Mish's Global Economic Trend Analysis

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• Romney "Surrounded by Neocons, Playing Around with Matches" on Iran
• The Real Consumer Credit Story: Virtually No Recovery in Revolving Credit, No Recovery in Non-Revolving Credit
• Off the Cuff: Chris Martenson and Mish on the Global Economy

Romney "Surrounded by Neocons, Playing Around with Matches" on Iran Posted: 09 Apr 2012 08:15 PM PDT Zbigniew Brzezinski says Romney is 'playing around with matches' on Iran. Mitt Romney has been talking tough on Iran lately. In an op-ed last month in the Washington Post, the all-but-certain Republican presidential nominee wrote: I will buttress my diplomacy with a military option that will persuade the ayatollahs to abandon their nuclear ambitions. Only when they understand that at the end of that road lies not nuclear weapons but ruin will there be a real chance for a peaceful resolution. Romney added that he'd restore aircraft carriers to the eastern Mediterranean and Persian Gulf region. And he closed with this stark warning: "Either the ayatollahs will get the message, or they will learn some very painful lessons about the meaning of American resolve." "The easy, quick fashion in which he disposes of the Iranian problem by indicating that in effect, he would be using force, is very troubling," Brzezinski pere told the gang. "I don't think a presidential candidate should be playing around with matches that way. This whole thing can become explosive, disturbing, and destructive." Joe Scarborough noted that in recent times, the Republican Party has been split between realists like James Baker and Colin Powell, and the neo-conservatives who pushed for war in Iraq. "If you look at the people who are around Mitt Romney, he's surrounded by neocons," said Scarborough. One thing the panel didn't mention: A centerpiece of Romney's criticism of President Obama on foreign policy has been his charge that Obama has gone around the world "apologizing" for America -- he even called his campaign book "No Apology," an effort to emphasize what he sees as the contrast between his own approach and Obama's. The only problem: Independent fact-checkers have established that the claim is basically a fabrication. Matches or Dynamite? President Obama is playing around with fire, Romney has the fuse on a stick of dynamite lit already. This "No Apologies" strategy, aside from being a lie, is also wrong. When you make a mistake, it is best to admit it, otherwise you end up repeating them, just as we are doing now. How many asinine battles is the US going to fight anyway. Vietnam, Iraq, Afghanistan, were all idiotic. The US should apologize for mistakes made in those countries. Fools never apologize. Romney is an arrogant war-mongering fool hell-bent on waging yet another asinine war to prove the "meaning of American resolve". Such idiocy was the basis for the War in Vietnam, the War in Iraq, and a 10-year long ongoing war in Afghanistan that the US public was fed up with years ago. History shows "American Resolve" lost the war in Vietnam and will skedaddle from Afghanistan as well unless Romney is stupid enough to stay the course there as well. As bad as Obama is on foreign policy, Romney is worse. I cannot and will not vote for either Romney or Obama. Many independents feel the same, and they will be the key to the election. 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.

