Thursday, April 28, 2011

Newly Graduated And Drowning In Six Figures Of Student Loan Debt

College Graduates Wikimedia Image
Amanda M. Fairbanks
Huffington Post

NEW YORK -- Hardly a day goes by where Ashley Angello doesn’t fret about her student loan debt.

Angello thinks about it at night, when packing tomorrow's lunch means a few saved dollars. And she worries about it the next morning when deciding what to wear to work, since she hasn’t been able to afford any new clothes since starting her job.

“I used to joke when I was in college that I’d be paying off these loans for the rest of my life,” says Angello, 22. She graduated nearly a year ago from Ithaca College, where she majored in communications. “Little did I realize that I actually will be.”

Angello is on the hook for about $120,000. With six-figures in debt, she has little choice but to save every little bit that trickles in. And still, it's a struggle.

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Gold Futures Surge to Record on Outlook for Sagging Dollar, Low U.S. Rates

Gold futures rose to a record $1,530.30 an ounce on speculation that the Federal Reserve will be slow to raise U.S. borrowing costs, weakening the dollar and boosting the appeal of the metal as an alternative asset.

The dollar fell to the lowest since December 2009 against the euro after the Fed kept borrowing costs at a record low and said it would continue $600 billion in bond purchases through June. The European Central Bank this month began raising rates to stem inflation.

“This move is about the dollar,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “There’s no hint whatsoever of the Fed being close to raising rates, so people are buying gold.”

Gold futures for June delivery rose $13.60, or 0.9 percent, to settle at $1,517.10 at 1:48 p.m. on the Comex in New York. After the close, the metal reached the all-time high. The price has gained 31 percent in the past year.

Gold for immediate delivery rose as much as 1.6 percent to a record $1,529.68. The price traded at $1,528.88 at 3:42 p.m.

The Fed has kept its benchmark rate at zero percent to 0.25 percent since December 2008 to stimulate the economy. Today, the central bank raised its estimate for core inflation and reduced its growth outlook for 2011.

Earlier this month, the European Central Bank raised its main lending rate by a quarter point to 1.25 percent and signaled it will continue with increases to stem inflation.

Dollar ‘Suffering’

“There’s not a lot the Fed can do to ease the dollar’s suffering,” said Matthew Zeman, a strategist at Kingsview Financial in Chicago. “The U.S. will be behind in the tightening cycle, and that’s a green light to buy gold.”

There will likely be no tightening of policy “for a couple of meetings,” Fed Chairman Ben S. Bernanke said in a press conference after the rate-setting meeting.

“The Fed has just given the go-ahead to buy more gold,” FuturePath’s Lesh said.

Silver futures for July delivery rose 90.8 cents, or 2 percent, to settle at $45.987 an ounce on the Comex. In after- hours trading, the price rose as much as 7.1 percent. Two days ago, the metal, which has doubled in the past 12 months, reached a 31-year high of $49.845.

Palladium futures for June delivery climbed $2.40, or 0.3 percent, to $758.10 an ounce on the New York Mercantile Exchange. The price has advanced 38 percent in the past 12 months.

Platinum futures for July delivery gained $13.80, or 0.8 percent, to $1,819.20 an ounce. The metal has gained 5.7 percent in the past year.

$50 Silver Means Hyperinflation Coming This Summer!

How Your Tax Dollars Fuel the Hatred of Muslims

Alex Kane

The decade after the 9/11 attacks has seen the creation of a profitable cottage industry of self-styled “experts” on Islam. As Sarah Posner recently noted in an article on Religion Dispatches, anti-Muslim fear-mongers, ranging from politicians to national security experts, have “cultivated awide-ranging conspiracy theory that totalitarian Islamic radicals are bent on infiltrating America, displacing the Constitution, and subverting Western-style democracy in the U.S. and around the globe.”

What hasn’t gotten a comprehensive look, at least until now, is how public tax dollars have been funding parts of this industry under the guise of counter-terrorism trainings for city and state law enforcement across the country, which after 9/11 has gotten heavily involved in fighting terrorism.

A recently released report by the Political Research Associates, a group that monitors the right in America, puts the spotlight on how “public servants are regularly presented with misleading, inflammatory, and dangerous information about the nature of the terror threat.” The report, titled, “Manufacturing the Muslim Menace: Private Firms, Public Servants, and the Threat to Rights and Security,” examines frames—like “Islam is a terrorist religion,” or “mainstream Muslim-Americans have terrorist ties”—and how they are propagated to law enforcement officers.

These trainings have caught the eye of Senator Joe Lieberman, the chairman of the Senate’s Homeland Security committee, and Senator Susan Collins, a ranking member. A March 29 letter to Attorney General Eric Holder and Secretary of Homeland Security Janet Napolitano from the senators reads, in part: “We are concerned with recent reports that state and local law enforcement agencies are being trained by individuals who not only do not understand the ideology of violent Islamist extremism but also cast aspersions on a wide swath of ordinary Americans merely because of their religious affiliation.”

The letter asks the attorney general to provide a list of grant programs being used to fund counter-terrorism trainings and asks about “improved oversight” of these trainings—demands that mirror the recommendations made in the Political Research Associates’ publication.

AlterNet recently caught up with Thom Cincotta, the author of the report and a Political Research Associates’ staff member, to delve into more detail on this subset of the anti-Muslim cottage industry.

Alex Kane: How did this project come to be?

