Tax Receipts Rebound, But………..
Posted By thestatedtruth.com on March 30, 2010
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By Dunstan McNichol
March 30 (Bloomberg) — The two-year slide in tax collections that opened a $196 billion gap in U.S. state budgets has stopped, easing pressure on credit ratings and giving leeway to lawmakers as they craft spending plans for next year.
The 15 largest states by population forecast a 3.9 percent gain in tax revenue in fiscal 2011, budget documents show. The 50 states on average may increase collections by about 3.5 percent, the first time in two years the figure is expected to grow, said Mark Zandi, chief economist at Moody’s Economy.com,
California took in 3.9 percent more since December than projected in January, Controller John Chiang said this month. New York got $129 million above forecasts in its budget year through February, according to a report from Comptroller Thomas DiNapoli. In New Jersey, the second-wealthiest state per capita, January sales-tax collections were 1.9 percent higher than a year earlier, the first annual increase in 19 months, forecasters said in a report last month.
“This time last year, we were sliding down a mountain, said David Rosen, chief budget officer for the New Jersey Legislature. I don’t think we are now; it’s stabilized.
States collected about $79 billion less in sales, income and corporate taxes in 2009 than in 2008, the U.S. Census Bureau said today in a report, as the economy struggled through its deepest slump since the Great Depression. Emergency spending cuts and tax increases became routine during the recession that began in December 2007.
more…..http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKBVswcpwXBE
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But………………
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California State Controller Chiang:
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State Budget Crisis Will Get Worse
By Rebecca Kimitch Staff Writer
Posted:Â 03/29/2010
State Controller John Chiang said Monday the worst of California’s budget crisis is still to come.
Although lawmakers are challenged by a nearly $20 billion deficit, “the bad year’s 2012,” Chiang said.
That year, state finances will be hit with a trifecta of pain: the temporary tax hikes approved last year will be over; federal stimulus funds will be gone; and funds that the state “raided” from local governments will come due.
The deficit at that point will be some $25 billion, according to Schwarzenegger administration estimates.
And finances in later years aren’t great either: last year, the Legislative Analyst Office released a report projecting a $20 billion deficit every year for the next five years.
But not even those highly publicized numbers tell the full story, said Chiang, the chief fiscal officer for the state.
Chiang said California also owes its own “special” state funds some $20 billion that it has borrowed in recent years to close deficits. He was referring to pots of money outside the state’s general fund.
And state employee health and pension benefits are not being adequately budgeted, he said.
“(A solution) is going to take a lot of legislators getting off the sidelines,” Chiang said.
“Yet we haven’t solved anything this year,”
Read more: http://www.sgvtribune.com/ci_14782375?source=rss_viewed#ixzz0jhTG4J87
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Tax Receipts Rebound As 15 Biggest
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 States See Gain
Downtown NYC Towers Sit Empty
Posted By thestatedtruth.com on March 30, 2010
By David M. Levitt
March 30 (Bloomberg) — Downtown Manhattan, where demand for office space began to surge three years after the 9/11 terrorist attacks, is about to lose its spot as the best- performing U.S. market.
Vacancies may exceed 14 percent of the area’s 87 million square feet by late 2011, empty space that’s equivalent to four Empire State Buildings and the highest rate since 1997, according to property broker Cushman & Wakefield Inc. That doesn’t include the 4.4 million square feet of offices in two towers now under construction at the World Trade Center site. Those are scheduled for completion in 2013.
“The amount of space that’s potentially going to come to the market will increase availabilities and put pressure on pricing,†said Kenneth McCarthy, Cushman’s head of New York- area research. “It will be quite awhile before it can be absorbed.â€
Lower Manhattan, dominated by financial firms, withstood the commercial property slump better than any other U.S. business district, with more than 90 percent of offices occupied at the end of last year even as the city lost 67,500 jobs in the 12 months through December. Now open space is rising faster than demand, as Goldman Sachs Group Inc. moves into its new downtown building, American International Group Inc. relocates its headquarters, and Bank of America Corp. shifts operations to its new tower in Midtown.
More at…http://www.bloomberg.com/apps/news?pid=20601109&sid=a3NKXZe6aJPE&pos=11
The U.S. Debt Taken On And The President Respnsible For It…..Repubicans Win Hands Down On Adding To The National Debt!
Posted By thestatedtruth.com on March 29, 2010
Borrowing costs borne by Government increase dynamically as the cost of forward debt service jumps. As servicing debt consumes the bulk of the Federal budget, it becomes a crisis almost immediately. The bloating of Governmental services, help to the states, and concurrent reluctance on the part of major creditors, just adds to what is an overall tempest now brewing in a toxic teapot.
If the Treasury can’t borrow enough to roll over the National debt without higher costs of significance, it will turn to a ‘lender of last resort’, the Federal Reserve. The Fed will then lend the Treasury money that it has printed, which would trigger inflation. As there is no evidence (since the days of Alexander Jackson at least) in history where a promise of serious debt reduction has taken place (not to be confused with the simple deficit reductions which are a ‘spin’ to confuse citizens to believe they’re being frugal) it is necessary to be suspicious of any program or agenda that has ‘money printing’ at the end of the line as a prospect. Normally any time you pay creditors ‘printed money’ you see the currency lose its value through inflation (that’s why we said eventually so but not yet, throughout this economic catharsis, because it was deflation not inflation on the front burner; with an eye toward probable inflation, later, on the back burner).
Given the stimulus borrowing (aside the misdirection of funds and so on we roiled bits of disapproval about), things promise to get worse! Treasury needs to borrow nearly a sum of 2 Trillion Dollars this year to roll-over the National debt. Not new debt either. On top of that, the Federal budget calls for over 1.5 Trillion Dollars in new debt just to cover new spending; that yields a total of over 3.5 Trillion Dollars in 2010, just alone.
