The Housing Bubble

Rating Cut by Fitch on Wealthiest U.S. State.

Connecticut is preparing to borrow $956 million to close a budget gap in the fiscal year beginning July 1, after borrowing money last year to cover a deficit of $947.6 million. Not good. Fitch has reduced the states credit rating from AA+ to AA.

“The downgrade reflects the state’s reduced financial flexibility, illustrated by its reliance on sizable debt issuances during the current biennium to close operating gaps in the context of already high liabilities,” Fitch said.

Connecticut is the wealthiest state on a per capita basis with personal income of $54,397 in 2009, according to Department of Commerce.

U.S.’s $13 Trillion Debt Poised to Overtake GDP.

(Bloomberg) — President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, a step toward what Bill Gross called a “debt super cycle.”

The CHART OF THE DAY tracks U.S. gross domestic product and the government’s total debt, which rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world’s largest economy to expand at a slower pace than the 3.2 percent average during the past five decades.

“Over the long term, interest rates on government debt will likely have to rise to attract investors,” said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest publicly traded bank. “That will be a big burden on the government and the people.”

With the fed funds rate at 0 and the feds inflating the national debt beyond comprehension why are the rates on Stafford Loans for kids college educations circa 7%? The kids futures are already fubar.

Secondly, Highways in our area (Mass) now have brand new markers every 1/5 of a mile. They are everywhere. Great use of our tax dollars (not).

BIL reports beaches in mid to sw Fla already seeing tar balls. Media would have you believe it’s contained to Pensacola. Any of our Fla friends have any further insight?

Desperately seeking COBRA subsidy.

NEW YORK (CNNMoney.com) — If you lose your job after June 1, you’ll see more than just your paycheck disappear. You also won’t get the 65% federal subsidy to cover your COBRA health insurance premium.

That’s because House Democrats last week opted not to extend the subsidy in order to bring down the cost of a jobs and tax bill winding its way through Congress. Continuing the provision through Dec. 31 would run $7.8 billion.

The loss of the 15-month subsidy leaves hundreds of thousands of newly jobless Americans to shoulder the burden of health insurance coverage on their own. On average, the monthly premium alone eats up 84% of a person’s unemployment check, according to Families USA, a consumer advocacy group.

Sounds like a few of the turds in the cesspool are getting a little worried about keeping their jobs.I hope there is a load of flushing this November.

Election spooks lawmakers, curbs Congress spending.

WASHINGTON (AP) - The 2010 elections have changed the direction of government only half way through the primary season, with voter anger and economic jitters causing lawmakers to balk at their most basic duties as well as key elements of President Barack Obama’s agenda.

After betting their political future on a government-mandated expansion of health care to include millions more Americans, Democrats appear to have little appetite for more legislative showdowns given voter rebellion against government spending amid trillion dollar-plus annual deficits.

The solution in some cases is to simply not vote. Immigration reform is too politically toxic. Key bills with massive price tags are getting shelved.

http://apnews.myway.com/article/20100607/D9G6D6NO0.html

BUDAPEST (Reuters) - Hungary’s government said on Saturday it aimed to meet this year’s budget deficit target, seeking to draw a line under “exaggerated” talk of a possible Greek-style debt crisis that unnerved global markets a day earlier.

< What else can Hungarian officials say? But the fact is Hungary’s money unit (the forint) is being battered just like most of the currencies of the world. The forint just lost 5.6 percent in parity against the euro, and the euro has fallen like a rock against the U.S. dollar.

I’m thinking it’s time we send a maned mission to the sun and figure out what’s going on up there, and what we did to cause it. I nominate AlGore to lead this historic mission for the good of all mankind.

As the Sun Awakens, NASA Keeps a Wary Eye on Space Weather.

Earth and space are about to come into contact in a way that’s new to human history. To make preparations, authorities in Washington DC are holding a meeting: The Space Weather Enterprise Forum at the National Press Club on June 8th.

