| Greece Shortfall Rises another €2.5 Billion to €14 Billion; Proposed Solution is Zero Interest Rate on Emergency Loans Posted: 20 Aug 2012 08:05 PM PDT The torture of Greece continues unabated. The country has absolutely no chance of getting out of the economic hellhole it is in as long as it remains on the euro. Although Germany has signaled it is fed up with can-kicking exercises, such delays are the only thing Brussels and the ECB can conjure up, even though Greece's deficit problems are always greater than expected. No one should be surprised to learn Greek Shortfall Growing Ever Larger Athens has not been having an easy time coming up with the €11.5 billion in cost cutting measures over the next two years it has promised Europe. Indeed, Greek Prime Minister Antonis Samaras is reportedly set to request an additional two years to make those cuts during meetings later this week with German Chancellor Angela Merkel on Friday and French President François Hollande on Saturday.
But according to information obtained by SPIEGEL, the financing gap his country faces could be even greater. During its recent fact-finding trip to Athens, the so-called troika -- made up of representatives from the European Central Bank, the European Commission and the International Monetary Fund -- found that Greece will have to come up with as much as €14 billion to meet the terms for international aid.
According to a preliminary troika report, the additional shortfalls are the result of lower than expected tax revenues due to the country's ongoing recession as well as a privatization program which has not lived up to expectations. The troika plans to calculate the exact size of the shortfall when it returns to Athens at the beginning of next month.
Many in Europe, particularly in Germany, are losing their patience and there has been increased talk of the country leaving the common currency zone. Over the weekend, German Finance Minister Wolfgang Schäuble reiterated his skepticism of additional aid to Greece. "We can't put together yet another program," he said on Saturday, adding that it was irresponsible to "throw money into a bottomless pit."
In order to prevent the need for an unpopular third bailout plan, SPIEGEL has learned that euro-zone governments are considering other measures. Under discussion is a reduction -- or the complete elimination -- of the interest rates Greece must pay for its emergency aid loans. So, Greece has to come up with another €14 billion, revenues will collapse further, and the already monstrous unemployment rate of 23.1% will rise again. Since none of this will help Greece pay back debts, a discussion is now underway to charge Greece zero percent for emergency loans. Lovely. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Robots to Rule the World? Taking All Jobs? Replace Women? Posted: 20 Aug 2012 11:31 AM PDT I have been collecting links on robots and the roles they play in manufacturing, fashion, and even writing sports updates of major league games. Let's take a look at some of them starting with an article in yesterday's New York Times, Skilled Work, Without the Worker.
Paul Sakuma/Associated Press
While the many robots in auto factories typically perform only one function, in the new Tesla factory in Fremont, Calif., a robot might do up to four: welding, riveting, bonding and installing a component.
At the Philips Electronics factory on the coast of China, hundreds of workers use their hands and specialized tools to assemble electric shavers. That is the old way.
At a sister factory here in the Dutch countryside, 128 robot arms do the same work with yoga-like flexibility. Video cameras guide them through feats well beyond the capability of the most dexterous human.
One robot arm endlessly forms three perfect bends in two connector wires and slips them into holes almost too small for the eye to see. The arms work so fast that they must be enclosed in glass cages to prevent the people supervising them from being injured. And they do it all without a coffee break — three shifts a day, 365 days a year.
All told, the factory here has several dozen workers per shift, about a tenth as many as the plant in the Chinese city of Zhuhai.
at Earthbound Farms in California, four newly installed robot arms with customized suction cups swiftly place clamshell containers of organic lettuce into shipping boxes. The robots move far faster than the people they replaced. Each robot replaces two to five workers at Earthbound, according to John Dulchinos, an engineer who is the chief executive at Adept Technology, a robot maker based in Pleasanton, Calif., that developed Earthbound's system.
