Make it rain

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Taibbi on Wall St Hustle

o Wall Street's Bailout Hustle (Rolling Stone)

On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.

The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.

Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."

Translation: We made a shitload of money last year because we're so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.

Continued after jump

The making of a Euromess

Krugman kirjoittaa hyvän (ja voimakkaan Euro-kriittisen) artikkelin Kreikan ja Espanjan tilanteiden taustoista.

o The Making of a Euromess(PK)

Lately, financial news has been dominated by reports from Greece and other nations on the European periphery. And rightly so.

But I’ve been troubled by reporting that focuses almost exclusively on European debts and deficits, conveying the impression that it’s all about government profligacy — and feeding into the narrative of our own deficit hawks, who want to slash spending even in the face of mass unemployment, and hold Greece up as an object lesson of what will happen if we don’t.

For the truth is that lack of fiscal discipline isn’t the whole, or even the main, source of Europe’s troubles — not even in Greece, whose government was indeed irresponsible (and hid its irresponsibility with creative accounting).

No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment.

Consider the case of Spain, which on the eve of the crisis appeared to be a model fiscal citizen. Its debts were low — 43 percent of G.D.P. in 2007, compared with 66 percent in Germany. It was running budget surpluses. And it had exemplary bank regulation.

But with its warm weather and beaches, Spain was also the Florida of Europe — and like Florida, it experienced a huge housing boom. The financing for this boom came largely from outside the country: there were giant inflows of capital from the rest of Europe, Germany in particular.

The result was rapid growth combined with significant inflation: between 2000 and 2008, the prices of goods and services produced in Spain rose by 35 percent, compared with a rise of only 10 percent in Germany. Thanks to rising costs, Spanish exports became increasingly uncompetitive, but job growth stayed strong thanks to the housing boom.

Then the bubble burst. Spanish unemployment soared, and the budget went into deep deficit. But the flood of red ink — which was caused partly by the way the slump depressed revenues and partly by emergency spending to limit the slump’s human costs — was a result, not a cause, of Spain’s problems.

And there’s not much that Spain’s government can do to make things better. The nation’s core economic problem is that costs and prices have gotten out of line with those in the rest of Europe. If Spain still had its old currency, the peseta, it could remedy that problem quickly through devaluation — by, say, reducing the value of a peseta by 20 percent against other European currencies. But Spain no longer has its own money, which means that it can regain competitiveness only through a slow, grinding process of deflation.

Between Dire and Disastrous

John Mauldlin kirjoittaa analyysia Kreikan tilanteesta:

Let's look at how Greece came to its current rather dismal predicament. And we will look at why it may be even worse than many pundits think.

First, we need to go back to the creation of the euro. Most of the Mediterranean countries that are now in trouble were allowed into the union with an exchange rate that overvalued their currencies relative to the northern countries, but especially to Germany. That meant that Greek consumers could buy products and services that previously may have been out of their reach. Plus, with government debt at low rates, the Greek government could borrow more to finance deficit spending, without the threat of higher interest rates. And Greece began to increase its debt with abandon.

Additionally, as it now turns out, Greece basically lied about its finances in order to gain admission to the union. It never complied with the fiscal discipline that was required for entrance.

With the high exchange rate, however, came the consequence of higher labor costs relative to, above all, Germany. While reviewing some economic facts about Greece, I came across the factoid that Greek workers had the second highest level of actual hours worked. But even with that, Greece was running a trade deficit that is currently 12.7% of its GDP.

And with the onset of the current recession, their fiscal deficit went from bad to worse. Their total debt is now €254 billion, and they need to finance another €64 billion this year, €30 billion of it in the next few months.

Bottom line, without some help or a bailout, they simply will not be able to borrow that money. And since a lot of that money is for "rollover" debt, that means a potential for default if they cannot borrow it.

European leaders said today that Greece will not be allowed to fail, hinting of a bailout. But there are a lot of "buts" and conditions.

Between Dire and Disastrous

While German Chancellor Merkel has indicated a willingness to help, the German finance minister and other politicians are suggesting German cooperation will either not be forthcoming or only be there at a very high price; and the price is a severe round of "austerity measures," otherwise known as budget cuts. Greece is being told that it must cut its budget to an 8.7% deficit this year and down to 3% within three years.

