Mish's Global Economic Trend Analysis |
- Obama Howls at the Moon
- Rebels Advance: Near Collapse of Ukraine Positions Near Lugansk; The Big One
- Forced Conscription: Ukraine to Mobilize 200,000 Armed Forces; Hyperinflation on the Way?
- Bloomberg Editorial Board Loses Mind
- Deflation Bonanza! (And the Fool's Mission to Stop It)
| Posted: 20 Jan 2015 10:11 PM PST During the last dozen years or so, the only State of the Union Addresses I failed to watch were because I was on the road. On Tuesday, I purposely missed one. Why Bother? We all knew in advance what Obama would say. He leaked it out in pieces long in advance. That took most of the drama out of things right up front. Icing on the #WhoCares cake is the answer to this question: How could it possibly matter? Lamest of Lame Ducks President Obama is the lamest of lame ducks. His ideas are headed for the ash heap of history.
We all knew those going in. The only thing we did not know was how blatant the lies would be. Lie of the Day To find the lies of the day, I just finished reading Obama's State of The Union Address. The primary lie was easy to spot. In case you missed it, here it is: "In two weeks, I will send this Congress a budget filled with ideas that are practical, not partisan. And in the months ahead, I'll crisscross the country making a case for those ideas." No doubt Obama will crisscross the country. That can be believed. The lie is in regards to "ideas that are practical, not partisan". Supposedly taxes on the wealthy, free education, and cutting carbon pollution are "practical, not partisan". That's two lies actually. All three proposals are all partisan, and not a single one of them is practical. I did not disagree with everything Obama said. For example, I do think we should talk with Cuba and Iran. Beyond that, there is little to like and much to dislike. Free Trade is Fair Trade I certainly would not give the president "trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren't just free, but fair." Instead, I would simply propose cutting all tariffs and be done with it, regardless of what any other nation does. Free trade is fair trade. And on that score many Republicans are worse than the president. Senator Rand Paul offered this response. Rand Paul Response Higher taxes, more spending, and bigger government.Rand Paul Video Link if video does not play: Rand Paul Responds to Obama's State of the Union Address. President Obama howled at the moon with partisan, impractical proposals nthat are dead on arrival in Congress. Looking for nonpartisan, practical ideas? Please play the above video. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Rebels Advance: Near Collapse of Ukraine Positions Near Lugansk; The Big One Posted: 20 Jan 2015 05:41 PM PST In Graves Waiting For Bodies: Major War Escalation in Ukraine; In 5 Weeks Ukraine Out of Money I stated ... Reader Jacob Dreizin, a US citizen who speaks Russian and read Ukrainian informs me that "The battle for the Donetsk airport is over. The rebels expelled Ukraine's most elite units from their last redoubts in the new terminal building." That statement was immediately challenged. For example, Reuters reported Sunday afternoon that Ukrainian troops retake most of Donetsk airport from rebels. Then that statement was challenged. Yahoo!News reported Ukraine, Rebels Both Claim to Control Donetsk Airport. Meanwhile Fox News reported Ukraine Rebels Claim They Control Donetsk Airport After Heavy Fighting. First Casualty of War As they say, the first casualty of war is the truth. Disinformation is everywhere. So whom to believe? I place faith in reports I get from reader Jacob Dreisin, Colonel Cassad, and others who have been right far more often than mainstream media. Colonel Cassad has called this better than Jane's Defense. See my August 26, report Jane's Defense vs. Colonel Cassad: Someone Seriously Wrong in which Jane's Defense wrote "Ukrainian Military Moves to Endgame". Brief synopsis: Jane was seriously wrong. Not everything Dreisin says is 100% accurate. But the same can be said about me. Until proven otherwise, I trust my sources, and they have some significant news. Ukraine Airport Synopsis Most of my reports come from Dreizin, so let's tune in. Dreisin writes ... Ukrainian forces have been cleared from every single building and built-up area within the airport complex. They may be still holding on to some of the open area at the edges. Reports of Kiev being in control of the airport is total spin. U.S. media passes along whatever Kiev's mouthpieces say.May Be "The Big One" The above is from yesterday. Today Jacob says ... Rebel chatter reports near-collapse of Ukrainian positions all along the front north/northwest of Lugansk city. This may be the big one that we've anticipated. It is more slow-motion, step-by-step than what happened in August, but it's happening nonetheless.Assault on Lisichansk and Severodonetsk Moments ago I asked Jacob if I transcribed Forced Conscription: Ukraine to Mobilize 200,000 Armed Forces properly. He responded "yes". He also added ... A very reliable rebel source claims Kiev expects an assault against Lisichansk and Severodonetsk imminently. This would be an advance by the rebels of something like 30-40 kilometers through many thousands of Ukrainian forces. Importantly, they would have to cover their flanks which probably means advancing northeast all the way from Krymskoe to the Russian border.This All Ties In This all ties in with Ukraine to Mobilize 200,000 Armed Forces; Hyperinflation on the Way? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Forced Conscription: Ukraine to Mobilize 200,000 Armed Forces; Hyperinflation on the Way? Posted: 20 Jan 2015 02:24 PM PST The war in Ukraine is going so well for Kiev that .... Ukraine will force 200,000 more into the army. According to military prosecutor Anatoly Matios, there will be three waves of mobilization in 2015. The overall plan is to call 200,000 Ukrainians into military service.Thoughts From Europe Reader Steven writes... Hello MishHyperinflation on the Way? Ukraine is down to five weeks of currency reserves. The only way to pay these soldiers is to print Hryvnia, constantly dwindling in value.  Seeds Sown The Hryvnia is down 48% vs. the US dollar since the end of 2013 (nearly 50% in just over a year). That is not hyperinflation material, but the seeds are sown. Even if some sort of bailout does come, if Ukraine blows it all on war (which sure seems to be the pledge), the decline in the Hryvnia is far from over. And if Ukraine does not get another bailout, the Hryvnia is toast. Pension promises will be worthless. For what? Smart Decisions Those fleeing Ukraine for Prague or elsewhere in Europe are the smart ones. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Bloomberg Editorial Board Loses Mind Posted: 20 Jan 2015 12:25 PM PST A Bloomberg editorial on what the ECB needs to do is rather amusing. The article headline, albeit true in and of itself, contradicts the body of the article. Let's take a look. ECB Cannot Save Europe The Bloomberg editorial board says Not Even Mario Draghi Can Save Europe Now. I certainly agree with that title. Had that been the entire article in and of itself, I would have said "the Bloomberg editorial board gets it". Unfortunately, the editors didn't stop with the headline. Instead the editors proposed "The ECB needs to surprise financial markets with a bigger-than-expected announcement." It gets better ... The board says Draghi should go for outright shock and awe. .... He could say that monetary policy, as he understands it, includes the option of "helicopter money" -- and that the bank would shortly begin sending out checks to every EU citizen. Such a scheme would be illegal of course. But hey, that's no problem. Legal or not, helicopter money would be a frontal repudiation of the monetary conservatism that Germany's government and others have sought to impose on the bank. Not even Draghi can save Europe, but let's do illegal things anyway to prove it. Wow. Eurozone Structural Problems The problems in Europe are insurmountable, and well understood by many.
What the hell good would even €5 trillion in QE do to fix those? What good would it do if the ECB bought every bond from every country and pushed rates to zero across the board? How would it fix any structural problem? More QE Will Not Help the World, says Mervyn King I seldom agree with central bankers, especially when they hold that position. On occasion, however, once outside their official role, they regain some sense of sanity. For example, More QE will not help the world, says Mervyn King. More monetary stimulus will not help the world economy return to strong growth, former Bank of England governor Mervyn King said, days before the European Central Bank is expected to decide whether to embark on a massive bond-buying programme.Pettis, Jakobsen Chime In Saxo Bank chief economist Steen Jakobsen made the claim the other day that QE was actually counterproductive. Here is Steen's actual statement: "Lower Interest Rates May Reduce Consumption". That may sound shocking, but his rationale is sound. Michael Pettis at China Financial Markets and Lacy Hunt at Hoisington Management both agreed. Grand Experiment Failure I wrote Steen's theory in Grand Experiment Failure; Bankers Prefer Bubbles; Europe is not USA; Final Epitaph, a rebuttal to Bloomberg author Barry Ritholtz, also in favor of massive QE. Instead of repeating myself again, I simply ask the editorial board and Ritholtz to "Read, Then Think!" Deflation fighting efforts ruined Japan, but somehow deflation fighting is supposed to cure Europe?! It makes no sense. Nonetheless, people believe central bank parroting instead of thinking on their own. Deflation Fighting Silliness Let's once again review my Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit" I also strongly suggest the editorial board review Deflationary Spiral Nonsense; Keynesian Theory vs. Practice; Eurozone Policymakers Concerned About Falling Prices. For a third take on the insanity of fighting consumer price deflation, please see Deflation Bonanza! (And the Fool's Mission to Stop It). Problem is Debt The problem with the global economy in general is debt. You cannot cure a debt-deflation problem via attempts to force more debt into the system. It is axiomatic the cure cannot be the same as the disease. Bloomberg, please go back to the drawing board. Next Time .... Think! Link if video does not play: The Blues Brothers - Aretha Franklin. The ECB, central bankers in general, the Bloomberg editorial board, Monetarists, and Keynesians, all need to step back and "Think!" about what they are trying to do (and why it cannot possibly work). Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Deflation Bonanza! (And the Fool's Mission to Stop It) Posted: 20 Jan 2015 09:33 AM PST Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them. The recent move in the Swiss franc puts a spotlight on the issue. For example, on Sunday, in Swiss Peg Removal: Did Anyone Win? I commented ... One widely recognized "big loser" is the tourism industry. For sure, hotel prices in Switzerland rose as much as 40% overnight compared to prices elsewhere.Shopping Bonanza! On Monday came a Wall Street Journal story that exactly matched my prediction: Soaring Franc Creates Bonanza in Swiss Stores. The soaring Swiss franc that caused howls in financial markets is creating a bonanza in stores, where shoppers are suddenly getting discounts on everything from vegetables to party dresses.Don't Cry For Exporter Yet In Swiss Peg Removal: Did Anyone Win? I also commented ... "Conventional wisdom is that Swiss exporters will be crucified and importers will benefit. Certainly there is an initial shock. But long-term, look at it this way: The price of materials used in exports (metals in watches and Swiss-made machinery) will get cheaper. ... So, don't cry for exporters just yet. US Dollar vs. Swiss Franc  Last Thursday, the value of the Swiss Franc related to the US dollar soared as much as 28 percent. About half of that has been recovered. Swiss exporters will find they can import commodities about 14% cheaper than early last week. They do lose out current inventories of goods, but this is not the widely-believed export disaster story except for the initial stock market carnage. Guess What? Shoppers are shopping! They are even booking extra trains to Germany to do so. Fancy that! Other travel is up as well. Gee who coulda thunk? The widespread belief is that when prices fall, shoppers will wait and wait and wait. I Have been mocking that view for years. Economic Challenge to Keynesians Let's once again review my Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit" Challenge to KeynesiansKrugmanites Cheer Abenomics The idea that falling consumer prices will lead to a downward spiral is absurd. Everyone in Japan would have died long ago if that was true. Instead of accepting the gift of falling prices (a clear benefit to consumers), Japan fought it every step of the way with the Krugmanites cheering every step of the way. Japan Deflation Fighting Results
Keynesian Theory vs. Practice Keynesian theory says consumers will delay purchases if prices are falling. In practice, all things being equal, it's the opposite. If consumers think prices are too high, they will wait for bargains. It happens every year at Christmas and all year long on discretionary items not in immediate need. Central Banking's Grand Experiment In spite of the above, and ignoring the total failure of both Monetarism and Keynesianism in Japan for decades, on January 15, Bloomberg author Barry Ritholtz came out in praise of Central Banking's Grand Experiment. I took the other side of the debate in Grand Experiment Failure; Bankers Prefer Bubbles; Europe is not USA; Final Epitaph. In praise of the Fed (and with a pointed finger at the ECB), Ritholtz proposed this tombstone epitaph for Bernanke "At least we tried". I responded ... And here's the irony: "At least we tried [to create inflation]" is not only the essence of the rising income inequality problem that Fed Chair Janet Yellen (and countless others) moan about, it's also the very essence of the ever-increasing debt problem the world faces.Asset Deflation vs. Consumer Price Deflation Central Bankers to the Rescue - Not. The fear of falling consumer prices is absurd. Ironically, by fighting routine price deflation, central banks create asset inflation, pent-up volatility (the Swiss franc is a prime example), speculative bubbles of increasing amplitude (housing is a prime example), and income inequality. When those asset bubbles break, banks are inevitably in trouble over loans made on speculative assets (for example housing bubbles or more recently loans made on wells that need $90 oil to be profitable). Then, the central bankers inevitably try to ease the shock, further encouraging moral-hazard speculation. The pattern repeats over and over creating bubbles of ever-increasing magnitude. Musical Tribute In spite of central bank foolishness, a musical tribute is in order. Link if video does not play: Bonanza Simpler Epitaph for Central Bankers In retrospect, my above proposed tombstone epitaph for central bankers is far too long. I now propose a far simpler gravestone engraving "We F'd Up". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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