said. He said his budget allocation was an increase of 19 percent in state health-care funding, but as with education, even that increase would not be enough to avoid service and program cuts.
Law-enforcement and prison funding will be enough to make sure prisoners serve 85 percent of their sentences and the courts continue operation, the speaker said, and he wants a 5 percent reserve held back to protect Florida's bond rating.
"Prioritize education, health and public safety over program areas such as transportation, general government and environment," Cretul told House budget committees, "even though funding in the latter two areas make up a very small portion of the state budget."Federal Workers Paid More Than Private Employees For Similar Work
Federal employees are earning considerably more than people doing similar work in the private sector, according to an analysis from USA Today – news that’s sure to rile lawmakers already concerned about the rate of federal spending.
Federal employees are earning considerably more than people doing similar work in the private sector, according to an analysis from USA Today -- news that’s sure to rile lawmakers already concerned about the rate of federal spending.
In more than eight out of 10 occupations, federal employees earned higher salaries, the newspaper's analysis of federal data found.
Among the higher earners are federal accountants, nurses, chemists, surveyors, cooks, clerks and janitors.
Federal workers earned an average salary of $67,691 in 2008 for jobs that exist both in government and the private sector, according to Bureau of Labor Statistics data. By comparison, the average pay for the same batch of jobs in the private sector was $60,046 in 2008, the most recent data available.
The figures don't include health, pension and other benefits, which averaged $40,785 per federal employee and $9,882 per private employee in 2008, according to the Bureau of Economic Analysis.
The federal government spends about $125 billion each year on compensation for about 2 million civilian employees.
Federal pay, which is at the center of a contentious political debate over the federal budget deficit, was one of the top campaign issues for Sen. Scott Brown, R-Mass., who won Ted Kennedy's Senate seat in January. He is fighting for a federal pay freeze.
Newsom asks dept. heads to take 10% pay cut Read more at the San Francisco Examiner:
The City is sending out 15,000 layoff notices Friday under Mayor Gavin Newsom’s plan to rehire workers as part-timers for a savings of $50 million. He is also asking department heads to give up 10 percent of their pay and is in talks with Police and Fire employees to give up pay raises.
Newsom held a press conference Friday morning defending the 37.5-hour work week proposal against criticism from union labor leaders and members of the Board of Supervisors.
He said 15,000 layoff notices are going out Friday and an “overwhelming majority” of the workers who receive the pink slips will return as part-time workers, with 37.5-hour work weeks, instead 40 hours. The move would save The City about $50 million in salaries.
“The reason I am doing this is to save people’ jobs and to save city services,” Newsom said.
Not moving forward with the part-time proposal would mean thousands of city workers would lose their jobs, he said, as The City must close a budget more than $500 million deficit by July 1.
Newsom also said that every city worker is being asked to give up 6.25 percent of their wages, even those not impacted by the part-time proposal.
Some supervisors have questioned why police and fire workers are not part of the part-time proposal. Newsom said that The City is in talks with those labor leaders about having the workers agree to not receive pay raises next year, which would represent a 6.25 percent wage cut.
“As difficult as this is, I think it’s appropriate with the cards that have been dealt,” Newsom said.
The mayor must submit a balanced city budget by June 1 to the Board of Supervisors for review and adoption.
Jobless rates rose in every state in ‘09
All 50 states were hit with increases of more than one percentage point in their unemployment rates last year, according to the U.S. Bureau of Labor Statistics.
The sharpest rise occurred in Michigan, where the average jobless rate for 2009 was 13.6 percent, up 5.3 points from 2008’s average of 8.3 percent.
The only other state with an increase of more than five points was Nevada, which soared from an average unemployment rate of 6.7 percent two years ago to 11.8 percent last year.
North Carolina’s increase was 4.4 points — from an annual jobless rate of 6.2 percent in 2008 to 10.6 percent in 2009. The average number of individuals employed during 2009 was 4.06 million, down from 4.29 million in 2008. The average number of unemployed rose to 484,000 from 283,000.
