Warning signals of a double-dip recession flash brightly across the world

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By Ambrose Evans-Pritchard

Global bond markets are flashing warning signals of a sharp slowdown in growth across the world and a possible slide toward a double-dip recession and outright deflation.

The yield on two-year US Treasuries has fallen to a record low of 0.61pc in a flight to safety, a level not seen during the depths of the Great Depression. Ten-year yields dropped below the psychologically sensitive level of 3pc to 2.96pc.

Such levels are clearly incompatible with assumptions on Wall Street for 3pc growth in the second half of this year. “If the bond market is correct then this recovery could be dead in the water,” said Jim Reid, credit strategist at Deutsche Bank. The credit markets tend to sniff out trouble first and have acted as an early warning alert at every stage of the financial crisis over the past three years.

Mr Reid said deflation has emerged as the dominant risk in the West and will force central banks to renew quantitative easing, the Americans “pre-emptively” and the Europeans “only when their backs are against the world”.

Triple tremors from the banking crisis in Spain, crumbling confidence in the US, and a setback in China’s leading economic indicator all combined with a vengeance on Tuesday. “The market in risky assets has capitulated today amid fears that the ­global recovery is petering out,” said Gavan Nolan, head of credit at Markit.

Rumbling in the background are influential voices warning of a global slide into economic quagmire.Nobel Laureate Paul Krugman said premature tightening in much of the North Atlantic region at the same time would lead to disaster. “We are now, I fear, in the early stages of a third depression, primarily a failure of policy. Both the United States and Europe are well on their way toward Japan-style deflationary traps. The Fed seems aware of these deflationary risks, but what it proposes to do is, well, nothing,” he wrote.

Warning signals of a double-dip recession flash brightly across the world

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• David Rosenberg: Paul Krugman's Doom Warning Is Spot On (businessinsider.com)

Jeff Gundlach: The US will 'Politely Default' on its Debt

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By Robert Huebscher

Today’s economic problems, it seems, can be understood through the lens of pop artist Andy Warhol.  Warhol, who DoubleLine’s Jeff Gundlach calls an “absolute futuristic genius” in his ability to depict trends in American consumerism, showed through his illustrations of everyday objects, such as Coca Cola cans, that products used by the upper crust of society were accessible to anyone in America.  That accessibility made it natural for consumers to borrow money to improve their standard of living, leading to a three-decade long explosion in public debt.

Gundlach delivered the keynote address at last week’s Morningstar Investor Conference in Chicago.  He is the chief investment officer of DoubleLine, the firm he founded after leaving TCW last year.  DoubleLine now manages just over a $1 billion in bond funds, mostly in mortgage-backed securities, where Gundlach’s expertise is highly regarded.

Gundlach’s presentation shared a similar theme with many he gave while he was at TCW, documenting the immensity of U.S. debt obligations and the lack of options for alleviating that burden.  As he has stated in the past, he does not consider inflation to be a threat in the capital markets today.  He cited six options open to policy makers, but believes a seventh – some form of default – is most likely.

As would be expected from one who manages large fixed income portfolios, he sees opportunities in the bond market, particularly in long-term US Treasury securities and in certain types of mortgage-backed debt.

At the end of his talk he sounded an ominous warning that if inflation were to occur, it would happen very quickly.

Jeff Gundlach: The US will 'Politely Default' on its Debt

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• Bond expert Gundlach: double-dip recession coming (seattletimes.nwsource.com)