For my American readers, let's put that into perspective. That is the equivalent of a $560-billion-dollar US budget cut this year and another such cut next year. That would mean huge cuts in entitlements, Social Security, defense, education, wages, subsidies, and on and on. And repealing the Bush tax cuts? That would just be for starters. No "let's freeze the budget" and try and grow our way out of it, as we effectively did in the '90s, or gradually cutting the budget a few hundred billion a year while raising taxes. That combination of tax increases and budget cuts would guarantee a US recession. Unemployment, already high, would climb higher.

And yet, that is what the Greek government is being asked to do as the price for a bailout.

A few facts about Greece. Some 30% of its economy is underground, meaning it is not taxed. In a country of 10 million people, only 6 (!!!!) people filed tax returns showing in excess of €1 million in income. Yet over 50% of GDP is government spending, and Greece has one of the highest public employee levels as a percentage of population in Europe. And its unions are very powerful. Nearly all of them have gone on strike over this proposal.

A National Suicide Pact

Now, here is where it actually gets worse. If Greece bites the bullet and makes the budget cuts, that means that nominal GDP will decline by (at least) 4-5% over the next 3 years. And tax revenues will also decline, even with tax increases, meaning that it will take even further cuts, over and above the ones contemplated to get to that magic 3% fiscal deficit to GDP that is required by the Maastricht Treaty. Anyone care to vote for depression?

And add into the equation that borrowing another €100 billion (at a minimum) over the next few years, while in the midst of that recession, will only add to the already huge debt and interest costs. It all amounts to what my friend Marshall Auerback calls a "national suicide pact."

Normally, a country in such a situation would allow its currency to devalue, which would make its relative labor costs go down. But Greece is in a currency union, and can't devalue. Or it would restructure its debt (think Brady bonds) to try and resolve the problem.

The dire predicament is the one where Greece cuts its budgets and more or less willingly enters into a rather long and deep recession/depression. The disastrous predicament is where they do not make the cuts and are allowed to default. That means the government is plunged into a situation where it has to cut the entire deficit to what it can get in the form of taxes and fees, immediately. As in right now. And defaulting on the interest on the current bonds wouldn't be enough, although it would help.

Why not just let Greece go under? Part of the argument has to do with moral hazard. If Germany bails out Greece, Ireland, which is actually making such cuts to its budget, can legitimately ask, "Why not us?" And will Portugal be next? And Spain is too big for even Germany to bail out. At almost 20% unemployment, Spain has severe problems. Its banks are in bad shape, with large amounts of overvalued real estate on their books (sound familiar?) and a government fiscal deficit of almost 10%. While Spanish authorities say they can work this out, deficits will remain high.

The fear is one of contagion. Some argue that Greece is only 2.7% of European GDP. But Bear Stearns held less than 2% of US banking assets, and look what happened.
...
It's More than Just Greece

The lesson here? This is not just a Greek problem. Debt and out of control deficits are a problem all over the developed world. The Greeks are just the first. As Niall Ferguson wrote this week in the Financial Times, the contagion is headed to US shores unless we get our budget house in order. You cannot spend your way out of a fiscal crisis. The current path is simply unsustainable. At some point, we can become Greece. Yes, we have the advantage of having our debt denominated in dollars, but that is only an advantage up to a certain point.

The Nobel Prize economists (who will go nameless here) who say the US cannot default because our debt is in dollars miss the point. Being the world's reserve currency just means we can run up bigger bills, but if we go the route of printing money to pay those bills, that is devaluation and fraud, as the value of a dollar will diminish; and that is tantamount to default.

Whether it is Japan or Portugal or the US or (pick a country), the body of evidence clearly shows that there is a limit to the amount of debt a sovereign country can handle without a crisis developing. That limit is different for each country, but there is a limit that the bond market will impose. And there are many countries in the developed world that are approaching that limit.

We are in the fullness of time approaching the End Game. In country after country, the choices that have been made over the last decades will yield a Greek situation, where there are no good choices. And the longer the hard choices are put off, the more difficult they will become.

For some countries it could mean deflation. For others, it will look like inflation on steroids. Countries with sensible budgets and policies will thrive.

