Home Refinance Calculator: February 2012

Wednesday, February 29, 2012

Mish's Global Economic Trend Analysis

Gold Plunges Over $100; Some Blame Bernanke; What Did He Say? Nothing (However, I have 5 Different Interpretations of Nothing)
Economy Grew 3.0% Annualized, Faster Than Expected in 4th Quarter; Or Did It?
World Bank Warns of Economic Crisis in China; Only 3% Growth for Decade Says Michael Pettis

Gold Plunges Over $100; Some Blame Bernanke; What Did He Say? Nothing (However, I have 5 Different Interpretations of Nothing)

Posted: 29 Feb 2012 06:06 PM PST

It was a wild ride in gold today with a top to bottom over $100 as show in the following chart.

Some Blame Bernanke For "Committing to Nothing"

Bloomberg reports Gold Falls in 'Manic' Plunge as Bernanke Damps Stimulus Bets

Gold futures fell as much as $100 to below $1,700 an ounce on signs that that the Federal Reserve will refrain from offering more monetary stimulus to bolster the U.S. economy.

In testimony before Congress today, Fed Chairman Ben S. Bernanke gave no signal that the central bank will take new steps to boost liquidity.

"People were expecting that the Fed would loosen policies, even if the perception is that the economy is doing well," James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in a telephone interview. "The investor sentiment changed as the Fed committed to nothing. This is the manic nature of the market."

Bernanke Hints at More QE

In video commentary Fox News says Bernanke Hints at More Quantitative Easing

Hints at More QE? Really? How about this interpretation?

Door is Open, But Not For A While

The Wall Street Journal reports Comex Gold Tumbles On Bernanke Testimony.

"Bernanke's comments to Congress left the door open for more QE," said Steve Scacalossi, a director of precious metals with TD Securities, in a note. "But his statements that employment is recovering at a better than expected rate implies that if QE is coming, it won't be for a while."

QE Increasingly Improbable

The LA Times says Bernanke's testimony in Congress pushes down gold, silver prices

Federal Reserve Chairman Ben S. Bernanke's words carried a great deal of weight in the commodity markets — so much so that they squashed the prices of gold and silver.

Bernanke told Congress that the U.S. economy was probably headed for modest growth this year, adding that the current increase in oil and gas prices probably would reverse before sparking long-term inflation.

The presentation Wednesday signaled to many investors that the Fed's embarking on another round of quantitative easing was an increasingly improbable scenario.

"When Bernanke didn't mention the possibility of another round of monetization, that was enough to take the fizz out of everything," said independent commodities analyst Dennis Gartman. "Before today, gold was looking quite strong, but today it just gave up the ghost."

Overall Dovish Undertones With Markedly Less-Dovish Testimony

Yahoo! Finance reports Euro Tanks, U.S. Dollar Surges on Bernanke Testimony

Federal Reserve Chairman Ben Bernanke was on Capitol Hill today testifying in front of the Committee on Financial Services. Despite overall dovish undertones, the chairman's testimony was markedly less-dovish than recent Federal Reserve communiqués, boosting the U.S. Dollar across the board.

Bernanke's Actual Testimony

Please consider Semiannual Monetary Policy Report to the Congress, Testimony by Ben Bernanke.

A quick sscan shows Bernanke did not mention the word "quantitative" once. The Only reference to "easing" was in relation to constraints on motor vehicle parts in Japan related to the earthquake.

Bernanke did say growth would be close to or somewhat above second half of last year but "fundamentals that support spending continue to be weak". More specifically the Fed forecasts "2.2 to 2.7 percent, considerably lower than the projections they made last June"

He also said "housing affordability has increased dramatically" but "potential buyers lack the down payment ... others are reluctant to buy a house now because of concerns about their income"

In regards to unemployment, Bernanke said "With output growth in 2012 projected to remain close to its longer-run trend, participants did not anticipate further substantial declines in the unemployment rate over the course of this year. Looking beyond this year, FOMC participants expect the unemployment rate to continue to edge down only slowly toward levels consistent with the Committee's statutory mandate."

That's "markedly less dovish"? Really?

What does that mean for QE?

Nothing. That's what.

People can and did read into Bernanke's testimony what they wanted to hear. Others judged the market reaction, and wrote a corresponding explanation to fit.

One thing's for certain, that was hardly an upbeat assessment of the economy especially in light of the statement that "global financial markets posed significant downside risks".

Here's the deal. If the economy tanks the Fed is likely to do another round of QE. The same holds true for another LTRO by the ECB.

By the way, a couple of the links above came via email from Pater Tenebrarum at the Acting Man Blog, who in turn got them from Lance Lewis. Thanks!

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

Economy Grew 3.0% Annualized, Faster Than Expected in 4th Quarter; Or Did It?

Posted: 29 Feb 2012 10:48 AM PST

Reuters reports Economy grew faster than expected in fourth quarter

Gross domestic product expanded at a 3 percent annual rate, the quickest pace since the second quarter of 2010, the Commerce Department said on Wednesday in its second estimate.

The reading, which was up from the 2.8 percent pace the government reported last month and reflected modest upward revisions to almost all components of GDP, added to the recent run of fairly upbeat economic reports.

Consumer spending, which accounts for about 70 percent of U.S. economic activity, was raised to a 2.1 percent rate of increase from 2 percent. At the same time, growth of real disposable income was revised up to a 1.4 percent rate from 0.8 percent.

