Mish's Global Economic Trend Analysis

Conscription of People, Cars, Businesses in Ukraine for Mindless Slaughter; Entire Villages Leave to Avoid Servitude; Hop on the Bus Gus
Alexis Tsipras "Open Letter" to German Citizens Regarding Extend-and-Pretend Unserviceable Debt
Asset Price Deflation Coming Up? Food Prices About to Drop? CPI About to Go Negative? Credit Deflation?

Conscription of People, Cars, Businesses in Ukraine for Mindless Slaughter; Entire Villages Leave to Avoid Servitude; Hop on the Bus Gus

Posted: 29 Jan 2015 06:37 PM PST

Ukrainians Fighting Ukrainians

Forced military conscription (slavery is a better word) imposed on citizens of Ukraine has reached new heights recently.

The government in Kiev now demands those forced into slavery to hand over their cars for military use. As one might expect, avoidance of needless military slaughter has also reached new heights.

Before we get to those stories, I have a video to share. It is in Russian, but with English subtitles. I am told by reader Jacob Dreizin the translation is essentially correct, but a couple things were translated too literally.

I do offer this warning. The video is graphic and it does contain a lot of harsh language. The video is about captured Ukrainian POWs on a fool's mission to retake the Donetsk airport. After about 12 minutes or so it gets gruesome, the beginning is not so bad.

Warning aside, I recommend watching the video, entirely. Watch the scenes where locals confront the Ukrainian POWs. The video accurately portrays Ukrainians fighting Ukrainians, not Ukrainians fighting Russians.

Ukrainian POW's Face NAF Commander Givi and the Fury of Donetsk Residents

Link if Video Does not Play: UAF Storms Donetsk Airport and Gets Asses Handed to them by NAF.

Want a translation to Spanish, German, Dutch, Danish, or French? Go to Information Clearing House. That is where I picked up the Video.

Translation Corrections

Around 4:41, "And if we dropped on Kiev such mines?" should be, "And if we dropped such mortar rounds on Kiev?"
At 5:22, a more accurate translation would be "You'll rebuild our city."
Around 8:30 to 8:57, "trucks" should be "armored vehicles (BMPs or BTRs)."
At 12:11, "respected" should be translated as "my good fellow."
At 19:31, should be more like "...his hands go lame", not his "...hands dry out." They are translating too literally.
At the end, the security guy is just joking about hanging him, obviously that's out of the question. These POWs will be traded for NAF POWs.

Rebel Propaganda?

Is that video rebel propaganda? You bet. Is it effective? Yep. And it's also the truth. Kiev routinely sends soldiers on fool's missions hoping for a miracle. Instead it's been slaughter after slaughter.

"No Regular Units of the Russian Army in Ukraine"

An important admission came today from Ukrainian military chief of staff, General Viktor Muzhenko, at a press briefing: "No Regular Units of the Russian Army in Ukraine".

Read link above for that statement. The title is different.

The admission was repeated by another Ukrainian news agency as well. Please consider Involvement of Russian Army in Illegal Armed Formation in Donbas.

Here's an exact (unedited) translation. Meaning is crystal clear.

Armed Forces General Staff has information about the participation of soldiers of the army of the Russian Federation in the conflict in eastern Ukraine.

This was announced during a briefing Armed Forces Chief of Staff Lieutenant General Victor Muzhenko.

"To date, we have only the involvement of some members of the Armed Forces of the Russian Federation, Russian citizens as part of illegal armed groups in the fighting. Fighting units of the regular Russian army today we're also not. We have enough forces and means in order to inflict a final defeat even illegal armed formation "- he said.

Video Translation

Jacob Dreizin offers a better translation of the video in the first link.

"At this time, we have only proof of participation of individual members of the Russian Federation armed forces and Russian Federation citizens in the illegal armed formations (and) in military operations. Also, at this time we are not engaged in military operations against regular Russian army units."

By "illegal armed formations", he is referring to the DNR/LNR.

Even if one believes there are "Russian Regulars" in Ukraine, its probably a number of "trainers" not the alleged 15,000.

For further discussion, please see Attack on Mariupol Begins; 7,000-8,000 Ukrainian Forces Nearly Encircled in Northern Cauldron; US Sends Army Trainers.

Conscription of People, Cars in Ukraine for Mindless Slaughter

The mindless slaughter should be obvious from previous videos I have posted. So let's move on to a another topic: new slavery (conscription) requirements.

