Mish's Global Economic Trend Analysis

Brilliant Bullshit!
Iran Seizes Two U.S. Navy Boats Hours Before Obama's SOTU Address; What the Hell is Iran Doing?
Decoupling Ridiculousness; US Rail Traffic Is Outright Recessionary
ISIS Suicide Bomber Hits Istanbul Tourist District, Nine Germans Killed; The Case for Merkel's Resignation
Unintended Consequence of Negative Interest Rate Madness: Swiss Canton Begs Taxpayers "Please Delay Tax Payments"

Posted: 12 Jan 2016 10:17 PM PST

On Tuesday evening I watched president Obama's state of the union address. It was brilliant.

Obama rang all the bells, dotted all the i's, and attacked all the ghosts. At times, he even made sense.

All in all, it was a brilliant effort, possibly his best speech ever, even though his speech was essentially bullshit.

In case you missed that speech, whether by accident or out of disgust, here is a Transcript Text of President Obama's 2016 State of the Union address.

Video Ad Libs

Obama deviated from his prepared transcript greatly. Here is a video for interested parties.

Belief in Change

In his address, Obama said "I believe in change because I believe in you".

That's ironic because his first campaign slogan was "Change you can believe in". People believed in change but what change did Obama deliver?

Despite promises, we are still in Afghanistan. Despite promises, we did not close Guantanamo Bay. The Mideast is a bigger mess than ever.

US unemployment is indeed half of what it was when Obama took office. But who gets the credit for that?

The answer is retiring baby boomers dropping out of the labor force by mad. Any US president would have achieved the same result by doing nothing. Obama gets to brag because he is lucky enough to be in office at the time.

Doing Things

Obama did do things. Obamacare was a disaster. But he bragged about it.

Obama's treaty with Iran is his single most positive accomplishment in eight years, but that's in dispute by many on the left and right.

Affordable Education

From the left, Obama received massive applause for affordable education.

Affordable "anything" would get applause from socialists. Yet, "affordable education" will drive up costs every bit as much as "affordable housing".

Without a doubt, history shows that any time government sets out to make something "affordable", the opposite happens.

Dare I ask: Were Bush's "Ownership Society" and "No Child Left Behind" programs all that different from Obama's proposals?

Pure Political Bullshit

75% of Obama's speech was purely political bullshit. Proving the sorry state of divisive politics, Obama received little applause, even on topics where he was right.

Campaign finance reform was one such topic.

Congress is clearly bought and sold by special interest groups. On the left, unions rule. On the right, bankers rule.

In general, neither party really wants reform. If they did, we would have had reform by now.

Hypocrisy in Action

Had a Republican given the exact same speech (stripping out global warming and other obvious nonsense), Republicans would have applauded every step of the way.

Obama's mention of "No Child Left Behind", a ridiculous program of the Bush administration, was nothing short of brilliant.

Republicans cheered Bush's program at that time. Curiously, there was dead silence from the Republican side of the aisle when Obama praised it.

Had a Republican bragged about taking out Osama Bin Laden, Republicans would have cheered like mad and Democrats would have been silent. We saw the opposite.

Brilliance Explained

Obama's SOTU speech was pure brilliance. With just a few minor tweaks, either party could have given the same speech, with accolades from their party.

That's "brilliant bullshit" at its finest.

Mike "Mish" Shedlock

Iran Seizes Two U.S. Navy Boats Hours Before Obama's SOTU Address; What the Hell is Iran Doing?

Posted: 12 Jan 2016 05:23 PM PST

Iran Seizes Two U.S. Navy Boats

Are things heating up in the Mideast? Is the Obama-sponsored nuclear deal about to unravel?

Those appear to be reasonable question following the news report Iran Seizes Two U.S. Navy Boats hours before president Obama's State of the Union (SOTU) address.

What the Hell is Iran Doing?

Upon reading the headline, my first thought was "What the hell is Iran doing?"

Then I read the story.

