The great interest rate rip off part 1

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The Credit Crisis Is Not Over After 23 Months - The International Forecaster

 

Rally of 1931 to haunt the markets this year, SEC hasnt really stopped anything, Fed must find a way to hide toxic assets, bear market not reversible, Currencies deprecate against gold, funding new health insurance initiatives not easy in times of debts, Monetary policy to become inflationary

The next major move in the stock market will be down. We are seeing the last vestiges of a rally similar to what we saw in 1931. The rally we expected at 6600 up to 8500 will end as soon as all the financial institutions that need to sell what stock is necessary to bolster their balance sheets. Our guess is the rally has been aided in a big way by short covering and the participation of the US government. Those who believe the SEC has stopped naked short selling are sadly mistaken. Markets weaken during the summer as volume dries up during the vacation season. In addition, second quarter earnings will be very disappointing, especially in the financial segment. Unemployment continues to worsen and capacity utilization is at its lowest level in years. Banks continue to cut credit lines and not lend nearly as much as they did before. Citigroup’s earnings should turn down again. They won’t have another $2.7 billion gain or another $400 million mark-to-market fictitious gain. Absent those gains they would have lost $2.8 billion.

 

The credit crisis certainly isn’t over after 23 months. The credit markets are still very tight and the residential and commercial real estate markets are still in a state of collapse. In the midst of this ongoing fiasco the Fed is monetizing $2.2 trillion in treasuries, Agencies and CDOs, collateralized debt obligation, otherwise known as toxic junk. Our fiscal deficit for this year ended 9/30/09 will be between $2 and $2.5 trillion, followed by more than $2 trillion in 2010.

 

Times are tough, everywhere and export nations are determined to keep their products cheaply devaluing their currencies.

 

When all is said and done the Fed will have to remove hundreds of billions in toxic assets from lender balance sheets, get consumers to spend and allow banks to lend again. Ben Bernanke at the Fed would really like to see a lower dollar, to get consumers to spend. But if that happens interest rates will move higher hurting real estate sales. As Ben dreams, unemployment increases adding more downward pressure on home prices, causing lower prices and reducing equity. Congress is pushing to have returned TARP money back to the Treasury and the PPIP program looks like a nonevent, because it could cause insolvencies. Public funds would be used to protect bondholders of mismanaged companies. Ben and Tiny Tim want to reopen securitization markets that caused the problem in the first place. They have to be insane. They want to bring back leverage that caused this monstrous problem we have.

 

The TALF, Term Asset-backed Securities Loan Facility, makes non-recourse loans, willing to buy AAA bonds backed by consumer and small-business loans, in a market that is frozen. Then for private investors there is a guarantee because the loan recipients cannot pay the loans back. This would cost taxpayers hundreds of billions more dollars.

 

The public is de-leveraging, which means less consumption, less profits and more savings. The bear market is far from reversible. The rally is over. Dow 6600 will be retested. The basis and support for growth no longer exists. Credit markets are still semi-frozen and the financial system is no better off now than it was 23 months ago.

 

The big foreign lenders have brought a new global dynamic into the game. Rising yields are a signal that the unusual dollar rally that should never have been, is over. The safety of the dollar is no longer sacrosanct. In fact, it is being in some quarters perceived that the dollar is no longer safe and it has to vie with gold as the safe haven go to asset. Fiscal deficits are projected this year to be $2 to $2.5 trillion and well over $1 trillion annually for years to come.

 

Commodity prices have surged over the past several months as the dollar has weakened, which reflects anticipated future inflation as well as rotation. We have seen this reflected in precious metal prices as well. The leeway the Fed experienced some months ago via deleveraging has past making it much more difficult to employ quantitative easing, monetization. The job of pegging long-term as well as short-term interest rates will be difficult and very injurious to the value of the dollar, as more and more money and credit are made up out of thin air. Trillions of dollars of MBS, ABS and CDO being purchased by the Fed incurring long-term losses can’t be tolerated indefinitely.

 

Sadly as the Fed and the Treasury go so does most of the nations of the world. In that case most all currencies depreciate against gold. Yes, the Fed can drive rates down, but for how long? Especially as the economy fails to perform and taxes rise as do borrowing costs. Import costs are already rising as well. Foreign lenders, with each passing day, become more skeptical of monetization, the damage it will do to the dollar and the Fed’s ultimate ability to retire dollars from the financial system. Dollar selling will feed on itself under those circumstances pushing the dollar lower versus other currencies and gold. It is now only a question of when will the system break? We do not know that, but we do know it will break and the only safe haven to preserve wealth is in gold and silver.

 

Higher interest rates have to have caused great consternation in the banking community concerning their IRS and CDS swaps. This is an unregulated market so no one except the players know what is going on inside. For a number of years these contracts have caused interest rates to be abnormally low. If these swaps were to blow up interest rates could and probably would move substantially higher.

 

The big loser in all of this will be the dollar as more and more dollar owners become fearful and sell dollars. If you look at a USDX chart you will see what we mean. A total breakdown as the dollar struggles to begin momentum and break out over 81 again. It is not going to happen. The question is how long will it take to get to 71.18? We can list all the reasons for pressure on the dollar, but you already know them.

 

The Fed is monetizing about $2.3 trillion in Treasuries, Agencies and CDOs. We said week’s ago that these monetizations would be followed by an additional $2 trillion if not by the end of this year, by March 2010. The Fed has no other choice. This is going to go on indefinitely until the dollar reaches 40 on the USDX and at that point no one will want to buy dollar denominated securities or to even borrow dollars. That is when we’ll have our next Bretton Woods type conference where all currencies will devalue and default and gold and silver will reach great heights. We saw all this coming when we warned you earlier in the year that you had until June to refinance debt. We hope you did so. We are now entering a new stage in real estate. Price pressure is going to press a further downward bias that will last a minimum of 3-1/2 years. How long we will be on the bottom no one knows.

 

Continues at the link.

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Article - WSJ.com

 

Standard & Poor's Ratings Service lowered its credit ratings on Renault SA by two notches into junk territory on expectations weak European auto demand this year will continue next year.

The two-notch downgrade to BB - two steps below investment grade, comes three months after S&P put the ratings at the brink of junk. The ratings outlook was changed to stable from negative Friday, reflecting S&P's view the French auto maker should be able to strengthen its credit profile after next year.

Renault has been cutting costs and aiming to strengthen its alliance with Nissan Motor Co. (NSANY) to weather the global downturn.

However, S&P said further downgrades or a change in outlook would be possible if Renault burns through a "significant amount" of cash this year or its debt grows. S&P said it views an upgrade or positive outlook revision as highly unlikely in the current environment.