The figures were contained in the Bureau of Labor Statistics’ year-end report for 2009, which included a full set of annual averages. The results for all 50 states and the District of Columbia can be accessed by clicking here. North Dakota was the most stable state in 2009. Its annual unemployment rate of 4.3 percent was just 1.1 points higher than its 2008 average of 3.2 percent.
Is Jim Bunning Immoral?
Paul Krugman today has chosen to write about Sen. Jim Bunning's recent attempt to hold up the extension of unemployment benefits, and it is clear his column could have been written by a DNC ghostwriter or by an editorial writer at the New York Times. What also is clear that this column was not written by an economist; it is pure political partisanship created by a political operative.
However, there was one difference between Krugman's column and the many other pieces of undisguised partisanship that has filled the airwaves and editorial pages: Krugman claims that the extension of benefits aids the economy. Don't take my word for it; here is the Nobel Laureate in his own words:
Lest one think I exaggerate, here is Krugman in his own words, displaying both his partisanship and his Keynesianism:
I would like to provide some counterarguments. First, Bunning said forthrightly that not only was he not against extension of benefits, but that he also was following President Barack Obama's dictum that we "pay as we go," and that there had been no budget allocation for this $10 billion expenditure. While Krugman and the Democrats (and most of the media) were declaring, "It's only $10 billion," Bunning replied that if Democrats could not even demonstrate some fiscal discipline in a relatively small amount of money, then they were incapable of dealing with the larger budget issues that threaten to swamp our entire country in a sea of unpayable debt.
Second, Kyle is correct; studies have demonstrated that indefinite extension of unemployment benefits also keep people from finding new jobs and ending their term of unemployment. Furthermore, as Murray N. Rothbard wrote in America's Great Depression, which clearly runs counter to Krugman's inflationary Keynesianism, that continued government spending only extends the downturn and makes it worse. He writes:
Austrians, on the other hand, recognize that there can be no substantive recovery until the original malinvestments are liquidated and the economy returned to a structure of production that is sustainable. Thus, if anyone is being dishonest, it is Krugman, who really, according to the Austrians, is advocating that the depression be extended and deepened.
Now, I am sure that Krugman and his Keynesian (and leftist) supporters would argue that Krugman wants the depression to end and that the Austrians want it to continue so they can enjoy watching people suffer. For years, Krugman has framed his arguments in such a manner to which anyone who disagrees with him does so because of innate hatred for humanity.
Yet, as we enter what is a third year of this depression with no end in sight and with the government continuing to prop up malinvestments through borrowing and printing money, just who is being immoral? Krugman is advocating a Big Lie. Had presidents Bush and Obama listened to the Austrians instead of the Keynesians, we would be out of this downturn and headed for a real recovery. Instead, the economy flounders and will continue to flounder.
So, whether or not Krugman and his allies want to claim that Bunning took his stand because he is evil, nonetheless, Bunning was right; the extension of these benefits, paid by money that will be borrowed or printed, only will extend the problem. Thus, Krugman is advocating the very policies that make our situation worse. Who is being immoral?
However, there was one difference between Krugman's column and the many other pieces of undisguised partisanship that has filled the airwaves and editorial pages: Krugman claims that the extension of benefits aids the economy. Don't take my word for it; here is the Nobel Laureate in his own words:
What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.This is classic textbook Keynesianism with some political partisanship included. We are in recession, according to Krugman, because we are not spending enough money. Give money to people, let them spend it, and out of this comes economic recovery.
Lest one think I exaggerate, here is Krugman in his own words, displaying both his partisanship and his Keynesianism:
But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”Krugman goes on to call this position "immoral," so the only way to interpret that is to say that according to the Economics of Paul Krugman, the only moral position one can take today is that of John Maynard Keynes. (I guess this is Krugman's version of a Keynesian theocracy.)
