Mar 20

What is Repo 105?

Posted by Kristjan Velbri | Posted in General | Posted on 20-03-2010

Repo 105, the accounting gimmick used by Lehman Brothers before it collapsed on itself, has been making the headlines as of late. But what is it and how did it help to ‘cleanse’ Lehman’s balance sheet? Well, this video should help you understand. If you haven’t fulfilled your Lehman appetite, then this list of links by Barry Ritholtz should do the trick.

Post to Twitter Post to Digg Post to Post to Reddit Post to StumbleUpon

Nov 26

Happy Thanksgiving, My American Friends!

Posted by Kristjan Velbri | Posted in General | Posted on 26-11-2009


Post to Twitter Post to Digg Post to Post to Reddit Post to StumbleUpon

Nov 13

An Empty City Built to Boost GDP in China

Posted by Kristjan Velbri | Posted in General, Video | Posted on 13-11-2009

Stories of cities and other, smaller infrastructure projects built to boost GDP or hand out government funds to lobby groups are always interesting, especially if those projects turn out to be a complete waste of money. In May, the BBC reported on a few abandoned airports in South Korea, but Al Jazeera English topped that just a few days ago with their story on an empty city in China. Enjoy.

Post to Twitter Post to Digg Post to Post to Reddit Post to StumbleUpon

Nov 12

Cutting Back on Spending

Posted by Kristjan Velbri | Posted in Economy, General, Politics | Posted on 12-11-2009

/category/general/chart_states_fiscal.gifIt has been evident for a while that local governments in the US have to cut back on spending. While the federal government can run  huge deficits (last year it was around $1.4 trillion), states have to balance their budgets. Although states are reliant on creative accounting and to some extent, illegal practices, they cannot hope to balance their budgets using the same old tricks for much longer because states’ revenues are down dramatically. According to a new report by the Pew Center “the same economic pressures that pushed California to the brink of insolvency are wreaking havoc on other states”.

The first state that comes to mind when talking about fiscal problems is California with its 49% budget hole and a 16.2% drop in revenue. But there are other states out there whose fiscal problems come eerily close to California: Illinois’ budget is off by 47% while Oregon’s revenue has fallen 19%, which is even worse than California. According to the law, states have to balance their budgets just like every enterprise interested in survival (companies can rely on debt, but they have to service that debt and eventually pay it off, unlike the federal government or the government of Japan, for that matter).

What to expect from all of this?

Well, first off, states will most likely use every possible means to raise revenue – meaning more traffic tickets, higher fees, giving out casino licenses (some states are seriously thinking about legalizing gambling to collect taxes) and downright stupid requirements like the one that New York just imposed on its vehicle owners by requiring them to buy new license plates for no other reason than to collect funds. But aside from collecting more taxes, states will start cutting back on vital public services like the maintenance of roads, bridges, waterfronts, levees, railroad crossings – all the while infrastructure is in a terrible shape and needs immediate fixing. This is very sad indeed – while I remain critical of the way the country is run, I am still very much fond of America. I would like to see America recover as much as Americans themselves, but given the current trends I don’t see that happening. It is indeed a sad chapter in American history.

Post to Twitter Post to Digg Post to Post to Reddit Post to StumbleUpon

Nov 05

How Is This Possible?

Posted by Kristjan Velbri | Posted in General | Posted on 05-11-2009

safe-deposit-boxI stumbled across a pretty disturbing news piece today which talks about how states auction off ‘unclaimed’ property in safety deposit boxes. This is not from some ‘alternative news media channel’ or from Alex Jones. One San Fransisco resident discovered the content of her safety deposit box had been auctioned off by the state to balance their budget. Carla Ruff was a loyal customer and had always paid her safety deposit box fee. The state took the property claiming it was ‘unclaimed property’ and therefore the property of the state. The state should have notified the owner of an impending confiscation and it could’ve done it – inside the box were papers with the owner’s name and address. The state did no such thing.

“Her great-grandmother’s precious natural pearls and other jewelry had been auctioned off. They were sold for just $1,800, even though they were appraised for $82,500.

These things were things that she gave to me,” Ruff said. “I valued them because I loved her.”"

The article goes on to cite numerous cases where states have taken the liberty to sell or auction off people’s assets without even notifying the real owners. One state (guess which one?) has been particularly keen on seizing its citizens’ assets. If fact, it has been so good at it that it now owes $5.1 billion dollars for all the things it has confiscated.

“California law used to say property was unclaimed if the rightful owner had had no contact with the business for 15 years. But during various state budget crises, the waiting period was reduced to seven years, and then five, and then three. Legislators even tried for one year. Why? Because the state wanted to use that free money.”

This is the kind of stuff that usually happens in third world countries or places that don’t have an established code of law. The fact that this is happening in America is a big disappointment.

ABC News :How Safe Is Your Safe-Deposit Box?
by Elisabeth Leamy

Post to Twitter Post to Digg Post to Post to Reddit Post to StumbleUpon