S&P credit analyst Barbara Castellano said the downgrade reflects the rating firm's expectations for very low demand next year and concerns about government incentive programs this year to support the sector.

S&P said in April that while European government programs to revive demand in the ailing auto industry could provide some companies with short-term liquidity, that they could impede the industry's long-term growth. At the time the credit rating firm said the government funds failed to address the industry's structural problems such as overcapacity and a fixed-cost structure.

S&P said Friday Renault had been hurt by a "large increase in debt in 2008," leaving its credit quality weak, and that it expects its credit profile will worsen amid diminished demand forecasts for next year.

The French government's 15% ownership in the company, while contributing to the stable outlook, doesn't provide "any notches of enhancement" to Renault's ratings, S&P said.

 

Not looking good for the car industry.

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Billionaire Stanford faces 375-year sentence after pyramid [problem] arrest - Times Online

 

Allen Stanford, the flamboyant financier and cricket impresario, faced a judge in America last night accused of running a $7 billion (£4.2 billion) pyramid scheme.

The moustachioed Texan, who landed a helicopter at Lord’s and was hailed as a potential saviour of English cricket, could face up to a 375-year jail sentence if convicted of fraud, money laundering and obstruction of justice.

 

At the hearing in Richmond, Virginia, Judge Hannah Lauck ordered Mr Stanford to be kept in custody but moved immediately to Houston, Texas, for a detention hearing, where bail terms are to be discussed.

 

He was detained in Richmond on Thursday night and appeared in court stone-faced and hobbled by leg-irons. He briefly grasped the hand of Andrea Stoelker, his fiancé, who sat behind him. As the case was presented, he listened intently, answering only three questions with a brief “Yes Ma’am”.

 

The Houston hearing is expected to take place early next week.

 

Also indicted yesterday were five Stanford Financial Group executives and an allegedly corrupt bank regulator on the Caribbean island of Antigua, which Mr Stanford turned into a virtual fiefdom.

 

Prosecutors said that Mr Stanford and his associates tricked between 5,000 and 6,000 investors into buying $7 billion of supposedly safe Certificates of Deposit from the Antigua-based Stanford International Bank, with returns too good to be true.

 

Mr Stanford and his alleged coconspirators allegedly misappropriated most of that money, including $1.6 billion in personal loans to Mr Stanford, prosecutors said.

 

So far investigators have frozen about $300 million in bank accounts in Britain, Switzerland and Canada, but have not been able to trace the other missing funds.

 

The criminal indictment said that Mr Stanford made “regular secret corrupt payments of thousands of dollars in cash” to Leroy King, the former head of Antigua’s Financial Services Regulatory Commission, to ensure that he did not audit the bank’s finances, and filed false reports to US authorities. The pay-offs totalled “hundreds of thousands of dollars”.

 

“Economic crimes such as those alleged here today are unfortunately all too commonplace,” said Kevin Perkins, assistant director of the FBI. “These crimes strike at the heart of our economy and our quality of life.”

 

Mr Stanford, 59, turned himself in to FBI agents after a grand jury in Houston handed down the 57-page indictment four months after the Securities and Exchange Commission (SEC) accused him of running a “massive Ponzi scheme”. He was taken into custody outside the home of Miss Stoelker, a former cocktail waitress. Dick DeGuerin, Mr Stanford’s lawyer, said that he “surrendered to FBI agents who were hiding in black SUVs outside the residence”. He added in a written statement that his client was “confident that a fair jury will find him not guilty”.

 

The case is the first major financial prosecution brought by the Obama Administration, which has pledged to crack down on financial fraud.

 

Mr Stanford was ranked by Forbes magazine last year as the 605th richest person in the world with an estimated fortune of more than $2 billion.

 

The fifth-generation Texan from the small town of Mexia affects aristocratic airs, taking advantage of a 2006 knighthood by the Caribbean island of Antigua to call himself Sir.

 

Though raised on baseball, he pioneered Twenty20 cricket, helped to fund the Antigua Sail Week regatta, struck endorsement deals with the Fijian golfer Vijay Singh and the England footballer Michael Owen, and sponsored a Sandhurst Cup polo tournament attended by the Prince of Wales. He claimed to be related to the founder of Stanford University until it filed a trademark infringement suit.

 

Mr Stanford came to dominate Antigua under the four-decade rule of Vere Bird, the island’s first Prime Minister, and his son, Lester Bird. The SEC said that he used the island as his “personal playground”.

 

The now-bankrupt Stanford International Bank has its headquarters in a Neo-Classical office park at the island’s airport, where Mr Stanford also owned the country’s major newspaper, the Antigua Sun, two restaurants, a spa and a cricket ground. In recent years he has lived in St Croix in the US Virgin Islands but also owns a 57-acre moated mansion in Florida.

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Hi

Just been looking through your messages with interest but I was wondering if anywhere on your items you have anything on the securitisation or Connells the estate agents and how the sub prime lenders are corrupting British house sales...??? not sure if you can help but thought you don't get nothing if you don't ask!!!

 

Cheers

 

I think there are posts about securitisation but I have no idea where they are. However without securitisation prices will fall as the banks simply don't have the money to lend at 2007 levels with out it.

 

Connells doesn't ring any bells sorry.

 

If you have bought a house in the past decade you have over paid for it, more so the nearer to the peak of 2007/8 you bought.

 

House prices have been higher due to many people lying to get mortgages, therefore prices have been artificially inflated to unsustainable levels. The whole house of cards it appears is about to collapse unless they can find another bubble.

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Long slow march to a stable population - 1996

 

THE world's population will probably never double again, according to the latest projections of the International Institute for Applied Systems Analysis in Vienna.

 

Link

 

Where have all the people gone?: The UN's demographic projections are predictably wrong - 1996

 

The truth is that many UN projections for cities are so much statistical garbage. Occasionally, demographers make a nonsense of their trends data by changing the boundaries round the areas they describe as "urban agglomerations", which may be very different from administrative boundaries. That is why Tokyo has apparently added 9 million people in the past decade, and why London has lost 2.5 million.

 

But usually the trouble seems to be demographers blindly extending existing population trends (often rather inaccurate guesstimates) into an improbable future. Most absurdly, back in the mid-1980s, the UN predicted that Ado Ekiti, which is a small town in the Nigerian interior, would be among the world's 25 biggest megacities by 2025, with more than 15 million people. No sign yet.

 

Link

 

The rise of the wrinklies . . . 1998

 

A growing number of demographers now believe that the world is settling onto the path that follows recent UN "low range" estimates. These make startling reading. According to the latest version, published earlier this year, the world population will peak in about 2040 on 7.7 billion and then go into long-term decline. Not just a small decline, either. By 2100 we could be back under today's population, and by 2150 the projection is for a world population of 3.6 billion, less than two-thirds of today's.