Thom Cincotta: At the Political Research Associates, we have been, for the past two years, looking at the growth of the domestic security apparatus, particularly how local police have been mobilized to fight terrorism—specifically in new forms of collaborative bodies like intelligence fusion centers and Joint Terrorism Task Forces. This mobilization represents a tremendous, unprecedented growth of our domestic intelligence apparatus, and with the new powers, capabilities and resources at the hands of that bureaucracy, there are risks for our civil liberties.

In examining that infrastructure, we have had an eye out for opportunities for the politicization of intelligence-type policing, and during the course of our investigation into fusion centers, we noticed some courses being offered at the local level. Specifically, in Massachusetts, we noticed that one company called Security Solutions International in May 2009 was offering a seminar on the “radical jihadist threat” that was hosted by the Massachusetts Bay Transportation Authority. The description of that course included things like the “legal wing of jihad in America,” and that right away set off red flags that this course content might not simply be looking at detecting valid terrorism.

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Stockman: The Bipartisan Death March To Fiscal Madness


By David Stockman

It is obvious that the nation’s desperate fiscal condition requires higher taxes on the middle class, not just the richest 2 percent. Likewise, entitlement reform requires means-testing the giant Social Security and Medicare programs, not merely squeezing the far smaller safety net in areas like Medicaid and food stamps. Unfortunately, in proposing tax increases only for the very rich, President Obama has denied the first of these fiscal truths, while Representative Paul D. Ryan, the chairman of the House Budget Committee, has contradicted the second by putting the entire burden of entitlement reform on the poor. The resulting squabble is not only deepening the fiscal stalemate, but also bringing us dangerously close to class war.

This lamentable prospect is deeply grounded in the policy-driven transformation of the economy during recent decades that has shifted income and wealth to the top of the economic ladder. While not the stated objective of policy, this reverse Robin Hood outcome cannot be gainsaid: the share of wealth held by the top 1 percent of households has risen to 35 percent from 21 percent since 1979, while their share of income has more than doubled to around 20 percent.

The culprit here was the combination of ultralow rates of interest at the Federal Reserve and ultralow rates of taxation on capital gains. The former destroyed the nation’s capital markets, fueling huge growth in household and business debt, serial asset bubbles and endless leveraged speculation in equities, commodities, currencies and other assets.

At the same time, the nearly untaxed windfall gains accrued to pure financial speculators, not the backyard inventors envisioned by the Republican-inspired capital-gains tax revolution of 1978. And they happened in an environment of essentially zero inflation, the opposite of the double-digit inflation that justified a lower tax rate on capital gains back then — but which is now simply an obsolete tax subsidy to the rich.

In attacking the Bush tax cuts for the top 2 percent of taxpayers, the president is only incidentally addressing the deficit. The larger purpose is to assure the vast bulk of Americans left behind that they will be spared higher taxes — even though entitlements make a tax increase unavoidable. Mr. Obama is thus playing the class-war card more aggressively than any Democrat since Franklin D. Roosevelt — surpassing Harry S. Truman or John F. Kennedy when they attacked big business or Lyndon B. Johnson or Jimmy Carter when they posed as champions of the little guy.

On the other side, Representative Ryan fails to recognize that we are not in an era of old-time enterprise capitalism in which the gospel of low tax rates and incentives to create wealth might have had relevance. A quasi-bankrupt nation saddled with rampant casino capitalism on Wall Street and a disemboweled, offshored economy on Main Street requires practical and equitable ways to pay its bills.

Ingratiating himself with the neo-cons, Mr. Ryan has put the $700 billion defense and security budget off limits; and caving to pusillanimous Republican politicians, he also exempts $17 trillion of Social Security and Medicare spending over the next decade. What is left, then, is $7 trillion in baseline spending for Medicaid and the social safety net — to which Mr. Ryan applies a meat cleaver, reducing outlays by $1.5 trillion, or 20 percent.

Trapped between the religion of low taxes and the reality of huge deficits, the Ryan plan appears to be an attack on the poor in order to coddle the rich. To the Democrats’ invitation to class war, the Republicans have seemingly sent an R.S.V.P.

Washington’s feckless drift into class war is based on the illusion that we have endless time to put our fiscal house in order. This has instilled a terrible budgetary habit whereby politicians continuously duck concrete but politically painful near-term savings in favor of gimmicks like freezes, caps and block grants that push purely paper cuts into the distant, foggy future. Mr. Ryan’s plan gets to a balanced budget in the fiscal afterlife (i.e., the 2030s); the White House’s tactic of accumulating small-fry deficit cuts over the enormous span of 12 years amounts to the same dodge.

Continue reading at the NYT...


Full Text Of FOMC Statement

Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since last summer, and concerns about global supplies of crude oil have contributed to a further increase in oil prices since the Committee met in March. Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Increases in the prices of energy and other commodities have pushed up inflation in recent months. The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations. The Committee continues to anticipate a gradual return to higher levels of resource utilization in a context of price stability.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and will complete purchases of $600 billion of longer-term Treasury securities by the end of the current quarter. The Committee will regularly review the size and composition of its securities holdings in light of incoming information and is prepared to adjust those holdings as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

2011 Monetary Policy Releases

1,900 Year Old Wisdom: "An Imbalance Between Rich and Poor Is the Oldest and Most Fatal Ailment of all Republics"

I noted in February that John Kenneth Galbraith and Marriner Eccles explained 50 years ago that inequality causes crashes, and that many modern economists agree.

I just found a slighter older statement saying the same thing.

Specifically, the well-known Greek historian Plutarch - who died in 120 A.D. - said:

An imbalance between rich and poor is the oldest and most fatal ailment of all republics.
Given that the level of inequality in America today is one of the greatest in history, it is not surprising that the republic is ailing so badly. See this, this, this, this and this.

