Posted By thestatedtruth.com on August 4, 2010
Contracts for pending sales of previously owned U.S. homes fell to a record low in June as buyers sat on the sidelines, a survey from the National Association of Realtors showed on Tuesday.
The June decline followed a 30 percent drop in May after a popular tax credit expired at the end of April. The index was 18.6 percent lower than in June 2009.
Posted By thestatedtruth.com on August 4, 2010
By Bloomberg News – Aug 4, 2010
China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said.
Banks were instructed to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.
Posted By thestatedtruth.com on August 3, 2010
Earth is bracing for a cosmic tsunami Tuesday night as tons of plasma from a massive solar flare head directly toward the planet.Â
The Sun’s surface erupted early Sunday morning, shooting a wall of ionized atoms directly at Earth, scientists say. It is expected to create a geomagnetic storm and a spectacular light show — and it could pose a threat to satellites in orbit, as well.Â
“This eruption is directed right at us and is expected to get here early in the day on Aug. 4,” said Leon Golub of the Harvard-Smithsonian Center for Astrophysics . “It’s the first major Earth-directed eruption in quite some time.”
The solar eruption, called a coronal mass ejection, was spotted by NASA’s Solar Dynamics Observatory, which captures high-definition views of the sun at a variety of wavelengths. SDO was launched in February and peers deep into the layers of the sun, investigating the mysteries of its inner workings.
“We got a beautiful view of this eruption,” Golub said. “And there might be more beautiful views to come if it triggers aurorae.”
Views of aurorae are usually associated with Canada and Alaska, but even skywatchers in the northern U.S. mainland are being told they can look toward the north Tuesday and Wednesday evenings for rippling “curtains” of green and red light.
When a coronal mass ejection reaches Earth, solar particles stream down our planet’s magnetic field lines toward the poles. In the process, the particles collide with atoms of nitrogen and oxygen in the Earth’s atmosphere, which then glow, creating an effect similar to miniature neon signs.
The interaction of the solar particles with our planet’s magnetic field has the potential to create geomagnetic storms, or disturbances, in Earth’s magnetosphere. And while aurorae are normally visible only at high latitudes, they can light up the sky even at lower latitudes during a geomagnetic storm.
Fortunately for Earth-bound observers, the atmosphere filters out nearly all of the radiation from the solar blast. The flare shouldn’t pose a health hazard, Golub told FoxNews.com.Â
“It’s because of our atmosphere,” he explained, “which absorbs the radiation, as well as the magnetic field of the Earth, which deflects any magnetic particles produced.”
The radiation “almost never” makes it to ground, he noted, though pilots and passengers in airplanes may experience increased radiation levels akin to getting an X-ray.Â
The solar particles also could affect satellites, though scientists think that possibility is remote. Orbital Sciences Corp. believe a similar blast may have knocked its Galaxy 15 satellite permanently out of action this year.
This type of solar event has both government officials and satellite manufacturers worrying.
NASA scientists warned recently that high-energy electric pulses from the sun could cripple our electrical grid for years, causing billions in damages. In fact, the House is so concerned that the Energy and Commerce committee voted unanimously to approve a bill allocating $100 million to protect the energy grid from this rare but potentially devastating occurrence.
The sun’s activity usually ebbs and flows on a fairly predictable cycle. Typically, a cycle lasts about 11 years, taking roughly 5.5 years to move from a solar minimum, a period of time when there are few sunspots, to peak at the solar maximum, during which sunspot activity is amplified.
The last solar maximum occurred in 2001. The latest minimum was particularly weak and long- lasting.Â
The most recent solar eruption is one of the first signs that the sun is waking up — and heading toward another maximum.
Space.com contributed to this report.
Posted By thestatedtruth.com on August 3, 2010
Las Vegans  just lived through the hottest month ever.
The high reached triple digits every day in July, and the heat hung on through the night to push last month into record territory.
According to the National Weather Service, July’s average temperature of 96.2 degrees was the highest of any month since record keeping began in 1937. The previous record, set in July 2007, was 95.4.
The question is, did anybody really notice?
July is traditionally the hottest month of the year in Las Vegas, and last month didn’t stand out much in terms of daytime highs. At McCarran International Airport, the valley’s official weather station, the mercury topped out at 113 on July 15 and 18, but neither of those was a record.
As is so often the case in Las Vegas, the difference was made after dark.
The average low temperature for July was 85.7, the highest on record by almost two degrees.
The coolest it got last month was 77. The temperature has not retreated below 80 since July 8.
“That’s a record stretch,” said Chris Stachelski, a meteorologist for the weather service in Las Vegas.
Another record set last month: For six days — five of them in a row — the temperature never dropped below 90.
http://www.lvrj.com/news/las-vegans-swelter-through-month-of-record-heat-99810549.html
Posted By thestatedtruth.com on August 3, 2010
From Art Cashin on the floor of the New York Stock Exchange
Longtime readers know that for years we’ve been remarking on the unusual lack of solar activity. Well, the sleeping sun woke up Sunday and woke up in a big way. Here’s a bit of detail from Spaceweather.com:
COMPLEX ERUPTION ON THE SUN: On August 1st around 0855 UT, Earth orbiting satellites detected a C3-class solar flare. The origin of the blast was sunspot 1092. At about the same time, an enormous magnetic filament stretching across the sun’s northern hemisphere erupted. NASA’s Solar Dynamics Observatory recorded the action:
The timing of these events suggest they are connected, and a review of SDO movies strengthens that conclusion. Despite the ~400,000 km distance between them, the sunspot and filament seem to erupt together; they are probably connected by long-range magnetic fields. In this (171 Е), a shadowy shock wave (a “solar tsunami”) can be seen emerging from the flare site and rippling across the northern hemisphere into the filament’s eruption zone. That may have helped propel the filament into space.
In short, we have just witnessed a complex global eruption involving almost the entire Earth-facing side of the sun.
The early effect may reach the Earth’s upper atmosphere as early as today. The full impact of the event may not be felt until Wednesday or Thursday. Here’s what they said in a Presto Alert a bit after the event:
A frontsided halo CME erupted on August 1 around 08:00 UT, SOHO data was not available at the time but STEREO data show that this event should arrive to the Earth around August 5. It was related to the C3.2 flare from NOAA AR 11092 and to a large filament eruption in the northern solar hemisphere.
Many folks have worried that a large scale CME (coronal mass ejection) might disrupt communications and electric grids here on earth. A massive example of such an event occurred back in 1859.
We’ll try to monitor the reports and assessments of the incoming flare.Â
Posted By thestatedtruth.com on August 3, 2010
By Jim Polson and Katarzyna Klimasinska – Aug 3, 2010
BP Plc started plugging its Gulf of Mexico oil well with drilling mud, another step in the company’s effort to permanently seal the source of history’s worst accidental oil spill.
BP began pumping mud into the top of the well for its “static kill†operation at 3 p.m. local Houston time. The company may need “a bunch of hours to a couple of days†to complete the process, Senior Vice President Kent Wells told reporters during a conference call today. BP may pause the operation to measure pressure and determine where the mud is going, he said.
If the static kill is successful, BP would be able to plug the Macondo well from the top. The company still needs to complete a relief well to permanently kill the damaged well, National Incident Commander Thad Allen said at a Houston press conference.
Government scientists issued revised estimates yesterday that the well spewed 4.9 million barrels of oil, making it the largest accidental maritime oil spill. About 800,000 barrels of the oil was captured by BP, and some was skimmed or burned. Scientists expect to quantify within days how much oil remains in the Gulf, potentially in underwater plumes, Allen said.
Posted By thestatedtruth.com on August 2, 2010
Hulu is a website offering commercial-supported streaming video of TV shows and movies from NBC, Fox, ABC, and many other networks and studios. Hulu videos are currently offered only to users in the United States In order to ensure that no international users outside the U.S. have access to the videos, Hulu blocks many anonymous proxies and virtual private networks. Hulu provides video in Flash Video format, including many films and shows that are available in 288p, 360p and 480p. Hulu also provides web syndication services for other websites including AOL, MSN, MySpace, Facebook, Yahoo!, and Comcast‘s fancast.com.
Hulu is a joint venture of NBC Universal (Comcast), Fox Entertainment Group (News Corp) and ABC Inc. (The Walt Disney Company).
Posted By thestatedtruth.com on August 2, 2010
Key Elements Of This Article Are: In the United States, the Fed’s latest Survey of Consumer Finances revealed that current or close retirees have roughly $50,000 of retirement savings, excluding the now questionable equity in their homes. Those born before in a macabre sense, the financial crisis couldn’t have been better timed, if it focuses attention on the need for people to save more for retirement.
And part of the reason they are in such a fiscal black hole resides in the explosion in their structural, age-related liabilities. According to the IMF, the net present value of pensions, healthcare and long-term care out to 2050 dwarfs the costs of the banking crisis everywhere. Based on policy commitments in mid-2009, it is over 600% of GDP in Spain and Greece, 500% GDP in the U.S., 335% in the UK, and between 200 and 300% in other major EU countries.
Demographic change will bring forth new consumer products and patterns, significant changes in information, bio and resource and materials technologies that could revolutionise manufacturing processes, mind-boggling changes in medical science and treatment, new forms of asset gathering and insurance and, lest we forget, the next billion consumers in emerging markets and all that jazz.
