Mish's Global Economic Trend Analysis

Greece Prime Minister Calls "Crisis Meeting" Attacks EU, IMF; Does Germany Want a Deal?
Cameron Announces "Open Door" Policy Welcoming French Banks if France Start Tobin Tax
Privatizing of Gains and Socializing of Losses; You Want the News? From Where?
Euro Area Unemployment Rate Up 0.2 Percentage Points to 10.4%; 8th Consecutive Monthly Rise; Further Deterioration Coming; Country-by-Country Comparison; Expect Germany to Turn for the Worse
CNBC's Best Alternative Financial Websites; Strategist News' Best Business Blogs 2011; Business Blogs vs. Financial Blogs
German Retail Sales "Unexpectedly" Fall in December, November Revised Lower; Unexpected by Whom?

Greece Prime Minister Calls "Crisis Meeting" Attacks EU, IMF; Does Germany Want a Deal?

Posted: 31 Jan 2012 06:25 PM PST

Things are going so well in Greece (just one step away from a deal for weeks on end), that Greek officials attack EU and IMF as debt talks stall

Greek officials launched a vociferous behind the scenes attack on European Union and International Monetary Fund negotiators as talks in Athens over the country's mounting debts appeared to stall.

Prime minister Lucas Papademos told aides that a crisis meeting of party leaders would be called as early as Thursday to thrash out a response to an increasingly intransigent negotiating team sent by Brussels, which is demanding severe austerity measures before sanctioning a further €130bn (£109bn) of bailout funds.

Papademos and his team of aides returned in sombre mood on Tuesday from a round of talks in Brussels and Frankfurt at the offices of the European Central Bank (ECB), despite relief that a German proposal to install an EU commissioner in Athens, with special oversight of Greek finances, had been quashed.

On the negotiations over the bailout funds, Greek MPs have objected to demands by the troika for further wage cuts and reductions in the minimum wage.

"The troika doesn't appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses," said the government aide. "No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we're very worried."

Greece Must Pledge Tough Reforms for Debt Swap Deal

CNBC reports Greece Must Pledge Tough Reforms for Debt Swap Deal

"The debt swap agreement is ready, but it will not be announced before the end of the week and until the government has made certain commitments on reforms, labour issues and the pension system," said the banker, who declined to be named.

"By delaying the debt swap, European partners are putting pressure on the government and political leaders to make certain commitments."

Prime Minister Lucas Papademos on Tuesday confirmed that Athens was aiming for a definitive agreement on the debt swap by the end of this week -- roughly the same time it expects to conclude talks with lenders in Athens on its second bailout.

Papademos acknowledged that the main sticking points in talks with the so-called "troika" of foreign lenders - the European Central Bank, the EU and the International Monetary Fund -- revolved around spending cuts and labour reform.

On top of biting austerity measures already taken that regularly bring droves of angry protesters onto the streets, Greece's lenders have demanded it make extra spending cuts worth 1 percent of GDP - or just above 2 billion euros - this year, including big cuts in defence and health spending.

In a sign of the challenges the government faces in pushing those through, a Greek union official said the country's major unions were gearing up for more anti-austerity protests next month after an early grace period for Papademos's government.

The prospect of elections as early as April has further complicated the talks, with political leaders in Papademos's national unity coalition eager to distance themselves from any cuts that herald more pain for ordinary Greeks.

Increasingly exasperated by Athens' failure to live up to pledges on the reform front, European partners have demanded all Greek parties commit to measures agreed under the bailout irrespective of who wins the next elections.

Without a deal and a subsequent release of funds from the bailout plan, Greece would sink into an uncontrolled default that risks spreading turmoil across the euro zone and tipping the global economy back into recession.

Greece is Irrelevant

Let's dispense with the nonsense first. The world economy will not go into a recession over Greece. However, it is highly likely to go into recession regardless of what Greece does. At this point, Greece is irrelevant.

Pertinent Questions

Does Germany want a deal?
Is the proposal by Germany for Greece to cede budget sovereignty a ploy to win Greek concessions?
Will Germany be overridden if it does not want a deal?

