Saturday, February 12, 2011

Mubarak resignation cools demand for gold

by Pham-Duy Nguyen

Gold fell from a three-week high Friday as an advance by the U.S. dollar eroded demand for the precious metal as an alternative asset.

The greenback rose for a second straight day against a basket of major currencies as reports showed the U.S. economy is improving and Egyptian President Hosni Mubarak stepped down. Earlier, gold gained as much as 0.5% amid mounting tensions in Egypt.

"Some of the dollar strength is hurting gold," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "If gold doesn't rally from here, it's going to trigger a lot of sell signals."

Gold futures for April delivery fell US$2.10, or 0.2%, to settle at US$1,360.40 an ounce. Earlier, the price reached US$1,369.70, the highest for a most-active contract since Jan. 20. This week, the metal climbed 0.8%, the third straight gain, after slumping 6.1% in January. In 2010, the price jumped 30%, the 10th consecutive annual gain.

Silver futures for March delivery declined 9.9¢, or 0.3%, to US$29.995 an ounce. This week, the metal gained 3.2%.

The tightest physical silver supplies in four years have tipped the U.S. silver futures market into backwardation this week, making near-term prices more expensive than more distant months.

Market watchers said that it has been more than 10 years since silver futures were last in backwardation, an unusual term structure associated with shortage of physical supply. Warehouse stocks have dropped to a four-year low on surging demand, while miners have hedged their future production.

Booming industrial demand for silver and record U.S. coin sales, combined with a surge in demand from mining companies to borrow the metal for their hedge programs have led to a squeeze in the physical silver market.

Palladium futures for March delivery fell $6.20, or 0.8%, to $814.70 an ounce on the New York Mercantile Exchange. This week, the price dropped 0.2%.

Platinum futures for April delivery declined $17.30, or 0.9%, to $1,813.50 an ounce. The commodity fell 1.7% this week.

Critic blames ethanol for world food shortages

by DAN PILLER
Ethanol is again under fire as corn prices have climbed and food costs rise.

An anti-ethanol advocate accused biofuels of being a factor in global food shortages Friday.

The ethanol industry fired back, noting distiller grains are a cattle feed and that ethanol is the only nonfossil fuel available in mass quantities.

Meanwhile, corn's price rose again on the Chicago Board of Trade by 8 cents to $7.06 per bushel for the March contract. Corn's price has doubled since last June as domestic corn stocks have dwindled.
Nationally, about 37 percent of the corn crop goes to ethanol production. In Iowa, the amount is 60 percent.

Princeton University professor Tim Searchinger, a frequent ethanol critic, checked in with an op-ed piece Friday in the Washington Post essentially accusing ethanol of causing food shortages.

Searchinger didn't limit his criticism to corn-fed ethanol.

"Brazil's reliance on sugar ethanol and Europe's on biodiesel have comparably increased growth rates in the demand for sugar and driven up demand for vegetable oil," Searchinger said.
Growth Energy, the biofuels lobbying group put together by ethanol producer Poet and other biofuels interests, fired back with a statement and a news conference Friday in Washington, D.C.

Growth Energy noted that the ethanol fermentation process removes the starch, but leaves the protein kernels to be used as animal feed.

"Ethanol is both a food and a fuel business. What is ignored in this piece is that every ethanol plant in the country turns out animal feed as well as fuel - we only take the starch out of the corn kernel but put all the protein, fiber and oils right back into the food supply as 'dried distillers grains,' " Growth Energy said.
Growth Energy added, as a reminder, that ethanol is the only biofuels game in town until cellulosic ethanol is developed further.

"There is only one commercially viable alternative to this country's dependence on foreign oil, and that is domestic ethanol," Growth Energy said. "Every day, foreign oil is getting riskier, costlier and dirtier to extract. On the other hand, with cutting-edge technology and innovation, domestic ethanol is getting cleaner, smarter and more abundant."
Continue reading this article>>

Updates of Super Commodity Systems

SUPER COMMODITY OPEN TRADES
Soybean Meal - After a few days seems wants to break the trading-range with several divergences on daily chart.
Platinum - Nice trade, it is now on the first support. Here yowe can lightens the position.
Soybeans - The trade started well with several divergences on daily chart.

SUPER COMMODITY RECENTLY CLOSED TRADES
Gasoline - After a promising start the trade has been stopped at breakeven.
eMini Nasdaq -After closing with a good gain the previous long trade, the sell short reverse has been stopped with a small loss.

SM S PL
RB NQ

Survivor Trading System - Trades of 11 February

I trades di Survivor System del 11 Febrraio. I risultati real-time di Survivor e di alcuni altri nostri trading systems sono a disposizione al seguente link: http://www.box.net/shared/5vajnzc4cp

Trades of Survivor System on 11 February. Real-time results of Survivor and our some other trading systemsare available at the following link: http://www.box.net/shared/5vajnzc4cp

SP TF EMD
GC CL

Gas Prices Hit Their Highest Level Ever For Mid-February

by Mike "Mish" Shedlock

U.S. gasoline prices have jumped to the highest levels ever for the middle of February. The national average hit $3.127 per gallon on Friday, about 50 cents above a year ago.

The price is about 6 percent higher than on this date in 2008. The next day, pump prices began a string of 32 gains over 34 days. They rose 39 percent over five months, eventually hitting an all-time high of $4.11 per gallon in July.

Although gas prices are expected to rise, most experts aren't expecting a reprise of 2008, when the price spike forced many drivers to join car pools and trade in gas-guzzling SUVs for fuel-efficient cars.

"It would be a mistake to think we're going to have that all over again," said OPIS chief oil analyst Tom Kloza.

He says oil demand will slide in the U.S. by May, as refineries slow fuel production while they switch to summer blends of gas. World oil consumption also may not rise as much as expected.

And Kloza contends that oil traders are more cautious now, after getting burned when oil plunged to $33 per barrel in early 2009, just six months after hitting $147 per barrel. Even the most bullish traders no longer think they can chase commodity prices higher without risk, he says.

Still, Kloza expects gas to reach $3.50 to $3.75 per gallon this spring because of the usual run-up in prices ahead of the summer driving season. That would mean an increase of 12 to 20 percent from the current level.

Crude Futures - Monthly Chart

Chart
Crude futures for now have stalled right at 50% retrace level of the 2008 plunge in spite of the recent turbulence in Egypt.

