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Thought For This Afternoon:
The US dollar/euro intervention by the Forex Stabilization Fund to prevent the Chairman from looking bad so far is anaemic.
Click chart to enlarge in PDF format
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Jim Sinclair’s Commentary
Remember December’s BS? Keep this in mind as you hear more of the same.
The US dollar is no safe haven. Gold will reach $1650 and more.
Fed to Keep Rates Low for ‘Extended Period’
By SEWELL CHAN
Published: March 16, 2010
WASHINGTON — The Federal Reserve left its benchmark interest rate near zero on Tuesday, affirming its view that job growth and other economic indicators remained weak as the United States slowly pulls itself out of recession.
The Federal Open Market Committee, the Fed’s chief policy-setting arm, left the fed funds rate at zero to 0.25 percent, where it has been since December 2008. As it has said since March 2009, the committee said the rate would probably remain “exceptionally low” for “an extended period.” Most economists have taken that language to mean that the Fed will not begin tightening monetary policy until later this year at the soonest.
“Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit,” the committee said in a statement. “Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.”
With interest rates unable to go any lower, the Fed has had to turn to other instruments of monetary policy to help stimulate economic growth. Chief among those tools has been the purchase of enormous sums of assets, which has had the effect of placing downward pressure on long-term interest rates.
The Fed on Tuesday confirmed its intention to end its purchase of $1.25 trillion in mortgage-backed securities by the end of this month. While some economists fear that the termination of the program could lead to an increase in mortgage rates and hamper the recovery of the housing market, the gradual winding down of the purchase program so far has not had a major effect, which the Fed has taken as an encouraging sign.
Thoughts For This Morning:
Do you think the present revelations about Lehman are plausible denial for having flushed it?
Do you really believe that Lehman was the only entity to play outside the rules?
Do you think Lehman was attending to all the details and ethics of finance when securitizing mortgages it bought?
Did your mortgage pass through Lehman’s hands?
Do you want to buy the Brooklyn Bridge?
Jim Sinclair’s Commentary
Please watch the factual BBC documentary, the Last Days of Lehman Brothers. which is a free download at the link below.
Click here to watch the video…
Jim Sinclair’s Commentary
Note that the US is first in line, not alphabetically.
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.
Jim Sinclair’s Commentary
The criminals stay on the payroll, the victims get thrown out.
OTC derivatives are not a victimless crime.
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.
Jim Sinclair’s Commentary
A Jobless Recovery? This is the jobless side of the statistical recovery.
State tax collections drop; Gov. Bobby Jindal plans for more budget cuts
By Jan Moller, The Times-Picayune
March 15, 2010, 7:56PM
An unexpected drop in state tax collections has created a mid-year budget deficit that could be as high as $400 million, adding dark new clouds to the state’s bleak financial forecast as lawmakers prepare for the start of their annual session in two weeks.
The news, delivered to Gov. Bobby Jindal’s administration late last week by state economists, comes less than three months after the governor cut $248 million from the 2009-10 budget to adjust for shrinking state tax collections.
Those cuts have led to hundreds of layoffs in state government and fell particularly hard on health care and higher education programs.
Timmy Teepell, Jindal’s chief of staff, said it’s too soon to know how big the latest shortfall will turn out to be, but that the governor already has asked Commissioner of Administration Angele Davis to plan for a fresh round of budget cuts.
"It’s safe to say that we will see a further reduction in revenues this year, and most likely it will be significant," Teepell said.
Jim Sinclair’s Commentary
The epidemic of the Formula spreads. The first victims here are children’s health clinics and nursing homes.
The first victims should be those that got us into the problem.
OTC are not victim-less crimes.
Montgomery, Prince George’s slash budgets
By Michael Laris and Jonathan Mummolo
Washington Post Staff Writers
Tuesday, March 16, 2010
Maryland’s two largest counties outlined spending cuts Monday that would reach from children’s health clinics to nursing homes, slice tens of millions of dollars in education spending and furlough thousands of public employees.