The answer to the first question should be clear. Germany has had enough. I wrote about it on Friday in Prepare for Greece to Leave Eurozone; German Government Calls for Greece to Cede Sovereignty Over Tax and Spending Decisions to Eurozone "Budget Commissioner"; Text of the German Demands .

German and IMF demands make meaningless any hint of a deal "soon". Germany has signaled it has had enough and will not throw another 130 billion euros down a rathole. The IMF signaled the same thing but not as emphatically.

Thus, if Germany does not back down and the IMF insists on a 10-page list of "prior actions" a Greek exit from the Eurozone is at hand.

Look for a "bank holiday" in Greece soon.

France Does Want a Deal

Complicating matters for Merkel, France does want a deal, and Sarkozy stepped in to support Greece.

Is this a game by Germany to extract concessions? I do not think so. This goes far beyond hardball. People do not understand the pressure on Merkel within her own party to end these nonsensical bailouts.

Merkel is fighting for her political life. She has no wining plays. In chess terms, she is in a Zugzwang position. Please see Political Zugzwang for a discussion of 4 losing options Merkel faces.

I believe she selected the best one from her perspective: Let Greece go, and fight another day.

Will Germany be Overridden?

The only question of relevance is "Will Germany be Overridden?"

If the EMU and EU leaders know what is good for them, they can take some pressure off Germany, by making demands so great that Greece will not accept them.

That may or may not be the state of the current game, but it sure is a possibility that explains a lot of things, especially the never-ending announcements that a "deal is at hand" and today's declaration of an emergency meeting by Papademos.

Insisting that "all Greek parties commit to measures agreed under the bailout irrespective of who wins the next elections" is an extremely bitter pill, especially given the demands Germany forced on Greece.

Does Germany want Greece to comply with those demands? I highly doubt it. Will Greece comply? I do not know.

Merkel's actions strongly suggest she is rooting this deal collapses in spite of obstacles by placed by Sarkozy who clearly does want a deal.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Cameron Announces "Open Door" Policy Welcoming French Banks if France Start Tobin Tax

Posted: 31 Jan 2012 05:01 PM PST

In a move sure to raise the ire of French President Nicolas Sarkozy, British Prime Minister David Cameron says French banks would come to Britain to avoid tax.

In comments aimed squarely at Nicolas Sarkozy after the French president reportedly criticised British industry, Cameron said the concept of the tax at a time of economic difficulty was "mad" and "extraordinary".

"The European Commissioner has told us this would cost Europe half a million jobs. Now when we're all fighting for jobs and for growth, to do something that would cost so many jobs does seem to me to be extraordinary.

"And in the spirit of this healthy competition with France, if France goes for a financial transactions tax then the door will be open and we'll be able to welcome many more French banks, businesses and others to the UK.

In a televised speech on Sunday, Sarkozy announced plans to introduce a 0.1 percent tax on financial transactions to come into effect from August this year in France.

He said in the same speech that Britain had no industry left, but while the British press played up the French president's comments, Cameron played down suggestions of a rift.

Relations have been stormy between the two in recent months.

In December when Cameron criticised the eurozone's efforts to tackle its debt crisis, Sarkozy reportedly snapped that -- as Britain is not part of the single currency -- Cameron should shut up.

Open Feud

This is not a rift, it's an open feud. The only reason it's not bigger is Cameron would rather deal with Sarkozy than Sarkozy's challenger François Hollande.

Note that Hollande also wants a financial transaction tax. For further details please see Hollande Vows to Tax the Rich, Take Pay Cut; Sarkozy Promises German-Style Reforms; Merkel Cannot Save Sarkozy, But She Can Hurt Herself Trying

Transaction Tax a Bad Idea

Rest assured the Tobin Tax is a bad idea. I made the case in Why the Tobin Tax is a Bad Idea; Sweden's Experience With the Tax; Details of Sarkozy's Proposed Tax; Sarkozy Wants to "Provoke a Shock"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Privatizing of Gains and Socializing of Losses; You Want the News? From Where?

Posted: 31 Jan 2012 01:18 PM PST

I am a fan of Michael Hudson. I was pleasantly surprised to see him on Capital Accounts with Lauren Lyster a few days ago.