Third US carrier, 4,000 Marines augment US armada opposite Iran

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DEBKAfile

DEBKAfile's military sources report that Washington has posted a third carrier opposite Iran's shores. It is supported by amphibious assault ships and up to 4,000 Navy and Marine Corps personnel, bringing the total US strength in these waters to three carriers and 10,000 combat personnel.
The USS Nassau (LHA-4) Amphibious Ready Group 24th Marine Expeditionary Unit, tasked with supporting the Bahrain-based 5th Fleet area of operations, is cruising around the Bab al-Mandeb Straits where the Gulf of Aden flows into the Red Sea. Its presence there accounts for Tehran announcing Sunday, June 27 that its "aid ship for Gaza" had been called off, for fear an American military boarding party would intercept the vessel and search it.  This would be permissible under the latest UN sanctions punishing the Islamic Republic for its nuclear program.
The third US carrier group to reach waters around Iran consists of three vessels:
1. The USS Nassau Amphibious Assault ship is not just an enormous landing craft for the 3,000 Marines aboard; its decks carry 6 vertical take-off AV-HB Harrier attack plans; four AH-1W Super Cobra, twelve CH-46 Sea Knight and CH-53 Sea Stallion helicopters, as well choppers convertible to fast V-22 Osprey airplanes capable of landing in any conditions.
This vast warship has 1,400 cabinets for sleeping the entire Marine-24th Marine Expeditionary Unit aboard.
2.  The amphibious transport dock ship USS Mesa Verde which carries 800 Marines equipped for instantaneous landing.
3.  The amphibious dock landing ship USS Ashland which carries 400 Marines and 102 commandos trained for special operations behind enemy lines.

Third US carrier, 4,000 Marines augment US armada opposite Iran

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• Marine Amphibious Assaults May Be A Thing Of The Past (huffingtonpost.com)

G-20 to Obama: La, la, la, we can't hear you!

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BY ANDREW LEONARD

The G-20 summit is over, and the big news is that "fiscal austerity" is the new global watchword: the official summit declaration announces that "advanced economies have committed to fiscal plans that will at least halve deficits by 2013."

And everyone gets a new pony, too. The leaders of the United Kingdom and Germany believe that the new austerity drive will somehow result in renewed economic growth. Students of history, mindful of the lessons of the 1930s, worry that a "Third Depression" is in the offing. But all the pundits seem to agree on one thing: The G-20's declaration represents a failure for President Obama, whose warning that what the world needs now is more government-stimulated demand, rather than fiscal retrenchment in the face of a very shaky global economy, was rudely ignored.

G-20 to Obama: La, la, la, we can't hear you!

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• US Loses at G20 Summit (businesspundit.com)

More Iran Concerns

Thunder Road Report - June 2010

Mortgage rates hit 50-year lows and it likely won't matter

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Ann Brenoff

The good news: Mortgage rates dropped to their lowest levels in more than 50 years.
The bad news: You need to have a job and impeccable credit to get them.

The average 30-year fixed loan rate tumbled to 4.69% this week, down from 4.75% last week, Freddie Mac reported. These are the lowest rates since the mortgage giant began keeping records in 1971 and the last time rates were lower was in the 1950s.

Nobody expects the falling rates to matter much. They aren't likely to snap the housing market back to life. And they aren't likely to benefit anyone who is unemployed, underemployed or who has had their credit rating dinged in the recession.Sales of new homes fell 33% after the federal tax credit incentives expired at the end of April and while existing home sales are still showing better numbers, experts say those numbers are being buoyed by the tax credit buyers still in the pipeline and trying to close escrow.

As long as prospective home buyers are worried about their financial well-being and job security, many will be reluctant to take the plunge, Greg McBride, senior financial analyst with Bankrate.com, told MSNBC.

Read more: http://www.walletpop.com/blog/2010/06/25/mortgage-rates-hit-50-year-lows-and-it-likely-wont-matter/#ixzz0s9hVk2an

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• MORTGAGES / Historic lows for rates - but who's buying? (sfgate.com)

Financial Reform Makes Biggest Banks Stronger

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by Michael Hirsh

Glass-Steagall, meet Dodd-Frank. President Obama, in his comments on the landmark bill on Friday, proclaimed it “the toughest financial reform since the one we created in the aftermath of the Great Depression.” And indeed in many ways this vast and sprawling attempt to address the causes of the 2007–09 financial disaster is very impressive: it brings trillions of dollars in “dark” trading in over-the-counter derivatives into the open; it creates new, tough watchdogs for credit card and mortgage companies as well as banks; and it gives the government new tools to liquidate failing firms.

