June 2010

Credit Suisse Estimates BP costs to be $37 billion

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Credit Suisse has released an initial estimate on the costs to BP and it's $37 billion.

More details from Business Week:

Cleanup costs may be $15 billion to $23 billion if the well leaks until relief drilling is completed in August, analysts led by Kim Fustier in London said. Claims may rise to $14 billion

Note, the two major components to this estimate. The first is the spill rate. Credit Suisse clearly is using 75 million gallons total.

By early August when the relief wells are drilled, Macondo could have spilled 45 to 75 million gallons of oil into the Gulf, four to seven times Exxon Valdez.

That is quite low of an spill rate estimate. Using a recent top estimate of 4 million gallons per day, we calculate by August, the total amount spilled would be 360 million gallons. The spill rate is an estimate, there is no meter actually measuring it. Spill rates were revised to the high end of 25,000 barrels a day.

Using a longer and clearer video clip of the oil leak for the USGS analysis, Wereley said the figure from his team was reduced to the 12,000-25,000 per-barrel range because of the amount of methane gas and other natural gases consistently gushing out of the pipe.

Challenger Gray - Layoffs Increase 1.3% for May 2010

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Challenger, Gray & Christmas tracks layoffs. In their May Report (attached), the tally of layoffs is 38,810. April announced layoffs were 38,326. 16,697 of the layoffs were in government and non-profit, which is an increase from last month.

New York had the most firings, with 18,960 layoffs in that state alone in May.

The number one reason for firing people is cost reduction. 15,998 of the 38,810 firings gave this reason.

While Challenger & Gray compares this to last year and seems to say how great it all is, the reality is more corporations have been offshore outsourcing and labor arbitraging American workers for over a decade now. Below is the Challenger Quarterly Layoff tracker starting in 1989. One can see the pattern of treating workers as disposable commodities, starting to escalate as technology, such as cheap telecommunications, expanded and bad trade deals, like the China PNTR came into effect. Global labor arbitrage is a long term structural problem for the U.S. labor force.

 

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U.S. Mint runs out

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Yesterday there were two headlines of interest. One of which was about gold.

(Reuters) - The U.S. mint sold 190,000 1-ounce American Eagle gold coins in May, the largest number since January 1999, and the most in any month so far in 2010, according to a spokesman for the U.S. agency.

The other news article was about silver.

The United States Mint’s bullion 2010 American Silver Eagles posted their best May and second best sales month in history, according to the most recent figures available from the Mint.
In just the one month, buyers purchased an astonishing 3,636,500 of the one ounce .999 fine silver coins. This number smashes the old May record of 1,904,500 set last year.
May 2010 sales fell short of the best month ever by only 59,500.

So with all that gold and silver leaving the mint, I guess today's bulletins aren't really all that surprising.

House Passed Bill Which Closes the "Offshore Outsourcing" International Corporate Tax Scheme

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A little observed provision to remove the tax incentives to offshore outsource your job was passed last Friday by the House of Representatives in the American Workers, State, and Business Relief Act of 2010 bill.

The legislation ties corporate revenues directly to the foreign tax credit. If passed, no longer can a corporation claim credits for foreign taxes yet park the actual profits made offshore in a low tax country. Previously corporations claimed the foreign tax credits, yet only to reduce their U.S. tax liability. The actual foreign revenues were not repatriated into the United States. If one obtains tax credits yet doesn't have to actually pay tax on profits accrued offshore, this encourages the movement of capital, assets and production overseas, including jobs.

In White House Semi-English:

Who Owns The World

During these times of rampaging predatory capitalism, one is tempted to dwell on the details; the endless new scams and instruments to generate profits from debt, and always new creations:

  • Blythe Masters (who gave us the credit default swap) hard at work on carbon derivatives,
  • JP Morgan Chase’s q-Forwards,
  • Goldman Sachs and their collateralized risk obligations (CRO) and convoluted public-private partnership configurations,
  • Morgan Stanley and their Pinnacle Notes,
  • Citigroup’s crisis derivatives,
  • and ELX Futures’ (Goldman Sachs, JP Morgan Chase, Morgan Stanley et al.) exchange of futures for futures (EFF) gambit,

but sometimes examining the fundamentals is recommended.

A long time ago, Henry George, the great political economics thinker, came to the conclusion that the concentrated land ownership – or the monopoly of land – was the chief cause of poverty.

The free-thinking economist, J.W. Smith and his elegant economic democracy philosophy elaborated this to the monopolization of land, capital and knowledge. While in logical agreement with Dr. Smith, the second two categories are always dependent upon the primary monopoly of land.

Adam Smith, in his Wealth of Nations so very conveniently avoided a confrontation with the land owner hegemony of his day; instead writing to the status quo and avoiding the obvious concentration in land ownership.

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