In this rant, Steve Waldman laments the fact that we lack a real financial system.

From Naked Capitalism with some links about bad news about international trade.

And from Calculated Risk comes some links with bad news about local government funding.

Last, but not least, The Prudent Bear reminds us that we are all going to die.

From Reuters…

Fifteen U.S. business groups have asked legislators to provide relief on a pension plan funding law to help companies avoid having to freeze or end pension plans that may be inadequately funded because of the financial crisis.

They want Congress to lower levels at which pension plans must be funded and to clarify whether they could smooth out the market values of pension plan assets over several years in financial reports.

The right answer is no. Markets have fallen by a lot, but they are still not under priced by most historical measures. The idea that the current market drops will soon reverse and bring the pension funds back full funding is a pipe dream. But who has the courage to face the costs of the right answer? The article quotes a letter from the business groups….

At a time when companies need cash to keep their businesses afloat, they are also required to make unexpectedly large contributions to their plans in order to meet funding requirements. Consequently, many companies will have to consider whether to freeze or terminate their pension plans or reduce retirement benefit accruals in order to survive.

I don’t think these companies are just fear mongering to try to get their way. They honestly cannot afford to put away what they need to put away to fund their pensions in the current market. The truth of the matter is that America as a nation has not saved enough for the retirement of the baby boomers. There is no magic cure for this problem.

One thing that is going to be forced on companies is a reduction in the golden parachutes that they hand out to executives. But even if we paid all the executives in American minimums wage, we would hardly make a dent in the hundreds of billions of dollars that pensions funds are lacking.

From a long article in the Wall Street Journal on FDIC’s attempts to stave off foreclosures…..

When the Federal Deposit Insurance Corp. seized control of IndyMac Bancorp — the nation’s 10th-largest mortgage lender by loan volume — the agency vowed to ease terms for many of its troubled borrowers. In doing so, the FDIC wanted to show the mortgage industry how it could slash home foreclosures by making decisions both sensible and humane.

That is the goal. Keep that in mind. Now from latter on in the article….

Nanci Puerto, a 40-year-old house cleaner in Antioch, ran into such a problem. She refinanced her house for $637,288 from IndyMac in 2006, taking out cash for a down payment on another property. She and her husband, who works in a machine shop, take home a combined $70,000 a year. Each month, she makes the minimum payment on her loan, $2,416. At the same time, she watches the outstanding principal swell since that payment doesn’t fully cover the interest costs. Now she owes IndyMac $707,000, on a house that the county tax assessor says is only worth $410,000.

When she called the bank, however, she says the agent told her IndyMac is just a “collector” for the investors who own her mortgage. The bank could only consider altering her mortgage terms if she were delinquent.

“I’m going to stop paying so they’ll modify the loan,” Ms. Puerto said this week. “Otherwise they won’t help me.”

There are two things to note. One is that while brining down Ms. Puerto loan down to something that she can afford might make sense, it is still going to involve major losses for the banks that loaned her the money. She is in overhead to such a degree that you are not going to make her house affordable for her with just minor cuts in the monthly payment. You are going to have to offer her a major deal.

But there in lies the rub. If you offer her a major deal, you are going to give everyone else major incentives to game the system so that they qualify for the same deal. Why should should a guy who is just barely making payments get a different deal than Ms. Puerto? Banks can try as hard as they want to try to make sure that those deals only go to people who can’t make their payments otherwise, but human ingenuity will defeat them every time. Nobody is going to pay what they owe once they figure out that banks are terrified of trying to foreclose in this environment.

In short, I understand why people think it is foolish for banks to try to foreclose when they can’t sell the house for anything near what it is worth. But anyone who thinks that loan modifications are going to cut the losses that banks are going to suffer is dreaming. It is not going to work that way.

From Brad Setser…

The Fed’s balance sheet just surpassed $2 trillion dollars. It has grown by a trillion dollars over the course of the year. Literally. See “total factors supplying reserve balances” at the close of business on October 29. That growth was financed by Treasury bill issuance ($560b from the supplementary financing facility) and a large rise in banks deposits at the Fed ($405b).

The stated foreign reserves of China’s central bank reached $1.9 trillion at the end of September. That though understates the total assets managed by the PBoC by around $200 billion. It is now clear – I think – that the PBoC manages about $200 billion in foreign currency that the state banks have placed at PBoC. This isn’t a secret: the PBoC reports over $200 billion in “other foreign assets.” That means the PBoC already has a foreign currency balance sheet of over $2 trillion.

He then goes on to discuss how both central banks are trying to keep the American economy afloat.

From Brad Setser….

Russia’s reserves fell by over $30 billion during the third week of October — tumbling from $515.7b on October 17 to $484.7b on October 24. Roughly $15 billion of the fall reflects the fall in the dollar value of Russia’s euros and pounds. But about $15 billion reflects Russian intervention in the currency market, as well as the drain on Russia’s reserves associated with the loans Russia’s government is making to Russian banks and firms seeking foreign exchange to repay their foreign currency debts.

A $15 billion weekly outflow is rather large.

At this rate, Russia’s remaining reserves will be gone in about 32 weeks. But it is unlikely to continue at this rate. Still, this shows that having large reserves does not guarantee economic stability in a nation’s future.

If you try to talk about how demographics will affect a country’s economic future you will alway come acrossed a few people who will argue that all the problems can be fixed by people working longer. To a certain degree, this makes a lot of sense. People are living longer so it seems as if they should be able to work longer. But in the here and now, living longer has not correlated to working longer. On the contrary, as the average live span has gone up, the working age has gone down. From Brian Sullivan…..

We continue as a nation to retire younger. More workers are making smart investment and retirement decisions and that’s helping say “so long” to the working world at an earlier age. The Bureau of Labor Statistics shows that the average “exit” age from the workforce has dropped from 66.9 in 1950-55 (the study is done in 5 year increments) to 62.0 years in 2000. Five years earlier. Good work!

As we retire younger, we live longer. Our lifespan continues to hit a record in America. The accounts vary, but on a whole its safe to say the American lives to be an average of about 75 years old. Women live to an average age of 80, men drag the average down. And this upward trend is going to continue. The Center for Disease Control estimates that the average lifespan in America will increase by another 2 years by 2015. Even men may live to be 80 someday.