Capital Account is produced by RT. That stands for Russia Today. I have numerous emails criticizing me for being on "Russia TV".

Let's take a look at what Wikepedia says about RT.

RT is the second most-watched foreign news channel in the United States, after BBC News. By March 2010, its videos had garnered more than 83 million views on YouTube and has also set a TV News Channel record after exceeding a view count on YouTube of half a billion.

RT broadcasts from its headquarters in Moscow and its studio in Washington, DC, and also has bureaux in Miami, Los Angeles, London, Paris, Delhi and Tel Aviv.

In the United States, the channel is available to digital customers of Time-Warner Cable in New York and New Jersey on channel 135 (channel 196 in upstate New York), in Los Angeles and the desert cities on channel 236, and in San Diego and North County on channel 222. Digital customers of Comcast can receive the channel in Chicago on channel 103, and in Washington, D.C. on channel 274. Digital subscribers to Buckeye CableSystem can receive the channel in Northwest Ohio and Southeast Michigan on channel 266. The channel is also available in the Washington, D.C. area via Cox (channel 474), RCN (channel 33), and Verizon FIOS (channel 455).

Last week RT interviewed Mohamed A. El-Erian, the CEO of PIMCO. They also interviewed me. More recently they interviewed Michael Hudson.

Alternate Sites vs. Mainstream Media

Most of the mainstream sites do one of three things (over and over and over).

Interview those who manage the most money
Interview those with bullish forecasts
Interview those with the latest "hot hand" about to flame out

Reflection on News vs. Opinions

Please consider Rupert Murdoch

In an era of media empires, Rupert Murdoch, the Australian-born chairman and controlling shareholder of News Corporation, is perhaps the preeminent global media magnate.

The company, which owns Fox News, The Wall Street Journal, The New York Post and the 20th Century Fox film studio, among other assets, is one of the world's largest media conglomerates.

In the worlds of politics as well as media, Mr. Murdoch has been one of the most influential figures of our time, and nowhere more so than in Britain, where he made his mark in newspapers.

But in July 2011, he and his company were engulfed in an explosive scandal involving the hacking of public figures' telephone messages by journalists at News of the World, another British newspaper owned by News Corporation. The firestorm was set off by the revelation that the paper had deleted voice mail messages from the cellphone of a 13-year-old girl who was abducted and murdered in 2002, a move that had added to vain hopes that she was still alive.

In the wake of the furor, Mr. Murdoch closed down News of the World, saw two former editors of the paper arrested, accepted the resignation of Les Hinton, one of his closest associates, and abandoned what would have been the biggest deal of his career, the $12 billion takeover of Britain's biggest pay television company, British Sky Broadcasting (BSkyB). He also bore the brunt of an outcry from the public and Parliament, as politicians of all parties who had long chafed under the need to win his support lashed out.

On July 19, Mr. Murdoch was questioned by a Parliamentary committee. In his testimony, he said that he was deeply sorry about the revelations of widespread unethical practices at his British newspapers, that he knew little or nothing about them and that he had not tried to cover them up. While defending his company against the accusations accompanying the scandal, Mr. Murdoch insisted that he had the backing of News Corporation's board and would stay on as its chief executive for the foreseeable future.

News vs. Opinion

If you watch Fox News, rest assured it has a general overall spin that is approved by Rupert Murdoch.

Fox News will toss an occasional bone to Ron Paul, primarily from Judge Napolitano. I suspect it is out of necessity of hoping to appear balanced.

Much of what appears on Fox News belongs on "Reality TV" not news stations.

Understanding Bias

When someone reads my blog they understand what they see is "my opinion". When someone listens to Fox News many do not realize they are not getting facts, they are getting "political opinions" disguised as the news.

The Fox news slant is Republican, anti-Paul, pro-warmongering.
The Financial news sites are very biased towards "economic cheerleading".

Those who want something else turn to blogs like Calculated Risk, the Big Picture, Zero Hedge, Max Keiser etc.

