Tuesday, October 16, 2012

Wednesday October 17 Housing and Economic stories



TOP STORIES:

US Postal Service to default on second $5B payment - (finance.yahoo.com) The U.S. Postal Service, on the brink of default on a second multibillion-dollar payment it can't afford to pay, is sounding a new cautionary note that having squeezed out all the cost savings within its power, the mail agency's viability now lies almost entirely with Congress. In an interview, Postmaster General Patrick Donahoe said the mail agency will be forced to miss the $5.6 billion payment due to the Treasury on Sunday, its second default in as many months. Congress has left Washington until after the November elections, without approving a postal fix. For more than a year, the Postal Service has been seeking legislation that would allow it to eliminate Saturday mail delivery and reduce its $5 billion annual payment for future retiree health benefits.

Spain's rising debt costs eat up austerity gains - (www.telegraph.co.uk)  Spain has pushed through €40bn of fresh austerity measures in the teeth of recession, despite violent protests across the country and separatist crises in Catalonia and the Basque region that threaten to break the country apart. Premier Mariano Rajoy has frozen public pay in 2013 for the third year in a row. The agriculture ministry and culture expenses will be cut by 30pc and the defence bureacracy by 15pc. It comes on top of a €62bn squeeze already in the pipeline. He brushed aside warnings that fiscal overkill – at a time when unemployment is already 25pc – could push the country into turmoil, saying he would listen only to the “silent majority” of responsible citizens. Bowing to pressure from Brussels, the government has agreed to an independent budget office and a clampdown on early retirement. Pensions will rise by 1pc, paid for by raiding the social security reserve fund. The closed professional guilds and old-boy networks dating back to the Franco era will, in theory, be shaken up. There will be a lottery tax.

Fed discloses banks’ emergency borrowing – (www.ft.com) The US Federal Reserve has started to disclose emergency borrowing by individual banks, highlighting the risk that they will stop using its facilities because of stigma. Banks including the Royal Bank of CanadaUBS and Mitsubishi UFJ all borrowed small amounts from the Fed at a penalty rate during the third quarter of 2010. Markets will study whether banks that used Fed loans suffer damage to their reputations. If they do, then bankers may be reluctant to borrow from the Fed for any reason in the future. The Fed, like other central banks, provides back up liquidity for banks through its discount window. If a bank is short of cash overnight, it can borrow from the Fed at a penalty interest rate, provided that it has good collateral.

Italian unions strike against PM Monti's spending cuts - (www.reuters.com)  Up to 30,000 members of two of Italy's biggest unions marched through Rome on Friday to protest against Prime Minister Mario Monti's cuts in public spending, forcing the closure of the Colosseum. Opposition to austerity policies aimed at steering the country out of its economic crisis is growing as the year-long recession shows no signs of letting up and unemployment continues to rise.

The US Fed is essentially admitting failure - (www.goldseek.com)  The recent decision by the US Federal Reserve to contaminate the financial body until it responds favorably was the last straw in my book. Witness a declaration of permanent QE and hyper monetary inflation of the most virulent strain, unsterilized. The USFed is essentially admitting failure. The signal serves as the loudest death knell for the USDollar among many in a sequence. On a similar parallel note, lighter and more humorous, one might be reminded of the pirate swash buckling style of yelling at the swabbies that the beatings will continue until morale improves. The QE bond monetization of USGovt debt has turned viral and entrenched. It is sold as stimulus, when in fact it acts like a giant wet blanket on the USEconomy. It is intended as stimulus to businesses, but the effect is felt on the financial speculation and on Asian direct business investment. 




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