Posted: 21 Aug 2012 04:40 PM PDT

Spain has been devastated by round after round of tax hikes. Another one is on the way. Via Google-translate, please consider this non-modified translation of government shuffles new tax increases to reduce the deficit

Never two without three. The brutal tax increases approved by the Government of Mariano Rajoy in late 2011, increasing the income tax and the tax on savings , among other figures, and the recent increase launched last July, with the increase in VAT , Taxes -special rate you could add soon a new tax hike to reach the deficit target of 6.3% of GDP set for this exercise. This, with an eye on a country's total bailout, whose application could occur next September.

Before formalizing the request for assistance, the government wants to make sure you are ready to meet the deficit target, and for that "is likely to take much more drastic measures they currently have," reveals a member of the Government, on Monday reported the newspaper El Pais. Among these, it weighs a new tax increases and a freeze on state pensions.

"The evolution of expenditure, with the cuts we have made, we have more or less clear, we do not know is how the revenues are going to go," admitted to the Government. In the first half of the year things did not go well: overall, tax revenues fell by 3.5% annual rate, far from expected for 2012 (increase of 4.3% per year).

The Ministry of Finance will report to the Executive on the development of tax collection during the summer months, and "if revenues continue to fall, probably will have to return to raise taxes and cut spending again, although here and can hardly play more ", added the sources. Specifically, in its editorial, the paper notes that Prisa Economy Minister Luis de Guindos, thinks "there is no room for further cuts in spending," which means that additional adjustments would have to come from the side of income.

Thus, the government may choose to remove the shelter deduction retroactively (about 6,000 million euros) or relief for contributions to private pension plans (2,000 million); impose verd penny and not only gas, but also to fuels; Excise reraise (alcohol, snuff ...) or implement new environmental taxes, and more. It is not ruled out anything.

Spain's economy minister says "there is no room for further cuts in spending", a position I believe is preposterous. However, my position does not matter.

What does matter is Spain is in an economic downward spiral and tax hikes will make matters worse. Sadly that is the primary option on the table.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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ECB Printing Press Door Is Open

Posted: 21 Aug 2012 09:39 AM PDT

Every day I get links from Spain, Italy, Germany, and Australia. The first three frequently cause problems. Translation from German is particularly difficult.

For example, a Google-translated headline on Welt Online reads ECB chief demonstrates German banker.

A cyberspace friend, "EM" writes Google has a tough time with much in this one - title boils down roughly to "Draghi holds Bundesbank President Weidmann Up To Ridicule".

Clearly that is an entirely different meaning.

Also from the same article, a Google-translated paragraph reads "Thus, the investor inclined saw with great astonishment, as at the last ECB press conference Jens Weidmann by Mario Draghi and the Portuguese Vitor Constancio, the vice president of the ECB, namely the ridiculousness was abandoned. An absolute rarity in the history of the ECB."

Here is a better translation from "EM".

"Thus, the willing investor saw with great astonishment at the last ECB press conference Jens Weidmann was held up to ridicule by Mario Draghi and the Portuguese Vitor Constancio, the vice president of the ECB. An absolute rarity in the history of the ECB."

The point of the article was the increasing isolation of Weidmann, up to the point of open ridicule by the president and vice-president of the ECB.

With the help of Bran from Spain, Andrea from Italy, and "EM" from Germany I can frequently provide much better translations of foreign articles than I could otherwise. Of course, articles from Tony and others from Australia and Canada are appreciated but require no translation.

Official Denial

The key point of the Welt Online story is the increasing isolation of Weidmann, including an official denial by the Bundesbank.

Consider this quote from yesterday as reported by Bloomberg. ...

"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.

Mish Translation: "The Bundesbank and its president Jens Weidmann are without a doubt isolated and essentially ignored. The printing press door is open and the presses ready for operation."

However, there are a few open questions as follows.

Open Questions

When Draghi fires up the presses
Speed at which he prints
How much gold and silver rise in response

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Part II - Robots to Rule the World? Taking All Jobs? Replace Women?

Posted: 21 Aug 2012 12:55 AM PDT

In part I of Robots to Rule the World? Taking All Jobs? Replace Women? I took a deep look at numerous robot and computer technologies that are displacing workers at a rapid pace.

Will Robots to Rule the World?

