Saturday, May 14, 2011

IMF warns EU debt crisis may still spread to core

Christiaan Hetzner and Dina Kyriakidou

FRANKFURT/ATHENS (Reuters) – Despite bailouts for Greece, Ireland and Portugal, Europe's debt crisis may yet spread to core euro zone countries and emerging Eastern Europe, the International Monetary Fund said on Thursday.

The stark warning came as government sources in Athens said international inspectors checking on Greece's compliance with its EU/IMF rescue package had found problems and were pressing for deeper spending cuts to cover a likely revenue shortfall.

"Contagion to the core euro area, and then onward to emerging Europe, remains a tangible downside risk," the global lender's latest economic report on Europe said.

A Reuters poll of investors and economists showed an overwhelmingly majority believe Greece will restructure its debt, possibly as soon as later this year. Most fund managers expect Athens to pay back less than half of what it owes.

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New Yorkers under 30 plan to flee city, says new poll; cite high taxes, few jobs as reasons

Wiki Commons
Kenneth Lovett
NY Daily News

ALBANY - Escape from New York is not just a movie - it's also a state of mind.

A new Marist College poll shows that 36% of New Yorkers under the age of 30 are planning to leave New York within the next five years - and more than a quarter of all adults are planning to bolt the Empire State.

The New York City suburbs, with their high property values and taxes, are leading the exodus, the poll found.

Of those preparing to leave, 62% cite economic reasons like cost of living, taxes - and a lack of jobs.

"A lot of people are questioning the affordability of the state," said Lee Miringoff, director of the Marist College Institute for Public Opinion.

An additional 38% cite climate, quality of life, overcrowding, a desire to be closer to family, retirement or schools.

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Carl Seel: Lawmaker Responds To $100K Mortgage Principal Reduction By Dropping Legislation

Arizona Rep. Carl Seel was supposed to propose an amendment to hold lenders accountable in foreclosure situations, but at the last minute he didn't. At the same time the principal on his mortgage was reduced by more than 50 percent. Coincidence? You decide.

Get more detail here...


The U.S. and Its Allies Will Do Anything to Prevent Democracy in the Arab World

Prominent American academic Noam Chomsky said the US and its allies will spare no effort to prevent democracy in the Arab World, as they fear losing their clout in the region.

During the 25th anniversary celebration of the national media watch group Fairness and Accuracy in Reporting in New York, Chomsky drew up his views about the popular revolutions sweeping across the Middle East and North Africa, expressing doubt that the US would allow authentic democracies to flourish in the region, reported Democracy Now on Wednesday.

“Across the [Middle East], an overwhelming majority of the population regards the United States as the main threat to their interests,” Chomsky said. “The US and its allies will do anything they can to prevent authentic democracy in the Arab world.”

“The reason is very simple… Plainly, the US and its allies are not going to want governments which are responsive to the will of the people. If that happens, not only will the US not control the region, but it will be thrown out,” the Jewish-American political analyst added.

Elsewhere in his remarks, Chomsky turned the spotlight on the ongoing anti-government protests in Bahrain, where people have been demonstrating since February 14 to put an end to the rule of the Al Khalifa dynasty and urge sweeping reforms.

He maintained that if ongoing movements correspond to the United States’ strategic and economic goals, officials in Washington would be quick to throw their weight behind any uprising, otherwise they would show scant enthusiasm to advocate any change that might run counter to their interests.

“If actions correspond to our strategic and economic objectives, that’s OK. We can have elegant rhetoric, but what matters is facts,” Chomsky noted.

“Actually, the most interesting case in many respects is Bahrain. Bahrain is quite important for two reasons. One reason, which has been reported, is that it’s the home port of the US Fifth Fleet, major military force in the region,” he said.

“Another more fundamental reason is that Bahrain is about 70 percent Shia, and it’s right across the causeway from eastern Saudi Arabia, which also is majority Shia and happens to be where most of Saudi oil is,” the 82-year-old senior academic noted.

