Daily Digest - July 4

• More Gerald Celente (Video)
• The Meaning of Enough
• Savings Grace - By the Charts...
• Michael Covel on CNBC’s Maria [NO SHOW] Bartiromo (Video)
• The Country that Punishes Savers: Americans Saving 7 percent of Income Putting nearly $800 Billion Annual Rate on the Sidelines. Banks offering 0 to 0.10 Percent to Borrow Your Money.
• More Fed Lawlessness: AIG
• Credit Card Addicted Nation
• The World’s Riskiest Sovereign Debt (Chart)
• ALL BUSINESS: Cash is king for investors
• India Joins Russia, China in Questioning the Kings Dominance (U.S. Dollar)

Economy

More Gerald Celente (Video)

The Meaning of Enough

I was going to write about the markets, but it's Father's Day so I want to share something with you my dad gave me, a Newsweek article by Peter Peterson, Why I'm Giving Away $1 Billion:
In 2007 the company I cofounded, the Blackstone Group, held a most successful public offering. I found myself, at 81, an instant billionaire. I wish I could've called my father, a Greek immigrant who had spent most of his life running a 24-hour diner in Kearney, Neb. The news might have pleased him as much as my being the first Greek cabinet officer, which he never hesitated to tell perfect strangers. In the 1930s, when I was growing up, there was all this talk about millionaires like John D. Rockefeller and Andrew Carnegie. Now I was a millionaire 1,000 times over.

But immediately I began wondering: what do I do with $1 billion? The idea of trying to make the money grow felt empty to me. For my father, who saved or gave away so much of his modest income, the ultimate pejorative was "big spender." So buying a yacht was out of the question. I was also struggling over what to do with myself. I would be retiring from Blackstone, but my mind was still sharp and my energy was good.

As my work commitments diminished, the phones gradually stopped ringing. The e-mails slowed. My schedule had too many blank spots. I was liberated. I was free. But I was joyless. I found my new life to be a kind of metaphor for my declining years—one might say a slow dying. I missed the frequent interactions with people I respected and enjoyed. I missed being needed. So I started looking at the lives of other billionaires. Almost all the ones I most admired were major philanthropists: Warren Buffett, Bill Gates, Mike Bloomberg, George Soros, Eli Broad—each with a passion to do good, each getting so much pleasure from giving their money away. I decided that's what I wanted to do. But to which worthy cause would I direct my money?

For the first time in my memory, the majority of the American people join me in believing that, on our current course, our children will not do as well as we have. For years, I have been saying that the American government, and America itself, has to change its spending and borrowing policies: the tens of trillions of dollars in unfunded entitlements and promises, the dangerous dependence on foreign capital, our pitiful level of savings, the metastasizing health-care costs, our energy gluttony. These structural deficits are unsustainable. Herb Stein, who served alongside me in the Nixon White House as chairman of the Council of Economic Advisers, once drily observed, "If your horse dies, I suggest you dismount." And yet, we keep trying to ride this horse.

Underlying these challenges is our broken political system. Our representatives, unlike our Founding Fathers, see politics as a career. As a result, they are focused not on the next generation, but on the next election. When the long-term problems are large and real, they anesthetize us, mislead us, divert us—anything to keep us from giving up something or having to pay for it. Too often, our political leaders are just enablers, co-conspirators in a disingenuous and greedy silence. Our children are unrepresented. The future is unrepresented. The moment is long overdue for us to become moral and worthy ancestors. So I decided to set up a different kind of foundation, one that would focus on America's key fiscal-sustainability challenges. The fact is, for most of these challenges, there are workable solutions. Our problem is not a lack of such options. It is a lack of will to do something about them.

Ultimately, I decided to commit $1 billion to the Peter G. Peterson foundation—the vast majority of my net proceeds from Blackstone. Why so much? Kurt Vonnegut once told a story about seeing Joseph Heller at a wealthy hedge-fund manager's party at a beach house in the Hamptons. Casting his eye around the luxurious setting, Vonnegut said, "Joe, doesn't it bother you that this guy makes more in a day than you ever made from Catch-22?" "No, not really," Heller said. "I have something that he doesn't have: I know the meaning of enough." I have far more than enough.

Peterson's memoir, The Education Of An American Dreamer, will be published by Twelve this month.

Having met many hedge fund and private equity fund managers, I can tell you Joseph Heller is absolutely right, you can't put a price on the "meaning of enough" and most of these super rich individuals do not have a clue about the real meaning of life.

I never met Pete Peterson but I have an autographed copy of his previous book, Running on Empty, which a senior private equity manager at a large public pension fund was kind enough to give me.

Finally, let me share with you this amazing YouTube video below of the real story of a inspirational love between a father and a son. Dick and Rick Hoyt - Team Hoyt - teach us that that there is never enough love for those we truly care about.

Happy Father's Day to all fathers and to my father whom I love deeply for all that he has done for me.

Savings Grace - By the Charts...

Video: Top 1000 world banks 2009

Boom Time: Personal Bankruptcies in SoCal

From the LA Times: Personal bankruptcies surge in Southern California

Going legally broke has made a big comeback -- especially in the Los Angeles area -- despite a mid-decade revision to the U.S. Bankruptcy Code intended to curb filings.