These are unprecedented sums, and there is no assurance that Treasury will be able to borrow ‘that much’ without turning to the Fed (ah hah!). With foreign lender balking, and rates close to rising, along with brewing tensions between Sunni and Shiites in at least a half dozen Islamic nations (a story that doesn’t make the news, including loss of over a hundred troops to Iran-backed infiltrators into Saudi Arabia from Yemen), as risks sending oil prices notably higher if a full-blown conflict between the sects breaks out (even Bahrain had to clamp down on terrorists this weekend; hardly reported by a Western press that for some reason would rather not deal with the stark implications); you have the ingredients starting to take shape which could foment serious problems.
Take debt service costs up 15-25% and/or Oil prices back over $100/bbl, and for that kind of combination, I don’t see how you’d avoid a crisis. Now sure, Fed comes in so what you get is a ‘virtual default’ at worst. That means ‘money printing’; inflation that’s occurring while the domestic economy stagnates (a form of stagflation), and Treasury gets to pay its bills with inflated currency, letting creditors eat the loss. That solves an immediate problem that may develop, but further erodes confidence in the U.S. and a debasing of the currency would be underway. Imports become more expensive; our exports might remain relatively stable; but that’s insufficient to help broad joblessness and that takes you into the next Election series, with widespread justified discontent.
Is this a worst-case scenario? Perhaps; but it’s not hard to fathom, as we are still very hard-pressed to find a ‘plan B’ from our current Government (or anyone else really for strategies that would provide alternate outcomes quick enough to be truly effective). I definitely am not trying to throw politicians into the bonfire or placate all so-called ‘tea party’ advocates. We’re not looking for scapegoats; but solutions aside financial crisis anew. As we haven’t found one yet; we have to leave the door open to another crisis.
Former Secretary of State, James Baker III, Has An Opinion….Would Tell Iran To Fold Its Nuclear Program Or Else!
Posted By thestatedtruth.com on March 29, 2010
03/29/2010
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“We have 3,500 nuclear weapons left over from the cold war we don’t need, they take 20 seconds to re-aim, we’re not afraid to use them, and by the way, they’re already aimed at you.†That is the approach James Baker III thinks America should take with Iran, Ronald Reagan’s Chief of Staff and Secretary of the Treasury and George H.W. Bush’s Secretary of State.
At the same time, we should be talking to the regime in Tehran, while doing everything we can to support the reformers, tighten sanctions, and enlist Europe’s help. Baker does not see a military solution in Iran, even though their potential to create instability in the region is enormous.
This was one of dozens of amazing insights I gained spending an evening chatting with the wily Texas lawyer during an evening in San Francisco. Baker is happy to take on the “America Bashers,†pointing out that the US still plays a dominant role in the UN, NATO, the IMF, and the World Bank. It still accounts for 25% of GDP, and its military is unmatched. The US spread globalization, and the spectacular growth of China and India is largely the result of open American trade policies, raising standards of living around the world.Â
But the US can’t take its leadership role for granted. The biggest threats to American dominance are the runaway borrowing and entitlements. US debt to GDP will soar from 93% to 100% in three years, the highest level since WWII. This is unsustainable, is certain to bring a return of inflation, and unless dealt with, will lead to a long term American decline on the world stage. Massive trade and capital flow imbalances also have to be addressed.
The 80 year old ex-Marine, who confesses to being the only Treasury Secretary in history who never took an economics class, believes that the advantageous rates that the government now borrows at are not set in stone. Baker is the man who engineered an end to the cold war with a whimper, and not a bang. He thinks that “even our power has its limits,†and that “there is a risk of strategic overreach.â€Â
Baker feels that while conditions in Iraq still look dicey, there is a good chance that we can pull out combat troops by August, all troops by 2011, and still leave a stable country. With the US politically evenly divided, Congress has degenerated from debating teams into execution squads, and consensus is impossible. The media are partly to blame, especially bloggers who propagate wild conspiracy theories, as confrontation sells better than accommodation. Regarding the financial crisis, we need to end “too big to fail†and embark on re-regulation, not strangulation.
All in all, it was a fascinating few hours spent with a piece of living history who still maintains his excellent contacts in the diplomatic and intelligence communities.
Scientists Stumped As Bee Population Declines Further
Posted By thestatedtruth.com on March 29, 2010
The decline in the U.S. Â bee population, first observed in 2006, is continuing, a phenomenon that still baffles researchers and beekeepers.Data from the US Department of Agriculture show a 29 percent drop in beehives in 2009, following a 36 percent decline in 2008 and a 32 percent fall in 2007.
This affects not only honey production but around 15 billion dollars worth of crops that depend on bees for pollination.
More at….http://www.breitbart.com/article.php?id=CNG.bd2664988112b33ebe7091069cfec28e.8b1&show_article=1
Are You Middle Class?
Posted By thestatedtruth.com on March 26, 2010
Household Net Worth
The typical household has a net worth of about $84,000, according to the Federal Reserve.  That’s down 30% since 2007, thanks to losses in stock portfolios and declining home values.
For the 50% of families in the middle of the scale, household income ranges from $51,000 to $123,000 for a typical two-parent, two-child family. The median is about $81,000. Those numbers, from 2008, have probably fallen by 5% to 7% since then because of the recession. Median income for a single-parent, two-child family is about $25,000. For two-parent families, the typical home is worth about $231,000 and accounts for $17,600 in mortgage payments and other costs per year.
Housing costs have risen more than twice as fast as income since 1990, a trend that may be reversing as housing prices weaken. The housing bubble was one factor that boosted housing costs, but the typical family also now lives in a much bigger home. From 1979 to 2007, the median size of a new single-family home grew by 40%, to about 2,300 square feet.  That trend may now also be reversing as families downsize from homes they can’t afford.
The median two-parent family spends $5,100 per year on health insurance and non-covered expenses — assuming an employer provides health insurance.  Health care costs have risen far more than any other aspect of the family budget since 1990, with no end in sight.
The typical family spends about $12,400 per year on two medium-sized sedans or the equivalent, with a total new-car value of $45,000.
The typical family puts aside $4,100 for college expenses for two kids, estimated to cover about 75% of expenses at a state university. Financial aid helps with the rest.
One week at the beach or another destination is standard, at a cost of $3,000 or so for a family of four.   More affluent families can afford two weeks, at around twice that cost.
Clothes, food, utilities, entertainment and other living expenses amount to $14,200 a year for a median-income family.