As I noted in 2008:

This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).

It is a question of focusing any government funding which is made to the majority of poker players - instead of the titans of finance - so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.

Ron Paul Announces 2012 Candidacy On Colbert: 'Biggest Counterfeiter In The World Is The Federal Reserve' (VIDEO)


The Colbert Report Mon - Thurs 11:30pm / 10:30c
Ron Paul

Colbert Report Full Episodes Political Humor & Satire Blog Video Archive

Video - Ron Paul with Stephen Colbert - April 25, 2011

"There is a law on the books that says you are not allowed to counterfeit, and the biggest counterfeiter in the world is the Federal Reserve. They just print money, trillions of dollars, and they give it out to their friends."

All previous Ron Paul appearances on Colbert are included at this link:

Ron Paul On The Colbert Report: Debating The Gold Standard & Whether The Fed Is Dead


Ron Paul on the View - April 25

Unrelated link:

AK - Fairbanks anti-federal rally seeks to draw attention to government

The organizer of a protest against the federal government tonight in Fairbanks says he does business with the government even though he doesn’t like what it’s doing in Alaska.

“People say, ‘If you’re angry, then don’t sell to the federal government,’ but we’re not stupid,” said Craig Compeau, owner of Compeau’s, a local boat, snowmachine and ATV retailer. “We’re going to bid on this stuff.”

Compeau organized tonight’s “Fed Up with the Fed” rally at the Pioneer Park Civic Center.

Compeau has for years done business with the federal government. In 2008, Compeau’s sold more than $215,000 of merchandise to the federal government, including more than $20,000 to the National Park Service, according to the website Between 2005-08, Compeau’s sold more than $600,000 of boats, snowmachines and ATVs to the federal government.

Compeau’s beef with federal authorities and the business he conducts with them are “two totally separate issues,” Compeau said.

“This is an access issue,” he said. “At the rate things are going, I won’t have a business if people can’t access anything. Four-wheelers will be the next endangered species in Alaska.”

Read more: Fairbanks Daily News-Miner - Fairbanks anti federal rally seeks to draw attention to government

Billionaire buys Hamptons mansion for $43.5million... then tears it down because it's not big enough

Set on more than six acres of oceanfront land, with palatial rooms, huge marble bathrooms, a tennis court and a swimming pool, this Hamptons mansion is a holiday home fit for any king.

But not for a hedge fund manager, apparently.

New York billionaire David Tepper, who took home more than $4billion in 2009, wanted something a bit bigger.

Mansion: Hedge fund boss David Tepper's $43.5million home in the Hamptons, which he will knock down and replace with one double the size

Mansion: Hedge fund boss David Tepper's $43.5million home in the Hamptons, which he will knock down and replace with one double the size

So he bought the 6,165sq-ft property for $43.5m last year in order to knock it down and rebuild in its place a mansion twice the size.

The home was bought from Joanne Dougherty, the former wife of Jon Corzine, once a Senator, Governor and Mayor of New Jersey.

Billionaire: Tepper, with his wife Marlene. The pair are knocking down their newly-bought Hamptons mansion to build one that is double the size

Billionaire: Tepper, with his wife Marlene. The pair are knocking down their newly-bought Hamptons mansion to build one that is double the size

Meanwhile, a grand East Side townhouse in New York has sold for $47million - as the US housing index announced that house prices have fallen for the eighth month in a row in February and are nearing lows reached in 2009 during the recession.

Tepper bought the Hamptons property, which rents for $900,000 each summer season, last year but authorities have now approved its demolition and the construction of a new 11,268sq-ft property.

Architect Jaquelin Robertson told officials the new home will be a cedar-shingled two-story Georgian Colonial-style home.

It will come with a sunken tennis court, a three car garage and second floor decks featuring a jacuzzi and covered porch.

The new property will also offer views of the ocean from the first floor that were previously blocked by sand dunes.

Tepper, 53, who has three children with his wife, Marlene and lives in Livingston, New Jersey, became the highest earning hedge fund manager in 2009, earning $7billion for his company and more than half of that for himself.

It is thought he made the money by correctly predicting that the US government would not allow major banks to fold that year, compounding his profits as the banks' share prices then recovered.

He worked for eight years at Goldman Sachs as a trader but left to start up his own hedge fund, Appaloosa Management, in 1992 after repeatedly being passed over for partnership.

Palatial: A gorgeous living room in the multi-million dollar property Tepper plans to knock to the ground

Palatial: A gorgeous living room in the multi-million dollar property Tepper plans to knock to the ground

Fit for a king: One of the bathrooms at the Hamptons holiday home

Fit for a king: One of the bathrooms at the Hamptons holiday home

Tepper is said to coach his children’s baseball, softball and soccer teams, which could be one explanation for his need for so many acres of land in the Hamptons.

In 2009, he was ranked as the 258th richest man in the world by Forbes.

Manhattan's most expensive residential home sold for $53 million in 2006.

The East 75th street townhouse was bought by private-equity executive J. Christopher Flowers.

In December, developer William Lie Zeckendorf sold an apartment at 15 Central Park West for $40 million.

The sale meant the home cost almost $10,000 per square foot - an all-time record.

Earlier this year, a Russian couple bought a $48 million apartment at the Plaza, one of the priciest condos ever sold.

News of the exorbitant sale comes, ironically, on the day the housing index released figures showing that US house prices have fallen for the eighth month in a row.

