Important News - Nov. 29

• 1) Detroit’s compounding debt points to disaster

“What does it mean when you can’t restructure your finances to make revenues match expenditures, and you can’t pay your debts except through more borrowing?

Lots of people would call that bankrupt.”

• 2) Is New York Headed for Bankruptcy?

“New York’s cash reserve is dwindling quickly, and the state faces a crisis if it doesn’t address its budget woes soon.

If the government can’t reach a budget agreement by Dec. 31, the state’s cash reserve will total only $36 million, and that’s only if the state dips to the bottom of its emergency reserve.”

• 3) San Diego’s Month in Review: Sliced & Diced

“A behind-the-scenes advisory board to Mayor Jerry Sanders is right in the thick of things. We obtained a draft of the panel’s report, which put the situation in pointed language: “Stop the half truths, unfunded mandates and budgetary gimmicks.”

The final report could be quite different. But this one says that the city should begin laying the groundwork for bankruptcy and indeed file for it if it can’t complete a long list of difficult reforms.”

• 4) State finances floundering, but bankruptcy isn’t answer (Illinois)

“SPRINGFIELD — By most measures, Illinois is broke.

The state can’t pay its bills on time. It is poised to top the $3 billion mark in the amount of money it will borrow this year to stay afloat. Programs are being cut and there is talk of selling off assets to help pay bills.

But don’t expect the state to declare bankruptcy anytime soon. It can’t.

Individuals, businesses and even local governments can file for reorganization under federal bankruptcy laws. But, that doesn’t cover state governments.”

• 5) Chinese Premier: China hopes world’s major reserve currency will maintain stable

“NANJING, Nov. 29 (Xinhua) — China hopes the world’s major reserve currency will maintain stable, said Chinese Premier Wen Jiabao here Sunday when meeting with three Euro Group leaders.

He was speaking with Euro Group President and Luxembourg Prime Minister Jean-Claude Juncker, European Central Bank President Jean-Claude Trichet and European Union Economic and Monetary Affairs Commissioner Joaquin Almunia ahead of the 12th EU-China summit.”

• 6) Iran plans to use rial in int’l transactions

“TEHRAN, Nov. 29 (Xinhua) — Iran is planning to use its own rial as the currency in international transactions, the local satellite Press TV reported on Sunday.

Iran has started discussions with other countries concerning the use of its national currency in international transactions, Iranian banking official Mahmoud Reza Khavari said.

“Some countries have agreed to use the Iranian rial for payment in some transactions,” Khavari, president of Bank Melli Iran, was quoted as saying.”

• 7) China 2009 Gold Demand, Output May Gain to Records, Group Says

““China is likely to become the number-one supplier and consumer of gold this year,” said Rozanna Wozniak, investment research manager at the World Gold Council.”

“Bullion, up 34 percent this year, is set for a ninth annual gain as central banks, pension funds and individual buyers seek to protect their assets from potential currency debasement and inflation. Gold may climb to $1,500 an ounce as the dollar falls amid low interest rates, Kenneth Tropin, chairman of Graham Capital Management, told Barron’s in its Nov. 30 issue.”

• Neelie Kroes says rising state debt a ‘time-bomb’

“Neelie Kroes, the outgoing EU Competition Commissioner, has called for banks to repay governments as quickly as possible to remove the risk of government default.

Ms Kroes, who has called for the Royal Bank of Scotland to sell some of its best assets – including its prized insurance division – and for Lloyds Banking Group to divest a chunk of its high street branches, said: “We need to get banks off state support quickly.”

Referring to the Dubai debt crisis, Kroes said banks, through restructuring and the restoration of healthy competition, should repay governments quickly and reduce the risk of government default.

Kroes, who is set to leave her role in the new year, called rising state debt a “time-bomb” that could bring down banks if governments default on state bonds. “Sovereign debt default could not only bring down a government but also a bank or series of debtors.”

Speaking at the same event in Amsterdam, Harvard professor Niall Ferguson said: “We should prepare for years of upheaval. The latest development in the Gulf region illustrates this.”"

• 9) Cutting Down To Size (Pittsburgh)

“And while The Washington Postand The New York Times have covered Pittsburgh’s economic face-lift in recent months, lost tax revenue and a costly pension program for city workers have kept it flirting with bankruptcy. It’s been “like watching a limb die,” says Rob Stephany, executive director of Pittsburgh’s Urban Redevelopment Authority (URA).”

• 10) Dangers Of An Overheated China (M.W.)