Tuesday, July 23, 2013

Three banks decline Buena Vista School District for last-minute loan

Buena Vista Schools reopen on May 20, 2013 after two-week shutdown
A faculty member arrives for the first day of class at Buena Vista High School Monday morning, May 20, 2013 after the school district was shut down for two weeks due to budgetary problems. (Jeff Schrier | MLive.com)

BUENA VISTA TOWNSHIP, MI — Buena Vista School District officials have fewer than five hours to find a private loan to keep the struggling district afloat.
Superintendent Deborah Hunter-Harvill said she’s contacted five banks about a loan, and three have sent messages in writing to decline.
“As the deadline looms, I’m staying upbeat and positive,” she said. “So far, I don’t have anything.”
On Thursday, July 17, State Superintendent Mike Flanagan and State Treasurer Andy Dillon gave Buena Vista and Inkster schools two days — until 5 p.m. Monday — to secure a private loan or face dissolution. Inkster officials already had started the process, and state officials gave Buena Vista the same option.
Buena Vista Board of Education President Randy L. Jackson last week called the deadline unreasonable but said district officials would fight to get the necessary funding.

If Buena Vista leaders are unable to find a loan, a lead on loan or viable operation plan for the fall, the Saginaw Intermediate School District will dissolve the district and redraw boundaries with neighboring districts. If the intermediate district failed to act, Flanagan and Dillon would step in.

Flanagan and Dillon said Buena Vista meets all six requirements for dissolution under a new state law.

Buena Vista School District ran out of money to make payroll after the Michigan Department of Education stopped state funding to recoup money overpaid to educate students not served by the district.
As a result, Buena Vista closed for two weeks in May. The district's deficit elimination plan, submitted to the state, was accepted on the third try. That allowed the state to release up to $460,000 in state aid, and classes resumed. The last day of school was June 26.
The district has a $3.7 million budget deficit, a $2 million loan due to the state treasury in 2014 and less than $2,000 in the bank.

Another Key Wall Street Master of the Universe to Elude Penalties for Alleged Fraud

banksters7 22Goldman Sachs, JP Morgan Chase...Just Fill in the Blank. Card is Transferable to Any Wall Street Master of the Universe.No, this is not yet another commentary about a top Wall Street player escaping potential criminal charges.  Criminal charges?  Are you kidding?  Going to jail or even being criminally indicted is about as likely for a Wall Street master of the universe as Edward Snowden getting a free ride on Air Force One and joining the Obama family on a Christmas vacation trip to Disney World.
No this column is about a key Wall Street executive, Blythe Masters, who the New York Times (NYT) reports is likely to escape even US government-assessed civil damages for what is alleged fraudulent trading (to increase profit) of electricity prices in California and Michigan:
Even as the nation’s top energy regulator is poised to extract a record settlement from JPMorgan Chase over accusations that it manipulated power markets, the agency is expected to spare a top bank lieutenant who federal investigators initially contended made “false and misleading statements under oath,” according to people briefed on the matter.
Blythe Masters, a seminal Wall Street figure who is known for developing exotic financial instruments, emerged this spring at the center of an investigation by the Federal Energy Regulatory Commission [FERC] into accusations of illegal trading in the California and Michigan electricity markets.
Of course, BuzzFlash at Truthout cannot say whether or not the allegations against Ms. Masters are accurate or provable, but the NYT notes:
The regulator [FERC] found that JPMorgan designed trading “schemes” that converted “money-losing power plants into powerful profit centers,” a commission document said.
While the commission and JPMorgan are negotiating a settlement for about $500 million, the people briefed on the matter said, Ms. Masters is not expected to face a separate action....
Months earlier, investigators planned to recommend that the regulator find Ms. Masters, who holds a powerful position within JPMorgan as the head of its commodities business, “individually liable.” But as the investigation progressed, these people said, top energy regulatory officials have been leaning toward not pursuing any civil charges against Ms. Masters....
Ms. Masters formed close ties with Jamie Dimon, the bank’s chief executive, who has moved to shore up support for her, according to people close to the bank. The two were bound by their belief that the commodities business was critical to JPMorgan’s growth.
Would that be the Jamie Dimon who sloughed off the Libor scandal, is BFF of President Obama, and who receives government coordinated protection from time to time?  Yes it is.
As for Masters, she is not just a member of the Wall Street impunity crowd that controls much of the nation's wealth (unless their gambles fail and they request taxpayer subsidies to bail them out). According to the NYT, Ms. Masters is one of the primary creators of the very exotic financial "instruments" that were a key contributor to the US economic crash of 2008:
Within Wall Street, Ms. Masters is widely considered a pioneer for her use of credit derivatives, the complex financial products that played a central role in the 2008 financial crisis. Rising through the ranks of JPMorgan — she was the youngest managing director at 28 — Ms. Masters became one of the most powerful executives on Wall Street, propelled by a vision that the products could radically remake the banking industry.
Okay, time for a recap.  JP Morgan Chase is negotiating to pay a $500 million fine for manipulation of energy markets, reportedly overseen by Masters. FERC is backing off holding the person who allegedly masterminded the scheme accountable.
How many times have we said this? It's deja vu all over again.
No one is even discussing, as far as the NYT reveals, criminal prosecution.  As has been standard for the Obama administration, the $500 million fine would come out of the company's balance sheet, which would affect stock holders but not the executives who oversaw the scheme.
A July 18th NYT article starkly states:
Under “pressure to generate large profits,” investigators said in the March document, traders in Houston devised a solution. Adopting eight different “schemes” between September 2010 and June 2011, the traders offered the energy at prices “calculated to falsely appear attractive” to state energy authorities....
In the March document, the investigators elaborated on the bank’s pushback. The 70-page document said that the bank “planned and executed a systematic cover-up” of documents that exposed the trading strategy, including profit and loss statements.
The investigators also traced some of the obfuscating to Ms. Masters. After California authorities began to object to the bank’s trading strategy, Ms. Masters “personally participated in JPMorgan’s efforts to block” the state authorities “from understanding the reasons behind JPMorgan’s bidding schemes,” the regulator, known as FERC, said.
The investigators also cited an April 2011 e-mail in which Ms. Masters ordered a “rewrite” of an internal document that questioned whether the bank had skirted the law. The new wording: “JPMorgan does not believe that it violated FERC’s policies.”
Again, we don't know if these charges would be proved true or not in a regulatory agency hearing or court of law, but if they are accurate, wouldn't this constitute fraud?
And why is Jamie Dimon willing, it appears, to pay a half billion dollar fine out of his company's piggy bank if the accusations are false?
Good questions, but when you have Wall Street "sovereign financial immunity," the answers don't really matter, do they?
JP Morgan Chase executives are even paying fines with someone else's money.
(Photo: DonkeyHotey)

Europe's crisis states should fight back with a 'debtors' cartel'

Public debt levels are rocketing in almost every country of the eurozone periphery. Debt ratios are already crossing the point of no return in Portugal and Italy, and is nearing the danger zone in Ireland.

