Mish's Global Economic Trend Analysis

Chicago's Sheep Dogs Approve Mayor's Tax on Sheep; Quote of the Day "It's Not a Piece of Art"
Fed Drops Risk Warnings, Opens Door for December Hike: Who's the Fed Fooling? You, the Bond Market or Itself?
Austria Announces Fence With Slovenia; Irony of German Whine; Cascading Fences; Mish Proposed Strategy
Slovenia Calls on Army, Private Security Forces, Ponders Article 222 for EU Military Aid to Halt Flow of Migrants

Chicago's Sheep Dogs Approve Mayor's Tax on Sheep; Quote of the Day "It's Not a Piece of Art"

Posted: 28 Oct 2015 08:43 PM PDT

"It's Not a Piece of Art"

Mayor Rahm Emanuel, Chicago's master shepherd, along with his pack of aldermatic sheep dogs, successfully rounded up, then slaughtered the very Chicago taxpayers they were supposed to watch over.

After slaughtering Chicago's sheep with the largest tax hike in history, Emanuel commented "It's Not a Piece of Art".

Amen to that. Slaughters generally aren't a piece of art.

Aldermatic Sheep Approve Emanuel's Tax Hike

Crain's Chicago Business reports Emanuel Gets His Huge Property Tax Hike.

The City Council has approved Mayor Emanuel's bad-news city budget, including plans for a record $543 million city property tax hike over the next four years.

The action came on a voice vote after a relatively tepid two-hour debate. But aldermen did take a roll-call vote on the related appropriation of funds for 2016, and it was approved 36-14.

"No, it's not a piece of art," Emanuel told the council. "But are we better off? Yes."

Question of the Day

Who is better off? The sheep dogs, those in bed with the mayor, the public unions, or the slaughtered sheep?

Expect More Torture

Those who survive the slaughter can expect still more torture.

Moody's says the budget is helpful, but the budget "assumes certain actions from the State of Illinois and Illinois Supreme Court that directly impact the city's statutory pension funding requirements. Should these decisions not match the city's assumptions, new operating pressures could materialize in the immediate- and longer-term."

The S&P says "Despite Chicago's efforts to address its longer-term structural issues (starting with the approval of the 2016 budget), we still consider the city's financial problems substantial, particularly because we anticipate that the city's required pension contributions will continue to increase and place pressure on the city's budget—one of the primary drivers of our rating. In our view, the extent of the city's structural imbalance, when factoring in required pension contributions, will take multiple years to rectify."

Crain's Chicago business writer Greg Hinz says "Hold the champagne, mayor!"

Hold the Champagne?!

Is it city taxpayers, the unions, or the alderman and their pensions who are supposed to hold the champagne?

In 2012 the Chicago Tribune listed Pensions of 21 Retired Aldermen while noting: "In 1991, Chicago aldermen became eligible for a pension based on up to 80 percent of their salary, with maximum benefits awarded after 20 years of service. It's a more generous plan than other city employees receive, even though membership in City Council is a part-time job. The costs are just now beginning to kick in as salaries increase and long-serving aldermen retire."

Given the tax hike did nothing more than pad pockets of public unions and the alderman's own pockets, it appears to me champagne with caviar is the call of the day ... at least for the dogs.

It's like taking a vote between anteaters and ants as to what's for dinner, but only counting the votes of the anteaters.

Mike "Mish" Shedlock

Fed Drops Risk Warnings, Opens Door for December Hike: Who's the Fed Fooling? You, the Bond Market or Itself?

Posted: 28 Oct 2015 01:06 PM PDT

In its Press Release following today's FOMC meeting, the Fed dropped all the references made last month about the softening global economy.

Who's the Fed Fooling?

Has the global economy stabilized in the last month? Of course not.
Have the risks receded? Of course not.
Last month China was a concern now it isn't.
Is China any better? Of course not.

Moreover, the economic reports from all Fed regions are in contraction, the soaring dollar will further dampen US exports, and the refugee crisis is making an enormous mess in Europe.

Nonetheless, the Fed is back to statements similar to those it has made for much of the year.

In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

Rate Hike Odds Jump But Still Below 50%

Yesterday the odds of a December hike were 33.2%. Today they are 42.6%. That's a decent jump but still below 50%.

Those odds imply a jump from 0-.25% to .25-.50%.

I still maintain the Fed might choose baby step 8th of a point hikes or quarter point ranges where the first step is an eighth of a point. Thus, the Fed might easily hike to a range .125-.375%.

Of course, if the next two jobs reports are weak, or even if the December jobs report is weak, a hike is off the table.

Mike "Mish" Shedlock

Austria Announces Fence With Slovenia; Irony of German Whine; Cascading Fences; Mish Proposed Strategy

Posted: 28 Oct 2015 10:44 AM PDT

Two months ago, Austria's chancellor Werner Faymann criticized Hungary for building a fence along its border.

Faymann proclaimed "To think that you can solve something with a fence, I believe this is wrong."

Today, Austria Announces Fence on Slovenia Border to Slow Refugee Flows.