The evolving financial crisis in the West and its long-term consequences has exposed deep-seated structural flaws in our economies, and in the global economic system. These span our susceptibility to deflation, the loss of traditional economic growth drivers, the integrity of public finance, the regulation of the banking system, weaknesses in labour markets, and the lack of discipline that obliges creditor countries, such as China, Japan and Germany to share the with a less visible and slow moving phenomenon that has a direct bearing on many of the structural problems we face, namely the onset of rapid aging.
Although demographic projections of population, life expectancy, and fertility are not free from error, the nature of aging means that for all intents and purposes, demographics are our destiny. A lively debate about rapid aging in richer economies has been going on for at least the last 30 years, and in its simplest form, it is about the essential question of “who’s going to look after grandma?â€
Although the populations of the U.S., and other Anglo- and northern-European countries are expected to rise slowly over time, those of Japan and Russia are already declining, and those of Germany, Italy and Spain will join them in the next five years.
But population aging also has other weightier economic, social and political consequences that are emerging from the dark shadows cast by the financial crisis. Some are about the efficiency of our economic coping mechanisms as the labour force ages, and stagnates or declines. Others are about the pressure to rebuild public and private savings, and strengthen our ability to finance aging societies without punitive levels of taxation on our children or ourselves.
The core of the debate is about the so-called demographic dividend, which occurs when falling fertility lowers child dependency, and when the working age population (aged 15-64) expands, but before old age dependency starts to rise significantly. This dividend is associated with rising investment and accelerating economic growth, and describes the situation that western economies have enjoyed for the last 30 years or so. But they have now exhausted this benefit, because weak fertility is keeping the supply of new workers in check, while the long-living boomers are going to be increasingly visible, bringing to their children hefty bills for income support and care costs. Consumption patterns will change, brands and spontaneous purchases will give way to more regular and common-or-garden consumption, and aggregate savings will decline over time. While the boomers may delay the asset switch equities could fall well short.
In the real estate market, the crisis will be the principal determinant of prices for a while, but it is worth noting that the number of 20-44 year-olds, deemed to be the prime first time home buyer cohort, will fall by 10-20% in the next two to three decades in most advanced nations, but by 30% in Spain and China, and by a whopping 40% in South Korea. So, by the time the leading edge of the boomers is aged 80-90, that is 2025-2035, we might well ask, who will buy the homes they are going to sell to fund residential care or when they downsize?
As far as real estate is concerned, all we know is that the cycles are protracted in both directions. While government and central bank policies have supported housing markets and values, and continue to do so, it would be rash to declare that the downswing in prices is over. There are too many bad mortgage loans that haven’t been written off or restructured, too many banks whose main aim is to shrink assets, too many properties for sale (or hidden in bank ownership), and it’s far too early for households to come back from their balance sheet repairs. The UK’s chronic under building of housing may offer some protection, but not in the event that the economy should slip back in to recession—a possibility that becomes increasingly likely in a lot of places in the face of concerted fiscal retrenchment in 2011-2012. In the longer-term, the weaker age structure, especially of younger, first time home buying citizens, will most likely dampen the housing cycle, certainly in real terms.
Individuals generally don’t save enough for their retirement. In a recent UK survey, a quarter of those who could save didn’t, and half of men and more than half of women who did, didn’t save enough. It’s not dissimilar in most other countries, and in the United States, the Fed’s latest Survey of Consumer Finances revealed that current or close retirees have roughly $50,000 of retirement savings, excluding the now questionable equity in their homes. Those born before In a macabre sense, the financial crisis couldn’t have been better timed, if it focuses attention on the need for people to save more for retirement.
And part of the reason they are in such a fiscal black hole resides in the explosion in their structural, age-related liabilities. According to the IMF, the net present value of pensions, healthcare and long-term care out to 2050 dwarfs the costs of the banking crisis everywhere. Based on policy commitments in mid-2009, it is over 600% of GDP in Spain and Greece, 500% GDP in the U.S., 335% in the UK, and between 200 and 300% in other major EU countries. The precise numbers are less important than the orders of magnitude, and the implications for public policy. For example, budgetary pressures have forced governments to implement or consider a variety of demographically driven policies. These include an increase in the retirement age, a temporary freeze on pensions, higher public employee contributions to pension schemes, and schemes to get citizens to pay more towards healthcare, or to specific conditions.
The answers to many economic and financial issues we consider nowadays aren’t rocket-science, but the political will and imagination to do something about them are in short supply. To countenance the effects of demographic change, there are many things that governments can do. They can increase employee participation in the work force, for example, raising the pensionable or retirement age, changing pension systems, retirement patterns, and working practices, encouraging companies to retain and retrain older workers, and in some nations, making it possible for more women to enter the labour force. They can help to create a climate for stronger productivity growth, by trying to avoid the financial strangulation of schools and higher education during the coming fiscal cutbacks, and by using public policy levers to encourage entrepreneurs and innovation, and by targeting the new sectors that will drive future growth. This last idea, by the way, is a long-established form of public support for industry, not least in the United States.
These initiatives all sound rather fanciful in 2010, but in the end, but they will provide the means for us to adapt to aging societies. In the meantime, even though it’s hard to find positives for real estate as an asset class, some types of equities will remain the investor’s asset of choice, cyclical volatility notwithstanding. Demographic change will bring forth new consumer products and patterns, significant changes in information, bio and resource and materials technologies that could revolutionise manufacturing processes, mind-boggling changes in medical science and treatment, new forms of asset gathering and insurance and, lest we forget, the next billion consumers in emerging markets and all that jazz.
www.BoeckhInvestmentLetter.com
Posted By thestatedtruth.com on August 2, 2010
SULTANS OF SWAP: Gold Swaps Signal the Roadmap Ahead
BIS – The Super SIV Solution
The news rocked the global gold market when an almost obscure line item in the back of a 216 page document released by an equally obscure organization was recently unearthed. Thrust into the unwanted glare of the spotlight, the little publicized Bank of International Settlements (BIS) is discovered to have accepted 349 metric tons of gold in a $14B swap. Why? With whom? For what duration? How long has this been going on? This raises many questions and as usual with all $617T of murky unregulated swaps, we are given zero answers. It is none of our business!
Considering the US taxpayer is bearing the burden of $13T in lending, spending and guarantees for the financial crisis, and an additional $600B of swaps from the US Federal Reserve to stem the European Sovereign Debt crisis, some feel that more transparency is merited. It is particularly disconcerting, since the crisis was a direct result of unsound banking practices and possibly even felonious behavior. The arrogance and lack of public accountability of the entire banking industry blatantly demonstrates why gold manipulation, which came to the fore in recent CFTC hearings, has been able to operate so effectively for so long. It operates above the law or more specifically above sovereign law in the un-policed off-shore, off-balance sheet zone of international waters.
Since President Richard Nixon took the US off the Gold standard in 1971, transparency regarding anything to do with gold sales, leasing, storage or swaps is as tightly guarded by governments as the unaudited gold holdings of Fort Knox. Before we delve into answering what this swap may be all about and what it possibly means to gold investors, we need to start with the most obvious question and one that few seem to ask. Who is this Bank of International Settlements and who controls it?
 BANK OF INTERNATIONAL SETTLEMENTS (BIS)
The history of the BIS reads with all the intrigue of a spy novel and comes with a very checkered past. According to the BIS web site, as a privately held bank, it decided in recent years to become wholly owned and controlled by the Central Banks of the world – a highly unusual decision for a private enterprise. Lengthy court cases in Le Hague were involved by private members who objected. Something like this is usually called a buy out or takeover, but there are no public records of any of the central banks making such an acquisition – an extremely strange set of events with little media coverage.
I am sure it can all be explained very logically until we get to the size of the balance sheet. We are talking close to a half trillion dollar balance sheet, or more specifically 259 billion SDR’s, which is approximately $400B. Where did the capital or deposits come from? The BIS goes out of its way to specifically assert it only accepts deposits from member central banks, though it does also state confusingly in the financial notes that there are deposits from previous financial statements from recognized international banks. Therefore, are we to conclude that the US Federal Reserve has huge deposits at the BIS? Though I couldn’t find the assets on the Fed’s balance sheet, I’m sure they are there in the small print or on the New York Feds balance sheet somewhere. It would be a legal requirement. It is a forensic accounting nightmare to find these items based on public documents of the various private organizations. Apparently it is just none of our business. For such a major element of the world’s operating financial structure to have such poor visibility, it seems preposterous until you actually do the research. It should be laid out so a freshman Economics class could easily follow the ownership acquisition and money flows. It isn’t and it appears to this researcher that it is intentionally opaque.
Since the BIS goes out of its way to ensure readers in its annual financial report that no private funds are accepted, maybe all we really need to know is what the BIS officially tells us. The BIS is owned and controlled by their member Central Banks. Therefore if the BIS was to do a gold swap of the magnitude of 349 metric tonnes, then board member Ben Bernanke would have known of it in advance and approved it. He would know exactly who the transaction was with and why. If he didn’t then he is legally negligent in his fiduciary responsibility as a BIS board member, because of the size of the transaction and its material effect. Other board members include: Mervyn King, Governor of the Bank of England, Jean-Claude Trichet, President of the European Central Bank, Axel Weber, President of the Deutsche Bundesbank and William C Dudley, President of the Federal Reserve Bank of New York. You can’t have it both ways.
Though we can suspect many things, there is no other conclusion we can reach than the swap is part of an agreed upon plan or concurrence between these board members. So what is the possible understanding or plan?
