Financial Crisis - 2013 - ????

[Ryan Ruck]

New year, new thread...

And to start it off, I just got this in the mail from LaRue Tactical:

12:01am January 1, 2013,

To our entire customer base …

For 2013 - We are suspending our L/E - Military discounts. It pains us, but our skyrocketing costs, due to a number of new government regulations, Obama-Care being just one, has forced us to use one price sheet for all customers. Through the years we have extended a savings to our military and Law Enforcement customers that we are quite proud of … a very large dollar number when totaled.

Orders entered before midnight Dec.31st will reflect our previous LE/MIL discount terms.

If some of these regulations are rescinded, and tax relief is returned, we will push to reintroduce these lost discounts in 2014.

Uncle Sam has got to stop spending money, or we're all done for. We will hold off on price increases just short of going off our own fiscal cliff.

Mark LaRue

[American Patriot]

It's all on....

Panetta Authorizes Hiring Freezes, Furlough Plans

Jan 11, 2013
Military.com| by Michael Hoffman
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Defense Secretary Leon Panetta has ordered the military services to take steps to prepare the Defense Department for sequestration cuts that would force the military to cut $52 billion out of its fiscal 2013 budget in six months.
Defense Department leaders authorized such measures as civilian hiring freezes, contract award delays, and furloughs of up to 30 calendar days. Panetta said the Pentagon will have little time if Congress waits until March 1, the new deadline set on Capitol Hill to determine sequestration cuts.
Panetta and Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, issued their sternest warnings yet Thursday, telling Congress the U.S. military will be unprepared in one year to protect the country if the Defense Department sustains the sweeping potential budget cuts.
“We'll be unable to reset the force following a decade of war,” Dempsey said. “Our readiness will begin to erode. Within months, we'll be less prepared. Within a year, we'll be unprepared.”

Panetta outlined how the convergence of three deadlines in March threatens to “hollow out” the military. He explained that the March 1 deadline to determine sequestration cuts, the expiration of the Continuing Resolution that’s funds the Defense Department, and the debt ceiling debate will work in confluence. Panetta called it a “perfect storm of budget uncertainty.”
“We have no idea what the hell's going to happen. All told, this uncertainty, if left unresolved by the Congress, will seriously harm our military readiness,” Panetta said.

Congressional members, who had said last year they didn’t expect sequestration cuts to occur, have changed their minds. Sequester cuts would chop $500 billion from planned defense spending over the next decade, to include $18 billion from military operations and maintenance costs in fiscal 2013.
Panetta laid out $52 billion worth of cuts the Defense Department would sustain in the six months remaining in fiscal 2013. If Congress fails to pass the 2013 budget, the Continuing Resolution that funded the Defense Department would extend through 2013 and cut $11 billion from the Pentagon’s budget.
The previous deadline to reach an agreement to avoid the sequestration trigger had been Jan. 2. Congress chose to push the deadline back to March 1 just minutes before the deadline.
Pushing the deadline back may have made sequestration cuts for the defense department more likely, said Todd Harrison, a defense analyst for the Center for Strategic and Budgetary Assessments.
Panetta and Dempsey signaled their uncertainty and concern the sequestration cuts would be enacted by authorizing measures to stem the damages the cuts could cause. The Pentagon leaders had previously said they didn’t count on planning for the cuts because they felt they were so unlikely. Their opinion has changed.
“I've directed components to develop more detailed plans for how they would implement sequestration if it's required, because there will be so little time to respond in the current fiscal year,” Panetta said. “I mean, we're almost halfway through the fiscal year.”
One of those precautions is a furlough for civilian employees that could extend up to 30 calendar days, Panetta said. In a Defense Department memorandum issued Thursday, the furlough would extend no more than “22 discontinuous workdays.”
Panetta emphasized that the furloughs are not approved. He has only told managers to put plans in place should they be needed.
“I want to make that clear: It's precautionary. But I have an obligation to -- to let Congress know that we may have to do that, and I very much hope that we will not have to furlough anyone. But we've got to be prepared to do that if we face this situation,” Panetta said.
Other measures taken to absorb the cuts include halting maintenance on equipment taxed by the past decade of war. Training evolutions for units not in line to deploy to Afghanistan would also have to be scrapped should the cuts be put in place, Dempsey explained.
Dempsey said the troops and missions deployed to Afghanistan will be protected, as well as wounded warriors and families.
“But for the rest of the force, operations, maintenance and training will be gutted. We'll ground aircraft, return ships to port, and sharply curtail training across the force,” the Army four-star explained. “We're on the brink of creating a hollow force, the very thing we said we must avoid.”
Panetta said he was disappointed in Congress’ inability to work together and come to an agreement to avoid the “self-inflicted” cuts outlined in sequestration. However, the former congressman is slated to leave his Pentagon post and retire to his California home.
“I'm committed to do whatever I can in the time I have remaining to try to work with the Congress to do what is necessary to resolve these issues,” Panetta said. “We have a vital mission to perform; one that the American people expect and that they are entitled to, which is to protect their safety and to protect our national security. Congress must be a partner in that mission. I'd love to be able to do this alone, but I can't.”