In 76% of two-parent families, both parents work.
Few parents would be surprised to hear that Moms and Dads are working more than they used to. The total number of hours worked in a two-parent family is 3,747 per year, up 5% since 1990.  The increased hours add up to more than four 40-hour weeks of additional work per family.
The typical household head has a high school degree plus about two years of college education, up by more than a full year of college since 1990.   That’s a good thing; education is a key factor in lifetime earnings, and high school dropouts face a dimmer future by nearly every measure.
What’s your top priority? In a 2008 poll by the Pew Research Center, it wasn’t healthy kids, a strong marriage or a great career; 68% of respondents said it was free time.  And just 12% said that being wealthy was the top priority.
About 18% of disposable income, on average, goes toward mortgage payments, auto loans, credit cards and other forms of household debt.  That’s a bit higher than it was in the ’70s and ’80s. But since debt payments peaked at the beginning of 2008, at 18.9% of income, they’ve been steadily falling.
Summary from…….http://articles.moneycentral.msn.com/Investing/Extra/are-you-middle-class.aspx?page=all
Half of U.S. Home Loan Modifications Default Again
Posted By thestatedtruth.com on March 25, 2010
By John Gittelsohn
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March 25 (Bloomberg) — More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report.
The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report today. The figure, which measures payments at least 30 days late, climbed to 57.9 percent for changes made in the prior 12 months.
U.S. homeowners are struggling to make payments as depressed housing prices leave them owing more than their properties are worth. About 24 percent of properties with a mortgage were underwater in the fourth quarter, First American CoreLogic said last month. The median price of a U.S. home was $165,100 in February, down 28 percent from its peak in July 2006, according to the National Association of Realtors.
Modifications are clearly not working well and it’s not a surprise, said Sam Khater, a senior economist at First American CoreLogic in Tysons Corner, Virginia. “It’s pointless to rewrite these loans because they’re underwater.
The number of homes with mortgage payments at least 60 days late climbed 2.39 million in the fourth quarter, up 13.1 percent from the prior three months and 49.6 percent from the year earlier period, the quarterly Mortgage Metrics report said.
Modified loans in the portfolio of banks — as opposed to loans owned by investors or government-sponsored enterprises such as Fannie Mae and Freddie Mac — had the best record of avoiding re-default, the Mortgage Metrics report said.
The banks are free to design modification plans for individual borrowers, Bruce Krueger, a mortgage banking expert with the Office of the Comptroller, said in a phone interview. The HAMP program requires lenders to follow a path of concessions to modify loans, beginning with interest rate reductions, extended loan terms and principal forebearance.
“It’s a very rigid process, Krueger said of the HAMP program. If the loan is on the bank’s books itself, the servicer can do whatever the bank might allow.
Last Updated: March 25, 2010 15:24 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVYxPZ56vjys
“Fact and Comment†STEVE FORBES
Posted By thestatedtruth.com on March 25, 2010
STEVE FORBES, Forbes.com “Fact and Comment†(3/25/10): Socialists believe
that the way to paradise is for governments to own “the means of
production.” Thus, decades ago even democratic countries such as France
and Britain nationalized considerable swathes of their economies to
achieve “social justice.” That didn’t work so well; therefore, since the
days of Margaret Thatcher there have been wave after wave of
privatizations in Europe and around the world.
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Today’s neosocialists are smarter than their ancestors. Instead of
outright takeovers, they are achieving much the same goal through rigid
regulations. ObamaCare is a prime example. Health insurers will eventually
be private in name only, as the details of their policies will be dictated
by governmental decrees. About the only thing companies will have any
autonomy over–perhaps–will be their corporate logo.
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Entitlements go hand in hand with sweeping, overbearing regulations.
President Obama wants higher education in this country to be free of
charge, which is why his Administration is pushing for a government
takeover of student lending. With such powers it will be but a wee stretch
to intrude even further into the governance of the nation’s colleges and
universities–including, ultimately, admissions.
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Senator Chris Dodd’s (D–Conn.) recently unveiled package of financial
regulatory reforms is a neosocialist’s dream. It is also destructively
stupid. The bill doesn’t address the key causes of the recent economic
crisis: the Fed’s too loose monetary policy, the behavior of Fannie Mae
(FNM) and Freddie Mac (FRE) in buying or guaranteeing almost $1.5 trillion
in junk mortgages and the failure to properly regulate credit default
swaps and other derivatives.
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Dodd’s punting on swaps is astonishing. Years ago Washington should have
mandated that such instruments go through clearinghouses so there’d be
full transparency and proper margin requirements. After all, classic
derivatives such as soybeans and currency futures have had margin
requirements and clearing mechanisms.
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In the name of fighting Washington’s too-big-to-fail doctrine for major
financial institutions, Dodd’s bill is a de facto institutionalization of
them. Financial outfits that are deemed a threat to financial stability
will actually be protected by the government. The bill establishes a $50
billion fund to deal with big failures, but the fact that such a fund
exists tells the market that when trouble comes big banks will be saved.
Thus these biggies, like Fannie and Freddie, will have lower costs of
borrowing–debt is by far the biggest component of their capital–which
will put their smaller competition at a crippling disadvantage.
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Moreover, the bill doesn’t address the problem small businesses have with
the current credit system. Bank examiners are applying a mark-to-market
mentality in evaluating bank loans. This is an unfair bias toward
bigger-sized borrowers and, of course, the debt-hungry U.S. government.
Thus the paradox of today: bargain-basement rates of interest for larger
firms and higher costs–or no credit at all–for smaller borrowers.
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With favored access to low-cost debt the big will get bigger–and they
will be beholden to Washington.
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Dodd’s scheme would create a new regulatory bureaucracy, the Financial
Stability Oversight Council (FSOC), with sweeping powers for itself (and
the Fed). Chief among its tasks would be assessing risk of banks and their
products and activities, yet Washington has demonstrated that it is
incapable of judging risk. Washington would have vast sway over the
operations of the U.S. financial system. In this new world banks would
have to get permission from Washington for any innovation. If an
institution incurred Washington’s displeasure, bureaucrats could order
divestitures of businesses or could even put a firm out of business.
