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Tuesday, February 24, 2015

Mish's Global Economic Trend Analysis

War of Terror: "Disappeared in Chicago"; Illegal Detention by Chicago Police Without Charges; Beatings and Death
Cash for Gas: Russia Threatens to Shut Off Gas in Two Days for Lack of Payment; Meter Maid Called In
Ukrainian Currency Comparison: Budget Rate vs. Official Rate vs. Interbank Rate vs. Street Rate
Crash Course in Free Market Economics and Income Inequality

War of Terror: "Disappeared in Chicago"; Illegal Detention by Chicago Police Without Charges; Beatings and Death

Posted: 24 Feb 2015 06:00 PM PST

Meet the "Nato Three"

Brian Jacob Church, Jared Chase and Brent Vincent Betterly, known as the 'Nato Three'. Photograph: AP/Cook County sheriff's office.

All were arrested, put in an "off-the-books" interrogation compound in Chicago and denied access to lawyers. This goes on every day. People are beaten and threatened.

It's all part of the alleged war on terror. I prefer to call it "War of Terror".

War of Terror

Please consider the Guardian report "The Disappeared": Chicago Police Detain Americans at Abuse-Laden 'Black Site'

The Chicago police department operates an off-the-books interrogation compound, rendering Americans unable to be found by family or attorneys while locked inside what lawyers say is the domestic equivalent of a CIA black site.

The facility, a nondescript warehouse on Chicago's west side known as Homan Square, has long been the scene of secretive work by special police units. Interviews with local attorneys and one protester who spent the better part of a day shackled in Homan Square describe operations that deny access to basic constitutional rights.

Alleged police practices at Homan Square, according to those familiar with the facility who spoke out to the Guardian after its investigation into Chicago police abuse, include:

Keeping arrestees out of official booking databases.
Beating by police, resulting in head wounds.
Shackling for prolonged periods.
Denying attorneys access to the "secure" facility.
Holding people without legal counsel for between 12 and 24 hours, including people as young as 15.

At least one man was found unresponsive in a Homan Square "interview room" and later pronounced dead.

Brian Jacob Church, a protester known as one of the "Nato Three", was held and questioned at Homan Square in 2012 following a police raid. Officers restrained Church for the better part of a day, denying him access to an attorney, before sending him to a nearby police station to be booked and charged.

"Homan Square is definitely an unusual place," Church told the Guardian on Friday. "It brings to mind the interrogation facilities they use in the Middle East. The CIA calls them black sites. It's a domestic black site. When you go in, no one knows what's happened to you."

Unlike a precinct, no one taken to Homan Square is said to be booked. Witnesses, suspects or other Chicagoans who end up inside do not appear to have a public, searchable record entered into a database indicating where they are, as happens when someone is booked at a precinct. Lawyers and relatives insist there is no way of finding their whereabouts. Those lawyers who have attempted to gain access to Homan Square are most often turned away, even as their clients remain in custody inside.

"It's sort of an open secret among attorneys that regularly make police station visits, this place – if you can't find a client in the system, odds are they're there," said Chicago lawyer Julia Bartmes.

When a Guardian reporter arrived at the warehouse on Friday, a man at the gatehouse outside refused any entrance and would not answer questions. "This is a secure facility. You're not even supposed to be standing here," said the man, who refused to give his name.

"They just disappear," said Anthony Hill, a criminal defense attorney, "until they show up at a district for charging or are just released back out on the street."

Jacob Church learned about Homan Square the hard way. On May 16 2012, he and 11 others were taken there after police infiltrated their protest against the Nato summit. Church says officers cuffed him to a bench for an estimated 17 hours, intermittently interrogating him without reading his Miranda rights to remain silent. It would take another three hours – and an unusual lawyer visit through a wire cage – before he was finally charged with terrorism-related offenses at the nearby 11th district station, where he was made to sign papers, fingerprinted and photographed.

Church's left wrist was cuffed to a bar behind a bench in windowless cinderblock cell, with his ankles cuffed together. He remained in those restraints for about 17 hours.

Though the raid attracted major media attention, a team of attorneys could not find Church through 12 hours of "active searching", Sarah Gelsomino, Church's lawyer, recalled. No booking record existed. Only after she and others made a "major stink" with contacts in the offices of the corporation counsel and Mayor Rahm Emanuel did they even learn about Homan Square.

After serving two and a half years in prison, Church is currently on parole after he and his co-defendants were found not guilty in 2014 of terrorism-related offenses but guilty of lesser charges of possessing an incendiary device and the misdemeanor of "mob action".

Bartmes, another Chicago attorney, said that in September 2013 she got a call from a mother worried that her 15-year-old son had been picked up by police before dawn. A sympathetic sergeant followed up with the mother to say her son was being questioned at Homan Square in connection to a shooting and would be released soon. When hours passed, Bartmes traveled to Homan Square, only to be refused entry for nearly an hour.

An officer told her, "Well, you can't just stand here taking notes, this is a secure facility, there are undercover officers, and you're making people very nervous," Bartmes recalled. Told to leave, she said she would return in an hour if the boy was not released. He was home, and not charged, after "12, maybe 13" hours in custody.

On February 2, 2013, John Hubbard was taken to Homan Square. Hubbard never walked out. The Chicago Tribune reported that the 44-year old was found "unresponsive inside an interview room", and pronounced dead. After publication, the Cook County medical examiner told the Guardian that the cause of death was determined to be heroin intoxication.

"Back when I first started working on torture cases and started representing criminal defendants in the early 1970s, my clients often told me they'd been taken from one police station to another before ending up at Area 2 where they were tortured," said Taylor, the civil-rights lawyer most associated with pursuing the notoriously abusive Area 2 police commander Jon Burge. "And in that way the police prevent their family and lawyers from seeing them until they could coerce, through torture or other means, confessions from them."

Tracy Siska, a criminologist and civil-rights activist with the Chicago Justice Project, said that Homan Square, as well as the unrelated case of ex-Guantánamo interrogator and retired Chicago detective Richard Zuley, showed the lines blurring between domestic law enforcement and overseas military operations.

"The real danger in allowing practices like Guantánamo or Abu Ghraib is the fact that they always creep into other aspects," Siska said.

"They creep into domestic law enforcement, either with weaponry like with the militarization of police, or interrogation practices. That's how we ended up with a black site in Chicago."

There's much more in the Guardian report. Read it. I am so infuriated by this I am at a loss for words.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Cash for Gas: Russia Threatens to Shut Off Gas in Two Days for Lack of Payment; Meter Maid Called In

Posted: 24 Feb 2015 02:28 PM PST

Meter Maid Called to Resolve Dispute

Last year, Russia shut off gas deliveries to Ukraine for lack of payment. Most of the flow through Ukraine goes to Europe, but Russia accused Ukraine of siphoning off gas without paying for it.

In December, Ukraine agreed to prepay for gas. The flows resumed, but a major dispute has recently arisen.

Gas Dispute

Yesterday, Ukraine complained it has not received gas it paid for.
Today, Russia complains it has not been paid for gas delivered.