Public debt levels are rocketing in almost every country of the eurozone periphery. Debt ratios are already crossing the point of no return in Portugal and Italy, and is nearing the danger zone in Ireland.
Portugal's debt has just blown through the upper limits set by the EU-IMF Troika, reaching to 127.2pc of GDP in the first quarter of 2013. Photo: Bloomberg
The latest figures from Eurostat are shocking even to those who never believed that combined fiscal and monetary contraction -- made worse by bank curbs -- could have any other result than a faster rise in debt trajectories.
Portugal's debt has just blown through the upper limits set by the EU-IMF Troika, reaching to 127.2pc of GDP in the first quarter of 2013. This is fifteen percentage points higher than a year ago, the bitter fruit of austerity overkill. The Portuguese people have suffered year after year of cuts only to find themselves sinking deeper into a debt swamp.
Italy's debt has hit 130.3pc -- compared to 123.8pc a year ago -- rapidly spiralling beyond the safe threshold for a country without its own sovereign currency and central bank.
In Ireland, public debt has leapt by 18 points to 125pc in a single year. This is partly `pre-funding' to cover borrowing needs for 2014, but a slide back into recession accounts for a big chunk.
The former head of the IMF's team in Ireland, Professor Ashoka Mody, has called for "a complete rethinking" of the austerity strategy. He confirmed what the Irish trade unions and others have said along: that fiscal overkill is self-defeating, especially if compounded by tight money.
"Given the debt dynamics, if debt levels remain where they are and growth remains where it is, there is never going to be a reduction in the debt ratio the foreseeable future. Moving away from austerity at this stage is a sensible course of action," he said.
Ireland is certainly not a basket case. It has a fat trade surplus. Exports are 105pc of GDP, compared to 30pc or less most for Club Med. It is well able to compete at the current exchange rate.
Ireland's policy of austerity cuts and "internal devaluation" has done wonders for the trade account, but only at the cost of an even deeper debt-deflation crisis. This is the fundamental contradiction of EMU crisis strategy in every high-debt country. The more these economies deflate wages, the more they raise the real cost of debt.
In Ireland's case -- as in Spain -- this debt burden is the legacy of an almighty credit boom that was itself caused by EMU and years of negative real interest rates. The details are spelled out in a study entitled "What went wrong in Ireland" by Patrick Honohan, now central bank governor.
"These countries are walking a very fine line," said Marchel Alexandrovich from Jeffereies Fixed Income. "Once debt gets to the 130pc level there is a risk that markets will start to wake up. The moment truth could come as soon as political stability is called into question in any one of these countries."
Portugal has been flirting with just such a crisis ever since the finance minister and austerity chief, Vitor Gaspar, stormed out three weeks ago.
Portuguese bond rose Monday in a relief rally after the country's president backed down from threats to call a snap election, agreeing instead to let the crippled coalition of premier Pedro Passos Coelho limp on.
Yields on 10-year bonds fell 42 basis points to 6.2pc, back where they were before the constitutional crisis erupted. Yet it is a strange state of affairs when failure to form a "national salvation government" is greeted with delight by the markets. "The politics of economic reform in Portugal have become even more treacherous, and it is very unlikely that the political wounds that have opened up can be healed," said sovereign debt strategist Nicholas Spiro.
"Mr Passos Coelho's authority has now been undermined, and aggressive austerity has in any case completely failed. The public debt burden is rising at a frightening pace," he said.
The IMF warned last month that the debt outlook remains "very fragile" and that any external shock could push the country over the edge. It said a serious crisis could force the state to take on contingent liabilities and push debt to "clearly unsustainable" levels.
The country has to raise 23pc of GDP in funding this year and 22pc next year, when it is supposed to return to capital markets. External debt has reached 230pc of GDP. Nominal GDP has contracted over each of the last two years, causing the "denominator effect" to play havoc with debt dynamics.
Portugal's denouement is fraught with risk. Europe's leaders have given a solemn pledge that they will never again impose haircuts on banks, pension funds, and other investors holding EMU sovereign debt, tacitly recognizing that their experiment in Greece was calamitous.
So what will they do when the time comes? Do they impose tangible losses on German, Dutch, and French taxpayers for the first time? Does German finance minister Wolfgang Schauble ask the Bundestag to write a line into the budget worth €10bn or €15bn marked "Losses in Portugal", admitting at last that EMU bail-outs cost real money?
Or do the creditor states resile from this pledge -- as they have resiled from others -- and set off panic flight from Spanish debt, with instant knock-on effects in Italy?
Besides, having now imposed the "Cyprus template" of losses on bank depositors above €100,000 as was all bond-holders if lenders get into trouble, how can they hope to contain systemic banking crisis in Portugal if investors start to fear that the situation is getting out of hand again.
Societe Generale says EU leaders may tempted, unwisely, to think it is safe to impose private haircuts on the grounds own northern banks have greatly reduced their exposure top these countries. This how accidents happen.
There ought to be a point in this wretched saga when it is clear to the victim states, if it is not clear already, that solidarity rhetoric from the northern powers is contemptible deception, that the North still refuse to accept its joint responsibility for capital and trade imbalances that lie behind the EMU debacle, and still refuse to recognize that excess northern savings flooded Club Med, with the complicity of the European Central Bank.
There is condign retort to the creditor cartel. The peoples of southern Europe could at any time choose to form their own debtors cartel and turn the tables.
They could confront the creditors with a stern ultimatum. Either you change the entire structure of EMU crisis policy, agree to a reflation strategy, and accept your share of the clean-up costs for this collective disaster, or we repudiate our debts.
Either you meet us half way, or we take long overdue steps to protect our societies against mass unemployment, and to prevent our industrial base.
The current batch of Club Med leaders are too embedded in the EU Project to embrace such an idea, and still seemingly persuaded that recovery is nigh, so they allow themselves to be picked on one by one by the creditors cartel.
The current course is untenable. Markets may tolerate EMU debts of 130pc for a while, but they unlikely to tolerate levels nearing 140pc, or even any prospect of it.
The harsh truth is Europe failed to use the five year of the largesse created by the US Federal Reserve and the Chinese credit system after the Lehman crisis to resolve its internal mess. It needlessly pushed southern Euroland into a double-dip recession and ran a 1930s contraction policy.
It is time for Southern Europe to look after its own interest once again.

Detroit bankruptcy filing paves the way for assault on workers

Michigan Republican Governor Rick Snyder and Kevyn Orr, the emergency manager overseeing the financial restructuring of Detroit, defended their decision to force the city into Chapter 9 bankruptcy at a press conference Friday.

