From the UPS Web Site….

UPS Ground and UPS Standard to Canada services will increase 4.9%.

Air and International express services will increase a net 4.9% through a combination of a 6.9% increase in rates and a 2% reduction in the air and international fuel surcharge.

From Naked Capitalism…

The latest policy is a regulatory change by the Equal Employment Opportunity Commission that says employers can reduce benefits when retirees reach age 65 and become eligible for Social Security and Medicare.

Another instance of the Bush Administration, while having come into office claiming to be a compassionate conservative and anti-large-scale government, being anything but that. This allows corporations to shift their obligations on to taxpayers, and will make it politically more difficult to implement changes in Medicare and Social Security.

From Calculated Risk….

According to the Fed, the discount rate spread is 145 bps. This graph was released this morning.

From The Age….

The depth of the housing crisis was underscored by the head of one of America’s largest banks, Bank of America, the straight-speaking Kenneth Lewis, who warned of a completely new attitude by Americans to their homes amid fears that as many as 20 million householders may “walk” from them, further deepening the crisis.

Lewis’ comments came as a new expression – “jingle mail” – referring to the growing trend where Americans mail the keys to their homes to the lenders before vacating, entered the US lexicon. Figures for November revealed more than 200,000 US homes were foreclosed, a 68% increase on November 2006.

Robert Folsom via Financial Armageddon…..

At the end of 2006, the financial assets of financial institutions surpassed 20% of annual GDP (those assets had never even eclipsed 5% of GDP until the early 1990s).

Since a picture is worth a thousand words, follow the link and look at the graph. It will do a much better job of communicating the dramatic nature of the change then mere words will.

If I was good with graphs, I would take the graph that Robert Folsom made and I would slap a graph of the national savings rate over it. Unless my memory is playing tricks on me, the growth of the financial assets of financial institutions matches the dramatic fall of America’s saving rate over the same period.

Over at the Marginal Revolution, Tyler Cowen asks….
The question is, when inflation comes, why doesn’t the expectation of that inflation lead to proportional increases in nominal interest rates, thus keeping the real rate constant?
In the comment section on his post I said…
I am going to reveal my ignorance here, but it would seem to me Click Here to continue reading.

From Naked Capitalism….

The ECB’s offer to lend to all takers who could post collateral for two weeks at 4.21% or higher led to an unprecedented $500 billion worth of advances.

From Yahoo….

For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll.

From the Wall Street Journal….

Former Treasury Secretary Lawrence Summers, once a fiscal hawk among Clinton Democrats, said the government should consider a $50 billion to $75 billion tax-cut and spending package to stave off a deep recession.

From Naked Capitalism,

Although food inflation has been hard to miss (just go to a grocery store), it’s getting worse. Inflation in cereals, which drives the costs of other foodstuffs, is accelerating. Bloomberg reports that wheat has just risen to over $10 a bushel as corn and soybean prices are spiking; the Financial Times has a series of articles today on food price inflation.

From Mish,

Notice how the index for shelter is rising even though home prices are falling nationally. This tells me the .3% rise for shelter simply is not happening. This component was seriously understated for many years but is now overstated for the last two years. What is rising however, is the cost of “driving” a home so to speak. Energy (heating and utilities) are soaring but with $400,000 homes (2005 prices) now going for $250,000 in many places, the overall cost of housing for a new buyer has plunged. Unfortunately the debt hasn’t, and that debt is an enormous drag on bank and consumer balance sheets alike.

And Stuart Staniford has bunch of graphs relating to food inflation. He ends his piece by saying…

And there lie the key issues for wealthy citizens of developed nations I think.

In the last year, there have been food riots, protests, or stampedes in Mauritania, China, Senegal, India, Pakistan, Morocco, Mexico, Yemen, Indonesia, and Burkina Faso.

If food prices continue to go up, the world’s middle classes will still be able to afford ample food. But it’s hard to see how, in the long term, we will be insulated from the social and ecological collapses that might get triggered in poor countries.

The the best explanation of the Fed bailout on the web comes from Interfluidity…..

I agree with several commentators (Felix Salmon, Calculated Risk) that the Bair/Paulson Plan, whatever it is, is not a bailout. But this, this is a bailout,. Nearly all government bailouts take the form of subsidized loans, extending credit at low rates to counterparties or against collateral for which the market would have demanded a high premium. That is precisely what the TAF will do. The Fed’s press release claims, of course, that loans will only be available to “sound” banks, and that they will be “fully collateralized”. But no one who can get the same deal from private markets will use this facility. The need for the program arises because private markets are skeptical about the soundness of counterparties and the quality of the assets they have to offer as collateral. The Fed hints at this when it mentions the “wide variety of collateral” that can be used to secure loans. You can bet that whatever it is private lenders are eschewing will be pledged as collateral to the Fed under TAF. The Fed is going to bear private risk that market refuses to. That is a bailout.

Calculated Risk also has things to say. Felix Salmon explains just how lax the requirements for collateral are…….

But what if the CDO is completely illiquid, and you can’t find a price for it at all? No worries, the Fed will still accept it as collateral, and lend up to 85% of par value. (There’s an interesting thought experiment here: what happens if a long-term CDO has a market value of, say, 90 cents on the dollar? In that case, an illiquid version of that CDO would actually be worth more to the Fed than the liquid version.)

Do keep on looking down that list, though: it turns out that banks can even put up as collateral subprime credit-card receivables – they don’t even need a AAA rating.

The Wall Street Journal has an explanation. Marginal Revolution has a take. So does Macro Man.

Ape Man is going to hate this. He wrote this rant before the bailout was announced.

Edit: I should have also included this from Bloomberg…

The Federal Reserve took advantage of emergency powers to authorize the auctions that officials felt were necessary to ease a credit squeeze, concluding it otherwise lacked legal permission to do so.

The Fed bypassed requirements for prior notice and public comment when writing the regulations to implement today’s agreement with the European Central Bank and three other central banks. The Fed’s official notice today said any delay caused by following standard procedures would have been “contrary to the public interest.”

Twice this week I came in to find the database that was supposed to be cranking out morning reports instead saying, “Invalid argument.” For those without any coding background, this is basically saying “The thing you want to use can’t be used that way, or maybe it doesn’t even exist.”
In a previous generation of the Click Here to continue reading.

Everyone knows that government regulations are ridicules and overly complex. But sometimes it is hard believe just how ridicules they are.