Unleaded Gasoline Futures - Monthly Chart

Chart
Unleaded gasoline futures and gas pump prices follow the price of crude as one might expect.

Note the seasonal nature of the moves. Gasoline prices (and crude futures) tend to rise from January until June or July in most years.

In 2007, there was a ramp from the beginning of the year that ended in April, followed by a pullback until July. From then it was straight up for a full year.

2009 was back to the familiar pattern of continued strength from the beginning of the year until July. 2010 had a July low instead of a high, similar to 2007.

Crude Futures - Daily Chart

Chart
Prices at the pump may be up, but crude prices are down since the start of the year as noted by the dashed line. Prices at the pump will head lower eventually if crude prices keep sliding.

Inability for crude prices to continue higher with events in Egypt and the Mideast might be meaningful. Moreover, interest rate hikes in China could start weighing on commodity prices in general, especially if those hikes come at a pace faster than expected.

There are a lot of variables in play, including seasonality, rate hikes in China, the extremely overbought reflation trade, Quantitative Easing, and price action weakness (except for a 2-day pop now taken back) in the face of events in Egypt.

Continue reading this article>>

Unpredictables could send gold price skyrocketing

by Jeffrey Nichols

Readers of these articles should not be surprised by gold's recent rebound. In late January, as gold was testing recent lows near $1,310 an ounce, we said "the fundamentals suggest much higher prices ahead" with "market activity strengthening the case for a surprisingly sharp snapback and new all-time highs later this year."

Indeed, we anticipate gold will retake its all-time high near $1,432 an ounce in the months ahead . . . and reach $1,700 later this year . . . on its way to $2,000 an ounce in 2012 . . . and still higher prices in the next few years.

GLOBAL INFLATION RISING

One of the key forces contributing to expected gold-price strength is the acceleration in inflation now underway around the world.

It seems that almost everywhere - except here in the United States - inflation is on the rise.  We now read daily about the rise in agricultural, energy, and industrial commodity prices from one country to the next - and the consequential acceleration in consumer prices.  China, India, Brazil, the United Kingdom, and the Eurozone economies make the newspapers because these are the largest economies after the United States and they are the most populous, too.

But, less noticed outside their own borders, one country after the next, is suffering from higher prices, especially for food and energy - and the acceleration of inflation in some countries is beginning to have broader social and political consequences as we have seen recently in Tunisia and Egypt.

Today's global inflation is largely a consequence of U.S. monetary policy and the unbridled flood of dollars into the world economy on the one hand . . . combined with an unwillingness among central bankers in the other big economy countries to allow upward appreciations of their own currencies.

Just as in the United States, central bankers in these countries prefer economic expansion and happy workforces to low inflation with higher unemployment.

And, although some - China, India, and Brazil, for example - are raising interest rates and restricting bank lending, these measures are intentionally insufficient to greatly restrain future economic growth and, therefore, insufficient to restore price stability in their respective economies.

It's no wonder that smart savers and investors in China and India are buying hundreds of tons of gold a year - and will most likely continue to do so even as gold prices move significantly higher.

Anyone worried about inflation should be worried about the fantastic growth in the Fed's holdings of U.S. Treasury securities.  Recently, the Fed surpassed China as the largest holder of U.S. Treasury securities - and by mid-summer the Fed will likely hold more Treasury securities than both China and Japan combined.

The explosive growth of U.S. Treasury securities - T-bills, notes, and bonds - held by the Federal Reserve is the flip side of the central bank's policy of quantitative easing.  The Fed has now replaced foreign central banks as America's financier, funding our Federal budget deficit by creating new money.
This is a policy that must eventually result in a significant erosion in the greenback's purchasing power brought on through a depreciation of the U.S.
dollar in world currency markets and an acceleration of inflation here at home - an acceleration that is bound to occur irrespective of continuing economic slack, high unemployment and low capacity utilization.

OTHER PRO-GOLD FUNDAMENTALS

In addition to rising global inflation and inflation-fueling U.S. economic policies, other on-going trends in the world of gold will also contribute to higher prices later this year and beyond:

Continuing strong gold demand for jewelry and investment - even in the face of higher prices - from China, India, and other gold-friendly Asian and Middle Eastern nations.  Demand from these countries is driven by rising household incomes and rising inflation expectations - and these trends are likely to persist for some time to come.

Continuing official purchases by China, Russia, and other cash-rich central banks with "under-weighted" gold reserves.  Central banks tend to buy on dips when their purchases are least likely to disrupt the market - and official demand in recent weeks with prices near $1,320 helped stabilize and reverse the short-term price decline.

Expanding investment demand from a small but growing segment of retail investors in the United States and Europe who are worried about rising inflation and currency depreciation . . . and from hedge funds and other institutional investors who understand gold's bullish fundamentals.

Given the relatively small size of the gold investment market relative to world stock and bond markets or major currency markets, a very small shift in portfolio preference away from conventional assets in favor of gold may have a negligible affect on the stock and bond markets - but will have a big affect on the price of gold.

Easier access to gold through new investment vehicles, especially exchange-traded funds, is promoting the growth in gold investment from one country to the next.  Even India and China are jumping on the bandwagon with new ETFs denominated in local currencies and weight units familiar in each country.
IMAGINING THE UNPREDICTABLE

In addition to these somewhat predictable gold-positive trends, unpredictable geopolitical developments could, under certain circumstances, have an overwhelming affect on the price of gold.

What if Egypt sinks into a prolonged period of social and political chaos?

What if the Suez Canal is threatened or closed by political developments or by terrorism?

What if similar spontaneous revolutions erupt in Lebanon, Yemen, or Saudi Arabia, the world's largest source of oil?

What if new governments in the region threaten Israel militarily?

What if Iran takes advantage of the political vacuum created by these popular uprisings?

Or, in other regions . . .

What if North Korea launches another, but more serious, assault on the South?

What if Europe's sovereign debt problems erupt again, triggering a flight from the euro?

And, closer to home . . .

What if Congress and the Obama Administration fail to make any significant progress in balancing America's Federal budget deficit, triggering a flight from the dollar?

Any of these events are certainly plausible - and there are many others we simply can't imagine - but each has the potential to send gold skyrocketing.

