Economy News

23.5.13

Mish's Global Economic Trend Analysis

France Private Sector Implosion Continues
Another Warning Call for Depositors! Bank of Spain Says Spanish Banks Need €10bn More Loan Loss Provisions; Mish Asks €10bn or €100bn?
Christine Lagarde, Head of IMF, In Court Facing Questions on Embezzlement and Fraud
Japanese Bond Rout Continues; BoJ Vows to Curb Bond Turbulence; Curbing Turbulence is Theoretically Easy
Nikkei Plunges 1,143 Points (7.32%); Global Equities Hammered; Start of Reflation Bubble Bust?

France Private Sector Implosion Continues

Posted: 23 May 2013 10:36 PM PDT

Here's some news that caught my eye earlier today when I was on the road: The Markit Flash France PMI® shows French private sector output continues to fall at marked rate in May.

Key points:

Flash France Composite Output Index unchanged at 44.3

Flash France Services Activity Index unchanged at 44.3

Flash France Manufacturing PMI rises to 45.5 (44.4 in April), 9-month high

Flash France Manufacturing Output Index up to 44.3 (44.1 in April), 9-month high

Summary:

The downturn in French private sector output continued in May. Unmoved from April's reading, the Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, posted 44.3. Although remaining above the levels registered in Q1, the latest reading was indicative of a marked rate of contraction in overall activity.

Comment:

Jack Kennedy, Senior Economist at Markit and author of the Flash France PMI®, said:
"May's unchanged PMI reading points to ongoing struggles for the French private sector economy. Activity has continued to fall at a marked pace in Q2 so far, suggesting that another drop in GDP could well be on the cards following the recent confirmation that France was in recession during the previous two quarters. PMI data highlight continued pressure on employment and operating margins, as the difficult business climate facing French companies persists."

Mish Comments

Scores below 50 designate contraction, and scores in the 44-range designate substantial contraction, so those 9-month highs just go to show how awful conditions are.

With French president Francois Hollande at the helm of France, and the nannycrats in Brussels in control elsewhere, don't expect conditions to get much better any time soon.

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

Another Warning Call for Depositors! Bank of Spain Says Spanish Banks Need €10bn More Loan Loss Provisions; Mish Asks €10bn or €100bn?

Posted: 23 May 2013 12:34 PM PDT

Here's an optimistic headline on the Financial Times that could easily be off by a factor of 10 or more: Spain's banks need €10bn more provisions.

Spanish banks will need to put aside extra provisions of up to €10bn to cover loans that borrowers will struggle to repay, according to an internal estimate by the Bank of Spain.

According to recent data, Spanish banks rolled over more than €200bn of loans before they expired – often because corporate borrowers would be unable to repay their debt on time and in full. The €10bn estimate is the first official assessment of the likely impact of the central bank's new approach towards these refinanced loans.

The Bank of Spain believes that the risks emanating from this practice, known as "extend and pretend", have not been fully covered and is pressing all banks to reclassify their refinanced loans according to tighter standards by the end of September. The new regime will make it harder for banks to treat refinanced loans as if they were performing normally, in turn forcing lenders to take additional provisions.

"Our banks will need more provisions," a senior official at the Bank of Spain told the Financial Times. "The provisions will affect their results, but the question is by how much. We cannot know for sure but we think the impact will be between €5bn and €10bn [in provisions] across the system."

€10bn or €100bn?

Banks rolled over €200bn of loans because they could not pay debt on time, pretending the loans were current, and the Bank of Spain estimates the risk at a mere €10bn.

Who do they think they are they fooling?

Will 70% of those loans be paid back? 50%? 20%? I don't know but I strongly suggest it sure will not be 95%.

Given the perpetual over-optimism on Spanish bank losses, I estimate there is a 0% chance the losses on this disclosure will be as little as €10bn.

That said, I do not know what the existing loan loss provisions are, but if they are high enough (extremely doubtful), then there is some chance the losses will be on the order of €30bn or so (on the general principle things are typically 300% worse than the optimistic scenario).

This does not factor in losses on Spanish government bonds when Spain eventually seeks a massive bailout. Realistically, Spanish banks are insolvent.

Another Warning Call!

By the way, this is yet another warning call "If you have money in Spanish banks, move it somewhere else immediately!"

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

Christine Lagarde, Head of IMF, In Court Facing Questions on Embezzlement and Fraud

Posted: 23 May 2013 10:47 AM PDT

Christine Lagarde, head of the IMF, is in court today addressing her role in a $366 million payout to Bernard Tapie, a close friend of former president Nicolas Sarkozy who was also Lagarde's boss at the time. Lagarde was Sarkozy's finance minister.

