Mish's Global Economic Trend Analysis

Economic Zealots Endanger Global Economy; IMF Hypocrites Urge Permanent US Can Kicking, Fiscal Stimulus, and Enormous Deficits
Odd-Even Gas Rationing Hits NYC; Only 25% of Stations Operational, Full Production Weeks Away; Why Rationing Won't Work; Insanity Over Price Gouging
Merkel and Cameron Deadlocked Over EU Budget; Common Agricultural Idiocy
Explosion in Uncovered Employment During the Recovery

Economic Zealots Endanger Global Economy; IMF Hypocrites Urge Permanent US Can Kicking, Fiscal Stimulus, and Enormous Deficits

Posted: 08 Nov 2012 10:55 PM PST

One thing sure to raise my ire is a group of mindless hypocrites who say one thing and do another, while pretending they have a clue. In this case I am talking about the IMF.

As part of the Troika, the IMF helped ruin Greece. The country is now in a never ending depression with the youth jobless rate at 58 percent, and overall unemployment at 25.4%. Every step of the way the IMF demanded more austerity measures, as did the ECB, EU, and Germany.

And every step of the way Greece spiraled further and further behind. It's not that austerity was unneeded, rather austerity could only really work in conjunction with a eurozone exit and work rule reform.

The IMF has lowered economic forecasts on Greece too many times to count. What was a €40 billion problem several years ago when I urged Greece to default is now a €240 billion problem.

Yes, the Troika threw €200 billion at a €40 billion problem. The reason is stubborn arrogance coupled with what amounts to religious fanaticism to save the euro project no matter who is destroyed in the process.

Eventually there is going to be a €240 billion haircut when Greece comes to its senses, tells the Troika to go to hell, and defaults on the entire mess.

IMF Hypocrites Urge Permanent US Can Kicking, Fiscal Stimulus, Enormous Deficits

While preaching round after round of austerity for Greece, Spain, Portugal, and Ireland, austerity is the last thing the IMF wants for the US.

Please consider IMF urges permanent fix to U.S. 'fiscal cliff'

The International Monetary Fund on Thursday urged the United States to quickly reach an agreement on a permanent fix to avoid automatic tax hikes and spending cuts early next year, saying a stop-gap solution could be harmful to the global economy.

In a report prepared for the Group of 20 finance ministers' meeting in Mexico on November 4-5 and published on Thursday, the IMF warned that the euro zone crisis and the threat of a political impasse in Washington over the looming fiscal cliff posed the biggest risks to the world economy.

The IMF has estimated that the tax increases and spending cuts amount to $700 billion in 2013. Unless avoided, this could contract U.S. gross domestic product by around 4.5 percent.

"A last-minute deal that relies on suboptimal fixes or largely 'kicks the can down the road' may ultimately prove harmful," the IMF said in the report.

For some reason it is OK for the US to run trillion dollar deficits year after year but no one else. Yes indeed, the IMF is literally asking the US to spend the world out of recession.

Reckless spending is what got Greece and Spain into trouble but reckless spending is OK for the US.

The IMF would have you believe the "permanent fix" to the fiscal cliff is "permanent trillion deficits".

Anyone with a 7th grade education and a bit of common sense would realize you cannot spend your way out of a debt problem but that is exactly what the IMF is asking the US to do.

Economic Zealots Endanger Global Economy

Consider the brilliant tirade by Ambrose Evans-Pritchard who asks Who will stop the Sado-Monetarists as jobless youth hits 58pc in Greece?

Greek unemployment rose to 25.4pc in August. Youth unemployment rose to 58pc.

Under the official forecast, the economy will contract by a further 4.5pc next year, so it fair to assume that lots more people are going to lose their jobs. It is certainly not going to improve in any meaningful way for years to come.

This is what happens when you lock into the wrong currency and block the escape routes – or join a "burning building with no exits" in the words of William Hague.

Even if the EMU machine succeeds in keeping Greece in the system, is this any longer a remotely desirable goal? Has it not become a vicious and immoral policy in itself?

Premier Antonis Samaras issued hysterical warnings before the vote of what would happen if parliament refused to obey the EU-IMF Troika, talking of catastrophe and a collapse of Greek society.