Continue reading this article>>

The Grain Report - USDA REVEALS

By Tim Hannagan

USDA REVEALS................. Let's knock off the Thursday export sales report first, then covered the crop report psychology. Thursday's weekly export sales report put wheat sales last week at 391,000 metric tons down 27% from the week prior and 40% under our four-week average. Egypt was missing from the party list for obvious reasons over their civil unrest. Egypt's the largest monthly buyer on the world market. Once this revolution is over buying will resume but the meantime leaves us filling small lot orders, and not enough demand on this report to drive prices. Bean export sales were 20,000 metric tons a new marketing year lows since last September 1. China was absent from the buy sheet old crop delivery but no surprise here as China was on there lunar new year holiday all week. But -CAUTION- now on near-term demand for soybeans. South American crops are coming to export now from March to April and we have to expect slower seasonal US exports near-term. Additionally, several weeks ago when the Chinese premier was here in Washington negotiating the new years grain deal, it was announced days after that meeting they took home a bonus of almost 3 m.m.t. but it was for 2011- 12 delivery, not this year. Last years same meeting resulted in a 2 m.m.t. take home purchased from the meeting, but for immediate delivery. The delayed shipping of this new year bonus buy tells us Obama stressed our tight supply inventory situation and asked for them to push more deliveries into the new crop season and marketing year. It doesn't mean less demand overall, but less for old crop delivery before September 1. Couple this with prospects for more acres going to corn and less than needed for beans for new crop delivery and the fact that November new crop soybean futures are $.65 under the old crop year July soybeans. Were set up to see new crop November gain on July crop and potentially November over July. A great spread trade to follow. Corn export sales were a whopping 1.107 m.m.t. up 51% over the four-week average and over 1 m.m.t. for the second consecutive week. It's becoming clear to importers that they better move in and buy US corn now as stocks continue to drop and prices rise. They're all afraid they may have to pay one or two dollars more later. How about the crop report on Wednesday. They left wheat alone putting ending stocks come wheats new marketing year June 1, at 818 m.b. unchanged from the months prior. Traders expected a drop of 8 m.b. off poor weather conditions and better demand into the Middle East but even if a little lower resulted it would've had little impact as wheat traders await March on our winter wheat crop for dormancy to break for production issues to trade. As long as were still sitting with ample wheat stocks it's all about production. Beans too saw no change in ending stocks from the months prior at 140 m.b. This still represents the lowest ending stocks since 2008 of 138 m.b.. Total soybean exports for the 2010-11 marketing year which ends September 1 are at 89% of the USDA forecast, yet we have six months left in the marketing year. Clearly ending stocks will decline further, but it also gives us more mindset the government wants to push more exports out into the new marketing year after September 1 , supporting the long November short july soybean spread in the long-term. Corn ending stocks were all the excitement. Corn stocks come September 1, 2011 were pegged at 675 m.b. down 70 m.b. from last month and down eight of the last nine months. The 675 represents a 20 day supply and has us set up to run out in 2012 if we have a poor summer growing season and demand stays unchanged. The last five monthly reports have seen an average ending stocks drop of 89 m.b. Prior to February the four prior months averaged a $.71 gain from the crop report results. This sets up may corn futures to push to 7.50 to 7.60 to price in this reports 70 m.b. decline. Funds are systematic and pattern in their trading so unless something enters that's not there now, we have to expect further gains, even if a near-term profit-taking pullback occurs. Early seed and fertilizer sales occurring are favoring more corn acres than beans will be planted. Only the big landowner growers take advantage of early deep discounted purchases as the early discount buy savings add up on large acreage numbers. Smaller growers let the price of the grain determine how much of what crop they will plant and they may not commit until after the government's March 31 planting intentions report. But don't expect a big surge in corn acres. Farmers already plant fence post to fence post, thanks to two of the last three years being the most profitable years ever for farm income. There is talk of getting acres from the government conservation reserve program. This is unlikely in 2011. Reasons are many. First, the land originally put in is the worst land a grower has. Low lands that flood and land void of adequate topsoil to produce yields profitable enough to offset fertilizer costs. Additionally, if a farmer pulls land out early, he has to pay back what government money he received to put it in. February told you the government's thoughts when they announced they would accept up to 3.9 million acres additional into the reserve program. Corn and beans can not steal acres from each other as both need to expand. The land looks to come from alfalfa, hay and oats fields that are far less profitable to the growers. But even then were talking about 3 or 4 m.a. available to swipe away. Acres just are not there to ensure a surge to safer ending stocks levels for 2012. This sets up the planting and growing season between April and August to be the most weather sensitive to pricing in history. Here's your technicals. March corn support is 6.84. A close over 7.00 is very bullish setting up 750 the 760 as next stop. March beans support is 14.15 then 13.95. Resistance is 14.70. A close over resistance would be very bullish technically setting up 15.00 next. March wheat support is 845 then 825 with resistance the old high of 895.

The Future of Public Debt

by John Mauldin


This week I find myself in Bangkok, and I must admit to enjoying the experience a great deal, so much so that I am going to preview a portion of my coming book, Endgame, so that I can go back out and play tourist. Next week I get back to my more or less regular schedule, but I think you will enjoy this first portion of chapter six, where we look at an important paper from the Bank of International Settlements on “The Future of Public Debt.” It is not a pretty one. We are watching one of the last great bubbles begin to deflate – the bubble of government and government debt – all over the developed world. This is a serious weight that will be a drag on our growth, and it is interesting to contemplate as I sit in Bangkok, a city that is vibrant and teeming with opportunity.

Endgame will be in the bookstores in a few weeks, but let me once again ask you to not pre-order the book from Amazon or online. Pre-order books do not get into the book sales numbers (long story and more information than you want to know). I encourage you to pre-order from your local book store if you have one. Let me note that in the portion below, the pronoun we is used a lot. It is not the royal we – I do have a co-author, Jonathan Tepper, and this book has very much been a collaboration. More on some Thai thoughts at the end, but let’s jump into today’s Thoughts from the Frontline.

 

The Future of Public Debt

Our argument in Endgame is that while the debt supercycle is still growing on the back of increasing government debt, there is an end to that process, and we are fast approaching it. It is a world where not only will expanding government spending have to be brought under control but also it will actually have to be reduced. In this chapter, we will look at a crucial report, “The Future of Public Debt: Prospects and Implications,” by Stephen G. Cecchetti, M. S. Mohanty, and Fabrizio Zampolli, published by the Bank of International Settlements (BIS).

The BIS is often thought of as the central banker to central banks. It does not have much formal power, but it is highly influential and has an esteemed track record; after all, it was one of the few international bodies that consistently warned about the dangers of excessive leverage and extremes in credit growth.