Demolished: Tepper will knock down the house, which includes this exquisite bedroom

Demolished: Tepper will knock down the house, which includes this exquisite bedroom

Exclusive: A bird's eye view of the huge property, complete with tennis court and swimming pool

Exclusive: A bird's eye view of the huge property, complete with tennis court and swimming pool

The Case Shiller housing index, which is compiled by rating agency Standard & Poor's, was down 3.3 per cent compared to this time last year.

Of the 20 cities tracked by the index, 19 declared falling prices over the past 12 months.

The index is now just 0.4 per cent above the low it reached in May 2009 after the US housing bubble burst.

'There is very little, if any, good news about housing,' said David Blitzer, S&P's index committee head. 'Prices continue to weaken, trends in sales and construction are disappointing.'


Townhouse: The grand East Side home, bought for more than $47million

A home has sold on Manhattan's East Side for more than $47million - one of New York's highest residential sales ever, it was reported today.

The 33-foot-wide townhouse on East 69th Street, which is five storeys high, was sold by author Sloan Lindemann Barnett and her husband Roger Barnett, a web entrepreneur who offloaded his company,, for $42 million in 2000.

A sales contract has been signed, according to the Wall Street Journal, but the buyer's identity is yet to be established.

In a shrewd move, the Barnetts found a buyer on their own, so will not have to give away a broker's fee.

The couple bought the townhouse in 2000 for about $11million but the property soared in value after they enlisted interior designer Peter Marino to oversee renovations to the neo-Georgian home.

Marino's celebrity clients have included Andy Warhol, Giorgio Armani and Calvin Klein.

Fukushima Workers working under Horrible conditions

Biggest US airlines have combined 1Q loss over $1B

With fresh red ink at Delta and US Airways, the five biggest U.S. airlines showed a combined loss of more than $1 billion for the first quarter. Soaring jet fuel prices are the big culprit.

The total loss was only about $100 million larger than a year ago, even though jet fuel spending jumped by 28 percent, nearly $1.9 billion. Airlines were able to narrow the difference in fuel spending with a 12 percent increase in revenue.

They have raised fares seven times since the start of the year and would like to keep doing that to offset higher fuel costs.

"We must fully recapture our costs on every flight, every day, to maintain and improve our earnings performance," said Delta CEO Richard Anderson.

Delta Air Lines Inc., which reported a $318 million loss on Tuesday, said fare increases covered 70 percent of the run-up in fuel costs for the first quarter.

US Airways Group Inc. lost $114 million in the quarter. On Tuesday, it announced new reductions to its flying schedule in the second half of the year, which should cut costs and perhaps drive up fares.

The Delta and US Airways results came after United Continental Holdings Inc. and American Airlines parent AMR Corp. reported huge losses last week. Southwest Airlines Co. was alone among the five biggest U.S. airline operators in posting a profit, and just $5 million at that.

Between them, the five airlines lost $1.08 billion in the first three months of this year, when several big storms in the U.S. and the earthquake in Japan compounded the problem of costly jet fuel. A year ago, the same airlines lost $978 million. Fuel spending jumped to $8.45 billion from $6.60 billion a year earlier.

Still, Tuesday's losses at Delta and US Airways were not as large as analysts had feared. And airline executives' tough talk about raising fares and cutting flights may have cheered investors.

Delta shares jumped 99 cents, or 11 percent, to close at $9.99, US Airways shares rose 52 cents, or 6.3 percent, to $8.80, and other airline stocks also rose. Airline stocks have been hammered recently by rising oil prices. Delta shares are down 21 percent since the beginning of the year, while US Airways shares lost 12 percent.

With fuel costing more than $3 a gallon — spot prices are up about 50 percent since September — airlines are culling flights that don't produce enough revenue.

Delta will cut flying 4 percent compared to a year earlier starting in September, including 8 to 10 percent on routes across the Atlantic.

It will also park 20 more planes this year than planned, including some of the largest planes used for international flights. All told, Delta now plans to sideline 140 planes over the next year and a half, from its smallest propeller-driven regional planes to big international jets.

Delta's fuel bill rose 29 percent, or $483 million, in the first quarter compared to a year earlier. Higher ticket prices boosted revenue 13 percent, to $7.75 billion.

Delta's loss for the quarter that ended March 31 was 38 cents per share. A year ago Delta lost $256 million, or 31 cents per share. Analysts surveyed by FactSet expected a loss of 50 cents a share and revenue of $7.61 billion.

For US Airways, the loss was 71 cents per share, or 68 cents per share not counting special items. Analysts expected a loss of 73 cents per share excluding items.

The airline saw fuel costs jump $272 million, almost 39 percent, compared with a year ago. It is the only U.S. airline that does not hedge against fuel price spikes. Executives said they expect to spend $1.45 billion more on fuel this year than last year.

US Airways, based in Tempe, Ariz., also said it would reduce capacity by a half-percent in the third quarter and by 2 percent in the fourth quarter after growing in the first half of the year.

US Banks Warn Obama on Soaring Debt

A group of the largest US banks and fund managers stepped up the pressure on Congress and the Obama administration to reach a deal to increase the country’s debt limit, saying that even a short default could be devastating for the financial markets and economy.

Barack Obama

The warning over the debt limit is the strongest yet to come from Wall Street, highlighting growing nervousness among investors about the US political system’s ability to forge a consensus on fiscal policy.

The most pressing budgetary issue confronting Congress and the Obama administration is the need to raise the US debt ceiling, which stands at $14,300 billion.

That threshold will be reached by May 16 and the Treasury department has said that in the absence of congressional action, the world’s largest economy could default by early July.

Although such a scenario is still likely to be avoided, the looming deadline is stoking concerns within the financial industry.