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The bankruptcy of Detroit, a city of 700,000 people, is the largest municipal bankruptcy in US history. It sets the stage for draconian attacks on workers and pensioners, the gutting of what remains of city services, and the sell-off of public assets to pay creditors.
The events in Detroit are being watched by local governments across the United States and will set a precedent for a nationwide assault on the pensions of public sector workers. Orr, who was appointed by Snyder last March, is seeking a ruling from a US judge that bankruptcy proceedings can be used to abrogate pension agreements, even those, as in the case of Michigan, that are protected under the state Constitution. The city owes about $9 billion to its retiree pension and health benefit funds.
Michigan Governor Snyder with Detroit Emergency Manager Orr at the press conference
Shortly after the press conference, a Michigan Circuit Court judge ruled that the bankruptcy filing violated the state Constitution by threatening to diminish the pension benefits of Detroit city workers. The governor’s office is appealing the ruling, which will likely be put on hold while the bankruptcy case proceeds in federal court.
Snyder oozed pious hypocrisy in his opening remarks, feigning concern for the plight of Detroit residents. At the same time, he praised billionaires like Quicken Loans Chairman Dan Gilbert and Little Caesar’s owner Mike Ilitch, who are buying up downtown property on the cheap in the hopes of turning a quick profit as developers pour money into the downtown area.
Both Snyder and Orr repeatedly cited “legacy costs”—that is, the pensions and health care benefits of the city’s 31,000 active and retired workers—as a major factor in the decision to file for bankruptcy. Under a proposal that Orr advanced earlier this year, pension funds would receive just 10 cents on the dollar for billions in the city’s unfunded pension obligations. Orr likewise proposed an immediate freeze on future pension payments and to shift retirees onto Medicare or privately-controlled health care exchanges under Obama’s Affordable Care Act. Current employees would also see drastic cuts in health benefits and the loss of employer-paid pensions.
The Obama administration, while signaling its support for the bankruptcy filing in Detroit, has made clear there will be no federal money made available to assist the city. This despite the $85 billion a month that the Federal Reserve is pumping into Wall Street through its “quantitative easing” program.
When a reporter for the World Socialist Web Site asked Orr why the city was only offering pension funds 10 cents on the dollar while some banks holding Detroit’s debt were being offered 75 cents on the dollar, the emergency manager defended his actions citing “the realities” of the situation.
Another reporter asked Snyder if city assets like Belle Isle and artwork from the Detroit Institute of Art would be put up for sale as part of the bankruptcy settlement. Snyder replied that “all the assets of the city need to be considered as part of this process.”
A WSWS reporter asked Snyder how he and Orr could claim that there was no money for pensions when hundreds of millions of dollars, including public money, are being poured into downtown development. In response the governor first cited years of waste and mismanagement of the pension system. He then cynically claimed to sympathize with the plight of the retirees.
For their part, the city worker unions have refused to mobilize their membership to oppose the moves by Orr and Snyder and only protested that the union leadership was excluded from the process of attacking worker’s pensions. In a statement on the bankruptcy filing, American Federation of State County and Municipal Employees (AFSCME) President Lee Saunders complained that the governor and the emergency manager had acted without first entering into negotiations with the unions. “Despite assurances from Snyder’s hand-picked financial manager Kevyn Orr that AFSCME would have ample opportunity to discuss alternatives, they unilaterally embarked on this treacherous path without meaningful input from those who would be most affected.”
Detroit city workers and residents responded to the proposal to rob them of their pensions with anger and disgust.
Ken, a worker contacted by the WSWS on Friday, said, “By calling workers’ pensions ‘legacy costs,’ they are saying our lives have no value. Jones Day [Kevyn Orr’s law firm] will make a killing off of this. They will handle the bankruptcy, no doubt, and the workers will be on the losing end.”
“The decision to file for bankruptcy is unfair and biased,” said Trandi, a former Ford employee and current city worker. “They are going after the workers but are protecting the businesses.”
“It is pitiful,” said Barbara, a retiree who has lived in the city for eleven years. “I have never seen anything like it. The reason they are doing the bankruptcy to me, boils down to the people who are running the city, the politicians and the rich business people. They are stealing the money.”
She was especially angry about the contrast between the vast investments and public subsidies for upscale downtown development and the savage attack on working class living conditions and city services. “They just take, take, take, take,” she continued. “They never do anything for the city. They want to build up the downtown and let the rest of us starve. How can we stand it?. They have been doing the same thing for 60 years, but it is just now coming to a head.
“Coleman Young was doing the same thing and the white mayor that was in office before him. They all do it. They are just for the rich people— white, black, or whatever. Race does not matter.
“They want Detroit to be just for the rich. They want us, the working people who have lived here all of our lives, to move out. That’s all it is.”

Warning sign for America? Detroit Plans to Cut Retirees’ Pensions… City not alone under mountain of long-term debt

Detroit Plans to Cut Retirees’ Pensions

DETROIT — Gloria Killebrew, 73, worked for the City of Detroit for 22 years and now spends her days caring for her husband, J. D., who has had three heart attacks and multiple kidney operations, the last of which left him needing dialysis three times a week at the Henry Ford Medical Center in Dearborn, Mich.

City not alone under mountain of long-term debt
Detroit may be alone among the nation’s biggest cities in terms of filing for bankruptcy, but it is far from the only city being crushed by a roiling mountain of long-term debt.
At the heart of Detroit’s problem is a growing unfunded debt on benefits owed to current and future retirees — some $3.5 billion, according to its emergency manager, Kevyn Orr — which mirrors a circumstance being seen across the U.S.
Warning sign for America?

Gov. Rick Snyder (R) of Michigan could be forgiven for sounding like a bit of a cheerleader when discussing Detroit‘s bankruptcy Sunday on NBC’s “Meet the Press.”
“I’m very bullish about the growth opportunities of Detroit,” he said.
On one hand, finding the silver lining of perhaps the worst fiscal disaster in the history of America‘s cities is his job – it’s hard to imagine Michigan truly thriving so long as its largest city is an economic millstone. Yet, on a much more personal level, it seems like Governor Snyder sincerely believes he was built for this.
SOLD: Struggling Pennsylvania capital auctions Wild West artifacts

The Tip Of The Iceberg Of The Coming Retirement Crisis That Will Shake America To The Core

by Michael Snyder
The pension nightmare that is at the heart of the horrific financial crisis in Detroitis just the tip of the iceberg of the coming retirement crisis that will shake America to the core.  Right now, more than 10,000 Baby Boomers are hitting the age of 65 every single day, and this will continue to happen every single day until the year 2030.  As a society, we have made trillions of dollars of financial promises to these Baby Boomers, and there is no way that we are going to be able to keep those promises.  The money simply is not there.  Yes, I suppose that we could eventually see a “super devaluation” of the U.S. dollar and keep our promises to the Baby Boomers using currency that is not worth much more than Monopoly money, but as it stands right now we simply do not have the resources to do what we said that we were going to do.  The number of senior citizens in the United States is projected to more than double by the middle of the century, and it would have been nearly impossible to support them all even if we weren’t in the midst of a long-term economic decline.  Tens of millions of Americans that are eagerly looking forward to retirement are going to be in for a very rude awakening in the years ahead.  There is going to be a lot of heartache and a lot of broken promises.
What is going on in Detroit right now is a perfect example of what will soon be happening all over the nation.  Many city workers stuck with their jobs for decades because of the promise of a nice pension at the end of the rainbow.  But now those promises are going up in smoke.  There has even been talk that retirees will only end up getting about 10 cents for every dollar that they were promised.
Needless to say, many pensioners are extremely angry that the promises that were made to them are not going to be kept.  The following is from a recent article in the New York Times
Many retirees see the plan to cut their pensions as a betrayal, saying that they kept their end of a deal but that the city is now reneging. Retired city workers, police officers and 911 operators said in interviews that the promise of reliable retirement income had helped draw them to work for the City of Detroit in the first place, even if they sometimes had to accept smaller salaries or work nights or weekends.
“Does Detroit have a problem?” asked William Shine, 76, a retired police sergeant. “Absolutely. Did I create it? I don’t think so. They made me some promises, and I made them some promises. I kept my promises. They’re not going to keep theirs.”
But Detroit is far from an isolated case.  As Detroit Mayor Dave Bingsaid the other day, many other cities are heading down the exact same path…
“We may be one of the first. We are the largest. But we absolutely will not be the last.”
Yes, Detroit’s financial problems are immense.  But other major U.S. cities are facing unfunded pension liabilities that are even worse.
For example, here are the unfunded pension liabilities for four financially-troubled large U.S. cities
Detroit: $3.5 billion
Baltimore: $680 million
Los Angeles: $9.4 billion
Chicago: $19 billion
When you break it down on a per citizen basis, Detroit is actually in better shape than the others…
Detroit: $7,145
Baltimore: $7,247
Los Angeles: $8,437
Chicago: $13,355
And many state governments are in similar shape.  Right now, the state of Illinois has unfunded pension liabilities that total approximately $100 billion.
There are some financial “journalists” out there that are attempting to downplay this problem, but sticking our heads in the sand is not going to make any of this go away.
According to Northwestern University Professor John Rauh, the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is4.4 trillion dollars.
So where are they going to get that money?
They are going to raise your taxes of course.
Just check out what is happening right now in Scranton, Pennsylvania
Scranton taxpayers could face a 117 percent increase in taxes next year as the city’s finances continue to spiral out of control.
A new analysis by the Pennsylvania Economy League projects an $18 million deficit for 2014, an amount so massive it outpaces the approximate $17 million the struggling city collects annually
A 117 percent tax increase?
What would Dwight Schrute think of that?
Perhaps you are reading this and you are assuming that your retirement is secure because you work in the private sector.
Well, just remember what happened to your 401k during the financial crisis of 2008.  During the next major stock market crash, your 401k will likely get absolutely shredded.  Many Americans will probably see the value of their 401k accounts go down by 50 percent or more.
And if you have stashed your retirement funds with the wrong firm, you could end up losing everything.  Just ask anyone that had their nest eggs invested with MF Global.
But of course most Americans are woefully behind on saving for retirement anyway.  A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.
That certainly isn’t good news.
On top of everything else, the federal government has been recklessly irresponsible as far as planning for the retirement of the Baby Boomers is concerned.
As I noted yesterday, the U.S. government is facing a total of 222 trillion dollars in unfunded liabilities.  Social Security and Medicare make up the bulk of that.
At this point, the number of Americans on Medicare is projected to grow from a little bit more than 50 million today to 73.2 million in 2025.
The number of Americans collecting Social Security benefits is projected to grow from about 56 million today to 91 million in 2035.