Reuters reports IMF's Lagarde in court for French arbitration case.

IMF chief Christine Lagarde was questioned in court by French magistrates on Thursday over her role in a 285-million-euro ($366 million) arbitration payment made to a supporter of former president Nicolas Sarkozy.

Lagarde risks being placed under formal investigation at the hearing for her 2007 decision as Sarkozy's finance minister to use arbitration to settle a long-running court battle between the state and high-profile businessman Bernard Tapie.

Under French law, that step would mean there exists "serious or consistent evidence" pointing to probable implication of a suspect in a crime. It is one step closer to trial but a number of such investigations have been dropped without any trial.

In Paris, Lagarde flashed a smile at waiting media as she arrived at court with her lawyer and said: "It's a pleasure to see you."

They were not expected to emerge until the end of the day's proceedings, which could run into late evening. The decision on whether to place her under investigation or give her "supervised witness" status will be announced at the end of the hearing, which could last into Friday.

Lagarde is not accused of financially profiting herself from the payout and has denied doing anything wrong by opting for an arbitration process that enriched Tapie. With interest, the award amounted to 403 million euros.

However a court specializing in cases involving ministers is targeting her for complicity in the misuse of funds because she overruled advisers to seek the settlement.

If Lagarde is formally charged with embezzlement or fraud, she may be asked to resign as head of IMF whether she is convicted or not.

It's difficult to say how much of this is political maneuvering by current French president Francois Hollande, but it's equally difficult to dismiss the charges outright.

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

Japanese Bond Rout Continues; BoJ Vows to Curb Bond Turbulence; Curbing Turbulence is Theoretically Easy

Posted: 23 May 2013 08:42 AM PDT

Curve Watchers Anonymous has been watching a major selloff in Japanese bonds. Here are a couple charts to consider.

10-Year Japanese Government Bond Yield

5-Year Japanese Government Bond Yield

Since March 4, the 5-year yield has gone from 0.1% to 0.43%. Although a mere .33 percentage points, the move represents a 330% percent rise in in yield.

One Month Changes

Charts courtesy of Bloomberg

Note: Those charts were snapshots taken last evening. This morning, yields have settled down, for now.

Bank of Japan Vows to Curb Bond Turbulence

NewsDay reports Bank of Japan vows market steps to curb bond turbulence

The Bank of Japan vowed yesterday to take necessary steps to reduce volatility in bond markets that has threatened to jeopardise the government's fight to end deflation and revive growth.

BOJ Governor Haruhiko Kuroda vowed to take steps needed to reduce volatility in the JGB market, but he disappointed some bond investors by sticking with the strategy of leaving it to BOJ bureaucrats to address the problem by tweaking the bank's market operations.

Indeed, Kuroda played down any economic impact from the bond moves, where the benchmark yield recently had its biggest three-day spike in a decade as investors struggle to cope with the overwhelming impact of the BOJ's radical money expansion.

"I don't think the recent rise in yields is having a big impact on the economy," Kuroda told a news conference after a two-day BOJ policy meeting.

No Impact "Yet"

In absolute terms there is not much impact, yet. However, I put an emphasis on the word "yet", a word Kuroda conveniently left out.

Curbing Turbulence is Theoretically Easy

It's theoritically easy to curb turbulence. Central banks can in fact control any single economic variable they want such as interest rates, money supply, or even the price of gold.

To control bond turbulence, all the Bank of Japan has to do is corner the market. To do so would be quite similar to the Swiss National Bank putting a cap on the value of the Swiss Franc or the Bank of China controlling the exchange rate of the Yuan vs. the US dollar.

To set a price, the Bank of Japan would have to be willing to buy every single bond offered at that price. It could pick any price it wanted, but the lower the interest rate, the more bonds it would have to buy. At a low enough price, it would have to buy every security.

Damn the Consequences

The problem with controlling interest rate turbulence (or any other factor) is the consequences. If the Bank of Japan does buy every Japanese government bond, it will have no control over things like the value of the Yen, the CPI, various asset bubbles that may form, or in the extreme case - Japanese hyperinflation.

Practical Ridiculousness

If you reflect on what's theoretically possible for more than a second, you will see the practical ridiculousness of the Bank of Japan's statement on curbing turbulence. And what applies to Japan applies even more so the Fed's dual mandate of "low inflation and job growth".

Simply put, it is impossible for a central bank to control more than one variable at a time, and the consequences of controlling even a single variable are rather extreme when the market refuses to play along.

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

Nikkei Plunges 1,143 Points (7.32%); Global Equities Hammered; Start of Reflation Bubble Bust?