[Phil Fiord]

As I understood it, it takes the defense budget back to 2007 levels. It was pretty big then and there are certainly wise areas to cut that would not undermine our country at home.

[American Patriot]

Agree... but they are going to take some from here and there. Not just, say shut down units that have lived beyond their usefulness. Personally, I think they should shut DOWN the DHS, TSA and the Departments of Education. Instant relief.

[Phil Fiord]

I am with you there Rick. Just TSA and DHS gone and we have a budget fix worth considering. I always had an awkward feeling about a name like Homeland Security as it implies a superiority or police state feel.

[Ryan Ruck]

I'm a little behind on posting some stuff...

US Retailers Report Weakest Holiday Sales Since 2008

December 26, 2012

U.S. holiday retail sales this year were the weakest since 2008, when the nation was in a deep recession. In 2012, the shopping season was disrupted by bad weather and consumers' rising uncertainty about the economy.

A report that tracks spending on popular holiday goods, the MasterCard Advisors SpendingPulse, said Tuesday that sales in the two months before Christmas increased 0.7 percent, compared with last year. Many analysts had expected holiday sales to grow 3 to 4 percent.

In 2008, sales declined by between 2 percent and 4 percent as the financial crisis that crested that fall dragged the economy into recession. Last year, by contrast, retail sales in November and December rose between 4 percent and 5 percent, according to ShopperTrak, a separate market research firm. A 4 percent increase is considered a healthy season.

Shoppers were buffeted this year by a string of events that made them less likely to spend: Superstorm Sandy and other bad weather, the distraction of the presidential election and grief about the massacre of schoolchildren in Newtown, Connecticut. The numbers also show how Washington's current budget impasse is trickling down to Main Street and unsettling consumers. If Americans remain reluctant to spend, analysts say, economic growth could falter next year.

In the end, even steep last-minute discounts weren't enough to get people into stores, said Marshal Cohen, chief research analyst at the market research firm NPD Inc.

"A lot of the Christmas spirit was left behind way back in Black Friday weekend," Cohen said, referring to the traditional retail rush the day after the Thanksgiving holiday in late November. "We had one reason after another for consumers to say, `I'm going to stick to my list and not go beyond it."'

Holiday sales are a crucial indicator of the economy's strength. November and December account for up to 40 percent of annual sales for many retailers. If those sales don't materialize, stores are forced to offer steeper discounts. That's a boon for shoppers, but it cuts into stores' profits.

Last-minute shoppers like Kris Betzold, of Carmel, Indiana, embraced discounts that were available before Christmas.

"We went out yesterday, and I noticed that the sales were even better now than they were at Thanksgiving," said Betzold while shopping Monday at an upscale mall in Indianapolis. Betzold, who said the sluggish economy prompted her and her husband to be more frugal this year, noted that she saved about $25 on a Kindle Fire she found at Best Buy.

Spending by consumers accounts for 70 percent of overall economic activity, so the eight-week period encompassed by the SpendingPulse data is seen as a critical time not just for retailers but for manufacturers, wholesalers and companies at every other point along the supply chain.

The SpendingPulse data include sales by retailers in key holiday spending categories such as electronics, clothing, jewelry, luxury goods, furniture and other home goods between Oct. 28 and Dec. 24. They include sales across all payment methods, including cards, cash and checks.