I have called in the meter maid to investigate these claims and counterclaims.

Shutoff in Two Days

RT reports Kiev Cash-for-Gas Failure Could Cost EU its Supply.

Russia will completely cut Ukraine off gas supplies in two days if Kiev fails to pay for deliveries, which will create transit risks for Europe, Gazprom has said.

Ukraine has not paid for March deliveries and is extracting all it can from the current paid supply, seriously risking an early termination of the advance settlement and a supply cutoff, Gazprom's CEO Alexey Miller told journalists. The prepaid gas volumes now stand at 219 million cubic meters.

"It takes about two days to get payment from Naftogaz deposited to a Gazprom account. That's why a delivery to Ukraine of 114 million cubic meters will lead to a complete termination of Russian gas supplies as early as in two days, which creates serious risks for the transit to Europe," Miller said.

Last week, Russian Prime Minister Dmitry Medvedev ordered the energy minister and the head of Gazprom to prepare proposals on fuel deliveries to the self-proclaimed Republics of Donetsk and Lugansk (DPR and LPR) after Kiev had cut off the delivery pipeline into the southeastern regions. Ukraine's Naftogaz said it had halted gas supplies to eastern regions due to broken pipelines.

Russian Gas to Europe

Russia supplies 30% of the European continent, and 55% of Russian gas flows through Ukraine.

Ukraine Says Russia Not Sending Gas Paid in Advance

Reuters reports Ukraine's Naftogaz Says Russia Failed to Deliver Prepaid Gas.

After cutting off Ukraine's gas for six months, Moscow resumed supplies in late-2014 when the two sides signed an interim agreement, under which Kiev would pay off some debt for past deliveries and pre-pay for supplies for the winter.

Naftogaz said the Russian firm had broken this deal by delivering only 47 million cubic metres (mcm) of a 114 mcm order that Kiev had paid for in advance last Thursday.

Last week Ukraine cut back supplies of gas to regions held by pro-Russian rebels, and Moscow began supplying gas to the separatist regions directly for the first time.

A Gazprom spokesman said at the time that the supplies to the rebel regions were being shipped under the contract with Naftogaz.

Gazprom Threatens to Cut Supplies to Ukraine

Radio Free Europe reports Gazprom Threatens to Cut Supplies to Ukraine.

Russian natural-gas giant Gazprom is threatening to cut off supplies to Ukraine entirely as early as February 26, a move the Russian company says could result in a suspension of supplies to Europe.

The European Commission helped broker a deal last October between Moscow and Kiev that was meant to ensure Ukraine received gas during the winter and that supplies of Russian gas to Europe through Ukraine were not disrupted.

Under that agreement, Ukraine promised to pay off arrears for gas received and to prepay for future gas shipments, while Gazprom agreed to lower the price. That deal is valid until the end of March.

Gazprom said it is supplying gas to the parts of the Donetsk and Luhansk regions in eastern Ukraine that are controlled by pro-Russian separatists -- since Kiev stopped supplying them.

Gazprom said it considers those two regions as being part of the contract with Naftogaz for supplies to Ukraine though the Russian company conceded that Naftogaz "does not take these volumes into account, as a result...estimates of how much prepaid gas has been supplied differ."

Lovely Rita Meter Maid

While pondering the claims and counterclaims, I offer this musical tribute.

Link if video does not play: Lovely Rita - Beatles

I am pleased to note that "Lovely Rita" just pinged me with a rhetorical question as well as her official opinion.

Rita asks "If pipelines to the Eastern regions are broken, how is it that Russia can use them, but not Ukraine?"

Rita says "It's pretty easy to see what has happened. One does not even need a meter. Ukraine is broke and does not want to pay for gas delivered to Eastern Ukraine."

Ukraine Bankrupt

For more on the plight of Ukraine and its budget woes, please see Ukrainian Currency Comparison: Budget Rate vs. Official Rate vs. Interbank Rate vs. Street Rate.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Ukrainian Currency Comparison: Budget Rate vs. Official Rate vs. Interbank Rate vs. Street Rate

Posted: 24 Feb 2015 12:17 PM PST

Last Friday, reader John told me the "street rate" for currency in Ukraine was not the reported 28 Hryvnias per US$ but rather on the order of 32 per US$.

I asked John where he got his information. He replied, "from my sister who lives in Lviv".

Lviv is a beautiful city in Western Ukraine.

John did not know what the "street rate" was yesterday, but he informed me the "interbank rate" was 31.50 to 32.50. The interbank rate is higher still today.

Meanwhile, Investing.Com shows a jump today to 32.487 today from 28 yesterday.

click on chart for sharper image

Interbank Rate is 33.5/USD

The above chart is closer, but still not correct.

On February 14, a researcher from Johns Hopkins Institute asked me where I got my rates from. I did not have an official source then, but today I have one.

Please consider The Dollar on the Interbank Market was Fixed at Around 33.5/USD.

Hryvnia exchange rate on the interbank foreign exchange market trading results on Tuesday, February 24, fell to 33.5 UAH / USD from 32,00 UAH / USD a day earlier. The top value today reached 33.80 UAH / USD.

Quotes hryvnia against the euro amounted to 36.2432 / 37.9354 UAH / EUR, RUR - 0.5072 / 0.5315 USD / ruble.

At the beginning of 2015 the hryvnia on the interbank market was about 19,00 UAH / USD.

February 24: The official hryvnia strengthened to 28.29/USD. National Bank Chairman Valery Hontaryeva explained the collapse of the hryvnia shock of transition to a free exchange rate . "We believe that the demand and supply of currency must find a balance, and hence the importance of adequate price" - said Hontaryeva.

Official vs. Interbank vs. Street

Note the "official" rate is still 28.29/USD. One cannot buy dollars at the "official" rate anywhere. And while the foreign exchange rate is 33.5/USD. I strongly suspect the "street" rate is worse yet.

Budget Rate

As long as we are discussing various rates, let's also consider the "2015 Budget Rate".

Ukraine's international newspaper, The Mirror (available in English), reported on February 16, Ukrainian Government Changes Rate to UAH 21.7/USD in 2015 Budget.

Thus, Ukraine's budget is a farce. The move from 21.7 to 33.5 is a decline of 35.22%. That's how far off Ukraine's budget is ... and worsening weekly, if not daily.

Exchange Rates

2015 Budget: 21.1
Official: 28.29
Interbank: 33.5
Street: Unknown but assuredly higher

At the beginning of 2014, the exchange rate was 8.21 per dollar. From 8.21 to 33.5 is a decline of 75% in just over a year!

And it's going to get worse.

Full Scale War

Ukraine's deputy foreign minister announced a "Full Scale War" on Saturday.

For details, please see "Prepare for Full-Scale War" says Ukraine Deputy Foreign Minister: "With What?" asks Mish; Ukraine Lie of the Day.

Ukraine is broke. It has no means to fight a war. Nonetheless, Ukraine is dedicated to the impossible, with foreign currency reserves dwindling.