 

It is worth noting that this doesn't assume any global catastrophe, just couples carrying on doing what they have always done, making rational decisions for themselves about how many children they want. As the Australian demographer John Caldwell told the UN population conference in Cairo in 1994: "The experience of the past 20 years makes it much more likely that we will end up with a declining population"

 

Link

 

Counting Down - 1999

 

But delve behind the words of the doom-mongers, say some demographers, and you'll find evidence that in the not-too-distant future, the world population may actually start to shrink.

 

According to this very different picture, the world's population will peak some time in the 21st century, then start falling.

 

"Over the past five years, fertility has declined in all major parts of the world," says one of the heretics, Wolfgang Lutz, head of population research at the International Institute for Applied Systems Analysis in Laxenburg, Austria. "All changes point to lower population forecasts." And on his most recent forecasts, the upward path of population growth, which has been accelerating ever since the Black Death killed as much as a third of Europe's population in the 14th century, will stall and go into reverse in about 70 years.

 

Demographers had predicted a downturn. But it is happening much faster and more widely than they anticipated. Twice in the past three years, the UN's statisticians have lowered their projections of future populations. On the second occasion, late last year, they postponed by four months the "six-billion day" and reduced their forecast of the world population in 2050 by half a billion, from 9.4 billion to 8.9 billion.

 

The main reason for these changes is the dramatic fall in fertility rates, particularly in the developing world. Across Africa and Asia, hundreds of millions of people are confounding predictions by reducing family sizes. It used to be said that, without the Draconian imposition of birth control, only countries with rising prosperity and increasingly literate and urban populations could go through what demographers call the demographic transition - the switch to smaller families and stable populations.

 

But in the 1990s, a number of countries have disproved this. Bangladesh, once in the world's demographic doghouse, has cut its fertility rate from 6.2 children per woman to 3.4 in a decade, thanks to contraception, and despite extreme poverty and illiteracy. Fertility rates in many African countries, though still very high, are falling fast as contraceptive use grows there as well.

 

According to the UN's population division in New York, fertility rates are now below the long-term replacement level of 2.1 in 61 countries, including most of Europe, the Caribbean and eastern Asia, including China. American women have 2 children on average, British women 1.7 and in Catholic countries such as Italy and Spain, the figure is as low as 1.2 children.

 

Some senior UN demographers think this pattern is unlikely to continue. They say fertility rates will eventually return to higher levels. However, they fail to provide a detailed explanation of why they believe this, although some note that many modern women may simply be postponing having children rather than not having any at all. Based on these assumptions, the UN predicts that some time towards the end of the 21st century, the world's population will stabilise at between 10 or 11 billion.

 

But Warren Robinson, at the Pennsylvania State University, says: "It requires a leap of faith to assume that replacement-level fertility will be the average procreational goal of all couples in the world for generations to come."

 

Nafis Sadik, executive director of the UN Population Fund, admitted last week: "No country in history has ever succeeded in raising birth rates over a long period once they have started to decline." Lutz predicts that around 2070, the world's overall population will begin to fall. Many UN demographers quietly agree. And less trumpeted is the UN's low projection, the latest of which makes sobering reading. It predicts that the world's population will peak in 2040 at around 7.7 billion people and then go into a long-term decline. By 2100, it could be back below today's figure of six billion and by 2150 the projection is for just 3.6 billion people.

 

Link

 

Global population to peak in 2070 - 2001

 

The world's population may reach a peak of nine billion as early as 2070 and then start to shrink, according to a new analysis by Austrian researchers.

 

Wolfgang Lutz, of the International Institute for Applied Systems Analysis, and his team created thousands of simulations of the future world population and evaluated them, assigning probabilities to each range of possibilities.

 

They think there is an 85 per cent chance that the global population will stop growing before the end of the century - most probably by 2070.

 

Lutz thinks declining fertility rates around the world are the main driving force behind the slowing in population growth.

 

"We hope these findings will help people get away from the apocalyptic view that the population will explode in the future," he told New Scientist. "Humankind can control the future by controlling fertility."

 

Link

 

Global population forecast falls - 2003

 

In new forecasts released on Wednesday evening, UN demographers cut 400 million from their best estimate of the world's population in 2050. Joseph Chamie, the head of the UN population division in New York, said he now expected 8.9 billion people on Earth in 2050, rather than the 9.3 billion that he forecast in 2002. The current figure is 6.3 billion.

 

The new population projections stretch to the year 2050, but not beyond. However, he warned that "fertility rates will be below replacement levels in three-quarters of the world by 2050". The great majority of women worldwide will be having fewer than two children.

 

In fact, the new projections assume that most countries will eventually approach a fertility rate of 1.85 children per woman. This represents a clear break with past thinking - demographers had always assumed countries would settle down to replacement fertility levels.

 

Chamie agrees that it has "momentous" implications for humanity.

 

Link

 

The Population Paradox 2008

 

 

The righteous intensity surrounding this debate has obscured the fact that the story has changed. The "population bomb" has already gone off.

 

Traditionally, human societies needed high birth rates to balance high death rates. As they start defeating famine and disease, death rates drop. Then population soars until birth rates eventually fall too. Countries passing through this "demographic transition" have caused the global population to more than double since 1950.

 

The first societies to industrialise - Europe and its colonies - were first to make the switch. Now everyone is doing it, and for the same reason: if you're fairly sure they'll survive, two well-fed, well-educated kids make more economic sense than six starving, unemployable ones.

 

So birth rates have fallen dramatically - and voluntarily. Coercive birth control, including "paying people not to have babies", was discredited and abandoned decades ago (though it may still sometimes happen in China). Nearly two-thirds of couples in poor countries now use birth control, and not because some patriarchal westerner told them to. In the 1970s, the government of Bangladesh offered people in the Matlab region low-cost contraceptive supplies and advice. Birth rates promptly fell well below neighbouring regions. So Bangladesh extended the service nationally and its birth rate plummeted from six children per woman to three. Given the choice, people want fewer children.

 

So do governments, whose own life expectancy falls when people multiply faster than they can be provided with food, water, medicine, schools and jobs. In 1989 Iran introduced free contraception nationwide. It experienced the fastest fall in birth rates ever seen: from five births per woman to two by 2000.

 

But here's the rub. For countries making the transition, high birth rates in the recent past mean there are far more young people than old. So if these young people have only enough babies to replace themselves, there are still more births than deaths. Even when birth rates fall, this lag means populations keep growing for decades until birth and death rates even out.

 

On current trends of birth and death rates, the UN predicts that world population will hit 9.2 billion by 2050, before it stops climbing. Because of the time lag, even if everyone moved to birth rates of around two children per woman tomorrow, we would still hit 8.5 billion. This means the population explosion will continue.