Odessa Region "Recruits" Ordered to Quit Jobs and Turn Over Cars

Via translation please consider Odessa Region Recruits Ordered to Quit Jobs and Turn Over Cars.

In the Belgorod-Dniester district of Odessa region reserve servicemen were banned from leaving the area. The ban applies even to those who have not yet received a summons.

Businesses commissar requires organizations to dismiss employees receiving a summons and to ensure the attendance of recruits at the points specified in the mobilization orders.

In addition, citizens, businesses and organizations required to hand over to the military conscription office all serviceable vehicles.

Mobilization 2015: In Transcarpathia Entire Villages Go Abroad

Here's another story on the same subject: Mobilization 2015: In Transcarpathia Entire Villages Go Abroad

In 2015, only 6% of persons subject to mobilization, are volunteers according to Oleg Boyko, Main Directorate of Mobilization. This compares to 20% in the first wave of mobilization in 2014.

"The biggest problem in mobilization activities in the Transcarpathian region," - he said.

According to Boyko, sometimes whole villages leave the country. "There is a report of the Chairman of the Kosovo village of the district, according to which the local population has hired two buses and drove them to the Russian Federation."

In the Ternopil region, there continues a mass escape of the male population abroad. "Strange as this may seem, people flee to the Russian Federation", said Boyko.

Mindless!

"Strange as this may seem, people flee to the Russian Federation", said Boyko. It's only strange if you are a mindless idiot.

Military Servicemen Massively Flee Abroad

Also via translation, please consider Military Servicemen Massively Flee Abroad

The article relates to what Oleg Boyko, chief of the Draft Directorate of the Main Directorate for Defense and Mobilization Planning of the Ukrainian General Staff, said at a meeting with President Poroshenko's office yesterday:

A representative of the General Staff of the Armed Forces of Ukraine appealed to the government to formulate a bill to prevent citizens of Ukraine from leaving the country.

In particular, he suggested that the Government develop a change in the law "On the departure of Ukrainian citizens abroad, subject to conscription in a special period."

A representative of the General Staff proposed to revise downward the list of enterprises, institutions and organizations that are exempt from equipment mobilization for the needs of the army.

He noted the need to amend border crossing rules due to the fact that during the current mobilization phase, entire villages go abroad to avoid conscription. In particular, they head to the territory of the Russian Federation.

According to the Ternopil military commissariat (draft board) "the population of Ternopol province is quitting their jobs en masse, with the goal of avoiding the draft. Draft eligibles are also leaving the country en masse. In the Ternopil region, two buses of the local population went to the Russian Federation."

There are also problems with the mobilization of equipment for the needs of the army.

My Advice

Here's my belated advice to those living in Ukraine: "Get the F* out of Ukraine. Now!"

Small Price Theory Revisited

I wrote about the "small price theory" on August 8, 2014, in "Small Price to Pay".

It seems the "small price" keeps getting bigger, and bigger, and bigger.

Jacob Dreizin wrote today ... Maybe your "Small Price to Pay" friend would like to come to Ukraine and take the place of all these draft dodgers? Surely his life would be a small price to pay to keep the world safe for democracy. Instead, does he have any kids to spare?

That's the problem isn't it? As reader Bran from Spain once emailed, "Proponents of the small price theory never really have much at stake. Everyone else does."

It's pretty damn clear those in Ukraine whose sons and daughters are forced to fight a stupid war have decided "this ain't no small price!" Meanwhile, those in the US who manufacture weapons and hope to send more of them to Ukraine for a profit are the biggest proponents of the "small price" theory.

My friend is not in the latter category, and he was staunchly against the Vietnam war. Rather, he simply is not thinking clearly now, idealistically hoping for some of global "UN-sponsored united world peace concept" (my phrasing not his), that must be defended at all costs, presumably even nuclear war with Russia.

Hop on the Bus Gus

In honor of Ukrainians citizens smart enough to disavow the "small price" theory and willing to tell their government to F* off, I offer this musical tribute.

Link if Video does not Play: 50-Ways Paul Simon

Hop on the bus Guss
Don't need to discuss much
Just drop off the keys Lee
And get yourself free!

No one has the right to own you. No one. No government. Ever!

To disagree with the above is to support forced slavery.

This War is Over

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

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

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

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

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

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

I authorize translation and republication of this individual article, to any language, on any site, as long as it contains a link back to this article.

