Mish's Global Economic Trend Analysis

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Federal Bankruptcy Court Lets Stockton, California Cut Retiree Health Care Benefits; Flood of City Bankruptcies Coming Posted: 28 Jul 2012 08:28 PM PDT In a welcome, common sense ruling, Court lets Stockton, Calif. cut retiree health care A federal bankruptcy judge on Friday cleared the way for Stockton, California to cut health care benefits for retirees while it is in bankruptcy proceedings. Stockton is seeking Chapter 9 protection from its creditors and said that it would cut retiree health benefits while it reorganizes. Retired employees sued to stop those cuts. Judge Christopher Klein on Friday issued a temporary order denying the bid to stop the benefit cuts, and he said a formal decision was on its way. Stockton's attorneys had argued that bankruptcy law gave the city wide latitude on how to spend its revenue while it prepares a plan to restructure its finances. "For the reasons explained in the forthcoming decision of this court, the Application for Temporary Restraining Order and Preliminary Injunction or in the Alternative for Relief from Stay is DENIED," Klein wrote. Flood of City Bankruptcies Coming This is a good start for what needs to happen. The next step needs to be huge clawbacks on promised benefits, preferably top down, so that those with the highest pension benefits bear the brunt of the hit.  As soon as cities realize this is the way out, a flood of bankruptcies will be on the way. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Schäuble Rejects ECB Help for Spain; Full Bailout Still Coming Posted: 28 Jul 2012 09:49 AM PDT As any clear-thinking person should have expected, Schäuble rejects ECB help for Spain Berlin - For days, it is speculated that the European Central Bank (ECB) is planning, together with the bailout fund EFSF Spanish government bond buy - so come back to Spain to cheaper capital. The "Sueddeutsche Zeitung" According to the euro countries willing to support this approach . Federal Finance Minister Wolfgang Schäuble (CDU), but has now dismissed the reports in an interview with the newspaper "Welt am Sonntag". "No, at this speculation is not true," Schäuble said the newspaper. The Finance Minister said it was already a sufficiently large aid package for Spain have been laced. The 100-billion-euro package to recapitalize Spanish banks also close an emergency aid of 30 billion €. "The short-term financial requirements of Spain is not so great", said Schäuble, "the painfully high interest rates - but the world will not, if you have to pay for some bond auctions a few percent more." Full Bailout Still Coming Schäuble is saying the right things. For starters, ECB backdoor bailouts of Spain are likely against the German constitution. Even if they weren't, why should German taxpayers accept the risk of any of these leveraged proposals that have been circulated, and recirculated? It's important to understand that the near-7% current market rate does not affect interest on prior bonds (only the current value of them). However, high rates do reflect the interest Spain would have to pay to float new bonds or rollover existing ones. Thus, high rates reflect extreme stress and are unsustainable for the long-term, but they are not an immediate killer for Spain. Regardless, Spain is deep in recession and there is no way it can meet its deficit targets. A full bailout of Spain is a certainty. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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