Right now it appears that way. Manufacturing may be returning to the US, but automation has eliminated the human workers.

And it's not just manufacturing. For example, consider, JCPenney to Eliminate All Checkout Clerks, Instead Using RFID Chips and Self-Checkout.

If that idea catches on for major retail stores, tens-of-thousands of jobs will vanish. Will anything replace those jobs?

Two Viewpoints

What follows is a pair of widely-differing viewpoints from an email exchange with a couple of friends regarding technology and robots. One friend talks about a collapse of society, the other sees unimaginable numbers of jobs in industries we cannot even conceive of now.

Collapse of Society

One friend writes ...

When the vast bulk of production and services can be produced and delivered by computers, robotics, smart systems, and ubiquitous computing devices with only a small fraction of the human labor force we have today, we have no choice but to devise a system of income creation and distribution radically different than we have today or face unprecedented scale of labor underutilization, loss of purchasing power, collapse of the economy, and the risk of systemic societal collapse.

Unimaginable Numbers of Jobs in Unimaginable Industries

In response a second friend commented ...

10 and 20 years from now, there will be jobs we cannot even conceive of now. Just as today there are jobs and industries no-one could conceive of 20 years ago. Only 70 or 80 years ago, about 70% of the population worked in agriculture. Today not even 2% of the population works in agriculture and it produces an output that is an order of magnitude greater. This is the very definition of economic progress - to free up people from the drudgery of manual labor, so they have the time to do things that add far more value to our world.

When the car was invented, all industries concerning the horse and horse-powered transportation practically disappeared, except for the remnant that still exists today to serve the horse leisure industry. Should we have opposed the invention of the car? Luddite visions of increasing automation destroying jobs forever and ever all rely on a fundamental fallacy, namely that the economy is static. The economy is however not static, but highly dynamic. If the Luddite version of history were correct, we would all be better off if we were still living in pre-stone-age conditions. After all, the invention of the first tool surely destroyed a number of stone-age jobs.

My assessment is also highly personal. Not even one of the jobs I am doing today would be conceivable without the inventions of the past 20 - 30 years, i.e. the PC, the internet, modern software, cheap electronic devices of all kinds, , free information at my fingertips, and so forth.

Sure, I could in theory do all I am doing now in some kind of variation that would take much more effort, cost hundreds of times more money, and I would entirely depend on the kindness of middlemen willing to market my output.

Since the internet has enabled me to get to know all those who hire my services today. I would be forced to do some sort of uninteresting provincial work, forever constricted by the fact that I could only afford a very limited version of the machinery that is at my disposal today.

My health does not allow me to engage in many tasks. I would be totally useless as a farmer. So when you tell me how modern technology destroys jobs, I must point out that it has created all of mine.

Case for Optimism

I completely understand both viewpoints but side with the second with a caveat about government and Fed interference in the free market.

I too am biased by personal experience. I made a living at computers for 20 years, then remade myself out of necessity. I could not have done it without the internet.

As a side note, if anyone told me at high school graduation that I would be writing for a living and have an international audience I would have responded they were out of their mind.

Looking back a couple of decades, the internet, and PC revolution created millions of jobs.
Currently, technology is at a saturation point of sorts where further advances generally cost jobs.

Yet, I believe that some new technology will eventually come along that will again create enormous numbers of jobs. I strongly suspect it will be energy related.

In the meantime, however, until something does come along, we are in a creative destruction phase in which technological advancement destroys more jobs than it creates.

Unfortunately this current phase can last quite some time, perhaps even a decade or more. Those looking for jobs now do not have a decade, and the wait is extremely painful.

Case for Pessimism

Technology cannot be stopped, and advances will lead to a new source of jobs eventually, but governments, fractional reserve lending, and Keynesian madness are making a mess of things now.

The irony is the cheap money the Fed supplies (allegedly to create jobs), instead creates huge incentives for companies to shed workers while brutally punishing savers on fixed incomes.

Robots are not inherently cheap. However cheap financing can make them seem so, even to the point of encouraging outright malinvestment to shed workers.

Conclusion

The case for pessimism is not that robots will rule the world, taking all the good jobs that humans need, but rather all the cries for the government and the Fed to "do something" leads to trade wars and other inept policy decisions setting back the global economy for a prolonged period.

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

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