How is a society with a steadily declining economy going to care for them all adequately?
Yes, we truly are careening toward disaster.
If you are not convinced yet, here are some more numbers.  The following stats are from one of my previous articles entitled “Do You Want To Scare A Baby Boomer?“…
1. Right now, there are somewhere around 40 million senior citizens in the United States.  By 2050 that number is projected to skyrocket to 89 million.
2. According to one recent poll, 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.
3. 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.
4. One survey that covered all American workers found that 46 percentof them have less than $10,000 saved for retirement.
5. According to a survey conducted by the Employee Benefit Research Institute, “60 percent of American workers said the total value of their savings and investments is less than $25,000″.
6. A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year.
7. 67 percent of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”.
8. Today, one out of every six elderly Americans lives below the federal poverty line.
9. More elderly Americans than ever are finding that they must continue working once they reach their retirement years.  Between 1985 and 2010, the percentage of Americans in the 65 to 69-year-old age bracket that were still working increased from 18 percent to 32 percent.
10. Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.
11. According to one recent survey, 70 percent of all American workers expect to continue working once they are “retired”.
12. According to a poll conducted by AARP, 40 percent of all Baby Boomers plan to work “until they drop”.
13. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.
14. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do.  The following is from a recent CNBC article
New research from the AARP also shows that those ages 50 and over are carrying higher balances on their credit cards — $8,278 in 2012 compared to $6,258 for the under-50 population.
15. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percentof all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.
16. Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.
17. What is causing most of these bankruptcies among the elderly?  The number one cause is medical bills.  According to a report published in The American Journal of Medicine, medical bills are a major factor inmore than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.
18. In 1945, there were 42 workers for every retiree receiving Social Security benefits.  Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.
19. Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check.  The truth is that most Social Security checks simply are not that large.  The following comes directly from the Social Security Administration website
The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.
You can view the rest of the statistics right here.
Sadly, most Americans are not aware of these things.
The mainstream media keeps most of the population entertained with distractions.  This week it is the birth of the royal baby, and next week it will be something else.
Meanwhile, our problems just continue to get worse and worse.
There is no way in the world that we are going to be able to keep all of the financial promises that we have made to the Baby Boomers.  A lot of them are going to end up bitterly disappointed.
All of this could have been avoided if we would have planned ahead as a society.
But that did not happen, and now we are all going to pay the price for it.

NOBODY BUYS LOW. PEOPLE LIKE TO BUY HIGH! Money Is Pouring Like Crazy Into Stocks Despite The Economy Is Still A Huge Disappointment. Oil Rally Rekindles ‘Flash Crash’ Fears, McDonald’s Earnings Disappoint, Euro Area Government Debt Rises To New Record High

Everyone’s Talking About This Huge Stampede Of Cash Rushing Into The Stock Market
As the market sails to new highs, the floodgates have broken open.
Money is pouring like crazy into stocks, which is of course classic investor psychology. Nobody buys low. People like to buy high.
In Goldman Sachs’ latest “Weekly Kickstart” note, strategist David Kostin relays the discussion the firm is having with clients. The discussions are all about retail fund flows, and the rush of money into stocks.
Read more: http://www.businessinsider.com/everyones-talking-about-the-huge-stampede-of-cash-into-the-stock-market-2013-7#ixzz2ZmI2sfxe
The Economy Is Still A Huge Disappointment
Here’s the thing.
People keep talking about the Fed Exit, and the economy achieving escape velocity, and the jobs market returning to normal.
But a lot of the data just isn’t that impressive.
For the second quarter, for example, a lot of the estimates are for growth under 1%.
This morning, Ben Casselman at WSJ takes a look at some of the weak US growth numbers:
There also are signs that consumers—whose spending has helped prop up the economy for much of the past year—are beginning to tighten their belts. Retail sales grew a paltry 0.4% in June, Commerce Department figures showed, and would have been even worse if higher gasoline prices hadn’t forced drivers to spend more at the pump. 
“This year is proving to be more challenging than we had originally planned,” Howard Levine, chairman and chief executive of discount retailer Family Dollar Stores Inc., told investors earlier this month. “The consumer is just more challenged than we had anticipated.”
Sales at restaurants—a key source of recent job growth, adding more than 150,000 positions over the past three months—tumbled last month, suggesting consumers could be pulling back on discretionary spending.
Read more: http://www.businessinsider.com/economy-looking-unimpressive-2013-7#ixzz2ZmIC5GxR
Four-week rally in US crude rekindles ‘flash crash’ fears
The risk of a disorderly decline in benchmark U.S. crude futures is growing after a four-week rally sent prices to 16-month highs and money managers amassed record bullish bets, defying an economic slowdown in China and the North American shale energy supply boom.
WTI (West Texas Intermediate, the oil grade underpinning the U.S. crude futures benchmark) on Friday flipped to a slight premium over its Brent counterpart for the first time in three years, reflecting stronger refiner demand, U.S. economic optimism and efforts to drain the supply glut at the WTI oil storage hub of Cushing, Oklahoma. Brent held a mere seven cents a barrel premium over its U.S. rival at $108.39 early on Monday morning.
McDonalds Misses Revenue And Earnings Due To “Economic Uncertainty And Pressured Consumer Spending”
It must have been the weather: at least that is what we expect McDonalds will blame the latest (in a long series) of Q2 revenue misses, but also earnings as moments ago the fast food giant reported $1.38 EPS in Q2 earnings, while revenue of $7.08 billion missed expectations of $7.09 billion. The internals were just as ugly: Q2 comp sales rose 1% on expectations of a +1.5% print; Europe was down -0.1% with the bulk of the hit coming strangely enough from Germany and France. The rest was in line, with global comp sales up 1% vs Exp. 1%, however this being the weakest of all categories it is hardly offsetting what is becoming increasing a weak lower-end consumer story, as well as one of FX headwinds with forex eating into Q2 EPS by $0.02.