The ideologues running monetary union cannot bring themselves to contemplate any step back in the Project, just as they would not admit yesterday in the Commission's economic report that they have gravely misjudged the effects of fiscal tightening (the fiscal multiplier) and have therefore miscrafted their entire austerity strategy.

We are not dealing with rational people. We are dealing with a religious order, and these monks are becoming an increasing danger to Europe's societies and democracies.

Religious zealots (religion being the almighty euro project), have destroyed Greece to save the project. They will destroy, Spain, Portugal, and Italy as well.

In the US, my fear is not of the fiscal cliff. Rather, my fear is the US listens to the IMF illiterates and continues deficit spending until it blows up in our face too.

Heart-to-Heart Talk Needed

It's long overdue for the president Obama to have a heart-to-heart talk with the nation, telling everyone we are on an unsustainable path of military and entitlement spending, and that massive cuts in both are long overdue.

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

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Odd-Even Gas Rationing Hits NYC; Only 25% of Stations Operational, Full Production Weeks Away; Why Rationing Won't Work; Insanity Over Price Gouging

Posted: 08 Nov 2012 01:44 PM PST

Crain's New York Business reports Mayor calls for gas rationing in NYC

Mayor Michael Bloomberg on Thursday called for gas rationing in New York City to begin Friday, saying only 25% of stations in the city were operational and that full production would not be restored for several more weeks.

Vehicles with license plates ending in an even number or zero can purchase gas on even-numbered days. Vehicles ending with odd-numbered plates can buy gas on odd-numbered days. Vehicles with licenses plates ending in a letter or other character can make purchases on odd-numbered days.

Commercial, emergency and paratransit vehicles, medical doctor plates and vehicles licensed by the Taxi and Limousine Commission are exempt.

Rationing Won't Work

Precisely what good is rationing supposed to do? Whatever the theory is, it cannot possibly work.

Overall demand for gas will not drop a bit. Instead of random queuing, we will see odd-even queuing.

Insanity Over Price Gouging

In even more inane action, NY AG Subpoenas Craigslist for Sellers Price-Gouging in Wake of Hurricane Sandy.

The New York attorney general's office hit popular web site Craigslist.org with a subpoena for the names and identifying information of sellers who are purposefully jacking up prices on essential goods like gas and generators, in the wake of Hurricane Sandy, according to the New York Post.

The subpoena is part of a larger investigation by AG Eric Schneiderman into post-storm price gouging by unscrupulous grocery stores, hardware stores, hotels and others.

The AG's office is looking into more than 100 of the worst Craigslist sellers in New York, according to an official, like a brazen poster who was selling a five gallon empty gas container for $500. Others were selling the containers – which retail for under $20 – for between $40 and $100 on the site.

Free Market Solution

People should be able to sell whatever they want, for whatever price they can get. The same holds true for gasoline.

We see the same idiocy after every major hurricane.

Everyone tries to get out of the hurricane zone, they all need gas, then those who stay behind to sell gas to those fleeing, perhaps even risking their lives to do so, get accused of gouging.

Want to end the long lines?

Let stations charge whatever they want. The lines will clear out in no time, and everyone else can decide how much they really want to drive. I bet we would see a lot of ad-hoc carpooling in a hurry.

Free market forces will fix the problem easily and efficiently (as best as it can be fixed). Rationing will not do a damn thing except create odd-even queues.

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

Merkel and Cameron Deadlocked Over EU Budget; Common Agricultural Idiocy

Posted: 08 Nov 2012 08:46 AM PST

Merkel and Cameron Deadlocked

British Prime Minister David Cameron is locked in a battle with German chancellor Angela Merkel over whether to increase the size of the EU budget.

Cameron is the only holdout (yet he deserves no credit for his position). Rather, the British Parliament Voted to Reject EU Budget, Cornering Cameron. Otherwise he was prepared to have the EU budget go up at the rate of inflation.

The 17 net recipient nations are all in favor of more money of course. And as I have pointed out numerous times, Merkel would sell her soul to keep the EU intact.

Bear in mind, the EU budget could be and should be cut at least 50% (assuming there should be an EU budget at all which is certainly debatable).

Common Agricultural Idiocy

Nearly half the EU budget is crop subsidies, price support mechanism, and guaranteed minimum prices on agricultural good. The aim of the Common Agricultural Policy (CAP) is to provide farmers with a reasonable standard of living, consumers with quality food at fair prices and to preserve rural heritage.