But in one respect, the nearly 2,000-page bill marshaled through Congress by Sen. Chris Dodd and Rep. Barney Frank falls short of that earlier, Depression-era standard. Whereas Glass-Steagall substantially altered the structure of the financial system and required the creation of brand-new kinds of firms, Dodd-Frank effectively anoints the existing banking elite. The bill makes it likely that they will be the future giants of banking as well. Legislators touted changes that would restrict proprietary trading by banks and force them to spin off their swaps desks into separately capitalized operations. But banks get to keep the biggest part of their derivatives business, which is dominated by interest-rate and foreign-exchange swaps. Some 80 to 90 percent of that business will remain within the banks, and J.P. Morgan, Goldman Sachs, Citigroup, Bank of America, and Morgan Stanley control more than 95 percent, or about $200 trillion worth of that market. These same banks may end up controlling or at least dominating the clearinghouses they are being pressed to trade on as well, since language proposed by Rep. Stephen Lynch, D-Mass., to limit their ownership stakes to 20 percent, was dropped in the final version of the bill, according to Lynch’s spokeswoman, Meaghan Maher. “No numerical limitations were set; regulators were given the ability to do so,” she said.

Financial Reform Makes Biggest Banks Stronger

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• Banking Bill Invites the Next Global Meltdown: Roy C. Smith (businessweek.com)

G-20 Nations: Race to the Bottom will Continue

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by DAWN PALEY

As the G-20 summit winds down behind the fences surrounding fortress Toronto, there are at least 560 folks in jail, and anyone left out on the streets is facing detentions, beatings, searches and arrests.

This is the context in which the Group of 20 gathered to write the Toronto Summit Declaration, a 27 page document released earlier this evening. An early critical reading of this text makes it evident that those who have taken great risk to mobilize against the G20 have done so on behalf of the health of communities, and the planet.

Because though the Toronto Declaration begins with a populist appeal to sustainability, job creation and financial regulation, it enshrines a commitment to force the poor and working class around the world to tighten their belts yet again as states implement strict new austerity programmes.

The Declaration proposes an ambitious new structural adjustment agenda, designed by the IMF and the World Bank, that aims to halve first world deficits by 2013. 

Shoring up financial sector abuse of public funds is likely one of the most pressing concerns of publics, who have been denouncing the bank bail out all around the world. But the language in the Toronto Declaration does little to guarantee meaningful public oversight of the financial sector.

The Declaration welcomes the recently passed US Financial Reform Bill, which according to Newsweek "effectively annoints the existing banking elite," without putting a cap on executive compensation. Nor does the bill crack down on the banks that are supposedly "too big to fail," including J.P. Morgan, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley.

G-20 Nations: Race to the Bottom will Continue

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• Financial Reform Makes Biggest Banks Stronger (newsweek.com)

Economic Outlook: Worsening picture in the US

By Jack Farchy

Investors will this week be bracing themselves for signs that the US recovery is slowing, as a slew of economic data on the world’s largest economy is expected to paint a downbeat picture.

However, they face a challenge disentangling the effects of the removal of government stimulus programmes from the scale of the private sector recovery.

This week sees the release of the monthly US non-farm payrolls report, the most closely watched statistic in global markets.

The headline figure is expected to show a sharp drop in non-farm employment – but that is largely the effect of temporary workers hired to carry out the US census coming to the end of their contracts.

There was a decline of about 250,000 in the number of people working on the census this month from May, leading to consensus expectations of a drop of 75,000 in the headline non-farm payrolls figure.

That could push the US unemployment rate above its current level of 9.7 per cent, leading to fears that the recovery might stall.

Economic Outlook: Worsening picture in the US

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• Here's What You Need To Know Before This Week's Huge Jobs Report (businessinsider.com)

At economic summit, world leaders line up behind pledge to cut budget deficits in half by 2013

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JANE WARDELL,MARTIN CRUTSINGER, THE ASSOCIATED PRESS

World leaders lined up Sunday behind a bold pledge by rich nations to cut budget deficits in half by 2013, despite concerns that cutting stimulus spending too quickly could hurt the global recovery.
Canadian Prime Minister Stephen Harper, host of a summit of the world's 20 top industrial and developing nations, said that it's "imperative that we get our fiscal house in order."
The deficit-cutting goal would mean cutting the red ink in half within three years and getting the total debt stabilized by 2016.
"Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016," according to a draft statement obtained by The Associated Press. The gross domestic product measures the value of all goods and services, and is considered the best gauge of economic health.

