Mish's Global Economic Trend Analysis

Reflections on Meaning of "Last Minute"; The Most Productive Workers on the Planet
Market Yawns as Greek Debt Deal Finalized; Deal? What Deal? Why Does it Even Matter?
Cameron's Foolish Bluster; Monti Asks Cameron for Up-or-Down Vote on UK Membership in EU
Five Star Movement (Eurosceptic) Surges into Second Place in Italian Polls

Reflections on Meaning of "Last Minute"; The Most Productive Workers on the Planet

Posted: 26 Nov 2012 10:31 PM PST

Progress on the alleged fiscal cliff has been non-existent. Obama wants tax hikes on the wealthy, Republicans want to close loopholes.

With little possibility of a breakthrough on the fiscal cliff until the "last minute", inquiring minds are likely wondering what the term "last minute" precisely means.

I can help.

Please consider the Wall Street Journal article Obama Calls Boehner, Reid on 'Fiscal Cliff'.

President Barack Obama called House Speaker John Boehner and Senate Majority Leader Harry Reid over the weekend to discuss the fiscal cliff, as staff-level negotiations have moved slowly and produced no visible signs of progress on how to avoid the tax increases and spending cuts due take effect in January.

A broader group of negotiators that includes Senate Minority Leader Mitch McConnell (R., Ky.) and House Democratic Leader Nancy Pelosi of California, had been expected to reconvene this week, but that is now unlikely.

With each passing day, the government moves closer to the fiscal cliff, the combination of $500 billion in tax increases and spending cuts that begin in January and that economists have said could tip the country back into a recession.

One veteran Democratic aide said he wasn't surprised major concessions hadn't been made, given that real deal making usually happens at the last minute, which he put at "two weeks away."

Expect Definition to Change

Two weeks away would be December 10, which I suggest is far too early to be considered "last minute".

As supporting evidence, I present the online Congressional Calendar for December.

Green is Senate in Session. Orange is House in Session. The green hashed bars are TBD "to be determined".

Note the Congressional calendar does not include Saturday or Sunday.

Schedule Not Finalized

Out of curiosity, I called the office of the House majority leader Eric Cantor and was told the Congressional schedule for December will not be finalized until Friday, November 30.

Thus, we will not know the semi-final definition of "last minute" until then, but right now the preliminary estimate is no sooner than Friday, December 14.

Bear in mind, should December 14 (or whatever day Congress adjourns for the year) come and go without a Fiscal Cliff deal, assume that "last minute" will be redefined to mid-January 2013 when leaders of both parties will be anxious to roll back some of the tax hikes, referring to the rollbacks as "tax cuts".

Reflections on Our Hard-Working Congressional Representatives

While waiting for the final definition of "last minute", inquiring minds just might want to take a look at other months in the Congressional Calendar to see how frequently our representatives are at work for us.

Here are some sample months to consider.

Shock and Awe

Some people are probably shocked by this. I was not only shocked by appalled.

Indeed, my very first reaction was "My God! Look at how horrendously overworked our representatives are!"

No doubt, many of you had the exact same initial reaction.

That strenuous schedule coupled with hard work explains many things, such as why we have 73,608 pages of tax code piling up month after month year after year.

click on chart for sharper image

US Congress: The Most Productive Workers on the Planet

The results speak for themselves: US Congress collectively has the most productive workers on the planet.

These horribly-overworked souls are so dedicated to churning out mind-numbing pages of legislation that any clear-thinking individual should be able to quickly spot the need to reduce the number of hours Congress is in session.

Thus, I propose Congress be in session no more than three days per month. Should that fail to dramatically reduce total the number of pages of Congressional bills, I further propose limiting Congressional sessions to alternating months.

If this sounds backwards, you just are not thinking clearly.

Everyone knows nothing gets done until the "last minute" anyway, and this clever proposal will massively increase the percentage of time worked at the "last minute" while also reducing the sheer volume of pages of legislation produced, hopefully to a readable number.

Perhaps Congress would even find the time to read the bills they sponsor.