Although the BIS is quite conservative by its nature, the material covered in this paper is startling to those who read what are normally very academic and dense journals. Specifically, it looks at fiscal policy in a number of countries and, when combined with the implications of age-related spending (public pensions and health care), determines where levels of debt in terms of GDP are going.

Throughout this chapter, we are going to quote extensively from the paper, as we let the authors’ words speak for themselves. We’ll also add some of our own color and explanation as needed. (Please note that all emphasis in bold is our editorial license and that we have chosen to retain the original paper’s British spelling of certain words.)

After we look at the BIS paper, we will also look at the issues it raises and the implications for public debt. If public debt is unsustainable and the burden on government budgets is too great, what does this mean for government bonds? The inescapable conclusion is that government bonds currently are a Ponzi scheme. Governments lack the ability to reduce debt levels meaningfully, given current commitments. Because of this, we are likely to see “financial oppression,” whereby governments will use a variety of means to force investors to buy government bonds even as governments actively work to erode their real value. It doesn’t make for pretty reading, but let’s jump right in.

 

A Bit of Background

But before we start, let’s explain a few of the terms the BIS will use. They can sound complicated, but they’re not that hard to understand. There is a big difference between the cyclical versus structural deficit. The total deficit is the structural plus cyclical.

Governments tax and spend every year, but in the good years, they collect more in taxes than in the bad years. In the good years, they typically spend less than in the bad years. That is because spending on unemployment insurance, for example, is something the government does to soften the effects of a downturn. At the lowest point in the business cycle, there is a high level of unemployment. This means that tax revenues are low and spending is high.

On the other hand, at the peak of the cycle, unemployment is low, and businesses are making money, so everyone pays more in taxes. The additional borrowing required at the low point of the cycle is the cyclical deficit.

The structural deficit is the deficit that remains across the business cycle, because the general level of government spending exceeds the level of taxes that are collected. This shortfall is present regardless of whether there is a recession.

Now let’s throw out another term. The primary balance of government spending is related to the structural and cyclical deficits. The primary balance is when total government expenditures, except for interest payments on the debt, equal total government revenues. The crucial wrinkle here is interest payments. If your interest rate is going up faster than the economy is growing, your total debt level will increase.

The best way to think about governments is to compare them to a household with a mortgage. A big mortgage is easier to pay down with lower monthly mortgage payments. If your mortgage payments are going up faster than your income, your debt level will only grow. For countries, it is the same. The point of no return for countries is when interest rates are rising faster than their growth rates. At that stage, there is no hope of stabilizing the deficit. This is the situation many countries in the developed world now find themselves in.

 

Drastic Measures

“Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable.

Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability.”

“Drastic measures” is not language you typically see in an economic paper from the Bank for International Settlements. But the picture painted in a very concise and well-written report by the BIS for 12 countries they cover is one for which the words drastic measures are well warranted.

The authors start by dealing with the growth in fiscal (government) deficits and the growth in debt. The United States has exploded from a fiscal deficit of 2.8 percent to 10.4 percent today, with only a small 1.3 percent reduction for 2011 projected. Debt will explode (the correct word!) from 62 percent of GDP to an estimated 100 percent of GDP by the end of 2011 or soon thereafter. The authors don’t mince words.

They write at the beginning of their work:

“The politics of public debt vary by country. In some, seared by unpleasant experience, there is a culture of frugality. In others, however, profligate official spending is commonplace. In recent years, consolidation has been successful on a number of occasions. But fiscal restraint tends to deliver stable debt; rarely does it produce substantial reductions. And, most critically, swings from deficits to surpluses have tended to come along with either falling nominal interest rates, rising real growth, or both. Today, interest rates are exceptionally low and the growth outlook for advanced economies is modest at best. This leads us to conclude that the question is when markets will start putting pressure on governments, not if.

“When, in the absence of fiscal actions, will investors start demanding a much higher compensation for the risk of holding the increasingly large amounts of public debt that authorities are going to issue to finance their extravagant ways? In some countries, unstable debt dynamics, in which higher debt levels lead to higher interest rates, which then lead to even higher debt levels, are already clearly on the horizon.

“It follows that the fiscal problems currently faced by industrial countries need to be tackled relatively soon and resolutely. Failure to do so will raise the chance of an unexpected and abrupt rise in government bond yields at medium and long maturities, which would put the nascent economic recovery at risk. It will also complicate the task of central banks in controlling inflation in the immediate future and might ultimately threaten the credibility of present monetary policy arrangements.

“While fiscal problems need to be tackled soon, how to do that without seriously jeopardizing the incipient economic recovery is the current key challenge for fiscal authorities.”

Remember that Rogoff and Reinhart show that when the ratio of debt to GDP rises above 90 percent, there seems to be a reduction of about 1 percent in GDP. The authors of this paper, and others, suggest that this might come from the cost of the public debt crowding out productive private investment.

Think about that for a moment. We (in the US) are on an almost certain path to a debt level of 100 percent of GDP in just a few years, especially if you include state and local debt. If trend growth has been a yearly rise of 3.5 percent in GDP, then we are reducing that growth to 2.5 percent at best. And 2.5 percent trend GDP growth will not get us back to full employment. We are locking in high unemployment for a very long time, and just when some 1 million people will soon be falling off the extended unemployment compensation rolls.

Government transfer payments of some type now make up more than 20 percent of all household income. That is set up to fall rather significantly over the year ahead unless unemployment payments are extended beyond the current 99 weeks. There seems to be little desire in Congress for such a measure. That will be a significant headwind to consumer spending.

Government debt-to-GDP for Britain will double from 47 percent in 2007 to 94 percent in 2011 and rise 10 percent a year unless serious fiscal measures are taken. Greece’s level will swell from 104 percent to 130 percent, so the United States and Britain are working hard to catch up to Greece, a dubious race indeed. Spain is set to rise from 42 percent to 74 percent and only 5 percent a year thereafter, but their economy is in recession, so GDP is shrinking and unemployment is 20 percent.

Portugal? In the next two years, 71 percent to 97 percent, and there is almost no way Portugal can grow its way out of its problems. These increases assume that we accept the data provided in government projections. Recent history argues that these projections may prove conservative.

Japan will end 2011 with a debt ratio of 204 percent and growing by 9 percent a year. They are taking almost all the savings of the country into government bonds, crowding out productive private capital. Reinhart and Rogoff, with whom you should by now be familiar, note that three years after a typical banking crisis, the absolute level of public debt is 86 percent higher, but in many cases of severe crisis, the debt could grow by as much as 300 percent. Ireland has more than tripled its debt in just five years.