Europe's migration crisis escalated on Wednesday after Austria said it would build a fence on its border with Slovenia in a bid to create an "orderly" inflow of refugees and migrants into the country.

The move marks potentially the most serious fracture in the EU's response to the crisis, which has seen nearly 700,000 people enter Europe since the start of the year, as it would mark the first time a physical barrier is built between two members of the continent's passport-free Schengen zone.

Johanna Mikl-Leitner, interior minister, insisted that Austria would not totally shut its border with Slovenia. Instead, the plan involved "fixed facilities in the area of border crossings", she said.

"It's not just about a fence . . . it is about all technical possibilities to ensure a controlled, orderly influx into our country," she told Ö1, Austria's national broadcaster, adding that the plan was not "at all" an attempt to close the border.

Despite repeated meetings, leaders have so far failed to come up with a unified response. While some national capitals have introduced strict border controls, others have opted to let migrants and refugees straight through, despite EU rules dictating that they should be processed when they arrive.

The crisis has strained relations Germany and Austria which burst into the open on Wednesday.

In a significant toughening of German rhetoric towards the crisis, Thomas de Maizière, interior minister, on Wednesday blamed Austria for accelerating the movement of refugees and putting the German authorities under extreme pressure.

"Austria's behaviour in all this in the last few days has not been in order," said Mr de Maizière, immediately after a cabinet meeting in Berlin chaired by Chancellor Angela Merkel.

He added: "We have had to complain that the refugees have been taken to specific places without any warning and after dusk and from there they have come to the German border with preparation and without any warning."

The comments from Mr de Maizière follow criticism from Horst Seehofer, the head of the Bavarian sister party of Germany's ruling Christian Democrats, who on Tuesday lambasted Austria's handling of the wave of refugees, saying that a "lack of co-ordination" on the border between Bavaria and Austria meant that refugees were entering Germany unchecked.

Austria's decision to erect a fence also triggered concern in Italy, which fears that migrants travelling along the Balkan route may be diverted from Slovenia to its northeastern border area, near the cities of Gorizia and Trieste.

"It is worrying," said one senior Italian official. "It sends a strong signal." However the official cautioned that building a fence to slow the migrant flow was not the same as shutting the border.

Cascade of Fences

Various German officials are blaming Austria, who in turn is blaming Slovenia, who in turn blames Greece. And now Italy is concerned that Austria's fence with Slovenia will cause the flow to turn to Italy.

Irony of German Whine

The Irony of Germany's whine is intense. Chancellor Merkel and EU head Jean-Claude Juncker should have thought about the cascade effect when they welcomed these refugees with open arms.

As I said months ago, there is an unlimited demand for free services.

And Germany was not only handing out free services but free cash. So of course the migrants wanted to flood into Germany.

One cannot blame Slovenia for this. Nor should anyone blame former scapegoat Hungary.

No Cash Just Vouchers - Hah!

In a futile effort to appease the German public and halt the flow of refugees into Germany, Peter Altmaier, Chancellor Angela Merkel's chief of staff announced "officials will also start replacing cash handouts for refugees in reception centres with vouchers for food and essential purchases. The move will make would-be refugees think twice before trying to seek asylum in Germany."

I openly mocked that ridiculous notion in Sweden's Migration Projection Doubles in Three Months (And It Won't Stop There); No Cash, Just Vouchers (Hah!)

When you have no food and no shelter, it is virtually guaranteed that money would be spent on food and shelter. So in essence, vouchers are nearly as good as cash, just a bit less flexible.

Sweden is another country complaining. "It's as if we have a land border with Turkey," said Anders Danielsson, head of the Sweden's Migration Board.

Of course it's as if Sweden and Germany have borders with Turkey. Sweden and Germany offer the most free services.

These refugees aren't stupid. They go to the countries with the biggest handouts.

Rules? Who Cares About Rules?

EU rules require countries who first receive the refugees to register them. That too is a seriously misguided policy.

The key entry point is Greece. But what the hell is cash-strapped Greece supposed to do with hundreds of thousands of refugees other than to let them move on to Slovenia?

Slovenia Math

I did the Slovenia math this morning in Slovenia Calls on Army, Private Security Forces, Ponders Article 222 for EU Military Aid to Halt Flow of Migrants.

84,000 migrants flooded Slovenia, a country of 2 million, in less than two weeks.

Let's do the math on that population inflow: 84,000 / 2,000,000 is a population growth of 4.2% in 10 days.

Were the US population to grow at the same rate, the US population would grow by over 13 million, 13,393,800 to be precise.

What would happen if 13.4 million migrants flooded entry points of San Diego California, El Paso Texas, and Miami Florida in the same 10 days?

Partially Blocked

After criticizing Hungary for building a fence, Austria, is now building a fence that will effectively trap the migrants in Slovenia, unless the flow turns to Italy instead. So now Italy is worried, and rightfully so.

Where Wall Really Needed

Months ago I proposed a wall between Greece and Turkey because the vast majority of the migrants enter the EU from that route. I also proposed limiting free food, free shelter, and free services.