WHO GAVE UP THE GOLD?
There are not a lot of institutions who possess 349 metric tonnes of gold. So who needs $14B worth of cash and has this amount of gold? That shouldn’t be too hard to find.
Sovereign governments have historically created their wealth by invading other countries to pillage their treasuries which held gold, silver and the crown jewels. The winning and seizure of more land allowed the sovereign to give it to the nobles who used it to tax and tithe the feudal tenets. Recurring wealth flowed upward to the sovereign treasury.
Considering today’s EU membership, where sovereign countries can no longer print their own currency (the politicians first weapon of choice), there are three channels (other than the very politically unpopular increase in taxes and fees) open in modern times to raising money for the treasury:
1-Â Â Â The public sale of debt offerings instruments such as Bills, Notes and Bonds
2-Â Â Â The more recent and stealthy approach of selling assets, including revenue streams from such things as taxes, fees, licensing etc.. These are sold into the securitization market through complex derivative structures such as Interest Rate and Currency Swaps contracts. This approach, as recently discovered, has been rampant throughout Europe even prior to the creation of the EU.
3-   When you exhaust all of the above, you then sell the family jewels – the sovereign treasury of gold holdings.
The BIS was very quick to respond to public speculation about the massive gold swap when they immediately clarified that the gold swap was with a commercial bank. Since by its own statements, as I mentioned above, it doesn’t accept deposits from non member banks, this seems confusing on the surface. Does it or doesn’t it accept private deposits?  It would be respectful to assume that the BIS is telling the truth and that they did in fact conduct the transaction with a private bank who was transacting the swap on behalf of a central bank or sovereign treasury. This would sort of make everything work. For the BIS to be telling the truth in all their statements, the transaction must be with a member central bank with the involvement of an intermediary commercial bank. But something still isn’t right here.
When you work through the details you quickly arrive at an astounding coincidence. Portugal shows it has 348 tonnes of sovereign gold. The swap was for 346. Portugal is a member bank, though does not sit on the Board, but attends the General Meeting as an observer only. Portugal, as a member of the PIIGS, only days after the unearthing of the swap, was again downgraded by Moody’s, thereby making its lending costs even higher than the already elevated levels being demanded by the financial markets. There is a very strong possibility that the swap is with Portugal. Though who the swap is with is important to those trading debt and credit derivatives it isn’t quite as important to those interested in the gold market.
Ben Davies the CEO of Hinde Capital in London and a player in the gold market suspects (12:40) we may have a modified form of swap emerging. There is the possibility that the commercial bank is in fact a major gold bullion bank. Some of the bullion banks have major short positions on gold that far outstrip the annual physical production of gold. The disconnect between physical and paper gold along with rising gold prices is likely causing serious strains on their balance sheet. As Davies points out the gold may be transacted from a central bank to the BIS through a bullion bank while the gold physically remains with the originating central bank; is classified as ‘unallocated’ at the BIS but in fact remains on the books of the bullion bank. It effectively is double accounted for. The increase in gold would allow gold prices to be pushed lower, which in fact is what has been happening. A careful reading of the BIS financial statements shows more clearly the accounting for such a transaction.
The March 31 2010 Financial Statement of the BIS shows 43.0B SDR’s of gold or 16.6% of total assets. According to note #4 to the BIS Financial Statements: “ Included in ’Gold bars held at central banks†is SDR 8,160.1 million (346 tonnes) (2009: nil) of gold, which the Bank held in connection with gold swap operations, under which the Bank exchanges currencies for physical gold. The Bank has an obligation to return the gold at the end of the contract.† It is very important to appreciate this note is pertaining specifically to BIS ‘assets’ which in the case of banks are what the reader would consider ‘loans’. Under Financial Policy notes #5 to the Financial Statement the BIS is clear that under banking portfolios “all gold financial assets in these portfolios are designated as loans and receivablesâ€. Separately, but very interestingly the BIS additionally states “ the remainder of the Banks equity is held in gold. The Bank’s own gold holdings are designated as available for saleâ€. Â
There can be little doubt that the Gold Swap is with a central bank where the physical gold remains. The transaction is considered a deposit at the BIS (liability) but has been lent to a commercial bank (likely a bullion bank) as a loan (asset). The question is only why a bullion bank needs to borrow this quantity of gold, remembering it never gets the physical gold because it remains at the originating central bank. The reader is encouraged to read the Financial Policy notes #4,5, 6, 13, 14, 15, 16, 17 and 19 within the BIS Financial Statement for a clearer understanding along with Notes to the Financial Statements #4 and #11.
The BIS is known as the central bank to the central bankers.
The BIS may equally be referred to as the Central Gold Bullion Bank to the Gold Bullion Banks.
      
The BIS may equally be referred to as the Central Gold Bullion Bank to the Gold Bullion Banks.
SPECIAL DRAWING RIGHT (SDR)
If problems get worse for Portugal, as possibly the global economic climate worsens, then the gold may never legally belong to Portugal. The contracted swap terms at some point may simply reclassify it a net zero sale, if Portugal fails to return the cash portion of the swap. The BIS would have 346 tonnes of gold and Portugal the $14B of Euros it has long since spent to solve a 2010 problem. By then Portugal likely would need even more loans in whatever currency would replace a crumpling or possibly extinct Euro.
Up until 2004 the BIS denominated its financial statements in Gold Francs. It now has made a major shift to denominating itself into Special Drawing Rights (SDRs). The calculation is exactly the same as used for the IMF. The SDR is operating as a defacto currency.
It takes a little arithmetic (which is not done in the financial statements) to be able to get values in any currency that can give the reader a perspective of the scope of the activities at the BIS. The SDR reporting obscures the BIS’s significant size and scope.
FUNDING
For those who followed the European Sovereign Debt Crisis and the negotiations with Greece, you know that the IMF was an unwelcomed intruder into EU financial affairs. Greece on more than one occasion held the IMF as a negotiating ploy and as a funding alternative to the EU’s procrastination and lack of decisiveness.
The IMF’s willingness to interfere created a lot of bad feelings within the EMU and Germany specifically. As Ambrose Evans-Prichard reported:  “The ECB is barely on speaking terms with the IMF – the “Inflation Maximizing Fund” as it was dubbed in a Bundesbank memo – – The IMF has not caught up to the reality in Europe said ECB über-hawk Jürgen Stark on July 9,2010  the final EU bailout in fact heavily involved the IMF participation. The very busy IMF is the dominant crisis lender of last resort throughout all Central & Eastern European current financial problems.
What we are seeing is the emergence of another funding structure based on the SDR – SDR’s that have a degree of gold backing. The BIS now has a total of 12.4% of its deposits (32B SDR) in the form gold deposits. Note #11 to the BIS financial statements states: “Gold deposits placed with the Bank originate entirely from Central Banks. They are all designated as financial liabilities measured as amortized costâ€.
ARE WE SETTING THE PINS UP FOR AN ALTERNATIVE RESERVE CURRENCY?
Are we moving towards the BIS and IMF being fractional reserve banks that will create money & credit – a reserve currency that will satisfy Russia and China with an element of Gold backing? A bank such as the BIS could easily assume this role (if it hasn’t already) as could the IMF with possible banking charter adjustments.
The chances are high that this is the roadmap we will find ourselves taking. Like all banking that started as Gold backed you could expect that in this case the little gold backing that starts the process is quickly diminished so a limitless money machine could begin functioning. The gold backing would likely be an initial requirement by Russia and China. The partial gold backing would lend credibility to the acceptance and a possible reserve currency alternative and eventual establishment as the global reserve currency.
SHADOW BANKING REPLACEMENT
The collapse of the Shadow Banking system and its attendant SIV / CDO structures were at the root of the financial crisis.  That structure which is representative of a huge amount of the credit growth since the dotcom bubble burst isn’t coming back soon, if ever. The world needs more liquidity than the central banks or sovereign treasuries can currently deliver politically. The central bankers, huddled in their bimonthly board meeting at the BIS in Basel, Switzerland, know this better than anyone. Their discussions in the very halls of the BIS must resonate with them to use all the tools available at their disposal – quickly.
Paul McCulley and Richard Clarida at Pacific Investment Management Co. (PIMCO) have written extensively about the Shadow Banking System and its growth. An extensive slide presentation on the Shadow Banking System can be found on my web site at TIPPING POINTS. I won’t go into the detail here, but suffice it to say that the shadow banking system collapse has created a massive hole in credit creation that central bankers can’t fill in the manner in which they presently appear to be approaching the problem. Of course appearances can be deceiving.
The problem has now reachd crisis proportions and the central bankers know they must urgently act in a coordinated manner. Deflation now has a firm hand on the global economy and this must be reversed. I have been calling for a US Quantitative Easing QE II of $5T in my writings for some time. This amount is required for the US alone. The entire global requirement is three to four times this amount.
The above chart serves as an illustration to simplify the essence of the Shadow Banking System . The international bankers prefer to refer to the process as Capital Arbitrage. An arms-length agreement allowed the banks to invest in a Structured Investment Vehicle (SIV) as an affiliate investment. The large spread that an SIV captured made it an excellent investment, but more importantly it allowed the banks to use their fractional reserve (10X) money creation abilities to buy risky securitization products without them appearing on their balance sheet. The banks received huge multiplier leveraged returns from the high yielding Collateralized Debt Obligations (CDOs) until the crisis imploded the game.