“The sun is waking up from a deep slumber, and in the next few years we expect to see much higher levels of solar activity. At the same time, our technological society has developed an unprecedented sensitivity to solar storms. The intersection of these two issues is what we’re getting together to discuss.”

The National Academy of Sciences framed the problem two years ago in a landmark report entitled “Severe Space Weather Events—Societal and Economic Impacts.” It noted how people of the 21st-century rely on high-tech systems for the basics of daily life. Smart power grids, GPS navigation, air travel, financial services and emergency radio communications can all be knocked out by intense solar activity. A century-class solar storm, the Academy warned, could cause twenty times more economic damage than Hurricane Katrina.

This not unexpected and, in a long term sense, good news plays into the possiblity that we may have consumer price inflation in the U.S. despite stagnant wages, unemployment, and falling asset prices.

http://www.nytimes.com/2010/06/08/business/global/08wages.html?hp

“Coastal factories are raising salaries, local governments are hiking minimum wage standards and if China allows its currency, the renminbi, to appreciate against the U.S. dollar later this year, as many economists are predicting, the cost of manufacturing in China will almost certainly rise.”

“Although the salaries of factory workers in China are still low compared to those in the United States and Europe (the minimum wage in southern China is close to $125 a month), economists say the changes will eventually ripple through the global economy, driving up the prices of everything from T-shirts and sneakers to computer servers and smart phones.”

I agree on the stock transaction tax…It would probably eliminate the high speed trading…and that 1000 point market crash…

———————–
Germany to unveil cuts to welfare, jobs

BERLIN (AP) - Germany was close to finalizing Monday a major package of government savings, which would likely cut social welfare benefits, slash public sector jobs, and raise taxes to tackle the budget deficit.

With the debt crisis undermining the euro, Chancellor Angela Merkel’s government is determined to tackle Germany’s deficit - which while among the smallest in Europe is still above the official EU limit.

Several other countries - notably Greece, Spain and Portugal - have already embarked on much tougher austerity drives.

Merkel brought together her Cabinet for a two-day meeting at the chancellery that started Sunday to discuss the package. She said as she went into the meeting that Germany can no longer live beyond its means, insisting “we can only spend what we take in.”

“Our citizens’ greatest concern is that public deficits could grow to become immense,” Finance Minister Wolfgang Schaeuble said.

Measures reportedly under consideration include cuts to public-service jobs, a reduction of handouts to new parents and new taxes on power providers.

Germany had a budget deficit of 3.1 percent of gross domestic product last year. It is expected to exceed 5 percent this year, still well above the European Union’s 3 percent threshold.

Officials say Germany needs to save euro10 billion ($12 billion) a year through 2016 to meet a constitutional balanced budget requirement.

Opposition politicians and union officials criticized the prospect of cutbacks on social spending.

The head of Germany’s labor union federation, Michael Sommer, argued that Germany should increase taxes for the rich and introduce a financial market transaction tax to help narrow its budget gap.

“In a situation like this … we must do everything to stabilize the state’s finances - and that means those who have more really being drawn on to finance this state,” Sommer said on Suedwestrundfunk radio.

I’m at the beach 70 miles southwest of Tallahassee, Fl.

It smells like bug spray. It is the same smell in New Orleans two weeks ago. It is the same smell at the Stuckey’s east of Pensacola yesterday.

We really need an intelligent energy policy. We didn’t have it under “Read My Lips” Bush, “Cigars” Clinton, “This Suckers Gonna Blow” Bush. and “Ch-ch-changes” Obama.

Now we have a huge mess in the Gulf and ‘can’t stop doing what we are doing’ i.e. drilling.

What a mess.

Roidy

Posted this over the weekend, but just in case anyone missed it, official 1.5 release of the Joshua Tree Extension is out. See here:

http://mysite.ncnetwork.net/drumminj_tx/download.html

If you use it and enjoy it, please donate to Ben on my behalf so we can keep this place running

The ratings issued by Moody’s and S&P are “garbage.”