Instead, Chancellor Merkel made a bargain with Turkey, offering the Turks 3 billion euros to pen the migrants.

Even worse, Germany shelved a report highly critical of Turkey's free speech record to make the deal.

I discussed the foolishness of that idea in Bargaining With the Devil: Germany Bribes Turkey With Aid Package, EU Sidelines Highly Critical Report on Turkey's Free Speech Record.

Concentration Camp for Migrants

One of Turkey's demands was visa-free access for 75 million Turks to the Schengen border-free area from as soon as 2016!

Merkel had clearly lost her mind to agree to that. Fortunately for the EU, the deal fell through when Turkey decided one day later €3 Billion Not Enough, coupled with a vow to not become a 'concentration camp for migrants'.

Winter Scramble

So here we are, in a Winter Scramble with Juncker Warning "Refugees Will Freeze to Death" coupled with an an apology from Tony Blair for the creation of ISIS.

Has any refugee crisis in history ever been handled worse?

Origin of the Crisis

The origin of this mess is two-fold.

The US overthrow of Saddam Hussein that directly led to the power vacuum and the creation of ISIS
US support for Al Qaeda rebels in the Syrian civil war also destabilized Syria creating millions of refugees in the war-torn country.

The free handouts from Germany, Sweden and others bought the crisis to where we are now. It would help if Syria was stable, even under a leader we do not like. But Obama will have no part of that.

Mish Proposed Strategy

Block the border between Greece and Turkey
Stabilize Syria, even under Assad, but also seek promises of free Syrian elections
Eliminate or greatly reduce the free handouts
Return economic refugees to point of entry
Give Turkey some aid for US/UK role in this mess

US and EU bureaucrats have done none of the above.

Mike "Mish" Shedlock

Slovenia Calls on Army, Private Security Forces, Ponders Article 222 for EU Military Aid to Halt Flow of Migrants

Posted: 28 Oct 2015 12:07 AM PDT

Slovenia has a population of 2 million people. But in the last 10 days alone, 84,000 migrants have flooded the country.

In response, Slovenia has called out the Army and private security forces to help maintain order.

That did not stem the tide, so Slovenia Considers Calling for EU Military Aid.

Slovenia, the tiny Balkan state struggling to cope with the migration crisis, has raised the idea of invoking a never-before-used "solidarity clause" in the EU treaties to formally request European aid and military support.

Ljubljana [Slovenia's capital] recently floated the option of triggering Article 222, which enables military aid to EU nations overwhelmed by disasters, according to two officials familiar with the talks.

It indicates the drastic steps under consideration to deal with a tide of asylum seekers arriving in Europe. One Slovenian government official said invoking Article 222 was a "viable option" as a last resort.

Alarmed by the potential for Slovenia pulling the bloc's emergency cord, EU officials have sought to head off a request, in part by arranging for EU countries to provide 400 police to help Ljubljana manage the crisis.

Miro Cerar, Slovenia's prime minister, had warned the EU would "fall apart" unless the "unbearable" pressure was not eased promptly. His foreign minister Karl Erjavec hinted at the potential for a fence, saying "impediments" could be considered to stem the cross-border flows.

The solidarity clause states that EU member states "shall mobilise all the instruments at its disposal, including the military resources" in the event the requesting country is subject to a terrorist attack or is the victim or a man-made or natural disaster.

It has never been invoked.

Some EU officials are keen for the principle not to be tested.

Barbed exchanges between the leaders of Croatia, Serbia and Slovenia have raised concerns in Brussels that tensions could open old wounds from the bloody break-up of Yugoslavia and rekindle various territorial disputes.
Slideshow

Jean-Claude Juncker, European Commission president, described the worst finger-pointing as "the politics of panic".

Politics of Panic

In actuality, Slovenia should have panicked long ago. The EU is offering 400 police officers. Lovely. As noted earlier, 84,000 migrants flooded Slovenia, a country of 2 million, in less than two weeks.

Let's do the math on that population inflow: 84,000 / 2,000,000 is a population growth of 4.2% in 10 days.

Were the US population to grow at the same rate, the US population would grow by over 13 million, 13,393,800 to be precise.

Imagine what would happen if 13.4 million migrants flooded entry points of San Diego California, El Paso Texas, and Miami Florida in the same 10 days.

Do you think there would be panic? I sure as hell do.

By the way, there are another 2 million refugees in Turkey, many of them making their way towards the border with Greece,

Peak Merkel

This crisis will be the undoing of German Chancellor Angela Merkel. I labeled the process "Peak Merkel".

Joining me in similar analysis, Financial Times writer Gideon Rachman says The End of the Merkel Era is Within Sight.

Rachman is a lot more forgiving of her errors than I am, but his central idea is correct. I beat him to the punch by eight days with Swamped By Stupidity; Peak Merkel.

Finally, Juncker himself might be in for a bit of panic given this warning shot: Poland Elects Rightwing Eurosceptic, Anti-Immigration Government.

Mike "Mish" Shedlock

Economy News

28.10.15

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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