At an automation trade show last year in Chicago, Ron Potter, the director of robotics technology at an Atlanta consulting firm called Factory Automation Systems, offered attendees a spreadsheet to calculate how quickly robots would pay for themselves.
In one example, a robotic manufacturing system initially cost $250,000 and replaced two machine operators, each earning $50,000 a year. Over the 15-year life of the system, the machines yielded $3.5 million in labor and productivity savings. Manufacturing Returns Without the Jobs Manufacturing may be returning to the US, but the jobs are nowhere to be found. Moreover, the higher the salaries of workers, and the more benefits workers demand, the greater the incentives of manufacturers to eliminate humans. The article notes that Apple plans to install a million robots in China to "supplement" its work force. A large banner at Flextronics plant near San Francisco proudly proclaims "Bringing Jobs & Manufacturing Back to California!" but the assembly line runs 24 hours a day, seven days a week with nearly all robots and few human workers. China, NAFTA Not To Blame If you want to blame something for the loss of manufacturing jobs, blame increased productivity, not China or NAFTA. A couple of graphs will show what I mean. Manufacturing Jobs  That graph makes it appear as if the decline began in 1980. The following chart suggests something else entirely. Manufacturing Jobs as Percentage of All Jobs  Except for the spike in World War II, manufacturing has been in perpetual constant decline since the beginning of this data series. China, Robots, and Unemployment I picked up this idea, recreating the above chart from the Econfuture article China, Robots/Automation and Unemployment One of the most interesting things about the graph above is that, if technology is the primary driver, then employment in China must inevitably follow the same path. In fact, there are good reasons to believe that manufacturing employment's download slope will be significantly steeper for China. The U.S. had to invent the technology to make manufacturing more productive, while in many cases China only needs to import it from more developed nations. It is also true that China is beginning its journey at a time when information technology (which is the primary enabler of automation) is many orders of magnitude more advanced than in the 1950s when U.S. manufacturing employment was at its peak.
In the U.S. (as well as in other advanced countries), workers shifted out of manufacturing and into the service sector — which now accounts for the vast majority of jobs. Will China be able to pull off the same transition?
In the absence of consumer spending, China's economy remains highly dependent on manufacturing exports and, especially, on fixed investment. An astonishing 50% of China's GDP is driven by investment in things like factories, housing and infrastructure (the U.S. figure is around 15%). The problem is that all that investment has to ultimately pay for itself, and that happens via consumption. Once a factory is built it has to then produce something that gets sold at a profit. Homes, retail buildings and apartment complexes likewise have to be sold or rented out. Obviously, no economy can indefinitely invest anything like 50% of its output without eventually finding a way to get a positive return on that investment.
Achieving that return requires consumers — either at home or abroad. China continues to rely heavily on consumers in the U.S. and Europe, but that's unlikely to be a sustainable formula for growth. The debt crisis and the resulting austerity is cutting into economic growth and consumer spending in both Europe and the U.S.
The real problem China faces is that it is late to the party. Just as it reaches its manufacturing employment zenith, it faces a potentially disruptive impact from automation technology. And that will happen roughly in parallel with similar transitions in the service sectors of the countries that currently consume much of its output. In the face of that, can China succeed in re-balancing its economy toward consumption, increasing personal incomes, and building a vibrant service sector to keep its population employed? Breast Cancer Diagnosis Extreme Tech reports that a computer system called C-Path (Computational Pathologist) is more accurate than human doctors at breast cancer diagnosis Since 1928, tissue samples have been screened for breast cancer by hand. Pathologists examine the tumor under a microscope and, by measuring a handful of cellular features, can produce a fairly accurate diagnosis and prognosis for the patient. C-Path replaces the human looking down the microscope and uses computer vision to look for the same cancerous indicators. Furthermore — and this is what makes C-Path so accurate — by looking at a large number of human-diagnosed samples, the system learns.
For example, one of the features that human doctors look for is the speed at which tumor cells divide by mitosis — through learning, C-Path might've discovered that mitosis isn't actually the most accurate indicator.