 

We can't solve the problem by forcing all those over-fertile poor people to stop reproducing, because they've mostly already done it. However, we can at least try to make sure that population peaks closer to the lower figure. There is most work to do in Africa, which has high birth rates that even AIDS deaths don't dent. Women still want large families, for the old reasons: high infant mortality and desire for sons, field hands and support. Educating girls changes this by delaying marriage and raising both child survival and women's power. Providing this basic human right will bring Africa through the transition, like everyone else.

 

Meanwhile many who want birth control can't get it. In most of Asia and Latin America, women average 2.5 babies each. Still, people there say they want fewer. There is a huge unmet demand for birth control; 1 in 5 births - and 36 million abortions - in developing countries would not happen if people had more choice.

 

The UN Population Fund published a report last week pointing out that population efforts must be "culturally sensitive". This is crucial, as the most effective way to bring down birth rates is to empower people to control their own reproduction, free of coercion from within their society or outside.

Link

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'Work until 77 for comfortable retirement' | This is Money

 

Many Britons hoping for a comfortable income at retirement could find themselves working until they are almost 80 years of age, according to new research.

 

Fund management group, Fidelity International, says workers relying on company pensions, linked to stock market growth, also known as defined contribution plans, need to significantly top up their pension, with an additional 8% of their salary each year, if they wish to retire at the standard age of 65.

 

Industry experts generally acknowledge that a comfortable income in retirement is two thirds that of the final salary in employment.

 

But while many retirees do get by on much less, they can be significantly worse placed to cope with rising costs, such as fuel bills or long term care.

 

The UK mean annual salary is £26,020 and employees, who want to retire on two thirds of their final salary but rely solely on their current employer contributions, at an average of £140 will have to work until they are aged 77, assuming average stock market performance and 40 years of contributions.

 

Anyone who wants to retire on two thirds' final salary at age 65 will have to put in an extra 8%.

 

For average salary earners, this means topping up with £173.47 of their own cash per month, which would provide a pension pot of £956,000. If they didn't after 40 years work they would be left with just £427,000.

 

If employees cannot afford 8% of salary they might be able to nearly double their final pension pot if they could stretch to finding an extra 6% (£140 plus £130.10), which could turn £427,000 into £824,000.

 

And if workers could put in an additional 9% of their annual salary - £140 plus £195.15, they may even be able to build a million pound pot.

 

As I said at the start of the year the pension crisis would be revealed.

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Mish's Global Economic Trend Analysis

 

Three more banks failed today bringing the total to forty on the year. Please consider Banks in Georgia, North Carolina, Kansas Closed by Regulators.

 

Banks in Georgia, North Carolina and Kansas with total assets of $1.5 billion were closed today, bringing this year’s tally of failures to 40 amid the highest unemployment in a quarter century.

 

State regulators shut Southern Community bank of Fayetteville, Georgia and Cooperative Bank in Wilmington, North Carolina. The Office of the Comptroller of the Currency closed First National Bank of Anthony, Kansas. The Federal Deposit Insurance Corp. was named as receiver for all three, according to statements from the FDIC.

 

Southern Community’s $307 million in deposits were bought by United Community Bank of Blairsville, Georgia, and most of Cooperative’s $774 million in deposits went to First Bank in Troy, North Carolina, the FDIC said. Bank of Kansas in South Hutchinson acquired First Bank’s $142.5 million in deposits. The acquiring banks are taking over a combined $1.47 billion in assets, mostly loans, from the failed institutions, and signed agreements with the FDIC to share more than 80 percent of the losses with the government.

 

As many as 1,000 U.S. banks could fail in the next three to five years on losses related to commercial real estate loans, RBC Capital Markets analysts said in February. The FDIC estimates U.S. bank failures through 2013 may cost $70 billion.

 

The FDIC classified 305 banks as “problem” institutions in the first quarter, a 21 percent jump from the fourth quarter and the highest since 1993, the agency said May 27. The agency doesn’t identify problem lenders.

 

The FDIC insures deposits at 8,246 institutions with $13.5 trillion in assets.

Forty bank failures is not the proper way to look at things. The reality is they all (or nearly all) failed. However only forty (so far) have been closed.

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Mish's Global Economic Trend Analysis: Flow of Funds Report Offers Hard Evidence of Deflation

 

I am not sure if this was his intent, but recent analysis of the Flow of Funds Report by Martin Weiss eloquently makes the case for deflation.

 

In New, Hard Evidence of Continuing Debt Collapse! Martin Weiss Writes ...

 

While most pundits are still grasping at anecdotal “green shoots” to celebrate the beginning of a “recovery,” the hard data just released by the Federal Reserve reveals a continuing collapse of unprecedented dimensions.

 

It’s all in the Fed’s Flow of Funds Report for the first quarter of 2009, which I’ve posted on our website with the key numbers in a red box for all those who would like to see the evidence.

 

...........

 

To say this situation is unprecedented does not do justice to the word.

 

Hyperinflation, or even strong inflation predictions in the near term look rather silly in the face of this data unless one is only looking at the printing and not the destruction in credit.

 

OK treasury yields have been soaring, but that is belief in green shoots, a rebound from ridiculous levels, and massive supply of treasuries. And in case you did not notice, government bond yields have been soaring the world over, not just in the US.

 

Bear in mind my definition of deflation includes marked to market values of bank credit. It's very difficult to get a handle on Marked to Market anything as the Fed is still fighting rules that would mandate it. However, we do know there is still a mountain of things hidden off balance sheets in SIVs (Citigroup alone has $800 billion and what that is really worth is anyone's guess). Furthermore massive credit card losses are on the way as unemployment rises, and of course we cannot forget the upcoming crisis in Alt-A and Pay Option ARM mortgages.

 

Think consumers are about to go on a spending spree after a massive $13.87 trillion collapse in net worth? Think banks are going to start lending with this employment picture and household debt? I don't and boomer demographics makes the situation even worse. Don't forget the bleak employment picture. There is no source of jobs.

 

Those who get hyperinflation out of this picture must be reading the playbook in Bizarro World because it sure is not the playbook here.

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Obama, Harper force bankruptcy on auto parts industry

 

President Barack Obama’s Auto Task Force this week rejected a request from two national organizations of auto-parts suppliers for up to $10 billion in loan guarantees. Task Force member Ron Bloom told industry representatives that Obama favors bankruptices and the “contraction” of the industry— that is, tens of thousands of layoffs. “Consolidation for the industry needs to take place,” Bloom is reported to have said.

The Canadian government has also rejected assistance to the industry. Currently there are about 400,000 auto parts jobs in the US, and another 100,000 in Canada. At least a third of these workers will confront layoffs within the next year or two.