It's the first major snapshot of retail sales during the holiday season through Christmas Eve. A clearer picture will emerge next week as retailers like Macy's and Target report revenue from stores open for at least a year. That sales measure is widely watched in the retail industry because it excludes revenue from stores that recently opened or closed, which can be volatile.

Despite the weak numbers out Tuesday, retailers still have some time to make up lost ground. The final week of December accounts for about 15 percent of the month's sales, said Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse. As stores offer steeper discounts to clear some of their unsold inventory, they may be able to soften some of the grim results reflected in Tuesday's data.

Still, this season's weak sales could have repercussions for 2013, he said. Retailers will make fewer orders to restock their shelves, and discounts will hurt their profitability. Wholesalers, in turn, will buy fewer goods, and orders to factories for consumer goods will likely drop in the coming months.

In the run-up to Christmas, analysts blamed the weather and worries about the "fiscal cliff" for putting a damper on shopping. Superstorm Sandy battered the Northeast and mid-Atlantic states in late October. Many in the New York region were left without power, and people farther inland were buried under feet of snow. According to McNamara, the Northeast and mid-Atlantic account for 24 percent of U.S. retail sales.

Buying picked up in the second half of November as retailers offered more discounts and shoppers waylaid by the storm finally made it into malls, he said.

But as the weather calmed, the threat of the "fiscal cliff" picked up. In December, lawmakers remained unable to reach a deal that would prevent tax increases and government spending cuts set to take effect at the beginning of 2013. If the cuts and tax hikes kick in and stay in place for months, many economists expect the nation could fall back into recession.

The news media discussed this possibility more intensely as December wore on, making Americans increasingly aware of the economic troubles they might face if Washington is unable to resolve the impasse. Sales never fully recovered, Cohen said.

The results were weakest in areas affected by Sandy and a more recent winter storm in the Midwest. Sales declined by 3.9 percent in the mid-Atlantic and 1.4 percent in the Northeast compared with last year. They rose 0.9 percent in the north central part of the country.

The West and South posted gains of between 2 percent and 3 percent, still weaker than the 3 percent to 4 percent increases expected by many retail analysts.

Online sales, typically a bright spot, grew only 8.4 percent from Oct. 28 through Saturday, according to SpendingPulse. That's a dramatic slowdown from the online sales growth of 15 to 17 percent seen in the prior 18-month period, according to the data service.

Online sales did enjoy a modest boost after the recent snowstorm that hit the Midwest, McNamara said. Online sales make up about 10 percent of total holiday business.

[Ryan Ruck]

Some anecdotal evidence of how the dollar is weakening...

It used to be common that most ATMs held $10s and $20s, some with $5s and $1s even (mostly machines in cafeterias or machines that allow direct check deposit).

Now we are equipping more machines with $50s cassettes...

[Malsua]

Some anecdotal evidence of how the dollar is weakening...

It used to be common that most ATMs held $10s and $20s, some with $5s and $1s even (mostly machines in cafeterias or machines that allow direct check deposit).

Now we are equipping more machines with $50s cassettes...

I've not used a machine that dispensed anything less than $20 bills since at least 2000. I recall back in the 80s, machines would spit out 5 dollar bills but by the 90s it was 10s min and 2000 or so, 20s.

It's always a shock to go to the Casino and have to get increments of 100 heh. Of course they charge like $4 for the privilege.

[Ryan Ruck]

I've not used a machine that dispensed anything less than $20 bills since at least 2000. I recall back in the 80s, machines would spit out 5 dollar bills but by the 90s it was 10s min and 2000 or so, 20s.

I guess I could see how that could be the case in NJ or NY where cost of living is higher.

It's always a shock to go to the Casino and have to get increments of 100 heh. Of course they charge like $4 for the privilege.

Yeah, didn't think to mention casino machines. $50s and $100s loaded in those are definitely common. It's definitely the first time you see a cassette loaded with $100s.

[Ryan Ruck]

Something I think we all knew...

It's Official: Worst. Recovery. EVER

January 24, 2013

If there was any debate whether the Fed's policies have helped the economy or just the market (and specifically the Bernanke-targeted Russell 2000), the following two charts will end any and all debate. As the following chart from the St Louis Fed shows, as of the just completed quarter, US GDP "growth" since the "recovery" is now the worst in US history, having just dipped below the heretofore lowest on record.



