IMF paper warns of 'savings tax' and mass write-offs as West's debt hits 200-year high

IMF paper warns of 'savings tax' and mass write-offs as West's debt hits 200-year high. HT: The Telegraph

Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.

The IMF working paper said debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, either negotiated 1930s-style write-offs or the standard mix of measures used by the IMF in its “toolkit” for emerging market blow-ups.

“The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point,” said the paper, by Harvard professors Carmen Reinhart and Kenneth Rogoff.

The paper said policy elites in the West are still clinging to the illusion that rich countries are different from poorer regions and can therefore chip away at their debts with a blend of austerity cuts, growth, and tinkering (“forbearance”).Critics says extreme austerity without offsetting monetary stimulus is the chief reason why debts have been spiralling upwards even faster in parts of Southern Europe.Read the full story here. 

A number of hedge funds and other shareholders filed a Class Action Lawsuit against General Motors

A number of hedge funds and other shareholders filed a Class Action Lawsuit against General Motors.(MP).A number of hedge funds and other holders of shares in General Motors have filed a class action lawsuit alleging that GM is channel stuffing in order to inflate its sales numbers. This has been long discussed and finally some action. If you think the economy is so robust, what is robust is how much manipulation is going on.
 Quote: --------------------------------------------------------------------------------

1. This is a securities class action on behalf of all purchasers of the common stock of GM pursuant in or traceable to the Company's November 18, 2010 initial public offering (the "MO" or the "Offering") pursuant to the Securities Act of 1933 (the "Securities Act").

2. Defendants made materially false and misleading statements, and failed to make subsequent disclosures to make the earlier statements not misleading, related to GM having strong inventory controls in place at the time of the IPO.

3. In connection with the IPO, and in order to assuage concerns that GM was predicting revenue based on production rather than actual sales, GM falsely assured investors that it was actively managing its production by monitoring its dealer inventory levels. Additionally, GM assured investors that in 2011 it would improve inventory management, which would improve average transaction price.

4. These statements were false when made. In July 2011, reports began to surface that GM had engaged in an extraordinary inventory build-up. In particular, an article published by Bloomberg on July 5, 2011 revealed that GM may have been unloading excessive inventory on dealers, a practice known as channel stuffing, in order to create the false impression that GM was recovering and sales and revenues were rising. The Bloomberg article stated that GM's truck inventory swelled to 122 days worth of average sales whereas, by comparison, GM's less profitable car inventory was limited to 60 to 70 days of average sales, Ford was maintaining only a 79 day inventory on comparable trucks, and GM's truck inventory during the years 2002-2010 had similarly averaged only 78 days of average sales. By November 2011, GM dealer inventories were 30% higher than they were on September 30, 2010 (the end of the last full quarter before the November 18, 2010 IPO) and 62% higher than they were at the end of2009.

5. During the three months following the Bloomberg article, GM's share price fell from more than $31.00 to below $20.00, far below the IPO price of $33.00, and continues to trade around $20.00 today.

6. Plaintiff is asserting non-fraud prospectus liability claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 on behalf of purchasers of GM stock in or traceable to the November 18, 2010 IPO.

Hmmmm..........Obama Pushes False GM Success Story: "As part of a credit agreement with Treasury, $16.4 billion in TARP funds were placed in an escrow account that GM could access only with Treasury's permission." As it turns out, GM got Treasury's OK to "repay" more than $6.7 billion "using a portion of the escrow account that had been funded with TARP funds." So GM is merely paying the government back with government money, not money GM is earning selling cars, as the administration has claimed.............."Yes We Can?"Read the full story here.

Video - The Obamamobile is awesome! In fact, the VoltsWagen is smokin'!

HT: WolfFiles.

Crisis: Spain; EU rescues banks, not country, Krugman.

Crisis: Spain; EU rescues banks, not country, Krugman.(ANSAmed) - MADRID - "Yet again the economy slides, unemployment soars, banks get into trouble, governments rush to the rescue - but somehow it's only the banks that get rescued, not the unemployed." This statement was made by Paul Krugman, U.S. winner of the 2008 Nobel Prize for the Economy, in an opinion article in the New York Times, cited today by El Pais. The article regards the bailout of the Spanish banking system with 100 billion euros, agreed by the Euro Group and Spain. According to the economist, the bailout is necessary, but is ''not the solution Spain needs. "There's nothing necessarily wrong with this latest bailout (although a lot depends on the details). What's striking, is that even as European leaders were putting together this rescue, they were signaling strongly that they have no intention of changing the policies that have left almost a quarter of Spain's workers - and more than half its young people - jobless." Krugman complains that the European authorities ''are always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve." He also reproaches the European Central Bank for refusing to lower interest rates. ''Unemployment in the euro area has soared,'' Krugman writes, ''and all indications are that the Continent is entering a new recession. Meanwhile, inflation is slowing, and market expectations of future inflation have plunged. By any of the usual rules of monetary policy, the situation calls for aggressive rate cuts. But the central bank won't move." The economist heavily criticises the eurozone's paralysis and concludes: ''it's becoming increasingly clear that it will take utter catastrophe to get any real policy action that goes beyond bank bailouts. But don't despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner."Read the full story here.

Obama Ad Claims to Have Helped Man Get a Job, but Man Claims Employment Since 2006

Obama Ad Claims to Have Helped Man Get a Job, but Man Claims Employment Since 2006.(WS).Matt Negrin of ABC reports that "A new ad by Obama tells the story of Brian Slagle, an autoworker in Ohio who says he was laid off and 'scared to death' until the president swooped in to save the industry." In the spot, Slagle says, "Obama stuck his neck out for us, the auto industry. ... He wasn’t going to let it just die, and I’m driving in this morning because of that, because of him." The ad is meant to praise Obama's auto bailout for saving jobs.Indeed, it appears, via Facebook, that Slagle is an employee at Johnson Controls, a Wisconsin company that "create[s] quality products, services and solutions to optimize energy and operational efficiencies of buildings; lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles; and interior systems for automobiles," according to its website.
But the ad itself seems to be misleading. It is not because of Obama's auto bailout that Slagle has a job. In fact, Slagle has been employed with Johnson Controls since February 2006, according to his own Facebook page,Slagle has since taken down his employment information from his Facebook page, but not before these screenshots were taken.Read and see the full story here.