At economic summit, world leaders line up behind pledge to cut budget deficits in half by 2013

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• G-20 Leaders Pledge To Halve Deficits By 2013 (huffingtonpost.com)

USS Carrier Harry Truman Now Officially Just Off Iran, As Israel Allegedly Plotting An Imminent Tehran Raid

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Tyler Durden

As we first reported last week, in an article that was met with much original scepticism, the Pentagon has now confirmed that a fleet of 12 warships has passed the Suez Canal, and is now likely awaiting orders to support the escalation in the Persian Gulf. The attached image from Stratfor shows the latest positioning of US aircraft carrier groups as of June 23: the USS Harry Truman (CVN-75) is now right next to USS Eisenhower (CVN 69), both of which are waiting patiently just off Iran.

As for the catalyst the two carriers may be anticipating, we provide the following update from the Gulf Daily News where we read that Israel may be on the verge of an attack of Iran, with an incursion originating from military bases in Azerbaijan and Georgia.

USS Carrier Harry Truman Now Officially Just Off Iran, As Israel Allegedly Plotting An Imminent Tehran Raid

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• Armada of U.S. and Israeli Warships Head for Iran (disquietreservations.blogspot.com)

Household Wealth Fell In Five Successive Quarters Creating A Loss Of $12.8 Trillion

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Recently released Federal Reserve figures show that household wealth fell by a record $5.1 trillion in the period October to December 2008, which was almost twice as much as the decrease in the previous quarter.

According to the Federal Reserve’s quarterly Flow of Funds report that was released March 12, 2009, the net worth of households and non-profit groups dropped to $51.5 trillion from $56.6 trillion in the third quarter of last year, making it the lowest level for four years.

Household net worth declined in five successive quarters causing a loss of $12.8 trillion during that period, and the decline is almost equal to the total size of the U.S. economy, which stood at $14.2 trillion in the last three months of 2008.

America’s total wealth declined by $11.2 trillion in 2008 from the previous year, which is the biggest annual decrease since the government began keeping its quarterly records in 1952.

Total borrowing by businesses, consumers, and government agencies climbed to an annual rate of 6.3 percent during final quarter, compared with an 8.1% rise during the prior quarter, and the gain was led by a 37% increase in borrowing by the federal government, and borrowing by state and local governments rose at a 1.2% rate.

The amount borrowed by businesses rose at an annual pace of 1.7% after having risen 4.1% during the previous quarter.

Household Wealth Fell In Five Successive Quarters Creating A Loss Of $12.8 Trillion

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• UPDATE 1-U.S. household net worth up $1.1 trillion in Q1 (reuters.com)

Suiting Up for a Post-Dollar World

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by John Browne

The global financial crisis is playing out like a slow-moving, highly predicable stage play. In the current scene, Western governments are caught between the demands of entitled welfare beneficiaries and the anxiety of bondholders who fear they will be stuck with the bill. As the crisis reaches an apex, prime ministers and presidents are forced into a Sophie's choice between social unrest and bankruptcy. But with the "Club Med" economies set to fall like dominoes, the US Treasury market is not yet acting the role we would have anticipated.
Our argument has always been that the US benefits from its reserve-currency status, allowing it to accumulate unsustainable debts for an unusually long period without the immediate repercussions of inflation or higher borrowing costs. But this false sense of security may be setting us up for a truly monumental crash.

There is fresh evidence that time is running out for the dollar-centric global monetary order. In fact, central banks outside the US are already making swift and discrete preparation for a post-dollar era.
To begin, the People's Bank of China has just this week decided to permit a wider trading range between the yuan and the dollar. This is the first step toward ending the infernal yuan-dollar peg. While the impetus behind this abrupt change remains a mystery, I have a sneaking suspicion that, as my colleague Neeraj Chaudhary explained in his commentary last week, the nationwide labor strikes were a prime motivator.

In response to the 2008 credit crunch, the Fed printed so many dollars that the People's Bank of China was forced to drive Chinese inflation into double digits to maintain the peg. The pain has fallen on China's workers, who have seen their wages stagnate while prices for everything from milk to apartments have skyrocketed. This week's move indicates that, regardless of its own policy motives, the Communist Party can no longer afford to keep pace with the dollar's devaluation. The result will be a shift in wealth from America to China, which may trigger a long-anticipated run on the dollar, while creating investment opportunities in China.