"Consumers are spending from rising income rather than digging into their savings to spend," said Shulyatyeva.

Business investment in capital goods was lifted to a 2.8 percent pace from 1.7 percent, but still weak compared to the recent trend. Outlays on home building were firmer than previously estimated, while investment on nonresidential structures was modestly weak.

While a rebuilding of inventories added a hefty 1.88 percentage points to GDP in the last quarter, the increase was revised down to $54.3 billion from $56.0 billion.

"The large boost to GDP growth from stock building in the fourth quarter is unlikely to be repeated in first quarter but the household accounts provide a much more encouraging backdrop for consumer spending," said Peter Newland, a senior economist at Barclays Capital.

Excluding inventories, the economy grew at a 1.1 percent rate, rather than the 0.8 percent initially reported. That was still a sharp step-down from the prior period's 3.2 percent pace.

The report also showed exports were not as strong as previously thought, but imports are also not growing strongly, leaving a smaller trade gap that was less of a drag on growth.

It also showed still moderate inflation pressures, though a

price index for personal spending rose at a 1.2 percent rate instead of 0.7 percent.

GDP Price Indices

The rise in income is nice but excluding the inventory correction, the rise in GDP was anemic.

Moreover, please note Excel Spreadsheet Table 4.--Price Indexes for Gross Domestic Product and Related Measures: Percent Change From Preceding Period in the BEA's GDP Report.

My friend BC Writes

Does anyone actually believe prices decelerated at a 70% quarterly annualized rate in Q4?

Had the trend rate of the deflator held from Q1-Q3, annualized real GDP for Q4 would be 1.3% instead of 3%, 1.2% yoy, and a slight contraction q-q for real final sales and barely 1% yoy (historically recessionary).

It would not surprise me were the NBER in 3 quarters or more to date a recession as having begun in Q1 '12 after the economy stalled in Q4 '11.

BTW, the Treasury withholding receipts from Jan. to Feb. indicate a contraction in employment, which fits with Gallup's self-reported employment survey.

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

World Bank Warns of Economic Crisis in China; Only 3% Growth for Decade Says Michael Pettis

Posted: 29 Feb 2012 12:32 AM PST

A World Bank report to be released next week warns of an economic crisis in China unless state-run firms are scaled back. The Wall Street Journal discusses the report in New Push for Reform in China

An exclusive preview of an economic report on China, prepared by the World Bank and government insiders considered to have the ear of the nation's leaders, offers a surprising prescription: China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms.

"China 2030," a report set to be released Monday by the bank and a Chinese government think tank, addresses some of China's most politically sensitive economic issues, according to a half-dozen individuals involved in preparing and reviewing it.

The report warns that China's growth is in danger of decelerating rapidly and without much warning. That is what has occurred with other highflying developing countries, such as Brazil and Mexico, once they reached a certain income level, a phenomenon that economists call the "middle-income trap." A sharp slowdown could deepen problems in the Chinese banking sector and elsewhere, the report warns, and could prompt a crisis, according to those involved with the project.

It recommends that state-owned firms be overseen by asset-management firms, say those involved in the report. It also urges China to overhaul local government finances and promote competition and entrepreneurship.

China's Difficult Transition From an Unsustainable Growth Model

Peak oil, a housing bubble, bad debts and over-reliance on investments with no genuine economic feasibility guarantee China's current boom is not sustainable. China bulls are in for a ride awakening when various bubbles pop.

As for recommendations, the report proposes a sharp increase in the dividends that state companies pay their owner (the government) in order to boost revenue and pay for new social programs.

Does China need to increase competition, break apart, and privatize the state-owned monopolies?
Or should China simply increase the dividends?

I vote for the former as does Michael Pettis at China Financial Markets.

Via email, Pettis says:

The report is good as far as it goes, but it doesn't go far enough. Of course increasing SOE dividends to the government for use in social programs will transfer wealth from the state sector to the household sector, but if the total profitability of the SOE sector is less than one-fifth to one-eighth of the direct and indirect subsidies transferred from the household sector, as I have argued many times, then even 100% dividends is not enough to slow the transfer significantly, and remember the transfers have to be reversed, not merely slowed. This proposal falls in the better-than-nothing category, but just.

What we really need are much more dramatic transfers, for example wholesale selling of assets, with the money used either to clean up bad loans or delivered directly to households. According to the article, however, "neither the World Bank nor the DRC proposed privatizing the state-owned firms, figuring that was politically unacceptable."

This is the problem. The best solution for China, economically, seems to be off limits because it will be politically difficult. In that case the second best solution, a gradual build-up of government debt as growth slows for many years, is the most likely outcome.

And how much will growth slow? The World Bank report apparently doesn't say, but the consensus has been slowly moving down towards 5-6% annual growth over the next few years.

That's better than the crazy numbers of 8-9% most analysts were predicting even two years ago (and some still are), but it is still too high. GDP growth rates will slow a lot more than that. I still maintain that average growth in this decade will barely break 3%. It will take, however, at least another two or three years before a number this low falls within the consensus range.

And by the way when it does, metal prices should fall sharply. Copper prices have done reasonably well in the past few months as Chinese buyers have restocked, as we suggested might happen to our clients last fall. With the recent easing we may see more strength in copper over the next month or so, but I have little doubt that within two or three years copper prices are going to be a whole lot lower than they are today. Chinese investment demand simply cannot hold up much longer.