I would like to provide some counterarguments. First, Bunning said forthrightly that not only was he not against extension of benefits, but that he also was following President Barack Obama's dictum that we "pay as we go," and that there had been no budget allocation for this $10 billion expenditure. While Krugman and the Democrats (and most of the media) were declaring, "It's only $10 billion," Bunning replied that if Democrats could not even demonstrate some fiscal discipline in a relatively small amount of money, then they were incapable of dealing with the larger budget issues that threaten to swamp our entire country in a sea of unpayable debt.
Second, Kyle is correct; studies have demonstrated that indefinite extension of unemployment benefits also keep people from finding new jobs and ending their term of unemployment. Furthermore, as Murray N. Rothbard wrote in America's Great Depression, which clearly runs counter to Krugman's inflationary Keynesianism, that continued government spending only extends the downturn and makes it worse. He writes:
If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don't interfere with the market's adjustment process. The more the government intervenes to delay the market's adjustment, the longer and more grueling the depression will be, and the more difficult will be the road to complete recovery. Government hampering aggravates and perpetuates the depression. Yet, government depression policy has always (and would have even more today) aggravated the very evils it has loudly tried to cure.He goes on to list the various ways that government makes things worse, and it is a textbook description of everything that Krugman claims will end this economic nightmare:
1. Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further, etc.Why the great divide between Rothbard and Krugman? Krugman believes that recessions simply are episodes of reduced spending while Rothbard and the Austrians hold that recessions are the inevitable result of massive malinvestment of capital and resources. To Krugman, a recovery simply happens, and that in the interim, government needs to replace private spending by any means possible.
2. Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments, which, in their turn, will have to be liquidated in some later depression. A government "easy money" policy prevents the market's return to the necessary higher interest rates.
3. Keep wage rates up. Artificial maintenance of wage rates in a depression insures permanent mass unemployment. Furthermore, in a deflation, when prices are falling, keeping the same rate of money wages means that real wage rates have been pushed higher. In the face of falling business demand, this greatly aggravates the unemployment problem.
4. Keep prices up. Keeping prices above their free-market levels will create unsalable surpluses, and prevent a return to prosperity.
5. Stimulate consumption and discourage saving. We have seen that more saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved-capital even further. Government can encourage consumption by "food stamp plans" and relief payments. It can discourage savings and investment by higher taxes, particularly on the wealthy and on corporations and estates. As a matter of fact, any increase of taxes and government spending will discourage saving and investment and stimulate consumption, since government spending is all consumption. Some of the private funds would have been saved and invested; all of the government funds are consumed. Any increase in the relative size of government in the economy, therefore, shifts the societal consumption-investment ratio in favor of consumption, and prolongs the depression.
6. Subsidize unemployment. Any subsidization of unemployment (via unemployment "insurance," relief, etc.) will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.
Austrians, on the other hand, recognize that there can be no substantive recovery until the original malinvestments are liquidated and the economy returned to a structure of production that is sustainable. Thus, if anyone is being dishonest, it is Krugman, who really, according to the Austrians, is advocating that the depression be extended and deepened.
Now, I am sure that Krugman and his Keynesian (and leftist) supporters would argue that Krugman wants the depression to end and that the Austrians want it to continue so they can enjoy watching people suffer. For years, Krugman has framed his arguments in such a manner to which anyone who disagrees with him does so because of innate hatred for humanity.
Yet, as we enter what is a third year of this depression with no end in sight and with the government continuing to prop up malinvestments through borrowing and printing money, just who is being immoral? Krugman is advocating a Big Lie. Had presidents Bush and Obama listened to the Austrians instead of the Keynesians, we would be out of this downturn and headed for a real recovery. Instead, the economy flounders and will continue to flounder.
So, whether or not Krugman and his allies want to claim that Bunning took his stand because he is evil, nonetheless, Bunning was right; the extension of these benefits, paid by money that will be borrowed or printed, only will extend the problem. Thus, Krugman is advocating the very policies that make our situation worse. Who is being immoral?
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