KeNo's Housing and Economic Portal: Friday March 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Are US Taxpayers Bailing Out Greece? - (Ron Paul at www.safehaven.com) Last week we were reminded that ours is not the only country suffering from severe economic turmoil. The Greek government is the latest to come close to default on their massive public debt. Greece has insufficient funds in their treasury to make even the minimum payments that are now coming due. Their debt level is about 120 percent of their gross domestic product and their public sector absorbs what amounts to 40 percent of GDP. Any talk of cutting costs and spending is met with violent protests from the many Greeks heavily dependent on government payments. Mounting fears of default have sent shockwaves through their creditors and all of the eurozone countries. But there have been statements made by the European Central Bank to calm fears and give assurances that Greece will get the aid it needs. Details of agreements are not forthcoming…. Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels. Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent. Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.

Illinois Pension Fund $61 Billion Underwater; State Borrows Money For 2010 Contribution; California $20 Billion in the Hole Again - (Mish at http://globaleconomicanalysis.blogspot.com) In November 2009, the state's Pension Modernization Task Force sent its recommendations to Gov. Quinn. The Task Force concluded that Illinois' unfunded pension liability exceeds $61 billion! And that number is growing exponentially. [Note: Projections have it at $89 billion by the end of the fiscal year - See below Mish] The report lays out the problem clearly: "Not wanting to implement dramatic cuts in spending on essential services, the legislature and various governors elected to instead divert revenue from making the required employer pension contribution to maintaining services like education, health care, public safety and caring for disadvantaged populations. Effectively, the state used the pension systems as a credit card to fund ongoing service operations." Illinois now has public debt of more than $130 BILLION. Unlike the federal government, our state cannot simply create new money to pay its bills. At some point -- and that point is very near -- investors will no longer be willing to lend money that cannot be repaid. Perversely, the problem is so huge that our politicians won't acknowledge this true "elephant in the room." So let me say it loud and clear: The Emperor Has No Clothes. Illinois is Broke. And there's no way public pensions will be paid -- unless huge changes are made. And that's The Savage Truth.

Greek Swaps Information Demanded This Week in EU Investigation - (www.bloomberg.com) Greece was ordered by the European Union to hand over information on its swaps transactions by the end of this week in an investigation that may extend to other EU countries. EU Economic and Monetary Affairs Commissioner Olli Rehn told Greece to submit the swaps data by Feb. 19. The probe comes as questions arise about how long European officials have known that Greece may have used derivatives to conceal the extent of its budget deficit, and whether other EU countries used similar techniques. “In case there is a reason to expect that this kind of technique has been used by other member states, not only Greece, then we shall request information” from those nations, Rehn said today after a meeting of EU finance ministers in Brussels. “We need further enquiries on this,” Luxembourg Treasury Minister Jean-Claude Juncker said. Greece turned to Goldman Sachs Group Inc. in 2002 to get $1 billion in funding through a swap, Christoforos Sardelis, head of Greece’s Public Debt Management Agency at the time, said in an interview last week. EU officials today fielded questions about how long they knew about the swaps and whether other countries used such instruments to mask the size of their debt.

Builders Nailed by Lumber Prices - (online.wsj.com) The long-ailing U.S. housing market is facing a new headwind: a jump in the cost of lumber. Lumber prices have climbed 32% on the futures market this year, a sudden and unexpected surge that could raise construction costs or force builders to swallow an added expense. "That's the last thing we need right now," Stephen Melman, director of economic services at the National Association of Home Builders, said of the recent price hike. Lumber's price rise contrasts with a decline in most other commodities, such as fossil fuels and industrial metals. Those are dragging due to fears of weaker demand amid a fragile recovery from the financial crisis. But lumber prices shot up because of a shortage of supply. When the housing market cratered, mills in the U.S. and Canada cut production; output plummeted about 45% between 2005 and 2009, according to Random Lengths, an industry data provider. Wholesalers shrank their own inventories and had little incentive to build them back up last year. Housing is the largest single source of demand for lumber, and new-home sales fell 7.6% in December from the prior month, to 342,000 units.

Canadian Mine Workers Stubborn to Point of Self-Destruction - (Mish at globaleconomicanalysis.blogspot.com) At issue are proposals by Vale Inco to reduce a bonus tied to the price of nickel and to exempt new employees from its defined-benefit pension plan, moving them instead to a defined-contribution plan. Workers complain that they shouldn't have to give concessions to a company whose parent, Brazil-based Vale S.A., earned US$5.35 billion in 2009. This frustration was exacerbated when the other major mining company with operations in the Sudbury area, Xstrata Nickel, reached a labour agreement with its workers recently without having to resort to a strike. But [Vale spokesman Steve Ball] said Vale's Sudbury operations - formerly owned by Inco before it was bought by Vale for $19 billion in 2006 - need to be profitable without the help of its parent company, otherwise they could be shut down. The cost of keeping up with increasingly stringent environmental regulations and maintaining aging infrastructure means the company needs all the help it can get to stay profitable, he added. More than 3,000 employees at Vale's mill, smelter, refinery and six nickel mines in the Sudbury area have been on strike for seven months, along with their counterparts at Vale's Port Colborne, Ont., refinery. Workers at the company's nickel-cobalt-copper mine in Voisey's Bay, N.L. are also on strike, although the issues in that dispute are slightly different. For example, workers in Voisey's Bay are already on a defined contribution pension plan. Workers in Voisey's Bay briefly resumed bargaining last month, but those talks broke down almost immediately. No talks have been scheduled in Sudbury or Port Colborne since the strike began.

OTHER STORIES:

The Housing Double Dip Began In December - (www.businessinsider.com)

Report says Silicon Valley economy sputtering - (www.news.yahoo.com)

Rport Warns Silicon Valley Could Lose Its Edge - (www.nytimes.com)

Silicon Valley's Wage Crash by the Numbers - (www.eweek.com)

Commercial loan losses could threaten system - (www.marketwatch.com)

International Demand for U.S. Financial Assets Slowed - (www.bloomberg.com)

Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis - (www.nytimes.com)

Treasuries suffer as sentiment shifts - (www.ft.com)

U.S. looks to reluctant foreign investors to help fund the housing market - (www.washingtonpost.com)

U.S. credit card delinquency rates level off - (www.reuters.com)

U.K. Inflation Rate Accelerates to 14-Month High - (www.bloomberg.com)