Sad State of Political Acceptability

The report makes feeble recommendations to ensure the proposals are "politically correct". This is a bad practice for three reasons.

You only damage your own credibility
You presume perhaps incorrectly what is politically acceptable
You plant false hope that incorrect solutions will work, when it's clear they will not

It would be far better list the alternatives and the limitations of those alternatives, then provide an honest assessment rather than assume something cannot be done. Unfortunately, telling people what they want and expect to hear is the sad state of political pandering everywhere.

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

Tuesday, February 28, 2012

Mish's Global Economic Trend Analysis

Sharpen the Mower: Spain Needs Triple the Budget Cuts and Tax Hikes to Meet EMU Imposed Budget Targets
Damn the Voters, Full Bailouts (and Existing Policies) Ahead
Referendum on a Person or on a Treaty?

Sharpen the Mower: Spain Needs Triple the Budget Cuts and Tax Hikes to Meet EMU Imposed Budget Targets

Posted: 28 Feb 2012 03:35 PM PST

Conditions in Spain have deteriorated at a rapid pace. As little as a few months ago the Spanish economy was foolishly projected to grow at .7%. Now it expected to contract 1%.

Likewise, Spain's budget deficit was supposed to shrink to 6% in 2011 and 4.4% in 2012. Instead it rose to 8.51 percent in 2011, up from a revised estimate of 8.2% which was up from a revised estimate of 6.5%.

I think you can see a clear pattern here and as a result, the EU Commission Pressures Spain for Explanations.

Spain must explain soon to the European Commission why its 2011 budget deficit was substantially higher than expected and deliver clear future budget plans, the Commission said on Tuesday.

Spain's 2011 budget deficit came to 8.51 percent of GDP, the finance minister said on Monday, up from early estimates of 8.2 percent and far above forecasts from the Commission for something nearer 6.5 percent.

"We need to understand the causes of this significant slippage," Commission spokesman Olivier Bailly told a regular briefing in Brussels.

Spain will have to come up with more than 40 billion euros in savings to meet that target, implying spending cuts that most economists see as impossible given that the economy is already slipping into recession and the jobless rate is the highest in the European Union at 23 percent.

Bailly said Spain also needed to deliver its 2012 budget estimates in the coming weeks, not at the end of March, saying the task in hand was so great it could not be delayed.

Sharpen the Mower

My friend Bran notes that Spain now needs to come up with another 30 billion Euros in budget cuts on top of the 15 billion promised. Moreover, those cuts need to be spread out over 9 months, not 12.

This set of facts prompted the Spanish Gurus Blog to write Sharpen the mower. Spain's deficit exceeds 90 billion euros.

Specifically, Spain's budget deficit is 91.3 billion euros, 8.51% of GDP. So it should not take a wizard to realize the simple mathematical fact that team Rajoy has not yet begun with budget cuts and tax increases, if by 2012 Spain is to meet the 4.4% of GDP deficit target set by creditors.

The measures announced in December were only an appetizer. Instead of sharpening the blades, I think a good lawn mower would be more practical.

The announced cuts and tax increases of last December (income tax, capital gains), are expected to generate about 14,900 million.

To meet the objective of a 4.4% deficit, in 2012 the government deficit should not exceed 46,500 million euros.

To do so requires a nearly 30 billion euros hole to be filled, with the aggravating circumstance that it's now March and those 30 billion euros need to come in the next 9 months.

This figure is double the cuts and tax increases approved last December. So Rajoy has quite imagination if he expects this to happen.

I modified that translation substantially, but I am pretty sure I have it accurate. Spain's unemployment is already 22.9%. What pray tell would another 30 billion in cuts or tax hikes do to that number?

By the way, to go from 15 to 45 is tripling (not doubling) the tax hikes and cuts.

Many structural reforms pertaining to jobs and work rules are quite necessary. The accompanying tax hikes are not and the Spanish economy is poised to implode as a result.

Not to worry, EU commissioner Jean-Claude Juncker promises to "examine the situation with calm and serenity".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Damn the Voters, Full Bailouts (and Existing Policies) Ahead

Posted: 28 Feb 2012 10:48 AM PST

What's "too complicated" for France is not "too complicated" for Ireland. The Financial Times reports Ireland calls vote on European treaty

Dublin will hold a referendum on the eurozone fiscal treaty, plunging Europe into months of uncertainty and potentially placing a question mark over Ireland's future membership of the euro.

Enda Kenny, Ireland's prime minister, said on Tuesday that the government had decided to hold a referendum following advice supplied by the attorney-general that "on balance" the Irish constitution required the treaty to be put to a vote.

He said he would sign the treaty at a European Union summit on Friday and within a matter of weeks the government would organise a referendum commission – an independent body appointed to explain the subject matter of a referendum to the public.

An opinion poll last month found 73 per cent of the public felt a vote should be held on the treaty, which would tighten budget rules for the 17 countries sharing the euro. Some 40 per cent of the 1,000 people questioned in the Sunday Business Post/Red C poll said they would support the treaty, 36 per cent were opposed and 24 per cent were undecided.

The government's decision to hold a referendum follows a threat by the Sinn Féin party to challenge in the Supreme Court any decision not to give the public a say. Irish officials have privately acknowledged it would be more difficult to win a referendum if the government was seen to have been forced to hold a vote by the Irish courts.