Suiting Up for a Post-Dollar World

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• Yuan Parity Levels Signals Change (blogs.wsj.com)

Obama Internet kill switch plan approved by US Senate

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By Grant Gross

A US Senate committee has approved a wide-ranging cybersecurity bill that some critics have suggested would give the US president the authority to shut down parts of the Internet during a cyberattack.

Senator Joe Lieberman and other bill sponsors have refuted the charges that the Protecting Cyberspace as a National Asset Act gives the president an Internet "kill switch." Instead, the bill puts limits on the powers the president already has to cause "the closing of any facility or stations for wire communication" in a time of war, as described in the Communications Act of 1934, they said in a breakdown of the bill published on the Senate Homeland Security and Governmental Affairs Committee website.

The committee unanimously approved an amended version of the legislation by voice vote Thursday, a committee spokeswoman said. The bill next moves to the Senate floor for a vote, which has not yet been scheduled.

The bill, introduced earlier this month, would establish a White House Office for Cyberspace Policy and a National Center for Cybersecurity and Communications, which would work with private US companies to create cybersecurity requirements for the electrical grid, telecommunications networks and other critical infrastructure.

Obama Internet kill switch plan approved by US Senate

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• Senate panel approves controversial cyber security bill (infoworld.com)

Ben Bernanke needs fresh monetary blitz as US recovery falters

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By Ambrose Evans-Pritchard

Federal Reserve chairman Ben Bernanke is waging an epochal battle behind the scenes for control of US monetary policy, struggling to overcome resistance from regional Fed hawks for further possible stimulus to prevent a deflationary spiral.

Fed watchers say Mr Bernanke and his close allies at the Board in Washington are worried by signs that the US recovery is running out of steam. The ECRI leading indicator published by the Economic Cycle Research Institute has collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed's balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.

"We're heading towards a double-dip recession," said Chris Whalen, a former Fed official and now head of Institutional Risk Analystics. "The party is over from fiscal support. These hard-money men are fighting the last war: they don't recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again."

Mr Bernanke is so worried about the chemistry of the Fed's voting body – the Federal Open Market Committee (FOMC) – that he has persuaded vice-chairman Don Kohn to delay retirement until Janet Yellen has been confirmed by the Senate to take over his post. Mr Kohn has been a key architect of the Fed's emergency policies. He was due to step down this week after 40 years at the institution, depriving Mr Bernanke of a formidable ally in policy circles.

The Fed's statement this week shows growing doubts about the health of the recovery. Growth is no longer "strengthening": it is "proceeding". Financial conditions are now "less supportive" due to Europe's debt crisis.

The subtle tweaks in language have been enough to set bond markets alight. The yield on 10-year Treasuries has fallen to 3.08pc, the lowest since the gloom of April 2009. Futures contracts have ruled out tightening until well into next year.

Ben Bernanke needs fresh monetary blitz as US recovery falters

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Google Maps for Android Helps You Find the Right Place, Catch a Train, and Add Latitude Friends

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Hot off the presses, Google Maps for Android version 4.3 has added a couple new features to help you quickly choose the right place to grab dinner, catch the next train, and find friends to add in Latitude.
Have you ever had to make a split decision for dinner plans while on the go? Now, you can see a snapshot of what people are saying about places right on search result pages. Instead of poring through full reviews, you can start by looking at what the most frequently mentioned aspects about a place are, such as food, service, atmosphere, or anything else people keep mentioning. Just like on Place Pages for your computer, the color-coded bar gives an overview of how positively people are talking about any individual aspect. Tap one to see more details like the actual review snippets. Whether you’re looking for top-notch service or a vibrant ambiance, you can now pick just the right place to go.

Google Maps for Android Helps You Find the Right Place, Catch a Train, and Add Latitude Friends

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Budget 2010: Pain now, more pain later in austerity plan

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Larry Elliott and Patrick Wintour

George Osborne today imposed austerity measures on every family in Britain as he announced a £40bn package of emergency tax increases, welfare cuts and Whitehall spending restraint designed to slash the budget deficit by the end of the parliament.

The chancellor said the "unavoidable budget" required a VAT rise from 17.5% to 20% next January, higher capital gains tax, a levy on banks, a two-year public sector pay freeze and less generous benefits, but insisted the package was needed to prevent the financial markets from turning on Britain.