For most of the last two decades, investors have ignored country risk in the developed world. That is no longer a safe option.

SocGen Edwards: Greek bailout only delays Eurozone breakup

o Greece bailout only delays Eurozone breakup: Edwards (MarketWatch)

A bailout of Greece will only delay the inevitable breakup of the Eurozone because the one-size-fits-all interest rate policy imposed by the euro has left several countries in the region uncompetitive, Societe Generale strategist Albert Edwards said Friday.

Edwards, a noted bear, warned about the Asian currency crisis of the late 1990s before it happened. That turmoil led to Russia's debt default and the collapse of hedge fund Long-Term Capital Management.

"The situation in Greece following hard on the heels of similar solvency issues in Dubai feels to me very much like the Russian default and LTCM blow-up in 1998," SocGen's Edwards wrote in a note to investors Friday.

European leaders vowed this week to save Greece from a fiscal crisis that's pushed the country's relative borrowing costs to the highest level since the country joined the Eurozone more than a decade ago.

"Any 'help' given to Greece merely delays the inevitable break-up of the eurozone," Edwards wrote.

Kiina kiristää, Euroopan talouskasvu hidastuu

o China Tightens and Europe Slows (CR)

From Bloomberg: China Raises Bank Reserve Requirement to Cool Economy

China ordered banks to set aside more deposits as reserves for the second time in a month to cool the fastest-growing economy after loan growth accelerated and property prices surged.

The reserve requirement will increase 50 basis points, or 0.5 percentage point, effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones.

And from Eurostat: Euro area and EU27 GDP up by 0.1%

GDP increased by 0.1% in both the euro area1 (EA16) and the EU271 during the fourth quarter of 2009, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the third quarter of 2009, growth rates were +0.4% and +0.3% respectively.

Germany's economy stalled (no change), and Latvia saw the biggest decline (-3.2%).

And Greece's economy shrunk by 0.8%, possibly exacerbating the Greek debt crisis.

Rosie päivittää

Hyvä summary tähän viikon alkuun David Rosenbergiltä.

o Rosenberg Recaps The European, And Sovereign, Risk Soap Opera In Ten Paragraphs Or Less (ZH)

First the governments bail out the banks who were (are) basically insolvent. Then these governments, especially in Europe, see their balance sheets explode and face escalating concerns over sovereign default. The IMF now predicts that the government debt-to-GDP ratio in the G20 nations will explode to 118% by 2014 from pre-crisis levels of around 80%.

Now, the ball is put back onto the banks because many have exposure to the areas of Europe that are facing substantial fiscal problems right now. According to the Wall Street Journal, U.K. banks have $193 billion of exposure to Ireland. German banks have the same amount of exposure and an additional $240 billion to Spain. Many international bond mutual funds also have sizeable exposure to sovereign debt of Portugal, Ireland, Greece and Spain as well. Contagion risks are back. Stay defensive and expect to see heightened volatility.

In a nutshell, toxic assets have basically been swept under the rug in the hopes that we will outgrow the problem. Leverage ratios across every level of society are still reaching unprecedented levels as the public sector sacrifices the sanctity of its balance sheet in its quest to stabilize the dubious financial position of the household and banking sectors in many parts of the world.

Whatever bad assets have been resolved have almost entirely been placed on the books of governments and central banks, which now have their own particular set of risks, as we have witnessed very recently in places like Dubai, Mexico, and Greece, not to mention at the state and local government level in the United States. We simply have not seen a reduction in the percentage of properties with mortgages that are “under water”, hence the FDIC has identified 7% of banking sector assets ($850 billion) that are in “trouble”, so how can it possibly be that the financial system is anywhere close to some stable equilibrium?

When accurately measured, including the shadow inventory from bank foreclosures, there is still nearly two year’s worth of unsold housing inventory in the United States, and commercial vacancy rates are poised to reach unprecedented highs, and this excess supply is bound to unleash another round of price deflation and debt defaults this year. The balance sheets of governments are rapidly in decline across a broad continuum, and it is particularly questionable as to whether Europe is in sound enough financial shape to weather another banking-related storm.

