Mish's Global Economic Trend Analysis

Tea Party Ousts 6-Term Republican Senator in Indiana Primary for Not Being Conservative Enough; Extreme Polarization of Politics in Greece, Europe, and US; Tweedledee vs. Tweedledum
Chinese Architect Comments on "Dark Apartments", Vacancies, Residential Malinvestment
"Head Start" an Abysmal Failure for Kids, a Spectacular Success for Teachers
SYRIZA's Tsipras Lists Bailout Rejection as Key Demand; Don't Rule Out a SYRIZA Coalition; Eventually May Be At Hand; Why SYRIZA Will Win the Next Election
Greeks Political Parties Prefer Chaos Over Compromise; June 17 Elections on the Way; Next Bailout Tranche at Risk

Tea Party Ousts 6-Term Republican Senator in Indiana Primary for Not Being Conservative Enough; Extreme Polarization of Politics in Greece, Europe, and US; Tweedledee vs. Tweedledum

Posted: 08 May 2012 10:42 PM PDT

On Tuesday, six-term Republican senator Richard Lugar was ousted in shocking defeat in the Indiana primary to Tea Party activist Richard Mourdock, Indiana state's treasurer.

Mourdock sent Lugar down in flames as he questioned Lugar's policies on immigration, Supreme Court nominees, the "Dream Act", and bank bailouts. Mourdock said Lugar was "not conservative enough".

As proof of how extreme things have gotten, the Indiana Democratic Party released a statement Tuesday evening thanking Mr. Lugar for his service and criticizing Mr. Mourdock as an "extremist" who is "out of touch with Hoosiers."

The New York Times has details in Mourdock Defeats Lugar in Indiana Senate Primary

Clearly, there is increasingly little chance for moderates anywhere.

In Europe, 11 governments have collapsed over austerity measures. German chancellor Angela Merkel may be the next to go.

Chaos in Greece

Extreme polarization in Greece is such that no political party could gather as much as 20% of the vote. Indeed the top two parties combined could not even muster 33% of the vote.

For details and further discussion, please see

Polarization in US

For polarization in the US, look no further than the surprising showing of Rick Santorum vs. so-called moderate Mitt Romney midway through the the Republican presidential primary.

Santorum finally stepped aside, but the damage has been done.

Please note that Romney is hardly a moderate in any sense of the word. Romney is a war-monger promoting war in Iran, trade wars with China, and still more military spending in spite of massive budget deficits.

Moreover, anyone who thinks president Obama and his union supportive stance is a moderate has mush for brains.

Greece Is Ungovernable Pariah State

My friend "HB" writes ...

Today the markets realized that it may become entirely impossible to form a government in Greece, even after another election.

In that case there will also not be the votes to continue with the bailout package. I think it is slowly sinking in what that could mean: the troika will no longer have anyone to negotiate with.

The IMF, EU,and ECB would see tens of billions each evaporate. Greece would become a pariah state and likely drop out of the euro, followed by either a radical leftist government taking power or a military coup.

Greece has become near ungovernable. Its infrastructure is crumbling, its jobless rate is over 20%, youth unemployment is 50%, and Greek administrative institutions are paralyzed and corrupt.

The empire is fraying at the edges - literally.

Greece may by itself not mean much, but it is the first modern industrialized post WW 2 welfare state to go completely bust. The signal alone should scare the bejeezuz out of market participants.

Tweedledee vs. Tweedledum

In the US, the presidential choice is between Tweedledee and Tweedledum. Take your pick as to who is who. In case you disagree, please consider ...

Frankly it does not matter except for four year's down the road, and except for near-term Supreme Court appointees. Romney wants to overturn Roe vs. Wade, believes corporations are people, and strip searches are fine on the the flimsiest of excuses, three extreme positions.

Are those reflective of extreme positions or core US values?

Ignoring the Supreme Court effect, both candidates are war mongers and ObamaCare is the same RomneyCare (even though Romney campaigns against himself).

Inane Election Choices

The only real choice in this election is whether 4 years from now you want to face the inane possibility of Romney winning 4 more years vs. the inane choice of Obama winning 4 more years now (knowing in advance he is gone 4 years from now).

As we sit back and watch Greece and France disintegrate into a morass of extreme politics, the shocking defeat of Richard Lugar in the Indiana primary to a Tea Party activist suggests the US is on the same path.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Chinese Architect Comments on "Dark Apartments", Vacancies, Residential Malinvestment

Posted: 08 May 2012 03:48 PM PDT

From the China anecdotes file, reader Gary writes ...

"Hi Mish, I have a friend that is an architect in Shanghai. I sent him an article that talked about counting dark apartments at night to determine vacancy rates. He confirms everything I've been reading on your blog."

My architect friend says...

Once you get out of the city and into the second tier cities these 50% vacancy figures ring true. I've been to so many smaller cities and they are full of residential high rises going up everywhere. Most have a significant vacancy rate from what I see just from driving by.

The idea of "build it they will come" mentality has been fueling this. However, the government has since put down some hard rules to slow all of this down but so many buildings were either just completed or in the middle of construction before these measures were put into effect.

