Stiglitz Criticizes Bad Bank Plan as Swapping ‘Cash for Trash’

Jan. 31 (Bloomberg) — Nobel laureate Joseph Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt.

Obama’s administration is moving closer to buying the illiquid assets currently clogging bank’s balance sheets and preventing them from boosting lending, people familiar with the matter said this week.

That amounts to swapping taxpayers’ “cash for trash,” Stiglitz said in a panel discussion at the World Economic Forum in Davos, Switzerland today. “You shouldn’t chase good money after bad. We’re talking about a national debt that’s very hard to manage.”

Stiglitz, a professor at Columbia University in New York and a former adviser to President Bill Clinton, says the plan would leave taxpayers picking up the bill for years of excess lending by banks. It would also deprive the government of money that would have been better spent shoring up Social Security, he said.

Read moreStiglitz Criticizes Bad Bank Plan as Swapping ‘Cash for Trash’

Japan’s markets prepare for horror week

DREADFUL December industrial production figures from Japan and South Korea show the global recession is smashing manufactured trade.

Japan’s industrial production index dropped a record 9.6 per cent, month-on-month, solidifying fears the world’s second-largest national economy is shrinking at a double-digit rate.

Many economists expect preliminary GDP figures to be released in a fortnight will show the Japanese economy shrank at an annualised 10 per cent or more in the fourth quarter of last year.

Read moreJapan’s markets prepare for horror week

Britain’s richest man and his £35bn loss

Over the past eight months, Lakshmi Mittal, Britain’s wealthiest man, has lost around $51bn (£35bn). Mittal, who controls steel producer Arcelor Mittal, has profited from the construction boom of the past decade, driven by the emerging economies of China and India.

His stake in the business in June was worth $65bn. But, as demand for steel has crashed, so has the Arcelor Mittal share price. His holding is now worth $14bn – a staggering loss, although he is not exactly on the streets yet.

Mittal is not alone. Many of the world’s richest are finding their fortunes hollowed out by the havoc wreaked on financial markets.

Read moreBritain’s richest man and his £35bn loss

$4B shortfall – New York City may cut 23,000 jobs

Mayor says New York City may need to reduce payroll by 23,000 and increase sales tax to close $4 billion budget gap.

NEW YORK (CNNMoney.com) — The Big Apple will have to tighten its belt as the city that leans heavily on Wall Street’s profits is expected to suffer a dramatic decrease in tax revenues in coming years.

Mayor Michael Bloomberg said Friday that New York City may have to cut tens of thousands of jobs and it may have to increase the sales tax to make up for the city’s $4 billion budget shortfall in the fiscal year that begins in July.

“We had prepared for a downturn, but I think it’s safe to say nobody prepared for the severity of the downturn that we have been experiencing,” said Bloomberg.

As many as 23,000 city employees might be cut from the city payroll as part of an effort to save roughly $1 billion in expenses, the city said.

The public school system would suffer. If new aid does not come from the state, 14,000 teachers could lose their jobs. Most of the remaining 9,000 positions would be lost through attrition and about 1,000 layoffs.

The tax hikes could raise an estimated $900 million, Bloomberg said, but that may be “nowhere near adequate,” depending on the aid the city gets from the state and federal governments. He said he is hoping to get some concessions from city labor unions and aid from the state and federal governments totaling $2 billion.

Read more$4B shortfall – New York City may cut 23,000 jobs

TREASURIES-Bonds set for worst month in 5 yrs as GDP falls

The bond bubble is about to burst (this year).

This is the ultimate bubble.

Are you ready for the “Greatest Depression”?


* Anxiety about ballooning supply cap bond’s gains

* Treasuries on track for worst month in nearly 5 years

* Long-dated debt set for weakest month in about 16 years

NEW YORK, Jan 30 (Reuters) – The U.S. Treasury bond market crashed back to earth in January after a high-flying 2008, as fears over the government’s mammoth borrowing needs overshadowed evidence of further economic contraction.

U.S. government securities, despite their price gains on Friday, were on track for their worst month since April 2004, dragged down by a dramatic sell-off in long-dated Treasuries.

“It’s been an ugly month,” said Ralph Manigat, senior bond strategist with 4Cast Ltd. in New York.

On a month-to-date basis, Barclays Capital’s Treasury total return index was down 2.80 percent through Thursday. In 2008, it rose 13.74 percent, the largest annual gain since 1995.

Read moreTREASURIES-Bonds set for worst month in 5 yrs as GDP falls

Global News (01/31/09)

Australian PM calls for new economic order (AFP):
SYDNEY (AFP) — Australia’s prime minister has called for a “new world order” of government intervention and regulation, blaming capitalist greed for the global economic crisis.