Sadly, after reading the press release it appears the neither cold or hot spring/summer weather was at scapegoated fault (as it was for Coke and Google): “McDonald’s results for the quarter reflect our efforts to strengthen our business momentum for the long-term,” said McDonald’s President and Chief Executive Officer Don Thompson. “We remain strategically focused on the global growth priorities that help us better serve our customers. While the informal eating out market remains challenging and economic uncertainty is pressuring consumer spending, we’re continuing to differentiate the McDonald’s experience by uniting consumer insights, innovation and execution.” Innovation in the $1 meal? Good luck. More importantly, someone actually told the truth about end-demand, and the fact that consumer spending is deteriorating. Unpossible.
Euro Area Government Debt Rises To New Record High
While the European economy may be moving in a straight line from upper left to lower right, the same can not be said for the level of debt in Europe, which has taken on the inverse trajectory. As per the just released quarterly update of Euro area government debt, in Q1 2013, total government debt in Europe as a % of GDP just hit a new all time high of 92.2%. This compares to 90.6% in the previous quarter, and up from 88.2% in Q1 2012.
The proud Q1 debt-to-GDP outliers, where the local economies are expected to continue plunging and thus send the stock markets (if mostly that in the US) surging, are the following:
  • Euroarea: 92.2%, up from 88.2% a year ago
  • Greece: 160.5%, up from 136.5% a year ago
  • Italy: 130.3%; up from 123.8% a year ago
  • Portugal: 127.2%, up from 112.3% a year ago
  • Ireland: 125.1%, up from 106.8% a year ago
  • Spain: 88.2%, up from 73.0% a year ago
  • Netherlands: 72.0%, up from 66.7% a year ago
European Banks Brace for Losses on Detroit
Euro-zone Deflation Warning for U.S.
History shows that the U.S. should pay attention to economies in Europe
The economy has been sluggish for five years. There’s no shortage of chatter about “why,” yet few observers mention deflation.
One exception is a hedge fund manager who spoke up at the recent Milken Institute Global Conference.
Here Come Those Municipal Defaults That Everyone Said Couldn’t Happen, Pt 2

The Democrats Finally Embrace Money Printing

If you’ve been following American political theater since the start of the Global Financial Crisis in 2008, you’ve probably noticed how many (but not all) Republicans line up on the side of fiscal austerity and tight-money policies so as to limit the fiscal deficit and reduce the government debt (at least when it comes to non-military spending. And non-law enforcement spending. And non-bank-saving spending.)—

Who says the Dems don’t like money?
—whereas the Democrats have insisted that the government needs to take on more debt, and spend its way back to prosperity. In the Dems’ worldview, deficits and debt don’t matter: What matters to them is how much is the government going to spend in order to “save the economy”. (“Paging Professor Krugman!”)

But something happened last Thursday, during the testimony Federal Reserve Chairman Ben Bernanke gave to the Senate Banking committee.

Democratic senators questioned why Bernanke was thinking of tapering the bond purchasing programs of Quantitative Easing (QE). They wondered out loud if maybe QE should continue “until the economy further improves”.

In other words, the Democrats have finally realized that not only does QE mean they don’t have to reign in the deficit—QE also means that they can expand the deficit, confident that additional debt will be bought and paid for by the Federal Reserve. Confident that additional debt will be monetized by the Federal Reserve—because after all, that’s what QE is: Debt monetization, and everybody knows it.

Which means that the Democrats have finally embraced flat-out money-printing. That’s why the Democratic senators were questioning Bernanke’s talk of tapering QE. These senators and their Democratic colleagues are signalling that they want QE to not only continue—they probably want it to expand. They want to be able to continue with deficit spending—and they want the Federal Reserve to continue monetizing that deficit spending. All in the name of “reigniting the economy”.

It took a long time for them to arrive at this place. Before, all the Democrats cared about was deficit spending—they essentially did not care about monetary policy per se. Whenever they focussed on the Federal Reserve and its chairman, they ignored the monetary policy side of the Fed’s mandate and concentrated on the jobs creation side, or else the regulatory side. That is, they questioned how effective the Fed’s policies were in creating new jobs. And they grilled the Fed (cosmetically, in most cases) for not regulating and policing the banking sector enough.

But even though Quantitative Easing started in 2008, it seems as if Democrats didn’t really “get it”. They viewed it as a way to save the banksters’ collective bacon—they didn’t see it as the way by which the Federal government could go into limitless debt.

But with Thursday’s testimony, it’s clear like a bomb blast that the Democrats finally understand what QE really means: The Federal government can go into as much deficit spending as it wishes, because the Federal Reserve will be buying the bonds that finance this deficit spending by way of QE. And now that they understand this, they are all in favor of more of it.

This is the reason-why of the Democratic senators’ questions/comments during Thursday’s testimony: The Chairman of the Senate Banking Committee, Tim Johnson (D-SD) wondered whether it might be too soon to “taper off” Quantitative Easing. Senator Robert Menendez (D-NJ) later asked, “Isn’t it still way too soon to consider any kind of policy tightening?” Senator Chuck Schumer wondered aloud about more hawkish Fed board members, and how Bernanke’s departure next year would affect QE.

The upshot of all the questioning was that it revealed how the Democratic senators implicitly realize that it is the size of QE—and not the size of the deficit or the debt ceiling—that restricts how much the government can spend.

Democrats would probably deny and dismiss this characterization. They might well argue that their concern for the size of QE purchases is so as to ensure low unemployment. But QE does not affect unemployment directly. After all, it’s a bond-buying program. It affects unemployment indirectly—not to say circuitously—by providing price support to Treasury bonds, which thereby allows the Federal government to issue more bonds without fear of rising interest rates, and thereby have more cash to spend in order to soak up the unemployment by way of fiscal spending.

It is QE and QE alone that is providing price support to the bond markets, and ensuring that the Treasury Department has a buyer of last resort for all those bonds that it is issuing to cover the debt. At this time, QE purchases amount to some $85 billion-with-a-“B” per month—over a trillion dollars per year. Which is the lion’s share of the yearly Federal government deficit.

So Democrats might claim that they want more QE in order to get more jobs—but those jobs are by way of Keynesian-style Federal government deficit spending. Viewed this way, QE is Paul Krugman’s best friend: QE allows as much deficit spending as the Democrats or Krugman might ever want.

The B-story to this narrative is the coming nomination and confirmation of Ben Bernanke’s successor.

Anti-QE advocates, such as some Republicans and most clear-eyed observers of the state of the economy, have been nearly hysterical about how Quantitative Easing creates bubbles in equities and real estate markets, and sets the stage for a serious, perhaps catastrophic debasement of the dollar. These people (myself among them) want the next chairman of the Fed to get out of the QE business altogether, and deflate all these bubbles so that the economy might crash and reset in a more or less controlled manner, as opposed to a currency panic and collapse, which (from hard experience) is much, much worse.

But now, as Democrats come to see how useful QE is in expanding Federal government spending and thereby (in their eyes) “saving the economy”, they will insist on a new Fed chairman who will continue QE, if not expand it.

Enter Janet Yellin, the vice-chair of the Federal Reserve, and the odds-on favorite to be the confirmed nominee. She is famously dovish with regards to QE, concerned more than anything with full employment. If she becomes the next Fed chairman, she will certainly not taper QE, if unemployment levels are not to her liking. And if the situation continues to deteriorate, employment-wise, she will in all likelihood expand QE, so as to tacitly provide the Federal government with room to expand its deficit, confident that the Fed will buy up all those T-bonds it issues.

That’s why Janet Yellin will most definitely be the next Fed Chairman. Bonus for the Dems: She’ll be the first woman Chair of the Fed. But that won’t be the real milestone of Yellin as Chairwoman. The real milestone will be that she’s a QE-to-infinity-and-beyonder.

Anti-QE advocates always thought that the debate about QE-or-not-QE was a strictly economic debate: Technocrats on one side, technocrats on the other, like a super-nerdy version of dodgeball. But now with the Democratic senators questioning why Ben Bernanke is going to taper off QE, and whether he should continue it and/or expand it, the issue of Quantitative Easing has ceased being a technical, inside-baseball, What-would-Gary-Gygax-say debate, and become a political issue.

Now that the Democrats have realized how essential QE is to the continued Federal government deficits, there is no doubt as to what they are going to demand: More QE. A lot more QE.

The Dems won’t want QE-IV or QE-V, or (as I’ve called it) QE-∞—no, what the Democrats will want is Super-QE. QE-on-Steroids, QE-to-the-friggin’-Moon.

And to any anti-QE argument that Quantitative Easing might lead to a collapse of the dollar, the pro-Super-QE Dems will argue that, in five years of QE, there hasn’t been a significant rise in inflation—and therefore claim that the lack of inflation during the 2008–2013 period indicates that QE cannot cause inflation and thus the dollar cannot crash because of QE.