The global economy is set to cool off. Not only is China and India warding off inflation with credit tightening measures but most of the fiscal and monetary stimulus thrust in the U.S.A. and Canada is behind us as well. And, the fiscal tourniquet is about to be applied in many parts of Europe, especially the PIIGS (referring to Portugal, Ireland, Italy, Greece and Spain — these countries account for a nontrivial 37% of Eurozone GDP). Greece’s GDP has already contracted by 3.0% YoY, as of Q4, and is expected to contract 1.1% in 2010 and 0.3% in 2011 as a 13% deficit-to-GDP ratio is sliced from 13% to 3% (assuming this fiscal goal can be achieved politically). Portugal has a 9.2% deficit-to-GDP ratio that is in need of repair and Spain has a deficit ratio that is even worse, at 11.4% of GDP.

The bottom line is that even if the fiscally-challenged countries of Europe do not end up defaulting, or leaving the Union, the reality is that they will have to take draconian measures to meet their financial obligations. Devaluation was the answer in the past in Greece but it cannot rely on that quick fix this time around without leaving EMU and if it did, then that could make it even harder to service its Euro-denominated debts — at least not without a restructuring. And, if Greece did attempt at a debt restructuring, rest assured that Italy, Spain, Portugal and Ireland would be next — we are talking about a combined $2 trillion of potential sovereign debt restructuring that would more than triple the $600 billion direct cost of the Lehman bankruptcy.

This poses a hurdle over global growth prospects at a time when Asia will feel the pinch from the credit-tightening moves in China and India. And heightened risk premia will also exert a dampening global dynamic of their own in terms of economic decision-making by businesses and households alike. The intense sovereign risk concerns are not limited to Europe either. In the U.S.A. we saw CDS spreads widen out to their highest levels since the equity markets were coming off their lows last April. According to the FT, the Markit iTrax SivX [sic] index of CDS on 15 western European sovereign credits rose above 100bps on Friday for the first time ever.

Valuuttapakoa Kreikassa

o The Run On Greece Is Here: Investors Pull Out €10 Billion From The Troubled Country; Crisis Escalation Approaches (ZH)

Remember the proverbial run on the bank? Well, that was the norm (or rather the outlier) before governments decided to backstop entire financial industries residing within their territory. As a result, the post-Lehman version of "the bank run" will henceforth be referred to as "the country run" and for an example of one in practice, look no further than Greece. The Guardian reports that investors have pulled a stunning €8-10 billion since the Greek crisis commenced in earnest last November. If true, this is the beginning of the end for the troubled EMU-member country.

"In the last four to six weeks a lot of money has been moved abroad; I've heard extraordinary figures," analyst, Kostas Panagopoulos said.

"People are moving funds either because they don't trust our banking system, want to avoid what they fear will be taxes on deposits or are simply anxious about the future of our economy."

What is ironic is the previously discussed pervasive tax fraud in the country where very few resident actually declare their true income. As a result the implication of these sudden withdrawals on the country banking system is likely exponentially magnified:

While a fifth of the population lives beneath the poverty line, some 20% of Greeks are believed to earn more than €100,000 annually – even if, according to income tax records, 90% declare salaries of less than €30,000 a year.

"Greece has a lot of rich people who are not being taxed properly because there is so much tax evasion," finance minister Giorgos Papaconstantinou, told the Observer. "If you look at the actual numbers, you will see that the number of people declaring over €100,000 a year is roughly 15,000," he said. "I don't think that there is anyone in this country who believes there are only 15,000 Greeks earning more than €100,000 a year."

And as if the Greek population needed any more reasons to deteset the current economic fiasco, and to draw even more distinct lines of social separation:

The growing flight of funds from Greece has whipped up much resentment among the public. "It's revolting," said one popular radio chat-show host last week. "After pillaging the country, they flee with their ill-gotten gains at the very mention of the word tax."

If you will recall a mere 15 months back, the one factor that truuly excerbated the pre and post-Lehman fiasco, both domestically and globally, was investors' loss of conifdence in the system: first in the deposit custodians and then in money markets themselves. As the financial system is never, by definition, prepared for massive fund flows in the outward bound direction, this is the greatest nightmare of any regulator or any central bank. If indeed the money rush out of Greece has commenced, then it is too late to save the country, no matter what Papandreou or Almunia will say: the only voice that matters is that of the depositor, and what is being said is the polar opposite of the claims of those who continue lying and telling us that everything is fine.