Please see CNBC's Best Alternative Financial Websites; Strategist News' Best Business Blogs 2011; Business Blogs vs. Financial Blogs for further discussion of alternative sites.

Impossible Not to be Biased

It is impossible to not be biased, but as least everyone understands the alternative sites generally offer commentary that comes from the heart, not from robots hired to say and do exactly what the media giants want.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Euro Area Unemployment Rate Up 0.2 Percentage Points to 10.4%; 8th Consecutive Monthly Rise; Further Deterioration Coming; Country-by-Country Comparison; Expect Germany to Turn for the Worse

Posted: 31 Jan 2012 10:27 AM PST

Courtesy of a Barclays Capital email here are the latest unemployment numbers in Europe.

Euro Area: +0.2 to 10.4% based on slight upward revisions in November, September, August. This was the 8th consecutive rise.

Austria 4.1% unchanged
Belgium: 7.2% unchanged
Finland 7.6% unchanged
France 9.9% +0.1
Germany: 5.5% -.1
Italy 8.9% +0.1
Ireland 14.5% +0.1
Netherlands 4.9% unchanged
Portugal 13.6% +0.4
Slovakia: 13.4% -.1 to
Spain 22.9% unchanged

Quarterly Perspective

From a quarterly perspective, the unemployment rate in Germany fell 0.2pp to 5.6% in Q4 (from Q3 - and -1.1pp from a year ago). Following the same trend, in Ireland, it has edged down from 14.5% to 14.4%.

France's rose by another 0.1pp in Q4 11 to 9.8% after Q3 11 and is just 0.1pp above the 9.7% Q4 10 level; Italy's rose 3 tenths in Q4 11 to 8.7%, now 0.5pp above Q4 10.

In the last quarter of the year, the situation in Portugal worsened particularly quickly as the unemployment rate rose 0.6pp to 13.3%, 1pp above Q4 10. In Spain, the situation deteriorated even quicker as the unemployment rate rose 7 tenths to 22.8% in Q4 11, 2.4pp above Q4 10 print.

Hiring Intentions

Barclays comments "We find that the overall picture is fairly negative and that it will not get any better in the short run. We expect the unemployment rate in the euro area to continue increasing - possibly at a faster pace - and we think it is more likely to stabilise in 2013 than in 2012."

Germany Unlikely to Keep the Boat Afloat

Barclays says Germany Unlikely to Keep the Boat Afloat

Germany is the only country among the main countries whose sentiment on future employment is levelling off at such high levels. This bodes well for the future performance of its economy, on top of its strong fiscal position.

Bringing France, Italy and Spain into the picture, we believe that the gap between Germany and the rest of the euro area should increase. France's labour market is faltering badly, while those of Italy and Spain, while stabilising at low levels, have leeway to fall further due to the likely additional fiscal consolidation. Nevertheless, although it has a c.30% weighting of euro area GDP, Germany won't be able to generate a strong enough positive loop to offset the negative trends at play within its euro area partners, we believe.

As a result, we expect the euro area unemployment rate to continue trending higher. Aside of a likely rise to 10.4% in the December print (to be released tomorrow), which would take the Q4 reading to 10.3%, up 0.2pp from Q3, we believe that the unemployment rate could reach 11.3% in Q4 12, only stabilising at the beginning of 2013.

Our hiring intentions index in the euro area has continued to deteriorate in January, albeit at the most modest pace since May 2011 (the beginning of the drop). It is now in negative territory for the second month in a row, at -0.2, the lowest level since August 2010. At the sector level, divergences were limited. The retail sector dropped the most by -0.1 pts, while the overall services index (normalised, 3mma) remained unchanged.

Expect Germany to Turn for the Worse

Like Barclays, I expect the European picture to deteriorate.

Unlike Barclays, I expect a dramatic reversal in Germany. The German export machine cannot keep humming mightily along with a slowdown in China and the huge recession that is going to hit Europe.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

CNBC's Best Alternative Financial Websites; Strategist News' Best Business Blogs 2011; Business Blogs vs. Financial Blogs

Posted: 31 Jan 2012 08:48 AM PST

Best Business Blogs 2011

Strategist News presents the Best Business Blogs 2011

This is our third year publishing this ranking. The business blogs field is getting more competitive than ever! Seth Godin continues to dominate the business blogosphere, while Guy Kawasaki and Robert Scoble still rule.