A slightly prettier version of the same chart created by JPM's Michael Cembalest, is presented below:



But fear not: it is only the worst recovery ever for anyone unlucky enough to still rely on such Old Normal concepts as the "economy" to feed, clothe and provide shelter for themselves.

For those lucky 1% of the US population whose entire wealth is in financial assets (and who once again managed to avoid a tax hike on carried interest or any actual financial assets), times have almost never been so good.



Well, it's not the biggest surge in the market since the economic trough in history, but it is close. Which as Bernanke admitted some time ago (when discussing the level of the Russell 2000), is the only thing that actually matters to the Fed.

Yet oddly enough, the trickle down from the trillions in excess wealth created for those who hold financial assets, as a result of daily POMOs pumping some $85 billion, and soon more, into the stock market each month, has yet to materialize.

Oh well: just keep on doing more of what you are doing Uncle Ben, and if possible destroy the US economy even more than you already have - at this point, at least on a relative basis, you can't destroy it more.

[American Patriot]

What is an "ATM" and how do they work?

lol

I use "BANK"

[Ryan Ruck]

Scam Complete: The US Government Takes A Page From Diocletian’s Book...

January 25, 2013

Via Simon Black of Sovereign Man blog,

Early in the 4th century, Emperor Diocletian issued an infamous decree to control spiraling wages and prices in the rapidly deteriorating Roman Empire.

As part of his edict, Diocletian commanded that any merchant or customer caught violating the new price structures would be put to death.

This is an important lesson from history, and a trend that has been repeated numerous times. When nations are in terminal economic decline, governments will stop at nothing to keep the party going just a little bit longer.

I thought of Diocletian’s desperation a few days ago when I read about the recent sanctions imposed on US rating agency Egan-Jones. It’s a similar story–

For years, major rating agencies (S&P, Moody’s, and Fitch) have championed the outright fraud of our financial system by pinning pristine credit ratings on insolvent governments and their heavily inflated currencies.

In doing so, the rating agencies are effectively claiming that the greatest debtor that has ever existed in the history of the world is nearly ‘risk-free’.

Clearly this is a ridiculous assertion. With a debt level over 100% of GDP, the US is so broke that the government must borrow money just to pay interest on the money it’s already borrowed. They’ve lost over a trillion dollars a year since 2008, yet they still spend money on things like drones and body scanners. It’s crazy.

As with any good scam, the government must maintain public confidence. The moment someone says ‘the Emperor has no clothes,’ that shallow, fragile confidence will come crashing down and expose the scam. Dissent must be vigorously and swiftly pursued.

So when S&P finally downgraded the US one notch in August 2011, the SEC and Justice Department announced that S&P was under investigation, just two weeks later.

Egan-Jones, a smaller rating agency, has been even more aggressive, downgrading the US credit rating three times in 18 months. And while the federal government may not have imposed Diocletian’s death penalty, they are just as willing to squash dissent.

In a country that churns out thousands of pages of new regulations each week, it’s easy to find a reason to go after someone. As you read this letter, in fact, you are probably in violation of at least a dozen regulatory offenses.

In the case of Egan-Jones, the SEC brought administrative action against the agency within two weeks of their second downgrade. And a few days ago, the case was settled.

I’m sure you have already guessed the ending: Egan-Jones is banned from for the next 18 months from rating US government debt. They’ve effectively been silenced from telling the truth.

The lesson here is obvious. Just as in Roman times, bankrupt nations today will stop at nothing to keep up the scam just a little bit longer.

Given that all this is happening at a time when Congress is voting to suspend the debt ceiling entirely, these actions are the clearest sign yet of just how desperate the government has become.

Could the warning signs be any more obvious?

[American Patriot]

http://www.latimes.com/business/mone...,7716581.story

hmmmmmmmmmmmmm

As Dow flirts with 14,000, are stocks cheap?

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Stocks have seen a recent rally, and the Dow Jones industrial average is again flirting with 14,000. But are stocks cheap or expensive? (Richard Drew / Associated Press / January 28, 2013)

By Andrew Tangel January 29, 2013, 7:39 a.m.




NEW YORK -- Stocks may be near record highs, but they are not terribly expensive, at least by one measure.


