Economy News

17.11.14

Mish's Global Economic Trend Analysis

Grubergate: Obama Caught Lying About Obamacare at G20 Summit, Kerry Provides the Proof
"Mystery of the Unexpected" Explained; Japan Slides Into Recession Yet Again; Blue Ribbon Panel in Review
"Debt Trap" Nonsense; Eurosceptics on Rise; Demise of the EU: "Soon There Won't be a Europe" Says Telegraph

Grubergate: Obama Caught Lying About Obamacare at G20 Summit, Kerry Provides the Proof

Posted: 17 Nov 2014 07:34 PM PST

The "Grubergate" scandal will just not go away.

For the background to this story and a startling video clip, please see my November 11 post, Obamacare Architect Explains "Stupidity of American Voter" Needed to Pass ACA.

Video clip shown below.

At the recent G20 conference, a reporter asked Obama to explain his role, what he knew, and the role of Jonathan Gruber. When the heat is on, politicians do what they do best: lie.

Here's proof, in a second video clip published on November 16.

Please play the first and second video. They are short and easy to understand.

Gruber commented twice (at least) on the "stupidity of the American voter". Now Gruber calls his statements "speakos", verbal typos.

Anyone believe that? Anyone believe Obama?

Regardless, it's too late. Obamacare passed and now (like it or not) we are stuck with it.

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

"Mystery of the Unexpected" Explained; Japan Slides Into Recession Yet Again; Blue Ribbon Panel in Review

Posted: 17 Nov 2014 01:04 PM PST

With two consecutive quarters of contracting Gross Domestic Product, Japan is officially back in recession. GDP shrank 1.6% annualized.

Unadjusted for price changes, the Japanese economy contracted an annualized 3 percent, the Cabinet Office said.

None of this was "expected". We will explore "why" in a moment. First consider some headlines.

Bloomberg: Japan Unexpectedly Enters Recession as Abe Weighs Tax.

Wall Street Journal: Japan Falls Into Recession. GDP Declines 1.6%, Setting Stage for Delay in [Another] Sales-Tax Increase.

Time: Japan Sinks Into Recession (Again).

Time Reports ...

An unexpected contraction in quarterly GDP shows that Prime Minister Shinzo Abe's radical economic program is badly broken. GDP in the quarter ended September shrank by an annualized 1.6% — far, far worse than the consensus forecasts. That followed a disastrous 7.3% contraction in the previous quarter. Speculation in Japan is that the bad results will push Abe to call a snap election only two years after taking office.

Financial Times: Sales Tax Tips Japan Back Into Recession

Financial Times Reports ...

Japan is poised for a snap election after its economy tipped into a technical recession, increasing the odds that prime minister Shinzo Abe will delay plans to raise the country's sales tax next year and appeal for a fresh mandate.

Monday's preliminary data for the period between July and September was far worse than markets expected, showing the economy shrank 1.6 per cent quarter-on-quarter on an annualised basis. Analysts had expected growth of 2.2 per cent.

The dip is a blow for "Abenomics", the most ambitious attempt to revive Japan's economy since it fell into stagnation two decades ago.

Expectation vs. Reality

Expectation: Last quarter's huge plunge was a one-time affair.
Expectation: 2.2% growth this quarter.

Instead, Japan's economy shrank 1.6% and last quarter was revised lower from negative 7.1% to negative 7.3%.

Blue Ribbon Panel in Review

Flashback August 31, 2013: Japan Seeks to Hike Taxes then Waste Money on Stimulus to Make Up for Decline in Spending.

My comment: "When you cherry pick a panel, and the panel has a pre-determined outcome, the answer always comes out the way you expect. Thus Abe's blue ribbon panel concluded tax hikes won't hurt. And for good measure, if by some chance they do, the panel suggested wasting those tax dollars on stimulus. Good grief!"

Flashback April 30, 2014: Japan Output and New Orders Decline at Fastest Pace Since 2012; Abenomics in Review

My Comment: "Abenomics said Japanese stimulus efforts would offset tax hikes. I disagreed. Although one month is not proof, Markit reports Japanese Output and New Orders Decline For First Time in 14 Months Following Tax Hike."

Flashback September 8, 2014: Japanese Economy Contracts Bigger than Expected 7.1% in 2nd Quarter; Really Bad Theories

My Comment: "By now it should be pretty clear that Abenomics is a complete failure. Abenomics did not spur lending, investment, hiring, or wage growth. It's one touted 'success' is that prices have gone up. And for cash-strapped consumers facing higher taxes, that alleged "success" is actually a disaster."

In September, I also commented on "really bad theories".

Really Bad Theories

"Theoretically, there should be no impact from the consumption tax increase on corporate spending or long-term corporate planning, but a large number of Japanese corporations seemed to see a large impact from the hike on final demand," said Junko Nishioka, an economist at RBS Japan Securities in Tokyo.

Good grief. Nishioka has theories, but they are as sound as a home foundation in a swamp. Here's an easy to understand explanation.

Eight Point Explanation

Japan's sales tax increased from 5% to 8%.
Wages did not go up.
Consumers have 3% less money to spend.
Consumers with less money, spend less.
Businesses faced with a slowdown in consumer spending reduce future plans.
Abe plans to hike the sales tax again and businesses know that as well.
Business sentiment sours.
Japanese demographics are such that businesses already have substantial worries.

What is it about those eight points that economist Nishioka fails to understand?

Mystery Explained

Why all of this is so "unexpected" is an apparent mystery. Sales tax hikes do not spur the economy, no matter how much of it government wastes. And it should not take a genius or an 8-point synopsis to figure that out.

So why was this news so "unexpected" in nearly every quarter? I have two answers.

Economists are the most optimistic lot on the planet. They believe what they want to believe.
The average economist also believes in Monetarist and Keynesian fairy tales.

Japan is living proof of the absolute stupidity of Abenomics (a combination of Keynesian and Monetarist stupidity), yet academia, let by economist Paul Krugman concludes "Japan did not do enough".

Apparently, debt to the tune of 250% of GDP fighting deflation was not enough. 500% would not have been enough either, for obvious reasons.

But don't expect any Keynesian or Monetarist clowns to admit that. They will never stop believing in fairy tales.

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

"Debt Trap" Nonsense; Eurosceptics on Rise; Demise of the EU: "Soon There Won't be a Europe" Says Telegraph

Posted: 17 Nov 2014 11:08 AM PST

Eurozone Breakup Coming

Telegraph writer Jeremy Warner moans Soon, There Won't be a Europe to be Part Of.

"It's not a question of in or out, but of whether Britain can avoid the flames of destruction," says Warner.

On that I certainly agree. In general, Warner has the "what's happening" part correct has but his synopsis of what to do about things is exactly the same tried-and-failed Keynesian and monetarist clatrap the Telegraph always sponsors.