The BIS paper continues:

“We doubt that the current crisis will be typical in its impact on deficits and debt. The reason is that, in many countries, employment and growth are unlikely to return to their pre-crisis levels in the foreseeable future. As a result, unemployment and other benefits will need to be paid for several years, and high levels of public investment might also have to be maintained.

“The permanent loss of potential output caused by the crisis also means that government revenues may have to be permanently lower in many countries. Between 2007 and 2009, the ratio of government revenue to GDP fell by 2–4 percentage points in Ireland, Spain, the United States, and the United Kingdom. It is difficult to know how much of this will be reversed as the recovery progresses. Experience tells us that the longer households and firms are unemployed and underemployed, as well as the longer they are cut off from credit markets, the bigger the shadow economy becomes.”

Clearly, we are looking at a watershed event in public spending in the United States, United Kingdom, and Europe. Because of the Great Financial Crisis, the usual benefit of a sharp rebound in cyclical tax receipts will not happen. It will take much longer to achieve any economic growth that could fill the public coffers.

Now, let’s skip a few sections and jump to the heart of their debt projections.

 

The Future Public Debt Trajectory

(There was some discussion whether we should summarize the following section or use the actual quotation. We opted to use the quotation, as the language from the normally conservative BIS is most graphic. We want the reader to understand their concerns in a direct manner. This is in many ways the heart of the crisis that is leading the developed countries to endgame. It is startling to compare this with the seeming complacency of so many of our leading political figures all over the world.)

“We now turn to a set of 30-year projections for the path of the debt/GDP ratio in a dozen major industrial economies (Austria, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Portugal, Spain, the United Kingdom and the United States). We choose a 30-year horizon with a view to capturing the large unfunded liabilities stemming from future age-related expenditure without making overly strong assumptions about the future path of fiscal policy (which is unlikely to be constant). In our baseline case, we assume that government total revenue and non-age-related primary spending remain a constant percentage of GDP at the 2011 level as projected by the OECD.

“Using the CBO and European Commission projections for age-related spending, we then proceed to generate a path for total primary government spending and the primary balance over the next 30 years. Throughout the projection period, the real interest rate that determines the cost of funding is assumed to remain constant at its 1998–2007 average, and potential real GDP growth is set to the OECD-estimated post-crisis rate.”

Here, we feel a need to distinguish for the reader the difference between real GDP and nominal GDP. Nominal GDP is the numeric value of GDP, say, $103. If inflation is 3 percent, then real GDP would be $100. Often governments try to create inflation to flatter growth. This leads to higher prices and salaries, but they are not real; they are merely inflationary. That is why economists always look at real GDP, not nominal GDP. Reality is slightly more complicated, but that is the general idea.

That makes these estimates quite conservative, as growth rate estimates by the OECD are well on the optimistic side. If they used less optimistic projections and factored in the current euro crisis (it is our bet that when you read this in 2011, there will still be a euro crisis, and that it may be worse) and potential recessions in the coming decades (there are always recessions that never get factored into these types of projections), the numbers would be far worse. Now, back to the paper.

 

Debt Projections

As noted previously, this text is important to the overall intent.

“From this exercise, we are able to come to a number of conclusions. First, in our baseline scenario, conventionally computed deficits will rise precipitously. Unless the stance of fiscal policy changes, or age-related spending is cut, by 2020 the primary deficit/GDP ratio will rise to 13% in Ireland; 8–10% in Japan, Spain, the United Kingdom and the United States; [Wow! Note that they are not assuming that these issues magically go away in the United States as the current administration does using assumptions about future laws that are not realistic.] and 3–7% in Austria, Germany, Greece, the Netherlands and Portugal. Only in Italy do these policy settings keep the primary deficits relatively well contained—a consequence of the fact that the country entered the crisis with a nearly balanced budget and did not implement any real stimulus over the past several years.

“But the main point of this exercise is the impact that this will have on debt. The results [in Figure 6.1] show that, in the baseline scenario, debt/GDP ratios rise rapidly in the next decade, exceeding 300% of GDP in Japan; 200% in the United Kingdom; and 150% in Belgium, France, Ireland, Greece, Italy and the United States. And, as is clear from the slope of the line, without a change in policy, the path is unstable.

“This is confirmed by the projected interest rate paths, again in our baseline scenario. [Figure 6.1] shows the fraction absorbed by interest payments in each of these countries. From around 5% today, these numbers rise to over 10% in all cases, and as high as 27% in the United Kingdom. Seeing that the status quo is untenable, countries are embarking on fiscal consolidation plans. In the United States, the aim is to bring the total federal budget deficit down from 11% to 4% of GDP by 2015. In the United Kingdom, the consolidation plan envisages reducing budget deficits by 1.3 percentage points of GDP each year from 2010 to 2013 (see e.g. OECD [2009a]).

“To examine the long-run implications of a gradual fiscal adjustment similar to the ones being proposed, we project the debt ratio assuming that the primary balance improves by 1 percentage point of GDP in each year for five years starting in 2012. The results are presented in [Figure 6.1]. Although such an adjustment path would slow the rate of debt accumulation compared with our baseline scenario, it would leave several major industrial economies with substantial debt ratios in the next decade.

This suggests that consolidations along the lines currently being discussed will not be sufficient to ensure that debt levels remain within reasonable bounds over the next several decades. An alternative to traditional spending cuts and revenue increases is to change the promises that are as yet unmet. Here, that means embarking on the politically treacherous task of cutting future age-related liabilities. With this possibility in mind, we construct a third scenario that combines gradual fiscal improvement with a freezing of age-related spending-to-GDP at the projected level for 2011. [Figure 6.1] shows the consequences of this draconian policy. Given its severity, the result is no surprise: what was a rising debt/GDP ratio reverses course and starts heading down in Austria, Germany and the Netherlands. In several others, the policy yields a significant slowdown in debt accumulation. Interestingly, in France, Ireland, the United Kingdom and the United States, even this policy is not sufficient to bring rising debt under control.”



And yet, many countries, including the United States, will have to contemplate something along these lines. We simply cannot fund entitlement growth at expected levels. Note that in the United States, even by draconian cost-cutting estimates, debt-to-GDP still grows to 200 percent in 30 years. That shows you just how out of whack our entitlement programs are, and we have no prospect of reform in sight. It also means that if we—the United States—decide as a matter of national policy that we do indeed want these entitlements, it will most likely mean a substantial value added tax, as we will need vast sums to cover the costs, but with that will lead to even slower growth.