Insistence on more fighting will produce more of the same results.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Crash Course in Free Market Economics and Income Inequality

Posted: 24 Feb 2015 10:56 AM PST

On February 19 Doug McMillon, President & CEO, Walmart, announced higher pay in a Letter to Associates.

Bloomberg columnist Barry Ritholtz, a higher minimum wage advocate, pounced on the news, calling the wage hike Wal-Mart's Crash Course in Labor Economics

Last week, we learned that Wal-Mart was giving the lowest paid of its hourly employees a raise. In a blog post, Wal-Mart Chief Executive Officer Doug McMillon said that as of April, the company will pay a minimum of $9 an hour. That is $1.75 more than the federal minimum wage of $7.25, which has been unchanged for almost six years. Next February, Wal-Mart's lowest hourly rate will rise to $10. All told, about a half-million Wal-Mart workers in the U.S. will be affected.

In the years since the last federal minimum-wage increase, many of Wal-Mart's employees had fallen below the poverty level and the strengthening economy has made it harder to attract and retain employees.

Although many factors contributed to the move, the simple reason for the increase is because Wal-Mart has stopped growing. Same-store sales have been little changed or declining for some time now. When we look at the underlying causes, the company's workforce, and how it is managed, are the prime suspects.

Cutting on salary and benefits, however, didn't necessarily lower costs. About 44 percent of Wal-Mart's hourly staff turns over each year. That's a lot of people, because the company employs 2.2 million workers worldwide. Hiring replacements is a costly and time consuming process.

Consider competitors such as Costco: It has average hourly wages of $20 and a turnover rate of "17% overall and just 6% after one year's employment," according to the Harvard Business Review.

Staff Turnover

Barry goes on and on with some things I agree with and many other things I don't. However, I believe we can all reasonably assume that staff turnover was a major factor in Wal-Mart's decision.

If so, what does that say?

It says that the free market wage for Wal-Mart employees is $10.00 an hour, not $9.53, not $12.28, not $15.00, not any pulled out of the hat government mandate.

Wal-Mart decided on its own accord it could not attract the quality of people it needs at $7.25. That says nothing about Costco or McDonald's.

Simply put, the free market worked, not pressure from protesters, not whining from Obama.

Wal-Mart is Not Costco

On August 29, 2013, I wrote Wal-Mart is not Costco; So Why Should it Pay Like Costco?

Bloomberg writer Megan McArdle also hit the nail on the head with her 2013 analysis of the situation in Why Wal-Mart Will Never Pay Like Costco.

Costco has a tiny number of SKUs in a huge store -- and consequently, has half as many employees per square foot of store. Their model is less labor intensive, which is to say, it has higher labor productivity. Which makes it unsurprising that they pay their employees more.

Trader Joe's is also private, but we do know some stuff about it, like its revenue per-square foot (about $1,750, or 75 percent higher than Wal-Mart's), the number of SKUs it carries (about 4,000, or the same as Costco, with 80 percent of its products being private label Trader Joe's brand), and its demographics (college-educated, affluent, and older).

In other words, Trader Joe's and Costco are the specialty grocer and warehouse club for an affluent, educated college demographic. They woo this crowd with a stripped-down array of high quality stock-keeping units, and high-quality customer service. The high wages produce the high levels of customer service, and the small number of products are what allow them to pay the high wages.

Minimum Wage Nonsense

The idea that government can dictate the right minimum wage that maximizes overall employment is nonsensical.

Wal-Mart decided on its own that its turnover was too high and/or the quality of its employees too low. Perhaps McDonald's makes the same decision, perhaps not.

Battle Over Hours

Another grievance of workers is flexible shifts that frequently change, and with short notice. The Financial Times details the problem in Walmart Pay Rise Obscures Shift in US Labour Market

Almost 7m US part-time workers are seeking full-time work in spite of a strong recovery in the jobs market.

Rising insecurity is driven by sophisticated technology that allows retailers and restaurant chains to adjust work rotas at short notice to respond to their own needs.

Zara and Urban Outfitters, the retailers, and Popeye's, a fast-food restaurant, are among those to come under fire for the notice employees are given on hours. Starbucks, the coffee chain, responded to a New York Times story detailing how workers were given schedules just days in advance with promises of improved working conditions.

Kory Lundberg of Walmart, which has witnessed protests from workers over pay and conditions, insists employees are given their schedules at least two-and-a-half weeks in advance "so they can plan their lives".

Part-timers who want additional work can sign up for extra hours online, Mr Lundberg adds. While this system has been praised by some workers' groups, others complain that shift availability varies from store to store.

Meddle Here, Cause Problems There

A primary cause of the rise of part-time hours (and more recently, uneven part-time hours and a rise in manager hours) is none other than government regulation called Obamacare.

In the last two years, hours worked by managers at discount and department stores are up 86% while hours worked by nonsupervisor employees is down.

Why? Supervisors, don't get paid overtime. It's yet another artifact of Obamacare.

I discussed that in Discount and Department Stores Boost Manager Ranks by 46% in Two Years, Hours Up 88%

The free market lesson at hand is "meddle here - cause problems there". The proposed solution by meddlers is always "more meddling".

Union Group Mobilizes "Against" Pay Hike

Just yesterday, I wrote Union Group Mobilizes "Against" Pay Hike.

I believe this is the first time in history a union group rallied to protest against a wage hike.

All in all, it should be perfectly clear that the minimum wage hike to $15 that McDonald's workers seek is absurd. Actually, any government mandated minimum wage is absurd.

Those who don't like their job can find another. If enough do, then wages will go up naturally, just as they did at Wal-Mart.

Crash Course for Ritholtz

Barry, please throw away your Soviet-style central planning model where governments set prices of wages, interest rates, crops, etc. It doesn't work.

Instead, embrace something that does work. It's called the free market. This economy would not be in such miserable shape, and wage inequality would actually be far less if we had more of a free market!

Crash Course on Income Inequality

For a discussion on the real cause of wage inequality ....

August 26, 2013: Income Inequality Explained: Why Wages Don't, Won't, and Can't Keep Up With Productivity
March 13, 2014: Democrat Sponsored "Income Inequality"; Law of Bad Ideas, Yet Again
October 17, 2014: Irony of the Day: Yellen Moans About Income Inequality; Seven Things That Cause Inequality
January 2, 2015: Income Inequality Author Turns Down Prestigious Award; Can you Solve a Problem When You Don't Know the Cause?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Monday, February 23, 2015

Mish's Global Economic Trend Analysis

Uneven Housing Recovery in Pictures: Florida, Arizona, Illinois the Worst Large-Population Performers
Union Group Mobilizes "Against" Pay Hike
Beggar Thy Taxpayer: Currency Wars, QE Strain Life Insurers and Pension Plans; Negative Returns With 4-7% Promises
Farmers Walk Away From Leases Due to Plunging Grain Prices

Uneven Housing Recovery in Pictures: Florida, Arizona, Illinois the Worst Large-Population Performers

Posted: 23 Feb 2015 05:12 PM PST

The latest Black Knight HPI Report shows what I call the "Uneven Housing Recovery".