HOW MUCH LEVERAGE WILL THE CENTRAL BANKER CHOOSE TO COMPOUND? => “x†times “yâ€
When the financial crisis unfolded you may recall that then US Treasury Secretary Hank Paulson’s (former Chairman and CEO of Goldman Sachs during the explosion of Shadow Banking structures) first solution was to create a $100B Super SIV. The SIV leverage thinking was so entrenched that this was the first ‘go to’ solution to fight de-leveraging. If we were to jump forward to today when we are further along in increasing and unprecedented de-leveraging, what the central bankers need to replace the shadow banking system is a vehicle that will deliver the previous scale of leverage PLUS an order of magnitude more. The answer is the Bank of International Settlements. The SIV model is used as illustrated ‘Shadow Central Banking System’ above.
With the use of the SDR ‘currency’, central bankers can compound fractional reserve lending.
IT’S ALREADY HAPPENING
It is my view this process is already well along. The following Bloomberg global money supply growth chart graphically shows this. As the circles indicate, once again money is flowing into the pipeline or at least into global bank reserves.
CONCLUSION
The advantage of this approach is:
1.    Leverage: Compounding money creation between banks
2.    Partial gold backing: Present BIS levels of 12.4%
3.    SDR: Offers a basket of currencies approach versus a single currency dependency.
4.    Former Communist bloc regime backing: China and Russia would likely support this approach for a number of reasons, which they have already expressed as short comings to the current global reserve situation.
5.    Reserve Currency: The SDR approach offers a migration path from today’s US$ reserve currency to an alternative bank reserve currency to a future global reserve currency.
This may be the final lever required to initiate a Minsky Melt-Up (see: EXTEND & PRETEND – Manufacturing a Minsky Melt-Up) and the $5T in QE II (see: EXTEND & PRETEND: A Guide to the Road Ahead) I have been writing about for some time now.
There are many questions that are raised in the above discussion – many about the future role and safety of gold. Time and space don’t allow for this here. I hope to work through the answers in forthcoming articles.
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The following gave me concern when I first read it many years ago and something for you to think about:
“…the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
Professor Carroll Quigley
Tragedy and Hope: A History of the World in Our Time (1966)
President Bill Clinton’s Georgetown Professor
Gordon T Long       Â
Mr. Long is a former senior group executive with IBM & Motorola, a principal in a high tech public start-up and founder of a private venture capital fund. He is presently involved in private equity placements internationally along with proprietary trading involving the development & application of Chaos Theory and Mandelbrot Generator algorithms.
Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, you are encouraged to confirm the facts on your own before making important investment commitments.
© Copyright 2010 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.
Posted By thestatedtruth.com on August 1, 2010
Why this is the Titanic and the life boats have already been launched!
The household debt/income ratio is (still) near record highs of 120% and one-quarter of the consumer universe has a sub-600 FICO score – which means they are ineligible for Fannie or Freddie mortgage financing.
The banks have few opportunities to lend – households are either not creditworthy enough to lend to or are busy paying off debts, and companies that do have any expansion plans have enough cash on their balance sheet to finance their initiatives.
Posted By thestatedtruth.com on August 1, 2010
Here are some of the comments from Alan Greenspan on NBC’s “Meet The Press”.  We should keep in mind that Alan Greenspan told congress a year or two back that his “model” was broken!
Joshua Zumbrun        August 1, 2010
“We’re in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession,†Greenspan said in an interview on NBC’s “Meet the Press.â€
Asked if another economic contraction, a so-called “double dip,†was possible, Greenspan said, “It is possible if home prices go down.
“But right under this current price level, mainly 5, 7 or 8 percent below, is a very large block of mortgages, which are under water, so to speak, or could be under water. And that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem.â€
Slowing economic growth, and a decline in housing activity following the expiration of a government tax credit, have raised fears that the economy could return to a recession before completing its recovery from the worst downturn since the 1930s.
“Our problem basically is that we have a very distorted economy,†Greenspan said. Any recovery has mostly been limited to large banks, large businesses and “high-income individuals who have just had $800 billion added to their 401(k)s, and are spending it and are carrying what consumption there is.â€
“The rest of the economy, small business, small banks, and a very significant amount of the labor force, which is in tragic unemployment, long term unemployment — that is pulling the economy apart,†Greenspan said.
“There’s nothing out there that I can see which will alter the trend or the level of unemployment,†he said.
Greenspan repeated his warning that fiscal deficits could push up long-term interest rates and threaten the recovery.
The Financial System is ‘Broke’  “At the moment, there is no sign of that,  meaning higher interest rates, basically because the financial system is broke, and you cannot have inflation if the financial system is not working.â€
http://www.bloomberg.com/news/2010-08-01/greenspan-says-decline-in-u-s-home-prices-might-bring-back-the-recession.html
Posted By thestatedtruth.com on July 31, 2010
The economy of the U.S. grew at a weaker than expected 2.4% in the second quarter, but the first quarter was revised back up to 3.7% on the strength of stronger-than-projected inventory rebuilding. But the recession years were revised downward rather significantly for this late in the cycle. We find now that the recession was worse than we thought, taking the economy down a total of 4.1% during the recession. As of today, we are not quite back to where we started, still down 1%. That means it is quite possible that we could finish the year and still not be “there yet.” (To see a 1% rise in GDP we would need to see a 2% annualized rise for the rest of the year. We’ll look at that possibility in a few paragraphs.)
Let’s look at a few charts courtesy of the Dismal Scientist, at www.economy.com. First, recent GDP numbers:
If this were an average recovery, the economy would be growing at a 6% rate at this point, which pretty much says it all about our current 2.4% number. Further, 2.5 years after the beginning of a recession, we are typically already 8% higher than the prior high. This is a very tepid recovery, indeed.
There is a category called “Final Real Sales” you can create by subtracting the inventories number from the real GDP number. That reveals that final real sales grew by 1.3% last quarter. This is against what is normally a 4% number this far into a recovery. Is it any wonder that small businesses are asking “When will we get there?”
Next, look at the contribution from fixed residential investment. It has been negative or flat for six of the previous seven quarters. This time it added 0.6% to last quarter’s GDP. But the housing market is lousy. What gives?
It seems that the housing tax credits induced home builders to increase construction by an annualized 28% last quarter. That was in spite of there being 18.9 million homes vacant in the US (an all-time high), and the number of foreclosures rising by as much as 100% in some cities. (Hat tip: David Rosenberg)
“Lenders are accelerating foreclosures as borrowers fall behind in mortgage payments after the worst housing crash since the Great Depression. A record 269,962 US homes were seized in the second quarter, according to RealtyTrac Inc. Foreclosures probably will top 1 million this year, the Irvine, California-based data company said in a July 15 report.” (Daily Reckoning)
Ownership rates are falling and heading back to more traditional levels. Mortgage delinquencies are rising as the unemployment level stays persistently high. It is my guess that residential real estate will not contribute much if anything to GDP this quarter.
What about inventories? That has been a strength the last few years, adding a lot to our national growth. But inventory-to-sales ratios are at an 8-month high, which suggests that businesses may back off from increasing inventories at the recent pace.
Government spending? The bulk of the stimulus programs are going away in the latter half of the year, especially those that benefited state and local governments. Governments are slated to cut back spending or raise taxes by almost 1% of GDP. As many as 500,000 government employees may lose their jobs.
All that being said, if we take away housing and project slower inventory growth and less government spending, we could see the GDP number for this quarter fall to the 1% range and stay there for the rest of the year. Even the normally bullish Economy.com suggests that growth will be “sluggish” in the last half of the year. All in all, the very definition of a Muddle Through Economy.
Until we start to see a real rise in employment, it is hard to get too enthusiastic. Everyone seems to be happy that initial claims have come down from their highs. But they have gone sideways for almost a year. Let’s look at two charts. First, the last five years of initial claims.
 
Then a chart (courtesy of Bill King) which shows that continuing claims are at levels typically associated with recessions. This is not the stuff that “V”-shaped recoveries are made of.
 
I was on CNBC and Fox this last Thursday to talk about deflation. On CNBC I was side by side with my good friend Paul McCulley. It is no secret that Paul is a rather liberal Democrat. He is all for increasing taxes on the rich. This spring he told me at my conference that tax increases on the rich do not have the same multiplier as those for everyone else, and so therefore taking the Bush tax cuts away will not threaten the economy. I, of course, think it will.
I called Paul up to chat before we went on together. I was quite surprised to learn that he now thinks the Bush tax cuts should be extended for maybe another two years.
Why? We are both concerned about an unwelcome bout of deflation stemming from lack of final demand (as opposed to falling prices from increased productivity). Look at the graph below. Notice that prior to the beginning of the last recession inflation was running at a 4% clip and actually rose to above 5% before falling to a minus 2% and then rising to almost 3%. Since the beginning of the year, as the economy has softened, inflation has been steadily falling and is now at 1%. If the economy continues to falter, one would suspect that inflation could fall even lower.
If the economy were to tip into a recession with inflation so very low (or even near zero at the end of the year), the results could be very toxic. As Paul’s colleague and my friend Mohamed El-Erian writes, we are driving our economic car without a spare tire. If we were to go into a deflationary recession, there is not much that government could do. Our deficits are already at dangerous levels, and a recession would mean that tax collections would fall further. The Fed has some policy room, but it is of a variety that has not been tried for a very long time. Frankly, we cannot be sure of the unintended consequences.
