Mish's Global Economic Trend Analysis

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• "Crash Tax" Ripoff Expands in California and New York
• Credit Default Swaps PIIGS vs CINN Group (California, Illinois, New York, New Jersey)
• Housing Bubble in Norway
• European Sovereign Debt Crisis in Pictures; PIIGS Spreads to Germany at or Near Record Levels

"Crash Tax" Ripoff Expands in California and New York Posted: 31 Dec 2010 04:46 PM PST You pay taxes for services. At least you think you do. Fifty cities in California think you don't. They tax the hell out of you, then bill you if you need services. Drivers who cause accidents in at least 50 cities can be billed for the police and firefighters who show up. Please consider 'Crash taxes' are growing in popularity among cash-strapped California cities At least 50 cities in the state have adopted so-called crash-tax laws allowing local governments to seek reimbursement from insurance companies for the costs of sending public emergency crews to accident scenes. The fees can amount to hundreds or even thousands of dollars. If insurers don't pay, cities can hire collection agents to seek payment from the motorists involved. Sacramento, with nearly half a million residents, soon could be the largest city in California to do so. The City Council has scheduled a vote next month to establish what it's calling a "fire cost recovery charge." The fee would reimburse the city for a variety of emergency-related chores, including cleaning up hazardous fluids, putting out vehicle fires and responding to gas line explosions and downed power poles. Proposed fees would range from $432 for a "scene stabilization" to $2,275 for a helicopter evacuation. The measure is expected to raise as much as $500,000 a year, city spokeswoman Linda Tucker said. "To me, it's an outrage. We're already paying these people — the police department, the fire department, the emergency vehicle drivers — handsome salaries and benefits," said Lew Uhler, president of the National Tax Limitation Committee. "Either we stop this kind of nonsense or we should quit paying taxes for these kind of services." The practice isn't limited to cities in struggling California. It's gaining momentum nationwide as cash-strapped communities seek a way to offset budget cuts. This month, New York Mayor Michael R. Bloomberg proposed charging drivers there as much as $490 when firefighters respond to an accident or a vehicle fire, beginning July 1. A public hearing is set for January. Local taxpayers shouldn't have to pay for accidents they had no part in creating, said Costa Mesa Fire Battalion Chief Bill Kershaw. "Someone has to pay for the cleanup," he said. "We're subsidizing the insurance companies" if cities don't collect from the responsible parties. At least 10 states, including Florida, Georgia and Pennsylvania, have already banned the collection of accident-response fees, according to A.M. Best Co., an independent insurance information service based in Oldwick, N.J. But California cities and the companies they hire to collect accident fees are gearing up for a fight. The Strickland bill would prohibit local governments from collecting for all types of emergency services, including fire, police and medical, they said. Such a ban "could devastate city services and economic health," the League of California Cities said in a letter to lawmakers. Insurance companies are trying to harness populist antitax sentiment, typified by the "tea party" movement, to protect their own profits, said Rick Benner, chief financial officer of Fire Recovery USA. The gall of Rick Benner of Fire Recovery USA and Costa Mesa Fire Battalion Chief Bill Kershaw infuriates me. Firefighters together with police unions they have bankrupted most cities in the nation. Public union firefighters and police (in general) are the most overpaid undeserving ungrateful ingrates the country has ever known. Those statements will annoy many, but it is the truth, in general, especially for the larger cities. If you are a small town police officer or firefighter with few benefits then what I said may not apply to you. I would gladly support collection measures if tax dollars did not already go to overbloated, untenable public union pension contracts. Spare me the sap about how dangerous the jobs are. Please consider the 8 Most Dangerous Jobs in the World 1. Fishermen 2. Pilots and airline employees 3. Loggers 4. Structural construction workers 5. Waste management employees 6. Farmers and ranchers 7. Power-line technicians 8. Roofers The true heroes deserving of respect and appreciation are volunteer fire departments. The problem is expenses not lack of revenues. Cities ought to outsource both police and firefighters, the latter to volunteer departments in return for reduced or eliminated property taxes. How many people do you think would volunteer for a few days a month in return for elimination of property taxes? I bet enough to get rid of nearly every public union fire department in the country. 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.