And if that weren’t bad enough, the more populist, more irresponsible, more war-mongering Republicans (“Paging Senator McCain!”) will agree with these money-printing Dems—and join the bandwagon of Super-QE. Because more QE means more deficits with which to pay for pork and prisons and wars, without the pain of raising taxes. Which is what McCain Republicans want.

So for a significant majority of the House and the Senate, more QE—Super-QE—is something that they will want: They will lobby the Fed for it, and ultimately vote for a new Fed chairman who will explicitly guarantee that QE will not only continue, but will be expanded. Which is what Janet Yellin tacitly promises.

Once the Democrats start to seriously push for more QE over and above the current $85 billion per month levels, it will only be a matter of time before the dollar is broken.

How will the dollar break? Simple: All that cash sloshing through the system because of QE will flow to commodities, sending them stratospherically higher, the rise in commodity prices cascading throughout the economy, until rising prices become a self-reinforcing phenomenon. And since the economy is too weak to apply some Volcker-style interest rate hikes, rising prices will quickly turn from ’70’s style stagflation to hyperinflation.

You think I’m smoking righteous weed when I say this? Think about it: Once the markets realize that Super-QE has been implemented, the rush will be to get out of every paper asset, and into hard commodities and precious metals. And that, as I have argued repeatedly, is when hyperinflation will take off.

Democrats have always been a little slow when it comes to economics. It only took them five years to figure out what Quantitative Easing really means. But now that they have finally understood what the MMT crazies have known all along, the Dems are going to ride that pony into the ground—and if that means ruining the dollar and thus breaking the economy, well . . . it was all done in order to “save the economy”.

The Economy Can’t Do Well, When The Country’s Young People Aren’t Doing Well

The economy can’t do well, when the country’s young people aren’t doing well. Because it’s the young people who have the greatest need to buy houses, cars, and everything else that there is to buy.
Ending up with huge student debts and going back to live with their parents, while working at Starbucks or at Wal-Mart, is what’s happening with many young people nowadays.
Only 27 percent of college grads have a job related to their major
Here’s some interesting new data from Jaison Abel and Richard Dietz of the Federal Reserve Bank of New York. The vast majority of U.S. college grads, they find, work in jobs that aren’t strictly related to their degrees:
Going to college is more like gambling than a sure thing to increase your income. Which can’t be good for the country and its economy. This is like the Great Depression for the young people. They don’t end up homeless drifters, like it happened in old days. But going back to live with their parents only masks their poverty and their lack of any future.
The Collapse of Jobs for Working-Age Men
July 18 (Bloomberg) — In today’s “Single Best Chart,” Bloomberg’s Scarlet Fu displays the drop off in employment for American males age 25-54. She speaks on Bloomberg Television’s “Bloomberg Surveillance.”

25 Facts About The Fall Of Detroit That Will Leave You Shaking Your Head

Submitted by Michael Snyder of The Economic Collapse blog,
It is so sad to watch one of America's greatest cities die a horrible death.  Once upon a time, the city of Detroit was a teeming metropolis of 1.8 million people and it had the highest per capita income in the United States.  Now it is a rotting, decaying hellhole of about 700,000 people that the rest of the world makes jokes about.  On Thursday, we learned that the decision had been made for the city of Detroit to formally file for Chapter 9 bankruptcy.  It was going to be the largest municipal bankruptcy in the history of the United States by far, but on Friday it was stopped at least temporarily by an Ingham County judge. 
She ruled that Detroit's bankruptcy filing violates the Michigan Constitution because it would result in reduced pension payments for retired workers.  She also stated that Detroit's bankruptcy filing was "also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy", and she ordered that a copy of her judgment be sent to Barack Obama.  How "honoring the president" has anything to do with the bankruptcy of Detroit is a bit of a mystery, but what that judge has done is ensured that there will be months of legal wrangling ahead over Detroit's money woes. 
It will be very interesting to see how all of this plays out.  But one thing is for sure - the city of Detroit is flat broke.  One of the greatest cities in the history of the world is just a shell of its former self.  The following are 25 facts about the fall of Detroit that will leave you shaking your head...
1) At this point, the city of Detroit owes money to more than 100,000 creditors.
2) Detroit is facing $20 billion in debt and unfunded liabilities.  That breaks down to more than $25,000 per resident.
3) Back in 1960, the city of Detroit actually had the highest per-capita income in the entire nation.
4) In 1950, there were about 296,000 manufacturing jobs in Detroit.  Today, there are less than 27,000.
5) Between December 2000 and December 2010, 48 percent of the manufacturing jobs in the state of Michigan were lost.
6) There are lots of houses available for sale in Detroit right now for $500 or less.
7) At this point, there are approximately 78,000 abandoned homes in the city.
8) About one-third of Detroit's 140 square miles is either vacant or derelict.
9) An astounding 47 percent of the residents of the city of Detroit are functionally illiterate.
10) Less than half of the residents of Detroit over the age of 16 are working at this point.
11) If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.
12) Detroit was once the fourth-largest city in the United States, but over the past 60 years the population of Detroit has fallen by 63 percent.
13) The city of Detroit is now very heavily dependent on the tax revenue it pulls in from the casinos in the city.  Right now, Detroit is bringing in about 11 million dollars a month in tax revenue from the casinos.
14) There are 70 "Superfund" hazardous waste sites in Detroit.
15) 40 percent of the street lights do not work.
16) Only about a third of the ambulances are running.
17) Some ambulances in the city of Detroit have been used for so long that they have more than 250,000 miles on them.
18) Two-thirds of the parks in the city of Detroit have been permanently closed down since 2008.
19) The size of the police force in Detroit has been cut by about 40 percent over the past decade.
20) When you call the police in Detroit, it takes them an average of 58 minutes to respond.
21) Due to budget cutbacks, most police stations in Detroit are now closed to the public for 16 hours a day.
22) The violent crime rate in Detroit is five times higher than the national average.
23) The murder rate in Detroit is 11 times higher than it is in New York City.
24) Today, police solve less than 10 percent of the crimes that are committed in Detroit.
25) Crime has gotten so bad in Detroit that even the police are telling people to "enter Detroit at your own risk".
It is easy to point fingers and mock Detroit, but the truth is that the rest of America is going down the exact same path that Detroit has gone down.
Detroit just got there first.
All over this country, there are hundreds of state and local governments that are also on the verge of financial ruin...
"Everyone will say, 'Oh well, it's Detroit. I thought it was already in bankruptcy,' " said Michigan State University economist Eric Scorsone. "But Detroit is not unique. It's the same in Chicago and New York and San Diego and San Jose. It's a lot of major cities in this country. They may not be as extreme as Detroit, but a lot of them face the same problems."
A while back, Meredith Whitney was highly criticized for predicting that there would be a huge wave of municipal defaults in this country.  When it didn't happen, the critics let her have it mercilessly.
But Meredith Whitney was not wrong.
She was just early.
Detroit is only just the beginning.  When the next major financial crisis strikes, we are going to see a wave of municipal bankruptcies unlike anything we have ever seen before.
And of course the biggest debt problem of all in this country is the U.S. government.  We are going to pay a great price for piling up nearly 17 trillion dollars of debt and over 200 trillion dollars of unfunded liabilities.
All over the nation, our economic infrastructure is being gutted, debt levels are exploding and poverty is spreading.  We are consuming far more wealth than we are producing, and our share of global GDP has been declining dramatically.
We have been living way above our means for so long that we think it is "normal", but an extremely painful "adjustment" is coming and most Americans are not going to know how to handle it.
So don't laugh at Detroit.  The economic pain that Detroit is experiencing will be coming to your area of the country soon enough.