Copyright 2010 John Mauldin. All Rights Reserved
John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore
Posted By thestatedtruth.com on July 30, 2010
The economy is so bad that:
Posted By thestatedtruth.com on July 30, 2010
By: David A. Patten
Former GOP House Speaker Newt Gingrich warned Thursday that President Obama and congressional Democrats appear to be on the verge of repeating the same mistakes that aggravated the Great Depression, adding that letting the Bush tax cuts expire would prove “very dangerous” for the nation’s economy.
Speaking in an exclusive Newsmax interview, Gingrich sounded the alarm that raising taxes could cause serious damage to the economic recovery.
“If we have large tax increases in January,” Gingrich told Newsmax.TV, “this economy will sink deeper into recession. There will be higher unemployment. The recovery will be longer.
“This was exactly the mistake made in 1937 and 1938, and it created a second mini-depression. I think it’s very dangerous, and I think the simple battle cry ought to be no tax increase in 2011, period. Keep current tax law exactly as it is through 2011,” Gingrich said.Â
“The financial reform law increased the power of Washington, D.C., increased the power of bureaucracies, increased the amount of uncertainty, killed American jobs, and made it easier for Frankfurt, London, Tokyo, and Shanghai to become the financial centers of the world,” Gingrich said.
When asked to give his recommendations for curing the nation’s ongoing economic woes, the former speaker pointed to the five-point agenda on his AmericanSolutions.com Web site, which is included in the Economic Freedom Act recently submitted to Congress by Reps. Jim Jordan, R-Ohio, and Jason Chaffetz, R-Utah.
That legislation calls for:
Among the other key points the former speaker made:
He called for a “serious inquiry” into the U.S. national security apparatus that has been unable to anticipate and thwart attacks such as the Christmas Day bomber and the attempted bombing in Time Square.
The United States would be much more secure today if authorities initially had identified the war on terrorism as being actually a struggle against radical Islam and the effort to impose Shariah.
Regarding the mosque controversy at ground zero, Gingrich urged the president and Congress to declare the area around the World Trade Center site a national military battlefield “because that was a battle and it’s part of a real war.” More Americans were killed at the World Trade Center than at any battle site in the United States since the Civil War. That justifies designating the area as a national battlefield, he said, where only “appropriate” buildings and uses would be allowed near the battlefield.
Gingrich also told Newsmax he will decide whether to run for president by March 2011, adding he is focused on trying to help as many Republicans as possible win in November.
Â
Posted By thestatedtruth.com on July 30, 2010
Hint……this is not a pretty picture!
Posted from zerohedge.com
Exerts from a Goldman review are shown below.
The chart below provides an integrated look at the GDP growth impact of fiscal policy at the federal, state, and local level.  These numbers are based on our current assumptions that (1) Congress will not extend emergency unemployment benefits beyond the current expiration date in November 2010, (2) state governments will need to make do without any additional federal fiscal aid beyond what was included in ARRA, and (3) Congress extends the lower- and middle-income tax cuts of 2001-2003 as well as the Making Work Pay tax cut of 2009 but not the higher-income cuts of 2001-2003.
Two additional comments are in order. First, we have lengthened and smoothed out the impact of tax changes on spending in order to reduce the volatility in quarterly GDP impulses from fluctuations in tax refunds and final settlements from one quarter to the next. Second, we recognize that part of the impact from income replacement measures, most prominently emergency unemployment benefits, is not a completely “exogenous†consequence of a shift to more generous benefit provision in ARRA but also partly an “endogenous†consequence of weakness in the economy.
Â
The upshot of the chart is that the overall fiscal impulse to GDP growth is likely to go from +1.3 percentage points between early 2009 and early 2010 to -1.7 percentage points in 2011. There are two main differences compared with our federal-only estimates—(1) a smaller positive impact in 2009 and (2) a somewhat earlier turn into negative territory in 2010. The reason for both is that state and local finances have been a drag on growth all along, and this drag has increased somewhat in early 2010. The earlier turn toward restraint may be one reason why growth has been weakening noticeably over the past few months, although the end of the positive inventory cycle has undoubtedly also been an important factor.
However, the basic implication is unchanged from our prior analysis—namely that fiscal policy will result in a substantial “swing†from stimulus to restraint. This is likely to contribute to slower GDP growth of around 1½% (annualized) in the second half of 2010, and it implies downside risks to our current forecast of 3% growth (on a Q4/Q4 basis) in 2011.
Posted By thestatedtruth.com on July 30, 2010
By John Hughes      July 30, 2010
The U.S. House passed legislation that would increase by sixfold the minimum experience pilots need to work at airlines in response to a commuter-plane crash.
The requirement that pilots have 1,500 hours of flight time, surpassing the current 250-hour minimum, was sought by pilot unions and relatives of victims in a deadly February 2009 crash near Buffalo, New York. The House approved the bill yesterday by voice vote.
The National Transportation Safety Board said this year that Captain Marvin Renslow of Pinnacle Airlines Corp.’s Colgan unit caused his plane to crash near Buffalo, killing 50 people, by incorrectly responding to a stall warning in the cockpit. He died along with all passengers, crew and a person on the ground.
“We can no longer delay in enacting the strongest safety bill in decades,†said Representative Jerry Costello, an Illinois Democrat, before the vote.
The legislation on flight training would require that the Federal Aviation Administration ensure pilots have been trained in stall recovery and would force airlines to take steps to assure that pilots aren’t flying when they are tired.
House Transportation Committee Chairman James Oberstar, a Minnesota Democrat, predicted the Senate will approve the pilot- safety provisions, which also require additional training for flying in icing conditions.
FAA Deadline ……The pilot-safety bill also would extend through September the law authorizing financing for the FAA. Without action by Aug. 1, taxes that support the agency would expire. While the FAA authorization in the measure would be temporary, the safety provisions would be permanent.
House and Senate lawmakers are putting off for now resolving disagreements that have stalled a longer-term FAA bill. Legislators are at odds over raising passenger ticket fees that fund airports and enacting a provision that would make it easier for ground workers at FedEx Corp.’s Express unit to form unions.
Congress is almost three years overdue in renewing the FAA authorization. The agency has been operating on temporary renewals while lawmakers negotiate.
Posted By thestatedtruth.com on July 29, 2010
Exerts from:             Bill Gross    Investment Outlook    August 2010
Observers will point out, as shown in the following chart, that global population growth rates have been declining since 1970 with no apparent ill effects. True, until 2008, I suppose. The fact is that since the 1970s we have never really experienced a secular period during which the private market could effectively run on its own engine without artificial asset price stimulation. The lack of population growth was likely a significant factor in the leveraging of the developed world’s financial systems and the ballooning of total government and private debt as a percentage of GDP from 150% to over 300% in the United States, for example. Lacking an accelerating population base, all developed countries promoted the financing of more and more consumption per capita in order to maintain existing GDP growth rates. Finally, in the U.S., with consumption at 70% of GDP and a household sector deeply in debt, there was nowhere to go but down. Similar conditions exist in most developed economies.
The danger today, as opposed to prior deleveraging cycles, is that the deleveraging is being attempted into the headwinds of a structural demographic downwave as opposed to a decade of substantial population growth. Japan is the modern-day example of what deleveraging in the face of a slowing and now negatively growing population can do. Prior deleveraging periods such as what the U.S. and European economies experienced in the 1930s exhibited a similar demographic with the lowest levels of fertility in the 20th century and extremely low population growth. Things did not go well then. Today’s developed economies almost assuredly offer substantially less population growth than the 1.5% rate experienced over the prior 50 years. Even when viewed from a total global economy perspective, population growth over the next 10–20 years will barely exceed 1%.
The preceding analysis does not even begin to discuss the aging of this slower-growing population base itself. Japan, Germany, Italy and of course the United States, with its boomers moving toward their 60s, are getting older year after year. Even China with their previous one baby policy faces a similar demographic. And while older people spend a larger percentage of their income – that is, they save less and eventually dissave – the fact is that they spend far fewer dollars per capita than their younger counterparts. No new homes, fewer vacations, less emphasis on conspicuous consumption and no new cars every few years. Healthcare is their primary concern. These aging trends present a one-two negative punch to our New Normal thesis over the next 5–10 years: fewer new consumers in terms of total population, and a growing number of older ones who don’t spend as much money. The combined effect will slow economic growth more than otherwise.
PIMCO’s continuing New Normal thesis of deleveraging, reregulation and deglobalization produces structural headwinds that lead to lower economic growth as well as half-sized asset returns when compared to historical averages. The New Normal will not be aided nor abetted by a slower-growing population nor by cyclical policy errors that thrust Keynesian consumption remedies on a declining consumer base. Current deficit spending that seeks to maintain an artificially high percentage of consumer spending can be compared to flushing money down an economic toilet. Far better to create and mimic other government industrial policies aimed at infrastructure, clean energy, more relevant education and less costly healthcare services.
More: http://www.pimco.com/
Posted By thestatedtruth.com on July 29, 2010
This is setting up a big problem.  The demographics of the system only point to larger and larger monthly payouts:
The median net worth of Americans from 25 to 34 has consistently dropped since 1985. There was a big drop from 2000 to 2004 and I would imagine the trend has accelerated in the current recession. Yet how were people able to continue buying more and more? It was all fueled by access to debt. It was largely a debtor mirage that kept the economy going in the last decade. In fact, the median amount Americans have saved in a retirement account (those still working) is $2,000.Â
By definition:  In probability theory and statistics, a median is described as the numeric value separating the higher half of a sample, a population, or a probability distribution, from the lower half.  The arithmetic mean is the “standard” average, often simply called the “mean”.