Nationally, prices are up 4.5% from a year ago, and down 0.1% from last month. Variances are wide.

A few pictures will explain what I mean.

Biggest Movers This Month

Biggest Metro Movers This Month

Think Florida looks good?

Then let's take a look at the largest 20 states in alphabetical order.

Performance of Largest 20 States

click on any chart for sharper image

Percentages are relative changes of HPI from dates shown to December 2014. Numerical ranking by most recent month's percentage change follows state name.

I reformatted the top-20 Black Knight table double-wide to make it easier to read.

Home prices in Texas and Colorado exceed their 2005-2006 high! New York has nearly recovered to its previous high in 2007.

Worst Large-Population Performers

Florida -30.3% since April 2006
Arizona -29.5% since May 2006
Illinois -22.5% since July 2006
Connecticut -20.9% since July 2006
California -20.2% since May 2006
Michigan -20.1% since July 2005
Maryland -19.9% since June 2007
New Jersey -19.5% since June 2006

Performance Analysis

Florida, Arizona, and Illinois are the three worst of the largest 20 states in terms of recovery.

Recovery has to do with several factors including magnitude of previous bubble, jobs, and tax policy.

Illinois did not have the bubble of numerous cities in Florida, Arizona, or California. Nor has Illinois had to suffer through a Detroit-style bankruptcy ... yet.

Rather, Illinois lags in the recovery because of poor job prospects, poor tax policy, and what most would consider poor weather. There is little here to attract businesses or immigrants from other states.

In particular, the property tax situation in Illinois is unsustainable. A home that might sell for $300,000 could require as much as $7,000 a year in property taxes, or more.

Taxes varies depending on home rule rates and how aggressive someone is willing to fight tax hikes and property valuations. I have fought tax hikes twice in the last 10 years and won. Most don't. If everyone did, no one would get them.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Union Group Mobilizes "Against" Pay Hike

Posted: 23 Feb 2015 01:27 PM PST

In what may be a first (otherwise an extreme rarity), a substantial force within a union has mobilized against a pay hike to $9.00 per hour from essentially nothing.

"Nothing" you say? Yes, it happens in small non-profit theaters that pay aspiring actors $7 to $15 per performance. Rehearsal time does not count.

Curiously, but rightfully so, the aspiring actors realize there will be no work at all if they have to get paid $9.00 an hour for acting and rehearsals.

Reader Richard, who works in the film industry writes ...

Hi Mish

Actor Equity (the union of stage actors) wants to force small theaters in Los Angeles "to pay the legally mandated minimum wage." There is no doubt this move will decimate local theater and goes against the vast majority of their LA member's wishes.

We have a few theater districts in the city which have sprouted restaurants that depend on the theater traffic to survive. Whole areas such as North Hollywood have transformed themselves as the NoHo Arts District [a play off the SoHo Arts District in New York City] all because of the theaters in the area.

Many actors have vowed to withdraw from the union. I myself work almost exclusively in the film and television these days, but I started my career in theater and benefited from the contracts negotiated by Actors Equity.

But Los Angeles theater is a completely different animal from New York theater and includes many actor run companies with national and international reputations. The economics of LA theater just do not support the model Actors Equity wants to foist on the theater community and will result in the closing of dozens of very well regarded theaters.

Anyway I thought it was an interesting twist on unions. Actors Equity has a vote planned for March 25th but the result is only advisory and the union leadership will them do what they want.

Hope you are well. Keep up the good work.

Cheers,
Richard

Small Theater Community Speaks Out Against a Pay Hike

The LA Times reports, L.A. County's Small-Theater Community Speaks Out on Proposed Wage Hike.

An impassioned, two-hour, open-mike meeting about the future of Los Angeles County's small-theater community Saturday at the Renberg Theatre at the Los Angeles LGBT Center in Hollywood drew an overflow crowd of well over 200 theater folks.

With just one exception, the dozens of speakers, including a calmly emphatic Tim Robbins, were motivated by a deep fear of what a proposed higher wage might do to their artistic scene.

Actors' Equity, the national union for stage actors, is seriously considering imposing a $9 hourly minimum wage for its members when they perform or rehearse in L.A.'s small venues.

Robbins and the rest think $9 an hour is exorbitant and that actors should continue working on small stages for what they have been receiving for decades. The going rate is $7 to $15 per performance, depending on ticket prices and seating capacities. Rehearsals, which can consume scores of hours, pay nothing.

Most of the small theaters are nonprofit organizations that need donations to augment ticket sales in order to sustain what's typically a hand-to-mouth existence.

Robbins is the founder and artistic director of the Actors' Gang in Culver City, launched before his 1988 ascent to movie stardom in "Bull Durham."

He stepped to a microphone wearing a pale blue denim jacket and said it made no sense for union officers to expect small theaters to survive under the proposed new terms. Even with volunteer labor from actors, Robbins began, "I've lost hundreds and hundreds of thousands of dollars. I should rephrase that — invested [it]."

The Actors' Gang has often done shows with big casts, developing new plays from scratch in lengthy rehearsal processes. Some have toured nationally and overseas — where real wages kicked in.

"I've gotten so much out of it, and so have the actors," Robbins said. "Actors have launched careers." The Actors' Gang would have died in the cradle, he said, had there been a minimum wage rule when it began.

"I may be the only person in this room voting yes," said Ann Colby Stocking. She said that she and some actor friends had in fact approached union leaders asking their help because they need better pay.

She painted the scenario she has seen actors endure: "They've come [to rehearsals] from working an eight-hour job. They're crying from exhaustion, they're fainting. They can't take time off, because they can't afford it." With better pay, she suggested, the play could be the thing, the exhausting day job, less so.

Stocking was politely received, even applauded. But by the time the meeting broke up it looked as if a civil war were at hand and that, in an extreme rarity for the U.S. labor movement, a substantial force within a union was mobilizing against a pay hike.

I believe this is a first. Yes, we have seen non-union forces organize against a union drive and alleged higher wages, but I cannot recall ever seeing unions rally against pay hikes. And this membership is not only against a pay hike, but overwhelmingly against.

Hats off to the LA guild for recognizing the theater itself may go under if this hike is forced upon them. So why be in a union at all?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Beggar Thy Taxpayer: Currency Wars, QE Strain Life Insurers and Pension Plans; Negative Returns With 4-7% Promises

Posted: 23 Feb 2015 11:28 AM PST

I received an interesting email on Saturday from Bob Hoye at Institutional Advisors regarding "Currency Wars".

Bob writes ...

Currency wars are very much the talk of the times. This was also the case in the last postbubble contraction when many countries sought to enhance exports through depreciation. And "beggar thy neighbour" policy was a feature of the early 1930s as well.

This time around it is an intelligentsia stricken by the fear of deflation, trying to ramp up anything that trades. But commodity markets and producer prices have not been "accommodating" central bankers. Instead there has been rampant inflation in financial assets, which has reached excessive levels of speculation. Clearly, it is a "beggar thy taxpayer" policy.