The Irish public have twice rejected EU treaties, only to approve them in second referendums. In 2008 the Lisbon treaty was rejected only to be approved in a second referendum held 18 months later.

Logic of Signing a Treaty then Voting on It

In the real world it makes no sense to sign a treaty then vote on it. In the political world it is a way of telling voters their wishes do not matter, that politicians will hold a referendum as many times as it takes to get a treaty signed.

In a massive landslide, Irish voters swept out Ireland's previous prime minister, only to have Enda Kenny come along and do the exact same things as the politician he replaced.

US Budgets and Bailouts

That is exactly what happened in the US 2008 presidential elections as well. Obama carried out the same bailout policies and the same war mongering policies as Bush.

There is plenty of rhetoric for change, just no real change that anyone can see. Both sides want to do something about the budget, neither side does.

Obama wants to close corporate tax loopholes, then just a few days ago proposed a new set of loopholes for manufacturing, just as Santorum and Romney have proposed. The net result would be an increase in the budget deficit.

There are differences between the parties on social issues, but nothing happens there but hot air.

Romney vs. Obama What's the Difference?

Not your grandfather's Republican Party; President Obama and Mitt Romney are Nearly One and the Same!

Obama Seeks to Prove He is More Like Romney; Obama vs. Romney - What's the Difference?

Germany Bailouts

Voter sentiment in Germany is overwhelmingly against giving more money to Greece. So why did Chancellor Angela Merkel ram through more aid for Greece?

The answer as explained many times is all Merkel cares about is her legacy, and that legacy says no country can leave the eurozone. Merkel does not give a damn about what is good for Greece, or what her own constituents want either.

French Promises

French President Nicolas Sarkozy will not hold a referendum claiming it's "too complicated". In reality, Sarkozy knows the referendum would be about him (See Referendum on a Person or on a Treaty?).

Everywhere you look, it's a case of "Damn the Voters, Full Bailouts (and Existing Policies) Ahead". Politicians have decided, things are "too complicated to change". Expect a cornucopia of promises from politicians, just don't expect any real change.

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

Referendum on a Person or on a Treaty?

Posted: 28 Feb 2012 09:49 AM PST

Reader Andrea from Italy, but who now lives in France adds some insight into Sarkozy's "Treaty Too Complicated For A Vote" excuse.

Andrea writes ...

Hi Mish,

I can add some more info.

Sarkozy started his presidential campaign pledging to be the "president of the people" and saying he wants to give to the people the power to decide about some issues: particularly he said he is going to propose a referendum about a couple of issues, immigration laws and unemployement benefits. As you can easily imagine, these are "minor" subjects for a referendum, normally dealt by executive power.

So, it is very contradictory that he does not want a referendum about the European Treaty, even more in the light of the fact that in recent years France held two referendums about Europe: one about Euro introduction and another about approval of the European treaty signed in 2006 (possibly as complicated as this one). Clearly he knows the topic is a referendum on his own policies and he wants to avoid this.

Regards,

Andrea

On second thought, the treaty is too complicated (for his own personal good), not too complicated for the good of France.

President of the people? Is there a president (leader) of the people anywhere? Certainly not Germany, Ireland, Greece, Italy, the United States, Australia, Canada, or anywhere else.

I am tired of the endless brutal lies from politicians everywhere. Unfortunately, such lies on both sides of the Atlantic are going to get much worse.

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

Monday, February 27, 2012

Mish's Global Economic Trend Analysis

Sarkozy Breaks Campaign Pledge, Says Treaty Too Complicated For A Vote
Capital Flight From Italy, Greece, Portugal Accelerates; Two Trillion Fantasy; Merkel Weaker Every Week; Crude and Geopolitical Risks
Mathematical Case for Brokered Convention; How Ron Paul Can Throw a Big Wrench Into Romney's Campaign

Sarkozy Breaks Campaign Pledge, Says Treaty Too Complicated For A Vote

Posted: 27 Feb 2012 09:53 PM PST

French president Nicolas Sarkozy is campaigning on a pledge to consult people directly on "significant issues". However, despite trailing in polls, Sarkozy refuses to agree to referendum on EU fiscal treaty.

Mr Sarkozy, who is trailing the socialist François Hollande in opinion polls seven weeks before the presidential election, came under pressure to promise a referendum on the pact after he pledged to consult the people directly on significant issues if re-elected.

"No," he replied when asked on French radio yesterday if he would put the treaty to a public ballot. "If you're dealing with a treaty with 200 articles, 250 articles, I can't see how you'd formulate a clear question."

The French electoral calendar means the treaty cannot be passed by parliament until after the election. Mr Hollande has said he will seek to renegotiate parts of the deal if he wins, a move that has been criticised by Mr Sarkozy and German Chancellor Angela Merkel.

Arnaud Montebourg, a prominent party figure who came third in the presidential primary last autumn and has been campaigning for Mr Hollande, went further than the candidate by predicting the treaty "will never be ratified".

Mr Montebourg said a left-wing majority in France would never vote for the pact, while there was "not a majority" in favour of it in Ireland, the UK or other European countries. "The 'Merkozy' treaty would inflict austerity on all of Europe and plunge us dangerously into recession," he said.

Too Complicated To Form a Clear Question?

Sarkozy says "I can't see how you'd formulate a clear question."