It appears the US made a mistake, not Iran. US officials say the navy lost contact with the boats and they may have veered into Iranian territorial waters near Iran's Farsi Island.

The White House moved to head off perceptions of the incident as an act of Iranian belligerence. "We do not see this as hostile intent, and every indication is they're being well treated and will be released," a senior administration official said.

White House press secretary Josh Earnest said U.S. officials were in touch with the Iranians and received assurances the sailors are "being afforded the proper courtesy that you'd expect." The boats were on a trip from Kuwait to Bahrain.

Bad Timing or Good Timing? For Whom?

Republicans will be screaming hellfire, but look at what we are talking about. These are the boats in question.

The boats detained by Iran were described as 'Riverine' crafts approximately 20 to 25 feet long. Above, two 'riverine' boats in June. Photo: U.S. Navy

Prompt Release

The Wall Street Journal reports "U.S. has received assurances that crew members will be released promptly".

If so, bear in mind that a prompt release would likely not been the case before the nuclear deal with Iran.

There is no story here except for Republican warmongers itching to unravel Obama's nuclear deal with Iran.

I maintain Obama's deal with Iran is the single best thing he has done in eight years. Hmm. Has he done anything else right?

Mike "Mish" Shedlock

Decoupling Ridiculousness; US Rail Traffic Is Outright Recessionary

Posted: 12 Jan 2016 11:30 AM PST

Global shipping traffic is awful. Worse yet, US rail traffic is downright recessionary looking.

Recessionary Decline in Rail Traffic

Bloomberg reports Rail Traffic Is Saying Something Worrying About the U.S. Economy.

It's not the jobs report or the latest housing data but railway cargo that has analysts at Bank of America concerned.

Railroad cargo in the U.S. dropped the most in six years in 2015, and things aren't looking good for the new year.

"We believe rail data may be signaling a warning for the broader economy," the recent note from Bank of America says. "Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week's -10.1 percent decline, has not occurred since 2009."

BofA analysts led by Ken Hoexter look at the past 30 years to see what this type of steep decline usually means for the U.S. economy. What they found wasn't particularly encouraging: All such drops in rail carloads preceded, or were accompanied by, an economic slowdown (Note: They excluded 1996 due to an extremely harsh winter).

"Similar periods of weakness have occurred in only five other instances since 1985: (1) the majority of 1988, (2) the first half of 1991, (3) several weeks in early 1996, (4) late 2000 and early 2001, and (5) late 2008 and the majority of 2009 … all either overlapped with a recession, or preceded a recession by a few quarters."

Rail Traffic

Shipping Traffic

Please consider Investigating Claims "North Atlantic Trade Ground to a Halt, No Ships Moving"; The Real Shipping Story.

Here's an eye-opening chart from that report.

Don't Blame Commodities

Mining and commodities are no doubt "part" of the decline, but please don't tell me this is all commodity related.

And don't tell me that the decline in shipping is all China related.

Above all, don't tell me manufacturing does not matter or the US economy has decoupled from the world.

Decoupling Ridiculousness

For details on the awful state of shipping, please see Investigating Claims "North Atlantic Trade Ground to a Halt, No Ships Moving"; The Real Shipping Story.

The idea that China would decouple from the global markets in 2007 was ridiculous. Reverse decoupling, the notion the US will decouple from the global economy is equally ridiculous.

Finally, the new found theory that "manufacturing no longer matters" and the US service economy will carry the day alone is the most ridiculous decoupling thesis yet.

Mike "Mish" Shedlock

ISIS Suicide Bomber Hits Istanbul Tourist District, Nine Germans Killed; The Case for Merkel's Resignation

Posted: 12 Jan 2016 10:21 AM PST

An ISIS suicide bomber struck at the heart of an Istanbul Turkey tourist district moments ago, killing at least ten people, among them nine German citizens.

The Wall Street Journal reports Turkey Blames Islamic State in Istanbul Attack.