What's sad is that these buildings are built very poorly and I'm not confident that they will survive long enough for the migration from rural to urban to occur. The developers here are severely handicapped when it comes to what and how to build. they are usually farmers who sold their land for big money and know absolutely nothing about developing profitable projects. They don't do any valid market research from what I can tell.

It's usually left up to us (the architecture firm) to figure things out for them.

Culturally these guys feel like they are the ones in power and must exhibit this power by making radical decisions so it appears to the cronies in the room that they are in charge. The crazy thing is China is so big and robust they can make many mistakes - build a shopping center, it fails, demolish, rebuild, all within short period of time - and they don't go bankrupt.

This type of program would ruin development in the united states but it doesn't have similar results here. I think it's going to take China another 20 years before they get up to speed and find their identity, until then China is still third world in terms of knowledge, quality of work.

Malinvestment is the word that best describes what Gary's architect friend describes.

It has indeed bankrupted many State Owned Enterprises (SOEs), and such development will come to a screeching halt sooner rather than later as I have mentioned many times, most recently in 12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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"Head Start" an Abysmal Failure for Kids, a Spectacular Success for Teachers

Posted: 08 May 2012 11:42 AM PDT

Head Start, a preschool program for low-income kids has been a spectacular success, not for kids, but for teachers and teachers' unions.

Please consider Miami-Dade County seeks to unload Head Start program, salaries

For more than four decades, Miami-Dade County officials have managed Head Start, the storied preschool program for children from low-income families. But the county now wants out — and "generous" salaries are partly to blame.

On average, Miami-Dade paid its Head Start teachers $76,860 in salary and fringe benefits in 2011, county records show. That's about 90 percent higher than the second highest-paying Head Start provider in the county, Catholic Charities, which paid its teachers an average of $40,418 in salary and benefits.

On the administrative side, 17 county Head Start staffers made more than $100,000 in salary and benefits.

Last week, the county submitted paperwork to offload much of the Head Start program to three local agencies: the Miami-Dade school system, Easter Seals of South Florida and the YWCA of Greater Miami-Dade.

But the plan has been met with resistance from some parents and politicians, who say the shake-up would hurt the current Head Start staffers.

About 400 county employees would face the prospect of either losing their jobs or accepting substantial pay cuts if the new agencies hire them.

"You're talking about great people who worked with kids for their entire lives with the county and now we're saying, 'We can do it cheaper,' " said Evelio Torres, president and CEO of Early Learning Coalition of Miami-Dade/Monroe. "You're talking about people who are trying to pay their mortgages and support a family."

Head Start was created in 1964 as part of President Lyndon Johnson's Great Society campaign. The program provides free, full-day preschool and social services for low-income children.

Head Start has been a consistent money-loser for the county, in part because Miami-Dade pays its Head Start employees much higher salaries and better benefits than any other local providers, records show.

Last year, the average Head Start teacher on the county payroll made more than triple the $19,441 in salary and benefits given to Head Start teachers at Paradise Christian, Miami-Dade's lowest-paying Head Start provider.

The county's highest paid Head Start employee was director Jane McQueen, who received $188,624 in salary and benefits.

Key Concern of Politicians and Unions

Notice the key concern.

But the plan has been met with resistance from some parents and politicians, who say the shake-up would hurt the current Head Start staffers.

Where the H is the concern for kids?

Logic would dictate that if teachers' salaries were lower, then the county could afford a much higher teacher-to-student ratio.

Instead, the concern is for the teachers and administrators. The problem is corrupt politicians are in bed with the unions and administrators. The former seeks to buy votes from the latter. The latter does not give a rat's ass about the kids.

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

SYRIZA's Tsipras Lists Bailout Rejection as Key Demand; Don't Rule Out a SYRIZA Coalition; Eventually May Be At Hand; Why SYRIZA Will Win the Next Election

Posted: 08 May 2012 09:36 AM PDT

The opportunity for Greece to tell the Troika to "go to hell" is at hand, if only the political left can stop bickering long enough to form a coalition.

Bailout Rejection Key Demand

Alexis Tsipras (SYRIZA's leader) says he will use all three allotted days to do so. His key demand is a bailout rejection, which would mean a eurozone exit whether that is his intention or not.

Please consider SYRIZA's Tsipras to make bailout rejection key bargaining point

The SYRIZA leader is expected to meet the head of the Democratic Left, Fotis Kouvelis, at 3.30 p.m., Ecologist Greens representative Ioanna Kontouli at 5.30 p.m. and the Social Pact president Louka Katseli at 7 p.m.

Tsipras has indicated that he will use the full three days at his disposal to talk with all the party leaders, including those of New Democracy and PASOK, but barring Chrysi Avgi (Golden Dawn).

Because of the 50-seat bonus received by the first party, in this case New Democracy, there is no way SYRIZA can form a government without ND if it does not secure the support of PASOK and the Communist Party (KKE).

KKE leader Aleka Papariga has already rejected any idea of cooperation with SYRIZA, although Tsipras will meet with her to discuss the matter.