Mish Attempt to Formulate Clear Question For Voters

Punch Yes to Approve Treaty
Punch No to Disapprove Treaty

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

Capital Flight From Italy, Greece, Portugal Accelerates; Two Trillion Fantasy; Merkel Weaker Every Week; Crude and Geopolitical Risks

Posted: 27 Feb 2012 08:49 AM PST

Via Email, here is a nice summary of European events from Steen Jakobsen at Saxo Bank in Denmark. Topics include the G20 Summit, Extend-and-Pretend Dogma, Capital Flight , and Geopolitical Risks.

Steen Writes ...

Two Trillion Fantasy

This week-end's G-20 came and went without any real new information. Yes, the policy makers wants us to believe ultimately IMF will have 2 trillion US dollars at its disposal.

No, the US, UK and rest of non-Europe is not really interested before we all get more clarification on how Europe will ring fence the debt crisis.

This is more and more Wall Street vs. Main Street: Underfunded banks buys underfunded government bonds and underfunded governments guarantees underfunded banks.

The real loser being the unemployed - Edward Heath put it more elegantly: Unemployment is of vital importance, particularly to the unemployed.

Meanwhile the real economy and unemployment is exploding higher adding further burdens to already stretched government deficits.

The new EU forecast for GDP growth in 2012 of minus .3% from this past Friday down from plus .05% is great example of how EU and the debt crisis non-solutions continues to lack behind fundamentals. Soon the rising disconnect will hit the politicians games of buying time.

Capital Flight

Merkel Weaker Every Week

Chancellor Merkel is weaker, week after week. She soon will have to rely on SPD votes if she continues down this path. 62 percent polled over weekend are against giving more money to Greece and 2/3 don't believe Greece can be saved according to German newspaper Bild.

Finland will have an interesting vote this week. Follow it closely.

The G20 did not give more credibility to more funds but they sure talked the talk of extend-and-pretend dogma.

Geopolitical Risks

Crude: We are potentially a few weeks from some sort of confrontation unfortunately. IEA report from Iran is due this week. Israel's time window is closing if you believe the media coming out of Israel. Iran's finances are running out of time as well. Iran failed to pay for Indian rice last week.

High energy prices will soon spill-over into gasoline and survey data and will start to impact data and sentiment negatively.

Greece Controlled Default: Greece will have a controlled default and a vacation from Europe.

Portugal CDS Spreads: Portugal is the real issue and containment is almost impossible. CDS spreads suggest the probability of default within five years is about 65 percent.

Nice money printing week,
Steen Jakobsen

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

Mathematical Case for Brokered Convention; How Ron Paul Can Throw a Big Wrench Into Romney's Campaign

Posted: 27 Feb 2012 12:33 AM PST

There are 2,286 republican delegates. It takes 1,144 delegates to win the Republication nomination. With four candidates remaining, many are wondering about the likelihood of a brokered convention where no candidate wins in the first round.

Conventional wisdom suggests there will not be a brokered convention. From where I sit, one is increasingly likely.

Following is a table of delegates won so far (totals from Real Clear Politics Delegate Count), plus my projections of all primaries and caucuses through Super-Tuesday on March 6 (based on recent polls).

State	Primary	Count	Romney	Santorum	Gingrich	Paul
Total to Date	-	243	99	47	32	20
Iowa	Jan 3	28	6	7	0	0
New Hampshire	Jan 10	12*	7	0	0	3
South Carolina	Jan 21	25	2	0	23	0
Florida	Jan 31	50*	50	0	0	0
Nevada	Feb 4	28	14	3	6	5
Minnesota	Feb 7	40	2	17	1	4
Colorado	Feb 7	36	9	17	2	1
Maine	Feb 11	24	9	3	0	7
Michigan	Feb 28	30*	13	11	2	4
Arizona	Feb 28	29	29	0	0	0
Washington	Mar 3	43	13	17	5	8
Georgia	Mar 6	76	19	22	27	8
Ohio	Mar 6	66	19	27	13	7
Tennessee	Mar 6	58	16	25	7	10
Virginia	Mar 6	49	49	0	0	0
Oklahoma	Mar 6	43	11	18	9	5
Massachusetts	Mar 6	41	28	8	2	3
Idaho	Mar 6	32	32	0	0	0
North Dakota	Mar 6	28	10	12	3	3
Alaska	Mar 6	27	10	11	3	3
Vermont	Mar 6	17	11	4	1	1
Super Tuesday Est	Mar 6	782	359	202	104	72
If Paul Wins Idaho	Mar 6	782	327	202	104	104

* States penalized half of their delegates.

Thru Super-Tuesday Scenarios
Romney 359 Others 423 (Romney wins Idaho)
Romney 327 Others 455 (Romney loses Idaho)

Notes

I assigned delegates by expected percentages based on recent polls except in winner-take-all setups. All state delegates were assigned to the above four candidates.
In no instance did I assume Romney would do worse than his most recent polls. In several instances I bumped up Romney's poll percentages substantially.
Points one and two were not done to favor Romney per se, but rather to to give a modest boost to the prevailing idea there would not be a brokered convention.