Last week the broad Standard & Poor's 500 index closed above 1,500 for the first time in five years. This week the Dow Jones industrial average has been flirting with 14,000, a level it hasn't seen since October 2007.


In early trading Tuesday, the Dow added 22 points, or 0.2%, to 13,905.


Stocks are a bit pricey relative to their earnings, but are nowhere near the overheated levels they've seen before, said Robert Shiller, a famed Yale University economist who identified the stock market and housing bubbles of the last decade.


Shiller, who may be best known for a widely reported index tracking U.S. house prices bearing his name, also created an index to track whether stocks were cheap or overpriced.


His CAPE index -- which stands for cyclically adjusted price-to-earnings ratio -- factors in 10 years' worth of earnings. He has collected data stretching back to 1871.
As of Jan. 16, the broad Standard & Poor's 500 index had a CAPE of 22.24 -- higher than the average over the last half-century of 19.52.
“It is somewhat high,” Shiller said, but "not shockingly high.”


His index's reading is only half of its reading of 44.2 in December 1999, amid the tech bubble that later burst.


Stocks are also cheaper than the last time the Dow hit 14,000, according to Shiller's index.


In October 2007, the index was at 27.31. Back then, George W. Bush was president, the investment banks Bear Stearns and Lehman Bros. still existed and the economy hadn't yet fallen into recession.


Shiller said historically low interest rates, which are making other investments less fruitful, were probably fueling the current rally. The Federal Reserve has been pumping money into the economy to lure investors into riskier assets like stocks.


“One would, just based on interest rates alone, want to have more in the stock market,” Shiller said.
Rising home prices, and better-than-expected corporate earnings may also be lifting spirits on Wall Street. Resolving the fiscal cliff -- and uncertainty over capital gains taxes -- likely also helped.


“There does seem to be some rekindling of investor sentiment,” Shiller said.

[Malsua]

I moved more of my 401k into stocks. I currently 40% money market 60% in mutual funds(the funds i'm in are about 75% stock, 25% bond).

Stocks are going to continue to raise via the Federal reserve's pump and pump(no dump from the feds)

[American Patriot]

US debt headed toward 200 percent of GDP even after 'fiscal cliff' deal
By Vicki Needham - 01/29/13 12:15 PM ET
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The nation's long-term fiscal outlook hasn't significantly improved following the recent agreement between Congress and the White House over tax and spending issues, according to a new analysis.

The "fiscal cliff" deal, combined with the debt-limit agreement of August 2011, only slightly delays the United States reaching debt-to-gross domestic product levels that would damage the economy and risk another fiscal crisis, according to a report from the Peter G. Peterson Foundation released on Tuesday.

The agreement "may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem," said Michael A. Peterson, president and COO of the Peterson Foundation.

"The primary goal of any sustainable fiscal policy is to stabilize the debt as a share of the economy and put it on a downward path, and yet our nation is still heading toward debt levels of 200 percent of GDP and beyond," he said.

The report concludes that the recent round of deficit-reduction measures won't make major improvements because they fail to address most of the major contributors to the debt and deficit, including rapidly rising healthcare costs.

The analysis suggests that lawmakers take action quickly to ensure that the nation is on a sustainable fiscal path.

At a House Ways and Means Committee hearing last week, lawmakers and budget experts agreed that rising healthcare costs, such as Medicare, must be addressed this year as part of efforts to overhaul the tax code and entitlement programs.

"Until spending in those areas is reduced, tax revenues are increased, or policymakers implement a combination of both, the United States will continue to have a severe long-term debt problem," the report said.

"Reforms should be implemented gradually, and fiscal improvements must be achieved before our debt level and interest payments are so high that sudden or more draconian reforms are required to avert a fiscal crisis."

The latest deal that stopped income tax increases for those making $400,000 a year or less may have only improved the burgeoning debt situation by a year.

Scheduled spending cuts from the 2011 budget deal, combined with the fiscal cliff agreement, put the debt on track to reach 200 percent of GDP by 2040, five years later than was projected prior to the passage of the two deals.

The recent deficit-reduction measure gave the nation an additional year before hitting that 200 percent threshold, the report showed.

Sequestration does not improve the outlook much, either.

Even if the budget sequester is fully implemented, federal debt would still reach 200 percent of GDP within about 28 years.