CNBC commentator Don Luskin added:

“Shame, shame, shame on Warren Buffett for saying the rating agencies are to be forgiven. … We’ve got the Obama administration talking about bringing criminal charges against BP. Why don’t we bring criminal charges against the rating agencies …?”

Dow down 300 points on Friday. So much for the PPT. It’s just lazy thinking to ascribe every market rise the the PPT tooth farie. And just dishonest to conveniently forget about the “PPT” when the market falls.

Foreclosure Glut: Is ‘Shadow Inventory’ Really a Threat?
Millions of New Foreclosures Will Stifle, Not Crush Housing Market, Say Economists. ~ June 7, 2010

Every once in a while, the term “shadow inventory” makes it into the business headlines. Invariably, stories warn of a looming flood of foreclosures that will drag the housing market down as soon as homeowners begin to feel optimistic again.
Tips to help stave off foreclosure.

But what is shadow inventory — and is it really such a big threat?

Different experts have different definitions. Some only include homes that have already been repossessed by banks and are awaiting distressed sales. Others include those whose owners are long-overdue on mortgage payments, while others still count homes whose owners would like to sell but are waiting for conditions to improve.

8 Million More Foreclosures May Be Waiting

“The definition of shadow inventory has gotten out of control,” says Rick Sharga, senior vice president at RealtyTrac, an online market for distressed homes.

Does California Need a $1 Million ‘Fish Ladder’? ~ June 07, 2010

The California Department of Transportation will be spending $1 million to help trout move upstream and spawn.

AINSLEY EARHARDT, FOX NEWS CORRESPONDENT (voice-over): Malibu. Sun, surf, sand and million-dollar homes. But there’s something missing from this coastal paradise: steel-head trout.

(on camera) For centuries here in Malibu, California, the fish used to travel back and forth between the Pacific Ocean and the Santa Monica mountains. But that all changed when humans moved in.

RON KOSINSKI, CALIFORNIA DEPARTMENT OF TRANSPORTATION: In 1949 they built the Pacific Coast Highway and blocked the passage ability for the trout to pass and go up dream from the ocean and spawn.

EARHARDT: So 60 years after the people got their highway, California wants the trout to get theirs.

KOSINSKI: Currently, if you’re a fish and you’re swimming in from the ocean, you’re going to come to this and it’s — it’s like a dam, right, so you’re going to have to jump up into this shallow concrete channel and then skedaddle up through the culvert until you get to the natural stream on the other side of Pacific Coast Highway.

EARHARDT: And the fish can’t do that, so the California Department of Transportation will be spending a million dollars building a fish ladder to help them.

Gulf damage will last ‘for years if not decades’
Oil spill will have ripple effects far into the future, scientists warn.

Snorkeling along a coral reef near Veracruz, Mexico, in 2002, Texas biologist Wes Tunnell spotted what looked like a ledge of rock covered in sand, shells, algae and hermit crabs. He knew, from years of research at the reef, that it probably wasn’t a rock at all. He stabbed it with his diving knife. His blade pulled up gunk.

“Sure enough, it was tar from the Ixtoc spill,” Tunnell said.

Twenty-three years earlier, in 1979, an oil well named Ixtoc I had a blowout in 150 feet of water in the southern Gulf of Mexico. The Mexican national oil company Pemex tried to kill the well with drilling mud, and then with steel and lead balls dropped into the wellbore. It tried to contain the oil with a cap nicknamed The Sombrero. Finally, after 290 days, a relief well plugged the hole with cement and the spill came to an end — but only after polluting the gulf with 138 million gallons of crude.