“Any delay in making an interest or principal payment by Treasury even for a very short period of time would put the US Treasury and overall financial markets in uncharted territory and could trigger another catastrophic financial crisis,” said Matthew Zames, a JPMorgan executive, in a letter to Tim Geithner, the Treasury secretary, this week.

Mr Zames was writing as chairman of the Treasury Borrowing Advisory Committee, which includes some of the largest investors in US government bonds, such as Bank of America [BAC 12.33 0.10 (+0.82%) ], Goldman Sachs [GS 152.86 -0.41 (-0.27%) ], Morgan Stanley [MS 25.50 -0.30 (-1.16%) ], Pimco [TUZ 50.869 0.002 (+0%) ], RBS [RBS 13.95 0.18 (+1.31%) ], Tudor [TDRLF 0.1595 --- UNCH (0) ] and Soros Fund Management.

In the letter, Mr Zames outlined several consequences of a default – or even an extended delay in raising the debt limit – that are causing jitters on Wall Street.

These included the dumping of US government debt by foreign holders and the downgrade of the US triple-A credit rating, following last week’s move by Standard & Poor’s to change its outlook on the US from “stable” to “negative” for the first time in 70 years.

Other effects were a “run on money market funds”, such as the one that followed the collapse of Lehman Brothers in 2008, and a wave of “acute deleveraging”.

“Because Treasuries have historically been viewed as the world’s safest asset, they are the most widely used collateral in the world and underpin large parts of the financial markets.

A default could trigger a wave of margin calls and widening of haircuts on collateral, which in turn could lead to deleveraging and a sharp drop in lending,” Mr Zames said.

The letter was released 10 days before the launch of a new round of high-stakes fiscal negotiations to be led by Joe Biden, US vice-president.

Senior administration officials have said they have received assurances from Republican leaders that they understood the high stakes involved in the discussion on raising the debt ceiling and would avoid pushing the US towards default.

But Republicans remain adamant that they want to take advantage of the need to raise the debt limit in order to extract additional budget cuts – and stringent fiscal rules on government spending over the long term.

That position appears to have hardened during the Easter break.

“If the president doesn’t get serious about the need to address our fiscal nightmare, there’s a chance [a debt ceiling vote] could not happen,” John Boehner, the Republican Speaker of the House, told Politico on Monday.

“But that’s not my goal.” “The world is watching, and while America must pay its bills, if we ask for more credit, we must prove worthy of it,” a spokeswoman for Eric Cantor, the House majority leader, told the Financial Times.

“That’s why President Obama, vice-president Biden and the leaders of their party are obligated to ensure that any debt limit increase is accompanied by serious reforms that immediately reduce federal spending and reverse the culture of debt hovering over Washington.”

Some budget analysts in Washington believe that a short-term extension of the debt limit, as long as it is worth less than $1,000 billion, could ultimately be agreed in order to give lawmakers a few more months to hash out a more lasting deal.

But House Republicans – even amid mounting pressure from Wall Street – may well resist, depending on the details.

Oil Crisis Just Got Real: Sinopec (Read China) Cuts Off Oil Exports

Source: ZeroHedge

Author: Tyler Durden

As if a dollar in freefall was not enough, surging oil is about to hit the turbo boost, decimating what is left of the US (and global) consumer. Xinhua, via Energy Daily, brings this stunner: ” Chinese oil giant Sinopec has stopped exporting oil products to maintain domestic supplies amid disruption concerns caused by Middle East unrest and Japan’s earthquake, a report said Wednesday. The state-run Xinhua news agency did not say how long the suspension would last but it reported that the firm had said it also would take steps to step up output “to maintain domestic market supplies of refined oil products”. Oh but don’t worry, those good Saudi folks are seeing a massive drop in demand… for their Kool aid perhaps. “Sinopec would ensure supplies met the “basic needs” of the southern Chinese special regions of Hong Kong and Macao, but they also should expect an unspecified drop in supply, Xinhua quoted an unnamed company official as saying.” Now… does anyone remember the 1970s?

The report said Sinopec has raised output of refined oil products this year, with its first-quarter production reaching 31.55 million tonnes, an increase of 6.2 percent from the same period last year.

Sinopec last month said its 2010 net profit rose nearly 14 percent on higher oil prices and strong domestic demand for refined oil and chemical products.

It reported a net profit of 71.8 billion yuan ($11 billion).

The Beijing-based company attributed the result to China’s rapid economic growth, robust oil demand and “the increase in the price of crude oil, oil products and petrochemical products.”

It had said at the time that it would continue to “expand markets” in China and overseas this year, while intensifying its exploration efforts in the country’s western regions.

Oil prices have surged on supply concerns as governments in the oil-rich Middle East and North Africa are hit by popular uprisings, while the Japan quake and resulting nuclear crisis led the country to seek other forms of energy other than atomic.

Read More:

Huge Gold Nugget Ignites Gold Rush

Largest Banks Likely Profited By Borrowing From Federal Reserve, Lending To Federal Government

A newly-released study from the Congressional Research Service bolsters claims that the nation's largest banks profited off the Federal Reserve's financial crisis-era programs by borrowing cash for next to nothing, then lending it back to the federal government at substantially higher rates.

The report reinforces long-held beliefs that the banking system in essence engaged in taxpayer-financed arbitrage: They got money for free, then lent it back to Uncle Sam while collecting juicy returns. Left out of the equation are the millions of everyday borrowers, like households and small businesses, who were unable to secure loans needed to tide them over until the crisis ended.

The Fed released records under pressure in December and March that showed the extent of its largesse. The CRS study shows for the first time how some of the most sophisticated financial firms could have taken the Fed's money and flipped easy profits simply by lending it back to another arm of the government.

