Mish's Global Economic Trend Analysis

“We Embittered the People to Protect the Future of the Nation"
Voters Punish New Democracy and Pasok; New Election, Euro Exit Coming Up? Best thing For Greece is Tell the Troika "Go to Hell"
Splintering of Greece: Will Anyone Rule? Exit Poll Has Anti-Bailout Party in Second Place
New American Dream is Renting; Reflections on Renting Houses, Cars, Books, Clothes; Will Rentership Fuel the Next Boom? What About Home Prices?

“We Embittered the People to Protect the Future of the Nation"

Posted: 06 May 2012 09:53 PM PDT

If you want to understand the reason PASOK went down in flames in a crushing defeat in Greek elections, simply look at the arrogance and gall of party leader Evangelos Venizelos in a statement following the election.

"We embittered the people so we could protect the future of the nation", said PASOK party leader and troika sponsored clown, Evangelos Venizelos.

Ekathimerini reports Election swing leaves Greece teetering.

PASOK leader Evangelos Venizelos and New Democracy chief Antonis Samaras both declared themselves open to the idea of forming a pro-European national unity administration that would include other parties and would seek to renegotiate the terms of the EU-IMF loan agreement.

"All Greeks have to get to know each other again," said Venizelos, who admitted that PASOK had paid the price for carrying the burden of the crisis. "We embittered the people so we could protect the future of the nation."

He said that the possibility of forming a national unity government with a "European orientation" regardless of parties' positions on the bailout should be explored.

Samaras said he would seek to form a "national salvation government" to keep the country in the eurozone and pledged to "amend" Greece's debt deal with foreign creditors in a bid to boost growth. He attributed the outcome of the elections, in which voters punished the two main parties, to "the disappointment of the Greek people for dead-end policies that have pushed them to the limits."

However, the possibility of a third group joining such a government looked extremely slim last night. Perhaps the best hope for Greece's two main parties would have been Democratic Left, which maintained a clear pro-European stance during the campaign.

However, party leader Fotis Kouvelis repeated his position that cooperation with New Democracy and PASOK was not in Democratic Left's intentions. "The results show people's frustration and anger," he said.

A failure by PASOK and ND to form a government would leave second-placed SYRIZA, the night's big winners, with the option of trying to form a government. Greece's electoral law means that in case of a hung parliament, the first party has three days to form a government, followed by the second party and then the group that comes in third.

National Salvation Party

The idea that Troika sponsored clowns can form the basis of Greek salvation is ridiculous. Furthermore, Venizelos' statement is right up there with other top Orwellian idiocies.

Top Orwellian Comments Of All Times

An American major after the destruction of the Vietnamese Village Ben Tre: "It became necessary to destroy the village in order to save it."
Vice President Joe Biden: "We Have to Go Spend Money to Keep From Going Bankrupt."
President George W. Bush: "I've abandoned free-market principles to save the free-market system."(For a discussion please see The Most Redeeming Feature of Capitalism is Failure)
Nancy Pelosi said "We have to pass the health care bill to see what's in it." (YouTube Video)
Larry Summers says "The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending." (Reuters)

We can safely add "We embittered the people so we could protect the future of the nation" to that list. As I said, Best thing For Greece is Tell the Troika "Go to Hell", and the election proves most Greek voters know it, even though they have been brainwashed into wanting to stay in the euro.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Voters Punish New Democracy and Pasok; New Election, Euro Exit Coming Up? Best thing For Greece is Tell the Troika "Go to Hell"

Posted: 06 May 2012 06:20 PM PDT

Assuming no defects in Pasok or the New Democracy parties, the pro-austerity may just scrape together enough votes to barely piece together a ruling coalition.

How long the coalition lasts is another matter as Pasok was humiliated with a third place showing.

Reuters reports Angry Greeks reject bailout, risk euro exit

The latest official results, with over 61 percent of the vote counted, showed the only two major parties supporting an EU/IMF program that keeps Greece from bankruptcy would be hard pressed to form a lasting coalition.

New Democracy was polling just under 20 percent and PASOK a humiliating 13.6 percent with the Left Coalition on 16.2.

In the last election in 2009, PASOK won a landslide victory with 44 percent and the Left Coalition had just 5 percent.

Left Coalition leader Alexis Tsipras, at 37 Greece's youngest political leader, hailed a peaceful revolution and said German Chancellor Angela Merkel should understand that austerity policies had been defeated.

In another indication of the extent of public anger, the extreme right Golden Dawn party was poised to take nearly 7 percent of the vote. This would allow such a party to enter parliament for the first time since the fall of a military dictatorship in 1974.

Several analysts said the unprecedented fragmentation of the vote could bode weeks of instability and force another election. But a New Democracy source said the party would not ask for repeat elections if it finished up as the largest party. Samaras is likely to be invited to try to form a government on Monday.