That remains the worst accidental oil spill in history — but the Deepwater Horizon blowout off the Louisiana coast is rapidly gaining on it.

market pulse

June 7, 2010, 10:39 a.m. EDT
FCIC issues subpoena to Goldman Sachs
By Ronald D. Orol

WASHINGTON (MarketWatch) - The Financial Crisis Inquiry Commission on Monday issued a subpoena to Goldman Sachs & Co. for failing to comply with the panel’s request for documents and interviews in a timely manner. The FCIC is examining the financial crisis that shook the economy to the brink in 2008 and is scheduled to issue a report with recommendations by the end of the year.
…

Can anyone predict how soon the Japanese Nikkei stock market index will regain its 1989 high level of 39,000? I am thinking now may be a good time to buy the dip.

June 7, 2010, 5:50 a.m. EDT
Nikkei down 3.8% for worst fall of 2010, leading Asia lower
By V. Phani Kumar, Colin Ng & Wei-Zhe Tan

HONG KONG (MarketWatch) — Japanese shares tumbled Monday to lead Asian markets sharply lower as weak U.S. jobs figures and Hungary’s fiscal woes sapped risk-appetite, also sending the euro to multi-year lows against the U.S. dollar and the Japanese yen.

Regional markets skidded off the blocks as global markets were roiled Friday after comments from an official in Hungary’s new government that the country faces a Greece-style fiscal meltdown sent the euro tumbling Friday. The new government rushed to calm markets with a pledge to keep the country’s official budget deficit goal for 2010 and stressed that Hungary isn’t facing any sovereign credit default.

“The fear over the European debt crisis can come back to haunt us because the problems have not gone away,” said Daphne Roth, head of Asia equity research at ABN Amro Private Bank in Singapore. “Take some money out [of the market] and come back after the World Cup football tournament. There’s no need to chase the market and face sleepless nights,” she said.

Japan’s Nikkei Stock Average finished at 9,520.80, tumbling 3.8% for its worst daily percentage loss of this year. Also dropping but by a smaller degree, Australia’s S&P/ASX 200 declined 2.8%, Taiwan’s Taiex gave up 2.5% and Hong Kong’s Hang Seng Index lost 2%, with South Korea’s Kospi and China’s Shanghai Composite falling 1.6% each.
…

Clinton says she expects Iran to ‘pull some stunt’

WASHINGTON (AP) - U.S. Secretary of State Hillary Rodham Clinton said Sunday she thinks Iran will “pull some stunt” in the next few days because it expects further United Nations sanctions over its nuclear program.

“They have consistently tried to avoid being held accountable,” Clinton told reporters before leaving on a trip to Latin America.

The U.S. suspects Iran is enriching uranium to build a nuclear warhead. Tehran denies this and insists on its right to a peaceful nuclear power program.

The U.S. hopes to bring a fourth sanctions resolution to a U.N. Security Council vote this week.

On Sunday, Clinton said, “I fully expect Iran to pull some stunt in the next couple of days because they know that sanctions are on the way.”

She added, “I think we will see something coming up in the next 24 to 48 hours where Iran says, ‘Wait a minute, wait a minute, look at what we’re going to do now.”

I doubt this downtrend is sustainable.

* POLITICS
* JUNE 7, 2010

Mortgage Delinquencies at FHA Show Slowdown
BY NICK TIMIRAOS

The government agency that backs home loans may have some good news for taxpayers.

Home mortgages insured by the Federal Housing Administration are falling into delinquency at a slower rate than they have in the past. If the trend is maintained, it could help the government agency avoid a taxpayer bailout.

In April, nearly 8.5% of loans backed by the agency were 90 days or more past due. While that was still higher than a year earlier, April marked the third consecutive month in which delinquencies, which peaked at 9.4% in January, declined.
…

* U.S. NEWS
* JUNE 5, 2010

Black Flight Hits Detroit

By ALEX P. KELLOGG

DETROIT—This shrinking city needs to hang on to people like Johnette Barham: taxpaying, middle-class professionals who invest in local real estate, work and play downtown, and make their home here.

Ms. Barham just left. And she’s not coming back.

