30.7.15

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Which Will It Be: United States of Europe OR United States of Germany?

Posted: 30 Jul 2015 02:26 PM PDT

Socialists Seek to Outvote Germany

In the wake of the near-Grexit, France and Italy seek more powers for the European Commission (EC).

And both countries want another parliament with more power. Their unstated goal is to create a United States of Europe where socialists would outvote the Germans.

Germany Seeks to Prevent Being Outvoted

German finance minister Wolfgang Schäuble has a completely different idea: Schäuble Outlines Plan to Limit European Commission Powers.
German finance minister Wolfgang Schäuble is proposing to strip the European Commission of some of its core oversight powers in an effort to avoid politicising EU decision-making at a time when the executive body has touted its new partisan role in Europe.

The European Commission has quasi-judicial authority over some of the most sensitive Europe-wide decision making, particularly in the area of merger approvals and antitrust monitoring, powers that could be moved to independent bodies under Mr Schäuble's plan.

Berlin has also long called for the eurozone's budget rules to be triggered automatically when a country breaches EU debt and deficit ceilings, and has complained bitterly that France has been given repeated waivers by the commission despite violating those limits for years — waivers some have viewed as politically motivated.

François Hollande, the French president, pressed for the eurozone overhaul almost immediately after the Greek deal was reached and, in a recent interview in the Financial Times, Italian finance minister Pier Carlo Padoan called for a rapid move to a full political union.

However, the new ideas being advanced have highlighted the differences between eurozone countries on the way forward, particularly between the French and Italian camp and Berlin.

Both Paris and Rome are emphasising a pooling of resources, either in the form of a eurozone budget or a common EU unemployment scheme, while Berlin is focusing on giving the eurozone's rules more bite and less interference from political forces.
Battle Line

The battle lines are clear: Stricter Rules and Less EC vs. Fewer Rules and More Politics.

Let's not kid ourselves here. This is not an "effort to avoid politicising EU decision-making". Schäuble is scared to death about what the socialists have in mind.

If there is a new parliament, France, Spain, Italy, and Portugal will all seek to "pool resources", the same general idea as "transfer German savings for politicians to spend elsewhere".

Instead, Schäuble seeks "independent" bodies. Let's translate that as well. "Independent" really means "appointed by and to the liking of Germany".

Because politics can change, Schäuble also seeks a fallback mechanism: "budget rules to be triggered automatically".

Of course, France, Italy, Spain, etc., want no part of automated budget rules; they want to vote on rules because they know they can collectively outvote Germany any time they want. Here are the French and Italian proposals:

United States of Europe Proposals


      Which Will It Be?

      Let me summarize the debate with a question: Which will it be:

      1. United States of Europe
      2. United States of Germany

      Please think before you vote. The answer could be neither.  I purposely left out a key choice: The eurozone may still break apart.

      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.

      GDP Bounce: Disappointing Mixed Bag of Expectations and Revisions; Where to From Here?

      Posted: 30 Jul 2015 11:54 AM PDT

      This morning, the BEA reported Second Quarter GDP was 2.3%.

      2.3% was at the low end of the Consensus Range of 1.9% to 3.5%. On the plus side, first quarter was revised way higher.

      Revisions

      • First quarter 2015 revised up from -0.2% to +0.6%
      • 2013 GDP revised lower from 2.2% to 1.5%
      • 2012 GDP revised lower from 2.3% to 2.2%

      Evolution of First Quarter 2015 GDP

      • +0.2% Initial
      • -0.7% Revised
      • -0.2% Revised
      • +0.6% Revised

      GDP is the most lagging of all indicators. By the time all the revisions are in (years later), no one even cares.

      I suspect after the "final" revision, first quarter 2015 GDP will be back in the negative column, with all of 2015 revised lower as well.

      Don't hold your breath waiting.

      Weak First Half

      Meanwhile, the first half of the year looks pretty weak.

      Last year, a first quarter GDP of -0.9% was followed by a huge second quarter surge to +4.6%, sustained with a strong third quarter +4.3%.

      In comparison, this bounce was feeble.

      Where to From Here?

      If retail sales do not pick up, and especially if auto sales slide as I suspect they will, third quarter will shock the economists who believe this economy is strong and getting stronger.

      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.

      Police State "Ministry of Truth" Hits Spain; Man Fined for Calling Police "Slackers" on Facebook

      Posted: 30 Jul 2015 02:03 AM PDT

      On July 1, the Spanish Government went to "Full Police State", with enactment of law forbidding dissent and unauthorized photos of law enforcement.
      Spain's officially a police state now. On July 1st, its much-protested "gag" law went into effect, instantly making criminals of those protesting the new law. Among the many new repressive stipulations is a €30,000-€600,000 fine for "unauthorized protests," which can be combined for maximum effect with a €600-€300,000 fine for "disrupting public events."

      This horrible set of statutes has arisen from Spain's position as a flashpoint for anti-austerity protests, the European precursor to the Occupy Wall Street movement. Fines, fines and more fines await anyone who refuses to treat authority with the respect it's forcibly requiring citizens to show it.

      The law also extends its anti-protest punishments to social media, where users can face similar fines for doing nothing more than encouraging or organizing a protest. Failing to present ID when commanded is another fine. And then there's this:

      Showing a "lack of respect" to those in uniform or failing to assist security forces in the prevention of public disturbances could result in an individual fine of between €600 and €30,000.

      A clause in the wide-ranging legislation that critics have dubbed the "gag law" provides for fines of up to 30,000 euros ($33,000) for "unauthorized use" of images of working police that could identify them, endanger their security or hinder them from doing their jobs.
      Man Fined for Calling Police "Slackers"

      We now have our first test case of this inane law.

      The Independent reports Spanish man fined up to €600 under new gag laws for calling police 'slackers' in Facebook post.
      A young man in Spain has been fined for calling the police lazy in a Facebook post – becoming the first citizen to fall foul of a series of controversial new "gag" laws.

      The 27-year-old man, identified only as Eduardo D in national media reports, described the local police force as a "class of slackers" in a series of online posts which he described as humorous.

      According to the Spanish daily El Pais, Eduardo made three comments on Facebook criticising the money spent on police facilities in his town of Güímar, Tenerife.

      He also accused local authorities of misappropriating a public building, and in a third post suggested local police were so lazy they might as well have "a hammock and a swimming pool" at each station.

      Eduardo made the comments on 22 July, according to the Spanish edition of The Local, and that afternoon he received a visit from police accusing him of "making comments on social media that showed a lack of respect and consideration for Güímar's local police".

      He now faces a fine of between €100 and €600, and told El Pais he had appointed a lawyer to fight the "madness" of the penalisation process.

      One of the first uses of the nationwide so-called "gag laws", Eduardo's case comes amid a backdrop of a range of bizarre new laws across Spanish municipalities following the sweeping success of left-wing groups at elections two months ago.

      They included the introduction of a compulsory siesta in the town of Ador near Valencia, attempts to limit tourists only to the most popular destinations in Barcelona, and the setting-up of a so-called "Ministry of Truth" in Madrid.
      Is the US next?

      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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