“The carnage will be occurring in the next 60 to 120 days,” said Craig Wiggins of the auto consultation firm Tooling & Capital Solutions of Tecumseh, Ontario. “It’s still going to be an abolute bloodbath.” Wiggins was involved with the loan negotiations taking place in both Washington and Ottawa.

Neil De Koker, president of the Original Equipment Suppliers Association, said the US Treasury’s decision would likely result in “disorderly chaos in the industry.” The Motor & Equipment Manufacturers Association (MEMA) joined in the appeal for the loans. The Treasury had earlier extended $5 billion in loans and guarantees to firms in the industry that supplied General Motors and Chrysler Group LLC.

The auto parts industry has been hammered by the national collapse in auto sales, which have declined by more than one third from last year, and the bankruptcies of GM and Chrysler, which have disrupted long-established supply chains.

Twenty-one auto parts manufacturers have filed for bankruptcy so far this year. Among these are major concerns such as Visteon Corp., Metaldyne Corp., Noble International Ltd. and Cooper-Standard Automotive Inc., all headquartered in Michigan. An industry executive anticipates that these will now be a “rush of failures.” The manufacturers’ associations pleaded with the Obama administration, warning that without further assistance 49 major suppliers would collaspe in 2009, followed by 60 more in 2010.

“There are a number of parts manufacturers that are virtually on the edge of being pushed into a Chapter 11 situation,” MEMA President Bob McKenna warned. “And, on the other hand, when business picks up, you’ve got to have money to invest in building those products to satisfy the market. But in an environment where nobody is lending money, particularly to the automotive industry, it’s pretty tough.”

Particularly hard-hit by the destruction of much of the auto parts industry will be the states of Michigan, Ohio, Indiana and Kentucky. The collapse of the parts suppliers will accelerate next week, ironically, when Chrysler resumes production. As the Windsor (Ontario) Star notes, “in order to drive down parts prices, the Detroit Three have been feeding [suppliers] just enough business for the past three years to keep them staggering along in a near-death state. The zombies will start to die in larger numbers next week when Chrysler reopens its plants for production and elects not to keep some of them alive. More will disappear when GM does the same in a few weeks.”

 

More at the link.

 

They can't prop everything up, more and more cracks are appearing in the damn.

 

How many of these people will have loans? How many people are in negative equity?

 

The banks are going to be stress tested like never before, the sub prime fiasco was merely the light starter.

 

Terminal velocity seems to be approaching with demand destruction, the next 12 months could get really scary, but still at least we've got green shoots and house prices stabilising. It could be worse.

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Mish's Global Economic Trend Analysis: States in Deep Trouble Over Plunging Income Tax Revenues

 

The Nelson A. Rockefeller Institute of Government has issued a State Revenue Flash Report discussing an across the board enormous drop in personal income tax revenues.

Total personal income tax collections in January-April 2009 were 26 percent, or about $28.8 billion below the level of a year ago in states for which we have data. In April 2009 alone (April being the month when many states receive the bulk of their balance due or final payments), personal income tax receipts fell by 36.5 percent, or $18.2 billion.

 

Personal income tax receipts in the first four months of calendar year 2009 were greater than in 2008 in only three states — Alabama, North Dakota, and Utah.

 

In FY 2008, personal income tax revenue made up over 50 percent of total tax collections in six states — Colorado, Connecticut, Massachusetts, New York, Oregon, and Virginia. Personal income tax revenue declined dramatically in all six of these states for the months of January-April of 2009 compared to the same period of 2008. Among all 37 early-reporting states, the largest decline was in Arizona, where collections declined by nearly 55 percent.

 

In the month of April alone, 37 early reporting states collected about $18.2 billion less in personal income tax revenues compared to the same month of 2008.

 

This $18.2 billion is close to the $20 billion shortfall that states experienced in overall tax revenue collections in the first quarter of calendar year 2009. This is particularly bad news for the states that rely most heavily on personal income tax.

 

Given the ominous picture of personal income tax collections, deeper overall revenue shortfalls and further deterioration in states’ fiscal conditions are likely on the way for most states for the April-June quarter of calendar year 2009.

 

What a Bad April Does to State Budget Processes

 

An April income tax shortfall comes at the worst time of year for two reasons. First, by the time it is recognized in late April or mid-May, it is just 6-10 weeks before the end of the fiscal year for 46 states. For states without large cash balances, this can create a cash flow crunch or even a cash flow crisis. There is not enough time to enact and implement new legislation cutting spending, laying off workers, raising taxes, or otherwise obtaining resources sufficient to offset the lost revenue before the June 30 end of the fiscal year. As a result, a state without sufficient cash on hand to pay bills must resort to stopgap measures to “roll” the problem into the future.

 

Second, the increased budget problems caused by an April income tax shortfall come late in the fiscal year and late in the budget process — often as states are supposed to wrap up their budget negotiations.

 

The new bad news for elected officials can unsettle carefully balanced gap-closing plans already tentatively negotiated. Since the budget actions included in these tentative plans presumably were the most attractive options available to them, almost by definition actions to close new budget gaps will be much more difficult.

 

It appears that a massive contraction of govt spending is inevitable.

[interestrateripoff]

UPDATE 3-Moody's stuns California with debt warning | Markets | US Markets | Reuters

 

California, struggling to close a $24.3 billion budget gap, faces the prospect of a "multi-notch" downgrade in its credit rating if the state's legislature fails to act quickly to produce a budget, Moody's Investors Service warned on Friday.

 

The ratings agency's decision to place California's general obligation debt on alert for such a dramatic possible downgrade stunned state officials.

 

"I cannot remember reading a ratings note that raised the specter of a multi-notch downgrade," said H.D. Palmer, a spokesman for Governor Arnold Schwarzenegger. "It's another clear warning from the financial markets that there will be substantial and costly consequences if the legislature does not send the governor a budget that he can sign."

 

Moody's in a statement cited California's expected massive shortfall for fiscal 2010 of more than 20 percent of its general fund budget and limited options for plugging it.

 

The state's current A2 credit rating is Moody's sixth-highest investment grade and makes California the lowest rated of the 50 states. The A2 rating is just five notches above speculative status and Moody's raised the potential for the rating to tumble toward "junk" status.

 

"If the legislature does not take action quickly, the state's cash situation will deteriorate to the point where the controller will have to delay most non-priority payments in July," Moody's said in its statement.

 

"Lack of action could result in a multi-notch downgrade," Moody's added.

 

A downgrade could push California's borrowing costs up at time when state officials expect to issue up to $9 billion in revenue anticipation notes as soon as possible after a budget agreement is reached -- a deal whose timing is in doubt.