CAP is idiocy. Farmers deserve no more taxpayer subsidies than bricklayers or computer programmers. Simply put, everyone deserves the exact same fair shake regardless of what they do. The way to accomplish that is not give any select groups subsidies.

Wimpiest of Wimps

Cameron is the wimpiest political leader in the G7. He refuses to hold a referendum on whether the UK should stay in the EU when the majority of UK citizens would leave, and a majority of his own party are begging for a referendum.

Showdown Time

Now it's showdown time as Merkel warns Britain against European Union exit.

Germany's Angela Merkel on Wednesday warned Britain not to turn its back on Europe and urged its Prime Minister David Cameron to work with her to avoid deadlock at European Union budget talks later this month.

The leaders met in London to try to iron out differences over the EU's €1 trillion (£800.5bn) budget that threaten to block a deal and fuel fears that London is drifting away from the 27-nation union.

Describing plans to increase the EU budget as "ludicrous", Cameron has threatened to veto any deal he thinks is not in Britain's interests and will push for a real-terms freeze.

However, German officials are exasperated by what they see as London's slide towards Europe's margins, a feeling reinforced last week after the British parliament voted to call for a real-terms cut in the EU's budget.

Before meeting Cameron, the German Chancellor told the European Parliament she could not imagine a Europe without Britain, the world's sixth largest economy, which relies on the EU for half its trade.

Cameron was humiliated by last week's defeat in parliament and opponents say he has lost control of Conservative Party anti-Europeans, a group that helped topple former leaders and that wants a referendum on Britain's EU membership.

Debate over a referendum on Britain reworking its EU role or even leaving has climbed the agenda. A YouGov survey in October found 49pc of those polled wanted to leave the EU, against 28pc who wanted to stay in it.

Talking tough on Europe can play well with "eurosceptic" British voters and Conservative politicians, but Cameron risks angering EU neighbours and his pro-European coalition partners, the Lib Dems.

Cameron's threat to block a deal could delay a funding increase for the poorest east European member states and isolate Britain from disgruntled EU nations. He has already angered some by talking of using closer eurozone integration as a chance to repatriate some powers from Brussels.

In the past, many of Cameron's threats have been hollow. This one likely is genuine, but only because British parliament forced his hand.

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

Explosion in Uncovered Employment During the Recovery

Posted: 07 Nov 2012 11:26 PM PST

Covered employment is the set of working employees that have unemployment benefits.

Self-employed persons such as myself have to pay into state unemployment insurance programs but we are ineligible to receive benefits (we are not covered).

Similarly, people selling trinkets on Ebay as well as those involved in multi-level marketing schemes and calling it their only job are not covered either.

Covered employment was one of the topics that came up in my November 2 interview on Capital Account with Lauren Lyster.

In the interview I noted that covered employment has crashed and reader Tim Wallace frequently sends me charts to prove it. Here are the latest charts from Tim.

Uncovered Employment Since January 2009

click on chart for sharper image

I added data points to Tim's chart. Let's do the math.

According to the BLS, the economy added 4,951,000 since January 2009. In the same timeframe, uncovered employment rose by 6,573,468! The difference is 1,622,468.

Got that?

133% of the jobs created since January 2009 are not covered. Employment rose by less than 5 million while uncovered employment rose by over 6.5 million.

BLS Employment History

Let's look at actual levels of employment (covered or not) since 1948. The chart compares October of 2012 with October in prior years, not seasonally adjusted.

click on chart for sharper image

Employment is on an upswing but it's all self-employed or other jobs not covered by unemployment insurance benefits.

The labor force itself is flat, but it should be growing.

All of these factors severely distort the reported unemployment rate.

Structural Factors

As I have noted many times before, the falling unemployment rate is via several structural factors that actually show an underlying weak economy.

Disability Fraud: disability fraud

An amazing drop in the participation rate well beyond what demographics alone would suggest. For a discussion, please see About That "Expected" Drop In Participation Rate Also see Charting Errors in BLS Participation Rate Projections.

Obamacare: Obama Slashes Four Hours Off Definition of "Full-Time" Employment

Realistically unemployment is much higher than stated.

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

"Wine Country" Economic Conference Hosted By Mish
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Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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