Â
The Dodd bill is an open invitation for government to micromanage the
whole breadth of finance in America, including even your local pawnshop.
Nationalizing the U.S. financial system without formally nationalizing
it–Karl Marx would be drooling in delight ….
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Read on:
A Looming Trade War With China . . .
Posted By thestatedtruth.com on March 24, 2010
Gene Inger’s Daily Briefing . . . for Thursday March 25, 2010:
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Good evening;
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A looming trade war with China . . . superficially seems the least desirable tact, for both China and the United States. However, the trend has been building for a couple years now; as we’ve forewarned with respect to inferior product quality control; failure to enforce intellectual property rights in China (or in products exported but unlicensed to use American technology); plus of course cyber-espionage attacks of all sorts; that the communist regime has failed to acknowledge. In fact, Beijing switched tactics just today and accused Google of colluding with U.S. intelligence and of a strategic error.
In reality; this is typical of China’s foreign trade and partnering posturing; where they twist the truth to fit their policies. While we realize that democracy, even open-source content on the internet, is not entirely something for any company to assert in another land; it’s not so simple as the communist pipe-organs suggest. Remember that China used Google and others to ‘snoop’ and as a vehicle to entrap dissidents and others in this battle; and at some point a principled Western company has to have some limits, if they are to contend any remaining morality in their operations.
China accuses Google’s (entirely legal by the way) move to redirect search traffic to Hong Kong is actually a U.S. preemptive strike in a ‘pre-dawn internet war’. Well, it’s China who started the battle; it’s China who thought by being our biggest lender that they could determine what we do with impunity; and it’s China who is admitting they are engaged in cyber-attacks, if they even suggest such measures as ‘preemptive’.
Although we have warned since January (when some pundits and analysts were out there pushing Google with absurd targets in the 700’s) that Google was topping and an ensuing move was just a rebound before it headed 50-100 lower (if not more); the primary point with respect to the market was the potential of a dispute with our largest lender. Ie: the point about owing them so much that it’s more their problem than ours. Also; that unless we get some ‘mettle’ in trade policies, we’re just swinging aimlessly with respect to the projected tendency to instill worries about perennial outsourcing to other nations, as well as undermining all the efforts to stabilize the U.S. jobs picture.
The disingenuous posturing by the Red Chinese (acting more like Soviet Russia after the Olympics, pretty much dropping the pretense of liberalization) is emphasized by a ‘rethinking’ that American and other countries have regarding outsourcing and failure by Bejing to revalue their currency more realistically (which hurts them multiple ways) if for no other reason than to maintain fallacies of some sort of level playing fields. As this day evolved, even the (sometimes quirky in its own right) ‘Godaddy.com’ stated they will stop registering internet domain addresses in China altogether. Before one is tempted to forget this, and with all the spats from the communists, the internet just happens to be a U.S. product; which is hardly recalled these days. The purpose was originally for the military to be able reroute communications if an enemy cut our lines; thus the ability to have messages or telephony arrive at any point via wide rerouting. That’s why to this day all registrations go through American registrars, of which one of the original ones has a heritage dating to when early www url’s were all registered in Virginia, in a building that happens to be across the street from a large intelligence office. That probably irks the Chinese to this day; but oh well; it’s our ‘net, not theirs.
Unintended Consequences…..
Posted By thestatedtruth.com on March 23, 2010
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States Sue Over Healthcare Overhaul
By Pat Wechsler
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March 23 (Bloomberg) — President Barack Obama faces a fight over the health-care overhaul from states that sued today because the legislation’s expansion of Medicaid imposes a fiscal strain on their cash-strapped budgets.
Florida, Texas and Pennsylvania are among 14 states that filed suit after the president signed the bill over the constitutionality of the burden imposed by the legislation. The health-care overhaul will make as many as 15 million more Americans eligible for Medicaid nationwide starting in 2014 and will cost the states billions to administer.
States faced with unprecedented declines in tax collections are cutting benefits and payments to hospitals and doctors in Medicaid, the health program for the poor paid jointly by state and U.S. governments. The costs to hire staff and plan for the average 25 percent increase in Medicaid rolls may swamp budgets, said Toby Douglas, who manages the Medicaid program for California, which hasn’t joined the lawsuits.
“The states are coming through the worst fiscal period in the history of record keeping, said Vernon Smith, a former Medicaid director for Michigan and now a principal at the research and consulting firm Health Management Associates in Lansing, Michigan. Medicaid is the most significant, most visible and most costly part of this expansion and states fully expect to see increases in their spending.
For California, with a $20 billion budget deficit, the extra load will cost at least an additional $2 billion to $3 billion annually, said Douglas, chief deputy director for California’s health care programs. He said the overhaul is currently projected to add 1.6 million people to the 7 million enrolled in his state’s program.
“We face enormous challenges just sustaining our existing program, said Douglas in a March 18 telephone interview. I just don’t see states having the capacity to move forward on these changes in this environment.
The numbers of new enrollees because of the overhaul are based on current estimates and may be low, he said in an e-mail. The estimate doesn’t incorporate the growth that the program, known in California as Medi-Cal, may experience even without the new federal legislation, he said.
Medi-Cal recipients are projected to increase 4.3 percent to 7.3 million in fiscal 2011, which begins July 1, spokesman Norman Williams said.
Medicaid spending accounts for about 22 percent of state spending, according to the National Governors Association, which said it doesn’t expect revenue to return to pre-recession levels until at least 2014. Budget directors estimate the fiscal 2011 budget gap could expand to $102 billion and may even reach $180 billion, the Kaiser study said. States by law, unlike Washington, must balance their budgets.
“In the past, Medicaid was only as strong as its weakest link, said Stephen Somers, president of the health-policy nonprofit Center for Health Care Strategies Inc. in Hamilton, New Jersey. Now, there is the first universal floor and it will form the foundation for universal coverage.
Last Updated: March 23, 2010 16:30 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajwSWE6H1kHM
How The Middle Class Slowly Evaporated In The Last 40 Years
Posted By thestatedtruth.com on March 23, 2010
How the Middle Class Slowly Evaporated in the Last 40 Years – Loss of Manufacturing, Bank Deregulation, Hyper Consumption, and Short-term Profit Seeking from Wall Street.