Long before interest costs rise even to 10 percent of GDP in the early 2020s, the bond market will have rebelled. (See Figure 6.2.)


This is a chart of things that cannot be. Therefore, we should be asking ourselves what is endgame if the fiscal deficits are not brought under control? Quoting again from the BIS paper:

“All of this leads us to ask: what level of primary balance would be required to bring the debt/GDP ratio in each country back to its pre-crisis, 2007 level? Granted that countries which started with low levels of debt may never need to come back to this point, the question is an interesting one nevertheless. [Table 6.1] presents the average primary surplus target required to bring debt ratios down to their 2007 levels over horizons of 5, 10 and 20 years. An aggressive adjustment path to achieve this objective within five years would mean generating an average annual primary surplus of 8–12% of GDP in the United States, Japan, the United Kingdom and Ireland, and 5–7% in a number of other countries. A preference for smoothing the adjustment over a longer horizon (say, 20 years) reduces the annual surplus target at the cost of leaving governments exposed to high debt ratios in the short to medium term.”

Can you imagine the United States being able to run a budget surplus of even 2.4 percent of GDP? More than $350 billion a year? That would be a swing in the budget of almost 12 percent of GDP.

[End of excerpt]
I have taken enough of your time today, gentle reader, and it will soon be time to hit the send button. I spoke yesterday at the Foreign Correspondents Club here in Bangkok, and took a number of questions, as I did in all my presentations this week. Let me tell you, there is some skepticism as to whether the Western world in general and the US in particular can meet the challenges posed by the massive fiscal deficits. There was genuine concern that the world as a whole and their world in particular could once again be dragged into a crisis. They were looking for answers, and some assurance that we could find the way out. I have few answers, and although I am somewhat of an optimist that we will figure it out (after we are maybe forced to!), there is little in the way of assurance that the ride will not be a bumpy affair.

What answers I do have are not ones you will like, as I can assure you that I don’t like them myself. But when we are left with no good choices, we must choose among the poor ones. And that is a topic we will deal with more and more in this letter, as the choices we make (among the various nations) will determine our own personal investment and protection strategies.

 

Phoenix, Tokyo, and London

I will be speaking next week in Phoenix at the Phoenix Investment Conference & Silver Summit February 18-19, 2011, at the Renaissance Glendale Hotel and Spa. Attendance is free. You can register at http://www.cambridgehouse.com. The conference focuses on metals and mining, and if those are among your interests, check it out.

Then it’s on to Tokyo, where I get to have dinner with Christopher Wood of CLSA (consistently rated the #1 strategist in Asia) and then speak at their annual conference. I have long wanted to spend time with Chris (a colorful figure in our world), and this is a dinner I am really looking forward to. I am literally in and out of Tokyo in two days, but at least it is a non-stop flight from Dallas. Getting back from Bangkok is a very long, three hops, a full day indeed.

Then I will be in London and Malta for sure in the third week of March, and my guess is that somewhere along that time I will also be in New York and elsewhere to promote the new book.

I must hit the send button, as my host here in Bangkok, Tony Sagami, is downstairs; and soon Richard Duncan (the author of The Dollar Crisis and The Corruption of Capitalism) will join us. I see some fun and new sights in my near future. I am off shopping tomorrow in what they tell me is the world’s largest open air market (it seems some friends and family have this shopping list, don’t you know). It will be an interesting next few days. Have a great week!
Your not understanding one word he hears here analyst,

Continue reading this article>>

Decoding the Egyptian Revolution

By IB Times Staff Reporter

The great Egyptian Revolution of 2011 is probably one of those history-altering events that will be studied for centuries. The fall of President Hosni Mubarak succumbing to the immense civil pressure after 30 years of reign draws significance from various factors - as a proof of social power of the working class to the domino effect or the consequences of the revolution.

The roots of the revolution
The Egyptians took inspiration from the Tunisian counter-parts in launching the campaign to overthrow the government. In December 2010, an unrest was sparked off in Tunisia, when Mohamed Bouazizi set fire to himself in the central town of Sidi Bouzid protesting confiscation of his vegetable cart by police. Demonstrations in support of Bouazizi began. Anger intensified when Bouazizi died of burns and his funeral added to the momentum. The larger reasons behind the protests were unemployment and repression. Close to a month of protests and clashes, Tunisia's President Zine al-Abidine Ben Al on Jan. 14 fled to Saudi Arabia after his empty promises of reforms and elections failed to calm the people. Tunisia saw a new dawn.

The 18-day toil
Barely ten days after the Tunisian revolution, thousands of Egyptians gathered demanding the ouster of President Hosni Mubarak. It began as the 'Day of Wrath' on January 25, when Egyptians organised protests through internet and social media platforms and turned up in thousands. As the demonstrations continued, Mohamed ElBaradei, reform campaigner and former head of the International Atomic Energy Agency, arrived in Cairo on Jan. 27.

Clashes between police and civilians worsens with deaths and injuries on the rise. Mubarak ordered troops and to quell demonstrations. However, people cheered the move as the military is considered neutral, contrary to the police force, which is used kill dissent. The army, with respects towards freedom of expression, decided against using any force.

In the meanwhile, Mubarak resorted to all possible political tactics to convince the people against the dissidence. On Jan, 29, he sacked his cabinet but refused to step down and named intelligence chief Omar Suleiman as vice-president.

On Jan. 31, a new government is sworn in. On Feb. 1, Mubarak said he would surrender power when his term ends in September.

The protests continue to grow in strength - thousands turned to millions. Even though the troops maintained the stance, the army called for protesters to leave the streets. However, violence broke out between pro- and anti-Mubarak groups in Tahrir Square on Feb. 2.

Death toll continued to rise. Thousands gathered in Tahrir Square to mount further pressure on Mubarak marking Feb. 4 as the 'Day of Departure'.

After Gamal Mubarak, son of the president, resigned from the leadership of Egypt's ruling party, the Opposition stepped in. Groups, including the banned Muslim Brotherhood, held talks to insist that the core demand for the removal of

Mubarak was not met. On the same day, thousands gathered in Tahrir Square joining noon prayers to honor "martyrs" killed in the bloodshed.