Net Worth Chart:
A giant part of net worth was pulled from housing equity that has now largely evaporated. The fact that half of U.S. households only have $2,000 in retirement accounts tells us that many are close to a zero net worth after the housing bubble burst. Â
For more of this fantastic article: http://www.mybudget360.com/
Posted By thestatedtruth.com on July 29, 2010
The unusually cool summer continued in Southern California, where several new record-low temperatures were recorded on Wednesday.
The 68-degree low at Los Angeles International Airport broke the old record low for the day, which was 70 degrees in 1991. Santa Barbara (68) and San Luis Obispo (69) broke records as well.
The temperature at USC, 75, tied the record low set in 1999. UCLA also set a record, 56 degrees, according to the National Weather Service.
While the region saw a heat wave a few weeks ago, temperatures have been gradually going down again as July comes to an end.
June was also marked by gloomy conditions and lower-than-normal temperatures.
–Shelby Grad
Posted By thestatedtruth.com on July 29, 2010
A drop in usage is showing up just as health-care companies report financial results. Insurers, lab-testing companies, hospitals and doctor-billing concerns say that patient visits, drug prescriptions and procedures were down in the second quarter from year-ago levels.
“People just aren’t using health-care like they have,” said Wayne DeVeydt, WellPoint Inc.’s chief financial officer, in an interview Wednesday. “Utilization is lower than we expected, and it’s unusual.”
Complete article at:Â http://online.wsj.com/article/SB10001424052748703940904575395603432726626.html?mod=WSJ_hpp_MIDDLTopStories
Posted By thestatedtruth.com on July 28, 2010
By Alex Kowalski – Jul 28, 2010
Pacific Investment Management Co.’s Bill Gross said deficit spending by governments that seek to maintain artificial levels of consumption “can be compared to flushing money down an economic toilet.â€
Without acceleration in population growth, developed countries finance more consumption to maintain economic growth, the world’s biggest bond-fund manager wrote in his August commentary today on Newport Beach, California-based Pimco’s website. Leveraged spending, he said, is not a substitute for demand created by people.
“I will go so far as to say that not only growth but capitalism itself may be in part dependent on a growing population,†Gross wrote. “Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence.â€
Deficit spending will be unsuccessful in what Pimco calls the “new normal†because deleveraging, re-regulation and de- globalization produces structural headwinds that lead to slower growth and lower-than-average investment returns, Gross said.
Japan is the modern-day example of what deleveraging in the face of a slowing and now negatively growing population can do, Gross said. Prior deleveraging periods, such as what the U.S. and European economies experienced in the 1930s, exhibited a similar demographic with the lowest levels of fertility in the 20th century and extremely low population growth, he wrote.
Posted By thestatedtruth.com on July 27, 2010
This means each additional dollar of debt is now working its way into a negative muliplyer effect on our economy….not to long ago, it had just the opposite effect, the more debt, the more we would grow. Now at some point going forward, a hiccup in the trillions of dollars of derivatives will set off a domino effect of defaults, the system wil be purged (if everything doen’t melt down in the process) and we will reset the economy for another growth cycle. It’s likely a matter of how long we have to wait for this whole thing to completly wash out.  Not rocket science, just basic economics 101.
Posted By thestatedtruth.com on July 27, 2010
Just a reminder…… Jim Rogers was George Soro’s original partner for the Quantum Fund. Both are now billionaires! Robert Shiller, co-creator of the Standard & Poor’s/Case-Shiller house price index, also warned that the next downturn may come, maybe even sooner.
By James Quinn, US Business Editor
Published 27 Jul 2010
Mr Rogers, the respected currency trader and hedge fund pioneer, cautioned that when the downturn takes hold “the world is going to be in worse shape because the world has shot all its bullets.”
Speaking in an interview with business television channel CNBC, the septuagenarian investor said that “since the beginning of time” there has been a recession every four-to-six years, and that’s mean another one is due around 2012.
With reference to Ben Bernanke, chairman of the US Federal Reserve, he said: “Is Mr. Bernanke going to print more money than he already has? No, the world would run out of trees.”
Meanwhile, Robert Shiller, co-creator of the Standard & Poor’s/Case-Shiller house price index, warned that the next downturn may come even sooner.
“For me a double-dip is another recession before we’ve healed from this recession. The probability of that kind of double-dip is more than 50pc. I actually expect it,” he said. His prediction came despite the S&P/Case-Shiller index for May showing a 4.6pc year-on-year increase in house prices in 20 major US conurbations.
Posted By thestatedtruth.com on July 27, 2010
“Noisy†economic reports underscore the “unusually uncertain†outlook cited by Federal Reserve Chairman Ben S. Bernanke, according to Pacific Investment Management Co.’s Mohamed El-Erian.
Corporate earnings are backward-looking, and the key economic issue is the U.S. labor market, El-Erian, Pimco’s chief executive and co-chief investment officer, said in a radio interview today with Tom Keene on Bloomberg Surveillance.
“The minute someone puts out a green light, and earnings constituted a green light, you’ll see people rushing back into risk markets,†El-Erian said. “The indicators that we look at suggest that the economy continues to lose momentum. The key is going to be ultimately is the economy creating enough jobs to make people comfortable, to allow companies to invest?â€
Bernanke said on July 21 in testimony to the Senate Banking Committee that “the economic outlook remains unusually uncertain.â€
Global growth will be below average during the next three to five years as developed economies struggle with mounting deficits and increased regulation in the wake of the 2008 collapse of credit markets in what Pimco calls the “new normal,†El-Erian has said.
The firm is advising investing more in emerging-market nations such as Brazil and China, which should continue to thrive because of stable levels of government debt and expanding middle classes. Brazil is in a “developmental breakout phase,†El-Erian said in today’s interview.
 Pimco is a unit of Munich-based insurer Allianz SE.
Posted By thestatedtruth.com on July 27, 2010
U.S. local governments may cut almost 500,000 jobs through next year to cope with sliding property taxes, a decline in state and federal aid and added need for social services, according to a report released today.
The report, a result of a survey by the National League of Cities, the U.S. Conference of Mayors and the National Association of Counties, showed local governments are moving to cut the equivalent of 8.6 percent of their workforces from 2009 to 2011. That suggests 481,000 employees will lose their jobs, according to the report, which said the tally may yet rise.
“Local governments across the country are now facing the combined impact of decreased tax revenues, a falloff in state and federal aid and increased demand for social services,†said the study, which was released in Washington today.
While a separate report by the National Conference of State Legislatures today said U.S. state revenue is recovering from the drop in tax collections caused by the 2007 recession and the slow pace of job growth since, the greatest blow to local governments will be felt from now through 2012, the local groups said.
The local groups said their budgets are likely to be hit by a drop in property taxes, which trail changes in home values because of the way assessments are calculated. Although prices peaked in 2006, property taxes paid to state and local governments kept rising until the first three months of this year, according to annual totals compiled by the U.S. Census Bureau.
“Over the next two years, local tax bases will likely suffer from depressed property values, hard-hit household incomes and declining consumer spending,†the report said.
“For local governments, unemployment and foreclosures resulting from the Great Recession translate into too few revenues making it increasingly difficult to fund or satisfactorily maintain many basic services,†Loveridge, who is also the president of the National League of Cities, said in a statement.
Posted By thestatedtruth.com on July 27, 2010
About 18.9 million homes in the U.S. stood empty during the second quarter as surging foreclosures helped push ownership to the lowest level in a decade.
The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.6 million in the year-earlier quarter, the U.S. Census Bureau said in a report today. The ownership rate, meaning households that own their own residence, was 66.9 percent, the lowest since 1999.
Lenders are accelerating foreclosures as borrowers fall behind in mortgage payments after the worst housing crash since the Great Depression. A record 269,962 U.S. homes were seized in the second quarter, according to RealtyTrac Inc. Foreclosures probably will top 1 million this year, the Irvine, California- based data company said in a July 15 report.
The share of homes empty and for sale, known as the vacancy rate, was 2.5 percent, matching the year-earlier period and down from 2.6 percent in the first quarter, the Census Bureau said. The homeownership rate fell from 67.1 percent in the first quarter, the third straight decline. The rate reached a record high of 69.2 percent in the second and fourth quarters of 2004.
Foreclosures are included in a part of the Census Bureau report that also tracks vacant properties under renovation or tied up in legal proceedings. There were 3.7 million empty homes in the second quarter, up from 3.5 million in the year earlier period, the report said.
Bank seizures could also be counted as vacant properties for sale or rent, or as owner-occupied homes if lenders haven’t yet evicted previous owners, the federal agency said. There were 2 million empty homes for sale in the second quarter, up from 1.9 million a year earlier.
A record 4.6 percent of U.S. mortgages were in foreclosure in the first three months of 2010, according to a May 19 report by the Mortgage Bankers Association. The combined share of foreclosures and home loan delinquencies was 14 percent, or about one in every seven U.S. mortgages.
Demand for homes has slumped since the April expiration of a government tax credit for buyers. The rate of new-home sales last month was the second-lowest on record, behind May, the Commerce Department reported yesterday. Sales of previously owned homes fell 5.1 percent in June, the National Association of Realtors said last week.
