Mish's Global Economic Trend Analysis

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• Chinese Banking System Nearly Bankrupt Says Professor of Finance at the Chinese University of Hong Kong; Nothing Shocking About Mistrust, Lies, Suppression of News
• Sovereign Debt Yields and Spreads Soar Everywhere: Belgium, France, Italy, Spain, Ireland; Major Problem List is Every Country but Germany; Belgium Spread Inverts Significantly
• German ZEW Economic Sentiment Index Falls Sharply Again in November; Europe Already in Recession, Expect it to Dramatically Worsen
• Jim Grant Video on Central Bank Printing (ECB and Fed), Leverage, and the Bubble in Farmland

Chinese Banking System Nearly Bankrupt Says Professor of Finance at the Chinese University of Hong Kong; Nothing Shocking About Mistrust, Lies, Suppression of News Posted: 15 Nov 2011 05:52 PM PST In one of these headline news stories that sounds shocking but is not shocking in the least, The Epoch Times reports Chinese TV Host Says Regime Nearly Bankrupt China's economy has a reputation for being strong and prosperous, but according to a well-known Chinese television personality the country's Gross Domestic Product is going in reverse. Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn't think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. In his memorable formulation: every province in China is Greece. The restrictions Lang placed on the Oct. 22 speech in Shenyang City, in northern China's Liaoning Province, included no audio or video recording, and no media. He can be heard saying that people should not to post his speech online, or "everyone will look bad," in the audio that is now on Youtube. In the unusual, closed-door lecture, Lang gave a frank analysis of the Chinese economy and the censorship that is placed on intellectuals and public figures. "What I'm about to say is all true. But under this system, we are not allowed to speak the truth," he said. Despite Lang's polished appearance on his high-profile TV shows, he said: "Don't think that we are living in a peaceful time now. Actually the media cannot report anything at all. Those of us who do TV shows are so miserable and frustrated, because we cannot do any programs. As long as something is related to the government, we cannot report about it." He said that the regime doesn't listen to experts, and that Party officials are insufferably arrogant. "If you don't agree with him, he thinks you are against him," he said. Nothing Shocking About Mistrust, Lies, Suppression of News The article was clearly meant to sensationalize. I gave it a big "so what else is news?" You may wish to read the reasons for Larry Lang's statements but there is nothing shocking at all about mistrust, about news suppression, about lies, about Chinese bank insolvency. I say that because I have reported on numerous occasions "the entire global financial system is bankrupt". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Sovereign Debt Yields and Spreads Soar Everywhere: Belgium, France, Italy, Spain, Ireland; Major Problem List is Every Country but Germany; Belgium Spread Inverts Significantly Posted: 15 Nov 2011 10:03 AM PST The ECB, IMF, EMU, and EU are on the verge of multiple emergency meeting, if indeed meetings are not already underway. A quick check of the following bond spread tables and today's yield action will explain. Across the board, yields and spreads widened significantly today. Note in particular the jump in the 2-year bond yield of Belgium.Also note the inverted spread situation for Belgium. The spread to German 2-year bonds is 3.49 while the spread to 10-year bonds is 3.13. Sovereign Debt Table 10-Year Bonds Country Change Yield Spread Germany +.00 1.78 0.00 France +.26 3.68 1.90 Spain +.23 6.34 4.56 Italy +.37 7.07 5.29 Portugal -.16 11.29 9.51 Belgium +.32 4.91 3.13 Ireland +.47 8.21 6.43 Sovereign Debt Table 2-Year Bonds Country Change Yield Spread Germany +.00 0.31 0.00 France +.28 1.82 1.51 Spain +.31 5.31 5.00 Italy +.49 6.48 6.17 Portugal +.27 17.40 17.09 Belgium +.53 3.80 3.49 Ireland +.19 8.34 8.03 Belgium has been off nearly everyone's radar, but not for long. The EFSF is underfunded for Spain and Portugal alone. It's now time to add Belgium to the major problem list. On second thought, the major problem list now includes every country but Germany. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

German ZEW Economic Sentiment Index Falls Sharply Again in November; Europe Already in Recession, Expect it to Dramatically Worsen Posted: 15 Nov 2011 08:52 AM PST Barclays Capital via email reports that German ZEW economic sentiment index falls sharply again in November. The ZEW German economic sentiment index fell to -55.2 in November from -48.3 in September, below our forecast (-52.0) and consensus (-52.5). The current reading is far below the long-term average of about +25 points and reflects the very low expectations of the financial experts taking part in this survey for German economic activity over the next six months. The ZEW's current situation index declined from 38.4 in September to 34.2 and the gap between sentiment and the current situation remains large. Current readings are now very close to those in June 2008, before the current situation index went into free fall and a sharp recession followed. The ZEW said that "world trade is weakening and the public debt problems in the Eurozone and in the US weigh heavily on business activity. These risks could even gain more importance and thus could further harm economic growth in Germany." In our view, these figures underline the very pessimistic outlook of financial sector experts which is increasingly shared by others and clearly shaped by the sovereign debt crisis in the euro area. They point to growing risks to our German GDP Q4 forecast of only a slight contraction in Q4 GDP by 0.1% q/q. Europe in Worsening Recession Europe is already in recession and it's going to get worse, much worse. European country after country is struggling to little avail to prove to the bond markets it is going to tackle budget problems. While long-term structural reforms are certainly needed, austerity measures in Italy, Greece, Spain, and Portugal are going to bite, and bite hard. Moreover a Technocratic Showdown in Greece with Troika is underway. The leader of Greece's main conservative group Antonis Samaras said on Monday his New Democracy party would not vote for any new austerity measures and said the mix of policies demanded by international lenders should be changed. "We will not vote for any new measures," Samaras told a meeting of his own MPs. Good luck with that. And good luck with Spanish unemployment at 22% with new austerity measures coming. In Italy, there are more people on retirement than there are workers. Good luck with a program to make it easier to fire people. It will be impossible to fire workers and maintain pension benefits. And what happens to spending and GDP when benefits are reduced and people are fired? What happens to the bond market if that does not happen? These are the questions and scenarios analysts should be asking and discussing instead of making wooden forecasts of slight recessions. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Jim Grant Video on Central Bank Printing (ECB and Fed), Leverage, and the Bubble in Farmland Posted: 14 Nov 2011 11:25 PM PST Here is an interesting video on Bloomberg with Jim Grant regarding the European Central Bank's response to the sovereign-debt crisis, ECB policy, Fed policy, central bank printing, and farmland. Link if video does not play: ECB's Response to Debt Crisis, Money Printing Grant notes that farmland in Iowa is going for $17,000 an acre far above the rental value of the land. Grant does not use the term bubble, but does suggest this is the wrong time to buy. Bubble is the correct term. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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