Currency Wars and QE Strain Life Insurance Companies and Taxpayers

Bob gets credit for the phrase "beggar thy taxpayer" but I have been thinking along those lines for quite some time.

Pension plan assumptions are always on my mind and a Financial Times article earlier this month puts a spotlight on the problem. Please consider Draghi's QE Strains German life Assurers.

In a report published on Wednesday, Moody's said the "profitability and solvency" of the industry in Germany would come under further strain from the European Central Bank's bond buying.

German life companies, which have estimated liabilities of more than €700bn, sell policies that offer annual guaranteed returns to policyholders, who use the products to save for retirement.

Similar products are sold across Europe, but the guarantees have been particularly generous in Germany.

The ECB's plan to buy €60bn worth of bonds each month has further depressed yields, giving the industry greater concerns. The yield on Germany's benchmark 10-year bond has fallen to 0.35 per cent

To help cope with the pressure, insurers have been reducing the returns they pledge to policyholders. The maximum guarantee sanctioned by authorities in Germany is now 1.25 per cent. The industry has also sought to sell more products that have no guarantees — effectively placing the investment risks with policyholders instead of shareholders.

However, the insurers still need to meet commitments from policies sold in previous years, for which the guarantees have been as high as 4 per cent.

Negative Returns With 4% Promises

Insurers have made 4% promises but long-term bonds yield close to zero.

Benjamin Serra, senior credit officer at Moody's said "They are increasingly constrained by the high level of guarantees sold in the past." 2015 will be a "pivotal and challenging year" for Germany's life assurance industry. Moody's maintained a "negative outlook" for the sector.

As of Friday, 10-year German bonds yield 0.39%. Five-year German bonds yield -0.07%.

Recall that the ECB pledged on January 22 to buy 60 billion euros ($68 billion) of assets a month for at least 19 months in its inane pledge to avert deflation. Buy from where?

Hoarding Bonds

Reuters asked an interesting question last Friday: ECB's Draghi wants to buy bonds, but who will sell?

Weeks before the European Central Bank begins a program to buy about 1 trillion euros of euro zone government bonds, banks, pension funds and insurers across the continent are hoarding them for regulatory or accounting reasons.

"We prefer to hold on to them," said Antoine Lissowski, deputy CEO at French insurer CNP Assurances. "The ECB's policy ... is reaching its limits now."

Insurers and pension funds typically buy long-term debt. They could make hefty profits selling to the ECB. But the money would have to be re-invested in other bonds whose yields would be much lower than their long-term commitments to clients -- a regulatory no-no.

"If we were to sell bonds, we would make huge capital gains, but we will then have to reinvest that money at a yield of 0.5 percent, set against liabilities at 3.50-3.75 (percent)," said Bart de Smet, the CEO of Belgian insurer Ageas.

RBS strategists see a 40 percent chance that ECB purchases would help turn German 10-year Bund yields negative this year.

US Yield Curve

US Promises

In the US, pension funds have not made 1.25% promises or even 4% promises, but rather 7.0%+ promises with the 10-year bond yielding 2.13%.

Annuities promise 6% or so.

How you get 6% in a 2% world?

The correct answer is: you don't. But insurers and pension plans try, by taking risks. And the more risk they take, and the more margin they use, drives prices higher and higher into bubble territory.

Seven Year Negative Returns

As of January 31, 2015, Stock and bond prices are so stretched that GMO's 7-Year Asset Class Real Return Forecast shows negative real returns for seven years in US equities and bonds.

"The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward‐looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward‐looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward‐looking statements. Forward‐looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward‐looking statements. U.S. inflation is assumed to mean revert to long‐term inflation of 2.2% over 15 years."

As of December 31, 2014 GMO managed $116 billion in assets.

Broken Model

In the US, pension plans have aggressively shifted from investing in AAA rated bonds to equities and junk bonds because yields in US treasuries and AAA rated corporates is not high enough.

Denial that this has happened is nearly everywhere one looks. Of course the Fed, and most others, cannot and will not see a bubble until it bursts wide open.

Even if the air is let out slowly (something that has never happened in practice), negative real returns, and perhaps zero nominal returns for seven years is the only other plausible outcome unless one expects an even bigger bubble coupled with even longer negative returns in the future.

I will do a follow-up on this broken model later this week with a look at US pension plans, especially State of Illinois promises that absolutely cannot be met.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Farmers Walk Away From Leases Due to Plunging Grain Prices

Posted: 23 Feb 2015 12:43 AM PST

Walking Away Farmer Style

The price of corn is at a price seen in late 2006, wheat late 2005, and soybeans 2004. Land prices, lease prices, equipment prices, and fertilizer are much higher.

This has put the squeeze on many farmers, especially those who lease land. The result is best described as "walking away farmer style".

Please consider Rent Walkouts Point to Strains in U.S. Farm Economy

Across the U.S. Midwest, the plunge in grain prices to near four-year lows is pitting landowners determined to sustain rental incomes against farmer tenants worried about making rent payments because their revenues are squeezed.

Some grain farmers already see the burden as too big. They are taking an extreme step, one not widely seen since the 1980s: breaching lease contracts, reducing how much land they will sow this spring and risking years-long legal battles with landlords.

The tensions add to other signs the agricultural boom that the U.S. grain farming sector has enjoyed for a decade is over. On Friday, tractor maker John Deere (DE.N) cut its profit forecast citing falling sales caused by lower farm income and grain prices.

Many rent payments – which vary from a few thousand dollars for a tiny farm to millions for a major operation – are due on March 1, just weeks after the U.S. Department of Agriculture (USDA) estimated net farm income, which peaked at $129 billion in 2013, could slide by almost a third this year to $74 billion.

The costs of inputs, such as fertilizer and seeds, are remaining stubbornly high, the strong dollar is souring exports and grain prices are expected to stay low.

How many people are walking away from leases they had committed to is not known. In Iowa, the nation's top corn and soybean producer, one real estate expert says that out of the estimated 100,000 farmland leases in the state, 1,000 or more could be breached by this spring.

The stakes are high because huge swaths of agricultural land are leased.

Landowners are reluctant to cut rents. Some are retirees who partly rely on the rental income from the land they once farmed, and the rising number of realty investors want to maintain returns.

One catch is that many landlords never thought to file the paperwork to put a lien on their tenants' assets. That means landowners "can't go grab anything off the farm if the tenant doesn't pay," McEowen said. "It also means that they're going to be behind the bank."

Corn Monthly

click on any chart for sharper image

Wheat Monthly

Soybean Monthly

If grain prices stay depressed, can lease prices and land prices be far behind?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Sunday, February 22, 2015

Mish's Global Economic Trend Analysis

Google Chrome Approaching World Domination?

Posted: 22 Feb 2015 03:54 PM PST

A few moments ago a reader was having difficulty with an ad on my blog. I occasionally get complaints, and most of the recent ones involve non-US ads. The reader said the problem went away when he switched over to Chrome from Internet Explorer.