In seven years as a homeowner in Detroit, she endured more than 10 burglaries and break-ins at her house and a nearby rental property she owned. Still, she defied friends’ pleas to leave as she fortified her home with locks, bars, alarms and a dog.

The Last Straw

Then, a week before Christmas, someone torched the house and destroyed almost everything she owned.

In March, police arrested a suspect in connection with the case, someone who turned out to be remarkably easy to find. For Ms. Barham, the arrest came one crime too late. “I was constantly being targeted in a way I couldn’t predict, in a way that couldn’t be controlled by the police,” she says. “I couldn’t take it anymore.”

Ms. Barham’s journey from diehard to defector illustrates the precarious state of Detroit today. The city—which has shed roughly 1 million residents since the 1950s—is now losing the African-American professionals who had stayed steadfastly, almost defiantly, loyal.
…

I don’t understand the concept of federal agencies “running out of money.” Can anyone who grasps how an entity with access to the Fed’s printing press and the federal tax base could do so please explain?

WSJ Blogs
Developments
Real estate news and analysis from The Wall Street Journal

* June 7, 2010, 10:57 AM ET

Why the FHA Isn’t Out of the Woods Yet
By Nick Timiraos

In today’s WSJ we look at how, in a surprising development, mortgage defaults have fallen for three straight months at the Federal Housing Administration.

If that trend holds, the agency could avoid burning through its cash reserves, which are estimated to fall sharply over the coming years. Still, the FHA’s commissioner, David Stevens, says “there’s plenty of room for caution.”

Indeed, the FHA is by no means out of the woods. If the economy weakens or home prices slide again, the agency could see significant losses because it has a much bigger exposure to housing today than it did when the housing market tanked three years ago.

Even if the FHA’s improvement continues, it’s possible that this year’s annual audit could show that the agency is still running low on cash, or worse, that it is insolvent. Here’s how: Every fall, an independent auditor estimates the value of the agency’s reserves after accounting for expected losses. If the home-price forecast used to predict those cash flows takes a bearish view of future home prices, then those models could signal that the FHA will run out of money, absent any new business.
…

Spendaholic ‘Housewife of NJ’ owes a big-hair-raising $11M
By JEANE MacINTOSH
Last Updated: 11:55 AM, June 5, 2010

She has a gaudy new mansion, pricey breast implants and spends thousands of dollars on shopping sprees for her spoiled brats — but a New Jersey reality star and her goombah hubby are real-life deadbeats who owe $11 million, court records show.

Free-spending “Real Housewives of New Jersey” diva Teresa Giudice and her husband, Joe, make just $79,000 a year and are up to their tanned necks in liens, foreclosures and unpaid bills, according to bankruptcy papers filed in Newark federal court.

The Giudices say they owe creditors $10,853,648.04.

Teresa, known for her lust for designer clothes and expensive bling on the Bravo show, owes nearly $20,000 on credit cards for Bloomingdale’s, Nordstrom and Neiman Marcus. In total, the Giudices show $104,000 in debt on at least eight credit cards.

Read more: http://www.nypost.com/p/news/local/deadbeat_reality_8f3qwDPV2oY8s9N51fL82I#ixzz0qBVsUA25

Hey, I asked before but didn’t see a response. What happened to Ahansen?

Medicare’s $250 ‘donut hole’ checks coming.
June 7, 2010

NEW YORK (CNNMoney.com) — To help close the Medicare “donut hole,” the government this week is mailing $250 checks to seniors who fall into the program’s gap in prescription coverage.

The first checks will be sent June 10, three weeks earlier than scheduled, to about 80,000 people. The Department of Health and Human Services estimates that about 4 million seniors will get the rebates in 2010.

The move is one of the first tangible results of the health reform law. At a press conference last month, HHS Secretary Kathleen Sebelius said closing the donut hole is “one of the biggest ways the new law is going to help seniors.”