 

Moody's said California's leasing debt and other state-related debt are also on review, affecting a total of $72 billion of debt.

 

STATE FINANCES A MESS

 

Schwarzenegger and lawmakers face the task of closing a $24.3 billion budget deficit for the state's fiscal year beginning on July 1.

 

The gap was opened by the state's most severe drop in revenues since the Great Depression, including a steep drop in personal income taxes and sagging retail activity as consumers reined in spending, and the long-running downturn in housing.

 

Rising joblessness is also weighing on the state. Its unemployment rate jumped to 11.5 percent in May from 6.8 percent a year earlier, state officials reported on Friday.

 

The UCLA Anderson Forecast unit said this week the state economy would grow at more normal levels by the beginning of 2011, but will not create enough jobs to push the jobless rate below double digits until the end of that year.

 

As a result, the state government's finances will remain under pressure, said economist Steve Levy of the Center for the Continuing Study of the California Economy: "Today's budget challenges are overwhelming and it is certain that large budget challenges will remain in 2010 and 2011."

 

Standard & Poor's on Monday placed California on review for a possible downgrade, also citing concerns about the state's fiscal stress.

 

Spreads on California general obligation debt have widened as the budget crisis has worsened. Since May 1, the yield on the five-year California GO scale is up 92 basis points, compared with a rise of 41 basis points for the five-year benchmark Municipal Market Data triple-A scale.

 

The warnings by the rating agencies may scare off some investors from holding the state's debt, said Lawrence Glazer, managing partner of Mayflower Advisors in Boston. "It appears that California will have some unpleasant decisions ahead of them. ... A scary headline is probably enough to shake some investors out of their positions in the State of California."

 

On the other hand, California's strained finances may attract investors looking for risk premium. "Some investors will look at buying and getting a yield advantage from California," he said.

[interestrateripoff]

Premier League ends TV rights deal with Setanta

 

Sports broadcaster fails to meet deadline to pay for football screening rights

 

 

• A billion to go hungry with food prices back on rise
  
• Car production down again but decline slows
  
• US jobless at record high in eight states
  
• Lufthansa downgrades profit expectations
  
• Business Diary: 20/06/2009
  
• Bank warns of credit supply threat to economic fightback
  
• Goodwin agrees to scrape by on £342,500 a year
  

 

David Prosser: The housing market is still in trouble

 

Outlook: Goodness, it's not just the recession that's coming to an end (see all those reports of green shoots); even the housing market is now poised for recovery, says Taylor Wimpey. We paraphrase, of course, but Britain's biggest housebuilder sounded more optimistic yesterday than at any time since house prices first went into freefall.

 

 

• David Prosser: Oil workers pick the wrong fight
  
• David Prosser: A rare success for the PM
  
• David Prosser: Credit market weeds threaten to suffocate green shoots
  
• David Prosser: Now it's time to give Sir Fred a break
  
• David Prosser: Horlick must fold or raise at Bramdean
  

 

Trouble down on the dairy farm

 

After the collapse of a major dairy co-operative, is the British industry at risk? James Thompson reports

[interestrateripoff]

Setanta set for administration after Blavatnik pulls rescue deal

 

Loss of Premier League contract and withdrawal of Blavatnik bid looks likely to put sports broadcaster in administration

 

• Setanta told to pay £20m or lose match rights
  

 

• Setanta collapse may cost clubs £500m
  

 

Stanford faces 375 years in prison

 

Flamboyant financier once hailed as potential saviour of English cricket accused of running a $7 billion investment fraud

 

• Stanford arrested after surrendering to the FBI
  

 

• Stanford investors 'may lose everything'
  

 

Threat to power supply after dismissals

 

Two thousand power plant workers walk out in wildcat strikes over a jobs dispute at a Total refinery in Lincolnshire

 

• How dispute grew to threaten Britain's power
  

 

• Defiance on Lindsey picket line
  

 

Charities to get no help after banks collapse

 

Cats Protection and a children’s hospice will get no assistance to recover millions lost in Icelandic banks' collapse

 

• Management briefing: investment by councils
  

 

• Many put their faith and cash in Iceland
  

 

 

Grangemouth may be sold to China

 

Ineos, which is struggling with debts of £6.5 billion, could sell parts of Firth of Forth oil refinery to Chinese Government

 

• Wildcat strikes at Longannet and Grangemouth
  

 

• Striking workers march out of Grangemouth
  

 

Taylor Wimpey sees the bottom

 

Housebuilder says there is continued stability in UK housing market and believes that, overall, situation is improving

 

 

Mathewson makes £3m from Wood Mackenzie sale

 

About 100 people who work for the energy and research consultancy share about £100 million after £553 million deal

 

• Wood Mackenzie put up for sale
  

 

• Gala Coral considers bingo hall closures
  

Builders ask lenders to ease criteria for new homes

 

Home Builders’ Federation asks that lenders return to increase mortgage borrowing so the industry can move towards recovery

 

• Greenshoots watch: Service sector boost
  

 

• New build initiatives for first-time buyers
  

John Lewis stunned by electrical goods sales

 

Embattled electricals retailers receive a boost when John Lewis reports a 'stunning' rise in sales of white goods

 

 

UBS suit threatens accounts treaty

 

Information-sharing agreement between Switzerland and UBS could collapse if IRS continues suit with Swiss bank

 

GM receives 500 objections to bankruptcy

 

More than 500 objections to GM's restructuring poured into court but none serious enough to hold up its emergence from Chapter 11

 

• The day the music died for GM
  

 

• Ripplewood still interested in GM Europe
  

African mobile users to join weather service

 

Collaboration between Ericsson, Zain and Global Humanitarian Forum aims to save lives and money with forecasting

 

• Money transfer helps the world go around
  

 

• Needy Ugandans develop the mobile-phone ATM
  

Japan's fight for all-male carriages

 

After women-only carriages were introduced in response to gropers on trains, activists assert that men deserve the same safety zone

 

 

The foundation of a recovery - Times Online

 

 

Good reasons to put the plug back into the power utilities - Times Online

 

 

Race is on to create a new world of energy

 

Political leaders should remember that failure to act now could force us into more painful choices down the road

 

 

I'm guessing they'll leave it for someone else to sort out.

