Stocks kicked off the week with modest losses on little significant news. Manufacturing activity gained .1% in February, high tech, mining and utilities were the big contributors, capacity utilization increased to 72.7%. The latest TIC Report showed foreigners bought just 19.1 billion in securities during January, less than the trade deficit but average purchase have been more than sufficient over the last 12-months or so. Corporate and Agency issues continue to slip, as does equity buying.
A recent report about Social Security having to dip into its substantial Treasury holding, oops I mean IOU’s, to pay retiree benefits, as tax collections are no longer keeping up with benefit demands. Puts the spotlight on the 2.5 trillion in IOU’S that make up the Social Security Trust funds, seems to me this makes a mockery of the whole concept of “Trust Funds” but what do I know. The AP article went to great lengths to reiterate that said IOU’s were backed by the full faith and credit of the US, not much comfort when one considers that the national debt is 12.5 trillion and counting or $42,000 for every man woman and child in the country. But the Fed didn’t just raid the Social Security Trust Funds, leaving IOU’s other government pension and trust funds were raided as well to the tune of about 2 trillion. A trillion here and a trillion there, pretty soon it adds up to real money, or was that “billion”?
Another 4 banks went to the receivers last week bringing the 2010 total to 30, Statewide Bank, Covington, LA; Old Southern Bank, Orlando, FL; Park Avenue Bank, New York, NY and Liberty Pointe Bank, New York, NY. Incidentally the former president of Park Avenue Bank has been arrested on a litany of charges including fraud and embezzlement.
The Fed’s 4th Quarter 2009 Flow of Funds Report contained some great info as always. Household net worth gained 5 trillion last year but remains 11.8 trillion below the late 2007 peak. Some of the gain obviously came from the substantial stock market rally in 2009. Most of the gain came from a 72 billion reduction in mortgage debt, 53 billion of that in the 4th quarter, which combined with some home price appreciation improved homeowner’s equity to 43.6% from the record low of 40.8% seen in 2008.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. Much like my daily radio show on KPIG 107.5 FM in Santa Cruz California and KPYG FM 94.9 Cayucos/San Luis Obispo California. A thousand Blogs were able to spot the current problems and many began discussing it years before it reached crises proportions. While there were exceptions, and these exceptions are becoming more common, the mainstream media failed to get it and largely continue to do so.
on Mar 15th, 2010 at 12:49 PM
Now the chicken come home to roost – this social security calamity is the beginning of inevitable sovereign default and bankruptcy, after which even these IOUs are worthless. Siphoning money out of Social Security via these IOUs in effect will just mean you were paying a higher, non-redeemable income tax all those years.