Drop-offs in revenue and in expected state aid are forcing officials in Montgomery and Prince George’s counties, home to nearly a third of the state’s population, to confront some of the same unforgiving math that has caused governments across the Washington region to propose cuts to popular programs and safety-net services.
Counties across Northern Virginia, from Arlington west to Loudoun, face a patchwork of deep cuts and tax increases. Officials in Fairfax County are pushing layoffs, school cuts and a property tax increase. The District is facing an estimated $500 million budget gap in fiscal 2011 while continuing to grapple with $200 million in spending pressures for the current fiscal year.
On the state level, Virginia leaders agreed on a budget late Sunday that cuts millions out of core services, including education, health care and public safety. In Maryland, Gov. Martin O’Malley (D) has proposed near equal parts budget cuts and one-time transfers and other financial maneuvers to close an estimated $2 billion budget gap.
In Montgomery, one of the nation’s richest counties, officials who had become accustomed to managing rising budgets are overseeing a painful and unfamiliar reversal. County Executive Isiah Leggett (D) proposed a $4.3 billion spending plan that cuts the total government budget for the first time in more than 40 years. It calls for cuts across government operations, furloughs of many employees and a budget for schools that is $137 million less than they requested, which comes in below state requirements.
Jim Sinclair’s Commentary
History calls this an unusual amalgamation of interest.
Little is a coincidence. Japan looks to Asia and away from being a state of the USA.
China, Japan Reduced Holdings of U.S. Treasury Debt in January
By Vincent Del Giudice
March 16 (Bloomberg) — China and Japan, the two biggest foreign holders of Treasuries, reduced their positions of U.S. government debt in January as a measure of demand for American financial assets fell to a six-month low.
China remained the biggest owner abroad of Treasuries, even as its holdings dropped by a net $5.8 billion to $889 billion, according to Treasury Department data released yesterday in Washington. Japan cut its holdings in January by $300 million to $765.4 billion, the report showed.
China has been a net seller of Treasuries for three straight months, the longest such stretch since the end of 2007. Chinese officials have questioned the dollar’s role as a reserve currency and recently sought assurances about the safety of U.S. government debt as the budget deficit widens to a projected record $1.6 trillion this year.
“Foreign central banks stopped buying Treasuries in January,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “If this were to continue, if China were to stop recycling its dollars into U.S. Treasuries, it could have dire implications for Main Street America in that mortgage rates could move higher.”
Jim Sinclair’s Commentary
The "Jobless" portion is real.
The "Recovery" portion is illusionary.
Obama Aides See Jobless Rate Elevated for ‘Extended Period’
By Rebecca Christie and Mike Dorning
March 16 (Bloomberg) — U.S. employers won’t hire enough workers this year to lower the jobless rate much below the level of 9.7 percent reached in February, three Obama administration economic officials said today.
The proportion of Americans who can’t find work is likely to “remain elevated for an extended period,” Treasury Secretary Timothy F. Geithner, White House budget director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers, said in a joint statement. The officials said unemployment may even rise “slightly” over the next few months as discouraged workers start job-hunting again.
“We do not expect further declines in unemployment this year,” the officials said in testimony prepared for the House Appropriations Committee. They predicted the economy would add about 100,000 jobs a month on average — not enough to bring the jobless rate down substantially.
Today’s projections are in line with the 10 percent average unemployment forecast for this year in last month’s budget plan. Christopher Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ Ltd. in New York, said the administration’s language risks damping expectations for a recovery.
“They need to work on the message, and right now the message is that there is not a lot to be hopeful about,” Rupkey said. “Warning about a slow jobless recovery can help make it a reality.”
Jim Sinclair’s Commentary
Goodbye America.
I apologize to all those who gave their life for the Constitution, Freedom and due process.