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Posted: Tue, 23 Mar 2010 22:06:51 +0000
Some like to think that the middle class has always been a fixture of American society. In fact, the rise of a steady and strong middle class didn’t happen until after World War II. Clearly people can’t look at the economically painful Great Depression, which rampaged the nation from 1929 to 1939 as a good time for average Americans? In fact, even a few years after World War II the nation hit a few rough patches with price controls and millions of Americans rushing back into the workforce. But with many of the industrial economies in tatters in Europe and Asia, the U.S. had a well positioned spot for decades of strong growth. But make no mistake by looking at history that we were producing and manufacturing goods for the world. And things seemed to work out well for many Americans even with a robust manufacturing base.
The above chart is extremely telling. There are many reasons and explanations for the Great Depression but World War II clearly got our employment machine going. That is something that we are struggling with today. After all, even with the two wars going on today, much of the warfare doesn’t require heavy machinery like fleets of tanks. What use are thousands of tanks if someone with an improvised explosive can do just as much damage? So simply saying war is what will drag an economy into production is not necessarily true especially in the modern era.
The middle class today has it very different from the same family in the 1950s. Back then, one blue collar income was enough for the purchase of a modest house, a car, and a bit of money for savings without going into massive amounts of debt. That is no longer the case. Even though in the last year debt loads have fallen (because of bankruptcy and millions of foreclosures) American households are still highly over leveraged with debt:
Here is some stunning data for comparison:
1953Â Â Household Debt (mortgages, auto loans, etc):Â Â Â Â Â Â Â Â $106 billion
1953Â Â GDP:Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â $2 trillion
2010Â Â Household Debt:Â Â $13.5 trillion
2009Â Â GDP:Â Â Â Â Â Â Â Â Â Â $13.1 trillion
*Real US GDP (2000 Constant Dollars)
So we went from household debt being 5 percent of GDP to where we are today where household debt is nearly 100 percent of GDP. This is clearly unsupportable and as the chart above shows, we can expect more deleveraging in the years to come. As Stein’s Law will have it “if something cannot go on forever, it will stop.â€
Bank Deregulation (No Enforcement)
Since the 1970s, strong regulations that were in place to keep the banking industry in check have come off letting the wild hyena loose. Those that argue today that we have too much regulation are right but it is weak regulation in agencies that have no power (obviously since this decade was a Wall Street Wild West). Simple regulations like usury or even checking income before making a loan were all removed. So in 50 years, we went from very little debt and high levels of production to massive consumption fueled by easy money. But when things went bust the net was pulled for average Americans while Wall Street racked up trillions in taxpayer money.
Since you need an army for this kind of fraud, this is what has happened over the decades:
As the manufacturing base slowly drifted away starting in the late 1970s the financial and real estate part of the employment equation exploded. With massive amounts of deregulation, capital flowed to any industry regardless of the long-term implications to the U.S. We are seeing some of those longer term trends now hitting us. At this point, it is like reversing the Queen Mary in the middle of the ocean. This is actually an important debate to have yet few are exploring this at least at the national level. Some use the price point argument. They argue that it is fantastic that we can get cheap goods from other countries. But they usually ignore the cost (see above). In an ideal world, there would be a balance between exports and imports for any country. These are usually your perfect case examples in economics. But right now, if we look at our trade deficit with China for example it is anything but balanced. Is it any wonder the U.S. Treasury walks on a fine line when discussing policies with China?
Many multi-national companies are doing well in this recession even though we have an underemployment rate of 20%:
If you would have asked someone if you could envision a 70 percent stock market rally while 20% of Americans were unemployed or underemployed people would have laughed. But that is the new structure we currently have with the corporatacracy running the system especially when it comes to financial reform.
The Short-Term Fix
Think of all the horrible short-term policies that have led us to this mess. What benefit did we get by offering zero down toxic adjustable rate no verification mortgages? The only benefit came from mortgage brokers getting $10,000, $15,000, and even $20,000 commissions by putting Americans into toxic financial time bombs. The other winner was Wall Street who then packaged this waste and sold it off to investors globally but also found its way into the funds of many American pensions and retirement accounts. How did this help our economy? What use did this serve? Or what about the billions in overdraft fees usually pushed on the poorest in our country? The notion that anything can go flies in the face of thousands of years of human history. Wall Street made trillions gambling and making money on short-term instruments that really did not improve the overall economy. In fact, they were parasites that have now created this deep financial mess we are in. And here we are with no serious financial reform over two years into the crisis.
One thing that really isn’t talked about is whether we want to protect the middle class. This is a legitimate debate we should be having and should be priority number one. So far, the banking angle has been that without the enormous bailouts, the middle class would have suffered. This was of course merely fear mongering to make sure the financial structure stayed in place. If we continue on this current path, a Japan like scenario in terms of part-time employment is possible. A population where a third of their workforce is employed part-time yet headline unemployment is at 4 or 5 percent. And this notion that we have no money is absurd because that hasn’t stopped Wall Street from getting $13 trillion in bailout funds. We may not have the money but somehow we were able to funnel that much there way while the middle class is feeling the pinch from every angle.
U.S. States Assert Sovereignty
Posted By thestatedtruth.com on March 22, 2010
States Rebel Against Washington
The pushback against federal power began under Bush, but may now be accelerating.
Atlanta
There’s an old joke in South Carolina: Confederate President Jefferson Davis may have surrendered at the Burt-Stark mansion in Abbeville, S.C., in 1865, but the people of state Rep. Michael Pitts’s district never did. With revolutionary die-hards behind him, Mr. Pitts has fired a warning shot across the bow of the Washington establishment. As the writer of one of 28 state “sovereignty bills” – one even calls for outright dissolution of the Union if Washington doesn’t rein itself in – Pitts is at the forefront of a states’ rights revival, reasserting their say on everything from stem cell research to the Second Amendment.
Washington can be a bully, but there’s evidence right now that there are people willing to resist our bully,” said Pitts, by phone from the state capitol of Columbia.