Warner's nonsense culminates with "It is an economic truth pretty much universally acknowledged that you cannot deflate your way out of a debt trap, yet it seems entirely lost on the eurozone high command."

Europe is really attempting deflate? Really? In what alternate universe?

Debt Trap Nonsense

The entire notion there is such a thing as a "debt trap" is a Keynesian-sponsored fallacy.

The facts of the matter are simple:

Central bank Monetarists in conjunction with Keynesian fiscal fools created the "debt problem" with absurd inflationary policies.
Now that debt-bubbles have burst, Jeremy Warner, like his Telegraph counterpart, Ambrose Evans-Pritchard and multitudes of writers and academics, expect the same polices that created the debt problem to cure it!

Attempts to inflate out of alleged "debt traps" are nothing more than absurd can-kicking exercises that defy common sense. Japan is real-life proof.

Rise of the Eurosceptics

Let's leave the "why" and the "what to do about things" aside and instead focus on Warner's perception of what is happening right now on the eurosceptic front.

Across the continent, traditional centrist politics are in a state of meltdown. Nowhere is this more apparent than in Spain, where a radical Left party that didn't even exist 10 months ago is now topping the polls. Ill-judged attempts by the Rajoy government to use the crisis as a means of strengthening Madrid's grip on the country have meanwhile reignited Spain's centuries old centrifugal forces. It's not just the Catalans who threaten to break away.

What goes for Spain is just a proxy for Europe as a whole, where attempts to impose fiscal discipline from the centre have resulted only in growing public alienation and anger. In France, the polls are led by an anti-European crypto-fascist with a Left-wing agenda that makes even the disastrous François Hollande look moderate.

In Italy, the only viable alternative to the beleaguered Matteo Renzi is a professional comedian, Beppe Grillo, with no apparent policies at all, or few that make any sense. Even in Germany, the protest vote is fast gaining momentum. As with Ukip, Alternativ für Deutschland has taken off like a rocket since it widened its appeal from the single purpose of bringing back the beloved Deutschmark to an anti-immigrant, law and order, agenda.

Brainwashing Messages and Fake Tories

In the Telegraph comment section, "Richard N" offers this accurate assessment of what Warner wrote.

To say Grillo's party doesn't have any policies is just stupid: he is expending most of his time and energy - very noisily - on getting a referendum on Italy leaving the euro.

He says that Italy's desperate financial straights are due in large part to being in the euro. That is a policy - and an eminently sensible one for Italy.

As for Le Pen being a crypto-fascist - that's an equally stupid thing to say. She is a left-wing nationalist - it's that simple.

You guys at the Telegraph do the same thing as the fake eurosceptic MPs in the Tory party - mouth the eurosceptic stuff - but inject the EU's brainwashing messages in between the lines, to attack those new political parties which threaten the power of the incompetent, power-hungry goons running the EU.

Keynesian and Monetarist Silliness

Actually, its not just brainwashing efforts by the EU, but also by central banks, politicians who want more taxes and more spending, academics like Paul Krugman, and monetarists such as Ambrose Evans-Pritchard and Harvard professor Greg Mankiw.

Harvard Professor Greg Mankiw wins the prize for making the most inane monetarist proposal in history. Mankiw proposed that 10% of money be made worthless every year via a lottery in which the the Fed would pull a number out of a hat each year and all currency ending in the digit drawn would immediately be worthless. I called Mankiw out in Economist Mankiw Defends Policy of Theft
Ambrose Evans-Pritchard also constantly sings a preposterous monetarist tune. For example, please see Monetarists Accuse ECB of "Dangerous Game of Chicken"; The REAL Dangerous Game
While on the subject of foolish economic policies, I have yet heard a reply to my October 19 Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit"

Status Quo is Dead

Aside from the ad hominum and personal attacks, Warner has the eurosceptic trend correct. His conclusion is also accurate:

"The European Union is failing. Whether we are in or out scarcely seems to matter any more. In imagining it does, many of our leading businesses and politicians are woefully behind the curve. Something will eventually emerge from the wreckage. But whatever it is, it won't be the status quo."

Indeed. Something will emerge from the inevitable wreckage, and it will not be the status quo.

On one hand, that's encouraging. However, I must warn: never underestimate the propensity of central bankers and politicians to make matters worse, with Keynesian and Monetarist fools cheering every step of the way.

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

16.11.14

Mish's Global Economic Trend Analysis

Swiss Gold Referendum in Perspective

Posted: 16 Nov 2014 05:54 PM PST

A number of readers have asked me to comment on the Swiss Gold Referendum and what it may mean for the price of gold.

Let's start with a recap of the three primary points that citizens in Switzerland will vote on.

Switzerland Gold Initiative

Halt all Swiss National Bank (SNB) gold sales
Repatriate Swiss gold held in foreign vaults (UK and Canada)
Establishes minimum 20% level of SNB Assets in gold

Of course, central bankers everywhere are horrified by the idea they should have to do anything, especially hold sound assets.

And in a flurry of fearmongering by the central bank and inflationists in every corner, it appears the initiative is headed towards defeat.

What If?

Polls aside, let's play a bit of "What If?"

Specifically, what would happen to the price of gold if the referendum passes?

Spanner in the Works

Variant Perception says Swiss Gold Referendum: A Spanner in the Works.

As polls continue to swing around ahead of the Swiss gold referendum on 30th November, we expect increased volatility in the FX and gold market.

After the implementation of the EURCHF floor, gold's share of the SNB balance sheet has fallen to 7.5% from around 30% in 2007 (top chart) [SNB Balance Sheet]. The SNB has already pointed out the untenable nature of the peg should the referendum pass, but the impact on the gold market would also be significant.

Taking the current balance sheet of 522bn CHF and spot gold prices, the requirement to hold at least 20% of assets in gold would necessitate buying 1,800 tonnes of gold over 5 years. Total global production in 2013 was 2,982 tonnes, thus the SNB would need to buy at least 10% of the annual production every year for the next 5 years.

The bottom chart [SNB Reserves] shows the latest composition of the SNB's FX reserves. The requirement to buy gold will necessitate selling reserves, mainly EUR (which makes up 45% of all reserves). Should these euro selling flows come to pass, it will weigh heavily on the currency.

SNB Balance Sheet

SNB Reserves

Missing the Boat

I am a fan of research by Variant Perception, but I believe they may have missed the boat here.

Specifically, I question if gold production is much of a factor at all. That may sound strange since the referendum would require Switzerland to purchase a big percentage of all future gold mining over the course of 5 years.

However, mining is not the only supply. Nearly all of the gold ever mined is available for a price. It's reasonable to exclude gold in museums, historic items, rare coins and the like, but in aggregate there may be over 170,000 tons or so of gold supply.

A few charts courtesy of Nico at Sharelynx Gold will explain.

