NYSE defaults on gold futures

[...] if you bought a mini futures contract from an NYSE-Liffe clearing member, prior to December 31st, you could bind them to their legal contract with you, and force them to either deliver the 1 kg bar, or pay for you to obtain it on the open spot market.  Based upon the original wording, NYSE-Liffe and its clearing members are legally obligated to deliver that 1 kg bar per contract, whether they want to or not, and regardless of the internal rules of the exchange.

But there’s been so much demand for delivery on gold futures the NYSE is no longer able to deliver 1kg bars.  So they’re giving out “warehouse delivery receipts” instead.  IOUs by any other name.

And what’s worse, the WDRs are not redeemable for the contracted 1kg bar.  They’re redeemable for one third of a 100oz bar.  That means you need to gather three of them to get your gold bar.

Invested your savings in gold futures and could only afford two 1kg bars?  Looks like you’re fucked, at least for now.

[...]  Unlike the American exchanges, the 1 kg. bar dominates deliverable contracts, for example, on the Tokyo Commodities Exchange, as well as many other commodities exchanges around the world.  They were also the primary unit of the mini-gold contracts (YG), offered by NYSE-Liffe, prior to the technical default.  In other words, the retail gold shortage has spread into the wholesale market.  What’s next?  Will there be a shortage of 100 ounce bars?  No exchange rule can be used to hide from a technical default on delivery of 100 ounce bars.  But, vast numbers of 100 ounce bars are stored at the iShares COMEX gold trust (IAU).  So, a default in delivery of 100 ounce bars will take a while.

All that said, however, given that the Fed printing press is running overtime, things are going to get tighter. It will take only a few months of delivery percentages similar to those seen in December, 2008, before all the 100 ounce gold bars are gone.  What will the futures exchanges do?  Hand out little slips of paper entitling contract holders to a ¼ interests in 400 ounce banker’s bars?  There is no rule that allows that.  What happens when people start taking mass delivery of the 400 ounce bars?  Will they hand out fractional shares in gold mines, along with picks and shovels?

WSJ: Why raising the tobacco tax will hurt the states

Higher taxes discourage cigarette sales.  Nobel economist Gary Becker pegs the long-run price elasticity of demand for cigarettes at 0.8 -- i.e., a 10% increase in price causes an 8% decline in unit sales.  The Obama tax hike translates into a 13.3% increase in the average pack price.  That implies a 10.6% decline in unit sales -- which the National Tax Foundation has calculated adds up to a $1 billion overall revenue loss for hard-pressed states.

[...]

None of this is good for the economy.  Consumers and state governments are already having a tough time making ends meet.  Burdening them with a new $38 billion tax and a $1 billion cut in revenues isn’t going to help create jobs.  Estimates by the National Association of Tobacco Outlets of the job losses in cigarette manufacturing and distribution alone exceed 100,000.

Smugglers and counterfeiters won’t lose their jobs, though.  Both the General Accounting Office (GAO) and the Alcohol, Tobacco, and Firearms (ATF) agency have concluded that the multibillion-dollar cigarette-smuggling business grows with every excise tax increase.  The ATF and GAO also believe that cigarette-smuggling is a form of cash laundering and profits for both organized crime and terrorist organizations.

"Controlled bankruptcy" for GM

So says the New York Times.

Under a plan being worked out by the administration, G.M. would file for bankruptcy, according to people briefed on the matter.  It would then use a sale authorized under Section 363 of the bankruptcy code to quickly sell off the desirable assets to a new company financed by the government.  These good pieces might include Cadillac and Chevrolet, as well as assets the company needs to run the business.

Less desirable assets, brands like Hummer and underperforming factories, would be left in the old company.

Proceeds from the sale, including stock in the new company, would be given to the old G.M., helping to settle claims.

The part of this I’m unclear about is which part ends up still being called GM.