So please call your representatives and tell them you support "Mish's Proposal to Reduce Congressional Sessions" but only after they reduce the number of pages in the tax code to 15.

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

"Wine Country" Economic Conference Hosted By Mish
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Market Yawns as Greek Debt Deal Finalized; Deal? What Deal? Why Does it Even Matter?

Posted: 26 Nov 2012 06:44 PM PST

At long last Euro zone, IMF agree on Greece debt deal.

Euro-zone finance ministers, the European Central Bank and the International Monetary Fund reached a deal early Tuesday in Brussels that is expected to see them release more financial aid to Greece.

The euro-zone finance ministers, known collectively as the Eurogroup, said in a statement that a worse macroeconomic situation and delays in implementing assistance have resulted in a weaker outlook for Greek government finances.

The Eurogroup members said that the "necessary elements are now in place" for member states to approve a European Financial Stability Facility (EFSF) disbursement to Greece of 43.7 billion euros ($56.8 billion), with the formal go-ahead expected by Dec. 13.

Greece's debt targets were also tweaked, with government debt now targeted to fall to 124% of gross domestic product by 2020, and to substantially less than 110% of GDP by 2022.

Eurogroup members said in a statement they are prepared to consider various measures to support Greece, including:

Lowering interest rates on the Greek Loan Facility by 100 basis points

Cutting guarantee costs for Greece's EFSF loans by 10 basis points

Possibly deferring interest payments on EFSF loans by 10 years.

The Eurogroup said that the measures will not affect the creditworthiness of the EFSF, the euro bloc's bailout fund.

Deal? What Deal?

How the hell can there be a deal when the news clearly states the Eurogroup is prepared to consider various measures?

What kind of deal is that?

Why Does it Even Matter?

Let's assume for the moment that all of what the EU has considered actually happens. You still have to be nuts to think this makes the situation stable.

Supposedly "government debt is now targeted to fall to 124% of gross domestic product by 2020". This will be just another missed target in a long series of missed targets, not that 124% is remotely sustainable in the first place.

Yawn

The market seems to have had enough of these games. The euro barely moved on the non-news.

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

Cameron's Foolish Bluster; Monti Asks Cameron for Up-or-Down Vote on UK Membership in EU

Posted: 26 Nov 2012 05:34 PM PST

I frequently disagree with Financial Times writer Wolfgang Münchau, especially on keeping the eurozone and EU intact.

Today, I largely agree (but sometimes for opposite reasons) with Münchau's take in Britain's bluster serves the eurozone well.

Münchau: The singular importance of the budget negotiations, and of British prime minister David Cameron's insistence on an EU budget freeze, lies in what they reveal about the future of the EU itself. A frozen budget means that the EU is stuck with what it does. Forget the Agenda 2020, or any other pretence at growth-enhancing policies.

What the fraught budget negotiations tell us is that the process of European integration – at the level of the EU – is largely completed. In that sense it matters little whether the UK, for example, stays inside or not. In formally leaving the EU, there would be no need for the UK to give up on any existing rights, including the right to take up work and residence in the EU and, of course access to the single market – whatever that is worth. The terms of a withdrawal from the EU are freely negotiable. Even now, it does not feel that different, apart from the temperature, whether you are in Britain inside the EU, or in Norway outside the EU.

Mish: From the point of view of the EU, Münchau is largely correct. The EU can blunder along in its creation of an economic nannyzone with or without the UK, but not with or without Germany.

However, from the point of view of the UK, it would be better for the the UK to leave. The UK does not need inane EU agricultural subsidies, inane financial regulations, inane work rules, or this endless bickering over rules and budgets that the EU nannyzone requires of member states.

Münchau: Today's EU has two important functions left. Some readers may find my list shockingly short. The first is that it provides the institutions and legal framework for the eurozone to muddle through to a solution of its crisis. I am not saying that the eurozone will necessarily achieve that goal. There is a non-trivial probability that it will not.