Annual Gold Production

Cumulative Gold Production Since 1835

Central Bank Holdings vs Cumulative Production

Of the 2013 total (a bit higher now), central banks hold about 31,877 tons.

SNB Purchases Irrelevant

One must exclude central bank holdings from the amount of gold available for central banks to buy. And as stated earlier, one can subtract various other items like rare coins, but the overall numbers show that it's safe to conclude "buying 1,800 tonnes of gold over 5 years" is essentially irrelevant from a "gold available" for purchase standpoint.

That said, one must also factor in gold psychology. It is entirely possible that SNB purchases could significantly alter perceptions on the desirability of holding gold.

From that aspect, Variant Perception may indeed be correct on their assertion of the importance of the referendum should it indeed pass.

Most Gold Analysis Wrong

Many gold analysts point out gold production vs. jewelry demand. It's essentially the same miss-analysis. Jewelry demand is of little meaning in and of itself as a factor in price.

Someone has to hold every ounce of gold ever produced. It's that demand for gold, all 170,000 tons of it, that determines the current price, not production.

I discussed this previously in Truly Inane Bloomberg Analysis On Gold

By the way, 170,000 tons of gold would fit into a cube about 67 feet wide, high, and deep. It does not take a lot of space to hold a fortune in gold.

What the Future Holds

I do not know the future price of gold, nor does anyone else.

But I do know the fundamental drivers as well as the reasons to hold gold. And neither of those has changed.

For further discussion, please see Plague of Gold Bears Now Say "Gold Unsafe at Any Price"; What's the Real Long-Term Driver for Gold?

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

Kiev Effectively Cedes East Ukraine to Separatists; Poroshenko Withdraws Hospital and School Funding, Bank Card Operations

Posted: 16 Nov 2014 11:46 AM PST

Scorched Earth Policy

Last week, the government in Ukraine cut off pensions benefits to residents of rebel-held areas until such time as these areas return to Ukrainian control.

Yesterday, in yet another scorched-earth policy move, president Petro Poroshenko announced Ukraine Rebel Areas to Lose State Services.

Ukraine's president has ordered the withdrawal of all state services, including funding for hospitals and schools, from rebel-held areas.

Mr Poroshenko's ruling says all state companies and institutions should end their work in the Donetsk and Luhansk regions within a week.

It also says Ukraine's central bank is to close down all banking services - including card operations - in some areas within a month.

Initial Thoughts

Poroshenko just ceded major portions of Ukraine to rebels
Expect a run on ATMs
Russia will have to intervene for humanitarian reasons
Western Ukraine will have a difficult time getting needed coal from the East

Point number two is happening already.

I picked this up from ZeroHedge Ukrainians Line Up to Withdraw Money from a Bank in Donetsk.

That's a small line now. I suspect it soon won't be.

Human Rights Violations

Here's some additional details on Poroshenko's Bank Servicing Decree.

"National bank of Ukraine [shall] adopt measures within one month to stop serving bank accounts, including card accounts, that belong to economic entities… and residents in the territories of anti-terror operation in Donetsk and Luhansk regions," the decree said.

Poroshenko asked the government Saturday to keep the Council of Europe informed on Kiev being forced to take steps violating the European Convention for the Protection of Human Rights in Donbas.

"To the Ministry of Foreign Affairs of Ukraine… together with the Ministry of Justice of Ukraine… to ensure that within a week in accordance with the article 15 of the [European] Convention for the Protection of Human Rights and Fundamental Freedoms… a statement on behalf of Ukraine about Kiev taking measures derogating from its obligations under the Convention for the Protection of Human Rights on the several territories of the area of special operation in Donetsk and Luhansk Regions, is sent to the Secretary General of the Council of Europe," the decree said.

Expect Major Rebel Advance

Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian, offers these thoughts via email.

Hello Mish,

I am tentatively calling for the start of the rebel offensive for on or about Friday, November 21st.

I may be wrong on the "when", but I will be right on the "how".

I expect the rebel offensive will be similar to the one in late August to early September and it will proceed in a direction or directions unexpected by Kiev and its CIA handlers.

The outcome will be that Kiev will lose almost all of its remaining heavy weaponry.(Over half was already lost by early September, according to both the rebels and Poroshenko himself.)

Most of the major population centers of Ukraine's Donetsk and Lugansk provinces that have not yet come under rebel control, will come under their control. This will demoralize the remaining Ukrainian troops.

Once that happens, Kiev has no strategic reserve and nothing to stop the remaining areas of historic Novorossia from being overrun or simply breaking off on their own accord. So this will not be a "long retreat." Once the tension snaps, things will be decided very quickly.

Then there will be a slowdown for winter. The winter will be so brutal for Ukraine that by the time spring comes, the rebels believe they will simply waltz into neighboring regions without much effort and be welcomed as liberators. On that point, we shall see.

Major Mistake?

To combat alleged terrorism, Kiev announced it can suspend article 15 of the Convention for the Protection of Human Rights and Fundamental Freedoms. Lovely.

If Ukraine was looking to give Russia a humanitarian reason to invade, it just did.

Is this a brilliant play by Poroshenko to trap Putin into invading, or was it just plain stupid?

Only the final outcome will tell. But one thing's for certain now: Poroshenko stirred up major resentment against Kiev, not the rebels, with his decree.

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

15.11.14

Mish's Global Economic Trend Analysis

John Major Sees 50% Chance UK Leaves EU, Sides With Cameron on Need for Immigration Reform

Posted: 15 Nov 2014 02:30 PM PST

Former UK Prime Minister John Major warns of Split Between UK and European Union.

The split is blatantly obvious, but since we have a major new voice chiming in, let's take a look.

The case for leaving the European Union will be fuelled further if EU countries do not help the UK limit immigration, Sir John Major has said.

The former prime minister said there was a "very real risk of separation" that would damage Britain and Europe.

David Cameron wants to renegotiate the UK's membership of the EU and hold an in/out referendum by 2017.

In a speech in Germany, Sir John said the UK had a "compelling" case to change the free movement of people.

Addressing German Chancellor Angela Merkel's Christian Democrats in Berlin, Sir John - whose Conservative government was dogged by rows over Europe - put the chance of a British exit from the European Union at "just under 50%".

But he said the probability would rise if Mr Cameron, who has promised the referendum if he is prime minister after the general election, could not secure reforms beforehand.

British governments were always willing to work with Europe on "the big issues", Sir John said, but added: "Our people deeply resent interference in the day to day activities that have been part of the British way of life for generations."

The UK's concerns are "not a political ploy" he said, warning of a "breach that is in no-one's interest".

He said he hoped other European countries would understand Britain's "dilemma", saying: "It can only inflame resentment if we are told our concerns are non-negotiable and we must toe the line."

Assessing the Odds

Major thinks the odds are "just under 50%" now but "probability will rise" is Cameron cannot get reforms.

That's a curious position because the odds Cameron secures a significant rule change are slim to none.