The report was requested by Sen. Bernie Sanders (I-Vt.), who likened the crisis-era emergency loans to "direct corporate welfare to big banks," in a statement. The cash likely was lent back to Uncle Sam in the form of Treasuries and other debt "instead of using the Fed loans to reinvest in the economy," Sanders added.

In all, more than $3 trillion was lent to financial institutions from the Fed, and terms were generous. Junk-rated securities were pledged as collateral for taxpayer-backed loans. The Fed did not provide conditions for how the money was to be used.

As part of one Fed program, on 33 separate occasions, nine firms were able to borrow between $5.2 billion and $6.2 billion in U.S. government securities for four-week intervals, paying one-time fees that amounted to the minuscule rate of 0.0078 percent.

In another, financial firms pledged more than $1.3 trillion in junk-rated securities to the Fed for cheap overnight loans. The rates were as low as 0.5 percent.

During one three-month period in 2009, Bank of America borrowed more than $48 billion at rates ranging from 0.25 to 0.5 percent. Meanwhile, the largest U.S. lender tripled its holdings of Treasuries and other taxpayer-backed debt to about $15 billion -- securities that yielded 3.5 percent.

During the third quarter of 2009, the bank borrowed $2.9 billion from the Fed through a program that charged 0.25 percent interest. In that same period, Bank of America increased its holdings of taxpayer-backed federal debt by $12 billion, according to the Congressional Research Service. Those securities yielded an average of 3.2 percent.

"Bank of America provided vital support to the economy throughout the financial crisis and we continue to support businesses and individuals today through our lending and capital raising activities," spokesman Jerry Dubrowski said in an email.

In another period, JPMorgan Chase, the second-largest bank, swelled its holdings of taxpayer-backed federal debt by $20 billion, which yielded 2.1 percent, while at the same time borrowing $29 billion from the Fed at a rate of 0.3 percent.

JPMorgan did not respond to a request for comment.

In contrast, during the first year of the Obama administration, small businesses shuttered due to lackluster sales and a lack of credit, foreclosures surged, and credit contracted at one of the quickest rates on record.

"Why wasn't the Fed providing these same sweetheart deals to the American people?" asked Warren Gunnels, senior policy adviser to Sanders. "The Fed was practicing socialism for the rich, powerful and the connected, while the federal government was promoting rugged individualism to everyone else."

At the time, Fed officials said its bailout programs were necessary to restart the flow of credit. If money couldn't flow to lenders, households and businesses would be next. Even more layoffs and foreclosures could have ensued, officials argued.

Lending, however, decreased, according to Fed and Federal Deposit Insurance Corporation data. Mortgage rates dropped, but mortgages were harder to come by. Credit card lines were slashed. Loans were called in. New financing plunged. In 2009, outstanding credit to U.S. households declined by $234.5 billion. For non-corporate businesses, credit plunged $296.1 billion, Fed data show.

Sanders said the spread between firms' borrowing rates and their lending rates to Uncle Sam amounted to "free money." For Bank of America during the third quarter of 2009, the spread was nearly 3 percent.

Dubrowski countered by pointing out that Bank of America "extended $184 billion in credit to individuals and businesses" during that time.

The author of the CRS report, Marc Labonte, cautioned that "correlation does not prove causation."

"There is no information available on how banks used specific funds borrowed from the Federal Reserve," he wrote.

The Federal Reserve declined to comment.

CRS on the Federal Reserve's Bailout

Obama orders $25 million in aid to Libyan rebels

Libyan rebels pose with their weapons
© AFP Borni Hichem

WASHINGTON (AFP) - US President Barack Obama on Tuesday formally ordered a drawdown of $25 million in urgent, non-lethal American aid to Libyan rebels fighting Moamer Kadhafi.

The grant of funds to Libya's Transitional National Council, which had been signaled last week, was contained in a memo from the president to Defense Secretary Robert Gates and Secretary of State Hillary Clinton.

Officials said last week that the aid could include vehicles, fuel trucks, ambulances, medical equipment, protective vests, binoculars, and radios.

The formal granting of US aid came on a day when British Defence Secretary Liam Fox said in Washington that Libya's rebels had gained "momentum" on the battlefield and that Kadhafi's regime was on the "back foot."

After nearly three hours of talks at the Pentagon with Gates, Fox painted an optimistic picture of the Libya conflict despite fears on both sides of the Atlantic that the war could turn into an open-ended stalemate.

A NATO spokeswoman meanwhile said that the alliance was considering sending a civilian "contact point" to Libya's eastern rebel bastion of Benghazi in order to improve political relations with the opposition.

© AFP -- Published at Activist Post with license

Fed chief to give historic press briefing

Billions if not trillions will hang on Bernanke
© AFP/Getty Images/File Jonathan Ernst

WASHINGTON (AFP) - The Federal Reserve's Ben Bernanke will give the central bank's first-ever post-meeting briefing on Wednesday, hoping to make a little -- but not too much -- Fed history.
In its 97 years the Federal Reserve has never answered questions after a meeting of its top policy-making panel.

That will all change on Wednesday at 14:15 in Washington (18:15 GMT), when chairman Ben Bernanke makes a brief statement and then takes questions from the press.

It is a seemingly small step, but is close to revolutionary for the ordinarily reserved bank -- with far-reaching implications for economic policy and the markets.

While Bernanke often comments on thorny and even politically charged topics, he usually does so via written statements, speeches delivered verbatim or carefully prepared congressional testimony.