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

Alexis Tsipras "Open Letter" to German Citizens Regarding Extend-and-Pretend Unserviceable Debt

Posted: 29 Jan 2015 12:18 PM PST

Here's a story from January 13 that just came my way today thanks to a reader wootendw who posted a link as a comment to one of my articles.

The background to this story is SYRIZA leader Alexis Tsipras' "Open Letter" to German Citizens, published on Jan.13 in Handelsblatt, a leading German language business newspaper.

Alexis Tsipras, now prime minister of Greece, sent this letter to Handelsblatt:

Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds bigotry, nationalism, even violence.

In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.

In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the 'extend and pretend' tactic would lead my country to a tragic state. That instead of Greece's stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself.

My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.

Indeed, even before a full year had gone by, from 2011 onwards, our predictions were confirmed. The combination of gigantic new loans and stringent government spending cuts that depressed incomes not only failed to rein the debt in but, also, punished the weakest of citizens turning people who had hitherto been living a measured, modest life into paupers and beggars, denying them above all else their dignity. The collapse of incomes pushed thousands of firms into bankruptcy boosting the oligopolistic power of surviving large firms. Thus, prices have been falling but more slowly than wages and salaries, pushing down overall demand for goods and services and crushing nominal incomes while debts continue their inexorable rise. In this setting, the deficit of hope accelerated uncontrollably and, before we knew it, the 'serpent's egg' hatched – the result being neo-Nazis patrolling our neighbourhoods, spreading their message of hatred.

Despite the evident failure of the 'extend and pretend' logic, it is still being implemented to this day. The second Greek 'bailout', enacted in the Spring of 2012, added another huge loan on the weakened shoulders of the Greek taxpayers, "haircut" our social security funds, and financed a ruthless new cleptocracy.

Respected commentators have been referring of recent to Greece's stabilization, even of signs of growth. Alas, 'Greek-recovery' is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!

Allow me to submit to you that this sorry attempt to recruit a new version of 'Greek statistics', in order to declare the ongoing Greek crisis over, is an insult to all Europeans who, at long last, deserve the truth about Greece and about Europe. So, let me be frank: Greece's debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding. The insistence in these dead-end policies, and in the denial of simple arithmetic, costs the German taxpayer dearly while, at once, condemning to a proud European nation to permanent indignity. What is even worse: In this manner, before long the Germans turn against the Greeks, the Greeks against the Germans and, unsurprisingly, the European Ideal suffers catastrophic losses.

Germany, and in particular the hard-working German workers, have nothing to fear from a SYRIZA victory. The opposite holds. Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits. Our target is, rather, the country's stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end 'extend and pretend' logic not against German citizens but with a view to the mutual advantages for all Europeans.

Dear readers, I understand that, behind your 'demand' that our government fulfills all of its 'contractual obligations' hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for 'reforms', as long as these 'reforms' do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.

Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.

A great opportunity for Europe is about to be born in Greece on 25th January. An opportunity Europe can ill afford to miss.

Emphasis in italics is mine.

Interest Rate Math

Regardless of how one views his other policies, that particular letter is not the work of an economic madman. Tsipras' position is entirely accurate. And although I disagree with many SYRIZA economic views, there is not a single thing in the "open letter" that I can find fault with.

A simple economic truism is that what cannot be paid back, won't be paid back. I posted the math recently in Greek Payback Math at 0% Interest.

Unfortunately, Greece has to convince 17 other Eurozone countries to renegotiate the terms. Germany and Finland have both said no. Eurozone rules are such that every country must agree.

Sanction Math

Interest rate math is not the only problem for Greece. Other clashes have developed.

I discussed that development in Clash Over Sanctions: Syriza Opposes Sanctions on Russia, Calls Them "Neocolonial Bulimia"; Negotiation Rules.

Greece opposes sanction on Russia, a position I fundamentally agree with. Sanctions inevitably harm both sides.

However, as with eurozone rules, EU sanction rules require unanimous agreement. With sanctions, 1 vote out of 28 (more countries in EU than eurozone) can kill the deal.

That's a lot of leverage, especially when 27 on the other side want something from you. What are they willing to offer in return?

Will these situations resolve via common sense or wreckage?

If there were two parties in the room, those parties might easily come to terms. Can 19 or 28 parties in Europe all agree to do the right thing?

Color me skeptical.

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

Asset Price Deflation Coming Up? Food Prices About to Drop? CPI About to Go Negative? Credit Deflation?