"'Point of No Return"

Cameron already received a "Point of No Return" Warning From Merkel.

Angela Merkel, the German chancellor, has said that she would not support any plans to change the freedom of movement rules that allow an unlimited number of EU migrants to live and work in the UK. br />
At a recent summit in Brussels, Mrs Merkel is reported to have told Mr Cameron that Germany would not accept any of his demands of freedom of movement and told him: "That's it."

Both Merkel and Cameron change their colors like Chameleons, but Merkel is far more adept. Regardless, it's Cameron who is on the hook (assuming he holds a vote).

As part of his anemic promise to hold a referendum, Cameron first has to win reelection. Then he has to live up to his promise, whether or not he gets concessions from Merkel.

Since those concessions are highly unlikely, does Major have the odds at 50-50 partly based on the chance there will not be a referendum?

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

14.11.14

Mish's Global Economic Trend Analysis

France Fesses Up: "Deficit in 2014 Much Higher than Expected", Budget Needs Revisions Yet Again
Beppe Grillo Seeks Referendum to Abandon Euro, "At War with ECB Scum, Not ISIS or Russia!"
Businesses Moving Too Quickly to Robots? Will 1 in 3 Jobs Vanish by 2025?

France Fesses Up: "Deficit in 2014 Much Higher than Expected", Budget Needs Revisions Yet Again

Posted: 14 Nov 2014 06:28 PM PST

France has been in constant violation of eurozone deficit rules for years, but then again, so has nearly every other eurozone country.

Spain and France Deficit Violations

Both Spain and France have constantly pushed back goals to meet stated targets. Spain has pushed back deficit targets at least six times by my count (official count may vary).

I also have pages on France violations of deficit rules.

Broken Promises

Other sources report similar stories. For example, please consider this Reuters September 2014 headline: France Breaks 2015 Deficit-Cutting Promise.

France announced on Wednesday it was breaking the latest in a long line of promises to European Union partners to cut its public deficit, conceding it now would take until 2017 to bring its finances in line with EU rules.

The statement by Finance Minister Michel Sapin follows weeks of hints by Paris that weakness in the euro zone's second-largest economy would prevent it bringing the deficit below the EU ceiling of 3 percent of output next year as promised.

The Agreement

France agreed to cut its budget deficit to 3% by 2015. I am sure we can find agreements for prior years.

Here's the humorous part (from September):

Sapin insisted France was not seeking to change or suspend the rules but wanted the deteriorating outlook for growth and inflation this year and next to be taken into account.

No Change in Rules?

On November 1, and in regards to France, The Economist says Budget, Fudge It.

France had set itself up for a collision in September, when President François Hollande's government unveiled its growth forecast. This showed that the country would fail to cut its budget deficit, as it had promised, to 3.8% of GDP this year and 3% next. Instead, the deficit would rise to 4.4% in 2014, before dropping back to 4.3% next year. France, announced Michel Sapin, the finance minister, would not reach the euro zone's 3% ceiling, originally promised by 2013, until 2017.

Amid rising frustration with France, Jyrki Katainen, the outgoing economics commissioner, asked Mr Sapin to explain why they were planning to miss their targets. Having initially insisted that they would not be bossed about by Brussels, the French then gave in. Two days before the commission's verdict was due, Mr Sapin told Mr Katainen he would find an extra €3.6 billion ($4.6 billion) in revenues in 2015, enabling him to cut the budget deficit next year to 4.1%.

4.1% Next Year? Really?

The compromise, as usual, was to give France more time if France went half-way.

After rounds of infighting, France said something to the effect "OK we will reduce our deficit from 4.4% to 4.1% in 2015".

Flashback April 10, 2014: Bloomberg reports France Must Meet 3% Budget Deficit Target for 2015, Sapin Says

French Finance Minister Michel Sapin said his country needs to stick to a budget deficit target next year of 3 percent of gross domestic product to follow European Union rules.

The goal to reduce the shortfall from 4.3 percent in 2013 "is a target that we must maintain," Sapin said today to reporters in Washington, where he is attending the spring meetings of the International Monetary Fund and the World Bank. "This is in the feasible range."

In September we learned the shortfall rose!

Today we learn ....

Deficit Much Higher than Expected

Le Monde reports Government Deficit in 2014 Much Higher than Expected.

The government presented Wednesday, November 12, a draft amending budget for 2014, which represents slippage in the deficit. The deficit will reach 88.2 billion euros at the end of 2014, 4.3 billion more than what was expected this summer.

Weak business growth has indeed resulted in less revenue than expected in tax on company's VAT and taxation of financial products individuals.

Compared to the first's expectation Amending Finance Act passed in late July, 6.1 billion euro revenue is missing.

On the expenditure side, Bercy also found overruns of about 2.1 billion euros, mainly due to the cost of military operations abroad, personnel costs and mechanisms of solidarity as the income of active solidarity or the aid of State Medical.

Bercy also left unchanged its forecast deficit - which encompasses that of the State, social protection and local authorities - made in early September, which already included the deteriorating economic environment. Deficit will be 4.4% of gross domestic product this year, up from 4.1% in 2013, and then flow back slightly to 4.3% in 2015.

Weak consumer spending? A deteriorating economic environment? VAT shortfalls? Extra government spending? Deficit shrinkage to 4.3% instead of 4.1%?

Gee who coulda thunk?

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

Beppe Grillo Seeks Referendum to Abandon Euro, "At War with ECB Scum, Not ISIS or Russia!"

Posted: 14 Nov 2014 11:24 AM PST

Beppe Grillo, leader of M5S (Five Star Movement), Italy's second largest political party, seeks a referendum for Italy to leave the Euro.

One might think this would be news, but a search shows that only RT, the BBC, ZeroHedge (where I found the story), and Prison Planet picked up the story.

"Ditch Euro, Defend Sovereignty"

RT had the story first, way back on October 12, so let's start there. Please consider 'Ditch euro, defend Italy's sovereignty!' Eurosceptic leader calls for referendum.

The Italian government is not effective in restoring jobs and helping people, said Beppe Grillo, the leader of Italy's anti-establishment M5S, which burst onto the political scene last year winning 25 percent of the vote in its first parliamentary election in 2013.

"Leave the euro and defend the sovereignty of the Italian people from the European Central Bank," Grillo told his supporters at a M5S event in Rome.

"We have to leave the euro as soon as possible," he said. "We will collect one million signatures in six months and bring them to the Parliament to ask for a referendum to express our opinion."

"This time, we have 150 parliamentarians and senators, and we have time to submit [the signatures] to the Parliament and adopt a law on the referendum," Grillo said referring to 109 seats out of 630 in the Chamber of Deputies and 54 seats out of 315 in the Senate that his party holds.

European Parliament Elections

In the May European Parliament elections, Beppe Grillo's M5S party garnered 21% of the vote, second only to PD's 41% of the vote.