Just as California under President Bush asserted itself on issues ranging from gun control to medical marijuana, a motley cohort of states – from South Carolina to New Hampshire, from Washington State to Oklahoma – are presenting a foil for President Obama’s national ambitions. And they’re laying the groundwork for a political standoff over the 10th Amendment, which cedes all power not granted to Washington to the people.
I.M.F. Gives Debt Warning For The Wealthiest Nations
Posted By thestatedtruth.com on March 22, 2010
I.M.F. Gives Debt Warning for the Wealthiest Nations
BEIJING — The global economic crisis has left “deep scars†in the fiscal balances of the world’s advanced economies, which should begin to rein in spending next year as the recovery continues, the No. 2 official at the International Monetary Fund said on Sunday in Beijing.
In a speech at the China Development Forum in Beijing, the I.M.F. official, John P. Lipsky, who is the first deputy managing director, offered a grim prognosis for the world’s wealthiest countries, which are at a level of indebtedness not recorded since the aftermath of World War II…
The Wheel Of Fortune…..Around And Around We Go, Where We Stop Nobody Knows
Posted By thestatedtruth.com on March 19, 2010
http://lcmgroupe.home.comcast.net/~lcmgroupe/Tipping_Points.htm
Credit Card Rate Report….How Does Your Card Stack Up
Posted By thestatedtruth.com on March 19, 2010
The current national average interest rate for credit cards is 14.56 percent yet they are offering clients who want to save 0.1% or even lower on their savings account. In business lingo this is what you call the margin and it is gigantic. This is why the banking system is fundamentally flawed. They borrow taxpayer money for cheap, take client money for cheap, and lend it out at usury rates. Not only does it encourage massive consumption but it creates a large part of our economy that is simply dedicated to paying rent above and beyond the face value of the product.  And many people only pay that minimum interest rate. As we have seen above, only paying the minimum with a 15% interest rate will double the cost of the item in 4.8 years. That flat screen TV no longer costs just $1,000 but $2,000 over many years and high amounts of interest.
And the problem with savings at least in our current banking model is that these same banks are also the biggest credit card pushers:
U.S. general purpose credit card market share in 2008 based on outstandings
(Note: 2007 ranking in parentheses)
1. JPMorgan Chase – 21.22% (17.74%)
2. Bank of America – 19.25% (19.36%)
3. Citi – 12.35% (13.03%)
4. American Express – 10.19% (11.40%)
5. Capital One – 6.95% (6.95%)
6. Discover – 5.75% (5.65%)
7. Wells Fargo – 4.21% (3.07%)
8. HSBC – 3.47% (3.65%)
9. U.S. Bank – 2.14% (1.84%)
10. USAA Savings – 2.02% (2.01%)Source: Creditcards.com
Flow Of Funds Data
Posted By thestatedtruth.com on March 19, 2010
Saving and the restoration of the average family unit’s retirement coffers is what this is about. And in that case current and former officials should be encouraging building citizen savings; not just trying to return us as a nation to the irresponsible practices of the past, which would only help the Chinese economy more than it will the American economy, anyway. What is very much needed are better trade policies here, rather than encouraging our countrymen to buy from there.
Stratfor………Military Priorities in Afghanistan
Posted By thestatedtruth.com on March 19, 2010
Military Priorities in Afghanistan
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Gen. David Petraeus, commander of U.S. Central Command, testified before the House and Senate Armed Services Committees in Washington this week, saying that military progress in Afghanistan will be difficult this year. Afghan security officials recently have issued similar warnings, noting that the number of violent assaults is likely to increase with the spring thaws. Some 15 provinces in the north, east and west face a serious threat from insurgents, and the situation is declining in provinces bordering Pakistan and Iran, officials said. Current flashpoints include Marjah and Kandahar, where a fresh NATO offensive is being prepared. Meanwhile, military and civilian development efforts — a key component of the U.S. strategy — are being focused on some 80 districts, most of them located on or near Afghanistan’s Ring Road.
New York State Tax Refunds Put On Hold, Gov. Paterson Freezes $500 Million, $1.5 Billion In School Aid Next To Be Halted
Posted By thestatedtruth.com on March 18, 2010
Mar 18, 2010 6:16 am US/Eastern
NEW YORK (CBS) ― For hundreds of thousands of New Yorkers, the check won’t be in the mail — at least not on time. New York State has stopped paying tax refunds and won’t start again until next month.
The tax refund delay is part of a bigger cash crunch.
Message to New Yorkers: don’t start spending your tax refund money because it’s going to be delayed.
Half a billion dollars’ worth of refund checks were put on hold last Friday, and state beancounters won’t start sending you your money until at least April 1.
“I apologize that we had to do this. I hope it serves notice on the public of how serious our financial situation is,” Gov. David Paterson said.
Several hundred thousand New York taxpayers will be affected with most getting an average refund of $1,000. People who filed in late February and early March might have to wait as long as six weeks till the checks are in the mail.
More at http://wcbstv.com/topstories/paterson.tax.refund.2.1569690.html
Broken Government Model…..Sallie Mae Sells Debt At Higher Rate Than Students Pay….No Wonder They’re Losing Money!
Posted By thestatedtruth.com on March 17, 2010
By Tim Catts and Sarah Mulholland
March 17 (Bloomberg) — SLM Corp., the largest U.S. student-loan company, raised $1.5 billion in the bond market, paying more than it charges some borrowers to begin addressing $11 billion of bonds maturing through next year.
Sallie Mae, as the company is known, sold $1.5 billion of 8 percent notes due in 2020 at a yield of 8.25 percent, according to data compiled by Bloomberg. Stafford federal loans disbursed between July 1, 2009, and June 30, 2010, have a fixed interest rate of 5.6 percent, according to the company’s Web site.
With $4.51 billion of bonds maturing this year and $6.44 billion in 2011, Sallie Mae is reestablishing access to unsecured debt markets. Sallie Mae hadn’t sold unsecured debt since a $2.5 billion offering of 10-year notes in June 2008. Its sale came after average yields fell to 3.978 percent yesterday, the lowest since Dec. 6, 2004, according to the Bank of America Merrill Lynch Global Broad Market Corporate index.