The number of Southern Californians seeking bankruptcy protection nearly doubled in 2008 from 2007 in the U.S. Bankruptcy Court's seven-county California Central District, by far the biggest increase in the nation.

Bankruptcy is still booming. Personal filings from January through April, the most recent month available, rose 75% in the Central District compared with the year-earlier period.

Michael Covel on CNBC’s Maria [NO SHOW] Bartiromo (Video)

The Country that Punishes Savers: Americans Saving 7 percent of Income Putting nearly $800 Billion Annual Rate on the Sidelines. Banks offering 0 to 0.10 Percent to Borrow Your Money.

We have never seen such a rapid change in the savings rate. Of course, going from zero anything would be an improvement. The current seasonally adjusted annual rate has not been seen since 1993 but as the chart above shows, the percent of change is unmatched with 50 years of data. What is occurring here? I’ve seen a few articles talking about the new found frugality that Americans are now embracing. This is something I hesitate to agree with because it presupposes that Americans are electing to save as a choice rather than being forced by external circumstances. I do believe many Americans are becoming more frugal by choice but the vast majority are simply responding to the horrific economy that has evaporated $13.8 trillion in American household wealth.

But who are the big winners here? Banks. The Fed shows that deposits at many banks now stands at $7.5 trillion showing the largest increase for the year. These banks are getting insanely cheap deposits from the government and now you to help mend their broken balance sheets. Call it double dipping. Look at how much money is being put into savings:

More Fed Lawlessness: AIG

See what happens when Congress refuses to enforce The Federal Reserve Act's provisions that require that equity ownership be taken only in instruments that have the full faith and credit of the US Government behind them?

Under the agreement, AIG will split off AIA and Alico into separate company-owned entities called "special purpose vehicles," or SPVs. The New York Fed will receive preferred shares now valued at $25 billion -- $16 billion in AIA and $9 billion in Alico -- and in exchange will forgive an equal amount of AIG debt.

So now The Federal Reserve (actually the NY Fed) partially owns an insurance company through more off-balance-sheet Frankenstein monsters.

This is blatantly in violation of The Federal Reserve Act but nobody in Congress seems to care.

The FRA was written as it stands to explicitly preclude this sort of transaction. If we are to take an equity ownership position in AIG linked to the taxpayer it has to be done through an appropriation passed by and overseen by Congress, not through an administrative action by The Federal Reserve or one of its districts!

The New York Fed said in a statement that the agreements "further the goals of enabling AIG to fully repay the assistance that it has received from U.S. taxpayers and advancing the company's global restructuring process. The exchange of senior secured debt for preferred equity interests reduces AIG's financial leverage and facilitates the independence of these two key subsidiaries."

And who authorized The New York Fed to engage in that transaction? Where is the explicit legislative authorization permitting the creation of an SPV that amounts to EQUITY OWNERSHIP of an insurance company?

The NY Fed just nationalized an insurance company without a bill proffered in Congress and signed by The President!

WHERE ARE THE DAMN COPS?

Credit Card Addicted Nation

Credit cards were developed as a form of convenience and not another stream of household income. The first major use in the United States started in the 1920s when it was used for the purposes of fueling the expanding auto owner population. Bank of America created the BankAmericard in 1958 which later became the Visa system. If we rewind to the start of the decade, let us use January 2000 as the date, Americans had $614 billion in credit card debt. Today that number now stands at $931 billion. Now this wouldn’t be such an issue if real wages and savings had increased over this timeframe but the reality is, Americans used over $300 billion in credit card debt to maintain a lifestyle beyond their means. Much of this came in conjunctions with the housing bubble which took three decades to expand.

The World’s Riskiest Sovereign Debt (Chart)

ALL BUSINESS: Cash is king for investors

This ratio jumped to an almost-unheard of level of more than 60 percent on March 9, almost triple the median level in the early years of this decade, for two reasons. Money market fund totals have surged 30 percent since the stock market peaked in October 2007, and by early March the S&P 500's market cap had plunged 57 percent from its high point in 2007.
Today, that ratio has narrowed to about 45 percent, primarily because of a recent rebound in stocks. There is $3.7 trillion sitting in money market mutual funds right now, and the market cap of the S&P 500 is about $8 trillion, up from a March low of $5.9 trillion.

India Joins Russia, China in Questioning the Kings Dominance (U.S. Dollar)

Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar’s future as a global reserve currency. Russia’s proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supranational currency.

“We will resume” talks on the supranational currency proposal at the G-8 summit in L’Aquila on July 8-10, Medvedev aide Sergei Prikhodko told reporters in Moscow yesterday.

Singh adviser Tendulkar said that big dollar holders face a “prisoner’s dilemma” in terms of managing their holdings. “That’s why I’m telling them to do this,” he said.

He also said that world currencies need to adjust to help unwind trade imbalances that have contributed to the global financial crisis.

“The major imbalances which led to the current situation, the current account surpluses and deficits, have to be addressed,” he said. “Currency adjustment is one thing that suggests itself.”

Emerging-Market Dependence