Michigan Prediction

30 Delegates
Percent: Romney-40% Santorum-35% Gingrich-8% Paul-12%
Delegates: Romney-13 Santorum-11 Gingrich-2 Paul-4
Real Clear Politics Michigan Primary Poll

Arizona Prediction
29 Delegates
Arizona is "Winner Take All"
Romney wins all 29 Delegates
Real Clear Politics Arizona Primary Poll

Washington Prediction
43 Delegates
Percent: Romney-30% Santorum-38% Gingrich-12% Paul-17%
Delegates: Romney-13 Santorum-17 Gingrich-5 Paul-8
Real Clear Politics Washington Caucus Poll

Georgia Prediction
76 Delegates
Percent: Romney-24% Santorum-26% Gingrich-33% Paul-10%
Delegates: Romney-19 Santorum-22 Gingrich-27 Paul-8
Real Clear Politics Super Tuesday Poll (Georgia, Ohio, Oklahoma, Massachusetts, Vermont)

Ohio Prediction
66 Delegates
Percent: Romney-26% Santorum-38% Gingrich-19% Paul-10%
Delegates: Romney-19 Santorum-27 Gingrich-13 Paul-7

Tennessee Prediction
58 Delegates
Percent: Romney-26% Santorum-40% Gingrich-12% Paul-16%
Delegates: Romney-16 Santorum-25 Gingrich-7 Paul-10
Vanderbilt University Tennessee Primary Survey

Virginia Prediction
49 Delegates
Romney wins all 49 Virginia delegates.
Virginia has a proportional allocation with a twist. Should any candidate take 50% in a district, the candidate will all votes in the district. In a display of complete ineptitude, Santorum and Gingrich failed to collect and turn in enough signatures on time and are not on the ballot. Romney is currently polling about 53% and Paul 23%, but Paul can only win delegates if he outright wins a district.

Oklahoma Prediction
43 Delegates
Percent: Romney-23% Santorum-42% Gingrich-20% Paul-9%
Delegates: Romney-11 Santorum-18 Gingrich-9 Paul-5

Massachusetts Prediction
41 Delegates
Percent: Romney-64% Santorum-16% Gingrich-6% Paul-8%
Delegates: Romney-28 Santorum-8 Gingrich-2 Paul-3

Idaho Prediction
32 Delegates
Romney wins all 32 Idaho delegates
January Straw Poll Results Romney-34% Santorum-10% Gingrich-12% Paul-43%
February Straw Poll Results Romney-45.4% Paul 42.7%

A third straw poll will be held March 1-3 and my answer may change based on the results of that poll.

Ron Paul or Mitt Romney will likely take all of the delegates based on the explanation below. Whether or not Paul or Romney takes all the votes depends entirely on whether or not Gingrich or Santorum can win any counties which at this time looks doubtful.
Idaho Caucus Explanation:

Voters will go to locations for their county and use ballots or tokens to support a candidate on Tuesday, March 6th. There are five candidates for Idaho voters to choose from and they will keep voting until a winner is selected.

In each round the candidate with the fewest votes or anyone with less than 15% is out of the race. The voting ends at the county level when there is a final vote for two candidates or one has more than 50% of the vote for that county.

The delegates assigned for that county will then represent the winning candidate. Counties will report their winner to the state office in Boise. If one candidate has more than 50% of the vote for all of Idaho, they get all 32 delegates. Otherwise, the candidates split delegates they won in each county

I cannot find any recent polls for North Dakota, Alaska, or Vermont. Romney should do extremely well in Vermont and fair at best in North Dakota and Alaska.

North Dakota Prediction
28 Delegates
Percent: Romney-35% Santorum-40% Gingrich-10% Paul-10%
Delegates: Romney-10 Santorum-12 Gingrich-3 Paul-3

Alaska Prediction
27 Delegates
Percent: Romney-35% Santorum-40% Gingrich-10% Paul-10%
Delegates: Romney-10 Santorum-11 Gingrich-3 Paul-3

Vermont Prediction
17 Delegates
Percent: Romney-64% Santorum-16% Gingrich-6% Paul-8%
Delegates: Romney-11 Santorum-4 Gingrich-1 Paul-1

How Ron Paul Can Throw a Big Wrench Into Romney's Campaign

I purposely bumped up Romney's percentages to see if a brokered convention would still be possible. I also awarded Romney all 32 delegates in Idaho even though that race is a statistical dead-heat with Ron Paul.

If Ron Paul wins Idaho, and the rest of my numbers above are close, the odds of a brokered convention are well above 50 percent in my estimation. There may be a brokered convention anyway, provided Santorum, Paul, and Gingrich stay in to the end.

Fuzzy Math

The New York Times discusses The G.O.P.'s Fuzzy Delegate Math.

There are 2,286 delegates to the Republican National Convention, of which 1,144 are required to clinch a majority. The Web site TheGreenPapers.com, which has extensive information on delegate-selection procedures in each state, divides them into two broad categories, what it calls "hard" and "soft." Hard delegates are formally bound to a candidate on at least the first ballot at the convention, while soft delegates are not.

Although this is a useful conceptual framework, it probably simplifies things too much. Instead, Republican delegates exist along something of a spectrum between bound and unbound, pledged and unpledged, hard and soft.

Contributing to the confusion is that there are a series of three interrelated ideas about delegates which are often treated as interchangeable, even though they are not:

Bound vs. Unbound Delegates. Is the delegate officially bound to a particular candidate on at least the first ballot at the convention?

Pledged vs. Unpledged Delegates. Whether or not she is formally bound to a candidate, will the delegate's candidate preference be known in advance of the convention and reported upon by the news media?
.
Elected vs. Selected Delegates. Was the delegate selected through some relatively direct means, such as based on the popular vote in the state's primary? Or through some indirect means, like through the series of conventions that often take place in caucus states, and which may not correspond to the popular vote there?