Credit Default Swaps PIIGS vs CINN Group (California, Illinois, New York, New Jersey) Posted: 31 Dec 2010 12:04 PM PST In response to European Sovereign Debt Crisis in Pictures; PIIGS Spreads to Germany at or Near Record Levels I received this chart from Chris Puplava at Financial Sense. click on chart for sharper image Chris writes "In addition to foreign credit risk (Greece, PIIGS), I'm seeing my CINN STATE (CA, IL, NY, NJ) Credit Default Swap (CDS) composite moving higher again." 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.

Housing Bubble in Norway Posted: 31 Dec 2010 09:40 AM PST Here is a quick post under the theme "Housing Bubbles Around The World". This one is from Norway, courtesy of reader Espen Johansen. Dear Mish Thank you for your effort to spread the economic truth in the jungle of lies. The Norwegian Central Bank and the authorities has fed the bubble monster for years by keeping interest rates too low too long, and the biggest culprit, socializing credit. (We have a socialist/communist government, and have had a blend of that since 1990) I have tried sending letters to the finance ministry, and the central bank, but no one seem to wake up. About 90 % of all households have Floating rate mortgages. I do not blame the banks, they know they will be bailed out, and compete doling out as much money as they can to make a profit for share/bondholders with the given terms of a bailout waiting. A picture says more than a 1000 words, and enclosed are some graphs I believe tell it all. Sources: The blog "krakk!" House price indices for Norway End the central bank cartel, and we will see prosperity and peace. Merry Christmas and a Happy New Year Med vennlig hilsen/Best regards Espen Johansen Inflation Adjusted Housing Prices In Norway Norway Homes Prices In Gold 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.

European Sovereign Debt Crisis in Pictures; PIIGS Spreads to Germany at or Near Record Levels Posted: 31 Dec 2010 02:14 AM PST The sovereign debt crisis in Europe is still simmering. Country by country, spreads to German debt are at or near record levels. Chart follow snips from German Bonds Climb in 2010 as Fiscal Crisis Roils Euro Area German bunds climbed this year, the best performance since 2008, as the fiscal crisis that roiled the euro area's most-indebted nations drove investors to the safest fixed-income assets in the region. Top-rated euro-denominated securities from Austria, Germany, the Netherlands, Finland and France led gains in 2010, while the debt of Greece and Ireland, which sought bailouts this year, had the biggest losses among 26 markets tracked by Bloomberg and the European Federation of Financial Analysts Societies. German bonds returned a profit of almost 6 percent this year, according to the Bloomberg/EFFAS data, compared with a 20 percent loss on Greek debt, a 14 percent slump in Irish securities and an 8 percent decline for Portuguese securities. Spanish and Italian bonds also made a loss as investors demanded increasing yields to own the debt of the euro area's high-deficit nations. As borrowing costs climbed again amid a wave of sovereign downgrades that saw Greek debt cut to non-investment grade at Moody's Investors Service and Standard & Poor's, Ireland opted on Nov. 28 to follow Greece, accepting an 85 billion-euro bailout. That, too, failed to prevent the spread of the debt crisis, fueling investor concern that Europe's stronger nations may be unwilling or unable to foot the cost of future rescues. The extra yield investors demand to hold Greek 10-year government bonds instead of German bunds, Europe's benchmark government securities, surged to a euro-era record of 973 basis points on May 7, and was at 953 basis points today. It started the year at 239 basis points. The difference in yield, or spread, between German bonds and 10-year debt from Ireland, Portugal, Spain and Italy also reached euro-era records. Germany, Ireland, Portugal, Greece Sovereign Debt Yields click on chart for sharper image France, Spain, Belgium, Italy Sovereign Debt Yields click on chart for sharper image Sovereign Debt Spread to Germany Country Jan 01 May 07 Dec 30 Belgium 0.3% 0.7% 1.0% France 0.2% 0.4% 0.4% Greece 2.4% 9.7% 9.5% Ireland 1.4% 3.1% 6.0% Italy 0.3% 1.5% 1.8% Portugal 0.7% 3.5% 3.6% Spain 0.6% 1.6% 2.5% The bailouts to Greece and Ireland solved nothing. Spain and Portugal are up next. The country to keep an eye on is Italy. It is off nearly everyone's radar right now. Not mine. Italy is simply too big to bail and its spreads are creeping up. Correction: Second chart as originally posted contained a line for Spain that was actually Portugal a second time. Now corrected. 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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