Yet, even though Grillo repeated his "abandon the euro message" recently, the only major news outlet to pick up the story was the BBC.

New York Times, Financial Times, Bloomberg, Washington Post, where are you hiding?

"We're at War with ECB, Not ISIS or Russia!"

The BBC reports Italy's Beppe Grillo Calls for Referendum on Leaving Euro.

Full Transcript

A referendum on the Euro. Next week we start collecting signatures. We will bring to parliament 3 or 4 million signatures, and this time we will have 150 of our own MPs [Members of Parliament] in parliament. And then we will ask for a referendum, something that wasn't done in 1989. We've got all the parties in favor of leaving the euro with us. We have two thirds of the parliament.

So we leave the euro and we bring down this system of bankers, of scum. We are dying and need a plan B. And we are implementing it. We are plan B. This year has become a nightmare. It was never meant to be like this.

We are not at war with ISIS or with Russia, we are at war with the European Central Bank [ECB]. A number of bankers tricked us out of our monetary and economic sovereignty.

"Eventually Will Come a Time"

Somehow this is not news. Not even the BBC provided that transcript, but I do thank the BBC for the embedded translation that I transcribed.

I keep repeating ....

"Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected."

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

Businesses Moving Too Quickly to Robots? Will 1 in 3 Jobs Vanish by 2025?

Posted: 14 Nov 2014 10:26 AM PST

Businesses Moving Too Quickly?

Are businesses are moving too quickly to robots? Is any job safe?

Patrick Thibodeau at Computer World discusses the idea things are moving "too fast" with a review of Nicholas Carr's new book, The Glass Cage, Automation and Us.

Please consider Automation Could Take Your Skills -- and Your Job by Patrick Thibodeau.

The Glass Cage examines the possibility that businesses are moving too quickly to automate white collar jobs, sophisticated tasks and mental work, and are increasingly reliant on automated decision-making and predictive analytics. It warns of the potential de-skilling of the workforce, including software developers, as larger shares of work processes are turned over to machines.

This book is not a defense of Luddites. It's a well-anchored examination of the consequences and impact about deploying systems designed to replace us.

Interview with Carr

Thibodeau posted a lengthy set of interview questions in regards to the book, along with answers from Carr.

Here are a few snips (emphasis added).

CW: What is the worry here? If I can get into my self-driving car in the morning, I can sit back and work on other things.

Carr: There are two worries. One is practical and the other is philosophical. We have to figure out how to best balance the responsibilities between the human expert or professional and computer. I think we're going down the wrong path right now. We're too quick to hand over too much responsibility to the computer and what that ends up doing is leaving the expert or professional in a kind of a passive role: looking at monitors, following templates, entering data. The problem, and we see it with pilots and doctors, is when the computer fails, when either the technology breaks down, or the computer comes up against some situation that it hasn't been programmed to handle, then the human being has to jump back in take control, and too often we have allowed the human expert skills to get rusty and their situational awareness to fade away and so they make mistakes. At the practical level, we can be smarter and wiser about how we go about automating and make sure that we keep the human engaged.

Then we have the philosophical side, what are human beings for? What gives meaning to our lives and fulfills us? And it turns out that it is usually doing hard work in the real world, grappling with hard challenges, overcoming them, expanding our talents, engaging with difficult situations. Unfortunately, that is the kind of effort that software programmers, for good reasons of their own, seek to alleviate today.

CW: Gartner recently came out with a prediction that in approximately 10 years about one third of all the jobs that exist today will be replaced by some form of automation. That could be an over-the-top prediction or not. But when you think about the job market going forward, what kind of impact do you see automation having?

Carr: I think that prediction is probably over aggressive. It's very easy to come up with these scenarios that show massive job losses. I think what we're facing is probably a more modest, but still ongoing destruction or loss of white collar professional jobs as computers become more capable of undertaking analyses and making judgments. A very good example is in the legal field, where you have seen, and very, very quickly, language processing software take over the work of evidence discovery. You used to have lots of bright people reading through various documents to find evidence and to figure out relationships among people, and now computers can basically do all that work, so lots of paralegals, lots of junior lawyers, lose their jobs because computers can do them. I think we will continue to see that kind of replacement of professional labor with analytical software. The job market is very complex, so it's easy to become alarmist, but I do think the big challenge is probably less the total number of jobs in the economy then the distribution of those jobs. Because as soon as you are able to automate what used to be very skilled task, then you also de-skill them and, hence, you don't have to pay the people who do them as much. We will probably see a continued pressure for the polarization of the workforce and the erosion of good quality, good paying middle class jobs.

CW: What do you want people to take away from this work?

Carr: I think we're naturally very enthusiastic about technological advances, and particularly enthusiastic about the ways that engineers and programmers and other inventors can program inanimate machines and computers to do hard things that human beings used to do. That's amazing, and I think we're right to be amazed and enthusiastic about that. But I think often our enthusiasm leads us to make assumptions that aren't in our best interest, assumptions that we should seek convenience and speed and efficiency without regard to the fact that our sense of satisfaction in life often comes from mastering hard challenges, mastering hard skills. My goal is simply to warn people.

I think we have a choice about whether we do this wisely and humanistically, or we take the road that I think we're on right now, which is to take a misanthropic view of technological progress and just say 'give computers everything they can possibly do and give human beings whatever is left over.' I think that's a recipe for diminishing the quality of life and ultimately short-circuiting progress.

Is Carr a Luddite?

Thibodeau claims "Carr's book is not a defense of Luddites".

Let's look up the term Luddite.

According to Merriam-Webster a Luddite is "one of a group of early 19th century English workmen destroying laborsaving machinery as a protest; broadly: one who is opposed to especially technological change"

Carr is not an extreme Luddite to the extent he wants to destroy machinery in protest. However, in the broader sense, it's easy enough to make a case that he is indeed a Luddite.

Loss of Skills

Computers ended the need for a slide rule. The skill simply vanished. Should anyone care? As a side note, I can still use a slide rule. Many today have never heard of one. I have a totally useless skill.
Robots replaced human welders. Who does a better job? The robot or the human welder? I suggest the robot. Yet, welding did not and will not go away. No skills vanished. For quick repairs and specialized jobs, human welders will not cease to exist. If I am wrong and human welders do vanish completely, and as with slide rules, human welding skills will no longer be useful.
Cars replaced horses. Horse riding is still a skill, but it has far fewer practical uses. Should anyone be concerned?

Computers, Robots, and the Quality of Life

The most curious position of Carr is his conclusion: Computer technology is "a recipe for diminishing the quality of life".

Ring the eject buzzer on that one. With the possible exception of warfare and nuclear accidents, there has never been any technological advance in history that was a "recipe for diminished quality of life".

Yes, disruption is unwelcome to many. But Carr's worries are no different than those who worried about cars replacing horses, the cotton gin replacing seed separators, or the telephone replacing the telegraph.