Category of Delegates

Legal Challenges on the Way

I did not take any of the bound, unbound, super-delegate counts into consideration. However, I was rather generous to Romney in other ways.

Moreover, there are legal challenges pending in Arizona and Florida. Winner-Take-All primaries are a violation of Republican National Committee rules if held before April 1. As it stands, Romney 50 Florida delegates and 29 Arizona delegates that could dramatically change the totals.

Should Romney loses those challenges and also lose Idaho, a brokered convention would be all but certain.

If Wishes Were Fishes

If wishes (mine) were fishes, then Ron Paul would win the nomination outright. A more realistic wish is for a brokered convention because Romney, Santorum, and Gingrich are all likely to lose to Obama.

I believe Paul would defeat Obama although polls don't currently support that idea.

Republicans Need to Face the Facts

Of the four candidates, only Ron Paul balances the budget, only Ron Paul wants to stop the war-mongering, only Ron Paul does not alienate the majority of women, only Ron Paul can ignite a fire in independents, and independents (not the radical right), are the key to this election.

Republicans are not going to vote for Obama so appealing to the far right makes little sense in terms of an overall strategy. Moreover, independents are likely horrified by the war-mongering and misguided statements on religious and social issues of all the candidates but Paul.

If Republicans lose this election, it will be because they all outdid each other in foolish attempts to appeal to the far right on issues where a huge majority of the population of the US is in the middle.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Sunday, February 26, 2012

Mish's Global Economic Trend Analysis

German Interior Minister Says EU "Should Create Incentives for Exit That Greece Cannot Turn Down"; Greece Delays Swap Until March 8

Posted: 26 Feb 2012 10:58 AM PST

It is possible if not likely we have to suffer through at least 11 more Groundhog days as Greece sets March 8 deadline for investors in bond swap.

Greece has set a March 8 deadline for investors to participate in its unprecedented bond swap aimed at sharply reducing its debt burden, according to a document outlining the offer.

Greece formally launched the bond swap offer to private holders of its bonds on Friday, setting in motion the largest-ever sovereign debt restructuring in the hope of getting its finances back on track.

In the document, Greece said the March 8 deadline could be extended if needed. Athens in the past has said it wants to conclude the transaction by March 12.

Interior Minister Says Greece Should Exit Eurozone

In yet another break in Merkel's ranks, German interior minister Hans-Peter Friedrich says Greece should exit eurozone.

With German Chancellor Angela Merkel facing a parliamentary vote Monday on a second Greek bailout, her interior minister, Hans-Peter Friedrich came out over the weekend in favour of Greece leaving the eurozone.

Friedrich told the news magazine Der Spiegel, "I do not mean that Greece should be kicked out of" the 17-nation eurozone, but he said the bloc should "create incentives for an exit that they cannot turn down."

Merkel is opposed to Greece leaving the eurozone, and agreed in January with French President Nicolas Sarkozy that Greece should be kept in the monetary union, as long as its government imposes strict budgetary reforms. She expects the Bundestag to approve the second bailout package in a vote Monday.

Friedrich, of the CSU, the Bavarian sister party to Merkel's Christian Democrats, is the first member of the federal government to have spoken out suggesting a radical change of course in euro crisis policy.

"Outside European monetary union, Greece's chances of regenerating itself and becoming competitive are definitely better than if it remained inside the eurozone," Friedrich told Der Spiegel.

Meanwhile, at a meeting of G20 finance ministers and central bankers in Mexico City, German Finance Minister Wolfgang Schäuble said it made "no economic sense" to be "endlessly" pumping money into eurozone rescue funds.

It should have been obvious Germany wanted Greece out of the Eurozone no later than January 27 when Merkel demanded Greece to Cede Sovereignty to Eurozone "Budget Commissioner".

Merkel's Official Denial "I will have no part in forcing Greece out of the euro" Should have made it all the more clear on February 7.

At the same time Schäuble started "Salami Tactics" on German participation (see above link). On February 23, came the Pact With the Devil Over Gold.

Then on February 23 Troika Demands 38 New Changes in Greek Tax, Spending and Wage Policies in Next 6 Days.

Finally, at long last, the German Interior Minister came flat out and stated what previously Finance Minister Wolfgang Schäuble only hinted at, and Merkel herself "officially denied". As I have said many times, Merkel's denial is not plausible. She just not does to be on record as the person causing any country to exit the Eurozone.

Merkel is to be pitied for one of two reasons.

She is so amazingly dense that she cannot see that Greece needs to leave the Eurozone
She is so concerned about her legacy that she does not have the honesty and decency to say what she knows is true, and she is willing to further destroy Greece in the process.

I vote for door number 2.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Saturday, February 25, 2012

Mish's Global Economic Trend Analysis

Bill to Destroy California Businesses Introduced in Senate; Bill Mandates Employers with 5 or More Employees to Create "Personal Defined Benefit Plan" Managed by CALPers

Posted: 25 Feb 2012 01:25 PM PST

The gall, arrogance, and stupidity of public union pandering has reached new heights. A senate bill sponsored by written by Sen. Kevin de León, D-Los Angeles seeks to force businesses with five or more employees to create personal defined benefit plans, managed by CALPers.