Putting the €10 billion number in perspective: Greece is facing roughly €8 billion in near-term maturities in April and May each. This is Greece, not America, and €10 billion is still a massive number. The latest miraculous Greek bond issue, which was supposed to sound the "all clear" call, was for €8 billion. Investors in that particular GGB are already underwater.

Kreikan lainatilanteesta

"Why should I as someone in Northern Europe pay for the errors in Greece's policies"

o Is Greece’s Debt Trashing the Euro? (NYT)

DIMITRIS DAMIANIDIS is a high school teacher and a strong supporter of Greece’s socialist government. But that won’t deter him from going on strike with hundreds of thousands of other public sector workers next week to fight for the 28,000-euro pension that he expects to receive annually after he turns 60 next year.

“Why should I as a worker pay for the errors in policies?” he asked, in response to reports that the embattled Greek state will cut his pay and, by extension, retirement benefits. “The worker can’t be the scapegoat. So we have to defend ourselves.”

As Mr. Damianidis and others on the state payroll prepare to stop work on Wednesday, fear is building that the country’s new government may lack the nerve to cut public wages and pension payments, which make up 51 percent of its budget.

“The risk of contagion is a real one,” said Scott Thiel, the head of European fixed income at the asset management firm BlackRock in London. “Investor sentiment is now focused on countries like Spain and Portugal, where fundamentals are weakest.” He said that for now, he saw little risk for Italy, given the relative stability of its economy.

“We have a centralized monetary policy, but we allow budgets and wages to move in different directions,” said Paul De Grauwe, an economist in Brussels who advises the president of the European Commission, José Manuel Barroso. “Without a political union, in the long run the euro zone cannot last.”

Indeed, as core economies like those of France and Germany show signs of economic recovery, Greece, Portugal, Ireland and Spain are just entering savage recessions. Spain, the largest of the peripheral economies, announced last week that the number of its unemployed had reached four million — the highest in its history — and warned that the country’s deficit might be worse than previously thought.

Civil Charges

Bring it on! Andrew Cuomo saa vihdoinkin jotain merkittävää aikaiseksi.

o BofA, Executives Face Civil Charges by Cuomo (WSJ)

New York Attorney General Andrew Cuomo filed civil securities fraud charges against former Bank of America CEO Kenneth Lewis and former Chief Financial Officer Joseph Price, alleging they decided not to disclose mounting losses at Merrill Lynch & Co. before getting shareholder approval to acquire the Wall Street firm.

Separately, the bank and the Securities and Exchange Commission reached a $150 million settlement on allegations of misleading investors during the Merrill deal. The settlement requires a judge's approval.

Shareholders approved the purchase on Dec. 5, 2008, not knowing that Merrill had accumulated more than $16 billion in "actual losses" for the fourth quarter of 2008, according to the attorney general. The bank didn't say anything about the mounting losses until the U.S. in January 2009 provided the bank with an additional $20 billion to absorb Merrill.

"We believe bank management understated the Merrill Lynch losses to shareholders to get shareholders to approve the deal then overstated their ability to terminate the agreement to get $20 billion from federal government," Mr. Cuomo said on a conference call.

After the shareholder vote, Bank of America executives went to U.S. officials and said they might back away from the purchase because the losses were greater than they expected. But Mr. Cuomo said Wednesday that "actual losses" were only $1.4 billion greater than at the time of the vote.

"That is just a fraud," he said.

Cliff diving

Ylös mennään portaita ja alas tullaan hissillä.

Rapakon takana aika rajun näköistä pudotusta ainakin näin pörssien avautuessa. Eipä sen puoleen, nämä työttömyysluvut eivät ole mitään kovin kaunista katsottavaa.

CR summaa tilanteen alla:

o Weekly Initial Unemployment Claims Increase to 480,000 (CR)

The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 30, the advance figure for seasonally adjusted initial claims was 480,000, an increase of 8,000 from the previous week's revised figure of 472,000. The 4-week moving average was 468,750, an increase of 11,750 from the previous week's revised average of 457,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending Jan. 23 was 4,602,000, an increase of 2,000 from the preceding week's revised level of 4,600,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims increased this week by 11,750 to 468,750.

