Must-Know News - Jan. 21

• 1) Boomers see retirement later, less likely

“Of those who turn 50 this year, 41 percent say they will never be financially capable of retiring and 23 percent have not even started to save, Pulte revealed at the International Builders’ Show, homebuilding’s annual industry event, held here this week.”

• 2) California budget crisis could tie up thousands of public works projects

“SACRAMENTO — Public works projects worth hundreds of millions of dollars could be in jeopardy starting this summer — and possibly for years to come — because of California’s continuing budget crisis, state financial officials warn.

Wednesday, the Treasurer’s Office renewed its concerns that a long political squabble over the state’s $20 billion deficit could keep California from selling enough bonds in time to pay for ongoing projects. Without a budget in place by July, officials say, the state will have little hope of enticing investors to purchase its debt.

And beyond that immediate problem may loom an even larger one: Even if the state does make it to the market this spring, skittish investors may be less than eager to buy what the state is selling. Already, California doesn’t have enough bond revenue to pay for all the projects voters have approved. ”

• 3) The Global Debt Bomb

“Mainstream credit analysts are worried. The U.S. has been able to sell vast amounts of debt because the Treasury market, with $500 billion a day in turnover, is considered safe and dwarfs all other debt markets. But Brian Coulton, head of global economics at Fitch Ratings in London, warns that once rock-solid economies like the U.S. and the U.K. could join shakier nations like Japan and Ireland in losing their aaa ratings if they don’t get their bad habits under control. “While aaas can borrow in the short term, very high and rising government debt-to-GDP ratios are ultimately not consistent with aaa status,” Coulton says.

Unchartered Waters

Governments around the world will issue an estimated $4.5 trillion in debt this year, triple the five-year average for industrial countries.”

• 4) China seeks new ways to use FX reserves - official (Reuters)

“China will look for new ways to invest the world’s largest foreign exchange reserves this year to generate higher returns, a senior regulatory official said on Thursday.”

“”Making more efficient and diversified use of foreign exchange reserves is an important issue for China. We will explore this issue further this year,” Guan said.

The currency composition of China’s reserves is a closely held secret, but many economists assume the majority of it is held in U.S. dollar-denominated securities, likely Treasury debt.

China had been a net seller of $12 billion in Treasuries in the last six months, Alan Ruskin, Royal Bank of Scotland economist, said in a note, citing U.S. government figures.”

• 5) Senate Proposes Increasing U.S. Debt Limit to $14.3 Trillion

“Jan. 21 (Bloomberg) — The U.S. debt limit would be raised by $1.9 trillion to $14.29 trillion under an amendment proposed in the Senate.

The chamber began debate yesterday on raising the debt ceiling for the fifth time in two years after lower tax revenue from the recession and higher stimulus spending boosted the calendar-year budget deficit to an all-time high last year.

“If Congress does not enact this legislation, and soon, then the Treasury would default on its debt for the first time in history,” said Senate Finance Committee Chairman Max Baucus, a Montana Democrat.

The White House in a statement urged lawmakers to pass the measure. “Such an increase is critically important to make sure that financing of federal government operations can continue without interruption,” it said. ”

• 6) Leaders Prepare For Disappointment in Europe

“With warnings of another slowdown in the euro-zone economy and powerful head-winds in the U.K., policy makers this week appeared to be preparing consumers and investors for disappointment.

Juergen Stark, a member of the European Central Bank’s policy council, said that the recovery in the 16-country euro zone could lose traction in the first part of this year. ”

“Waiting too late to begin consolidating budgets risks credit ratings downgrades on sovereign debt and higher interest premiums on state borrowing.

Governments already are over their limits. The average government budget deficit in the euro zone is now over 6% of gross domestic product, twice the European Union limit. Ratings agencies already have warned on countries such as Greece and Spain.

The U.K. is also under intense pressure to cut spending, and will have a budget deficit at a massive 12.6% of GDP this fiscal year, rivaling Greece. ”

• 7) Problems pile up for post-crisis world

“Perhaps the biggest unknown for 2010 is how smoothly the world’s central banks can withdraw the monetary crutch that buoyed markets in 2009.