This year we made a major change to our methodology. From this year on, we will only include standalone blogs of individuals. We have excluded all companies, newspapers, brands and groups. Why did we do this? Because we want to celebrate the individual writers. Not corporations. We do not want to be influenced by business models or advertising to skew the results. We just want to rank the best writing, period. So here they are…

Business Blogs vs. Financial Blogs

I came in 14th on the "business blog" list, but have to admit that I never heard of most of the sites selected by Strategist News.

Then again, the concept of "business blogs" encompasses a broad range of categories including marketing, careers, work finance, technology, small business, entrepreneurship, personal finance, microfinance, project management, and numerous other categories.

The categories are so broad, I am pleased to be on the list at all. Calculated Risk and Barry Ritholtz (Big Picture) were also on the list, in well-deserved positions of 5 and 8 respectively.

For those not familiar with the columns "Alexa Rank" and "Google Page Rank" in the above link, the general idea is the lower the Alexa number the better, the higher the Google Page Rank Number the better. It is very tough for economic blogs to do better than a "6" in Google Page Rank.

There is much controversy over Alexa and I pay scant attention to it other than occasional curiosity. Certainly, popularity based on those who have an Alexa toolbar installed is skewed at best.

Best Alternative Financial Websites

CNBC has an interesting 20-page slideshow on The Best Alternative Financial Blogs.

Today's Best Money Blogs

So what are the best alternative finance and economic blogs out there?

To assemble our list, we polled our friends, our sources, and our followers on Twitter. We excluded many of the sites we really enjoy because they are associated with major media organizations. So no Felix Salmon, FT Alphaville, or DealBook.

These are the sites that have struck out on their own, untethered to the "mainstream media." Some of them — like Business Insider or Minyanville — have become so successful that we almost disqualified them as being too mainstream.

On our list you'll find some representatives of the old school, some of the new school, and hopefully a few that are new to you. There are liberal fraud-busters, Austrian economics free-marketeers, and jaded market cynics on our list.

And now, here's the best of the web for 2012.

By John Carney
Posted 27 January 2012

In contrast to the Business Blog list, I have heard of nearly every blog on CNBC's Alternative Financial Website list.

20 Page Slideshow of Best Alternative Blogs

The first slide is the above block quoted (indented) text.
DealBreaker;
Business Insider
Zero Hedge
The Money Illusion
Mish's Global Economic Trend Analysis
Credit Writedowns
Of Two Minds
Naked Capitalism
The Big Picture
Calculated Risk
The Reformed Broker
The Epicurean Dealmaker
Pragmatic Capitalism
Economonitor's Edward Hugh
Ludwig von Mises Institute
Minyanville
Abnormal Returns
Distressed Debt Investing
Slideshow Replay

Each page has a brief discussion about the website chosen. I am Page 6 on CNBC's List with this description and image.

Mish's Global Economic Trend Analysis

For as long as anyone can remember, Michael Shedlock's website has been a must-read. When many people were predicting runaway inflation and a declining dollar, "Mish" correctly called deflation and the end to the long "flight from the dollar."

I did recognize nearly every name on the above list and am pleased with that image and description for four reasons.

My blog was cited as a "must read".
I am a deflationist (defined in terms of credit, not necessarily prices) and a gold advocate, as well. The image shown references gold. People still have a misconception that all deflationists hate gold. People still point to rising oil prices as if that proved there was inflation. As I have pointed out many times, it's all in the definition. Bernanke certainly has not been able to stimulate credit and that is why the recovery is extremely weak in terms of GDP and job creation.
"Fool in the Shower" is an article written by Caroline Baum, my favorite Bloomberg columnist. I cite Bloomberg more than any other news source for my numbers. I then provide my viewpoint (frequently different) as to what the numbers really mean.
Steen Jakobsen is the chief economist for Saxo Bank in Denmark and we see many things much alike. I have recently shared many emails from Steen.