This is the third weekly increase in a row for the four week average, and the average is now 28,000 above the low in early January. Both the level of claims, and the recent increase in the 4-week average, are concerning and suggest continued job losses.

The Cost of War

Mike Prysner taitaa olla se oikea sotasankari.

o The Enemy Is At Home (Mish)

Here is a short video of a speech given by a military soldier explaining the simple truth as to why we are actually in Iraq.


Why are we at war?

War is profitable, that's why.

It matters not how many die, as long as the warmongers make a profit on it.

Inquiring minds are noting increasing resentment against US militarism in places some might least expect. Please consider Thousands protest in Tokyo against U.S. military presence in Japan

Thousands of protesters from across Japan marched today in Tokyo to protest against U.S. military presence on Okinawa, while a Cabinet minister said she would fight to get rid of a marine base Washington considers crucial.



Some 47,000 U.S. troops are stationed in Japan, with more than half on the southern island of Okinawa. Residents have complained for years about noise, pollution and crime around the bases.

Japan and the U.S. signed a pact in 2006 that called for the realignment of American troops in the country and for a Marine base on the island to be moved to a less populated area.

But the new Tokyo government is re-examining the deal, caught between public opposition to American troops and its crucial military alliance with Washington.

On Saturday, labor unionists, pacifists, environmentalists and students marched through central Tokyo, yelling slogans and calling for an end to the U.S. troop presence.

Given that the US can no longer afford to be the world's policeman, this is an extremely welcome event. Let's hope it spreads.

Germany, Turkey, Philippines, and all 150 countries where US troops are stationed, please do us, yourselves, and the world a favor by kicking US troops out.

Säästöliekillä

Eschaton kirjoittaa:

Paradise Found

In Colorado Springs.

More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops — dozens of police and fire positions will go unfilled.

The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter.

Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.

Water cutbacks mean most parks will be dead, brown turf by July; the flower and fertilizer budget is zero.

City recreation centers, indoor and outdoor pools, and a handful of museums will close for good March 31 unless they find private funding to stay open. Buses no longer run on evenings and weekends. The city won't pay for any street paving, relying instead on a regional authority that can meet only about 10 percent of the need.

Shedlock jatkaa samalla teemalla:

o Massive Layoffs Coming in NYC, Nevada, California, Colorado, Arizona, Everywhere (Mish)

Cities, states, and municipalities are sinking by the minute. And unless unions agree to concessions (which they won't) massive layoffs are coming everywhere you look. New York City is a prime example.

Please consider NYC May Lay Off 19,000 Workers If State Cuts Aid

New York City will have to lay off more than 10,000 public workers, in addition to 8,500 teachers, if the state legislature approves the $1.3 billion of cuts the governor proposed in his deficit-closing budget, Mayor Michael Bloomberg said on Monday.

The mayor, in a speech to the legislature, estimated 3,150 police officers would be cut, reducing the force's "operational strength" to 1985 levels.

Drastic Cuts In Phoenix

Inquiring minds are reading City of Phoenix details plan for drastic cutbacks.

Phoenix's budget troubles came into sharper focus Thursday as City Manager David Cavazos proposed shutting down senior centers, libraries and sports complexes, and laying off hundreds of police officers and firefighters for the first time in decades.

The plan would help close Phoenix's $242 million deficit, balancing the general-fund budget through fiscal year
2011.

Cavazos' proposal would eliminate 1,379 of the city's 16,000 positions, though a third of the targeted positions are vacant. The Police Department would lose about 353 sworn positions, from patrol officers to assistant chiefs. The Fire Department would cut 144 sworn jobs. The cuts represent about 18 percent of the total sworn police and fire force.

Six of the city's 15 library branches, five of its senior centers and numerous sports complexes and community centers would be shuttered. Funding for the arts and after-school programs would be slashed. And bus routes and light-rail hours would be reduced.

"This is more than an inconvenience," Cavazos said. "When you close someone's senior center, that's their whole life."

