Mish's Global Economic Trend Analysis

Public Union Protesters More Like Greek Extortionists than Egyptian Freedom Fighters; Unions Under Fire in Wisconsin, Ohio, Tennessee; Student Idiocy
Portuguese Government Pleads for Help as Yields Soar to Record Level; Portugal Needs Bailout by April; Pressure Mounts for Haircuts
Japan's Social Security Panel Wants to Double Sales Taxes; Tax Cut Independents Win Local Elections in Landslide; Japan's Debt Trap Has No Escape

Public Union Protesters More Like Greek Extortionists than Egyptian Freedom Fighters; Unions Under Fire in Wisconsin, Ohio, Tennessee; Student Idiocy

Posted: 18 Feb 2011 01:48 PM PST

Senate Democrats in Wisconsin have gone on hiatus in Illinois in an effort to block badly needed legislation that will rein in extortion, bribery, and coercion by public unions.

A vote expected today has not taken place and Democrats vow to say away as long as it take, effectively shutting down government in Wisconsin. Schools in Madison and Milwaukee are closed because mass numbers of teachers calling in sick.

Vote Delayed

Please consider Vote on Wisconsin union bill faces more delays

A controversial bill that would end a half-century of collective bargaining for most public workers in Wisconsin was again in limbo on Friday. State Senate Democrats said they would stay away for days or even weeks, while Republican efforts to pass the bill in the state Assembly also faced an obstacle.

The 14 state Senate Democrats were meeting Friday in Illinois, and had no timetable for returning, Sen. Jon Erpenbach said at midday.

State Senate Majority Leader Scott Fitzgerald had earlier asked Gov. Scott Walker, a fellow Republican, to send two state troopers to the home of Mark Miller, the top state Senate Democrat, and other holdouts.

Republicans have 57 seats in the Assembly but 58 lawmakers must be present in order for them to take up the bill that all 38 Democrats are united against.

Rep. Bob Ziegelbauer is the Assembly's lone independent and could be that 58th person Republicans need. Ziegelbauer said that he wants to meet with Republican leaders to discuss a possible compromise.

Opponents of the bill packed the Assembly gallery as Democratic lawmakers introduced protesters from their districts and thanked them for their efforts. The crowd applauded and waved their hands silently.

Several hundred protesters were in the building early in the morning, with the ranks expected to swell as the day progressed. Many of them spent the night in the Capitol and another large rally was planned around noon.

As many as 25,000 students, teachers and prison guards have turned out at the Capitol this week to protest, standing shoulder-to-shoulder in the building's hallways, sitting cross-legged across the floor and making it difficult to move from room to room. Some have brought along sleeping bags and stayed through the night. Union organizers expected yet more to gather Friday.

Student Idiocy

Students have become unwitting pawns for the teachers' unions. Reforms proposed by Walker will help rein in costs, including the cost of education.

Unfortunately these students cannot think.

Neil Graupner, a 19-year-old technical college student from Madison, said he was planning to stay until the matter is settled.

"The fact that the Democrats have walked out, it shows they're listening to us," he said late Thursday as he prepared to spend the night at the Capitol.

There is nothing like complete fools needing lower costs of education then directly begging for higher costs.

Wisconsin is gathering a lot of attention but badly needed public union reform is happening in other states as well.

Unions Under Fire in Wisconsin, Ohio, Tennessee, New Jersey

CNN Money reports Unions under fire as states try to curtail benefits

Lots of state officials are pressing public employees to shoulder more of their health care and pension costs.

But in some places -- notably Wisconsin and Ohio -- officials are looking to go one step farther. Governors and lawmakers there are trying to limit or end public workers' collective bargaining ability, effectively neutering the unions.

Both states are seeking the flexibility to change employee benefits, and they're not alone.

Health care and pension costs are soaring, making it even harder for public officials nationwide to close massive budget gaps. Forty-four states and Washington, D.C. are facing a total shortfall of $125 billion for fiscal 2012, according to the Center on Budget and Policy Priorities.

In many places, public officials have little leverage to lower these costs because they are set in union contracts. If benefits were removed from the collective bargaining process, states and localities could change them without having to negotiate with the unions, a process that can drag on for months or even years.

State officials have long floated so-called right-to-work proposals that would curtail or eliminate union power. But this year, they are getting more traction because Republicans -- who are generally not big fans of unions -- have gained control of more state capitols and governor's mansions.

For instance, a bill that would end collective bargaining for teachers is currently working its way through the legislature in Tennessee, where Republicans captured the governor's office and took a commanding lead in the house.

And in Indiana, which banned collective bargaining on the state level in 2005, lawmakers are considering a bill to curtail the power of teachers' unions, which are at the local level.

Gov. Walker's controversial proposal

Even more controversial, Walker is looking to limit collective bargaining for most public employees to wages only. Local law enforcement and fire employees, as well as state troopers and inspectors would be exempt.

That means health care and pension contributions would no longer be subject to contract negotiations, giving state officials greater freedom to raise them.