That got me wondering what browsers people were using to read my blog. Here are the results from a 20-minute, mid-Saturday snip.

Mish Readers by Browser

The above is publicly available on Stat-Counter which tracks my traffic.

If you wish to take a look, click on the "View My Stats" button (not the number) at the bottom of this page.

Since inception I have had over 102 million hits (the number shown).

I switched over to Stat-Counter from SiteMeter long ago, for numerous problems that I still see people complaining about. Stat-Counter keeps track of all kinds of things as does Google Analytics.

Search Engine Traffic

Search engine traffic (if someone found by blog via a search rather than a bookmark) looks like this.

Mish Traffic by Location

Browser War Over?

I did a search for the term "browser war" and discovered this December 19, 2014 ZDNet article: Did the browser wars finally end in 2014?

The modern browser wars began in earnest in 2004, when Mozilla Firefox challenged Internet Explorer's complete and utter market dominance, successfully growing from zero to several hundred million users in less than five years.

Google took over in 2008, introducing its Chrome browser, which caught up with Firefox by 2012.

The fighting might have finally ended in 2014.

Over the past decade, a lot has changed: Mobile devices now outnumber traditional PCs, and the desktop browser has become much less important than mobile web clients and apps. Apple's mobile Safari and Google's Chrome are now major players, Mozilla is in a time of major transition, and Microsoft is still paying for its past sins with Internet Explorer.

And in 2014, all those players seem to have dug in to well-entrenched positions. Here's an end-of-year status report for each one.

Google Chrome: On a Path to World Domination

Google, it turns out, would love to have the dominant market share that Internet Explorer did back in its heyday, without the performance and security nightmares associated with IE.

The company is using a move straight out of the Microsoft playbook from the 1990s, using its dominant free services (Google Search, Gmail, and YouTube, in particular) to push the Chrome browser, and adding capabilities that require Chrome apps, which are designed to create the same type of lock-in that Microsoft's ActiveX enforced in the early days of the Web, minus the horrible security flaws.

If that screenshot reminds you of "Best viewed in Internet Explorer 6," you're not alone.

The strategy seems to be working. While other browsers are remaining flat or declining in share, Chrome is still ascending, albeit more slowly. According to Net Applications, Chrome was in use on 20.6 percent of desktop and notebook PCs and Macs at the end of 2014, up from 16.4 percent at the beginning of the year. At StatCounter, which measures usage, Chrome crossed the 50 percent mark this year and now accounts for more web-based activity than Internet Explorer and Firefox combined.

Internet Explorer: Still No Respect

Microsoft's biggest problem at this point is maintaining compatibility with older IE versions that don't hew to modern standards. This year the company announced plans to drop support for all but the latest version of Internet Explorer, a policy that would bring it into parity with most of its rivals. The trouble is, that policy doesn't take effect until January 2016.

Meanwhile, Internet Explorer is still despised by developers, who rightfully resent having to build in hacks for all those old but still supported versions. Despite the fact that recent versions of Internet Explorer are remarkably standards-compliant, there are still sites that don't work properly in IE, usually because whoever built the site designed it to run on Chrome or Safari and didn't even bother testing it with Internet Explorer.

Mozilla: An Uncertain Future

For the past three years, Mozilla has been living high on the hog, thanks to a search deal with Google that paid $300 million a year for the past three years.

That Google deal expired in November. As the clock ticked down, Mozilla announced a new five-year (U.S.-only) search partnership with Yahoo but pointedly resisted specifying its terms. A look at Mozilla's balance sheet raises questions about its long-term prospects, especially as it tries to move aggressively into the mobile sector with its own Firefox OS.

It hasn't been a great year for Mozilla. In March, Firefox Vice President Johnathan Nightingale publicly threw in the towel on a long and expensive development effort to build a touch-capable Firefox for the Windows 8 Metro interface. That same month, co-founder Brendan Eich became CEO but lasted less than two weeks before resigning over a controversial political donation.

Safari: Apple's House Browser

In the beginning, Safari was introduced on the Mac as a way for Apple to break its dependence on Internet Explorer.

And then a funny thing happened: As mobile devices became more important, mobile Safari on iOS became more important than its older sibling on the Mac. Apple has sold far more iPhones and iPads than MacBooks and iMacs at this point, and sales of mobile devices are continuing to grow faster than Macs.

And Safari is actually being used on those mobile devices. Yes, there are third-party browsers (including Chrome) in the App Store, but they're forced to use the Safari rendering and JavaScript engines, which means Apple has complete control over the web browsing experience.

Opera: Hanging On

For several months this year I've used Opera as my default desktop browser. The experiment was designed to see whether an independent alternative based on the Webkit rendering engine could succeed.

Overall, it hasn't been a completely unsuccessful experiment. There's a lot to like in the new Opera, although a few key features, including the ability to sync bookmarks and passwords, are still missing. More importantly, some sites that were designed to work best with Chrome or Safari fail in mysterious ways in Opera. The failure rate is worse than with Internet Explorer 11, in my experience.

Unfortunately, the most messed-up pages are those I see when I try to use Opera to visit ZDNet. In particular, our new commenting system is almost impossible to use with Opera. That means I either have to use another browser or ... stop reading comments. Decisions, decisions.

It's pretty clear to see where this is headed. Firefox has some major issues. Opera is not in the picture at all, and Microsoft is headed that way.

Addendum

Out of further curiosity, I did a Google Analytics view of readership sessions for the month of December 2014. In December, every country in the world visited my blog at some point except for Turkmenistan and 9 countries in Africa.

Top 10 Visits by Country

Those are sessions. Page hits are about 1.5 times higher.

For all of 2014, every country in the world visited this blog.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Tspiras Claims to have "Won a Battle, Not the War"; Greece to Combat Tax Evasion; Illusion Shattered; Another Bailout?

Posted: 22 Feb 2015 11:54 AM PST

On Friday, Prime Minister Alexis Tsipras backed down on nearly every promise made to the Greek electorate except one, to stay on the euro. After so much tough rhetoric, the question is why?

I believe the answer is the Greek primary account surplus vanished, making it impossible to honor all commitments made.

Simply put, Greece had to choose between staying on the euro and honoring the other campaign promises.

Greece Attacks Tax Evasion

On Monday, Greece will submit its reform plan to eurozone officials. At the heart of the deal, Reforms Will 'Combat Tax Evasion'.

Greece will crack down on tax evasion and streamline its civil service in its bid to secure a bailout extension, minister of state Nikos Pappas says.

The government is working on a package of reforms that it must submit to international creditors on Monday. If the reforms are approved, Greece will be granted a vital four-month extension on its debt repayments.

Mr Pappas said the reforms being proposed would take the Greek economy "out of sedation". "We are compiling a list of measures to make the Greek civil service more effective and to combat tax evasion," he told Greece's Mega Channel.

Illusion Shattered

Streamlining civil services will reduce expenses, but it's hardly what the leftist government promised. Combating tax invasion was a campaign promise, so make it two campaign promises kept for those keeping an official score.