A powerful explosion hit the heart of Istanbul's central tourist district on Tuesday, killing at least 10 people and injuring 15 others. Turkish President Recep Tayyip Erdoğan said a Syria-linked suicide bomber is believed to be behind the blast.

The bomber, identified by Turkish authorities as a Syrian man in his late 20s, walked up to a tour group preparing to explore the Blue Mosque and other world-renowned buildings nearby and blew himself up shortly after 10 a.m. Nine of those killed were German, and 15 people were wounded, Turkish officials said.

Prime Minister Ahmet Davutoglu said the bomber belonged to Islamic State and urged Ankara's allies to step up the fight against the Sunni Muslim extremist group based in Syria that has tried to project its global power by carrying out terrorist attacks around the world.

"This attack is a repercussion on Turkey of the civil war that has been going on in Syria for five years, and its related proxy wars," said Numan Kurtulmus, Turkey's deputy prime minister.

Merkel's Seriously Misguided Refugee Policy

After chancellor Angela Merkel foolishly welcomed refugees with open arms, public opinion forced her to change tactics. She did, but in superficial, counterproductive ways.

For example, Merkel bribed Turkey with a $3 billion payment so that Turkey will pen in refugees. How's that working?

Today we have proof of the absurdity of that offer. But let's dig deeper with more statistics.

Turkey Statistics

The population of Turkey is roughly 75 million of which 90% are Sunni Muslims.

As part of the deal for penning migrants, Merkel agreed to speed up Turkish admission into the EU. Those 75 million Turks would then have Visa-free access to the rest of Europe.

Not only is Turkey guilty of human rights violations, president Recep Tayyip Erdoğan has Turkey on a Path for Dictatorship.

Dealing with Erdoğan is madness.

Merkel Should Resign

400,000 Syrians are in Germany right now, seeking asylum. How many of them are ISIS terrorists? Is one too many?

Yet, even after the sex attacks in Cologne, she has done nothing to fix the problem. Heck, she will not even admit what the problem is.

Instead, Merkel sought deals with a would-be dictator.

As I have stated previously, for the good of Germany, Merkel should resign.

Mike "Mish" Shedlock

Unintended Consequence of Negative Interest Rate Madness: Swiss Canton Begs Taxpayers "Please Delay Tax Payments"

Posted: 11 Jan 2016 11:38 PM PST

"Please Delay Tax Payments"

Negative interest rates have had a new and unusual effect on taxing bodies in Switzerland: Swiss Canton Tells Taxpayers to Delay Settling Bills.

Taxpayers in parts of Switzerland this year face an unusual request from fiscal authorities: please delay settling your bill until as late as possible.

Zug, the small but affluent canton outside Zürich, has announced it is ending discounts for early payment of tax bills. The reason? The longer it has cash on its books, the more likely it will incur costs as a result of negative interest rates charged by Swiss banks. The canton calculates that the move will save SFr2.5m ($2.5m) a year.

Its extraordinary appeal — which could be followed by other cantons — is the latest unintended consequence of extraordinary steps taken by the Swiss central bank to weaken the strong franc, which is hitting export industries in the affluent Alpine economy.

"Considering the long lasting phase of low interest rates in Switzerland and the negative interest rates which have to be paid, the canton has no incentive to motivate taxpayers to make early payments," Zug authorities said in a statement. "On the contrary, the canton has an interest in receiving money as late as possible — so it pays less negative interest."

Unintended Consequences

I will gladly receive on Tuesday what you may wish to pay today.

Is a fine for bill prepayment the next logical step?

Think about that for a second.

Rather than getting individuals and corporations to spend (the desired central bank action), negative interest rates (not yet tried at the consumer level) just might get everyone to pay their bills early.

Going one step further, if lending rates are low enough, people could borrow money at negative rates and park it under their mattress or in safe deposit boxes and make money by borrowing.

Please take the money! Just promise to pay me back whenever.

More realistically, negative interest rates on consumer deposits will cause a run on the banks.

Mike "Mish" Shedlock

Economy News

12.1.16

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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