But on Wednesday every ad-lib response about rising petrol prices, Fed stimulus spending and US debt will be parsed by investors, with billions if not trillions of dollars depending on his tone, demeanor and word selection.

"There is little room for error," said Ryan Sweet of Moody's Analytics. "Miscommunication could rattle financial markets and create additional uncertainty."

On currency markets, for example, trader Kathy Lien predicts the dollar's value could rise -- making many US exports more expensive -- "simply because Bernanke did not say anything particularly damaging."

If that were not enough pressure, Bernanke's "'body language' may matter as much for the perceived success of the press conferences as the technical precision of his answers," according to Goldman Sachs economist Andrew Tilton.

Even for a seasoned public speaker like Bernanke, the scope for error is almost limitless.

For a start, the press conferences will give Bernanke more opportunity than usual to make a mistake.

The Fed's top interest-rate setting panel is used to issuing a roughly 400-word statement after its regular meetings.

But if Bernanke copies his counterpart at the European Central Bank, he is likely to utter more than 2,000 words during the 45-minute question and answer session.

Even if he avoids roiling markets by sounding more or less optimistic than expected, he could still upset the public and damage the Fed's broader standing.

On gasoline prices, for example, Bernanke will have to temper empathy for Americans who are angry about high prices at the pump with his view that energy and food prices do not matter too much when thinking about inflation risks.

He could also veer into non-policy trouble.

His ECB counterpart Jean-Claude Trichet was once heckled at a press conference in Germany for mentioning the national team's soccer World Cup defeat at the hands of Spain the night before.

"The press conference presents both risks and opportunities for Chairman Bernanke and the Fed," said Goldman Sachs's Tilton.

Tilton said the press conferences, coming directly after meetings of the Federal Open Market Committee, give Bernanke an all-important first opportunity to set the tone of debate.

In recent months some of his nine colleagues on the committee have expressed a more strident tone on tackling rising prices, skewing expectations away from the panel's majority view, which is more concerned about high unemployment.

That has spurred fierce criticism of the Fed's recent stimulus policies, including the purchase of $600 billion worth of US bonds, which Bernanke is expected to signal is coming to an end.

But given the pitfalls, many analysts expect the Fed chair will be ultra-cautious.

"We expect the chairman to choose his words very carefully," said David Resler and Aichi Amemiya of the Japanese investment bank Nomura.

"In any event, we believe this press briefing will prove to be an important new step toward greater transparency about policy," they added.

Whatever Bernanke says, it could be a radical change for an institution that just decades ago did not even inform the public about its interest rate decisions.

© AFP -- Published at Activist Post with license

CME Margin Cold Water for Red Hot Silver

Silver cracks, a little.

An excerpt of Sunday’s full Got Gold Report.

HOUSTON -- Red hot silver got a little official cold water thrown on it by the CME on Monday. The exchange raised COMEX Silver futures spec and maintenance margins on the big 5,000-ounce contracts by about 9% effective Tuesday, April 26. It is not all that surprising to see an immediate selloff tied directly to margin hike news, so we cannot be surprised by the harsh reversal in silver.

20110426SLV Graph A
SLV, 5-day, 30 minute trading bars as a proxy for silver. If any of the images are too small click on them for a larger version.

The focus now shifts to where silver will end up finding strong support.

As a reminder, Vultures should log in and check the April/May update for our Vulture Bargains now. Today we named a new VB, our ninth.

GGR Excerpt

Just below is an excerpt of the full 32-page Got Gold Report which was delivered to paying GGR subscribers on Easter Sunday, April 24, 2011.

Silver COT

(SLV, 5-day, 30-minute trade bars, as a proxy for silver trading this Easter Week. If any of the images are too small click on them for a larger version.)

White hot silver motorized higher another $3.88 or 9.7% COT reporting Tues/Tues, from $40.06 to $43.94 (again the highest close on a COT reporting date for this silver bull yet). Silver bears seem to be in full retreat, the price action confirms it, but curiously there has been little in the way of observable short covering in N.Y. futures.


The combined COMEX large commercial traders as a group added an astonishingly small 1,413 contracts to 52,692 contracts net short (LCNS). Recall that the prior week the LCs reduced their net short positioning by a large 5,135 contracts, so with silver powering $3.88 higher this week they did not even replace that which they covered the week before. Not even close. The open interest for silver increased by a tiny 311 contracts to 144,981 lots open.

Just below is the nominal LCNS graph for silver futures.

Source CFTC for COT data, Cash Market for silver.

We are at a loss to describe how surreal it is to see the silver price hurtling skyward with so little in the way of opposition coming in from the traditional short side. Just as we saw in late 2010, silver is screaming higher, but instead of the LCNS rising apace, thus showing confidence by the “COMEX price police” that the price of the metal will move lower (even if perhaps not right away, but relatively soon), the Big Sellers of silver futures have been more in retreat than anything.

How long can such a situation last? We think it can last until there is a material amount of silver called back into the market.

What can call in a material amount of silver back to the market? Significantly higher prices in USD terms is one answer. Apparently, as of Thursday, the “magic level” required to produce a flood of silver metal back to the market in amounts sufficient to quell the exploding demand for it has yet to occur.

As we do with gold, we compare the nominal silver LCNS to the total open interest. We think that gives us a better idea of the relative positioning of the largest hedgers and short sellers – the Producer/Merchants and the Swap Dealers combined into a single category – compared to all the other traders on the COMEX.

When compared to all contracts open, the relative commercial net short positioning (LCNS:TO) for silver did actually increase this reporting week, but only by the smallest of margins from 35.5% to 36.3% of all COMEX contracts open.

