USPS Defaults on Retiree Healthcare

One of the most significant economic dominos that has begun to topple is the failure of various pension and healthcare programs, especially those associated with local and national governmental agencies.

In a recent Bloomberg story, the US Postal Service acknowledged it will not be able to make its required $5.5 billion dollar retiree health care payment. Further, it has forecast it will lose $9.1 billion in the 12 months ending Sept. 30, not including the $5.5 billion payment. Essentially, the US Postal Service has twice defaulted on its loan payments with little possibility of anything changing in the near future. The USPS has not made a quarterly profit since 2009.

According to Representative Darrell Issa, the Republican from California and chairman f the Oversight and Government Reform Committee, “The default by the Postal Service on its obligation to its own employees and retirees follows decades of mismanagement, and a willful blindness to fundamental changes in America’s use of mail. The Postal Service continues to fail to do all it can under current law to cut costs.”

The USPS is another example of how government-run agencies are allowed to operate under a different set of financial rules that would scuttle
any normal household or private business.

Can the Federal Government save the USPS or is it just a matter of time before both its healthcare payments and letters fail to ever get delivered?

Peter Schiff: "Bernanke's Incompetence Will Destroy the Value of the Dollar"

If anyone had lingering faith that Mr. Bernanke actually has a plan to end the US government's addiction to cheap money, the Chairman's semi-annual testimony to Congress should have washed it away. In addition to claiming that his money-printing has helped the US economy, Bernanke told Congress that gold is not money, people buying gold are not concerned about inflation, and the external value of the dollar has no influence on its domestic purchasing power. He even took a moment to stump for President Obama's plan to raise the debt ceiling.

Read more: Peter Schiff: "Bernanke's Incompetence Will Destroy the Value of the Dollar"

IMF Head Urges Bigger Global Role for China's Yuan

"International Monetary Fund chief Dominique Strauss-Kahn said on Thursday the Chinese yuan should be given a greater role within a restructured international monetary system."

Read more: IMF Head Urges Bigger Global Role for China's Yuan

Report on Bancor: New monetary Standard ( pg. 26-27)

In an International Monetary Fund document, a Special Drawing Right (SDR) or basket of currencies called the Bancor would replace the US dollar as the world's reserve currency. It would consist of US dollar (44%), euro (34 %), Japanese Yen (11%) and the British Sterling (11%).

Source: IMF Report, Reserve Accumulation and International Monetary Fund, April 13, 2010

The Demise of the Dollar

According to Robert Fisk, the UK Independent, "In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar."

Source: The Independent (UK), October, 2009

Scrap dollar as sole reserve currency: U.N. report

Louis Charbonneau, Tue Jun 29, 2010 4:56pm EDT

"A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value. But several European officials attending a high-level meeting of the U.N. Economic and Social Council countered by saying that the market, not politicians, would determine what currencies countries would keep on hand for reserves."

Read more: Scrap dollar as sole reserve currency: U.N. report

28% of Americans have no emergency savings

Forget retirement, a recent CNN news story indicates nearly a third of Americans have no emergency savings if the rule of thumb is an emergency fund with six month’s worth of cash in it.

Further, about 50% of Americans don’t even have three month’s savings and 28% don’t have any savings at all. Basically, they’re just living from paycheck to paycheck.

The good news, for some 25% , is that they have six month’s worth of cash.

According to Bankrate.com’s Greg McBride, senior financial analyst, "The biggest barrier to saving is not being in the habit of saving," he said. "By establishing that habit, even if an unplanned expense comes up and wipes out what you've accumulated, you're only one paycheck away from restarting the saving process."

Are baby boomers ready for retirement? Perhaps the title of a June 26, 2012 Forbes article answers the question best:The Secret to a Successful Retirement: Don't Retire

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The best financial advice for the growing number of Baby Boomers eagerly approaching retirement is: “Don’t, says Forbes.

“That’s because a decade of dismal stock market returns, curtailed employer pension plans, poor saving habits, and plunging home values means that fewer than half of those now approaching retirement have enough money to retire comfortably, including Social Security benefits, which don’t begin in full until age 66.”

If Forbes is correct, at least 40 million baby boomers are not going to be able to retire any time soon. What kind of financial burden does that put on families, on children, on governments and on under-funded pension plans?

Buffet Warns of Derivatives Fiasco in 2002:

Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen.

It's interesting to see how Warren Buffet felt about derivatives as early as 2002, significantly ahead of the 2008 meltdown in which derivatives played a major role.

Read more: Buffet Warns of Derivatives Fiasco in 2002:

Berkshire Sees the Double Edge Sword of Derivatives; You win some and lose some.

Though Buffet warned shareholders about derivatives, in 2002, it didn't stop him from playing the game in 2012. In a letter to shareholders he once again noted the danger: "Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal," Warren Buffett wrote in 2002.

Read more: Berkshire Sees the Double Edge Sword of Derivatives; You win some and lose some.

JP Morgan Unit Also Has $100 Billion in Risky Bonds

The unit at the center of JPMorgan Chase's $2 billion trading loss has built up positions totaling more than $100 billion in asset-backed securities and structured products -- the complex, risky bonds at the center of the financial crisis in 2008.

These holdings are in addition to those in credit derivatives that led to the losses and have mired the bank in regulatory investigations and criticism. Said an anonymous spokesperson: "I can't see how they could unwind these positions because no one can replace them in terms of size. It's a bit of the same problem they face with the derivatives trade," said a credit trader at a rival bank. "They pretty much are the market."

Source: Financial Times, May 18, 2012.