The banking union could be a first step towards a single market for finance at eurozone level. Ultimately, I would also expect a single market for labour and for services, all at eurozone level. If there is a fiscal union, its budget will end up not only bigger than the EU's, but also different in composition – to fulfil the purpose of macroeconomic stabilisation.

Mish: I advise betting on the "non-trivial probability" things do not work out as Münchau sees. Ironically, the more "success" the EU has on achieving one-size fits none "nannyrules" for everything under the sun, the lower the overall growth in the region because the bureaucracy, financial taxes, agricultural rules, etc., are generally headed in the wrong direction.

Münchau:The EU's second important function is to serve as a waiting room for member states who are not yet in the eurozone, but are willing to enter it at some point in the future.

In the end, it does not matter whether the outs leave the EU formally, linger compliantly on the fringes or whether the eurozone leaves them. A messy divorce of some sort will take place, at some point, possibly still quite a few years away. It could take numerous forms. A formal separation is only one of several possibilities. But it is not sustainable for a group of permanent outsiders to enjoy permanent co-decision rights, even though the EU is endlessly patient when it comes to accepting transitional arrangements. The reality is that there is no sustainable biosphere that is outside the eurozone, but inside the EU.

Mish: There is a big difference between the UK sitting on the fence and the Czech Republic, Denmark, or Sweden sitting on the fence. The difference is the UK's size and ability to make waves.

However, let's assume Münchau is correct, that "there is no sustainable biosphere that is outside the eurozone, but inside the EU".

Given there is very little chance of the UK joining the eurozone, the sooner the UK leaves the EU, the better. Since that is what Münchau implies (assuming he agrees the UK will not join the eurozone), we are largely in agreement.

Münchau: By insisting on an EU budget freeze, Mr Cameron is ultimately doing the eurozone a favour. By undermining the EU, he provides further incentives for the eurozone to grasp its collective interest. I support him.

Mish: Not quite. Cameron sits like a wimp on a fence unable to do what needs to be done, nor will he even put the matter to a vote.

Monti Presses Cameron for EU Referendum

Most likely to the shock and horror of the bulk of nannycrats, Monti presses Cameron for EU referendum.

Italy's prime minister has publicly urged David Cameron to call a decisive referendum on "the fundamental question" of whether Britain should remain in the EU.

In comments that will complicate the British prime minister's efforts to fend off Eurosceptic demands for an "in-out" vote, Mario Monti argued that an unambiguous plebiscite was the best way to address "the British problem" and prevent an exit.

He added: "Above all, one day Britain must – I spoke with David Cameron about this last week – Britain must ask their electorate, not whether they agree or disagree on the latest change . . . but pose the fundamental question: do you want to remain in the European Union?"

Opinion polls suggest a majority of Britons want to leave the EU. A ComRes survey for the Independent newspaper, released on Tuesday, showed 54 per cent wanted Britain to exit and maintain close trading links.

While Mr Cameron has indicated he favours a referendum on a new "settlement" between Britain and an increasingly integrated eurozone, he makes it clear he wants the UK to retain its membership. He has refused to yield to pressure from his own Conservative party to hold an in-out vote.

The prospect of reopening Tory splits on Europe haunts Mr Cameron; the two previous Conservative premiers – Margaret Thatcher and John Major – were both brought down by party infighting over Europe.

Michael Fabricant, a Conservative vice-chairman, on Monday called on Mr Cameron to offer a referendum non-aggression pact at the next election with the Eurosceptic UK Independence party. He warned the Conservatives could otherwise lose 20-40 seats.

But Mr Cameron rejected the idea, saying there would be "no pacts" with Ukip, which secured its best-ever parliamentary by-election result last week. Nigel Farage, Ukip leader, said he could not do a deal with the Tories while Mr Cameron was in post.

Meanwhile, Mr Cameron said on Monday that a deal on the EU's long-term budget was "still doable" in spite of a breakdown of talks in Brussels last Friday. Britain sided with other EU paymasters – including Germany, Sweden, the Netherlands and Finland – in calling for cuts to proposed spending.

