Bailouts

Moody’s Analytics: All U.S. States Except Delaware Have Escaped Recession Risk

Just when I thought I had read/seen it all today comes this from Lisa Lambert on the Reuters website late this afternoon:

All U.S. states except for Delaware have escaped the possibility of falling back into recession, as they reap the rewards of strong private-sector employment and a burgeoning energy sector, according to an analysis released on Tuesday.

Moody’s Analytics, which tracks state and metropolitan economies, added Illinois, Wisconsin and Alabama to its list of states in recovery. That left Delaware alone in its “at risk of recession” category.

Moody’s Analytics, a unit of Moody’s evaluates economics and financial risk around the world. A separate unit, the credit ratings agency Moody’s Investors Service, recently said the outlook for states is now stable, after five years of being negative.

With the U.S. economy being kept afloat by massive federal government intervention, trillion dollar budget deficits, an almost zero percent federal funds rate, attempted reinflating of the housing and financial markets, $85 billion worth of long-term bonds being purchased by the Fed each and every month, job creation dominated by part-time positions, and highly-questionable government reporting of economic data to boot, one could easily argue another recession- measured using “official” figures- is a real and constant threat to the United States.

After I read that recession assessment by Moody’s Analytics, the following sarcastic line from “Gunny” Highway (actor Clint Eastwood) in the 1986 film Heartbreak Ridge came to mind:

Well, I’ll sleep a lot better at night knowing that sir.

Have a good evening everyone.

Source:

Lambert, Lisa. “Recession risk gone in all U.S. states but 1: Moody’s Analytics.” Reuters. 10 Sep. 2013. (http://www.reuters.com/article/2013/09/10/us-usa-states-economies-idUSBRE9891BG20130910). 10 Sep. 2013.

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Peter Schiff: U.S. Will Experience Cyprus ‘Bail-In’

Peter Schiff, Euro Pacific Capital CEO/Chief Global Strategist, talked about the proposed Cyprus “bail-in” despite Cyrpiot bank accounts having deposit insurance in his March 18 entry on The Schiff Report YouTube video blog. Schiff, who correctly-called the 2008 global economic crisis and U.S. housing bust, warned viewers:

You know, ultimately, the same thing is going to happen in the United States. We’ve got deposit insurance here in America. But eventually, we’re going to be faced with a similar problem. When interest rates rise, and big banks fail, the FDIC doesn’t have the money for a bailout. And, if the Fed is tightening, the Treasury doesn’t have the money to bail anybody out. So, we’re going to be in the same situation.

Schiff sees the Cyprus fiasco as being bullish for gold. He added yesterday:

I think, first of all, that this is a very positive development for gold. Now, the reason for that is that bank deposits are at risk. And if you think your money is at risk in a bank and you pull it out, what are you going to do with it? Well, putting it in gold is a great alternative. In fact, if you had euros deposited in a Cyprus bank, now you’ve lost about 10 percent, close to 10 percent of the value of those deposits, or 10 percent of your euros. But if you had gold in a safety deposit box in a Cyprus bank, you haven’t lost an ounce. So the people who have gold are whole, and those who have euros, or other currencies you had on deposit, but they’ve had a loss. So this highlights the safe haven aspect of gold.


“Insured Bank Deposits At Risk, America Burns While Obama Golfs”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Cyprus Bank Deposit Funds Seized For ‘Bail-In’

Something to think about before the financial crash comes to our shores. Peter Spiegel reported on the Financial Times (UK) website this morning:

International lenders agreed to a €10bn bailout of Cyprus early on Saturday morning after 10 hours of fraught negotiations, which included convincing Nicosia to seize €5.8bn from Cypriot bank deposits to help pay for the rescue, a first for any eurozone bailout.

The cash from Cypriot account holders will come in the form of a one-time 9.9 per cent levy on all deposits over €100,000 that will be slashed from their savings before banks reopen Tuesday, a day after a Cypriot holiday. An additional 6.75 per cent levy will be imposed on deposits below that level.

(Editor’s note: Italics added for emphasis)

Notice it’s not just “the rich” who are getting hammered by this “bail-in.”

Rebecca Christie and Corina Ruhe added on the Bloomberg website today:

While the tax on deposits will hurt wealthy Russians with money in Cypriot banks, it will also sting ordinary citizens. Some ATMs in the country have run out of cash, Erotokritos Chlorakiotis, general manager of the Cooperative Central Bank, told state-run CYBC.