He went on to say that as for oil-rich countries such as Libya, the US and its allies are more inclined to “get a more reliable dictator” and banish an “oil-rich dictator who’s not reliable, who’s a loose cannon. That’s Libya.”

Chomsky argued that the United States fears that it will eventually be forced out of the region if governments springing from the sovereign will of the people emerge in the region.

Source: Democracy Now

Gold Bet Pays Off as Dollar Tumbles

A woman walking by a box filled with fake 5,000 ruble notes in a marketing stunt. The ruble is gaining this year.
Igor Tabakov / MT

A woman walking by a box filled with fake 5,000 ruble notes in a marketing stunt. The ruble is gaining this year.

Click to view previous image 1 of 2 Click to view next image

With gold prices hovering around record highs of $1,515 an ounce and the U.S. dollar tumbling against the ruble, a recommendation by Vladimir Putin five years ago to buy more gold looks extraordinarily farsighted.

Putin, then the president, suggested in November 2005 that the Central Bank increase the share of gold in its reserves, just as gold prices hit an 18-year peak of $493 an ounce.

"In gold," Putin added, speaking during a tour of the Magadan region, "the Russian population could find an investment alternative to the dollar and euro."

A month later, the Central Bank started a tangible buildup of the gold stock in its vaults, its data show.

Gold accounted for $3.7 billion of its reserves in 2005, measuring between 3 percent and 2.2 percent of the total, as the dollar portion grew. But by this month, the proportion of gold in its reserves had reached 7.8 percent, the bank said. It has said it was considering boosting the share to 10 percent.

The bank's ongoing efforts to buy gold are taking on a new shine now that many economists spell doom and gloom for the U.S. dollar, which could weaken further as the U.S. government struggles with an enormous $14 trillion debt.

There's a chance that the United States will opt for a currency emission to ease its debt burden, which would further reduce the value of the greenback, said Alfa Bank economist Natalya Orlova.

"This risk is considerable," she said.

The argument against putting too much gold in the reserves is the limited liquidity of the commodity, Orlova said.

International Monetary Fund data released last week show that the Central Bank increased its gold reserves by 18.8 tons to 811.1 tons in March. The World Gold Council ranks the regulator as the eighth-largest holder of the metal among central banks worldwide.

The United States tops the World Gold Council's list with a long stable 8,133 tons, or 75 percent of its reserves, followed by Germany and the International Monetary Fund.

The Central Bank bought 136.6 tons of gold last year. Its first deputy chief Georgy Luntovsky said in January that the regulator looked to buy at least 100 tons of the metal every year.

Gold also beckons other emerging economies that are wary of the dollar. Mexico boosted its gold stock in February and March by a massive 93.3 tons worth more than $4 billion, adding to holdings of a mere 6.9 tons, according to the IMF.

A Central Bank spokesman declined comment Thursday.

While justifying the Central Bank's gold policy, the sliding dollar also helps the country's fiscal authorities by taming inflation.

Russia imports a lion's share of its consumer goods — meaning the weaker the dollar, the less people spend on both staples and durable goods.

The dollar edged up 1.2 percent to 27.9 rubles on Thursday as Urals crude, Russia's main export, stayed almost unchanged at $110.60 a barrel.

As of May 5, the ruble has appreciated 12 percent since the start of this year on the back of expensive oil. This came despite the huge capital outflows of almost $50 billion in the past eight months, which went a long way toward offsetting the effect of higher oil prices, Alfa Bank said.

A strong ruble hurts exporters, who earn fewer rubles for their oil, natural gas and metals on the foreign markets at the same time as their ruble-denominated expenses to produce the resources increase every year with inflation.

Exporters brought up the issue at a meeting with Prime Minister Putin last month, and he ordered the government to consider weakening the ruble. Finance Minister Alexei Kudrin said later that he preferred lower inflation — and the lower loan rates for a recovering economy — over a weaker ruble. But he admitted that every ruble off the dollar's value will deprive the federal budget of 204 billion rubles in revenues this year if the oil price stays at the current level.