Does anyone pity the widespread loss of Morse Code skills?

Curiously, although the slide rule vanished, Morse Code did not go away completely as the link above shows. It still has some limited use applications, and yes, I could do an SOS in Morse Code (but no one would pay me a dime for that skill).

Will 1 in 3 Jobs Vanish by 2025?

Is Gartner right that One in three jobs will be taken by software or robots by 2025?

If so, should there be a concern?

Real Concern

The real concern should not be the loss of jobs, but rather the Fed's response and governmental responses to price-deflation aspects.

Technology is inherently price deflationary. It's also wage deflationary except for those at the top-end of needed skills.

Central bank efforts to achieve 2% inflation in a hugely deflationary technological boom with a simultaneous and equally deflationary demographic shift is a huge problem.

In addition, liberal efforts to raise the minimum wage exacerbates the trend to move to robots.

If there is a "premature" move to robots, blame the Fed and governments, not the technology, and not businesses making the shift.

Question on Wealth Distribution

Reader Michael asks ...

"As more and more wealth is produced using less and less labor, society will be faced with the question of how to distribute this wealth. Does only a tiny fraction of the world's population get to enjoy the wealth or, do we realize that technology is enabling humans to enjoy more leisure and still have a share of the wealth?"

To answer Michael's question ...

We should embrace technology and the increased standard of living that comes with it. Yes, those at the top-end have amazing lifestyles that most can only imagine. But, it's also true that the average US citizen today lives like a king (and much longer) than someone 200 or even 100 years ago.

Every technological advance to date has been shared: computers, cell phones, television, sewing machines, radio, everything. It is inconceivable (actually impossible short of mass human extinction) for that trend to stop.

Everyone shares sooner or later. Competition ensures that outcome. Yet, it's also inevitable that the need for certain skills dies along the way.

In the short run, disruption is scary, especially to those immediately impacted. In the long run, the only fear should be of the central planner's (governments and central banks) response to such shifts.

Those who fear technology have precisely the wrong concern.

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

13.11.14

Mish's Global Economic Trend Analysis

Kissinger Warns of "Fatal Mistakes" on Sanctions, Russia, Cold War

Posted: 13 Nov 2014 06:58 PM PST

In response to "Brink" of a New Cold War? Another Cold War Already Started?, reader Ted informs me that former Secretary of State Henry Kissinger feels the same way about sanctions and the renewed cold war as I do.

Please consider Kissinger Warns of West's 'Fatal Mistake' that May Lead to New Cold War.

Former US Secretary of State Henry Kissinger has given a chilling assessment of a new geopolitical situation taking shape amid the Ukrainian crisis, warning of a possible new Cold War and calling the West's approach to the crisis a "fatal mistake."

The 91-year-old diplomat characterized the tense relations as exhibiting the danger of "another Cold War."

"This danger does exist and we can't ignore it," Kissinger said. He warned that ignoring this danger any further may result in a "tragedy," he told Germany's Der Spiegel.

If the West wants to be "honest," it should recognize, that it made a "mistake," he said of the course of action the US and the EU adopted in the Ukrainian conflict. Europe and the US did not understand the "significance of events" that started with the Ukraine-EU economic negotiations that initially brought about the demonstrations in Kiev last year. Those tensions should have served as a starting point to include Russia in the discussion, he believes.

Calling the sanctions against Moscow "counterproductive," the diplomat said that they set a dangerous precedent. Such actions, he believes, may result in other big states trying to take "protective measures" and strictly regulate their own markets in future.

BINGO

That's a BINGO on all accounts but one. It should be perfectly clear that anew cold war is not just a risk, a new cold war has already started.

Sanctions, threats from US Congress (especially Senator John McCain), and the reactions of president Obama, Chancellor Merkel, and UK prime Minister David Cameron are proof enough.

Kissinger is absolutely correct when he says sanctions against Moscow are "counterproductive," and set a dangerous precedent.

They increase, not decrease, the threat of escalations, even war.

To Kissinger detractors I might point out that like Greenspan, it's possible he makes more sense in private life than he aver did in public life.

For further reading, please consider More Blowbacks: Russia to Build 8 New Nuclear Reactors in Iran; Putin Signs Another Gas Deal with China.

In regards to Greenspan, please consider Reader Question on Greenspan and Gold: "No Fiat Currency Can Match It".

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

Next Phase in Currency Wars: Yen Plunge, Yuan Devaluation, and "Tidal Wave of Westbound Deflation"

Posted: 13 Nov 2014 12:02 PM PST

The Yen currently trades about 115 to the US dollar. At the end of 2011 the Yen was about 77 to the dollar. That is a decline of roughly 33%.

Yet, Japan's inflation barely budged. Japan's prime minister Shinzō Abe is not pleased.

On October 31, the Bank of Japan pledged "Unwavering Determination" to Get 2% Inflation. The Yen plunged and Nikkei futures rose limit up.

What's Next?

To quote Yogi Berra, "It's tough to make predictions, especially about the future." I know full well, having made some spectacular calls but also some very bad ones over the past few years.

Nonetheless, via email, Society General's Albert Edwards expects a "Tidal Wave of Westward Deflation" and "Yen at 145 to US Dollar by March".

¥145/$ by end of March - Albert Edwards

Forecast timidity prevents anyone forecasting ¥145/$ by end of March – so I will.

We revisit the most important chart investors should be focused on, namely the yen/dollar chart. The market still does not seem to have grasped the significance of this phase of currency wars. It reminds me of the 2006/07 period when falling US house prices and then widening corporate bond spreads were totally ignored by upbeat equity investors until it was too late. The yen is set to follow the US dollar DXY trade - weighted index by crashing through multi-decade resistance - around ¥120. It seems entirely plausible to me that once we break ¥120, we could see a very quick ¥25 move to ¥145, forcing commensurate devaluations across the whole Asian region and sending a tidal wave of deflation westwards.

It it is worth noting just how aggressive the BoJ has become with the central bank balance sheet already at around 55% of GDP and rapidly heading higher still! Japan is an economy a third of the size of the US doing roughly the same dollar QE as the Fed did at its peak!

The move to crank up the Japanese printing shouldn't have been a surprise. These guys at the BoJ, unlike the ECB, WILL do whatever it takes.

Did anyone see FT Alphaville's highlighting the stunning transcripts of former US Treasury Secretary, Tim Geitner's book, which revealed that Draghi was basically making it up as he went along and had no actual plan in his back pocket. [See Draghi's ECB Management: The Leaked Geithner Files] The problem for the eurozone is that Draghi is getting increasingly long on promises and pretty disappointing on delivery. Japan is just on a different page, league, or indeed planet, altogether.