I can’t imagine a similar event taking place here going over too well on Main Street.

That’s not to say it can’t happen, though.

Exploring legal avenues for escaping a situation like Cypriot bank account holders now find themselves in might not be a bad idea. If not feasible, keeping one’s money out of the bank may be the smartest play in times of serious economic upheaval.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Sources:

Spiegel, Peter. “Cypriot bank deposits tapped as part of €10bn eurozone bailout.” Financial Times. 16 Mar. 2013. (http://www.ft.com/cms/s/0/33fb34b4-8df8-11e2-9d6b-00144feabdc0.html#axzz2NiWqLmL5). 16 Mar. 2013.

Christie, Rebecca and Ruhe, Corina. “Cyprus Bank Deposits to Be Taxed in $13 Billion Bailout.” Bloomberg.com. 16 Mar. 2013. (http://www.bloomberg.com/news/2013-03-16/euro-area-takes-aim-at-depositors-in-cyprus-bailout.html). 16 Mar. 2013.

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Saturday, March 16th, 2013 Bailouts, Banking, Europe, Main Street, Savings No Comments

Study: Only 3 Out Of 76 Major U.S. Metro Areas Are In Economic Recovery

Surprise, surprise. More evidence is out that points to the economic recovery that’s supposed to be taking place in the United States as being a big joke. Reuters’ Lisa Lambert talked about a new report that was released today by the Washington, D.C.-based think tank the Brookings Institution and wrote on the Yahoo! News website:

The United States has the most major metropolitan economies of all countries – 76 – according to an annual report on the 300 largest metropolitan economies worldwide that Brookings released on Friday…

Three and a half years since the 2007-09 economic recession ended, only three major U.S. metropolitan areas are experiencing an economic recovery, according to the Brookings Institution.

(Editor’s note: Italics added for emphasis)

Those three metro areas are Dallas, Knoxville, and Pittsburgh.

Congratulations you guys.

Only 3 out of 76 major metropolitan economies in the U.S. experiencing an economic recovery?

Pathetic.

Especially when you consider all that stimulus, all those bailouts, all that government intervention, all that new debt heaped on the pile these past couple of years. Lambert added:

“It was still better than last year when the U.S. had no metro recoveries,” Brookings Associate Fellow Emilia Istrate said.

0 recoveries to 3 out of a possible 76? Pardon me for a moment while I head outside to go dance in the streets.

Source:

Lambert, Lisa. “Only three major U.S. cities see economic recovery: study.” Reuters. 30 Nov. 2012. (http://news.yahoo.com/only-three-major-u-cities-see-economic-recovery-050732585.html). 30 Nov. 2012.

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Romney 2, Obama 0

Just got done watching the second in a series of U.S. Presidential debates between former Massachusetts Governor Mitt Romney and the sitting President Barack Obama.

Predictably, the incumbent came out swinging after getting spanked in their first meeting.

However, despite a venue that sounded like it was full of his supporters tonight, Barack Obama fell short.

I give the President credit. It’s obvious he’s worked tremendously hard to get back into the game.

Yet, it’s become all too clear to many on Main Street- painfully in quite a number of cases- that regardless of how it’s spun, Barack Obama’s record in the White House over the past 4 years has been pretty poor.

Something which his challenger, Mitt Romney, seized on and kept hammering home tonight. As the Republican presidential candidate pointed out:

We have a record to look at.

And it’s a handicap I’m sure even Obama’s closest advisers are aware of (in spite of what they tell the public).

I know. “5 million jobs created.” Ever bother to look at what kinds of jobs were created? I have. Lots of low-paying ones.

Throw in where the country’s at with (un)employment, food stamps, poverty, budget deficits, national debt, the list goes on, and the last 4 years have been pretty ugly in retrospect.

Which is probably why President Obama kept talking up other subjects tonight like ObamaCare, the auto industry bailout, Planned Parenthood- things the government can give/provide for you, yet way beyond the scope of what the Founding Fathers ever intended for our republic.

Now, Mitt Romney didn’t bring his “A” game like last time, but his performance was still good enough to win the debate. In addition to the Republican contender pointing out the dismal economic reality of the last 4 years, his arguments made more sense. Especially as it concerned job creation. Consider this. Due to the state of the nation’s labor market these days, I’m guessing many Americans voters will be casting ballots with their pocketbooks in mind come November. The vastly-experienced challenger repeatedly emphasized his intent to create jobs and grow incomes by building-up small businesses and making America more attractive to foreign investment.