House may try to pass Senate health-care bill without voting on it
By Lori Montgomery and Paul Kane
Washington Post Staff Writers
Tuesday, March 16, 2010
After laying the groundwork for a decisive vote this week on the Senate’s health-care bill, House Speaker Nancy Pelosi suggested Monday that she might attempt to pass the measure without having members vote on it.
Instead, Pelosi (D-Calif.) would rely on a procedural sleight of hand: The House would vote on a more popular package of fixes to the Senate bill; under the House rule for that vote, passage would signify that lawmakers "deem" the health-care bill to be passed.
The tactic — known as a "self-executing rule" or a "deem and pass" — has been commonly used, although never to pass legislation as momentous as the $875 billion health-care bill. It is one of three options that Pelosi said she is considering for a late-week House vote, but she added that she prefers it because it would politically protect lawmakers who are reluctant to publicly support the measure.
"It’s more insider and process-oriented than most people want to know," the speaker said in a roundtable discussion with bloggers Monday. "But I like it," she said, "because people don’t have to vote on the Senate bill."
Republicans quickly condemned the strategy, framing it as an effort to avoid responsibility for passing the legislation, and some suggested that Pelosi’s plan would be unconstitutional.
Jim Sinclair’s Commentary
This is a hair to the left of a bailout!
This is very European to discuss everything to death. Now how about California and the many states to follow?
Eurozone ready to help Greece.
Eurozone leaders said yesterday that they’re prepared to help Greece, should that be necessary, by creating an emergency financial support facility for the first time in the euro’s history. However, they didn’t promise any specific sums to Greece and provided few details on their plan aside from the fact that it would likely be based on bilateral loans.
Jim Sinclair’s Commentary
1. Pakistan goes Taliban.
2. Israel makes a major miscalculation.
3. Turkey is a victim.
Thanks But No Thanks: Biden came offering a deal; Bibi balked.
By Aluf Benn | Newsweek Web Exclusive
Mar 15, 2010
Vice President Joe Biden’s visit to Israel last week was rightly hailed as a catastrophe—but not because of settlements. After a tense year in which Washington had failed to stop Prime Minister Benyamin "Bibi" Netanyahu from settling more occupied land, Biden had come to shore up the relationship. Instead, officials in Netanyahu’s government caught both men off guard by announcing plans to build more in contested East Jerusalem. True, that was a snafu. But the real disaster was what it may cost Israel. Biden had come to offer not just friendship, but support (and protection) against Iran—Israel’s greatest bogeyman—in exchange for a few concessions from Netanyahu. Instead, he got a finger in the eye.
When President Barack Obama and Netanyahu took office last year, consensus opinion expected a confrontation between the United States and Israel. It was almost a no-brainer—America was moving left as Israel was moving right. Obama’s grand design for a new, peaceful, and pro-American Middle East (featuring a new Palestinian state) stood in stark contrast to Netanyahu’s long-held support for Israel’s control of the West Bank and East Jerusalem. But Netanyahu thought that if he tacked between his rightwing coalition—committed to expanding settlements in the West Bank and moving more Jews into East Jerusalem—and Obama’s desire for peace talks, he could keep U.S. support against Iran and even start from scratch with the Palestinians. And until last week, Netanyahu seemed to pulling it off: he got indirect talks with the Palestinians in return for a limited and temporary settlement freeze that excludes East Jerusalem. His coalition survived intact. And his public popularity skyrocketed to 50 percent in February—which Israelis knew only in the Ariel Sharon period (while Obama’s approval ratings plummeted).
Then Biden came to town. On the face of it, this was just about assuring Israelis, directly and in their own country, about America’s love and support. It seemed like good politics in a tough election season back home, and Biden was a natural choice as messenger: alone in the high echelon of the Obama administration, the veep—an old-line Zionist—has come to consider "Bibi" as a close personal friend over a three-decade acquaintance. If anybody could reach out to Netanyahu, it was the former senator from Delaware.