Sacramento County

Please consider Sacramento County could see $150 million shortfall in 2010-11.

Sacramento County could be facing a $150 million general fund shortfall next fiscal year, according to preliminary county projections obtained by The Bee.

That number is based largely on ongoing shortfalls the Board of Supervisors failed to address at the start of this fiscal year when they instead chose to use more than $80 million in one-time funds such as reserves and inter-fund transfers to cover deficits. Increased labor costs stemming from negotiated contracts are projected to cost the general fund $44.3 million

Drastic Cuts In Nevada

Inquiring minds are pondering the ramifications of Nevada's $900 Million Shortfall

Nevada's budget outlook is so bleak that lawmakers doubt whether state government can remain afloat without drastic cuts to everything from prisons to schools to state parks and services for the poor and elderly.

Legislators met Tuesday with Republican Gov. Jim Gibbons to discuss how they will cope with a short-term deficit of about $900 million during an upcoming special session of the Legislature. Some Democratic lawmakers acknowledge options to bridge the gap probably won't include tax increases.

"It is important for all of us to understand how dire it is," Senate Majority Leader Steven Horsford, D-Las Vegas, said. "The things we attempted to protect are now going to be considered for reduction or elimination."

Nevada to borrow up to $1 billion to cover jobless benefits

Adding to already huge fiscal problems, Nevada to borrow up to $1 billion to cover jobless benefits.

The state will borrow between $800 million and $1 billion from the federal government this year to continue paying unemployment benefits to Nevadans. Employers will be saddled with paying off this debt at an interest rate of 4.6 percent.

Schwarzeneggers's Bizarre Plan To Outsource Prisoners To Mexico

In the truly bizarre category Schwarzenegger Proposes To Outsource Prisoners To Mexico.

Schwarzeneggers's daily stunts to keep his state afloat are getting more ridiculous.
The governor probably wasn't joking yesterday, when he suggested outsourcing California's overcrowded prison system to Mexico. Specifically, he would send the state's 19,000 imprisoned illegal immigrants to prisons south of the border.

"We pay them to build the prisons down in Mexico and then we have those undocumented immigrants be down there in a prison. ... And all this, it would be half the cost to build the prisons and half the cost to run the prisons," Schwarzenegger said, predicting it would save the state $1 billion that could be spent on higher education.

Verizon to cut 13,000 jobs

In the private sector, things do not look so hot either. Please consider Verizon to cut 13,000 jobs.

After posting a fourth-quarter loss, Verizon Communications, Inc. said Tuesday it plans to cut about 13,000 jobs this year.

Verizon recorded a net loss of $653 million, or 23 cents per share, compared with a profit of $1.24 billion, or 43 cents a share, a year earlier. The loss came after the company took a charge of $3 billion for cutting a total of 17,000 jobs last year in both its landline and wireless divisions. Analysts polled by Thomson Reuters had forecast earnings of 54 cents per share.

1,500 job cuts at Ericsson

Please consider Ericsson’s 1,500 job cuts may reach Kansas City area.

The Swedish telecommunications company on Monday reported fourth-quarter earnings of 700 million kronor ($96.8 million U.S.), down 83 percent from 4.1 billion kroner during the same period a year ago. Revenue during the three-month period dropped 13 percent to 58 billion kroner ($8 billion U.S.) as sales in central Europe, Africa and the Middle East slumped.

Jobs That Are Not Coming Back

• Intel's workforce is at 2003 level.
• Airlines have cut capacity, which means fewer routes and fewer flights. Total airline employment was down almost 10% through November from two years earlier, according to the Bureau of Transportation Statistics.
• Citigroup shed one-third of its employees and unloaded $500 billion in assets.
  
• GE is in the process of condensing its capital-finance unit, once the locomotive of its profit. During GE's conference call on Friday, Chief Financial Officer Keith Sherin mentioned the unit's "focused shrinkage." "GE Capital," he said, "will be a smaller but more meaningful contributor in the future."

The above bullet points from the Wall Street Journal.

Layoff stories are endless, and layoffs in the public sector have barely started. Those layoffs are likely to be staggering unless Obama and Congress are willing to go much deeper in debt, specifically to bail out failed states.