Posted: 29 Jan 2015 02:15 AM PST

When inflation alarmists want to convince everyone the dollar is about to become worthless, they post this chart of the CPI.

CPI - Urban Consumers - All Items - Index

Inflationists claim that is a trend to oblivion. And actually it is. But it's a slow trend towards oblivion with intermittent disruptions as the following chart shows.

CPI - Urban Consumers - All Items - Percent Change From Year Ago

As measured by consumer prices, inflation went negative from December 2008 until October 2009.

CPI - Urban Consumers - All Items - Percent Change Detail

The CPI hit a record low of -1.959 in July of 2009.

My prediction made in 2005 or so, was and still is "The US would go in and out of deflation a number of times over a long period of time".

I was speaking in terms of "credit deflation", but that occurred as well. Either way, I was correct and the inflationists who predicted hyperinflation before deflation were simply dead wrong.

Oil vs. CPI

I got to thinking about this again recently given the plunge in oil. Let's take a look at oil prices in relation to the overall CPI.

Clearly there is a correlation over longer periods of time but the amplitude of oil in both directions is much greater. That makes sense because housing is the largest component of the CPI, not energy.

Food

An article on Yahoo Finance on January 16 caught my eye and I bookmarked it: Yes, you ARE paying more for food.

I am not here to dispute that chart. In fact I agree with it. Worse yet it has been persistent, especially with beef, and for more than a year.

Mish Food Shopping Experience

From approximately 2000 until 2010 or perhaps 2011, the sale price of prime rib was $4.99 a pound. Now the sale price is $7.99 a pound, if you are lucky.

Pork is different though. I picked up center cut pork chops on sale last week for $2.49 a pound. That is roughly the same sale price for 10 years.

I have written about this many times. For example, on April 26, 2006 in A Look At Hyperinflation, I stated "Center cut pork chops not on sale are $5.49 lb. Phooey. Who needs that? At least once a month they are on sale for $2.29 lb or less. Seriously, we are talking 1970's prices [on chicken]. I know because I worked as assistant manager in a grocery store back then. Heck I have no idea how they can even raise chickens at .49 lb. If you know then please tell me!"

Chickens were a loss leader at $0.21 a pound in 1970. They were $0.49 when I wrote that.

In regards to pork chops, I have made similar claims in 2007, 2008, and 2011. And here we are again, back at $2.49. But what about beef?

Live Cattle

Beef prices are high because cattle prices are high. But, for the first time since the beginning of 2013, prices are down two consecutive months, and there is plenty of room to drop.

Why are pork chops back to $2.49 again?

Lean Hogs

Here we are once again. From 2011 until the beginning of 2014, center cut pork chops sale prices were higher, in the range of $2.79 to $3.29 a pound.

Welcome back $2.49. We missed you.

Not on sale? Don't buy them, or buy them sparingly.

Wheat

Wheat is back to where it was in late 2006.

Soybeans

Soybeans are back to where they were in late 2007. There's considerable room for prices to drop to 2006 levels like the other food commodities.

Advice

Buy a freezer and use it! It is crazy to pay $5.49 for chops when you can get them for $2.49. It is equally crazy to pay $10.99 for prime rib when you can get it for $7.99. Butter, bacon, and cheese all freeze well. Cheese is often half-price, so is bacon. If you are a vegetarian you have a harder time, but I hazard a guess a freezer or pantry can still come in very handy. Learn to shop!

Where To From Here?

No one can say, but it is pretty clear that food commodity prices are falling and food prices should drop with a lag.

If rent prices drop as well (I do not expect that, but it easily could happen), then the CPI could turn negative once again, even if oil prices head back up.

HPI-CPI

My preferred consumer price measure is HPI-CPI a self-designed index that includes actual home prices instead of rent. By that measure, we will be soon back in price deflation if housing prices drop, and I believe we are on the cusp of another housing decline.

I last wrote about HPI-CPI on September 24, 2014 in Housing Prices, "Real" Interest Rates, and the "Real" CPI

Here's the chart. See the article for discussion.

Credit Deflation?

The important thing is credit deflation, not the myopic central bank focus on consumer prices. I do expect credit deflation and a tightening of lending standards once elevated asset prices plunge.

The plunge in US treasury yields in the face of expected Fed hikes lends credence for the above analysis.

One more point: Please don't tell me about shadowstats CPI. It's a thoroughly discredited model.

For analysis, please see Wading Through Molasses: "Did the Real Economy, Not Counting Government, Expand in Last 20 Years?"

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

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