The Real Consumer Credit Story: Virtually No Recovery in Revolving Credit, No Recovery in Non-Revolving Credit Posted: 09 Apr 2012 10:26 AM PDT Bloomberg reports Consumer Credit in U.S. Rose Less Than Forecast in February U.S. consumer borrowing rose less than forecast in February, restrained by a drop in credit-card debt, according to a Federal Reserve report. Credit increased $8.7 billion, the least in four months, after a revised $18.6 billion gain in January that was more than initially estimated, Federal Reserve figures showed today in Washington. Economists projected a $12 billion rise in the measure of revolving and non-revolving loans for February, according to the median forecast in a Bloomberg News survey. Non-Revolving Debt Non-revolving debt, including educational loans and borrowing for autos and mobile homes, climbed by $10.9 billion in February, the smallest gain in four months, today's report showed. The Fed's report doesn't track debt secured by real estate, such as home equity lines of credit. I am amused by such reports because except for student loans, there has not been any growth in either revolving credit or non-revolving credit since the recession ended. The following charts show the real story. Non-Revolving Credit Non-Revolving Credit Detail Percent Change From Year Ago Excluding student and government loans there is virtually no recovery in non-revolving credit. Revolving Credit Revolving Credit Detail Conclusions There has been virtually no recovery in consumer non-revolving credit. There has been virtually no recovery in consumer revolving credit. Rising student loan debt is a major problem, not a sign of economic strength. Middle-Aged Borrowers Pile on Student Debt Reuters reports Middle-Aged Borrowers Pile on Student Debt Educational borrowing is up for every age group over the past three years, but it has grown far more quickly among those between 35 and 49, according to the analysis of more than 3 million credit reports provided to Reuters by the credit score tracking site CreditKarma (CreditKarma.com). That group saw its school debt burden increase by a staggering 47 percent, according to the analysis. The average student loan debt for those aged 38 to 41 was the biggest of that group -- about $12,000, up from just under $9,000 in 2009. Young people still carry the biggest student loan burdens; those aged 26 to 29 have an average of $14,000 in student debt. But the increased levels in middle-aged student debt is a new phenomenon. Negative Payback on Retraining The benefit of going back to school at age 49 is likely negative. My friend "BC" comments: The payoff for 40- and 50-somethings taking on debt to change occupations or trying to find jobs in "health care" or "education" and compete with Millennials trying to secure similar positions is low or negative. Statistically, the benefit to "education" occurs between ages 14 and 22, where one goes to high school and university. Obtaining an MBA, law degree, or another graduate degree after age 26-28 historically has not resulted in a net benefit in terms of job/career prospects or wage/salary income; and this has become particularly the case since the late '90s. In other words, the vast majority of people running up debt at universities, community colleges, and for-profit technical schools are wasting their time and money, as well as directing scarce resources to the "health care" and "education" sectors that don't need more misallocation further driving up costs. Needless to say, there is no precedent in US history for middle-aged unemployed, underemployed, or unemployable Americans running up debt in an economy that has not created a net new private sector full-time job per capita in at least 10 years. Recovery? What Recovery? People are hiding out in school because they cannot find jobs. In the process, they are piling up more student debt that for many will be a burden for the rest of their lives. Student loans are a scam and should be phased out starting now. Bernanke is trying like mad to encourage more consumer spending, but the results speak for themselves. He has failed. 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.

Off the Cuff: Chris Martenson and Mish on the Global Economy Posted: 09 Apr 2012 07:40 AM PDT Last week I did a podcast on the global economy with Chris Martenson. You can read a synopsis at Off the Cuff with Mike "Mish" Shedlock. Here is a snip. In this week's Off the Cuff, Chris and Mish look at the impact of the recently-released Fed minutes and the worsening situation in Europe (no, the problems there haven't gone away). On Tuesday, the Fed released its minutes, which showed that only two out of 10 voting members saw the case for additional monetary stimulus at this point. Markets, counting on additional easing measures, were disappointed; stocks and bonds dropped, and the precious metals have been clobbered. To Chris, this affirms his long-held position that it's nearly impossible to conduct actual "investing" these days, as asset prices are dictated by what the Fed members decide more than any other factor. If you have capital in the markets, you're really speculating instead. Mish is equally amazed that the market is entirely dependent on central bank policy vs. fundamentals, and he sees Europe as a prime example. In the EU, sovereign bond yields are moving higher as the ECB has announced it is ending the LTRO. Amazing. An injection of over $1 trillion was only able to stabilize rates for about 4 months... Spain, in particular, is looking increasingly vulnerable. Its prime minister recently announced that Spain has serious economic problems that are folly to underappreciate (a rare admission for a politician to make). Its latest bond auction saw scarily weak demand, and the interest rates on its sovereign debt have resumed climbing at concerning speed. Nearly 57% of its budget is spent on pensions, unemployment benefits, and debt interest payments! The bailouts have not worked, yet at this rate, another bailout in the near future seems in the cards. Where will this end? And the rest of Europe is faring little better. Portugal and Italy are teetering. Their weakness (along with Spain's, Ireland's, and Greece's) will hit the "stronger" EU countries like Germany -- at the same time that wage price pressure is rising in Germany. Meanwhile, civil unrest simmers higher in a number of countries. Political backlash against the ruling parties is making it harder for coalitions to form to get real changes made. Demonstrations and outbreaks of violence are on the rise. And back in the US, the positive news (when you can find any) is anemic. Mish predicts a substantial slowdown in the US economy in the next month. The takeaway: Proceed with caution. Click the play button below to listen to Off the Cuff with Mish & Chris (runtime 24m:25s) At this time I wish to thank Chris Martenson and Adam Taggart (Martenson's general manager) for their help in creating the Website design for the Les Turner ALS Foundation raffle. Chris and Adam have helped launch a successful campaign. Over 20 countries have made donations or purchased tickets so far, and the campaign is not even a week old. 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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