Michigan Gov. Snyder - Government Bailout Is The Wrong Answer For Detroit

70% of people blame Bush from Economic Troubles

Americans are still more likely to blame former President George W. Bush "a great deal" or "a moderate amount" than President Barack Obama for the country's current economic problems. More Americans blamed Bush during Obama's first year as president in 2009; however, since mid-2010, views have been steady at levels similar to today's.
About a third of Americans, 35%, assign a high degree of blame to Bush alone for current economic problems, about double the percentage blaming solely Obama (19%). Another 34% blame both, while 11% say neither is highly to blame.
While Bush has been out of office for four and a half years, the near fiscal collapse that occurred on Wall Street at the tail end of his presidency precipitated sharp declines in consumer attitudes about the economy that only recently recovered to levels approaching what they were previously. Underscoring this, just prior to Obama taking office in December 2008, 60% of Americans described the situation as "the biggest economic crisis the U.S. has faced" in their lifetimes.
The finding that most Americans continue to lay heavy blame on Bush for today's economic problems may help explain why Obama's overall job approval rating has consistently exceeded his approval rating on the economy throughout his presidency, even while the economy has consistently ranked as the nation's top problem. Most recently, 48% in the June 20-24 Gallup survey approved of the overall job Obama is doing as president, similar to the 46% who, in the same poll, said he bears little to no blame for current economic conditions, but higher than the 42% who, in early June, said they approve of Obama's job performance on the economy.
Americans' tendency to blame Bush more than Obama for the economy may also shed light on Obama's historically high job approval premium vs. U.S. satisfaction.
For much of his presidency, George W. Bush's overall job approval rating also exceeded his rating on the economy. However, this can largely be explained by the extended rally in his overall job approval rating following the Sept. 11, 2011, terrorist attacks, followed by a decline in his approval rating in 2005 and 2006, largely resulting from public dissatisfaction with the Iraq War.
President Bill Clinton's job approval rating was more closely yoked with his approval rating on the economy after his initial year in office. This was true at least until public satisfaction with the economy rose so high in 1998 that his overall job rating failed to keep up.
Bottom Line
Americans have long been unhappy with the economy, and Obama's approval ratings for handling it have ranged from poor to lackluster. However, weak approval ratings on the economy may not be having as much bearing on his overall job approval rating as they would otherwise because Americans are still largely holding his predecessor responsible for the economy's problems.
The reason Americans still tend to blame Bush more than Obama for the economy simply may be the severity of the 2008 economic crisis coupled with Bush's unpopularity at the time. Alternatively, Obama's personal likeability could be a factor, shielding him from blame. Regardless, these views have persisted for four and a half years, even enduring the 2012 presidential campaign when Republican candidate Mitt Romney attempted to argue that the economy would have recovered by now if not for Obama's policies. As such, it seems likely they will remain intact throughout Obama's presidency, at least as long as consumer attitudes remain negative.
Survey Methods
Results for this Gallup poll are based on telephone interviews conducted June 20-24, 2013, with a random sample of 2,048 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia.
For results based on the total sample of national adults, one can say with 95% confidence that the margin of sampling error is ±3 percentage points.
Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each sample of national adults includes a minimum quota of 50% cellphone respondents and 50% landline respondents, with additional minimum quotas by region. Landline and cell telephone numbers are selected using random-digit-dial methods. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.
Samples are weighted to correct for unequal selection probability, nonresponse, and double coverage of landline and cell users in the two sampling frames. They are also weighted to match the national demographics of gender, age, race, Hispanic ethnicity, education, region, population density, and phone status (cellphone only/landline only/both, and cellphone mostly). Demographic weighting targets are based on the March 2012 Current Population Survey figures for the aged 18 and older U.S. population. Phone status targets are based on the July-December 2011 National Health Interview Survey. Population density targets are based on the 2010 census. All reported margins of sampling error include the computed design effects for weighting.

Gold Breaks Above $1300 As Shorts Cover Most In 4 Months

Almost 11% of short gold positions covered in the last week according to CFTC Commitment of Traders' data. That is the largest weekly drop in net shorts for four months and the combined futures-and-options net long position jumped 13,287 contracts or an impressive 48% (the most since Nov 08). Following the ubiquitous "sell-while-Bernanke-is-speaking" dump last Wednesday gold has risen almost 4% touching $1320 this evening as Asia opens. So with Asian physical demand remaining high and COMEX vault's running dry (and JPMorgan's on fire), we wonder - now that Taper is off (according to equity market pundits) if this is the start of the long-awaited short-covering rally back to reality for the precious metal.
Big short-covering in gold last week...

and gold is breaking back above $1300...

City of Houston is Bankrupt (So are California, Oregon, and Pension Plans in General)

Houston, we have a problem. We are bankrupt.

That is the finding of Bob Lemer, CPA, Retired Partner at Ernst & Young; Aubrey M. Farb, CPA, Retired Partner at Grant Thornton; and Tom Roberts, CPA, Retired Partner at Fitts Roberts.

Cover Letter
October 22, 2009
Name, Title and Address [see list below]
Subject: Finances of the City of Houston
Dear : [see list below]

Enclosed is our partial analysis of the very serious financial situation at the City of Houston. We would be derelict if we failed to share this financial analysis with you. This financial heads up will assist you in meeting your fiduciary responsibilities to Houston voters, taxpayers, readers, viewers or investors---as the case may be.

We feel a public discussion of the City’s financial situation is necessary and firmly believe that addressing the City’s financial condition is in the best interest of the Houston economy and Houston taxpayers. We believe the sooner the City of Houston addresses the financial shortfall the better.

Please bear in mind that the Houston City elections are on November 3, 2009, with early voting having commenced on October 19, 2009. Recent history has shown a large portion of voting occurs during early voting.

We trust that the attached article is of significant assistance to you.
We may be reached at boblemer@sbcglobal.net.
The above was sent to:

City of Houston---Incumbent Mayor, City Controller, and City Council Members
City of Houston—Non-Incumbent City Candidates
Greater Houston Partnership---Board Members
Houston Chronicle---Editorial Board Members
Houston TV Stations---CEOs
Houston Business Journal---Editor
Houston Community Newspapers-Editor
Houston Press-Editor
Municipal Bond Rating Agencies---CEOs
Wall Street Journal---Editor
Investor’s Business Daily-Editor
USA Today-Editor
Texas Monthly---Executive Editor
Deloitte & Touche LLP---Houston and New York

Executive Summary
City of Houston
Disturbing Financial Facts---October 2009
By: Bob Lemer, Aubrey M. Farb and Tom Roberts

The City of Houston is financially broke and it appears that the mayor who takes office in January 2010 may have to captain the City through bankruptcy procedures.
The City’s unrestricted assets were $1.2 billion short of the already recorded
corresponding liabilities these assets were needed to pay as of fiscal year end June 30, 2008,according to the City’s latest publicly available audited Comprehensive Annual Financial Report (CAFR). The $1.2 billion shortfall was a result of operating losses totaling $1.5 billion for fiscal years 2004-2008, applying the full accrual basis of accounting used in the private sector.

Apparently the City has no idea as to what has transpired financially since June 30, 2008 or will transpire this fiscal year ending June 30, 2010, on the full accrual basis of accounting. But even on the modified accrual basis of accounting (essentially cash basis) followed by the City and all other municipalities, the $236.8 million fund balance in the City’s general fund as of July 1, 2009 (the beginning of this current fiscal year) would not exist except for the City having deposited the proceeds of pension obligation bonds into the City’s general fund instead of depositing them in their legally required immediate destination, the pension plans’ bank accounts.

The City is in this dangerous financial position because its total spending since fiscal year 2003 has greatly outstripped its total revenues in that period. And the rate of growth in the City’s total revenues since 2003 has, in turn, greatly outstripped the City’s rate of growth in population plus inflation.