The tax benefit, worth as much as $8,000, spurred a 4.9 percent rise in sales last year, the first increase since 2005, according to the Chicago-based National Association of Realtors.
U.S. home prices retreated 13 percent in 2009 to a median of $172,500, following a 9.5 percent drop in 2008, according to the Realtors’ association. This year, prices may rise 0.8 percent, the first gain since 2006.
The U.S. median home price tumbled 29 percent to an eight- year low of $164,600 in February, according to the Realtors. The median had reached a record high of $230,300 in July 2006.
Posted By thestatedtruth.com on July 27, 2010
This is going to be the new normal……specifically the savings part!
American consumers lost confidence in July, shaken by mounting concern over jobs and wages that threatens to constrain the economic recovery.
The Conference Board’s sentiment index fell to 50.4, below the median forecast of economists surveyed by Bloomberg News and the lowest level in five months.
A jobless rate that is projected to hover near 10 percent for the rest of the year means household spending, which accounts for 70 percent of the economy, will take time to recover as concerned consumers focus on saving more and paying down debt.   Ford Motor Co. is among companies lowering industry sales forecast for the year.
Posted By thestatedtruth.com on July 26, 2010
July 26 (Reuters) – Iranian criticism of Russian President Dmitry Medvedev is “unacceptable” and “fruitless, irresponsible rhetoric”, the Russian Foreign Ministry said on Monday.
Medvedev told foreign ambassadors on July 12 that Iran was moving closer to the potential to create nuclear weapons.
Iranian President Mahmoud Ahmadinejad reacted harshly last weekend, calling Medvedev’s statement “the announcement of a propaganda play, planned to be staged against us by America”. He said the Russian leader “has kick-started” this play.
More at: http://www.reuters.com/article/idUSLDE66P1P020100726
Posted By thestatedtruth.com on July 26, 2010
WASHINGTON – It could take days to restore power to hundreds of thousands of people in the D.C. area after a violent storm downed power lines and trees and left three people dead.
Powerful, fast-moving storms swept through the region Sunday, leaving hundreds of thousands of families without electricity.
Three people died as a result of the storm. In Beltsville, a tree crushed a minivan, killing the 44-year-old driver and injuring her passenger, a woman in her 60s. A man using a personal watercraft on the Chesapeake Bay and died after encountering severe winds and choppy seas while trying to get back to land. In Virginia, a 6-year-old boy died when a falling tree branch struck him outside a Sterling recreational center.
Officials said they hadn’t had a similar large outage since those in the wake of Hurricane Isabel in 2003, when flooding and fallen trees caused even more massive outages and some customers went a week or more without power.
More at:Â http://www.wtop.com/?nid=25&sid=2008840
Posted By thestatedtruth.com on July 24, 2010
About 31 percent of U.S. oil output and about 10 percent of gas production, comes from the Gulf of Mexico according to the Energy Department
By Dan Hart – Jul 24, 2010
Bonnie has degenerated to a “disorganized area of low pressure†near the U.S. Gulf Coast, hours after the National Hurricane Center lifted tropical storm warnings for the northern Gulf of Mexico, the center said.
The remnants of the weather system slowed to about 14 miles (22 kilometers) per hour as of 5 p.m. New York time as it moves to the west-northwest, the center said in its last public advisory. The low is anticipated to dissipate tonight or tomorrow, and no coastal watches or warnings are in effect, the NHC said.
Storms are closely watched in the Gulf, partly because they may topple oil production platforms and rupture pipelines. Bonnie hampered BP Plc’s efforts to drill relief wells near the Macondo spill site, as the company yesterday disconnected ships that had been drilling relief wells as the storm approached. The vessels began returning today, BP spokesman John Curry said by telephone from New Orleans.
The Gulf is home to about 31 percent of U.S. oil output and about 10 percent of gas production, according to the Energy Department.
Bonnie’s maximum sustained winds were about 30 mph, which are about the same reported in the previous advisory at 11 a.m. The storm was located about 100 miles east-southeast of the mouth of the Mississippi River.
The storm is expected to produce rainfall totals of one to two inches over southern parts of Louisiana, Mississippi, and Alabama, and the far-western part of the Florida Panhandle. Some areas might record as much as three inches, the agency said.
A storm must have winds of at least 39 mph to be considered a tropical storm.
Posted By thestatedtruth.com on July 24, 2010
Gloom, Boom and Doom publisher Marc Faber says the Fed will begin “massive†quantitative easing by October.  “The economy is not robust,†Faber told Bloomberg. “We have mixed signals, but in general, the economy is still weak.â€
And despite the euro’s recovery to $1.30, Faber also says he thinks Europe is stuck in a sideways economy for years, as austerity cuts and bailouts weigh on growth.  “I am not a great believer in this austerity that they are proclaiming,†Faber said in an interview with Daily Motion.
“I think the fiscal deficit will actually stay very high or even increase,” he said. “And I think that if they decrease the fiscal deficit then it will be offset by very expansionary monetary policy, in other words monetization, so the whole burden to support the economy will fall on monetary policies, then they’ll print money like crazy,†he said.
“Under a fiat monetary system you can print endless quantities of money and so stocks may adjust in real terms but not necessarily in nominal terms to the extent that the super bears are predicting.â€
The global economy is headed toward a sharp slowdown this year as the effect of these measures wanes, says economist Nouriel Roubini. “Private sector deleveraging has barely begun,†Roubini writes in todayonline.com. “Moreover, there is now massive re-leveraging of the public sector in advanced economies, with huge budget deficits and public-debt accumulation driven by automatic stabilizers, countercyclical Keynesian fiscal stimulus, and the immense costs of socializing the financial system’s losses.â€
Posted By thestatedtruth.com on July 24, 2010
Just as every school child knows that water is formed by the two elements of hydrogen and oxygen in a very simple combination we all know as H2O, so deflation has its own elements of composition. Let’s look at some of them (in no particular order).
First, there is excess production capacity. It is hard to have pricing power when your competition also has more capacity than he wants, so he prices his product as low as he can to make a profit, but also to get the sale. The world is awash in excess capacity now. Eventually we either grow the economy to utilize that capacity or it will be taken offline through bankruptcy, a reduction in capacity (as when businesses lay off employees), or businesses simply exiting their industries.
I could load the rest of the letter with charts showing how low world capacity utilization is, but let’s just take one graph, from the US. Notice that capacity utilization is roughly in an area that we associate with the bottom of past recessions (with one exception).
Deflation is also associated with massive wealth destruction. The credit crisis certainly provided that element. Home prices have dropped in many nations all over the world, with some exceptions, like Canada and Australia. Trillions of dollars of “wealth” has evaporated, no longer available for use. Likewise, the bear market in equities in the developed world has wiped out trillions of dollars in valuation, resulting in rising savings rates as consumers, especially those close to a wanted retirement, try to repair their leaking balance sheets.
And while increased saving is good for an individual, it calls into play Keynes’ Paradox of Thrift. That is, while it is good for one person to save, when everyone does it, it decreases consumer spending. And decreased consumer spending (or decreased final demand, in economic terms) means less pricing power for companies and is yet another element of deflation.
Yet another element of deflation is the massive deleveraging that comes with a major credit crisis. Not only are consumers and businesses reducing their debt, banks are reducing their lending. Bank losses (at the last count I saw) are over $2 trillion and rising.
As an aside, the European bank stress tests were a joke. They assumed no sovereign debt default. Evidently the thought of Greece not paying its debt is just not in the realm of their thinking. There were other deficiencies as well, but that is the most glaring. European banks are still a concern unless the ECB goes ahead and buys all that sovereign debt from the banks, getting it off their balance sheets.
When the money supply is falling in tandem with a slowing velocity of money, that brings up serious deflationary issues. I have dealt with that in recent months, so I won’t bring it up again, but it is a significant element of deflation. And it is not just the US. Global real broad money growth is close to zero. Deflationary pressures are the norm in the developed world (except for Britain, where inflation is the issue).
Falling home prices and a weak housing market are one more element of deflation. This is happening not just in the US, but also much of Europe is suffering a real estate crisis. Japan has seen its real estate market fall almost 90% in some cities, and that is part of the reason they have had 20 years with no job growth, and that the nominal GDP is where it was 17 years ago.
In the short run, reducing government spending (in the US at local, state, and federal levels) is deflationary in the short run. Martin Wolfe, in the Financial Times, wrote the following last week (arguing that that the move to “fiscal austerity” is ill-advised):
“We can see two huge threats in front of us. The first is the failure to recognize the strength of the deflationary pressures …Â The danger that premature fiscal and monetary tightening will end up tipping the world economy back into recession is not small, even if the largest emerging countries should be well able to protect themselves. The second threat is failure to secure the medium-term structural shifts in fiscal positions, in management of the financial sector and in export-dependency, that are needed if a sustained and healthy global recovery is to occur.”
Finally, high and chronic unemployment is deflationary. It reduces final demand as people simply don’t have the money to buy things.
Deflation that comes from increased productivity is desirable. In the late 1800’s the US went through an almost 30-year period of deflation that saw massive improvements in agriculture (the McCormick reaper, etc.) and the ability of producers to get their products to markets through railroads. In fact, too many railroads were built and a number of the companies that built them collapsed. Just as we experienced with the fiber-optic cable build-out, there was soon too much railroad capacity, and freight prices fell. That was bad for the shareholders but good for consumers. It was a time of great economic growth.