If one was looking for a sign of opposition or Big Seller confidence in lower silver prices, then one need look elsewhere for the evidence. It is not to be found in the relative net short positioning this week.

The silver LCNS:TO graph is just below.

Source CFTC for COT data, Cash Market for silver.

Apparently the Big Sellers have been racking up very large net losses with their legacy net short positioning, or they have been “rolling up” by closing out existing short positions and redeploying on up the price ladder in the hopes of catching a top, because otherwise the LCNS would be getting larger if they were simply adding to short positions or it would be getting appreciably smaller if they were doing more covering than new selling. We find it amazing and perhaps a little bizarre that there has been so little change in the amount of commercial net short positioning or for that matter in the silver futures open interest as silver ran up through the $20s, the $30s and now the $40s.

Indeed, back in August, with silver then in the $18s, the silver LCNS was around 52,000 contracts, or just about what it was this past Tuesday at $43.94 silver (more than double the price). In September, with silver then in the $20 neighborhood, the open interest was then roughly 145,000 contracts, or roughly what it was this reporting week.

However, this week the pace of advance for silver has accelerated to a parabolic pace and late week we could not help but notice that the COMEX open interest had moved sharply higher, up to 156,641 contracts as of Thursday’s close. So perhaps with silver having advanced a whopping 8.4% in a single week the usual “opposition” is feeling bold enough to take the short side once again. We’ll see soon enough.

Having said that, there are other factors that will soon come into focus that the bears need pay attention to.

Silver Extreme Backwardation

Just below we are copying the silver futures strip from our own trader’s journal for reference.

20110426SilverFuturesStripGraph 5
We have chosen to ignore the late electronic trades on Good Friday, as they are suspect given the extremely light liquidity involved. Instead, we will “go” with the Thursday close of $46.65 as a benchmark (knowing full well that a supply squeeze is underway on silver).

Note that even with the Thursday $46.65 close, all of the forward futures are well under that price, so backwardation in silver continues. Note that there is some slight contango in the relationship of all of the 2011 silver contracts (green), but then each successive month falls slightly in price (red). Note also that although the roll to July has begun in earnest, there remains an open interest in the May contract of 46,839 contracts.

That figure could become important just ahead if enough of the holders of those silver contracts decide to stand for delivery of physical metal. Importantly, as of Thursday, the Registered inventory of silver metal in COMEX approved warehouses showed about 35.7 million ounces. It is the Registered category of metal that literally backs up the COMEX futures contracts. As of Thursday, there was enough silver metal on hand at the COMEX to cover about 7,144 contracts, or roughly 15% of the May open interest. (7,144 contracts is less than 5% of the Thursday total open interest.)

5-Million Ounces Gone from COMEX Registered Inventory – One Week

What is particularly interesting about the above figures is that this week’s Registered silver inventory at 35.7 million ounces is more than 5.3-million ounces less than what it was when we marked it last week. The majority of that silver was converted from Registered to the Eligible category at the COMEX, meaning that some large players decided to have their metal allocated and removed from “play.”

We do not see 5-million ounce changes in the inventory every week, or even very often. Clearly the rumors of a silver squeeze have put traders into action, rightly or wrongly. Just as clearly, there are not now sufficient metal resources to cover very much of the COMEX futures action. It does not strain the imagination one bit to consider the very real possibility of a COMEX supply squeeze for silver at the moment, does it? Link to the COMEX inventory:

The idea dovetails with the many reports of supply shortages of commercial sized bars of silver in other venues, while at the same time, other, smaller and more “retail” types of material seem relatively plentiful at the moment (such as so-called “junk silver” and smaller retail bars).

We have noted the very heavy demand for commercial size physical silver and the recent disproportionately high inflow for silver relative to gold reported by dealers and bullion houses. We have spoken of the conversion of unallocated metal to defined metal, short covering of “paper silver” and a growing realization by the market that physical silver in commercial sized good delivery bars is insufficient to answer the current demand. We noted that condition has not only led to a rapidly rising price for silver and a plunging gold/silver ratio, it has also apparently discouraged the usual Big Sellers of silver futures from attempting to force the issue to the downside, likening it to stepping in front of a Silver Express freight train.

How much longer can such a condition last? It will last until significant amounts of silver appear to answer the now rapidly escalating prices, that’s when, and not a moment before. Now, witness the flight of over 5-million ounces of silver metal from the COMEX line of fire to the sideline “safety” in the Eligible category.

Repeating: We believe that at some point the much higher prices will call latent silver back into the market in elevated enough amounts to temporarily satisfy the burgeoning demand, but as of (Thursday) we can see no sign of that condition in either the price action or in the positioning of futures traders, … but we now suspect that silver could be mobilized very shortly ahead if the parabolic price rise either continues into the $50s, or if it were to reverse suddenly. Either one might be sufficient to call metal back into the market temporarily, but we think only temporarily as of now. We are convinced that we are in for a period of wild, trader testing volatility just ahead. Fasten seat belts, hang on, lash yourself to the railing and man battle stations. We sense heavy weather just ahead for both sides of the price battlefield.

As we have said here many times, we have no desire to sell any of our own accumulated silver metal. Rather, we intend to take advantage of the collapsing gold/silver ratio to use our silver as a leveraged way to trade it like-for-like for gold metal. Vultures already know our plans along those lines, so we won’t repeat them again here, but the time for action – for the first tranche of silver to gold conversion is nigh.

(End of excerpt)

We may publish another excerpt of the GGR in the coming days, so stay tuned.

That is all for now but there is more to come.


Obama Wants Gas Prices to Hit European Levels