In his debut budget speech, Osborne pleased the ratings agencies and the Organisation for Economic Co-operation and Development by intensifying the £73bn squeeze already planned by the last Labour government. But he signalled a second dose of gloom in October, when a three-year comprehensive spending review will spell out the size of the cuts for individual government departments.

Osborne warned today that ring-fencing the NHS and international development meant non-protected departments would face average real cuts of 25% but that some clemency would be shown to education and defence. The chancellor avoided even deeper cuts in Whitehall by earmarking the welfare budget for more than a third – £11bn – of the £32bn reduction in spending. Child benefit will be frozen, and the government will eventually save almost £6bn a year by linking all state benefits other than pensions to the slower-growing consumer prices index rather than the retail prices index. The Treasury will raise more than £12bn from the increase in VAT, but the chancellor sought to soften the blow from the toughest budget in modern times by raising personal allowances by £1,000, linking pensions to earnings and raising child credits for the next two years. He said a four-year phased cut in corporation tax would help the private sector become the engine of growth, and the economy would have to rely more heavily on investment and exports over the coming years.

Budget 2010: Pain now, more pain later in austerity plan

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• Budget 2010: VAT rise and benefits cuts to tackle Britain's deficit (telegraph.co.uk)

More Americans interested in gold

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More and more Americans are succumbing to the charms of the yellow metal as they seek shelter from a swirling combination of fears — a double-dip recession and the debt crisis in Europe, the volatile stock markets and the shaky currencies.

Unlike in Asia, stocks and property have always been traditional investment options for Americans.

But now in a nation of gold-skeptics, the yellow metal is being seen as a relevant investment choice once again.

Last month, the sale of the one-ounce, investment-grade American Eagle gold coins zoomed to its highest level in 11 years. Some 190,000 coins were sold, nearly three times the number last year. The demand continues to be strong this month, a U.S. Mint spokesman said on Friday as prices scaled a new high.

While coins make up a relatively small part of overall gold demand, the record sales point to a perked-up investor interest. Financier George Soros, for instance, grabbed headlines when he recently doubled the size of his gold holdings, which now represent 7.5 percent of his US$8.8-billion fund.

More Americans interested in gold

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• U.S. Mint's May gold coin sales reach most since 1999 (reuters.com)

Meredith Whitney: Definite Double Dip in Housing

Millions in the public sector to pay more for pension

By Rosa Prince

Millions of public sector workers are facing a steep rise in their pension contributions in order to help pay down Britain’s record deficit, The Daily Telegraph has learned.

Nurses, teachers, council workers, civil servants and police officers will be expected to pay hundreds or even thousands of pounds more each year into their pension pots, as the era of early retirement on generous payments is brought to an end.

A new government commission, led by John Hutton, the former Labour defence secretary, could recommend that public sector staff begin paying more towards their retirement as early as next spring. The move would save taxpayers billions of pounds a year.

George Osborne, the Chancellor, said on Sunday that the disparity between public and private sector pensions was “unsustainable” when the country was entering an age of austerity. Britain was heading down “the road to ruin” without urgent action to cut the national debt, he said.

Mr Hutton is to examine how to bring state employee pensions in line with the private sector. The Chancellor also hinted that a freeze in public sector pay, to be announced in Tuesday's emergency Budget, could last for more than the year that had been expected.

His approach risks a confrontation with trade unions, who last night warned of industrial action if public sector staff were forced to bear the brunt of Government spending cuts.

Mr Osborne also risked a rift within the new Coalition, as Liberal Democrat backbenchers said that they could not support cuts to welfare budgets.

Millions in the public sector to pay more for pension

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• Warning Over Public Sector Pensions Review (news.sky.com)

South Africa: Zuma Shelves Cabinet Review of State Entities

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Luphert Chilwane

THE Presidency has halted a review of state-owned enterprises by Public Enterprises Minister Barbara Hogan and Finance Minister Pravin Gordhan, which was supposed to have answered crucial questions about their mandate and operation.

A non-government panel, appointed by President Jacob Zuma after Ms Hogan and Mr Gordhan had already been asked by the Cabinet to do the job, will now conduct the only such review. This is despite Mr Zuma promising - when he announced his intention of appointing the external panel in March - that both reviews would continue and that both sets of findings would be considered by the Cabinet.