When the company issued asset-backed bonds linked to student loans on March 3, the debt priced to yield 325 basis points, or 3.25 percentage points, more than the London interbank offered rate, Bloomberg data show. Three-month Libor, a borrowing benchmark, was set at to 0.266 percent today.
More at……..http://www.bloomberg.com/apps/news?pid=20601087&sid=aUltqUOk3dsE&pos=3
Saint Patrick’s Day………
Posted By thestatedtruth.com on March 17, 2010
On this day in the year of our Lord 389, there lived a foin broth of a lad who was…. dependin’ on the boyographer ye read: a Spanish peasant, a French herdschild, a Celt from Bannavem or a Gael from Dumbarton, Scotland. At any rate, at age 16 this lad was kidnapped by pirates and sold to one of the only 2,500 Irish kings that were reigning at the time. He served this King as a swineherd mucking out stys and such. For six years he labored in slavery, poorly fed; often beaten; surrounded by people who spoke a language he couldn’t understand. Then he discovered that six years of such treatment was equivalent to a parochial school education. So he became a Catholic and escaped to France to become a monk.
Upon becomin’ a bishop he mistakenly perceived the French to be a bunch of snail eatin’, grape juice drinkin’, truffle huntin’ toads. He longed for the emerald green fields of God’s own land and the special amber holy water found there.
He returned to Ireland which was still under the influence of a group of heathen English druids and a few nocturnal banshees. Nonetheless, he set about convertin’ and baptizin’.
Unfortunately Patrick was not an MBA and, therefore, did not know the law of diminishin’ returns. So he managed to baptize over 120,000 people, built over 300 churches, chased the snakes out of Ireland, developed the shamrock and established a factory to make pennants with the slogan “Go Notre Dame”.
To celebrate the life of this fabulous man, sing ye some sad songs, talk ye merrily of battles and take ye a wee nip of somethin’ till ye might be seein’ da little people.
                  Art Cashin…..Cashin’s Comments
California Teachers Going Home By The Thousands…..
Posted By thestatedtruth.com on March 16, 2010
Pink Slips Sent To Thousands Of Calif. Teachers
By ROBIN HINDERY, Associated Press Writer
Monday, March 15, 2010
California’s budget crisis could cost nearly 22,000 teachers their jobs this year.
State school districts had issued 21,905 pink slips to teachers and other school employees by Monday, the legal deadline for districts to send preliminary layoff notices.
Not all the threatened layoffs will be carried out. The final tally depends on the state budget to be adopted for the coming fiscal year.
Last year, 60 percent of the 26,000 teachers who received pink slips ended up losing their jobs.
State Superintendent of Public Instruction Jack O’Connell expected this year’s actual job losses to be high, given the state’s persistent budget problems and the smaller pool of education stimulus money available from the federal government.
more……http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2010/03/15/state/n131126D27.DTL
Moody’s Fears The Worst As AAA States (Countries) Implement Austerity Plans….
Posted By thestatedtruth.com on March 16, 2010
Moody’s fears social unrest as AAA states implement austerity plans
The world’s five biggest AAA-rated states are all at risk of soaring debt costs and will have to implement austerity plans that threaten “social cohnesion”, according to a report on sovereign debt by Moody’s.
By Ambrose Evans-Pritchard
Published: 6:48PM GMT 15 Mar 2010
The US rating agency said the US, the UK, Germany, France, and Spain are walking a tightrope as they try to bring public finances under control without nipping recovery in the bud. It warned of “substantial execution risk” in withdrawal of stimulus.
“Growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion,” said Pierre Cailleteau, the chief author.
“We are not talking about revolution, but the severity of the crisis will force governments to make painful choices that expose weaknesses in society,” he said.
If countries tighten too soon, they risk stifling recovery and making maters worse by eroding tax revenues: yet waiting too is “no less risky” as it would test market patience. “At the current elevated debt levels, a rise in the government’s cost of funding can very quickly render debt much less affordable.”
Moody’s said Britain has been slower than Spain to “rise to the challenge” and may be at greater risk of smashing through buffers of AAA creditiblity if rates suddenly rise. Spain made errors at the outset of the crisis but has since become a model pupil, pledging to cut the budget deficit from 11.4pc of GDP to 3pc by 2013.
From Art Cashin On The Floor Of The New York Stock Exchange……….
Posted By thestatedtruth.com on March 16, 2010
Is It A Bluff Or Is It Battle Preparation? – Several blogs have picked up on reports that the U.S. may be transferring “bunker-buster bombs†to a base in the Indian Ocean. Here’s a part of a story in the Sunday Herald of Scotland:
Hundreds of powerful US “bunker-buster†bombs are being shipped from California to the British island of Diego Garcia in the Indian Ocean in preparation for a possible attack on Iran.
The Sunday Herald can reveal that the U.S. government signed a contract in January to transport 10 ammunition containers to the island. According to a cargo manifest from the US navy, this included 387 “Blu†bombs used for blasting hardened or underground structures.
Experts say that they are being put in place for an assault on Iran’s controversial nuclear facilities. There has long been speculation that the US military is preparing for such an attack, should diplomacy fail to persuade Iran not to make nuclear weapons.
Although Diego Garcia is part of the British Indian Ocean Territory, it is used by the US as a military base under an agreement made in 1971. The agreement led to 2,000 native islanders being forcibly evicted to the Seychelles and Mauritius.
We still think the U.S. would have a tough time “going it aloneâ€. Forces in nearby Iraq and Afghanistan would be suddenly vulnerable. The U.S. could not prevent a blockage of the Straits of Hormuz, cutting off huge supplies of oil. Nevertheless, we’ll try to vet this story further.    Art Cashin
The Set Up For Hyperinflation
Posted By thestatedtruth.com on March 16, 2010
When Money Supplies Go Wild!
          By James Turk
The US money supply is much bigger than the official numbers indicate…$1.25 trillion bigger, to be exact. If you care about the value of the dollars in your pocket, this information should matter greatly to you.