Your Money
Student Debt and a Push for Fairness
By RON LIEBER
Published: June 4, 2010

If you run up big credit card bills buying a new home theater system and can’t pay it off after a few years, bankruptcy judges can get rid of the debt. They may even erase loans from a casino.

But if you borrow money to get an education and can’t afford the loan payments after a few years of underemployment, that’s another matter entirely. It’s nearly impossible to get rid of the debt in bankruptcy court, even if it’s a private loan from for-profit lenders like Citibank or the student loan specialist Sallie Mae.

This part of the bankruptcy law is little known outside education circles, but ever since it went into effect in 2005, it’s inspired shock and often rage among young adults who got in over their heads. Today, they find themselves in the same category as people who can’t discharge child support payments or criminal fines.

Now, even Sallie Mae, tired of being a punching bag for consumer advocates and hoping to avoid changes that would hurt its business too severely, has agreed that the law needs alteration. Bills in the Senate and House of Representatives would make the rules for private loans less strict, now that Congress has finished the job of getting banks out of the business of originating federal student loans.

With this latest initiative, however, lawmakers face a question that’s less about banking than it is about social policy or political calculation. At a time when voters are furious at their neighbors for getting themselves into mortgage trouble, do legislators really want to change the bankruptcy laws so that even more people can walk away from their debts?
…

* The Wall Street Journal
* REVIEW & OUTLOOK
* JUNE 7, 2010

Bailouts as Usual
The credit-raters say ‘too big to fail’ is alive and well.

Washington’s favored credit-ratings agencies couldn’t see the risks in the American housing market, but they seem to have a better bead on Congress. The House and Senate are preparing to reconcile their financial-reform plans, and Democrats in both chambers claim they are ending taxpayer bailouts of giant banks. But Standard and Poor’s and Moody’s aren’t buying it.

Both raters have previously said that if the government’s implied support for banks considered too big to fail was ended, then the ratings on the debt of the largest banks would probably fall. But as they’ve watched the reform bills evolve, the big agencies have so far refused to downgrade their ratings on the biggest banks.

Moody’s went further in a report last week and said that it doesn’t see any changes in the near term. “Consequently, we expect that the senior debt and deposit ratings of systemically important banks in the U.S. will continue to benefit from unusual levels of support . . . until the economic recovery is sustained, financial market health is restored, and the risks of attempting to unwind an interconnected institution are reduced.”

This doesn’t mean Washington won’t do other things to hurt the creditworthiness of banks. Moody’s is warning that, apart from the federal safety net that is destined to remain, new regulations in the reform plans could hurt bank profitability. That could well trigger ratings downgrades, especially at smaller banks that aren’t lucky enough to be too big to fail.

In other words, Washington is on track to add costly new rules that could make bank failures more likely, while ensuring that taxpayers continue to shoulder the costs of such failures. This is what no change looks like.

“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and he carries his banners openly against the city. But the traitor moves among those within the gates freely, his sly whispers rustling through all alleys, heard in the very halls of government itself.”

~ Marcus Tullius Cicero 106-43 BC

Northern Indiana Cargo Trailer Plant Could Close.
Inside INdiana Business

A cargo trailer manufacturer has told the state it may close its operation in Middlebury. Pace American says it is selling all its assets, and that could prompt the closing of the Elkhart County operation.

Pace American says any closing would impact approximately 150 workers.

The company says it hopes operations will continue without interruption during the sale process, but it can’t guarantee the Middlebury plant will remain open.

Scotland ‘to lose 30,000 jobs in public sector’

Scotland’s unemployment count will increase to 225,000 and more than 30,000 public sector jobs will go in the next parliament, according to a respected economic forecast.

The Ernst & Young Item Club predicts a double-whammy for the economy will flow from the banking crisis and the deep Government spending cuts needed to cure the hangover.

Today’s report says unemployment will peak at around 225,000 this year, against 105,000 in mid-2008, before the recession began.