On top of that, the debt will continue to grow between now and 2022, and will accelerate significantly after that.


Debt is now projected to grow from 72 percent of GDP in 2012 to 87 percent in 2022, down only slightly from the 90 percent that was estimated before passage of the most recent deal.

Many economists suggest keeping debt at or below 60 percent of GDP, with research showing that economic growth slows for countries that have debt levels exceeding 90 percent of economic growth.

"Americans shouldn’t be under any false impression that our debt problems are behind us," Peterson said.

"And because it takes years to implement policies fairly and gradually, we need to make decisions now, before we are forced by markets to take severe action that hurts our economy and our citizens."

Read more: http://thehill.com/blogs/on-the-mone...#ixzz2JOJgUNaJ
Follow us: @thehill on Twitter | TheHill on Facebook

[American Patriot]

well... we're about to hit 14K on the DOW.

Interesting.

Wonder what next wag the dog thing will kill it today?

I mean after all, we can't let the stock exchange WORK right. Something is going to happen to kick it in the balls.

[American Patriot]

Obama's jobs council shutting down Thursday

January 31, 2013 RSS Feed Print

By JOSH LEDERMAN, Associated Press


WASHINGTON (AP) — Unemployment remains problematical, but that isn't stopping the White House jobs council from shutting down.


President Barack Obama created it in 2011 and filled it with prominent business leaders and economists. Its authority runs out Thursday, and the White House says it's not renewing the panel.


Instead, a White House official says the administration will focus on new ways to engage with the business community and create jobs, including expediting permits for infrastructure projects.


Obama met with the jobs council only a handful of times, most recently in February of 2012. Some Republicans say that's a sign he hasn't devoted enough attention to unemployment, a top concern for Americans.


Unemployment has dropped to 7.8 percent since Obama formed the council, but more than 12 million people are still without jobs.

[vector7]

Puerto Rico Says Will Default Tomorrow, Begs Congress For Help "Or Else Crisis Will Get Worse"

Submitted by Tyler Durden on 05/01/2016 17:10 -0400

Update: PR Governor Padilla has spoken...

• *PUERTO RICO GOVERNOR SAYS WON'T PAY DEBT TOMORROW
• *PUERTO RICO GOVERNOR SAYS ISLAND WON'T PAY DEBT MONDAY
• *PUERTO RICO GOVERNOR: GOVERNMENT SIGNED MORATORIUM BILL YESTERD
• *PUERTO RICO NEEDS DEAL W/ CREDITORS AND/OR CONGRESS: GARCIA

And of course, demands a bailout...

• *PUERTO RICO GOVERNOR CALLS ON U.S. CONGRESS, PAUL RYAN FOR HELP

And then threatens...

• *CRISIS WILL GET WORSE IF U.S. CONGRESS DOESN'T HELP: GARCIA
• *PUERTO RICO GOVERNOR CONCLUDES REMARKS TO COMMONWEALTH

As we detailed earlier, It's D-Day in Puerto Rico. As Bloomberg reports, investors are finding little comfort in the Puerto Rico Government Development Bank’s efforts to strike a last-ditch agreement with creditors to soften the blow of a default this weekend. The bonds that mature today (May 1st) have crashed to just 20c (disastrously below the 36-cent recovery rate the commonwealth proposed in March).

It appears investors are not buying what Puerto Rico is selling and prefer to dump the bonds than hold out in hope of a 'deal'...



A default on the $422 million due today is "virtually certain," S&P Global Ratings said April 11.

No matter which route Puerto Rico takes, credit-rating companies see a default as inevitable. Moody’s Investors Service analysts said last week that any non-payment, even if it’s agreed to by creditors, constitutes a default in their eyes. S&P Global Ratings said a distressed-debt exchange or temporarily withholding interest is synonymous to default.

But as Bloomberg reports, Puerto Rico said its Government Development Bank, which is operating in a state of emergency to preserve its dwindling cash, reached an agreement with some credit unions to delay $33 million of bond payments as the commonwealth rushes toward a potential historic default.

The pact only affects a portion of the $422 million that the bank owes on May 1. The GDB will exchange the $33 million in bonds for new debt that will mature May 1, 2017, Governor Alejandro Garcia Padilla’s administration said in a statement Friday. The terms of the agreement are available to other credit unions, called cooperativas, and investors, according to the statement.