It's a start. Public unions have gotten so greedy and so out of control the only thing that makes any sense is totally eliminate them.

Harold Meyerson, a seriously misguided columnist at the Washington Post compared the rally in Madison to the happenings in Egypt.

The continual riots by ungrateful overpaid union workers in Greece is a far better comparison to the events in Madison recent rallies in Egypt.

Please see 40% of Madison Teachers call in Sick, Schools Shut; Video of Massive Protest in Wisconsin Capitol Building; If Jackasses Could Think for some examples. Here is a small snip.

Collective Extortion

Meyerson's comparison to Egypt is 180 degrees reversed. Those Madison protesters were not fighting for democracy but rather to preserve a system of collective extortion.

Unions threaten, bully and bribe their way into power and want more every step of the way.

At a minimum, please play at least the first two of these videos, preferably all of them.

Give Up the Bucks

SEIU Spokesperson Threatening California Lawmakers with Union Retaliation

That is a small snip from the preceding post. I invite you to play those videos and the other in the preceding link to show you just how how much coercion, extortion, an threats unions use to get their ways.

Message From FDR

Inquiring minds are reading snips from a Letter from FDR Regarding Collective Bargaining of Public Unions written August 16, 1937.

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management.

The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees.

A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.

It is time to shut down pubic unions, totally, completely, and permanently. The actions in Wisconsin, Ohio, Tennessee, and New Jersey are but a small step in the right direction.

In the meantime, and likely every step of the way, we have to listen to misguided union sympathizers compare bribery, coercion, and extortion by public unions to democratic uprisings in Egypt. Worse yet, taxpayer dollars fund those messages as various unions are now flooding the airwaves and billboards with propaganda praising their blatant taxpayer extortion.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Portuguese Government Pleads for Help as Yields Soar to Record Level; Portugal Needs Bailout by April; Pressure Mounts for Haircuts

Posted: 18 Feb 2011 10:46 AM PST

Portuguese government debt yields hit fresh news highs today, prompting Portugal to beg for action from the ECB. Here are charts of 5- and 10-year yields.

Portugal 5-Year Government Bond Yields

Yields on Portuguese 5-year debt have soared nearly a full point in less than a month to an all time high of 7.13% closing at 7.04%.

Portugal 10-Year Government Bond Yields

Yields on 10-year Portuguese debt have soared all time high over 7.5% before closing just under that at 7.45%

Germany Pressures Portugal to Seek Bailout

Please consider Portuguese yields under pressure

The five-year Portuguese bond yield rose to a 7.126 percent high after the Jornal de Negocios reported, without citing sources, that Germany is pressuring Portugal to request an international bailout before the European rescue package is revised in March.

"We've stabilised at these wide levels now but Portugal trades more like an emerging market bond, it's bit of a joke," a trader said. "Five-year yields are above 7 percent, wave the white flag and surrender now."

Rabobank strategist Richard McGuire compared the move to a rise in Irish yield spreads just before Dublin agreed to a bailout last November, but he said the European Central Bank was likely to purchase bonds to support Portuguese debt until March.

"Yields have now breached the self-imposed line in the sand of 7.0 percent. Further speculation over the possibility of imminent financing strains will see this continue with default risk seeing pressure move from the belly toward the front end of the curve as a near-term credit event is priced in," he said.

The Portuguese government urged Europe to respond promptly to the year-long debt crisis on Thursday, warning further delays risked exacerbating the situation and put all EU member states at risk.

Portugal Pleads For Help

Please consider Portugal govt urges Europe to respond to crisis

Portugal is doing its bit to cut the budget deficit but any delay by Europe in coming up with a comprehensive response to the euro debt crisis will damage the euro and all EU member states, Cabinet Minister Pedro Silva Pereira said on Thursday.

"Any delay of an effective European response to confront this situation (debt market turbulence) damages all the countries and the euro itself," Silva Pereira told reporters after a cabinet meeting. "That is why our message is that Portugal is doing its work. Europe also needs to do its part."

Portugal Needs Bailout by April

The crisis in Portugal has finally reached a head as Portugal seen taking bailout by April.

European Union member states are increasingly concerned about Portugal's ability to fund itself in financial markets and believe Lisbon will need to seek a bailout by April, a euro zone source said on Thursday.

The EU has discussed a rescue plan for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance.

"Portugal is drowning, it's not going to be able to hold on beyond the end of March," the euro zone finance source said. "That's already understood to be the case in financial markets, but now it's also understood among (EU) finance ministers."

Portuguese officials have said in recent days that it is up to Europe as a whole to resolve the debt crisis, sending the message that if the EU can agree a "comprehensive package" to tackle the crisis by a summit set for March 24/25, that will help Portugal weather the pressure from financial markets.

Cabinet Minister Pedro Silva Pereira repeated that line on Thursday, saying that Portugal was doing all it could to cut its budget deficit and that it was now up to the rest of the euro zone to do its bit and agree the "comprehensive package".