Missing From the List

Some very noteworthy alternative sites are missing from the list. Here are some of them in alphabetical order.

Apologies offered in advance to anyone I missed.

Other Financial Citations

New York Times: NYT 10th Annual Year in Ideas - #1 Idea of the Year 'Do-It-Yourself Macroeconomics'

Time Magazine: Best 25 Financial Blogs

Bloomberg: Financial Blogs: The Best of the Bunch

It is an honor to be named on so many lists.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

German Retail Sales "Unexpectedly" Fall in December, November Revised Lower; Unexpected by Whom?

Posted: 31 Jan 2012 02:30 AM PST

I am amused to report German Retail Sales Unexpectedly Fall in December

German retail sales fell unexpectedly in December, dropping 1.4 percent on a monthly basis in real terms, preliminary data showed on Tuesday.

The notoriously volatile indicator was down 0.9 percent on an annual basis. Economists polled by Reuters had forecast retail sales to rise 0.9 percent on the month and 2.3 percent on the year.

November retail sales were revised downwards to a fall of 1.0 percent on the month, from a previously reported decrease of 0.9 percent. On an annual basis sales were also revised downwards to a gain of 0.9 percent from 1.4 percent.

More Amusement

I am even more amused by Barclays Capital Research (via email) that suggests "household consumption to be a major GDP growth driver in 2012."

German retail sales (real, sa, excluding cars/petrol) unexpectedly fell again in December, by 1.4% m/m (-0.9% y/y), according to the Federal Statistical Office (Destatis). The weak November figure was slightly revised down to -1.0% from a previously reported -0.9%. On average, retail sales in Q4 2011 were 0.7% below their level in Q3 2011 in real terms, indicating a weak performance of household consumption in last year's final quarter.

In nominal terms, food and non-food sales both rose 0.3% (y/y), but food sales fared significantly worse in real terms (-1.7%, y/y) than non-food items (-0.5% y/y), reflecting higher food prices. Among non-food items, sales of home furnishings and fixtures and building materials stood out, growing by 3.6% in real terms (y/y), indicating continued strong activity in residential construction in Germany.

Improving consumer sentiment, as reported by GfK, suggests that the notoriously volatile retail sales could pick up again soon. We expect household consumption to be a major GDP growth driver in 2012.

Household Consumption Major GDP Driver?!

Points of Contention

My reaction to Barclays is "Please be Serious". It is quite obvious that Europe is in a recession already.
It is also obvious that austerity measures in Greece, Portugal, Spain, and France will deepen the recession.
It is equally obvious the recession will be long and deep.
Finally, given that Germany depends on exports, especially to European countries, it should be obvious that Germany will be impacted, much more than economists and analysts think.

Then again, in reference to number 4 above, that is precisely why the falloff in retail sales was "unexpected" in the first place. Analysts and economists crunch numbers, looking in the rear view mirror instead of thinking ahead.

Watch for analysts' reports in the months ahead to comment on "unexpected" declines in German consumer sentiment, further "unexpected" declines in German industrial output, further "unexpected" drops in GDP, and further "unexpected" drops in retail sales.

Bear in mind, given the above cited "volatility" in retail sales, we just might see an unexpected "rise" in German economic numbers for a month or so. If so, don't make anything of it. It won't last.

Math Addendum

If it's fair for me to criticize Barclay's it is equally fair for them to criticize me.

In response to Greek Bond Math (Assuming the Deal Goes Through) ; Merkel Faces Backlash Over Deal; Political Zugzwang I received an email from a credit analyst at Barclays who prefers to remain anonymous. Here are his personal thoughts ...

The majority of the 145bn is for paying down existing debt, it is not additional debt

Current debt ~330bn split 120bn/210bn public/private
Post restructuring ~220bn split 120bn/100bn public/private

The 145bn then pays off ~80bn of the publicly held debt that matures + government deficit over 8 years + recapping the Greek banks (45bn)
So the net the government debt would end up at ~285bn (220+145-80)

Your basic point stands (debt is unsustainable), but worth getting the numbers right.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Tuesday, January 31, 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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