Nonetheless, those expecting Tsipras to immediately honor all pledges, just had their illusion shattered.

Reuters reports Greece Readies Reform Promises.

Top Marxist members of Tsipras's Syriza party, a broad coalition of the left, have so far been silent on the painful compromises made to win agreement from the Eurogroup.

But veteran leftist Manolis Glezos attacked the failure to fulfill campaign promises. "I apologize to the Greek people because I took part in this illusion," he wrote in a blog. "Syriza's friends and supporters ... should decide if they accept this situation."

Glezos, a Syriza member of the European Parliament, is not a party heavyweight. But he commands moral authority: as a young man under the World War Two occupation, he scaled the Acropolis to rip down a Nazi flag under the noses of German guards and hoist the Greek flag, making him a national hero.

A government official said Glezos "may not be well informed on the tough and laborious negotiation which is continuing".

The opposition pounced on the climbdown from promises that have raised huge expectations among Greeks. "No propaganda mechanism or pirouette can hide the simple fact that they lied to citizens and sold illusions," said Evangelos Venizelos, leader of the socialist PASOK party.

Friday's agreement merely buys time for Greece to seek a long-term deal with the Eurogroup. Euro zone members Ireland and Portugal have already exited their bailouts, but Greece faces yet another program - on top of bailouts in 2010 and 2011 totaling 240 billion euros - when the extension expires.

"Once you get them into the safe space for the next four months, there'll be another set of discussions which will effectively involve the negotiation of a third program for Greece," Irish Finance Minister Michael Noonan said on Saturday.

Troika by Any Other Name Smells Just as Bad

Six days ago in Greek Negotiations and Philosophical Questions I asked Does "Troika" by any other name stink as bad?

My answer was "Beauty is in the nose of the beholder. But logically, the answer is yes."

Keep Talking Greece has some interesting Excerpts from a Statement Made by Glezos.

"Renaming the Troika into Institutions, the Memorandum of Understanding into Agreement, and the lenders into partners, you do not change the previous situations as in the case renaming meat into fish.

The people voted in favor of what SYRIZA promised: to remove the austerity which is not the only strategy of the oligarchic Germany and the other EU countries, but also the strategy of the Greek oligarchy.

Some argue that to reach an agreement, you have to retreat. First: there can be no compromise between oppressor and oppressed. Between the slave and the occupier is the only solution is Freedom.

But even if we accept this absurdity, the concessions already made by the previous pro-austerity governments in terms of unemployment, austerity, poverty, suicides have gone beyond the limits."

Third Bailout Coming

On February 11, I discussed the need for a third bailout in Third Greek Bailout? Another €53.8 Billion Needed? Primary Account Surplus Revisited.

That explains the comment made by Irish Finance Minister Michael Noonan yesterday. "Once you get them into the safe space for the next four months, there'll be another set of discussions which will effectively involve the negotiation of a third program for Greece."

"Won a Battle, Not the War"

Will Tspiras finally draw a line in the sand or will he accept another €53.8 Billion crammed down his throat?

I think so. But before he can do so, Greece needs to have a solid primary account surplus. That explains why the heart of his reform program involves a crackdown on "tax evasion" and cutting civil service.

To default on the Troika and stay in the eurozone, Greece must have a primary account surplus. Tsipras has a four month window to achieve that.

War Postponed Four Months

In context, the battle was to stay on the euro. The war was postponed for four months. In the interim, Tsipras needs to keep his coalition intact.

Once again, I do not care for the leftist policies of Syriza. But the citizens of Greece have suffered enough and are better off defaulting as soon as they can. That requires a primary account surplus.

On Friday German finance minister Wolfgang Schäuble rubbed Greek capitulation in Tsipras' face with his comment "The Greeks certainly will have a difficult time to explain the deal to their voters. As long as the programme isn't successfully completed, there will be no payout."

Let's see what happens four months from now.

With roles reversed and Schäuble playing the witch, I envision Tsipras' silently saying "All in good time my little pretty, in good time".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Saturday, February 21, 2015

Mish's Global Economic Trend Analysis

"Prepare for Full-Scale War" says Ukraine Deputy Foreign Minister: "With What?" asks Mish; Ukraine Lie of the Day

Posted: 21 Feb 2015 01:25 PM PST

I have been sitting on close to a dozen videos describing the massive damage in military equipment in the latest separatist surge.

For a description, but no videos, please see Debaltsevsky Under Rebel Control, Boiler Remains; What's Next?

I saw no need to post videos because to me it was pretty obvious this was a repeat of the devastating defeat of Ukraine last August in the Battle of Ilovaisk in which Ukrainian forces refused an offer to exit encirclement by leaving behind equipment.

Ukraine Lie of the Day

Today Ukrainian "Antiterrorist Operation" spokesman Andrei Lysenko says Since 2015 Ukraine Destroyed Nearly 3,000 Militants.

I have no idea how many separatists were killed, but the rest of the claim in the body of the article is preposterous.

"According to operational information and data provided by our scouts, since the beginning of 2015, in Debaltsevo area, the Ukrainian military killed 2,911 militants and Russian military. More than 40 tanks, 30 armored combat vehicles, about 30 multiple rocket launchers."

In addition, since the establishment of the cease-fire, that is, from February 15, we neutralized 868 militants, 8 tanks, 11 armored combat vehicles and four multiple rocket launchers.

Tour of Carnage

Does anyone in Ukraine or elsewhere believe the horse hockey by Andrei Lysenko?

If 3,000 rebels are dead, can we have some images? What about images of tanks destroyed? Images of anything?

If there were destroyed separatist tanks, satellites would pick that up.

Let's take a brief video tour of the actual carnage. Here is a short 1:32 video showing a destroyed tank, captured equipment and a Nazi helmet.

Link if video does not play: On the former UAF Position we Found a German Helmet with Swastika. That video may have an annoying 15-second ad.

Here is a 4:16 video whose title roughly translates as Ukrainian Media Officer and Recon Team Meets Fate in Debaltsevo.

Tank Battle Video

Here is an 11:28 video that describes "Details of the Tank Battle on the Night of February 18"

This video starts out slow. You may wish to fast forward to the 2-minute mark. It does not get really interesting until the four minute mark when you see more destroyed Ukrainian tanks and other equipment. You also see captured stockpiles of weapons. The heart of the video is the 4 to six minute mark but more destroyed vehicles around the 7 minute mark and another destroyed tank towards the end.

Abandoned Tanks

Let's assume for a second the Ukrainian forces managed to destroy a tank or two. If it pleases you, assume three or five

Check out this video of abandoned Ukrainian tanks, other vehicles, and munitions.

The announcer at the beginning ends in about 15 seconds. Some of the footage repeats but around the 3:00 minute mark or so it gets interesting for a second time. The video shows an entire Ukrainian army camp abandoned.

No doubt the soldiers wanted to escape on foot with their lives. Again some of the footage repeats so it's difficult to tell how many times and many angles some of the same equipment appears.

Regardless, we can say the separatists captured many "trophies".