The Central Bank made an attempt for lower inflation when it increased its key refinancing rate to 8.25 percent at the end of last month, Otkritie chief economist Vladimir Tikhomirov said. The regulator is likely assessing the impact of the recent jump in gasoline prices before it makes further moves, he said.

The inflation rate, which now looks on track to reach upward of 9 percent, could slow down considerably in the second half of the year, Tikhomirov said. The reasons include a lower base for comparison — or a lower rate in the same period last year — and the chance of a good harvest that would cause food prices to go down, he said.

The ruble will weaken only with a drop in oil prices rather than due to any Central Bank intervention, he said.

In what looks like proof of this viewpoint, the Central Bank didn't bother snapping up too many dollars on the market in April — a strategy that helped the ruble to appreciate. It said Wednesday that it had bought a total of $3.66 billion, the lowest level since January.

By buying and selling dollars, the bank manages the ruble's exchange rate.

Treasury Auctions To Take US Over Debt Ceiling On Monday

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

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

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

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

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

House Speaker John Boehner (R., Ohio) said Monday that any increase in the government's debt limit should be accompanied by trillions of dollars in spending cuts.

"It's true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt limit without simultaneously taking dramatic steps to reduce spending and to reform the budget process," he said.

The federal budget deficit widened in April, with the government spending $ 40.49 billion more than it collected last month, a Treasury Department report said Wednesday.

The deficit was the 31st monthly shortfall in a row. With seven months of fiscal 2011 elapsed, the government has spent $869.90 billion more than it has collected.

Even the most aggressive plans wouldn't wipe out budget deficits for years, meaning that debt will continue to mount.

-By Jeffrey Sparshott

Rand Paul: Does Obama Have An Enemies List?

Gerald Celente -- 'Gold standard won't save US'

Video: War Criminal Condi: 'Al Qaeda Is A Greater Threat Than Nazi Germany, And Waterboarding Isn't Torture'

Earlier we saw this enjoyable exchange at Stanford as Rice was called a war criminal by righteous protesters...

So we decided to go deeper into the heart of the beast with this clip.

Video - Condoleezza Rice chats with Stanford students - April, 2009

  • "Nazi Germany never attacked the homeland."
  • "We did not torture anyone."

When Condi can't answer the student's questions, she changes the subject and tells the kid:

  • "Do your homework next time."

Well Condi, here's some homework for YOU. Meet Kahlid El-Masri. Want to claim he wasn't tortured? Actually, Condi knows he was tortured. Here's the Wikileaks cable to prove it.

Video - Khalid El-Masri, victim of torture and mistaken identity

Khalid El-Masri - Wikipedia

Update: What Taxpayers Need To Break Even On A.I.G.

AIG closed barely above $30 today, and 300 million shares won't be easy to place, not with current financials. Daytrading fools kept AIG too high for too long. Institutions are balking at anything above $27, and that means a loss for Treasury, who now threatens to postpone the offering.

AIG's $9 Billion Offering Could Be Pulled - Reuters


Source - NYT Dealbook

The Obama administration has said the $130 billion bailout of American International Group could one day produce a profit for taxpayers.

But that could take a while, if it happens at all. On Wednesday, A.I.G. unveiled plans for a stock offering that was much smaller than once expected.

The offering, which will include the sale of 200 million shares by the government and another 100 million shares by A.I.G., would reduce the government’s stake in the insurance giant to 77 percent from 92 percent.

The government spent $47.5 billion buying up more than 1.6 billion common shares from A.I.G. to save the company from collapsing. For the Treasury Department to recoup that investment, A.I.G. must sell the 1.6 billion shares at roughly $29 a share — and that is hardly a guarantee. Still, A.I.G.’s shares did close at $30.65 on Wednesday, up $1.03 for the day.

A.I.G. Outlines Share Sale Plan

Great Wall St.: Goldman Sachs & Co betting on yuan?