Beyond that, the worsening finances of both governments and individuals raises the spectre of sovereign debt defaults and may also mean the next leg of the crisis is social, Klaus Schwab, executive chairman of the World Economic Forum that organises the Davos gathering, said on Wednesday.”

………………7A) Sovereign defaults top 2010 risk hitlist

“LONDON (Reuters) - The risk that deteriorating government finances could push economies into full-fledged debt crises tops a list of threats facing the world in 2010, according to a report by the World Economic Forum.”

“”Government debt levels of 100 percent of GDP — which is where the United States and the UK are heading — and higher are clearly not sustainable,” said Daniel Hofmann, group chief economist at Zurich Financial Services, a contributor to the report.

“There is an inherent risk that investors may take fright, they may question the sustainability of these debt levels — the result (would be) sovereign debt crises and defaults.

“Clearly Dubai and Greece were early warnings that should be heeded,” he told a press conference”

• 8) Sovereign debt faces years of sub-par returns, says Pimco

“This is the continuation of the great financial crisis. The main economic event of 2009 was that various banks were busy fixing their balance sheets, but now the focus is on the risk associated with sovereign debt. This may be the beginning of a downward journey for sovereigns, evidence of which we have already seen,’ he said.

He thinks other countries may follow the likes of Greece, Ireland and Spain into trouble.

In the meantime, he is also worried about the prospects of government debt in an ageing society:”

• 9) More than 5.9 million are receiving extended (unemployment) benefits

“But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits customarily provided by states and are now receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

More than 5.9 million are receiving extended benefits in the week ending Jan. 2, the latest data available, an increase of more than 600,000 from the previous week. The data for emergency benefits lags initial claims by two weeks.”

• 10) Exclusive: Kucinich shreds Democrats for betraying promise of change

“”There’s nothing liberal about the bailouts. There’s nothing liberal about standing by and watching banks use public money to get their executive bonuses. There’s nothing liberal about giving insurance companies carte blanche to charge anything they want for health care… Since when did that become liberal?”

“There’s nothing liberal about letting coal and oil write climate change legislation,” he added. “Are you kidding me?”

The 13-year congressman lamented the lack of change in economic policies, tying it to the major problems Democrats are facing.

“The minute the president appointed Tim Geithner and Larry Summers to key policy positions, and the minute that [Ben] Bernanke was named to head the Fed again, we’re looking at people who participated in the decline of the economy,” he said. “This group has done us a disservice.”

“Every area of the economy is still about taking wealth from the great mass of people and putting it into the hands of a few. If you don’t have a economic democracy, you don’t have a political democracy.”"

• 11) Letter reveals L.A.’s plans for more layoffs

“Los Angeles Mayor Antonio Villaraigosa and City Council leaders have begun laying the groundwork for the elimination of 1,000 more jobs by July 1 in an attempt to eradicate a budget shortfall that has now ballooned to nearly $200 million.”

• 12) Pension fund proposal draws rage from state employee union (Illinois)

“The proposal calls for limiting growth of state government spending and would require all surplus revenue to go toward the annual state contribution to the pension system. ”

J”ohn Tillman, chief executive officer of policy institute, said pension reform is not an option. It’s a necessity.

“The state of Illinois has not been making its end payments for many, many years, starting in the late ‘90s but really accelerated in the 2000s,” he said at a press conference Tuesday. “And as a result of not making those early payments we now have an $83 billion unfunded liability that we need to make up for no later than 2045.””

• 13) Surprise rise in new US jobless claims

The number of US workers making first-time claims for jobless benefits unexpectedly rose last week, as the government worked through a pre-holiday backlog of filings.

Initial jobless claims climbed by 36,000 to 482,000, labour department figures showed on Thursday. That disappointed analysts, who were expecting claims to shrink, and was the third consecutive monthly rise.

• 14) EU Leaders Plan Emergency Moves to Prevent Greek Domino Effect

European Union leaders are now open to the idea of providing a loan of last resort to Greece as a means of stabilizing its deteriorating economy.

This decision is driven by fear that the IMF might need to bail out Greece if the EU doesn’t, reducing confidence in the economic area and perhaps triggering a potential downgrade of other troubled state’s sovereign debt.

• 15) So far of the Second Depression, who isn’t unemployed?

- Saxplayer00o1