The Sacramento Bee reports California Democrats push pension plan for nongovernment workers

Senate Bill 1234, written by Sen. Kevin de León, D-Los Angeles, would require businesses with five or more employees to enroll them in a new "Personal Pension" defined benefit program or to offer an alternative employer-sponsored plan.

The new system's investments would be professionally managed by CalPERS or another contracted organization. Employees would contribute about 3 percent of their wages through a payroll deduction, although they could opt out of the plan.

The fund would assume much lower investment returns than the 7.75 percent that the California Public Employees' Retirement System says its investments will generate, de León said.

Steinberg rejected suggestions that Democrats are pushing de León's bill to fend off pressure to enact substantial public pension changes.

"Absolutely not. We're not running away from it," Steinberg said, calling de León's bill the private sector "bookend" to public pension reform measures he expects lawmakers will send to Brown before the current session ends.

Pure Insanity

There is no polite way to put this so I won't. Sen. Kevin de León is clearly a certifiable nutcase.

Stoctkon and Vallejo California are both bankrupt over insane promises made to public union employees. So is Detroit Michigan, Central Falls Rhode Island, Providence Rhode Island, and Harrisburg Pennsylvania.

Numerous other cities will eventually be forced to seek bankruptcy. Los Angeles and Oakland and at the top of the list.

Numerous airlines and GM went bankrupt over defined benefit pension plans.

De León's bill would bankrupt countless small businesses trapped in its wake.

Things That Would Happen If Passed

Immediate large-scale firings by small businesses. No small business owner in his right mind would have over four employees.
Any business that could, would leave the state.
Many businesses that do stay would be destined to go bankrupt.
California would end up like Detroit or Greece

States on the Right Path

The road to reform is 180 degrees opposite. Governor Scott Walker in Wisconsin, Governor John Kasich in Ohio, and Governor Mitch Daniels are on the right path.

Five Point Road to Reform

End collective bargaining of public unions
Scrap Davis-Bacon and all prevailing wage laws
Scale back existing pension benefit promises via bankruptcy if necessary
Eliminate defined benefit pension plans
Institute national right-to-work laws

Corruption of America

The gall, arrogance, and stupidity of Senate bill 1234 sponsored by Sen. Kevin de León, D-Los Angeles, is absolutely stunning.

Here are a few particularly relevant paragraphs from my post Fatally Flawed Approaches to the Budget Deficit and Taxes; Debt Will Swell Under 3 of 4 Republican Hopefuls' Tax Plans

Porter Stansbury wrote a tremendous article on The Corruption of America and how public unions are at the center of it.

Golden State on road to Greece, by way of Detroit

Stansbury touched on Detroit in his article and so did the Orange County Register in an editorial Golden State on road to Greece, by way of Detroit

The Chicago Tribune reported Chicago teachers asking for 30% raises over next 2 years.

Is that insane or is that insane? The only way to stop such insanity is by ending collective bargaining of public unions, scrapping Davis Bacon and all prevailing wage laws, and instituting national right to work laws.

Legal Bribery

As long as public unions, corporations, and lobbyists can bribe legislators with campaign contributions, then bills are going to be written by public unions, corporations, and lobbyists.

Tax reform alone cannot and will not work. In addition to a balance budget amendment, something must be done to rein in the power of public unions and corporate lobbyists at the center of this mess.

Ending collective bargaining rights of public unions and passing right-to-work legislation would be a wonderful first step.

Addendum:

I missed the words "Employers could make voluntary contributions into the fund." Sorry, but I still don't buy it. This would be the first step towards mandated involuntary contributions. Moreover, maintenance of the plan would cause headaches, and giving money over to CALpers to manage is inane.

If people want to enter such programs on their own, let them. Mandating businesses offer such plans is another ridiculous burden on all businesses, especially small businesses. Nothing at all stops private companies from offering such plans.

Who is going to guarantee these benefits anyway, and who will be at risk when the plans fail to meet the goals? The answer today may be one thing, the answer down the road is sure to be taxpayers and businesses.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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160 German Tax Collectors Volunteer to "Help" Greece

Posted: 25 Feb 2012 12:22 PM PST

Goodness gracious, how gracious! The German business weekly WirtschaftsWoche reported Saturday that Germany offers to send tax men to Greece

The German government is prepared to send 160 financial experts to Greece to help the country overhaul its tax collection, the business weekly WirtschaftsWoche reported Saturday.

Hans Bernhard Beus, deputy finance minister, told the magazine that the tax officials are ready to jump in to help the ailing country. They would need to at least speak English, but about a dozen of the volunteers speak Greek, he said.

A large number of the volunteers would come from western German state of North Rhine-Westphalia, where state Finance Minister Norbert Walter-Borjans of the centre-left Social Democrats (SPD) told WirtschaftsWoche: "Greece is facing the problems that former East Germany faced in 1990."

The central German state of Hesse is also prepared to send in volunteers, the state's Finance Minister Thomas Schäfer of the conservative Christian Democrats (CDU) said.

"In helping Greece, we should also entertain the idea of bringing in retired tax collectors, because considerable practical experience could be used here," he told WirtschaftsWoche.

In January, the Greek government released a 170-page list of 4,000 tax evaders, who owe the state approximately €15 billion. The Greek government under Prime Minister Lucas Papademos has announced that it will be seriously pursuing tax evaders.

Is this tax collection help or the beginning of colonization?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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