Wimping Along

Cameron has not yet figured out there will only be positive ramifications to jettisoning the nannycrats instead of attempting to influence them.

Compromise is silly with so many major differences including the overall budget, financial transaction taxes, agricultural subsidies, tariffs in general, and work rules.

Here is the problem as I stated in Pin the Tail on the Scapegoat.

Losing by Winning

Cameron raised the EU's bluff and Merkel promptly folded.

The problem is the UK would be far better off by having a straight up or down vote on the EU by British citizens (which I am sure would be rejected), and sadly that outcome was avoided.

Instead, Cameron has decided to plod along instead of doing what needs to be done: having a national referendum on UK membership in the EU.

Cameron's Self-Serving Policies

Cameron will not do what polls suggest or even what his own party wants. Why? Like most politicians, Cameron is acting in his own self-interests hoping to offend the fewest number of people.

The risk is Labor wins the next election anyway, making an exit impossible.

Worse yet, the next prime minister could conceivably sell the UK down the river by agreeing to implement financial transaction taxes and imposing other nannycrat idiocies.

What Cameron really needs to do is not only call for a referendum, but also encourage people to vote to kiss the nannycrats goodbye.

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

Five Star Movement (Eurosceptic) Surges into Second Place in Italian Polls

Posted: 26 Nov 2012 10:09 AM PST

Reader Andrea who is from Italy but now lives in France writes ...

Hi Mish,

Here is a link to a web site that produces charting polls for Italian elections.

Click on the tab "I quattro poli". It shows a polynomial regression of the four major political parties.

Just for your info, a short translation of the legenda: Centro-Sinistra is the Center-Left coalition, Centro-Destra is the Center-Right coalition, Centro is of course Center (actually it is the coalition more supportive of Monti and actually seeking to have him for a second term as PM), and M5S is the usual acronym for Movimento 5 Stelle (Five Star Movement).

As you can see, Center-Left is for the moment the clear winner and M5S has now overcome Center-Right. I still think that a stall in Senate is likely anyway (which in some way could favor Monti for a second term as PM).

The other remarkable thing is that the people declaring today that they will not vote is as higher than 40% (some polls give it close to 50%).

This weekend the primary elections of Center-left took place: Pierluigi Bersani and Matteo Renzi scored first and second and a second round will be needed to choose between the 2, as nobody reached 50% in the first round. Bersani is the current secretary of the party and Matteo Renzi is the mayor of Florence and a kind of young outsider.

Best regards,

AC

Top Four Parties

Polling data appears to be from mid-October, not June as shown on the slidebar.

A deadlock in parliament following the next election may mean re-appointment of Mario Monti but the surge for the Five Star Movement is encouraging.

For more on M5S and founder Beppe Grillo, please see Six Reasons Why Italy May Exit the Euro Before Spain; Ultimate Occupy Movement.

Main Rules for the Five Star Movement

Not be an elected politician prior to 5 Stelle
Commit to stay in charge for no longer than 2 terms
Commit to take a minimum salary and give the rest back to the community
Post a public platform on the internet
Be willing to hold a public debate on the platform

Beppe Grillo's personal position, not a mandate for the Five Star Movement is "Get out of the Euro and default on debt".

From Andrea in the above link ...

Five Star Movement candidates have been able to get almost everywhere between 10 and 20% of votes, sometimes even more, all without a single minute of TV advertising or a single advertising page on newspapers.

The movement has simply spread via the internet, social networks and public meetings around the country. The message sent by their success is clearly: we are fed up with this corrupted, inefficient and incompetent political class.

The most important thing for the future months is the last stance Beppe Grillo has decided to take just before elections: get out of the Euro and default on debt. This position has been strongly criticized the rest of the political class and mainstream media, but the fact that Beppe Grillo has been breaking this "Taboo" and that there was a strong reaction by political and media environments, has finally opened the debate in Italy and has certainly made people to start seriously think about it, despite the fact that Italy so far had no financial help from the EU or IMF.

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

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Monday, November 26, 2012

Mish's Global Economic Trend Analysis

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