For those who say the US simply won't allow the yen to fall so rapidly, I would reply that Japan too won't want to annoy the US too much, especially as they rely on the US military umbrella at a time of increasing friction with China in the South China Sea. Nevertheless I simply think Japan will lose control of the situation given the quantity of QE being spewed into the markets and unless the US, the eurozone, or indeed Korea, is prepared to come remotely close to Japan's rate of QE, jawboning currency stability will do very little. But I do believe the yen devaluation will drag down other competing currencies in the Asian region, which brings us onto China.

After a record 32 successive months of deflation at the producer price level, China has suffered as much PPI deflation over the past three years as it did in the immediate aftermath of the 1997 Asian crisis. Do investors really think China can cope with a devaluation of the yen from here? They simply can't tolerate this and they won't. They will devalue.

Larger USD / Yen Chart

click on chart for sharper image

The above chart may be easier to read (especially expanded) but it is inverse. In contrast to Edwards' chart, up is actually a decline in currency value.

Edwards sees a decline in the Yen to 145 to the US dollar. If so that would be a currency decline of about 50% since 2011. At that point, the Yen would be where it was in July of 1998, so the move is not as shocking as it may initially sound.

Deflation Shockwave Thesis

Next phase of currency wars is underway.
Abe will "do whatever it takes" to produce inflation in Japan.
Abe will soon "lose control of the situation".
Yen sinks to 145 to US dollar.
China will respond by devaluing Yuan.
"Tidal Wave of Deflation" heads West.
US brands China a "currency manipulator"
Global currency crisis ensues
Gold soars

Points 1-6 from Edwards. I added points 7-9, as explained below.

It may play out this way, but if so, perhaps it takes longer than March. I will give a big tip of the hat to Edwards if it plays out that way within a couple of years (whether or not my points 7-9 happen).

My only disagreement with Edwards is on a tangential issue. The problem in the eurozone is not Mario Draghi or Germany.

Draghi cannot do "whatever it takes" to spur credit and inflation because the primary problem in the eurozone is structural, with the euro itself. A key secondary problem is productivity issues between member states. The secondary issue cannot be resolved (except at the expense of Germany and the Northern states) if every country remains on the Euro.

There is little Draghi can do to spur credit creation in Europe given the above constraints, productivity issues, bank leverage, the Maastricht Treaty, and increased infighting among member states, some of which want to violate the treaty and others not.

Draghi's Next Move - Back to Italy?

Neither Draghi, nor Germany, nor any Asian countries will be pleased by Japan's attempt to boost exports by driving down the Yen. This will make it all the more frustrating for Draghi. Calls will mount for Draghi to "do something".

I suggest Draghi might just quit, then head back to Italy, perhaps as next president, perhaps to run for prime minister. If Draghi is smart, he will get out of the way before crisis hits rather than during the next crisis.

Currency Crisis Coming Up

When China reacts (and China will react if the Yen hits 145 to the dollar, perhaps before that point), the US will scream and the protectionists in Congress will call on Obama to label China a "currency manipulator".

Political necessity ensures the largest screams will not be about Japan, but about China, when China reacts to pressure from Japan.

Labeling China a currency manipulator would of course make matters much worse, but that is precisely what I expect from Congress should China devalue. Global trade would then collapse amidst competitive currency debasement. Finally, under such a scenario, gold would likely soar.

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

12.11.14

Mish's Global Economic Trend Analysis

Pentagon Says "Stop Defense Cut Madness"; Mish Investigates Alleged "Cuts"
Tanks and Nukes: NATO Statements on Ukraine; McCain Will Go Ballistic
Historic Hype Over Global Warming Agreement With China; CO2 vs. Death-by-Pollution

Pentagon Says "Stop Defense Cut Madness"; Mish Investigates Alleged "Cuts"

Posted: 12 Nov 2014 10:46 PM PST

Thanks to the sequester (long forgotten by most), alleged "cuts" in spending were scheduled to happen automatically.

But no one is Washington is happy with that prospect: Not McCain, not Obama, not defense hawks, not Republicans, not Democrats, not anyone that I can find.

Obama labeled the cuts "draconian". The Pentagon called them "mad".

Undoing the "Mad Defense Cuts"

The following headlines will tell you everything you need to know.

On November 12, Reuters reported Pentagon Number Two Urges End to U.S. Defense Cut 'Madness'

On October 8, The Hill reported Obama Warns of 'Draconian' Military Cuts

On September 10, the Daily Beast reported Obama Wants a Blank Check to Fight ISIS—and Congress Is Ready to Give It to Him.

On August 14, Reason.Com wrote Effects of Sequester Cuts Were Overstated, but GOP Hawks (and Obama) Want to Cancel It Anyway

On April 1, the National Journal wrote Ryan Budget Calls for Return to Pre-Sequester Defense Spending.

"House Budget Committee Chairman Paul Ryan laid out a budget vision Tuesday that goes beyond President Obama's request by ramping up defense spending beyond the caps in 2016 and restoring them by 2017."

Cuts? What Cuts? Where? When?

Before you can undo cuts, don't you first have to have cuts? Logically, one should think so. So let's investigate the cuts.

Impact of Sequester on Defense Budget

The Mercatus Center put the "cuts" in perspective on August 21, 2012 (see above chart) in its report Defense Spending Will Continue To Grow In Spite of Automatic Cuts Set By BCA.

As a result of Congress's failure to come up with a $1.2 trillion deficit-reduction plan, automatic spending cuts or "sequestration" set by the Budget Control Act of 2011 (BCA) is set to take place from 2013 to 2021. As the threat of sequestration looms, concerns about cutbacks in defense spending have become a significant issue surrounding debates tied to national security and American jobs.

To understand the effects of sequestration on future defense spending, it is important to understand how the BCA spending caps and sequestration apply to the base defense budget alone and when war spending is considered.

The expansion of the defense budget starts with the Department of Defense's base budget (green region), which is the legal amount of spending approved by Congress. The base budget does not include war costs – categorized as Overseas Contingency Operations (OCO) – for military operations in Afghanistan, Iraq, and other defense operations. Therefore, the additional costs for funding wars (blue region) are included in the chart to establish a full picture of defense spending.

As the chart shows, defense spending has almost doubled in the past decade in current dollar terms and will continue to grow in spite of automatic cuts set by the BCA. Clarifying these figures reveals that sequester cuts do not warrant the fears of policymakers who warn about "savage cuts" to the defense budget.

Washington Compromise

As I have pointed out before, the way compromise in Congress works is both sides get money for whatever ridiculous programs they want.

Recall that the sequester (automatic cuts) was supposed to force bipartisan compromise on tackling the deficit. It didn't. Both sides opted for the sequester instead.

The sequester called for a reduction in future budget increases (no actual cuts anywhere except a trivial amount in the first year). Now both parties complain about "draconian cuts" that never happened.

Reductions in the rate of future budget increases will now be restored.

What a bunch of hypocrites. It's sickening.