Last month, the Scottish unemployment rate rose above that in the rest of the UK for the first time in four years as it hit 8.1%. The number of people out of work reached 216,000, up 55,000 in a year.

According to the report, another 10,000 construction workers will end up losing their jobs, along with 5,000 in distribution and a further 5,000 in manufacturing.

Gold jumps to $1239. A close there would be a new record I believe.

I can’t imagine that $108 million comes anywhere near to covering the collective economic damage to the U.S. economy that Countrywide’s lending practices caused.

FTC Settlement with Countrywide

The Federal Trade Commission (FTC), the nation’s consumer protection agency, sued Countrywide for unfair and deceptive practices in servicing the mortgages of homeowners in default or Chapter 13 bankruptcy. The settlement requires Countrywide to pay $108 million in refunds.

After the court approves the settlement, the FTC will send refunds to eligible homeowners. You’ll be notified by mail in the coming months if you’re eligible. You don’t need to do anything now.

Bookmark this page and check back regularly. We’ll post more information as soon as it becomes available.

I just spent the weekend at a wedding in Napa Valley, and while I enjoyed myself during the traditional events, I also enjoyed the driving back and forth between the events so I could count real estate signs.

It seems like a lot of ‘botique’ wine land (4-10 acres) is for sale up there these days.

And it’s probably overpriced because the big wineries do not appear to be ’snapping it up’.

MarketWatch
1:49p BREAKING Gold settles 1.9% higher, at $1,240.80 an ounce

Is that a fresh all-time high?

This should go over well.

Germany to unveil cuts to welfare, jobs ~ Jun 7

BERLIN (AP) - Germany was close to finalizing Monday a major package of government savings, which would likely cut social welfare benefits, slash public sector jobs, and raise taxes to tackle the budget deficit.

With the debt crisis undermining the euro, Chancellor Angela Merkel’s government is determined to tackle Germany’s deficit - which while among the smallest in Europe is still above the official EU limit.

Several other countries - notably Greece, Spain and Portugal - have already embarked on much tougher austerity drives.

Merkel brought together her Cabinet for a two-day meeting at the chancellery that started Sunday to discuss the package. She said as she went into the meeting that Germany can no longer live beyond its means, insisting “we can only spend what we take in.”

“Our citizens’ greatest concern is that public deficits could grow to become immense,” Finance Minister Wolfgang Schaeuble said.

Brown Squirts…

In Brutal Job Market, More Than a Million Quit Looking.
CNBC June 7, 2010

If you think the jobs situation has become pretty hopeless, you’re not alone. Roughly 1.1 million workers have given up hope of finding employment.

The staggering level of “discouraged workers” as the government calls them has swelled to historic proportions in 2010, past the million barrier for the first time since the Bureau of Labor Statistics has been tracking the number.

Though a bit off its all-time high of 1.2 million recorded in February, the metric stands as perhaps the most daunting statistic of last Friday’s gloomy jobs report, which showed that almost all the new employment is coming from temporary government Census jobs and not the kind that will sustain an economy.

“The fact that people are sitting down indicates just how bad the market is for some categories of people,” says Peter Morici, professor at the University of Maryland’s Smith School of Business and the former chief economist at the US International Trade Commission.

That picture is unlikely to get any better, particularly in terms of the headline unemployment rate number on which most people focus. That figure actually dropped from 9.9 percent to 9.7 percent in May, but was as much a reflection that many people simply dropped out of the jobs market and are no longer counted as unemployed.

Barry is far to busy partying to worry about the small stuff, especially since he doesn’t understand it.

Time Is Running Out for Obama thestreet.com Monday June 7,2010

Either President Obama fixes what’s broken in the economy, or he will be remembered for spending his entire first term blaming George Bush.

Last week’s jobs report was terrible for the 11th month in a recovery.

With nearly $800 billion in stimulus spending at its point of maximum impact, federal employment — net of temporary census jobs — was up a mere 1,000 in May.