The role of state corporations is a hot topic in the tripartite alliance, and a source of tension among African National Congress (ANC) leaders.

The party's leftist allies have been critical of the running of many of the entities, the composition of their boards, and their serving business interests instead of the state's development needs. There are also concerns that state entities have served as vehicles for enrichment for party leaders through lucrative tenders.

Leadership crises at Transnet and Eskom saw ANC leaders and Cabinet ministers pitted against one another. At the time, Ms Hogan spoke out against political meddling in state-owned enterprises, arguing that their CEOs should be held accountable only by their boards.

The dropping of her investigation, which was also intended to report on the future role and mandate of state corporations, could mean that her views on corporate governance and a hands-off role for politicians will not win out.

South Africa: Zuma Shelves Cabinet Review of State Entities

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• Zuma defends minister, demands spats end (reuters.com)

Foreclosure Epidemic Hits Minority Communities The Hardest: Center For Responsible Lending

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The foreclosure crisis has been much harder on African-Americans and Latinos, according to a new study by the Center for Responsible Lending (CRL).

"African American and Latino borrowers have borne and will continue to disproportionately bear the burden of foreclosures," asserts the CRL. Based on its estimates, nearly 8 percent of both African American and Latino borrowers have lost their homes to foreclosures, compared to 4.5 percent of white borrowers. Further, African-American and Latino borrowers are 76 percent and 71 percent more likely, respectively, than white borrowers to have lost their homes to foreclosure since housing prices started to tumble in January 2007.

From early 2007 to the end of 2009, the study estimates the completion of 2.5 million foreclosures and the origination of 6.9 million foreclosures across all races. In identifying reasons for the disparate impact of these foreclosures on communities of color, the CRL says:

"African-American and Latino borrowers were particularly vulnerable, as originators targeted traditionally underserved communities for subprime loans and steered borrowers of color to higher-cost loans. Indeed, court cases and information provided by former employees of subprime lenders describe the systematic targeting of African-American neighborhoods and other communities of color."

Lending Foreclosure Epidemic Hits Minority Communities The Hardest: Center For Responsible Lending

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• Are foreclosures racist? (blogs.reuters.com)

12 American Warships, Including One Aircraft Carrier, And One Israeli Corvette, Cross Suez Canal On Way To Red Sea And Beyond

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Tyler Durden

Arabic newspaper Al-Quds al-Arabi reports that 12 American warships, among which one aircraft carrier, as well as one Israeli corvette, and possibly a submarine, have crossed the Suez Canal on their way to the Red Sea. Concurrently, thousands of Egyptian soldiers were deployed along the canal to protect the ships. The passage disrupted traffic into the manmade canal for the "longest time in years." The immediate destination of the fleet is unknown. According to Global Security, two other carriers are already deployed in the region, with the CVN-73 Washington in the western Pacific as of May 26, and the CVN-69 Eisenhower supporting operation Enduring Freedom as of May 22. It is unclear at first read what the third carrier group may be, but if this news, which was also confirmed by the Jerusalem Post and Haaretz, is correct, then the Debka report about a surge in aircraft activity in the Persian Gulf is well on its way to being confirmed. There has been no update on the three Israeli nuclear-armed subs that are believed to be operating off the coast of Iran currently.

12 American Warships, Including One Aircraft Carrier, And One Israeli Corvette, Cross Suez Canal On Way To Red Sea And Beyond

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Peddling Relief, Firms Put Debtors in Deeper Hole

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By PETER S. GOODMAN

For the companies that promise relief to Americans confronting swelling credit card balances, these are days of lucrative opportunity.

So lucrative, that an industry trade association, the United States Organizations for Bankruptcy Alternatives, recently convened here, in the oceanfront confines of the Four Seasons Resort, to forge deals and plot strategy.

At a well-lubricated evening reception, a steel drum band played Bob Marley songs as hostesses in skimpy dresses draped leis around the necks of arriving entrepreneurs, some with deep tans.

The debt settlement industry can afford some extravagance. The long recession has delivered an abundance of customers — debt-saturated Americans, suffering lost jobs and income, sliding toward bankruptcy. The settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customer’s debt is actually reduced.