[interestrateripoff]

http://images.moneyandmarkets.com/1388/fed_%20flow_of_funds_%20q12009.pdf

[interestrateripoff]

BBC NEWS | Business | Setanta loses Premier TV rights

 

BBC NEWS | Business | Sandwich firm in administration

 

BBC NEWS | Business | Mandelson 'reassured' by US on GM

 

MORE FROM BUSINESS

Porsche global sales slump by 28%

 

Oil plant sackings spark walkouts

 

Dairy Crest may shut pension plan

 

Stanford charged with fraud in US

 

House market 'encourages' builder

[interestrateripoff]

Merlinesque figures are beginning to work their powers on recovery - Telegraph

 

Financial crisis? Six signs it's already back to business as usual for City bankers - Telegraph

 

Comment: Virgin's tracker fund trails the FTSE by 35 percentage points - Telegraph

 

Sir Allen Stanford held in custody prior to bail hearing

 

Texan billionaire Sir Allen Stanford could spend the rest of his life in prison if found guilty of conspiring to defraud investors of $7bn (£4.3bn) on his "personal playground" of Antigua.

UK wins concessions on EU rules

 

Leaders of Britain's financial community gave a cautious welcome to a planned overhaul of regulation across Europe after the UK appeared to win key concessions.

Lord Turner flags tighter capital rules

 

 

 

Over 2,000 down tools for sacked Total strikers

 

Thousands of energy workers have joined walk-outs in support of 650 contract employees sacked after staging strikes at a Total oil refinery.

 

Banks' support of 'viable' businesses in question

 

Banks say they are supporting 'viable' businesses but there is evidence to the contrary,

Sterling rebounds as Mervyn King says economy is stabilising

 

 

 

Car industry shows signs of recovery

 

Britain's car industry showed the first signs of recovery last month, despite another drop in production.

 

Binatone chief plans to ring the changes

 

Dino Lalvani, a dashing 36-year-old multi-millionaire, wants to shake up the mobile phone industry with a £29 'disposable' phone.

Binatone launches the 'Bin-a-phone'

 

 

 

General Electric faces dilemma over Obama reforms

 

 

 

Tchenguiz plans bond issues to raise £2bn

 

 

 

• Bank on King to spot the striking similarities
  

The tour of recession Britain

 

Join James Hall on his tour of five cities living with the downturn.

Edinburgh turned upside-down

 

 

Liverpool's retail therapy

 

 

Cardiff claws its way back

 

 

Wolverhampton is bashed

 

 

Sun still shines in Exeter

 

 

 

More Business News

 

Dairy Crest in talks over final salary scheme

 

 

Dividend withholding tax decision opens floodgates for claims

 

 

Real estate lending 'close to zero', says Bank of England

 

 

Doubts raised over Glencore flotation

[interestrateripoff]

The Food Crisis Continues - In The Form Of A Global Scramble For Lucrative Farmlands

 

Governments - concerned about future food security - have been furiously signing deals with other governments across the world. Saudi Arabia has tied up 25,000 ha in Sudan to grow corn, soy and wheat, with Jordan and Syria inking similar deals. China has reportedly signed numerous deals, as in Laos , where a state rubber company has acquired 160,000 ha, and Mozambique , where 10,000 "settlers" are reportedly set to assist in the conversion of thousands of hectares to export crop production. Even tiny Mauritius has agreed a deal with Mozambique to farm 5,000 ha of land in a country where over 50 percent of the people live on less than a dollar a day.

Private investors have not been laggardly either. According to the NGO GRAIN, Deutsche Bank and Goldman Sachs are " taking control of China 's livestock industry" while the investment firm Blackrock has mobilized a $200 million hedge fund to invest in land. A Russian firm, Renaissance Capital, has snapped up 300,000 ha of Ukrainian land, while a Swedish firms, Black Earth Farming and Alpcot-Agro have acquired 331,000 ha and 128,000 ha respectively in Russia's black earth region.

 

More at the link.

[interestrateripoff]

US prosecutors charge Allen Stanford with 21 counts of fraud | Business | guardian.co.uk

 

UK production of vans and lorries hit record low | Business | guardian.co.uk

 

Splitting banks up is not the answer

 

 

20 Jun 2009: Chris Colvin: Financial regulation has failed, but harking back to the mythical era of the Glass Steagall Act, as Larry Elliott does, is misleading

 

Splitting banks up is not the answer

 

 

20 Jun 2009: Chris Colvin: Financial regulation has failed, but harking back to the mythical era of the Glass Steagall Act, as Larry Elliott does, is misleading

 

 

• Cautious mood spreads among shoppers
   
   
  18 Jun 2009: Retail sales fall unexpectedly as consumers tighten their belts
   
   
  

 

 

• Don't bet on a V-shaped economic recovery
   
   
  18 Jun 2009: Surprise 0.6% drop in retail sales – but credit markets remain the real worry
   
   
  

[interestrateripoff]

http://www.nytimes.com/2009/06/20/business/20fdic.html?_r=1&ref=business

 

WASHINGTON (Reuters) — Federal regulators closed three small banks on Friday, bringing the number of bank failures to 40 so far this year. The largest of the banks closed on Friday was the Cooperative Bank of Wilmington, N.C., with $970 million in assets and $774 million in deposits, the Federal Deposit Insurance Corporation said.

The failure is expected to cost the F.D.I.C. deposit insurance fund an estimated $217 million. First Bank of Troy, N.C., will purchase all the deposits, except about $57 million in brokered deposits. The F.D.I.C. said it would pay the brokers directly.

The Cooperative Bank’s 24 branches will reopen on Monday as branches of First Bank.

The F.D.I.C. also announced the failure of Southern Community Bank of Fayetteville, Ga., which had $377 million in assets and $307 million in deposits. The failure is expected to cost the insurance fund an estimated $114 million.

United Community Bank of Blairsville, Ga., agreed to assume the insured deposits of Southern Community Bank, whose five branches will reopen on Monday as branches of United Community Bank.

In Kansas, the F.D.I.C. said regulators closed First National Bank of Anthony, with $156.9 million in assets and $142.5 million in deposits. The failure is expected to cost the insurance fund an estimated $32.2 million.

[interestrateripoff]

Interesting table at the link.

 

Table A-12. Alternative measures of labor underutilization

 

U6 16.4% May 09

U6 9.4% May 08

 

U-6 Total unemployed, plus all marginally attached workers, plus total employed part time economic reasons, as a percent of the civilian labor force plus all marginally attached workers

[interestrateripoff]

http://www.census.gov/const/newressales.pdf

 

http://www.census.gov/hhes/www/housing.html

[interestrateripoff]

Causes of economic recession

 

One thing that every economist believes is that recessions are something that cannot be avoided. The reason for this is that in a healthy economy you are going to have periods of high growth, slow growth and no growth. In fact in order for the economy to be healthy there needs to be some contracting and expanding. But in order for the economy to be considered in a recession the contracting period has to last for at least two consecutive quarters of a year or more simply put 6 months in a row. But the most common question that nobody can seem to answer very well is what is going to cause the next recession. In fact even fifty years after the great Depression, a really bad recession, and the answers to what causes an economic downturn or a recession is still a huge mystery.