Private-sector employment was up an insignificant 41,000, only one-fourth the pace of the previous two months. Retailers are again cutting employment, as consumers, turned pessimistic, flee the malls.

Making worse a stock market panicked by European debt woes, the President claims his policies are working.

After all, health care reform and the prospects of much higher taxes and more regulations are causing U.S. businesses to rush out and hire everyone they can before all the able-bodied are gone.

The economy is skating precariously on the edge of a second dip — this time into a depression — and the president should radically alter policies to ensure that doesn’t happen.

Descending Triangles abound. At support. Volume contracting (few bids). Rally or downward adjustment from here?

Morgan Stanley Not Done with Brokerage Cuts
FOXBusiness

Morgan Stanley has plans to shutter 300 branch offices and slash as many as 1,200 jobs over the next year as part of a plan to cut costs related to the merger of its brokerage division with Citigroup’s- Smith Barney, FOX Business Network has learned.

As previously reported by FOX Business, Morgan Stanley has already cut 200 jobs, mostly support staff, as part of the merging of the two divisions. But people close to the firm say officials at Morgan are far from finished as they attempt to squeeze $1.1 billion in savings from the deal by the end of 2011, and that means slashing jobs, and shuttering hundreds of branches.

The more I read on the grinding sovereign debt steamroller that is flattening the globalized economy, the less convinced I become about sustainable support for bubble-era U.S. residential real estate prices. Bigger issues will eventually overwhelm the narrow special interest priority to prop up the value of U.S. homes.

Page last updated at 19:38 GMT, Monday, 7 June 2010 20:38 UK

A euro coin

The eurozone has set up a rescue package worth 750bn euros

The International Monetary Fund (IMF) has told the eurozone bloc to speed up budget cuts or risk eroding the confidence of financial markets.

In a hard-hitting report, the IMF said the current “crisis management” was no alternative to fundamental economic restructuring.

The IMF report said the economic crisis was due to “unsustainable policies”.

It came as European finance ministers approved the creation of a fund for emergency loans to debt-laden states.

EU officials hoped that the 440bn euro ($525.8bn; £363.1bn) fund will calm investors who are worried about the lack of a safety net for European governments who cannot repay mounting debt.

Also on Monday, Germany unveiled details of austerity measures worth 80bn euros.

And British Prime Minister David Cameron warned that dealing with the deficit would be “unavoidably tough” and affect “our whole way of life”. An emergency budget detailing the cuts is being held in two weeks.
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The Buzz: The V-shaped economic recovery is a myth
cnnmoney

The latest jobs report spooked investors Friday because it showed that the labor market isn’t bouncing back as rapidly as many had hoped it would.

Should people really be surprised by that? Repeat after me. There is no V-shaped recovery. There is no V-shaped recovery. There is no V-shaped recovery.

Before Europe’s financial woes started to dominate the headlines, stocks were surging on the hopes that the U.S. economy was in the midst of a sharp rebound from the bottom — hence the description of it as being V-shaped.

But it looks like the V-shaped recovery — like the Loch Ness Monster, unicorn and Abominable Snowman — is a mythical beast. The economy is not on a tear. In fact, some economists are once again starting to worry about a double-dip recession.

Oops. Dow below 10,000 again.

Keynesians and financial industry supporters are going to lose their minds after reading, “Merkel spells out 80bn spending cuts” at the FT.

The financial tax will include high speed trading and derivatives. It’s pretty clear Germany is ignoring Geithner and instituting real reforms. From the article:

Drastic public spending cuts totalling more than €80bn ($96bn, £66bn) were unveiled by Angela Merkel, German chancellor, on Monday, combined with up to 15,000 job cuts in the public sector, as part of a sweeping austerity package.

New taxes will also be imposed on air travel and the nuclear power industry, and some form of financial transactions tax is planned, in addition to a banking levy already agreed by the German government.