Because Portugal is managing to fund itself in the markets currently, and does not suffer an acute refinancing crunch until April and then in June, sources said the immediate crisis point had not yet been reached but was drawing closer.

"We haven't yet entered the peak phase of the crisis," another EU source said.

Portuguese newspaper Journal de Negocios reported on Thursday that Germany was putting renewed pressure on Portugal to seek international help immediately.

Senior Bond Haircuts Needed and Will Come

The debt of Ireland, Greece, and Portugal cannot and will not be paid back in full and the markets know it. Yields would not be where they are if this debt was any good.

Please see yesterday's post European Sovereign Debt Crisis in Pictures; Nothing Solved Yet, Credit Stress Close to All Time Highs for a look at government bond yields in Spain, Ireland, Greece, Portugal, Germany, Belgium, and France.

So far, the ECB's primary response has been to take more of the default risk on its own plate, buying government bonds, in clear violation of the Maastricht Treaty. How long can that continue?

ECB president Jean-Claude Trichet supports those sovereign debt purchases, while German central bank president Axel Weber does not. Weber was thought by most to be Trichet's replacement, however, he resigned over the feud.

This debt cannot and will not be paid back.

The longer the ECB and IMF insist there will be no haircuts, the greater the market pressure will be to produce them. Worse yet, it's only a matter of time before there are renewed concerns about Spain, Italy, and Belgium.

Trichet's misguided approach, blessed by the rest of the ECB and also by the IMF, ensures that pressure will continue to mount until this whole mess blows sky high.

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

Japan's Social Security Panel Wants to Double Sales Taxes; Tax Cut Independents Win Local Elections in Landslide; Japan's Debt Trap Has No Escape

Posted: 18 Feb 2011 01:15 AM PST

After decades of foolishly fighting deflation, Japan is broke. Social Security now consumes a whopping 53% of government spending and that number will rise.

A government panel now says Doubling of Sales Tax Needed to Shore Up Finances.

Japan needs to more than double its 5 percent consumption tax to shore up the government's finances given soaring debt and welfare costs, a member of Prime Minister Naoto Kan's tax and social security panel said.

"I don't think an increase to 10 percent is enough," former Financial Services Minister Hakuo Yanagisawa said yesterday in an interview at his office in Tokyo. "Our discussions must be based on new realities

Concern over Japan's rising debt, the largest in the developed world, prompted Standard & Poor's to cut the country's credit rating last week. Social security costs in Japan, the world's most rapidly aging society, have risen more than 60 percent since 2000 and will account for 53 percent of government spending in the fiscal year beginning in April.

Raising the sales tax may have political consequences. Kan's Democratic Party of Japan lost elections for the Upper House of parliament in July after he floated the idea of raising the levy. When the tax was last raised in 1997, the economy went into recession.

More than 60 percent of voters believe raising the tax is necessary while 35 percent disagree, according to a Yomiuri newspaper survey published Jan. 16. The paper polled 1,069 people on Jan. 14-15 and didn't provide a margin of error.

60% Favor Tax Hike?

I was startled to see 60% in favor of a tax hike. However, my friend Mike "In Tokyo" Rogers explains:

"What a load of rubbish. I'm sure that survey was taken somewhere near Kokaigijido. That's where all the government offices all are.

There's no regular working or retired Japanese person in their right mind who agrees with a sales tax hike."

Sales Tax Cut Proponents Win Landslide Victories

Those seeking evidence that Mike "In Tokyo" has it correct need only read Japan's two-party system is collapsing

Tokyo - Landslide victories for independent candidates in local elections in central Japan earlier this month shocked the nation's two major parties and revived public doubt about the nascent two-party system.

'It is the beginning of the collapse of the two-party system,' Minoru Morita, a veteran political analyst, said.

The independents, Hideaki Omura, and the Nagoya Mayor Takashi Kawamura, who campaigned for tax cuts, defeated candidates endorsed by the big parties in the Aichi gubernatorial election and the mayoral race.

For the DPJ, a first indication of things to come were the November municipal polls in Matsudo, a Tokyo suburb. Of the 11 candidates the party fielded, only two won.

Another crushing defeat seems almost inevitable in upcoming nationwide local elections in April.

In the latest Kyodo News agency opinion survey, 19.9 per cent of those polled supported Kan's cabinet, down 12.3 points from mid-January, and 63.4 per cent disapproved of the cabinet, up 9.5 points.

Japan's Debt Trap Has No Escape

As in the US, voters in Japan are fed up with taxes. However, Japanese revenues are not only running dry, but in reverse.

Proving that government stupidity has no upper bounds, Mike "In Tokyo" notes Japan Wasted $78 Billion on Global Warming Research in six years.

Given a 200% Debt-to-GDP ratio, the world's worst aging demographics, and with Social Security consuming 53% of government spending, Japan is in a debt trap with no possible escape.

Japan's debt crisis is rapidly coming to a head, and few are even watching.

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

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Friday, February 18, 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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