UN: Babies caught in Sri Lankan crossfire (CNN):
A “handful” of United Nations staff are working around the clock to save a growing number of children caught in heavy crossfire between government forces and Tamil rebels in Sri Lanka’s volatile northeast, a U.N. spokesman said Saturday.

Bush shoe sculpture ‘taken down’ (BBC News):
A sculpture of a shoe erected in Iraq to honour a journalist who threw his footwear at George W Bush has been dismantled, reports say.

DEA quits Bolivia on Morales’ order (Market Watch)

Canada’s Economy Shrinks the Most Since 2003 Blackout (Bloomberg)

Thousands protest across Russia (BBC News):
Thousands of people have held rallies across Russia protesting against what they describe as the government’s mismanagement of the economy. The biggest demonstration took place in the eastern city of Vladivostok, where protesters demanded the resignation of Prime Minister Vladimir Putin.

Buckling Europe fears protests may spark a new revolution (The Age)

Homelessness surges as funding falters (msnbc)

Gannett To Take Quarterly Charge Of Up To $5.2 Billion (CNNMoney):
CHICAGO (Dow Jones) — Gannett Co., the largest U.S. newspaper publisher, said Friday that it will take non-cash charges of as much as $5.2 billion against financial results for the fourth quarter, as a number of its assets have diminished in value because of the worldwide financial crisis.

It’s time to rattle and bang in protest at this outrage (Guardian):
Delving into the truth of corporate taxes has taken our Guardian team months. What they have found is truly shocking

S&P may cut Gannett into junk territory (Reuters)

Are we in a Depression? (321gold)
(A rhetorical question)

Banks to transfer $535 million to Madoff firm trustee (Reuters)

Steep Slide in US Economy as Unsold Goods Pile Up (New York Times)

Catholic US Lawmakers Call for Direct Repudiation (Washington Post)

US pours cold water over hopes of Iran deal (Times Online)

Groups review Gaza conflict for war crimes (Globe and Mail)

Deficits For The Shrinking World Economy (The International Forecaster)

Weather Channel Founder Blasts Gore Over Global Warming Campaign (FOX News)

Humans ‘will be implanted with microchips’ (Ninemsn)

Economist John Williams on Real Unemployment Rate

John Williams, Founder of Shadow Government Statistics, calculates that the jobless rate is a full l0 percent higher than the government is reporting. He also discusses the news Monday morning that American companies (including Sprint, Home Depot) are cutting about 43,000 jobs.


Source: YouTube

For more information: Shadow Government Statistics

Lenders abruptly cut lines of credit, fear excessive use amid hard times

Banks and other lenders nationwide, seeking to reduce their debt exposure, are shutting off and limiting consumer credit card lines, even for many customers who carry low balances and pay on time.

As much as $2 trillion in consumer credit – nearly half of what is available – could be rescinded, according to an estimate by a prominent banking analyst. Just two years ago, institutions were handing out liberal borrowing lines to almost anyone. But now, drowning in debt and soured investments, lenders are seeking to stop consumers from running up big balances in hard times, bills they might not be able to pay.

The credit squeeze doesn’t just limit spending potential; it can also damage cardholders’ credit ratings by making them appear to be riskier borrowers. And in many cases, the institutions pulling back on credit took government bailout funds that were supposed to encourage them to lend more freely.

Read moreLenders abruptly cut lines of credit, fear excessive use amid hard times

Porsche looks to cut costs amid sharp drop in sales

Porsche yesterday ann-ounced a cost-cutting programme and further production cuts after the German sports carmaker and owner of a majority stake in Volkswagen reported a fall in half-year operating profits and a sharp drop in sales.

Wendelin Wiedeking, Porsche’s chief executive, said the company had initiated a programme to cut costs by far more than €100m ($128m) and would idle its plants for another 19 days before this year’s summer break.

Porsche, like many other carmakers, has already halted production longer than usual over the Christmas break.

Related article:
Porsche Faces Frankfurt Investigation Over VW Trading (Bloomberg)

Mr Wiedeking’s comments came as Porsche’s sales dropped by 27 per cent in the first six months of its fiscal year, which ended today.

“It is fair to say that operating earnings in the first half of the year were down by the same extent as the company’s sales,” Mr Wiedeking said at the company’s annual shareholders’ meeting.

But overall earnings, boosted by VW option trades, would exceed the €1.66bn of the first six months of the previous fiscal year, Mr Wiedeking said.

Porsche has used a controversial options strategy to gradually take over VW, Europe’s largest carmaker with a revenue 15 times larger than Porsche’s.

Read morePorsche looks to cut costs amid sharp drop in sales