The following day on Feb 7 Mubarak was reported to have set up two committees to draw up changes to the constitution. Even though the banks re-opened, the stock market remains closed (slated to reopen on Feb 13).

Feb 8 saw the biggest protests ever, prompting Vice President Suleiman to issue an assurance on the peaceful transfer of power and promise of no reprisals against the protesters.

However, the violence continued. Despite the mounting death toll, on the 17th day of protests, Mubarak came out to say Egypt was heading "day after day" to a peaceful transfer of power. In the first sign of buckling down, he handed powers to his vice-president. However, he refused to quit office.

Mubarak finally stepped down on Feb. 11, handing over the power to the army. In an announcement on national television, Suleiman informed that the a military council will run the affairs of the country.

Egyptian dissidents celebrate across the nations while sending shock waves across the Arab World. The revolt was a resounding warning to autocrats of the world.

Significance of the 2011 Egyptian Revolution

The whole world has been closely watching the Egyptian upheaval due to the immense significance it holds in terms of implications and possible effects:

Muslim Brotherhood and Islamist Influence

One worry that is likely to bother the whole world on the downfall of the Mubarak is that the power vacuum created by the removal of the President provides space for Opposition groups to grow. One of the prominent groups is thе Muslim Brotherhood, Egypt's powerful Islamist opposition group. The chaos in the country could lead to a long list of possibilities. However, it should be noted that the protests were nοt organized bу thе Muslim Brotherhood.

Regional Effects

The Egyptian revolution will trigger a large number of after-effects. As already seen, while the Tunisian revolution inspired the Egyptian upheaval, the Egypt revolution, in turn, led to upheaval in Jordon and Yemen.

Besides this, the chaos in Egypt is likely to affect thе Israel-Palestine peace process, to which Egypt was the arbitrator.

Egypt іѕ a major power broker іn the Middle East and as an effect of instability in the country the whole world is likely to be affected.

Alliance with U.S.

Sіnсе thе 1970s, Egypt has been a key ally fοr thе U.S. It is also thе second highest recipient οf U.S. foreign aid (аftеr Israel). Now, America finds itself in a tough position. While Joe Biden refused tο call Mubarak a dictator, Obama emphasized Egypt's role аѕ аn ally.

The challenge lies ahead

Although the Arab world's most populous nation has brought down the dictatorship, the challenge of cleansing the complete system lies ahead. As much as the Egyptians deserve to celebrate their victory of overthrowing the 30-year-old regime, when the jubilation dies down efforts towards rebuilding of the nation has to begin.

Although Mubarak has been ousted, the Egyptians still have to deal with the corrupt and oppressive empire he has built.

The people, most importantly the military, have a tough task ahead - starting from the lifting of the emergency laws to the complete cleansing of the system.

Continue reading this article>>

When Banks Outsource Foreclosures, Nothing Good Happens

By ABIGAIL FIELD

Lender Processing Service ( LPS ), is "the nation's leading provider" of "default solutions" to mortgage servicers, meaning it manages every aspect of foreclosure , whether in bankruptcy or state court. However, LPS is facing investigations and lawsuits that challenge its existence because they focus on the legality of LPS's basic business model.

It's a Louisiana bankruptcy case involving a single foreclosure that best illustrates the problems with the banks' outsourcing their mortgage default work to LPS or similar entities. During a bankruptcy, foreclosure is forbidden without the judge's permission, so LPS is frequently involved in seeking that permission.

In that Lousiana case, involving the bankruptcy of Ron and La Rhonda Wilson, LPS is facing sanctions for allegedly committing perjury during a hearing held to find out why the bank -- Option One -- twice asked the bankruptcy court for permission to foreclose when the debtors were current on their mortgage. LPS insists it did not intend to mislead the court .

A Disturbing Picture

Although the U.S. Bankruptcy Trustee, which is the party asking for the sanctions, seems to have the stronger case if you read the motions at those links, the perjury issue isn't central to my point here. In the detailed proceedings triggered by the wrongful requests to foreclose, a disturbing picture emerges of a thoroughly dysfunctional "legal" process between mortgage servicers and their LPS-network attorneys. As a result of that process -- adopted by servicers to save themselves money -- everyone else winds up paying.

Taxpayers pay because judicial resources are wasted. Everyone affected by the real estate market (pretty much everyone because of real estate's economic impact) pays because foreclosure and bankruptcy cases take longer to process. Everyone also pays because the process generates false documents. Those false documents taint the legal system and, depending on their type, can damage title to foreclosed property. Finally, foreclosed and bankrupt homeowners pay because lenders' legal fees are inflated, and worse, their homes are taken wrongfully.

In short, in their drive to maximize efficiency and minimize cost to themselves, mortgage servicers have shifted tremendous costs to everyone else. A classic case of market failure , of negative externalties.

Trying to Foreclose on a Current Loan

The Wilson case began when the couple declared bankruptcy in October, 2007. In January, 2008, Option One bank's LPS-network counsel, the Boles firm, asked the bankruptcy court to let it foreclose on the Wilsons' house, claiming that they hadn't made a mortgage payment since October. The debtors objected, saying they were current on the loan. The judge denied Option One's request.

A couple of months later, Boles tried again, this time attaching an affidavit signed in Option One's name by LPS employee Dory Goebel . The affidavit said the Wilsons were current through November, but now were delinquent for December, January, February and March. After the Wilsons detailed the payments made to prove they were still current , the judge decided to find out what was going on.

Here's what happened: The Wilsons sent the payments to Option One. Option One sent a message through LPS's computer system (LPS Desktop) to LPS, LPS messaged Boles, and Boles wrote that LPS should have the money sent to it. LPS relayed the message to Option One.

Judge Elizabeth Manger was baffled by this convoluted approach :

part of my concern is. . .that while Option One has the right to contact directly Counsel, and Counsel contact Option One, in fact, the policy is to go, quote-unquote, through [LPS]. . . . I'll just say for the record that I don't understand why that would be necessary if [LPS] had no ability to make decisions in the middle of this chain. Why go through them? It's just adding an additional layer.
A Boles attorney misleadingly told the court that he didn't know why he was receiving the payments from Option One. But even without misconduct on the attorney's part, the LPS approach made problems more likely.

Fundamentally Flawed

For starters, the LPS system is heavily automated, but as everyone knows, computers are only as good as the data given them. In the Wilsons' case, their account was set up wrong in the LPS computer system, and it wasn't properly reset when the first request was denied. Classic GIGO (garbage in, garbage out).