Learning also allowed C-Path to discover new, cancer-related cellular factors — 6,642 in total — which it then used to diagnose and prognose new cancer patients with better accuracy than a human doctor. One of these indicators, related to the stroma (connective tissue between cells), was a completely new discovery — in other words, C-Path's automated learning process just saved the lives of innumerable breast cancer patients around the world. Robots to Replace Women In Japan, Robots to Replace Women A new walking, talking robot from Japan has a female face that can smile and has trimmed down to 43 kilograms (95 pounds) to make a debut at a fashion show. But it still hasn't cleared safety standards required to share the catwalk with human models.
"Technologically, it hasn't reached that level," said Hirohisa Hirukawa, one of the robot's developers. "Even as a fashion model, people in the industry told us she was short and had a rather ordinary figure."
To add to the literal objectification of women, the robot will appear in the fashion show, naked, so that the public may come up with fun things the robot can do.
HRP-4C was designed to look like an average Japanese woman, although its silver-and-black body recalls a space suit. It will appear in a Tokyo fashion show — without any clothes — in a special section just for the robot next week.
The robotic framework for the HRP-4C, without the face and other coverings, will go on sale for about 20 million yen ($200,000) each, and its programming technology will be made public so other people can come up with fun moves for the robot, the scientists said.
The robot can apparently move enough of her body that human-robot sexual contact doesn't appear out of the question, and--just like a woman--she can show such emotions as "anger and surprise" That was written in 2009. By now I am quite confident they have improved upon the "rather ordinary" figure. Sports Stories Written by Computers When it comes to sports stories, Gadget Lab reports on an iPhone app called GameChanger that uses pitch-by-pitch game data to generate sports stories. Please consider Can an Algorithm Write a Better News Story Than a Human Reporter? Last year GameChanger produced nearly 400,000 accounts of Little League games. This year that number is expected to top 1.5 million. And the articles don't read like robots wrote them:
Friona fell 10-8 to Boys Ranch in five innings on Monday at Friona despite racking up seven hits and eight runs. Friona was led by a flawless day at the dish by Hunter Sundre, who went 2-2 against Boys Ranch pitching. Sundre singled in the third inning and tripled in the fourth inning … Friona piled up the steals, swiping eight bags in all …
The grandparents of a Little Leaguer would find this game summary—available on the web even before the two teams finished shaking hands—as welcome as anything on the sports pages. Stats Monkey NPR reports on a program called Stats Monkey that can do the same thing. Sample story generated by SportsMonkey from April 25, 2009:
UNIVERSITY PARK — An outstanding effort by Willie Argo carried the Illini to an 11-5 victory over the Nittany Lions on Saturday at Medlar Field.
Argo blasted two home runs for Illinois. He went 3-4 in the game with five RBIs and two runs scored.
Illini starter Will Strack struggled, allowing five runs in six innings, but the bullpen allowed only no runs and the offense banged out 17 hits to pick up the slack and secure the victory for the Illini.
The Illini turned the game into a rout with four in the ninth inning.
Strack got the win for Illinois. It was his fourth victory of the season. Strack allowed five runs over 6 2/3 innings. Strack struck out two, walked three and surrendered six hits.
Mike Lorentson suffered his sixth loss of the season for Penn State. He went four innings, walked none, struck out two, and allowed six runs.
Illinois closer John Anderson got the final seven outs to record his second save of the season.
Hammond says StatsMonkey can do more than analyze Little League games.