“Apart from this private exchange, GDB continues to negotiate a potential transaction related to an exchange of all of GDB’s bond indebtedness, which would require the participation of all creditors of GDB (including the cooperativas),” the administration said in the statement. “The private exchange does not affect, or take the place of, those ongoing negotiations.”

The bank is still negotiating a possible debt exchange on all of its bonds, which would require the participation of all its creditors, according a the statement. The GDB, which structured the island’s debt sales, has $5.1 billion of debt. The governor’s office said Garcia Padilla will speak to the commonwealth in a televised address Sunday at 5 p.m. New York time.

[Ryan Ruck]

Americans’ Spending On Gas Hits 30 Year High, Hurting Businesses

Spending on gas hits a 30 year high, which spells trouble for many business owners who may need to reevaluate 2013 plans.

February 5, 2013

Gas prices are emotional roller coasters – when they’re low, life is great, and when they’re high, we begin to think long and hard about taking lengthy drives. It’s a necessary expense that can’t be avoided by most, and it definitely has an impact on consumer and business spending. According to reports from the Union of Concerned Scientists and the U.S. Energy Department, consumers spent four percent of their pre-tax income on gasoline in 2012 – the highest percentage in the past 30 years.

That shakes out to about $2,900 per year spent in each U.S. household, which is a pretty large expense. With many consumers on limited incomes, this increase has to be followed by a decrease in another area, which will likely disposable income expenditures. Housing, food and utilities are all needs that can’t be skipped out on. And because many people need fuel to get to work, they will likely dial back extraneous purchases on things they want and take pleasure in doing.

How spending on gas can hurt businesses

For business owners, this trend hurts in two ways: one, less consumer disposable income leads to fewer sales, and two – higher fuel costs correlate with higher costs of business for entrepreneurs. And unfortunately, when owners raise their prices to compensate for the additional costs, it deters consumers from making a purchase even more as they are already strapped for cash themselves.

One way to combat these effects is by having a contingency budget to help cushion the blow of unexpected expenses such as emergencies, impromptu opportunities or increased fuel prices. Having this funding to fall back on when costs of business rise can help you maintain favorable prices that will hopefully encourage consumers to shop.

Gas prices generally tend to ebb and flow, so this cushion may be able to keep costs steady until prices even out. But if consumer spending on gas continues on this record breaking trend, you may need to re-evaluate your supply chain and all the entities that operate within it, and find ways to transport your products at a more economical price in order to keep attracting customers.

[Ryan Ruck]

GDP Shows Surprise Drop for US in Fourth Quarter

January 30, 2013

The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.

The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.

The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.

The surprise contraction could raise fears about the economy's ability to handle tax increases that took effect in January and looming spending cuts.

Still, the weakness may be because of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.

And those volatile categories offset faster growth in consumer spending, business investment and housing -- the economy's core drivers of growth.

Another positive aspect of the report: For all of 2012, the economy expanded 2.2 percent, better than 2011's growth of 1.8 percent.

The economy may stay weak at the start of the year because Americans are coming to grips with an increase in Social Security taxes that has left them with less take-home pay.

Subpar growth has held back hiring. The economy has created about 150,000 jobs a month, on average, for the past two years. That's barely enough to reduce the unemployment rate, which has been 7.8 percent for the past two months.

Economists forecast that unemployment stayed at the still-high rate again this month. The government releases the January jobs report Friday.

The slower growth in stockpiles comes after a big jump in the third quarter. Companies frequently cut back on inventories if they anticipate a slowdown in sales. Slower inventory growth means factories likely produced less.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced its inventories by $2 billion in the fourth quarter as global sales declined from a year earlier.

The biggest question going forward is how consumers react to the expiration of a Social Security tax cut. Congress and the White House allowed the temporary tax cut to expire in January, but reached a deal to keep income taxes from rising on most Americans.

The tax increase will lower take home pay this year by about 2 percent. That means a household earning $50,000 a year will have about $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.

Already, a key measure of consumer confidence plummeted this month after Americans noticed the reduction in their paychecks, the Conference Board reported Tuesday.

Economists expected the first reading on gross domestic product to show growth of 1 percent, down from the third quarter's reading of 3.1 percent.