Thus the City’s problems are a result of greatly overspending and not a result of
insufficient revenues. All of this occurred before the current severe recession. Now the City has the added burden of the recession.

The City is in a real financial dilemma, because now its two principal sources of general fund revenues are in trouble---sales taxes and property taxes. Sales tax revenues already are dropping significantly and property tax revenues will commence dropping at an even more rapid rate after the next annual appraisal and assessment process. And the City will have to go to the voters for any contemplated rate increases in either the sales tax rate or the portion of the property tax rate allocable to operations.

It appears to us that there may be no viable alternative to bankruptcy proceedings and thereby positioning the City to regain control over its overspending, through addressing structural spending problems such as overstaffing and overly generous employee benefits.
Pension Plans and Government Salaries To Blame

According to the report, pension plans and government salaries are at the heart of the matter. Here are a few select details.

Detailed Findings and Observations

1. The City incurred operating losses (“Change In Net Assets”) totaling approximately $1.5 billion for the five fiscal years ended 6/30/08--- per the latest (fiscal year 2008) publicly available audited Comprehensive Annual Financial Report (CAFR), page 199:

In Thousands
a. (312,790)
b. (531,465)
c. (131,893)
d. (221,452)
e. (281,556)
TOTAL (1,479,156) ---or--- $1.5 BILLION

2. The City’s deficiency in unrestricted assets [“Unrestricted (deficit)”] was $1.2 BILLION ($1,174,429 thousands) at June 30, 2008--- per 2008 CAFR, page 15. In other words, the City’s unrestricted assets were approximately $1.2 billion less than the already recorded liabilities that they will be required to satisfy.

3. The $1.2 billion deficiency in unrestricted assets as of June 30, 2008 (which was created essentially during fiscal years 2004-2008-see item 1) was basically financed, per page 15 of the 2008 CAFR, by:
(a) the $347,728,000 collateralized note payable to the municipal employees’
pension trust;
(b) the $643,413,000 combined accrued liabilities to the employees’ pension
trusts (municipal-$285,462,000, police officers’-$318,567,000, and firefighters’-$39,384,000);
(c) the $219,755,000 pension obligation bonds payable;
(d) the $272,941,000 accrued liability for other post employment benefits-----less, per pages 17 and 74 of the 2003 CAFR,
(d) the $54,395,000 net accrued liabilities to the employees’ pension trusts at June 30, 2003 (municipal-$92,386,000, police officers’-$19,221,000, and firefighters’-asset of $57,212,000).

4. Thus, as of June 30, 2008, the City’s elected officials essentially had transferred financial ownership of the City from the taxpayers to the City’s employees, about 43.7% of who do not live in the City, according to documentation we have received from the City’s human resources department. Very troubling, 63.3% of first responders (police officers and firefighters) do not live in the City, versus just 30.0% of civilian employees, according to the City’s human resources department.

5. The City’s deficiency in unrestricted assets is so severe that in their yet to be completed audit for fiscal year 2009 the City’s independent auditors apparently will have to address the audit reporting issue as to whether the City was a “going concern” as of June 30, 2009.

6. Apparently the City has no idea yet as to what its operating loss (“change in net assets”) was for the fiscal year just ended June 30, 2009 or what its deficiency in unrestricted assets was at June 30, 2009, and has no idea as to what is in store fiscally for fiscal year 2010. That is because the City does not keep its books on the full accrual basis of accounting (fully accruing its assets and liabilities) but once a year, via the audited Comprehensive Annual Financial Report (CAFR). And the CAFR cannot be completed until the (nearly always very substantial) annual audit adjustments are booked.


17. For example, Exhibit B demonstrates how it was possible for the City to actually show an audited surplus of $19,891,000 from operations in the general fund (which is the focus of the annual budget and the MFOR) for fiscal year 2008 when, in reality, the City had an audited Citywide operations deficit of $281,556,000 for fiscal year 2008.

18. Exhibit B is difficult to comprehend for a person not trained in governmental accounting, even for a CPA. But the two most significant reasons for the difference between the $19,891,000 general fund surplus from 2008 operations and the $281,556,000 deficit from 2008 Citywide operations are: (a) the ever-growing accrued liabilities to employees for pension plans and other post retirement benefits; and (b) the commenced practice of financing current pension plan expenses with backend loaded pension obligation long-term bonds.

19. Once one understands Exhibit B, or at least items 18(a) and 18(b), it becomes obvious that the City’s fiscal 2010 general fund budget is an illusion, for two reasons. First, it is calculated on the modified accrual basis of accounting (essentially cash basis) and therefore ignores the ever-growing and enormous accrued liabilities for employee pensions and other post retirement benefits. Secondly, it is dependent upon continued payment of some of the pension expenses with issuance of long-term backend loaded pension obligation bonds.

23. At June 30, 2008 (date of the City’s last audited financial statements), the City’s total Citywide debt per capita of $5,338 was over twice the $2,528 debt per capita of the now bankrupt State of California.
Inquiring minds may wish to download the entire Lemer/Farb/Roberts assessment of City of Houston Finances document from Scribd.

I agree with the findings of Bob Lemer, Aubrey M. Farb, and Tom Roberts. Any attempts to balance this on the backs of taxpayers is not viable. Houston should declare bankruptcy and seek to null and void the contracts of city workers including police and fireman.

California Is Bankrupt Too

Interesting, I note in point 23 that the authors of this report have concluded California is bankrupt. Of course I agree with that assessment as well. Unfortunately there is no provisions for states to declare bankruptcy.

What About Oregon?

Inquiring minds are reading Climbing PERS expenses face Oregon pension board, agency budget writers.
The cost of Oregon's Public Employees Retirement System is about to skyrocket to budget-busting levels.

As a result of PERS' $17 billion investment loss in 2008, every state agency, municipality and school district that participates in the system is staring at an average 50 percent increase in the base rates PERS charges to fund their employees' retirement benefits in 2011 and 2012.

That's not a doomsday scenario. Unless the pension fund's board changes its rate-setting rules, or its investment portfolio generates a 26 percent return in 2009, these rate increases are guaranteed. What does that mean to you? Fewer teachers, cops and firefighters. Less of every service that government provides. Higher fees and taxes. Perhaps all of the above.

The base rate that public agencies pay to support employees' retirement benefits could double in the next five years, according to the PERS actuary, Mercer Inc. If rates reach that level, the retirement system will gobble one quarter of every tax dollar that goes into a public agency to support payrolls.

Oregon isn't alone.

Public pensions nationwide are in crisis mode, and state Treasurer Ben Westlund points out that Oregon's pension system is still better funded than most. PERS officials also note that a major recovery in the stock market could alleviate, or even eliminate, the pain. Indeed, the system's investment portfolio has already bounced back 14 percent this year.

But here's the rub: Even if the pension system's investments return an average 10.5 percent annually for the next three years - their historical average - PERS rates will still increase to 21 percent of payroll in July 2013, according to Mercer's modeling.

If, in a slower growth scenario, investment returns are closer to their 10-year average of 4.5 percent, all bets are off. PERS' executive director, Paul Cleary, recently told the citizens board that oversees investment of the $50 billion pension fund that if 4.5 percent is the new normal, "our business model doesn't work."
Pension System Busted Country Wide

It is highly likely that nearly every pension plan in the country is busted. The solution is for every city and municipality in a predicament to "pull a Vallejo" and declare bankruptcy. Please see Judge Rules Vallejo Can Void Union Contracts for details.

Deficiencies cannot be met on the backs of taxpayers. Enough is enough. It's time to end every massively underfunded public defined benefit plan in the country, by force if necessary (bankruptcy), unless unions agree to major concessions that would make the plans viable without raising taxes one cent.