Greece faces an acid test as soon as next month when it must give parliamentary approval for over 11 billion euros in extra spending cuts for 2013 and 2014 in exchange for more EU/IMF aid.

That looks like a tough task even if a new government can be formed in time, given the success of anti-bailout parties.

Under the constitution, Greek President Karolos Papoulias will give the biggest party after the election three days to form a government. If it fails, the next largest group gets a chance and so on down the line. If they all fail, new polls would be called about three weeks later.

Best thing For Greece is Tell the Troika "Go to Hell"

Short-term Greece is likely to face strong inflation, perhaps even hyperinflation if it returns to the Drachma. However, long-term Greece faces a 10 year or longer permanent recession with austerity upon austerity upon austerity if the eurozone stays intact and Greece stays in the eurozone.

Had Greece left the eurozone two years ago it would be far better off today, and the sooner it tells the Troika where to go, the sooner Greece has a chance to recover.

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

Splintering of Greece: Will Anyone Rule? Exit Poll Has Anti-Bailout Party in Second Place

Posted: 06 May 2012 09:55 AM PDT

Preliminary exit polls are not good for the pro-austerity, keep Greece in the Eurozone at any cost coalition as 3 parties vie for top post

An exit poll commissioned by Greek media shows three parties are vying for the top spot in the country's critical parliamentary elections, with no definitive front-runner and none gaining enough votes to form a government.

According to the exit poll, the conservative New Democracy party will get between 17 percent and 20 percent; the formerly majority socialist PASOK between 14 percent and 17 percent, and the left-wing Radical Left Coalition, or Syriza, between 15.5 percent and 18.5 percent.

The extreme right-wing Golden Dawn is projected to win enough votes to enter parliament, with between 6 percent and 8 percent, well above the necessary 3 percent threshold.

It is widely expected that New Democracy and PASOK will combine to form a coalition. Both want to stay with the Euro. However, New Democracy wants changes made to agreed upon austerity measures.

PASOK leader Evangelos Venizelos is nothing but a tool for the eurocrat clowns and appears to be a big loser in the elections vs expectations just a few short weeks ago.

Exit Poll Has Anti-Bailout Party in Second Place

Other exit polls show the Radical Left Coalition (Syriza) at 16-19%. Bloomberg reports New Democracy Slightly Ahead in Greek Election, Exit Poll Shows

Antonis Samaras's New Democracy party showed a slight lead in Greek elections today, receiving between 17 percent and 20 percent of the vote, an exit poll forecast.

Anti-bailout party Syriza got between 16 percent and 19 percent, according to the exit poll broadcast on state-run television NET. Socialist Pasok got between 14 percent and 17 percent, according to the poll.

Spotlight on the Radical Left

The Wall Street Journal proclaims Greek Leftist Comes Into His Own

Young and charismatic, Alexis Tsipras may be the man to watch on the Greek political scene.

The 37-year-old, who's an engineer by training, heads the Coalition of the Radical Left — or Syriza — an umbrella left-wing party that brings together various leftist strands ranging from Communist to Social-democrat and environmentalist groups.

His party has seen its polling figures rise in recent weeks, ahead of the May 6 elections. The last polls—before a two week blackout period imposed ahead of Sunday's vote–showed Syriza poised to become the third largest party for the first time in its history, garnering on average above 10% of the popular vote.

Mr. Tsipras advocates the annulment of Greece's second bailout program with the fiscal-consolidation and structural-reform policies attached to it.

In a recent interview with a Greek website, Mr. Tsipras said the country was becoming a "protectorate, a colony" under the tough measures that Greece's troika of creditors–the European Union, the European Central Bank and the International Monetary Fund–demand to continue funding the country's bailout.

"It is not our choice to leave the euro. But the sacrifices made by the Greek people are not for the euro, they are for oligarchs, the plutocrats, the big capital," he said in the interview, adding that these sacrifices were made so that "[German Chancellor Angela] Mrs. Merkel and the northern countries benefit and run surpluses and the southerners run deficits."

Tsipras could well find himself leading the main opposition party after the elections, if Pasok and New Democracy form a coalition government. If Syriza does get around 12%, a realistic prospect according to Nikolakopoulos, that would translate to roughly 30 deputies in a highly-fragmented, 300-seat parliament. That would put the young party leader in a strong position to continue spreading his anti-austerity message.

The WSJ article was written three days ago. If exit polls are accurate, the Radical Left will not be in third place with 10% of the vote, but rather second place with perhaps as much as 18 or even 19 percent of the vote.

It is going to be very difficult forming a coalition government out of this splintered mess.

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

New American Dream is Renting; Reflections on Renting Houses, Cars, Books, Clothes; Will Rentership Fuel the Next Boom? What About Home Prices?

Posted: 06 May 2012 01:07 AM PDT

Housing has now gone full circle. President Bush's "Ownership Society" has morphed into the "Rentership Society". The attitude applies to more than houses as noted in the Wall Street Journal article Renting Prosperity by Daniel Gross.

Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move—and how it will lead to the next boom.

In the American mind, renting has long symbolized striving—striving, that is, well short of achieving. But as we climb our way out of the Great Recession, it seems something has changed. Americans are getting over the idea of owning the American dream; increasingly, they're OK with renting it. Homeownership is on the decline, and home rentership is on the rise. But the trend isn't limited to the housing market. Across the board—for goods ranging from cars to books to clothes—Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency that could fuel the next boom.

The reaction to extended leverage and foolish borrowing isn't to stop consuming and buying; it is to consume and buy more intelligently. That's what the Rentership Society is all about. And it starts at home. Literally. Housing is the biggest single component of consumption in the U.S. economy and the source of much of our present misery. According to the Bureau of Labor Statistics, the typical consumer spends about 32% of his or her budget on shelter. In the last decade, that generally meant borrowing a lot of money to take "ownership" of a home.

For an increasing number of Americans, though, it simply makes more sense to rent these days. According to Moody's, by late 2011 it was cheaper to rent than to own in 72% of American metropolitan areas, up from 54% a decade ago. And the more people who do it, the more socially acceptable and desirable it becomes. The decline in the ownership rate means that about three million more households rent today than did at the height of the bubble.

Zipcars and College Textbooks

Gross points out that students are increasing renting books as opposed to buying them. Of course there are also Kindle and other electronic ways of purchasing or renting books as well.

The same holds true for cars, and not just long-term leases either.

Gross writes ...

The Bureau of Labor Statistics says that private transportation—owning and running a car—is the second largest cost for a typical American household, accounting for 16% of expenditures. Factoring in finance costs, depreciation, repairs, insurance, taxes and gas, AAA calculates that an owner of a midsize sedan who drives 15,000 miles a year spends $8,588 a year on his car.

Enter auto-sharing firm Zipcar. Founded in 2000, it grew by focusing on cities and college campuses. It uses information technology to manage its fleet, and control access—people get cards that let them into garages where cars are kept and into the cars themselves. Users in New York pay a $60 annual fee and then $8.75 per hour on weekdays and $13.75 per hour on weekends—no extra charge for gas or insurance or miles. As the U.S. economy contracted, Zipcar went into hyper-growth: from 225,000 members in 2008 to 650,000 members and 9,500 cars in November 2011. Zipcar, which went public in 2011, has had success in the predictable big cities like Boston, New York and San Francisco, but its vehicles can also be found on 350 college campuses and in smaller cities like Providence, R.I., and Portland, Ore. Large rental agencies like Enterprise and Avis have responded by rolling out similar services.

Will Rentership Fuel the Next Boom? When? Why?

Gross put together a nice article explaining what is happening but the article falls far short of the opening premise "how it will lead to the next boom".

I see no reason renting Zipcars, textbooks, or houses will lead to a boom in anything. Every dime Zipcars makes is a dime lost by GM, Ford, and Toyota.

Kindle is going to put numerous bookstores out of business.

Younger Americans are not buying cars and houses because they cannot afford them. Collectively saddled with a trillion dollars in student loans, many cannot afford to buy much of anything, especially poor job prospects and falling wages.

I see no boom from this. Rather, I see pressures on profits in multiple places for multiple reasons.

What About Housing?

Renting cars and textbooks is the start of a trend that makes perfect economic sense. However, Zipcars, textbooks, clothes, and electronics are one thing, and housing is another.

When sentiment on houses reaches the widespread belief "It's Better to Rent", prices are bottoming. I expressed that thought on numerous occasions since 2005.

This is how I currently see things.

This is how I have called the housing bubble and bust in real time over the years.

March 26, 2005: It's a Totally New Paradigm
June 07, 2005: It's time to shift the arrow
April 10, 2006: US vs. Japan Land Prices Pictorial Update
February 15, 2008: Housing Bottom Nowhere in Sight
December 01, 2008: Housing Update - How Far To The Bottom?
July 13, 2009: Housing Update - How Far To The Bottom?
June 20, 2011: When was the Housing Peak and How Far to the Bottom?
March 13, 2012: How Far Have Home Prices "Really" Fallen? HPI Upcoming Changes; HPI and the CPI

The first four links above are quite humorous. The denial from Bernanke and others is stunningly funny.

Bottoming Process

Some cities are further from the bottom than others, but it is likely some cities have now finally bottomed.

That said, I do not think home prices are going much of anywhere "in general" because there is still years of shadow inventory and years of foreclosures to work through.

Moreover boomer demographics suggest much downsizing is ahead (and who will boomers sell their mansions to?)

Finally, generation Y has far different attitudes than boomers regarding wealth, debt, and possessions and will carry those attitudes for a long time having seen firsthand the trouble their parents and grandparents got into with too much debt, and how they are in the same boat with student debt.

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

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Mish's Global Economic Trend Analysis

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