 

Even though the exact causes of an economic recession are still a mystery there are numerous theories that have been put forth as to what causes an economic recession. But probably the most common thought on what causes a recession is that they are caused by events that have an economy-wide impact. Some examples of these events would be: increase in interest rates or a decline in consumer confidence.

 

http://www.richardpettinger.com/economics/...of-a-recession/

 

A recession occurs when there is a fall in economic growth for 2 consecutive quarters, however if growth is very low there will be increased spare capacity and people will feel there is a recession, this is sometimes known as a growth recession.

 

If there is a fall in AD then according to Keynesian analysis there will be a fall in Real GDP. The effect on Real GDP depends upon the slope of the AS curve if the economy is close to full capacity lower AD would only cause a small fall in Real GDP.

 

AD is composed of C+I+G+X-M, therefore a fall in any of these components could cause a recession. For example, if the MPC increased interest rates sharply this would cause the cost of borrowing to increase and make saving more attractive. This would have the effect of reducing consumer spending. AD could also fall due to deflationary fiscal policy, for example higher taxes and lower government spending would also cause a fall in AD.

 

If there was a fall in AD the multiplier effect may magnify the initial fall in AD, for example if there was a fall in output, workers would be made unemployed. These workers would then spend less causing a secondary fall in AD. This would make the fall in Real GDP greater.

 

A key feature in determining the rate of economic growth is the level of consumer and business confidence. If confidence was high then higher interest rates may not reduce demand. However if confidence is low and people fear they may be made unemployed, then they will start spending less, causing AD to fall (or increase at a slower rate). Therefore this shows that expectations are very important and it is possible for “people to talk themselves into a recession

 

An important feature of the UK economy is international trade, therefore the UK would be affected by a global recession. For example a recession in the EU would cause a fall in demand for UK exports reducing our AD (EU accounts for 60% of our trade therefore is important). Also a recession in other countries would effect economic confidence if people see the US in a recession they are worried and will spend less. However a global recession may not cause a recession in the UK if domestic demand remains high.

 

Classical Economists believe that any fall in Real GDP will be temporary and will end when labour markets adjust to the new price level. Classical economists argue that if there is a fall in AD then in the short term there will be a fall in Real GDP. However with a lower price level wages will fall therefore the SRAS will shift to the right and the economy will return to the original level at Yf and the recession will be over.

[Mistermind]

Hi

Just been looking through your messages with interest but I was wondering if anywhere on your items you have anything on the securitisation or Connells the estate agents and how the sub prime lenders are corrupting British house sales...??? not sure if you can help but thought you don't get nothing if you don't ask!!!

 

Cheers

 

Click "SEARCH" on the blue bar near the top.

When the dropdown opens, click "ADVANCED SEARCH" at the bottom.

Input "Connells" into the search box.

Select search whole thread not just title.

Select RETURN AS POSTS, not threads.

 

You will find many postings, some of possible interest, such as:

 

http://www.consumeractiongroup.co.uk/forum/general-consumer-issues/152502-connells-estate-agents.html

[interestrateripoff]

Public spending to be cut by 22 billion pounds say experts | News | News Of The World

 

PUBLIC spending will have to be slashed by BILLIONS more than either Labour or the Tories dare admit, it was revealed last night.

 

New figures show that, whichever party wins the next election, there will have to cuts of around 15 PER CENT . . . totalling a massive £22BILLION.

 

That's equal to the ENTIRE budget for Britain's secondary schools or FIVE TIMES the current bill for unemployment benefit.

 

And it's enough to pay for ONE MILLION nurses or 100 new hospitals - or 750,000 bobbies.

 

Otherwise every household in the land will have to fork out a whopping £30-A-WEEK extra in tax to balance the books.

 

This is despite Gordon Brown insisting he would actually INCREASE spending - regardless of his own figures showing the opposite.

 

And although the Tories have come clean on their plans to make savings they are only talking about 10 per cent cuts. But new figures - worked out by top accountants PricewaterhouseCoopers after analysing projections from Labour's own Budget - show far more savage savings will be needed in the three years to 2013/14.

 

John Hawksworth, the firm's head of macroeconomics, said: "Public spending cuts may need to be greater than either party is admitting. If Health is protected then other departmental spending would need to be cut by around 15 per cent in real terms.

 

"These real spending cuts equate to an average of around £1,600 per UK household - so that is the broad scale of the tax rises that might be needed if these cuts were not made. This arithmetic applies to whoever wins the next election."

 

Public spending cuts are set to be the key battleground at the election. Gordon Brown has already labelled Tory leader David Cameron "Mr 10 Per Cent" after Shadow Health Secretary Andrew Lansley admitted the Tories planned cuts of that size, except in health and international development.

 

But Brown's insistence Labour would increase spending has thrown the government into disarray, with Chancellor Alistair Darling and Chief Treasury Secretary Yvette Cooper both asking Brown at this week's Cabinet meeting to drop his claims.

 

The PM refused and was last night desperately sticking to his guns despite Tory accusations of "breath-taking dishonesty". He told the News of the World: "We are the party of the public services, not the Conservatives, who have exposed themselves by saying 10 per cent cuts.

 

"Ten per cent cuts for police would take thousands of police off the beat. Now that is not what the public in this country want to see."

 

At least the press it trying to be honest about the state of public finances.

 

Pity the idiot in No 10 can't be.

[interestrateripoff]

Property rush as billions raised to pick up bargains

 

Depressed commercial property prices have prompted a wave of interest in the market with up to 16 firms currently working on or readying plans to launch real estate funds.

 

 

• Centrica prepared to go hostile if Venture rejects bid
  
• Sexual equality survey homes in on six of City's biggest banks
  
• Sale of nuclear clean-up authority attracts 13 bidders
  
• Qatar to float its $1bn stock exchange
  
• Dome doom: Talks over sale of O2 Arena collapse
  
• Sole searching: Geox billionaire steps into Diadora
  
• DSG to post 80% profit collapse
  

 

Sean O’Grady: Forget about 'V' for victory, this recession is more of a wobbly 'W'

 

Economic View

 

 

• Margareta Pagano: King kicks like Le Tissier, but will he score a goal?
  
• David Prosser: The housing market is still in trouble
  
• David Prosser: Oil workers pick the wrong fight
  
• David Prosser: A rare success for the PM
  
• David Prosser: Credit market weeds threaten to suffocate green shoots
  

 

Darling vs King: Blood on the tablecloth

 

At the Mansion House dinner in London, the Governor took careful aim; more power to the Bank of England, he cried. But what of the Chancellor? He wants a strengthened FSA. Richard Northedge untangles the Gordian Knot of banking reform

 

 

• Just watch MySpace – it's not dead yet
  
• Henderson to the rescue at General Motors