Mish's Global Economic Trend Analysis

Japan Contracts Third Straight Quarter; No Escape
Reflections on Rand Paul's Response to Obama's State of the Union Address
Reader Reflections on "Watson" the Medical Computer
"Self-Inflicted Damage" Now the UK Goal; Inflation a "Cause For Optimism"
Hot Air and No Substance; Obama's Plan to Destroy Jobs "Won't Cost a Dime"

Japan Contracts Third Straight Quarter; No Escape

Posted: 13 Feb 2013 05:51 PM PST

Economists predicted an end to the recession in Japan.

However, economists were wrong again as Japan fourth-quarter GDP shows economy still in recession

Japan's economy contracted for the third consecutive quarter in October-December, showing the country is struggling to escape from a mild recession and adding weight to the new government's push for radical policy steps to revive growth.

Gross domestic product (GDP) fell 0.1 percent in October-December from the previous quarter, compared with the median forecast of 0.1 percent expansion, according to a Reuters poll.

Economics Minister Akira Amari said while the economy was still showing some weakness, it was likely to resume moderate recovery helped by monetary easing, stimulus spending and an expected pick-up in global growth.

On an annualized basis, the economy contracted 0.4 percent, Cabinet Office data showed on Thursday. Economists had expected a 0.5 percent annualized increase.

Private consumption rose 0.4 percent from the previous quarter versus the median forecast for a 0.5 percent increase.

Capital expenditure fell 2.6 percent, more than the median estimate for a 1.8 percent decline, marking the fourth straight quarter of decline.

A $117 billion stimulus package is likely to pass parliament in coming weeks.

No Escape

Those are not good numbers. Moreover, given Japan's massive debt-to-GDP ratio, there is virtually no escape for the predicament Japan is in.

If you are looking for who and what to blame, the answer is simple: Keynesian and Monetarist stimulus foolishness.

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

Reflections on Rand Paul's Response to Obama's State of the Union Address

Posted: 13 Feb 2013 03:30 PM PST

I invite you to listen to senator Rand Paul's response to president Obama's misguided agenda as delivered in the president's State of the Union Address.

Specifically Rand Paul says ...

Democrats believe that the government is the economic answer to all our economic and social ills. [Rand Paul doesn't believe government is the answer, nor do I]
The debt hangs like a sword of Damocles, reminding Obama that he cannot pursue his liberal agenda without raising taxes or bankrupting the country. [Agreed]
We are sick and tired of hearing why a program is wanted but not how we are going to pay for it. [Agreed]
Even without Obamacare, Medicare and social security are threatened by the demographics of the baby boomers. Within a few years we will go from 42 million seniors to 77 million seniors in the space of a few years. [Agreed]
Obama by his nature is a progressive, a believer that government is the answer, that the elite few can make society better if only they had enough money. [Agreed]
Obama believes that stimulus would work if only government had more taxpayer money to spend. No matter that stimulus spent $400,000 per job created. [Agreed]
Let us hope the debt crisis will be managed before we destroy this great country, before we destroy our currency, before we destroy the dream we hope to pass on to our kids and our grandkids. [Agreed]

Paul concludes with a message "We believe that government is the problem and not the solution". I endorse Rand Paul's message 100%.

For my specific blasting of Obama's SOTU address, please see Hot Air and No Substance; Obama's Plan to Destroy Jobs "Won't Cost a Dime"

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

Reader Reflections on "Watson" the Medical Computer

Posted: 13 Feb 2013 01:23 PM PST

In response to Meet Watson, Your Doctor in a Pizza-Size Box, reader Robert writes ...

Watson was most likely named for Thomas J. Watson, first president of the modern IBM company, not Sherlock Holmes' sidekick.

It will be interesting to see how Watson makes out. CAD (Computer Aided Diagnosis) is not new, and has been around for at least 15 years. 2nd read Mammography has been the first area of CAD, but lung cancer has been targeted as well. Raw computing power is not the issue, algorithms that can differentiate patterns are.

Computers and humans (to date) provide somewhat complementary skills, with computers providing good sensitivity but often poor specificity (high false positive rates) although this area is improving. We'll see what Watson can do.

I think a more interesting application would be rapid blood chemistry analysis, and DNA analysis (eg. analyzing and categorizing foreign DNA in the blood) which would give much earlier tests for cancer and other disease, even before a patient presents with symptoms and imaging studies are conducted.

Rob

Thanks Rob.

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

"Self-Inflicted Damage" Now the UK Goal; Inflation a "Cause For Optimism"

Posted: 13 Feb 2013 08:26 AM PST

Inflation is expected to run well above the Bank of England target rate of 2% for another two years in the UK. Don't worry it's a self-inflicted goal.

Moreover, Inflation is a cause for optimism says Bank of England governor Mervyn King.

The UK inflation rate will remain stubbornly high for longer than previously thought, the governor of the Bank of England has said.

Sir Mervyn King now expects inflation, currently 2.7%, to rise to at least 3% by the summer and to remain above the Bank's 2% target for two years.

In November he had said that inflation would fall back towards its target in the second half of this year. But the governor also said that "a recovery is in sight".

Sir Mervyn King, presenting the Bank's latest Quarterly Inflation Report, 20 years after it issued its first one, said the economy had "cause for optimism".