Second, the LPS system ensures that the left hand doesn't know what the right hand is doing, making garbage more likely to go in. For example, even though LPS knew the Wilsons had sent in the checks, it had no process for telling its affidavit signer, Goebel. It's not like Goebel was unaware of the possibility: She used to run the department that deals with payments from debtors in bankruptcy and has written extensively about the LPS "Document Execution Teams and Processes."
But LPS's extremely limited affidavit "verification" procedure , which Goebel testified lasts perhaps 10 minutes, doesn't involve a routine check with that department. Nor did it include a review of the correspondence that would have revealed if any payments had come in. The verification process simply involves checking numbers against a couple of computer screens.

Truth Be Dammed

But it gets worse still. LPS admitted that: "even if Goebel had reviewed the [correspondence] and been made aware of the existence of the checks in question . . . before she signed the affidavit . . . the affidavit would have remained unchanged." The LPS process is to rely on the records on particular computer screens in Option One's system, period, truth be damned.

Based on everything that came out at the hearing, Judge Magner decided far more discovery was necessary and allowed the U.S. Trustee to take the lead on it.

After sufficient discovery, in May, 2010 the trustee asked the court to punish LPS and the Boles firm because " [LPS] and Boles materially misled this Court as to their knowledge of post-petition mortgage payments [and LPS's role generally]. LPS and Boles, of course, disagreed. Boles's opposition is interesting in that the firm mostly stressed that it had cleaned up its act rather than deny it had done wrong.

Serious Consequences

A trial on the trustee's request was held on Dec. 1. The arguments are now over, and it's up to the judge to rule on sanctions. Whatever her decision, however, the key thing here is what the case reveals about the consequences of the banks' outsourcing model.

As a direct result of the bizarrely inefficient communication structure and the travesty of a "verification" procedure, Boles filed two motions it shouldn't have, both asking to foreclose on a mortgage that was current. (As later came out, the motions were also wrong because they sought permission to foreclose for Option One instead of for the Option One securitized trust that owned the mortgage.)

Each time the Wilsons and their attorney had to respond, and the court had to hold a hearing. Not only did the debtors' attorney spend more time and thus have to charge them more, but the work Boles did -- which LPS billed it for and for which Boles surely billed Option One -- would normally be charged, ultimately, to the debtors. Of course, once the judge decided to figure out what was happening, even more attorney time and judicial resources were spent.

The Wilsons' case isn't the first time LPS's business model has produced false documents. At the first investigative hearing Judge Magner held, Goebel wasn't present because she was in Ohio testifying about a different problematic affidavit she signed. Similarly, in weighing sanctions, Judge Magner has taken judicial notice of a New York bankruptcy case, In re Fagan .

In Fagan, a 2007 decision, Judge Adlai Hardin was irate because the bank submitted and resubmitted requests for permission to foreclose when the debtor was current -- including one with a false Goebel affidavit. And it was just one of several then-recent cases involving false certifications by creditors seeking to foreclose on current bankrupt debtors:

[Requests to foreclose] may be routine and inconsequential to secured creditors and their counsel. But to a debtor and his or her family, such a motion and the consequent loss of the family home may be devastating. Most creditors and counsel are conscientious. But some are callous by design or inadvertence, as exemplified by this motion and two others presented to the Court the same week. The danger here is that a debtor who does not have an attorney or the resources of intellect or spirit to defend against a baseless motion may lose his/her home despite being current on post-petition mortgage and plan payments.
Fagan involved a different creditor and a different law firm than those involved in the Wilson case. Still another bank and law firm were involved in a Pennsylvania case, In re Taylor . In Taylor, Judge Diane Weiss Sigmund had to deal with numerous incorrect motions and miscommunications because of the LPS business model, prompting her to comment that the request for permission to foreclose was "a textbook example of why the [LPS] procedures used by HSBC and its counsel in the name of minimizing collection costs is so problematic."

That request for permission to foreclose was also based on missed payments that weren't missed; they had been sent by HSBC to its counsel, albeit the sheriff's sale department instead of the bankruptcy department. Judge Sigmund was upset by how the payments were handled, calling them "circumstances that are life altering to debtors."

A Big Savings -- at a Huge Cost
Why do banks use LPS given that its methods result in false affidavits with meaningful frequency -- false regarding the amounts owed and the entity they're owed to, as well as false by being signed by people without personal knowledge? The answer: LPS is free to the banks (LPS charges the lawyers). Surely, using LPS saves the banks a lot of money.

Being free has given LPS more than half the market, but it doesn't have the whole market. While I don't have any information about other companies' performance, ads like this one for Orion Financial Group don't inspire confidence. I mean, look at the way the stick figures are signing the documents.

Judge Weiss had sympathy for the banks' cost-saving priority, but noted that when debtors contest the LPS filings, problems show:

It seems reasonable that a mortgage lender should be able to avail itself of economic and expeditious means of collecting defaulted loans through the use of technology and delegation of tasks to lower cost labor. In many cases, the motions are granted by default, [because the debtors just can't pay.] However, where, as here, the debtor contests the [request for permission to foreclose], the flaws in this automated process become apparent. At this juncture, an attorney must cease processing files and act like a lawyer. That means she must become personally engaged, conferring with the client directly and abandoning her reliance on computer screens as expressions of her client's will. This did not happen in this case until the Court became involved."
While all the cases I've discussed are bankruptcy cases, the same problems happen in foreclosure cases managed by LPS. Indeed, since judges aren't involved in many foreclosures, and fewer homeowners are represented in those cases, the problems are, if anything, worse.

Time for Change

Consumer bankruptcy Attorney O. Max Gardner III put it this way:

"The Wilson case succinctly documents the fundamental problems with the outsourcing of mortgage default legal work to non-lawyers such as LPS Default Solutions. LPS has created a thousand times more problems than they have solved. It is time to eliminate the middleman from mortgage work and assign the job to real lawyers who are more concerned about the accuracy and quality of their work than about meeting arbitrary timelines and benchmarks imposed by non-lawyers."
Despite the ever-increasing number of cases where the banks' cut-rate processes are shown to produce false documents and support foreclosing on loans that are current, the banks continue to be treated with undue deference in many arenas: courtrooms, Congress, even, perhaps, the Iowa Attorney General's office .

It's time for that to stop. The banks' embrace of "default solution" vendors is just one example of a tactic that helps banks' bottom line while hurting everyone else.


Follow Us