Mish's Global Economic Trend Analysis

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Mutual Guarantee Society: Spain Proposes State Guarantee of Bank Loans to Small and Medium Businesses Posted: 01 Jan 2013 04:34 PM PST Lending in Spain has all but dried up. Banks don't want to (or cannot) lend because they are capital impaired and there are too few creditworthy risks. In such an environment, lending is not wise. It will lead to more losses. But that is not how government bureaucrats think. Prime minister, Mariano Rajoy is preparing measures to 'desbancarizar' save the economy and SMEs He acknowledged President Mariano Rajoy in balance the first year of government: the main problem of the economy to start recovery is the lack of financing for SMEs [Small and Medium Enterprises]. With that goal-getting liquidity regrease economic system, the government last a number of measures to facilitate the financing of small and medium enterprises. Or what is the same, it is 'desbancarizar' the Spanish economy far too dependent on credit institutions in granting loans or other financing of productive activity. The Government is considering the creation of new instruments for SMEs operate with the State guarantee, which is considered key to boost economic activity. At the same time, they want to boost mutual guarantee societies, an instrument in the hands of the regions that did not just start with all its potential. In parallel, the Ministry of Economy is betting big on the credits of the ICO for SMEs, about 22,000 million euros in 2013 for self-employed and SMEs. The result of this 'banking' of the Spanish economy is lethal. There are no corporate funding mechanisms that provide a continuous flow of resources, which is an additional difficulty facing Spanish companies in a recessionary environment. With the addition of that full financial restructuring-dunk entities to restore its solvency levels, can not allocate funds to finance productive activity. To this we must add that the public sector is eaten much of the credit to finance their high fiscal deficits, the so-called crowding out effect, which involves the removal of private economic agents in funding. Spain Beyond Repair "Spain hopes to boost small business access to finance outside of the banking world by encouraging the market to accept paper of smaller businesses, by guaranteeing debt, and via the official credit office", writes reader Bran who lives in span and forwarded the above link. Regardless of the precise translation of "desbancarizar", I am certain it will fail. Quite literally Spain is beyond repair, at least within the eurozone. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Obama Deal Adds $3.97 Trillion to Deficit Over 10 Years; Only 5 Republicans Voted Against; White-Flag Surrender Posted: 01 Jan 2013 01:27 PM PST For all the pissing and moaning over the fiscal cliff, there was never much of a "cliff" in the first place. Worse yet, every delay made matters increasing irresponsible in terms of addressing the deficit. The final result, as passed by the Senate, watered down budget cuts from $600 billion to a mere $12 billion. Moreover, the extension of the tax cuts will add almost $4 trillion to the deficit over 10 years according to CBO analysis of the American Taxpayer Relief Act. Nonetheless, that was not enough for liberal democrats who thought they did not get enough out of the deal. The "Fiscal cliff" moves to House, where a slim hope remains that Republicans will punt this bill a mile high. In a rare late-night show of unity, the Senate voted 89 to 8 to raise some taxes on the wealthy while keeping income taxes low on more moderate earners. Republicans, unhappy that the bill contained over $600 billion in tax increases but only around $12 billion in spending cuts, said they may change it more to their liking and send it back to the Senate. Party leaders planned to take the temperature of rank-and-file lawmakers over the afternoon before deciding on a course of action. "My recommendation would be not to take a package put together by a bunch of sleep-deprived octogenarians on New Year's Eve," said Representative Steve LaTourette, a moderate Republican from Ohio who is a close ally of House Speaker John Boehner. "My district cannot afford to wait a few days and have the stock market go down 300 points tomorrow if we don't get together and do something," Representative Steve Cohen, a Democrat from Tennessee, said on the House floor. The White House has floated $600 billion worth of spending cuts in earlier negotiations, and Obama said he would be willing to tackle deficit reduction over the coming months. "There's more work to do to reduce our deficits, and I'm willing to do it," he said in a statement urging the House to pass the current bill. Republican Representative Tom Cole said his House colleagues should pass the Senate bill rather than try to change it. "We ought to take this deal right now, and we'll live to fight another day," Cole said on MSNBC. Only 5 Republicans Voted Against The Tax Foundation has additional Details of the Fiscal Cliff Tax Deal At 2AM this morning, the Senate passed H.R. 8, the American Taxpayer Relief Act of 2012, by a vote of 89-8. Voting no were Bennet (D-CO), Carper (D-DE), Grassley (R-IA), Harkin (D-IA), Lee (R-UT), Paul (R-KY), Rubio (R-FL), Shelby (R-AL). Not voting were DeMint (R-SC), Kirk (R-IL), and Lautenberg (D-NJ). TaxProfBlog has the text of Senate-passed bill  (157 pages). The Joint Committee on Taxation (JCT) has also produced a revenue estimate, as has the Congressional Budget Office (CBO). White-Flag Surrender Somehow, right before the election, budget cuts of 10-1 over tax hikes were not acceptable to Republicans. Now, they have settled for a package that essentially makes no budget cuts at all. This is one of the biggest white-flag political surrenders in history. Obama Tax Cut" To Add $4 Trillion To Deficit Over Next Decade President Obama made the biggest understatement ever regarding the budget deficit: "There's more work to do to reduce our deficits". More work? Pardon me for asking, when was "any" work done to reduce the deficit? Ill-fated attempts to reduce the budget deficit have only gone in reverse. Finally, it's important to note that the bill that passed the Senate is technically a tax cut. ZeroHedge accurately sums up the situation as follows "Obama Tax Cut" To Add $4 Trillion To Deficit Over Next Decade Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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