But deflation that comes from a lack of pricing power and lower final demand is not good. It hurts the incomes of both employer and employee, and discourages entrepreneurs from increasing their production capacity, and thus employment.
That is why it will be important to watch the CPI numbers even more closely in the coming months. The trend, as noted above, is for lower inflation. If that continues, the Fed will act. I did a summary of Bernanke’s 2002 speech on deflation a few weeks ago. For those who didn’t read it, here is the link.
If the US gets into outright deflation, I expect the Fed to react by increasing their assets and by outright monetization, buying treasuries from insurance and other companies, as putting more money into banks when they are not lending does not seem to be helpful as far as deflation is concerned. More mortgages? Corporate debt? Moving out the yield curve? All are options the Fed will consider. We need to be paying attention.
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Posted By thestatedtruth.com on July 22, 2010
By Connie Prater
Credit card agreements are written on average at a 12th grade reading level, making them not understandable to four out of five adults, according to a CreditCards.com analysis of all the agreements offered by major card issuers in the United States.
The average American adult reads at a ninth-grade level and readability experts recommend important information — such as credit card agreements — be written at that level. Only one in five adults reads above a 12th-grade level.
“It is clear from your study that something must be done to make these agreements easier to read,” says Lauren Z. Bowne, staff attorney for Consumers Union, the nonprofit owner of Consumer Reports magazine.
“Credit card contracts and other such documents are written in dense prose for a reason: So that the customer will NOT be able to understand it,” notes Roy Peter Clark, a national expert on writing and a senior scholar at the Poynter Institute in St. Petersburg, Fla. “I may be cynical, but I don’t think their writing strategies are accidental, the collateral damage of a bureaucratic mindset. I think those writers know exactly what they are doing.”
Readability poses Catch-22
Bowne points out what has become a Catch-22 for many credit cardholders. Told to read their agreements, they can’t. Financial advisers strongly urge card users to read their credit card agreements carefully to understand the deal they have with their card issuer. It has become even more important since a 2009 federal credit card reform law led to multiple changes in terms. In the new world of credit card use, they say, an informed consumer is better protected against “gotcha” fine print and surprise penalties.
However, as the CreditCards.com analysis shows, many adults may not be able to comprehend what they are reading.
“That’s easy to say, but sometimes difficult to do,” says Andrew Bernstein, a certified credit counselor for DebtHelper.com in West Palm Beach, Fla. He gives seminars on reading the small print of credit card terms. Clients often turn to credit counselors to help them decipher the fine print. Says Bernstein: “Credit counselors struggle reading it, too.”
|
Something must be done to make these agreements easier to read. |
| — Lauren Z. Bowne    consumer attorney    |
Researchers analyze more than 1,200 contracts
CreditCards.com hired a team of researchers who, using computer software, downloaded and analyzed every word of the majority of credit card agreements offered in America. More than 1,200 contracts were included in the analysis.
This became possible for the first time in May 2010, when the agreements were publicly posted in a new Federal Reserve database; large card issuers were required to give the Fed their agreements, and the Fed was required to post them online, by the Credit CARD Act of 2009.
CreditCards.com (see the study’s methodology details) graded every statement using a standard common in the teaching and textbook industries: the FOG Index. Readability formulas have been widely used by textbook and novel publishers for decades to ensure they weren’t writing above the reading levels of their target audiences.
FOG stands for “Frequency of Gobbledygook” — and it gives a numeric grade for any document. The higher the grade level, the more difficult it is to read.
Gobbledygook?    We encountered it frequently.
Can you read this?
The CreditCards.com analysis found:
Deliberate confusion?
Consumers and others accuse the banks of deliberately writing unintelligible agreements to confuse cardholders.
“I got lost in the first sentence,” Ron DeLa Rosa, an attorney in Austin, Texas, says after reading GTE Federal Credit Union’s agreement.
|
It’s unfair to say that these are deliberately made complicated … They try to make them simple, but there are legal requirements for disclosures. |
| — Nessa Feddis American Bankers Association |
“I’m sure all those legal minds came up with all those words to make things as confusing as possible for whoever the credit cardholder is ’cause that way when they get sued they’ll always have a way out,” DeLa Rosa says, adding: “That’s the way attorneys do it.”
Bankers deny deliberate deception and defend the densely worded fine print, blaming all the federal and state laws that require disclosure of terms. “It’s unfair to say that these are deliberately made complicated,” countered Nessa Feddis, a spokeswoman for the American Bankers Association. “They try to make them simple, but there are legal requirements for disclosures.”
A new Consumer Financial Protection Bureau — signed into law by President Obama on July 21 as part of the 2010 Wall Street reform package — may offer some relief. Among other things, the agency will have the power to mandate that credit card contracts be written in plain English so a majority of Americans can understand them.
More at:Â http://www.creditcards.com/credit-card-news/credit-card-agreement-readability-1282.php
Posted By thestatedtruth.com on July 22, 2010
PRINCETON, NJ — Gallup’s 2010 Confidence in Institutions poll finds Congress ranking dead last out of the 16 institutions rated this year. Eleven percent of Americans say they have “a great deal” or “quite a lot” of confidence in Congress, down from 17% in 2009 and a percentage point lower than the previous low for Congress, recorded in 2008.
The Gallup poll was conducted July 8-11, shortly before Congress passed a major financial regulatory reform bill, which President Obama signed into law this week.
Underscoring Congress’ image problem, half of Americans now say they have “very little” or “no” confidence in Congress, up from 38% in 2009 — and the highest for any institution since Gallup first asked this question in 1973. Previous near-50% readings include 48% found for the presidency in 2008, and 49% for the criminal justice system in 1994.
This year’s poll also finds a 15-point drop in high confidence in the presidency, to 36% from 51% in June 2009. Over the same period, President Barack Obama’s approval rating fell by 11 points, from 58% to 47%. However, confidence in the presidency remains higher than in 2008 — the last year of George W. Bush’s term — when the figure was 26%.
Military Still No. 1
The military continues its long-standing run as the highest-rated U.S. institution. Small business and the police occupy second and third places, respectively. These three top-tier institutions all earn high confidence from a majority of Americans, something no other institution achieves this year.
The military has been No. 1 in Gallup’s annual Confidence in Institutions list continuously since 1998, and has ranked No.1 or No. 2 almost every year since its initial 1975 measure.
The high level of confidence in small business contrasts with the low level of confidence in big business; the latter is tied with HMOs at 19% for next-to-last place. Confidence in organized religion is similar to where it has been since 2002, but is significantly lower than in prior years.
More at: http://www.gallup.com/poll/141512/Congress-Ranks-Last-Confidence-Institutions.aspx
Posted By thestatedtruth.com on July 22, 2010
* U.S. officials evaluating whether to evacuate area
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Thu Jul 22, 2010
By Kristen Hays and Anna Driver
HOUSTON, July 22 (Reuters) – BP Plc (BP.L) (BP.N) oil spill workers in the Gulf of Mexico prepared for a possible evacuation on Thursday as a tropical storm threatened more delays in attempts to end the environmental disaster.
The U.S. National Hurricane Center said Tropical Storm Bonnie, the second named storm of the 2010 Atlantic hurricane season, was packing maximum sustained winds of 40 miles (65 kph) per hour.
It formed near the Bahamas on Thursday on a track that could take it over BP’s oil spill site in the Gulf of Mexico.
Before it became a named tropical storm, U.S. officials said they would decide on Thursday night whether to unhook surface ships and evacuate the site. But the blown-out well would remain capped even if an evacuation forces a temporary halt to undersea surveillance.
Louisiana Gov. Bobby Jindal, who declared a state of emergency because the storm is forecast to hit the state’s coast on Sunday, said the storm could delay efforts to permanently seal the well by up to two weeks.
“Obviously that’s a concern,” Jindal said.
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More at:http://www.reuters.com/article/idUSN2216868220100722
Posted By thestatedtruth.com on July 21, 2010
CHICAGO (Reuters) – The intense heat and humidity that blanketed central Kansas since late last week have killed more than 2,000 cattle and one state official called the heat-related losses the worst in his 17 years on the job.
However, conditions for the cattle improved somewhat on Tuesday as the humidity has decreased and the wind has picked up, state and feedlot sources said.
Kansas is the third largest cattle state with more than 2 million cattle in feedlots.
“It is all cattle in feedlots. It is more the humidity than the heat,” Ken Powell, environmental scientist with the Kansas Department of Health and Environment, said of the more than 2,000 cattle deaths.
The cattle deaths have overwhelmed rendering plants and some feedlots are burying the carcasses in accordance with state regulations, said Powell.
“From the standpoint of dealing with the disposal of animals, this is the worst I have seen in the almost 17 years I’ve been here,” he said.
The death losses helped guide Chicago cattle futures higher on Monday, but on Tuesday the futures were near unchanged as traders awaited Friday’s release of a USDA cattle supply report.
Temperatures reached 101 Fahrenheit (38 Celsius) at Garden City in southwest Kansas on Monday, and highs in the region were expected to reach the upper 90s to low 100s F (upper 30s C) through Friday, said Joel Burgio, meteorologist at Telvent DTN.
“For three or four more days, it’s still pretty stressful,” Burgio said. “There is a chance you may see a few showers this weekend, which would help ease stress on the livestock.
http://finance.yahoo.com/news/Kansas-heat-wave-has-killed-rb-1249709782.html?x=0&.v=3
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