"Our goal is to genuinely model human thought, intelligence, reason," he says. "I have to admit, we are doing it not only in sports; we're looking at what other realms we could apply this [technology] to." Wikipedia Written by Robots Here is an interesting item you might not be aware of: 22 of Top 30 Wikipedia Editors are Robots. Scholars studying Wikipedia tend to ignore or quickly dismiss the influence of bots on the site, even though of the top 30 most prolific editors on the site, 22 are bots. In fact, Wikipedia itself erases their contributions; according to Geiger, when a Wikipedia "user account is flagged as a bot, all edits made by that user disappear from lists of recent changes so that editors do not review them." Got that? Changes made by Wikipedia robots are automatically approved. Changes made by human editors need review. I have to ask: by computer robots or humans? Inquiring minds might be interested in the list of articles on robots that I accumulated recently. List of Robot Articles I will have some thoughts on jobs, unemployment, rising productivity and issues related to robots and technology in a follow-up post in which I will answer the questions posed in the title of the article. For now, study some of the links and articles to form your own opinions. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Bundesbank Criticizes "Potentially Unlimited" Bond Buying Rate Cap Proposal; ECB Denies Discussion "Yet" Posted: 20 Aug 2012 08:27 AM PDT It took Germany's central bank less than a day to knock a reported proposal by the ECB to set interest rates caps on Spanish and Italian bond yields. Bloomberg reports Bundesbank Widens Euro Rift With Criticism of ECB Bond Plan. Germany's Bundesbank stepped up its criticism of the European Central Bank's plan to embark on potentially "unlimited" government bond purchases, widening a rift over how to tackle the sovereign debt crisis.
"The Bundesbank holds to the opinion that government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks," the Frankfurt-based central bank said in its monthly report today. The new program "could be unlimited" and decisions about potentially far greater sharing of solvency risks should be taken by governments or parliaments, not by central banks, it said.
The comments suggest Bundesbank President Jens Weidmann won't support a measure the ECB is rushing to design to help reduce governments' borrowing costs and win them time to implement fiscal reforms. Spanish and Italian 10-year bond yields slid to the lowest in more than six weeks today after German news magazine Der Spiegel reported the ECB's new program may set yield caps. In response, the ECB issued a statement saying it's "misleading to report on decisions which have not yet been taken."
The ECB issued a statement today saying a bond-yield cap has "not yet been discussed by the ECB's Governing Council," and it is "wrong to speculate on the shape of future ECB interventions." It didn't deny that ECB officials are considering the idea.
German Finance Minister Wolfgang Schaeuble said on Aug. 18 that the debt crisis mustn't become a "bottomless pit" for his country. "There are limits," he said, ruling out another aid program for Greece. At the same time, two German lawmakers said last week that Merkel is considering easing Greece's bailout terms.
The Bundesbank has resisted ECB intervention during the crisis before. Former President Axel Weber resigned last year after becoming isolated over his opposition to the ECB's original bond-buying program. Former Bundesbank vice president Juergen Stark also left his position as ECB chief economist in December in protest at the purchases, which were shelved in March this year.
Bundesbank Isolation
"Nobody should try to create the impression that the Bundesbank or its president are isolated," German ECB Executive Board member Joerg Asmussen told the Frankfurter Rundschau in today's edition. Precisely why is it wrong to discuss what fools might do, especially when the fools will not deny that they just might do something amazingly foolish? Consider what I said yesterday in ECB Considers Interest Rate Caps; Can Such a Scheme Possibly Work? when this story first surfaced ... Can This Work?
It depends on the definition of "work". In general, if central planners (and it is important to understand that is what we are talking about here) set prices too high there will be unlimited supply.
Likewise, if central planners set prices too low, there will be shortages.
When it comes to interest rates, the ECB must be willing to buy an unlimited number of bonds (up to the total supply of all bonds).
Theory vs. Practice
So yes, the ECB can "in theory" defend a price target on bonds, but only at the risk of owning every bond.
What about an exit mechanism? How will the ECB get rid of all those bonds down the road? To who, at what price?
Will Germany go along with this ridiculous scheme? For how long?
As is always the case, interference in the free market by central planning fools always fails in the long run. The German central bank clearly agrees with my analysis, but they might be isolated and outvoted. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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