"If you like, it is a bit of a self-inflicted goal in terms of the damage done to real take-home pay, perhaps another way of trying to implement fiscal consolidation through moving up the price level," he said.

In other optimistic news, The Office for National Statistics said on Wednesday that UK workers were earning no more than they were 10 years ago, while a report from the Resolution Foundation think tank warned that it could be another 10 years before living standards return to the levels they were at before the recession.

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

Hot Air and No Substance; Obama's Plan to Destroy Jobs "Won't Cost a Dime"

Posted: 13 Feb 2013 01:24 AM PST

When it comes to political lies that cannot and will not be met "It won't cost a dime" is right at the top of the list. Not unexpectedly, that was the central thesis of numerous Fantasyland projections in Obama's State of the Union Address Tuesday Evening.

Here are a few ideas from his state of the union address and my comments on them.

On Health Care Quality

In reference to health care costs, the president claims "medical bills shouldn't be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive."

Mish says good luck with charging healthcare based on quality, because quality is impossible to define.

On Closing Loopholes

Obama says we can hit deficit targets and "save hundreds of billions of dollars by getting rid of tax loopholes and deductions".

Mathematically speaking, one cannot save a dime by closing loopholes. Closing loopholes may be more fair, but that has nothing to do with "saving money". Rather, closing loopholes simply spreads costs around in a different fashion.

On Tax Code Changes

Obama says "The American people deserve a tax code that helps small businesses spend less time filling out complicated forms, and more time expanding and hiring."

I certainly agree with that, and a flat tax with no deductions would do just that.

Would Obama be willing to implement a flat tax structure and close "loopholes" like the mortgage interest rate deduction?

Of course not. The Real Estate industry would scream bloody murder. Obama is not really interested in closing loopholes per se, just the selected ones that he wants.

Hot Air and No Substance

Obama says "The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next."

I certainly agree with that.

The solution is to get rid of the Fed, end fractional reserve lending, and implement a balanced budget. Unfortunately, the president did not mention any of those action items. He is all hot air and no substance.

It Won't Cost a Dime

Obama wants "Congress to help create a network of fifteen [manufacturing] hubs and guarantee that the next revolution in manufacturing is Made in America. He says "nothing I'm proposing tonight should increase our deficit by a single dime."

That certainly would be excellent news (if only it was true). In reality, new manufacturing hubs in one city will come at the expense of existing manufacturing somewhere else unless more money is thrown at the problem.

Yet, if more money is thrown at the problem, why should anyone expect results different from Obama's disastrous entry in various clean energy schemes that went bankrupt?

Climate Change Nonsense

Obama says "For the sake of our children and our future, we must do more to combat climate change."

I suggest that if we want to do something for the sake of our kids, we should eliminate the deficit, get rid of the Fed, and back the dollar with gold.

Regardless of whether or not anyone believes the hype over global warming, the notion that governments will do anything sensible about it is complete nonsense. Certainly every cap-and-trade proposal to date has been preposterous.

Obama's speech got downright scary when he said "If Congress won't act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy."

And somehow that will "not cost a dime".

"The states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings will receive federal support to help make it happen."

Apparently, federal support to construct more buildings will "not cost a dime" either.

"Fix-It-First"

President Obama proposes a "Fix-It-First program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country."

Supposedly that will not "cost a dime either". Wait a second on that. His next sentence was "And to make sure taxpayers don't shoulder the whole burden, I'm also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children".

I have a simple question: What part of the burden will taxpayers shoulder?

This "partnership" sounds suspiciously like a plea for tax hikes with the money going to overpaid public union workers.

If the president really wanted to insure we rebuild America at a reasonable cost, he would scrap Davis-Bacon and all prevailing wage laws, implement national Right-to-Work laws, and end collective bargaining of public union workers.

Instead, the president appears willing to tax the rest of the county to death to help the unions who elected him.

Still More Tax Hikes

The tax hikes don't stop with "Fix-It-First" either. Obama says "Right now, there's a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today's rates."

If that does not add to the deficit, then it must be achieved by tax hikes.

Preschool

The president's free money ideas roll on and on. Obama proposes "working with states to make high-quality preschool available to every child in America". Supposedly that pays for itself.

Job Destruction

The surest way to destroy jobs is for government to mandate businesses pay labor costs in excess of a natural rate. Yet, Obama pledges to do just that. Specifically, Obama wants to "raise the federal minimum wage to $9.00 an hour".

He claims "This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead."

Minimum Wage Seen and Unseen

The president ignores the "unseen" effect of those who do not get a job because companies choose to hire a software or hardware robot instead of an overpriced human.

The problem is not a minimum wage, but rather how much the dollar buys. If Congress did not debase the dollar with massive deficits, the dollar would buy much more than it does.

The irony is Obama complains of "Factory towns decimated from years of plants packing up. Inescapable pockets of poverty, urban and rural, where young adults are still fighting for their first job."

The US lost jobs because US wages were too high. Manufacturing is now returning, but to robots, not humans.

The president concluded "Thank you, God bless you, and God bless the United States of America."

I conclude the president's entire speech was one proposal after another that will destroy jobs, add to the deficit, and increase taxes.

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

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Mish's Global Economic Trend Analysis

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