State attorneys general from New York to California and consumer watchdogs like the Better Business Bureau say the industry’s proceeds come at the direct expense of financially troubled Americans who are being fleeced of their last dollars with dubious promises.

Peddling Relief, Firms Put Debtors in Deeper Hole

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European Capital Flight (aka Bank Run)?

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Tyler Durden

A few months ago we drew the ire of RBS for suggesting that Greek savers are pulling their deposits out of Greek banks and expatriating assets, in other, less polite words, consummating a bank run. Today we risk that anger again, by taking the very same logic we used logic to the next degree, namely that there could well be a capital flight out of the entire continent of Europe. Some pundits have already suggested this, by looking at March and April TIC data, which however is sufficiently delayed to be irrelevant as the real European festivities only started in May. A far better proxy is the surge in Swiss FX reserves, which took these from 28% to 43% of GDP in one month! Obviously, this was due to intervention actions meant to moderate the rate of increase in the CHF, due to conversion of Euros into Francs as foreigners were depositing tens of billions into the country's banking system. With the EURCHF now back to 1.3743, or a level below all previous interventions, either the SNB has thrown in the towel or, as we wrote yesterday, another round of EUR buying is due any minute. In either case, the underlying problem continues - the broader public is buying CHF and selling EUR in droves, threatening to push the EURCHF to fresh all time lows, certainly signifying a capital flow out of the so-called European core, and into the little country by the alps with lots of cheese, chocolates and bank vaults. Below are Goldman's relatively more moderately noted, but just as troubling, thoughts on the matter.

European Capital Flight (aka Bank Run)?

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U.S. facing debt 'super cycle': $13trillion black hole to overtake country's GDP 'within two years'

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By MAIL FOREIGN SERVICE

America's $13trillion debt is set to overtake the country's GDP within the next two years as economists warn of a 'debt super cycle.'

Forecasters predict the U.S. debt will grow to surpass gross domestic product in 2012, based on data from the International Monetary Fund.

According to Bloomberg, the world's largest economy will expand at a slower pace than the 3.2 per cent average of the past five decades.

It comes as Barack Obama borrows record amounts to fund spending programs to help the economy recover from its longest recession since the 1930s.

'Over the long term, interest rates on government debt will likely have to rise to attract investors,' said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc.

'That will be a big burden on the government and the people.'

The forecast prompted warnings the country will be plunged into a debt 'super cycle' - which occurs when a debt exceeds the value of a nation's annual economic output.

Read more: http://www.dailymail.co.uk/news/worldnews/article-1284664/Americas-13trillion-debt-set-overtake-GDP.html#ixzz0rCgnxpJO

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ECB must buy 'hundred of billions' of bonds to tame Europe's debt crisis

Image by U-g-g-B-o-y-(-Photograph-World-Sense-) via Flickr

By Ambrose Evans-Pritchard

Brian Coulton, the agency's head of sovereign ratings, said German members of the ECB appeared to be blocking the sort of muscular intervention in southern European bond markets needed to restore the shattered confidence of investors.

"There has been an unwillingness to follow through, and markets are going to want to see the ECB's money. It will require hundreds of billions in my opinion," he told a global banking conference.

The ECB agreed to start buying Greek, Portuguese, and Irish bonds in April to help buttress the EU's `shock and awe' package, known as the European Financial Stability Facility. Total purchases so far have been €47bn (£39bn).

It has focused its firepower on Greece, mopping up some €25bn of government bonds. This has prevented a collapse of the Greek debt market but at the high political price of letting banks and funds dump their holdings onto the EU taxpayer.

ECB council member Jose Manuel Gonzalez-Paramo said it was "not entirely correct" to assume that the ECB was the sole buyer of the debt. "We will continue buying bonds until the situation has stabilized," he said.

The Bundesbank is reportedly irked that French banks have led the rush to the exits while German banks have stuck by a gentleman's agreement to keep their Greek assets. The ECB's council insists that it has "sterilized" all purchases, offering no net stimulus. In effect, the ECB has done little to offset severe fiscal tightening by some eurozone states, and as the M3 money supply contracts.

ECB must buy 'hundred of billions' of bonds to tame Europe's debt crisis

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