Monthly Archives: July 2013

Bill Bonner: Goodbye, Motor City

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“Motor City has been flattened. Now it’s being scrapped. The largest municipal bankruptcy in history. Detroit was once one of the richest…and most dynamic…cities in the world. And it was the centre of America’s most profitable industry: automobiles. German and Japanese automakers had the good fortune to be bombed out in World War II. But Detroit grew bigger…more prosperous…and full of zombies. Yes, dear reader, Detroit is a zombie story. Since 1971, almost all big stories have a zombie angle. Because the credit-based monetary system that Richard Nixon put us in is a perfect habitat for zombies.”

http://dailyreckoning.com/goodbye-motor-city/

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In cash-strapped Detroit, few critics question new sports arena funding

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“The Tigers’ home stadium Comerica Park, which opened in 2000, was built at a cost of $300 million, 38 percent of which was publicly financed. Ford Field, the Lions’ domed stadium, was built next door to Comerica and opened in 2002 at a cost of $430 million, 36 percent of which was publicly financed.  A state board recently approved issuing bonds to help pay for a new arena for the Red Wings at the heart of a proposed 45-block entertainment district just north of downtown. The total project is slated to cost $650 million. About 44 percent of the project would be financed through public sources.”

http://www.rawstory.com/rs/2013/07/29/in-cash-strapped-detroit-few-critics-question-new-sports-arena-funding/

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Should Detroit’s Bankruptcy Be an Early-Warning Sign for Washington?

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“There’s no way a bailout of Detroit goes through the House of Representatives. Heck, I don’t even think it could make it through the Senate. So some folks on the left would be justified if they asked why the high rollers on Wall Street supposedly deserved a bailout a few years ago but they don’t get one today. The answer, of course, is discrimination by color. But I’m not talking black vs white. The color that matters in politics is green. The financial industry dispenses huge campaign contributions to both sides of the aisle, and the bailout was their payoff. Public employee unions, by contrast, give almost every penny of their money to Democrats.”

http://danieljmitchell.wordpress.com/2013/07/29/should-detroits-bankruptcy-be-an-early-warning-sign-for-washington/

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America’s public finances: The Unsteady States of America

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“Detroit’s population has fallen by 60% since 1950. The murder rate is 11 times the national average. The previous mayor is in prison. Shrubs, weeds and raccoons have reclaimed empty neighbourhoods. The debts racked up when Detroit was big and rich are unpayable now that it is smaller and poor.  Though some of its woes are unique, a crucial one is not. Many other state and city governments across America have made impossible-to-keep promises to do with pensions and health care. Detroit shows what can happen when leaders put off reforming the public sector for too long.”

http://www.economist.com/news/leaders/21582258-it-not-just-detroit-american-cities-and-states-must-promise-less-or-face-disaster

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Federal Reserve expected to stay the course on near-zero interest rate

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“Markets appeared to ignore his assertion that the Fed’s key federal funds rate, at 0.0-0.25 percent since December 2008, would not rise before 2015. Interest rates jumped more than a full percentage point in two months, pushing mortgage rates suddenly higher, raising concerns they could snuff out the housing market recovery, one of the few bright spots in the sluggish economy. In later comments, particularly two days of twice-yearly testimony to Congress in mid-July, Bernanke sought to assure markets that the near-zero interest rate would stay put for a while, given the ‘weak’ economy. ‘If we were to tighten policy, the economy would tank,’ he told lawmakers.”

http://www.rawstory.com/rs/2013/07/29/federal-reserve-expected-to-stay-the-course-on-near-zero-interest-rate/

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BMW takes ‘great leap forward’ into electric car market

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“BMW on Monday took the bold strategic step of revealing its first all-electric car, and said it plans to clinch a significant share of a market still in its infancy.  The series-produced model will go on sale in Europe in November to be followed in the United States, China, Japan and several other markets in the first half of 2014. It will hit the German market at a price of 34,950 euros ($46,438) and has a range of 130 to 160 kilometres (about 80 to 100 miles).  The Munich-based company trumpeted technological features of the model, which can seat four, including a carbon fibre passenger cell to help offset the weight of the batteries and an aluminium chassis.”

http://www.rawstory.com/rs/2013/07/29/bmw-takes-great-leap-forward-into-electric-car-market/

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New York offers latest luxury: Five-star ‘outdoor bedroom’ atop skyscraper

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“In the concrete jungle of New York City, where open sky can be hard to find, the latest luxury offering is a night under the stars — or, under twinkling city lights, at least. For the not-so-insignificant price of $1,995 (1,500 euros) a night, the AKA Central Park promises a five star ‘outdoor bedroom,’ 17 floors up, complete with a queen-size bed, candle-lit dinner, fireplace, romantic snacks, and a giant telescope to admire the stars in the city that never sleeps. To the strains of live jazz guitar, Brazilians, Australians, Emiratis, and even New Yorkers spend the night doing what travel agents call urban ‘glamping’ — short for ‘glamorous camping.'”

http://www.rawstory.com/rs/2013/07/29/new-york-offers-latest-luxury-five-star-outdoor-bedroom-atop-skyscraper/

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Why Maiden Lane?

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“The Fed mobilized 13.3’s lending powers so as to justify purchases by creating five separate Delaware limited liability companies: Maiden Lane LLCs I, II, and III, Commercial Paper Funding Facility LLC (CPFF), and Term Auction Lending Facility LLC (TALF). It lent to these corporations under the authority of Section 13.3. These LLCs proceeded to use these funds to purchase assets not specifically authorized by the Federal Reserve Act. In short, the Federal Reserve attempted to get around [legal] limitations concerning asset purchases by lending to the five recently created LLCs it controlled, and ordering these LLCs to purchase whatever assets it deemed necessary.”

http://consultingbyrpm.com/blog/2013/07/why-maiden-lane.html

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Wall Street: The Next Fed Chief Should Keep the Presses Running

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“‘Monetary policy has little scope to stimulate the economy,’ Summers suggested in September 2008, ‘given how low interest rates already are and the problems in the financial system.’ Since then, the Fed has bought $2.3 trillion in Treasury and mortgage bonds. It also increased the money supply to unprecedented levels.  In contrast, the other front-runner, Federal Reserve vice chair Janet Yellen, said back in March she would not taper anytime soon. CNBC’s poll of Wall Street analysts indicated they believed Yellen would better manage a financial crisis. Translation: She is more likely to keep the presses hot.”

http://dailyreckoning.com/wall-street-the-next-fed-chief-should-keep-the-presses-running/

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Economist Withdraws Bank of Israel Candidacy

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“One of Israel’s top economists on Monday withdrew his candidacy as head of the central bank over an old shoplifting case.  The incident happened in a Hong Kong airport seven years ago. Jacob Frenkel told Israeli media he mistakenly thought his companion paid for an item he was carrying.  A committee reviewing his appointment raised questions about the incident, and Frenkel decided to withdraw his candidacy. Frenkel did not report the incident to the committee.”

http://abcnews.go.com/International/wireStory/economist-withdraws-bank-israel-candidacy-19806876

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