President Obama plans on creating more jobs by continuing his same policies and by expanding educational and training opportunities.

More burger flippers?

And education and training is nice and all, but what good is a degree/certificate if no one’s hiring in the first place?

Sounds like the U.S. President might be putting the cart before the horse here.

To many Americans watching the debate, Romney’s repeated emphasis on job creation was probably music to their ears.

One more thing. Barack Obama may have inadvertently shot himself in the foot (no pun intended) when he admitted tonight his desire to re-introduce the assault “weapons” ban that expired a few years back. Anti-gun groups and many in the mainstream media have tried desperately-hard for some time now to try and convince Americans that President Obama wouldn’t push gun “control” if he’s re-elected.

And then he goes on national TV and says he supports a new gun ban.

That’ll go over real well in those “swing states” with lots of firearm enthusiasts.

1994 all over again?

Anyway, it was a feisty debate. Barack Obama looked like a different man (still not as eloquent as with a teleprompter though), but Mitt Romney remained composed and pulled out the victory by repeatedly bringing up the sitting President’s track record in his first term and by emphasizing the Republican plan for creating new jobs, something I think will be key come Election Day.

On to the next, and final, debate…

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Big Banks Warned Of Coming Economic Collapse?

Some of my colleagues are pointing to the following story about big U.S. banks being directed to develop “recovery plans” as these institutions being warned about a soon-to-be-coming economic collapse. Rick Rothacker wrote on the Reuters website on August 10:

U.S. regulators directed five of the country’s biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

The two-year-old program, which has been largely secret until now, is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.

Note the two years. Rothacker added:

According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed five banks – which also include Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co – to come up with these “recovery plans” in May 2010.

They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk. The plans must be feasible to execute within three to six months, and banks were to “make no assumption of extraordinary support from the public sector,” according to the documents.

So, have these large financial institutions been given a heads-up by Washington and the Fed about a rapidly-approaching economic crash?

I don’t know. All of this could just be a drawn-out reaction to the Lehman Brothers fiasco of 2008.

That being said, I do expect more carnage in the financial system as the economic crisis marches on.

Source:

Rothacker, Rick. “Exclusive: U.S. banks told to make plans for preventing collapse.” Reuters. 10 Aug. 2012. (http://www.reuters.com/article/2012/08/10/us-banks-recoveryplans-idUSBRE87905N20120810). 15 Aug. 2012.

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Wednesday, August 15th, 2012 Bailouts, Banking, Federal Reserve, Government, Recovery No Comments

TARP Update: $119 Billion Still Owed, Could Eventually Lose $60 Billion

The Troubled Assets Relief Program, which was widely reviled as a $700 billion bailout for Wall Street titans, is now expected to cost the federal government a mere $25 billion – the equivalent of less than six months of emergency jobless benefits.

Washington Post, November 30, 2010

The government’s bailout of banks may cost U.S. taxpayers nearly two times more than originally estimated, according to the Congressional Budget Office.

The Troubled Asset Released Program, better known as TARP, will cost the federal government $34 billion, the CBO reported on its director’s blog.

-Huffington Post, December 16, 2011

$25 billion. $34 billion. These days, the U.S. government thinks TARP could eventually lose $60 billion. From Ronald Orol on the MarketWatch website early this morning:

Taxpayers are still owed $119 billion in outstanding Troubled Asset Relief Program funds, a watchdog for the government crisis response program said Wednesday in a quarterly report to Congress.

That number is down from $133 billion in TARP funds owed as of January, according to the author of the report, the Office of the Special Inspector General for the TARP. The government expects TARP to lose $60 billion.

The program was set up during the height of the financial crisis of 2008 to stem a growing credit contagion by providing taxpayer-funded capital injections into big and smaller banks.

(Editor’s note: Italics added for emphasis)

Opponents of TARP have argued that the bailout would end up wasting a huge chunk of taxpayer funds. Supporters of the program have responded that the U.S. financial system was in serious danger if these funds weren’t provided.

Source:

Orol, Ronald D. “Taxpayers still on hook for $119 bln in TARP funds.” MarketWatch. 25 Apr. 2012. (http://www.marketwatch.com/story/taxpayers-still-on-hook-for-119-bln-in-tarp-funds-2012-04-25). 25 Apr. 2012.

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Wednesday, April 25th, 2012 Bailouts, Banking, Credit, Government No Comments
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