The only other option open to SYRIZA is to receive the backing of ND and PASOK, which seems unlikely.

Sources have suggested that Tsipras will present a three-point proposal to his counterparts, which will include the rejection of the bailout terms.

Leading SYRIZA MP Panayiotis Lafazanis told Skai radio on Tuesday that the party would seek for some of Greece's debt to be written off.

"SYRIZA will ask for the debt to be renegotiated with the aim of its larger party being written off," he said, adding that the leftist party does not recognise debt that is not sustainable and which Greeks cannot pay.

Tsipras' Five Point Proposal

Please consider Tsipras lays out five points of coalition talks

The immediate cancellation of all impending measures that will impoverish Greeks further, such as cuts to pensions and salaries.
The immediate cancellation of all impending measures that undermine fundamental workers' rights, such as the abolition of collective labor agreements.
The immediate abolition of a law granting MPs immunity from prosecution, reform of the electoral law and a general overhaul of the political system.
An investigation into Greek banks, and the immediate publication of the audit performed on the Greek banking sector by BlackRock.
The setting up of an international auditing committee to investigate the causes of Greece's public deficit, with a moratorium on all debt servicing until the findings of the audit are published.

Election Process

An email from Barclays Capital Explains the Greek election process and dates:

Political uncertainty remains high in Greece. A new electoral round (which would probably be held on 10 or 17 June) looks increasing likely at this stage as, in our view, none of the three parties with the most votes seem likely to be able to secure Parliamentary support for a coalition government.

ND's leader Samaras (who came first at Sunday's ballot) declared yesterday he was unable to form a government, while Alexis Tsipras (SYRIZA's leader, who came second) seems likely to face difficulties to find support of other large left-wing parties. According to sources quoted by Kathimerini, Mr. Tsipras (SYRIZA's leader) will try in fact to reach an agreement with Communist Party (KKE) and Democratic Left, a moderate, pro-Europe grouping, although KKE has already ruled out any cooperation.

While PASOK will be also entitled to try to form a government (should SYRIZA's attempt fail), we think it will be difficult by then to form a coalition able to secure an outright majority in the Parliament.

In a second general election only the seven parties who received seats in Sunday's vote would be eligible to participate. Were there to be a second election, we think New Democracy and PASOK would probably seek to turn the election into a decision on Greece's membership of the euro. If there was still an inconclusive result after a second election, then it is likely that Lucas Papademos would be invited to form another technical government.

Eventually May Be At Hand

Here is a point that Barclays missed.

SYRIZA came in second place in this election. Perhaps SYRIZA comes in first place in the next election. If so, it would pick up an extra 50 seats.

As I have said on numerous occasions, Eventually, Will Come a Time When ....

Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected.

Why SYRIZA Will Win the Next Election

Alexis Tsipras is saying all the right things (in terms of what most Greeks want to hear). His surprise second-place finish is likely to become a surprise first-place finish in the next election, perhaps by a lot more than anyone thinks.

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

Greeks Political Parties Prefer Chaos Over Compromise; June 17 Elections on the Way; Next Bailout Tranche at Risk

Posted: 08 May 2012 08:18 AM PDT

In the wake of the Greek election, one thing is clear: No party or coalition of parties is in control. More elections are coming, but will the results be any different?

In the meantime, the next disbursement of Greece bailout funds is at risk, and Greece faces being unable to meet pension, salary and debt commitments next month.

Please consider Greece braces for a repeat of elections

Greece is bracing for a repeat general election after its centre-right leader failed to win leftwing support to form a "national salvation government" in the wake of Sunday's inconclusive outcome at the polls.

"We are now heading for a second vote next month in a deeply polarised atmosphere," said a disappointed government official. The repeat election would probably take place on June 17, he said.

Decision-making on further reforms, including finalising a new €11.5bn medium-term austerity package, will be stalled until a new administration is in place.

"Only non-political measures can go ahead," the official said, admitting that it will be hard to push forward with 77 separate structural reforms due to be completed during June.

The stalemate puts at risk the timetable for disbursement of Greece's next loan tranche from its second €174bn bailout. Despite a recent transfer of €3.5bn to cover financial emergencies, the country faces being unable to meet pension, salary and debt commitments next month.

The European Union and International Monetary Fund have warned they will block further loan disbursements until the next Greek parliament approves the medium-term package, which would include deep cuts in healthcare spending and in public sector employment – measures that triggered parliamentary rebellions under the two previous governments.

June 17 Elections on the Way

Let's hope this is the end of the end of the insanity in Greece instead of yet another package of proposals that sinks Greece further into ruin for the sole purpose of bailing out French and German banks.

The sooner Greece tells the Troika "Go to Hell", the sooner Greece has the potential to be on the road to recovery.

The keyword in the above sentence is "potential". Greece has a zero percent chance under Troika proposals. However, unless Greece adopts genuine reform on work rules and pensions, it is headed to the gutter, bailouts or not.

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

Mish's Global Economic Trend Analysis

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