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

Tanks and Nukes: NATO Statements on Ukraine; McCain Will Go Ballistic

Posted: 12 Nov 2014 03:42 PM PST

In the wake of renewed fighting following the breakdown of the Ukraine ceasefire agreement, Nato Accuses Moscow of Helping Ukraine Rebels to Carve Out State.

That Russia is helping the rebels is certainly believable. Yet, some of the NATO statements are so preposterous that everything NATO says is suspect. Let's take a look.

NATO: "We have seen columns of Russian equipment, primarily Russian tanks, Russian artillery, Russian air defence systems and Russian combat troops entering into Ukraine," General Philip Breedlove said on a trip to Bulgaria as fears mounted that a tenuous ceasefire would collapse.

Mish: Where can you hide a tank? More importantly, where can you hide "columns of equipment, primarily tanks"? If columns of tanks were heading from Russia into Ukraine, both US and NATO would have satellite images. So where the hell are the images?

Other statements by NATO appear more reasonable.

NATO: A Nato military officer told the Financial Times that the alliance believed Russia now has around 8 battalions – equivalent to as many as 6,400 men – in a state of high readiness on the border with Ukraine. The number of Russian special forces soldiers operating already inside Ukrainian territory has increased from 300 to between 400-500 in recent days, the officer said. The deployment of sophisticated modern weapons systems has become a particular concern.

Mish: Is it believable Russia massed troops on Ukraine's border. Yes. 6,400 men? Who knows? I don't. But where are the images? Can you hide 6,400 men? The problem regarding men is that even if NATO does provides border images, those counts are not necessarily believable unless one can prove when they were taken.

Are there 400-500 Russian special forces in Ukraine? That's certainly possible, even believable. But are those "special forces" volunteers or were they ordered by Putin? And by the way, isn't that much smaller than previous Ukraine estimates that pegged the number of special forces at 2,000-5,000?

BBC Chimes In

The BBC reports Russian Troops Crossed Border, Nato Says

NATO: Nato's Supreme Commander in Europe General Philip Breedlove has confirmed that over the past two days, Nato has seen columns of Russian armour, artillery and crucially - combat troops - entering Ukraine.

Mish: What about nukes?

NATO: General Breedlove also confirmed that Nato believes Russia is deploying nuclear-capable weapons to Crimea - a reference to reports that Russia is deploying short-range Iskander ballistic missiles there that could potentially be equipped with nuclear warheads.

Mish: That report ought to make McCain's hair stand straight up in shades of orange. No doubt McCain will use General Breedwar's assessment to get the US to send nuclear missiles to the Czech Republic. Should the US make such an offer, hopefully the Czech Republic declines.

Russia: Russian defence official Maj-Gen Igor Konashenkov said "there was and is no evidence" to support Gen Breedlove's claims.

Mish: We have heard the accusations on tanks before, repeated nearly every month by Ukraine. If there is strong evidence, can we see it please? Is that too much to ask?

Ukraine, the US, and NATO have had more than enough time to produce some images of convoys of Russian tanks rolling in over the border.

That they have not is strong evidence that NATO and Ukraine talk on tanks is mostly-to-all hype and little-to-no reality.

McCain Will Go Ballistic

Would Russia place nukes in Crimea? The idea is silly.

Russia knows full well McCain would go ballistic. In turn, Obama would agree to send more US missiles to Eastern Europe at US taxpayer expense. That is not a set of events Putin would want.

Unfortunately, McCain is likely to go ballistic anyway, precisely the reason for Breedwar's statement of "belief".

More nukes by any side, any place, is not going to ensure peace. Instead, nukes increase the likelihood of a serious accident.

Related Discussion Roundup

November 11: More Blowbacks: Russia to Build 8 New Nuclear Reactors in Iran; Putin Signs Another Gas Deal with China
November 09: Ukraine Split in Two; Expect Major Rebel Advance
November 06: Prepare for War: Obama Asks Congress for ISIS War Authorization; Republican Hawks Have War Plan Prepared; Clinton-McCain?!
November 05: Ruble Slide Continues; Russia Forced to Abandon Currency Intervention as Reserves Dwindle

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

Historic Hype Over Global Warming Agreement With China; CO2 vs. Death-by-Pollution

Posted: 12 Nov 2014 10:39 AM PST

On Tuesday, China and US Struck Deal on Carbon Cuts in Push for Global Climate Pact.

In a New York Times Op-Ed, Secretary of State John Kerry reflected on Our Historic Agreement With China on Climate Change.

Agreement Summation

President Obama pledged to cut US carbon emissions by 26-28% of 2005 levels by 2025
China agreed to cap its emissions by 2030 (earlier if possible, but no guarantees)
China will expand zero-emission sources to 20% by 2030.

Is this a good deal? For whom?

Here is a little perspective on the agreement.

Carbon Emissions by Country

Under the agreement, the US needs to act now. China can delay for 5-10 years or more.

Questions of the Day

What will China's emissions be in 2030 by the time China's cap kicks in?
Is this deal worth the accompanied hype?

Some of the comments on the Guardian Live Blog are ridiculous.

For example: "Today's deal puts intense pressure on Australia to announce a target for post-2020 greenhouse gas reductions, writes my colleague Lenore Taylor."

Please look at the above map. Would it matter one iota if Australia cut emissions 20% by overnight? Heck, would it matter if Australia cut emissions to zero?

From a carbon perspective the answer is no. However, the global loss in Australia's resource production would be quite significant, far more than any alleged gain from carbon reductions.

Pollution Perspective

Actually, I am all in favor of China reducing pollution. The sooner the better, but without so much hype over "global warming".

China is literally killing hundreds-of-thousands of people each year with air and water pollution.

Smog is so bad in China that discounting cultural issues and love of homeland, no one in their right mind would choose to live there if they had other options.

Interestingly, 47% of Chinese Billionaires Want to Leave China Within 5 Years, Only 6% of US Billionaires Seek to Leave US.

Death-by-Pollution Stories

New York Times: Air Pollution Linked to 1.2 Million Premature Deaths in China
Telegraph: China's 'Airpocalypse' Kills 350,000 to 500,000 Each Year according to China's former health minister.
Bloomberg: China's Smog at Center of Air Pollution Deaths

Those headlines believable? You bet.

I have written about China's Pollution Problems over a dozen times.

Click on the preceding link and look at a couple articles for some truly nauseating pollution images. CO2 emissions are the least of China's pollution worries.

So please China, clean up your act, not because of global warming, but because you are poisoning the world right now.

China knows all that, and would have acted alone, with or without any persuasion from Obama or hype from Kerry.

Useless Feathers and More Questions

Did China commit to anything it would not have done in the first place, without an agreement?

If the answer is no (and it is), then what did Obama's "historic" deal accomplish other than put another useless "I did it feather" in Obama's cap, a feather that comes at relative expense to the US vs. China?

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