by: Brandon Turbeville
Wednesday, August 8, 2012
On Friday, August 3, 2012, the United States Postal Service experienced its first-ever default on a Congressionally-mandated payment of $5.5 billion for the retirement benefits of future employees.
Although USPS is claiming that, for now, the default will have “no material effect” on the operation of the Post Office and that the agency will continue to deliver mail and pay employees, the fact is that this financial quandary has raised new questions regarding just how long the agency will be able to operate.
After all, the USPS is expected to default on the second half of this payment – another $5.6 billion – in September.
Congress is now debating what to do about the default and the question of how or if the USPS will continue to function in the future. FOX News reports that;
While the Senate passed a bill in April that provides an $11 billion cash infusion to help the mail agency avert a default, it would also delay many of the planned postal cuts for another year or two. The House remains stalled over a measure that allows for the aggressive cuts the Postal Service prefers, in large part due to concerns among rural lawmakers over cutbacks in their communities.
The Postal Service originally sought to close low-revenue post offices in rural areas to save money, but after public opposition it agreed to keep 13,000 open with shorter operating hours. The Postal Service also is delaying the closing of many mail processing centers, originally set to begin this spring. The estimated annual savings of $2.1 billion won’t be realized until the full cuts are completed in late 2014.
Continue Reading At: ActivistPost.com
August 1, 2012
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by: Tyler Durden
July 25, 2012
While it might seem like somewhat stating the obvious, it is nonetheless worth driving home to the politicians and public policy wonks who see rates at record lows and perceive a Keynesian borrow-and-spend-fest as once again the solution to borrowing-and-spending too much. As Morgan Stanley puts it,fiscal policy is sailing between the Scylla of chase-your-tail austerity and the Charybdis of sovereign insolvency
. In short, it is impossible for governments to grow their way back to solvency. Doing nothing would sail governments towards the whirlpool of national insolvency – at some stage. But avoiding insolvency would risk being monstered by recession. If ‘expansionary austerity’ worked, then Europe would now be booming. The outlook for fiscal policy and public sector finances is a major uncertainty for investors and, critically, is part of the reason why risky assets are being de-rated and ‘safe’ assets are at unprecedented valuations
.Continue Reading At: ZeroHedge.com
by: Nick Squires
July 23, 2012
Italy’s financial outlook darkened on Monday amid warnings that 10 cities are at risk of bankruptcy and schools may not be able to open in the autumn because of drastic spending cuts.
The cities at risk of running out of money include Naples, Palermo in Sicily and Reggio Calabria, on the toe of the Italian boot, according to the Italian press.
“The situation is becoming worse by the day,” said Graziano Del Rio, the president of a national association of municipal councils.
The warning came just days after Mario Monti, the prime minister, expressed fears that Sicily, which has a high degree of fiscal autonomy, was on the brink of a default.
Cities and towns in southern Italy have for years been plagued by mismanagement, corruption, the wasteful use of EU funds and infiltration by the Mafia. But the “black list” of cities at risk also includes some in the north of Italy such as Alessandria, in the Piedmont region.
Italy’s regions face “a serious situation”, said Annamaria Cancellieri, the interior minister, although she downplayed concerns that Sicily would be forced to default.
Continue Reading At: Telegraph.co.uk
by: Tyler Durden
July 18, 2012
Appropriately coming just after today’s Housing Starts data, which captured MSM headlines will blast was “the highest since 2008″ is the following chart from this morning’s Bloomberg Brief, which shows precisely the reason why “housing has bottomed” – and it has nothing to do with organic demand rising. No, it has everything with excess inventory once again starting to pile up, which means that the imbalance in the supply and demand curves is purely a function of shadow inventory being stocked away, and that there is once again no true clearing price.
by: Tyler Durden
July 17, 2012
When it comes to estimating the biggest threat to the global financial system, by far the biggest threat and biggest unknown is the total Financial
debt in the system, for the simple reason that as we have been showing for over two years, it is simply impossible to quantify just what the real level
of such debt in the developed world truly is, especially when one accounts for shadow liabilities, rehypothecated collateral, derivatives, and all those other footnotes in financial statements that only become relevant when daisy-chained collateral links start collapsing following the default of one or more financial entities, and when gross becomes net. What we can, however, do is show the other three major categories of debt currently existing in the system: Government, Corporate and Household debt, as they are distributed among the “developed” countries. We also know what the tresholds are beyond which the debt becomes unsustainable. In the words of the BIS
: “For government debt, the threshold is around 85% of GDP
… When corporate debt goes beyond 90% of GDP
, it becomes a drag on growth. And for household debt, we report a threshold around 85% of GDP
, although the impact is very imprecisely estimated.”