Link if video does not play: "Ghost" Brigade Took Novogrigorovku Towards Artemovskii

I have many more of these, from many locations, some showing gruesome bodies. In the above horse hockey, it's as if Andrei Lysenko is describing Ukrainian losses not separatist losses.

Jacob Dreizin comments ...

Politicians and generals in Kiev have been making up statistics on rebel casualties and "Russian tanks crossing the border" (and denying their own losses) since day one. However, it's clear now that the Anglo-American press is finally wising up to this. Although they are not yet wise enough to attempt an aggregate total for Ukrainian KIA to date. I estimate this at 6000 since April 2014 as an absolute minimum. This is about 4-5 times higher than the "official" tally from Kiev. That's my minimum estimate. I suspect the real figure is 1000 or 2000 higher. This does not include those too seriously wounded to ever return to front-line duty, which may be another 50% of the total dead. In addition, Ukraine is prosecuting over 1,000 deserters. Those deserters must also be counted as troops lost. As for rebel losses, I estimate 1/4 to 1/3 of the Ukrainian total.

Ukrainian equipment lost in the "Ilovaisk cauldron" and the various mini-cauldrons last summer were replaced from mothballed Soviet-era stocks and to a much lesser extent from new production.

I believe Kiev has finally hit the wall. Its stocks are nearly empty. There's still enough ammo to fight for a few years, but in terms of equipment, Ukraine no longer has anything to replace what it just lost around Debaltsevo, let alone to seriously equip new units coming online.

So all of these new draftees they are now "mobilizing" will have to fight on bicycles. Either that, or American tanks. Or, Kiev will need to ask the rebels for a 3-year ceasefire while it produces enough new equipment from its half-ruined factories. Take your pick.

"Prepare for Full-Scale War"

Jacob's comment came in yesterday. Today we see this headline from Colonel Cassad: Ukraine Deputy Foreign Minister Vadim Pristayko Says Ukraine Prepared for "Full-Scale War."

According to Pristayko, Kiev "Ukraine is no longer afraid to come into conflict with a nuclear power".

Don't like Cassad? OK I have Canadian source. CBC News says Ukraine preparing for 'full-scale war,' says former envoy to Canada.

An envoy to Canada is one thing, and a Deputy Foreign Minister is another. Vadym Prystaiko is now Ukraine's deputy foreign minister. And he is begging Canada for weapons for obvious reasons.

Ukraine's deputy foreign minister says he is preparing for "full-scale war" against Russia and wants Canada to help by supplying lethal weapons and the training to use them.

In an interview with CBC Radio's The House airing Saturday, Prystaiko says the ceasefire brokered by Germany and France was not holding.

"The biggest hub we ever had in the railroad is completely destroyed and devastated," he told host Evan Solomon about Debaltseve, captured by Russian-backed rebels after the terms were to have taken effect earlier this week.

The former ambassador was in the room during the attempts to broker a political solution with Russian President Vladimir Putin in Minsk.

"Personally I don't trust him," he says. "You look at him and you think, 'Are you serious?'"

[Mish comment: And why the hell should anyone, including Ukrainian citizens trust Ukraine president Petro Poroshenko. Poroshenko has lied about the losses, the civilian casualties, amnesty, constitutional reforms, and damn near everything else. This does not condone Putin. It's a statement that lies are not one sided.

"Nobody knows what is going on in his head. I believe he is becoming very emotional [over the two countries' historic ties]," he suggests, calling Putin's intentions "difficult to predict."

[Mish Comment: I do not pretend to know what is going on in Putin's head. But what the F is going on in Poroshenko's head to not give a damn about willingness to engage a nuclear power? And if anything it's easier to ascertain Putin. He does not want NATO on his back porch any more than Kennedy would allow Russian missiles in Cuba.]

"We don't want to scare everybody, but we are preparing for full-scale war."

What to do in the face of such a threat? For starters, get over your fears, he says.

"What we expect from the world is that the world will stiffen up in the spine a little," he says. "Everybody is afraid of fighting with a nuclear state. We are not anymore, in Ukraine — we've lost so many people of ours, we've lost so much of our territory.

[Mish comment: Prystaiko now begs Canada for weapons.]

"We would like Canada to send lethal weapons to Ukraine," he said. "Weapons to allow us to defend ourselves."

Canada has been helping to train Ukrainian soldiers for the last decade, but it isn't enough, he says. "It wasn't on the level that would help our army [against an] invasion." Ukraine wants weapons, and training to use them, he said.

Prepare for Full-Scale War - With What?

Why is Prystaiko begging Canada for weapons?

Because Ukraine is out of weapons. Ukraine lost masses of weapons last summer in various cauldrons and were pounded again recently.

These idiots in Ukraine do not care how many of their citizens die.

Why should the US or Canada or anyone else care about a civil war in Ukraine? So what if Russia is backing one side. It's none of our business.

And now these jackasses are prepared to up the ante risking war with a nuclear power. They are nuts and Canada would be nuts to give Ukraine weapons.

Flushing Action

Should there be a Maple Leaf on the above leg as well?

War is Over

On January 29, in Conscription of People, Cars, Businesses in Ukraine for Mindless Slaughter; Entire Villages Leave to Avoid Servitude; Hop on the Bus Gus I made these statements:

This War is Over

The Vietnam war ended when public support turned against it, even though fighting continued long after.

The same applies here. The war is over. Hearts and minds have been lost along with the will to fight. Ukraine is split in two, barring a major military intervention by the US.

Even though the war is over, the fighting can continue. How much longer the battles go on now depends on the US and IMF.

The US can fund the bloodshed for a while longer and so can the IMF. US war-mongers may decide no price is too high to pay, even to the absurd point of engaging Russia directly.
The US and IMF can force true peace negotiations on Kiev with a partition or federation of the country. But, what may have been acceptable to the separatists and Russia six months ago may no longer be so.

Either way, Ukraine is never going to be a single country again. Such is the madness of arbitrarily drawing borders with no regard to cultural, political, or religious beliefs.

The war is over. Kiev lost, even with the backing of the US. Let the peace process begin before more lives are lost and more needless destruction occurs.

I believe that was an accurate assessment, and no one else called it.

Not only have the citizens of Ukraine given up the will to fight, Ukraine is out of military equipment and now begs Canada and the US for some.

For what? Why?

Ukraine is never going to be a single 100% united country again. Crimea is gone for good. Of course, Crimea was never really part of Ukraine in the first place.

There is still hope for a loose federation with what remains. But that requires 100% guarantees of amnesty and constitutional reforms.

Meanwhile, if the US and Canada send more weapons, so will Russia.

The US and Canada should both tell Ukraine, as did Chancellor Merkel, "the solution is political not military".

If that were to happen, and especially if the IMF demanded a ceasefire before agreeing to more funding, the fighting would end tomorrow.

You cannot fight war with no money, no arms, and no will of the people. Realistically, the war is over. You may prefer the term "decided" instead of "over". Regardless, all the US and Canada can do at this point is prolong the misery.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com