As the financial crisis has unfolded over the last two years, the Federal Reserve has been responding in a variety of unprecedented ways. Therefore, it is logical to assume that these never-before-used actions have altered long-established ways of measuring the US dollar money supply.
The quantity of dollars in circulation is being underreported by relying upon the traditional and now outdated definitions used to calculate M1 and M2. These ‘Ms’ are calculated and reported by the Federal Reserve based on the following guidelines that identify the several different forms of dollar currency used in commerce:
M1: The sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the US Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float.
M2: M1 plus savings deposits (including money market deposit accounts) and small-denomination (less than $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments of less than $50,000), net of retirement accounts.
These esoteric definitions can be confusing, so let’s bring US dollar currency back to basics as the first step to explaining why these definitions are no longer adequate.
There are two types of dollar currency comprising the money supply – cash currency and deposit currency. Both are used in commerce to make payments.
1) Cash Currency
The cash currency we carry around in our pockets is issued by the Federal Reserve. Take a look at one of those green pieces of paper, and you will see that they are labeled as a “Federal Reserve Note”. A note is a debt obligation, and a few decades ago one could take that note to a Federal Reserve Bank and ask them to make good on their debt by redeeming it for silver, or until 1933, gold.
These liabilities of the Federal Reserve are no longer redeemable into anything, and are therefore “IOU nothing” currency, a phrase made famous by legendary advocate of sound money, John Exter. Nevertheless, Federal Reserve notes remain a liability of the Federal Reserve.
2) Deposit Currency
Deposit currency is comprised – as its name implies – of dollars on deposit in the banking system. These dollars circulate as currency when payments in commerce are made with checks, wire transfers, plastic cards and the like. In contrast to cash currency which circulates from hand-to-hand, deposit currency circulates from bank account to bank account.
Bank deposits take three standard forms – checking accounts, savings accounts and time deposits. They have different maturities, or tenor, to use a banking term.
Dollars in checking accounts are considered to be the most liquid because they are available on demand. Therefore, they are part of M1 because they are the most likely deposit currency to be used to make a payment in commerce. Dollars in savings accounts are less likely to be used to make a payment, but nonetheless are currency because they are spendable. So they are part of M2, which comprises those dollars less frequently used as currency.
The dollars in time deposits are used even less, but are currency and therefore available for use in commerce when they mature, or immediately if the tenor of the deposit is broken. They are – depending on the size of the deposit – included in M2 or M3, which is no longer disclosed by the Federal Reserve.
Having provided this background information, we can now get to the heart of the matter by looking at how currency is created ‘out of thin air’ by the Federal Reserve and banks and the impact of their actions on the monetary balance sheet of the US dollar.
Cash currency of course is simply printed, but every note issued is recorded on the Federal Reserve’s balance sheet. Basically, the Fed ‘monetizes’ an asset by turning it into currency.
If, for example, a bank sells a $1 million T-bill to the Fed, the Fed ‘pays’ for it with $1 million of newly printed cash currency. The Fed records the T-bill as an asset and the cash currency it issued as its liability. These Federal Reserve Notes are the “currency” component in the definition of M1 above.
In the past, the Federal Reserve only created cash currency. However, as the credit crisis erupted two years ago, the Fed began the unprecedented process of creating vast amounts of deposit currency. So instead of purchasing paper from the banking system solely with cash currency, the Federal Reserve since the start of the financial crisis has increasingly relied upon deposit currency to purchase paper.
Regardless how the Federal Reserve pays for the paper it purchases – cash currency or deposit currency – it is creating dollar currency and perforce expanding the money supply. But the traditional definition of M1 does not accurately capture this process when the Fed uses deposit currency to pay for its purchase. In fact, it is totally excluded. Because the Federal Reserve did not create deposit currency in the past, none of the Ms take it into account.
Consequently, the traditional definitions of the Ms are outdated because they do not capture the total quantity of dollars in circulation. Because M1 is underreported, so too is M2.
There has been an unprecedented amount of deposit currency created by the Fed over the past two years. The following chart illustrates this point. It shows the quantity of demand and checkable deposits, i.e., the amount of deposit currency, at the Federal Reserve since December 2002.
 |
From December 2002 until the collapse of Lehman Brothers in September 2008, the quantity of deposit currency created by the Fed averaged $11.8 billion, an amount that is relatively insignificant compared to total M1. Presently, it stands at a record high of $1,246.2 billion, which of course is highly significant.
More to the point, none of this deposit currency is captured in the traditional definition of the Ms. The quantity of dollar currency is therefore significantly underreported, which is illustrated by the following chart.
 |
The Federal Reserve reports M1 to be $1,716 billion as of February 15th. When deposit currency created by the Federal Reserve is added to the traditional definition of M1, M1 after adjustment is actually 170% higher at $2,918 billion. Its annual growth increases to 29.5%, nearly 3-times the rate reported by the Fed and more importantly, is an annual rate of growth in the quantity of dollar currency that is approaching hyperinflationary levels.
The US dollar is being inflated and worryingly, the rate of new currency creation is approaching hyperinflationary levels. Unless the Federal Reserve changes course, the US is headed for a deposit currency hyperinflation like those that plagued much of Latin America in the 1980s and 1990s.
James Turk
       for  The Daily Reckoning   www.dailyreckoning.com
New Stratfor Report
Posted By thestatedtruth.com on March 16, 2010
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From John Mauldin’s “Outside The Box” Newsletter
Posted By thestatedtruth.com on March 15, 2010
For the last two years, Gallup has been asking 1,000 Americans every day how much they’ve been spending at stores, restaurants, gas stations, and online. The average for upper-income households–those with incomes above $90,000–in February plunged to a new low of $98, down 13% from January. The numbers aren’t seasonally adjusted, so the monthly changes have to be taken with a grain of salt, but the yearly change is a sharp �19%.
By contrast, spending by middle- and lower-income households has been more or less flat for a year. Both are way off their May 2008 peaks–down by almost half for both groups.
full letter at….http://www.investorsinsight.com/
![[chart]](http://barrons.wsj.net/public/resources/images/OB-HV424_BAWorr_NS_20100312232001.gif)
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