Posted: 22 May 2013 11:49 PM PDT

The Nikkei plunged a whopping 1,143 points as the following chart shows.

Global Equities Hammered

It's not just the Nikkei that's being hammered. Asia-Pacific is in a rout as well.

click on chart for sharper image

Start of Reflation Bubble Bust?

Is this the start of the great reflation unwind? I don't know, but we should all hope so.

The bigger the bubble the bigger the crash, and this Fed (central bank in general) sponsored equity and corporate bond bubble is enormous.

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

22.5.13

Mish's Global Economic Trend Analysis

China Manufacturing Slips Back Into Contraction
Rand Paul Has the Right Idea, Congress Should Apologize to Apple; Holy Grail of Tax Avoidance; The "Golden Goose"; Hypocrite McCain
Bernanke's Semi-Annual Tap-Dance of Distortions, Half-truths, Lies, and Hypocrisy to U.S. Congress
Abenomics in Review: Yen, Inflation, Exports, Imports

China Manufacturing Slips Back Into Contraction

Posted: 22 May 2013 10:15 PM PDT

The HSBC Flash China Manufacturing PMI™ shows China Manufacturing Slips Back Into Contraction.

Key Points

Flash China Manufacturing PMI™ at 49.6 (50.4 in April). Seven-month low.

Flash China Manufacturing Output Index at 51.0 (51.1 in April). Three-month low.

click on chart for sharper image

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said: "The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of 2Q, casting downside risk to China's fragile growth recovery. Moreover, the further signs of labour market slackness call for more policy support. Beijing still has fiscal ammunition to do so."

Comment on the Comment

Economic illiterates call for more "policy support" month after month. Such "support" is about to wreck Japan and the fools do not see it.

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

Rand Paul Has the Right Idea, Congress Should Apologize to Apple; Holy Grail of Tax Avoidance; The "Golden Goose"; Hypocrite McCain

Posted: 22 May 2013 04:51 PM PDT

Rand Paul created quite a stir in Congress when he Tweeted 'The Senate should apologize to Apple'.

@SenRandPaul: Instead of examining our broken tax system, the US Senate is about to harass Apple-one of the greatest business success stories in history.
@SenRandPaul: I am offended by a $4 trillion government bullying, berating and badgering one of America's greatest success stories.
@SenRandPaul: To US Senate: I say, instead of Apple executives, you should have brought in a giant mirror if you want to see who is responsible.
@SenRandPaul: Instead of doing the right thing we drag businessmen and women in here to berate them for trying to maximize their profits for shareholders.
@SenRandPaul: Apple has done more to enrich people's lives than politicians will ever do.
@SenRandPaul: To the Apple executives here, I apologize for this theater of the absurd.
@SenRandPaul: If you want to chase companies like Apple away, continue to vilify them. Congress should be giving Apple an award today.
@SenRandPaul: It's absurd for Congress to vilify businesses like Apple for wanting to minimize their tax code just like every other American rightly does.
@SenRandPaul: The Senate hauled before a committee one of America's greatest success stories—and wanted what? Applause?

Why did Paul Tweet Those Things?

Because the Senator Carl Levin (D-Mich.) ripped Apple's 'Holy Grail' Of Tax Avoidance ahead of congressional testimony.

It's absurd that Apple CEO Tim Cook Should be in Congress in the first place.

Did Apple break any laws? Of course not. Is Apple responsible for the absurd tax code or is Congress? The answer of course is Congress.

What About GE?

Tax law is so absurd that GE paid no corporate income tax in 2010. GE also paid no corporate income taxes in 2009.

For doing precisely the same thing, Cook had to appear before a senate subcommittee.

GE's response "GE pays what it owes under the law and is scrupulous about its compliance with tax obligations in all jurisdictions."

Mish says please note that the CEO of GE, Jeffrey Immelt, advises president Obama on business.

Holy Grail of Tax Avoidance

The Wall Street Journal reports Apple CEO Tim Cook, Lawmakers Square Off Over Taxes.

Apple Inc.'s tax strategies came under harsh scrutiny Tuesday in the Senate, where lawmakers are finding it far easier to call for a simpler tax code than to produce one. Still, nothing in the deluge of bad publicity about the tax code in recent weeks touches on the most durable obstacle to congressional action on a broad tax overhaul. The two parties remain far apart on whether such a rewrite should also raise revenues to reduce the deficit. Democrats insist it should, while Republicans insist it shouldn't.

Sen. Carl Levin (D., Mich.), chairman of the investigations panel, on Tuesday accused Apple of employing "alchemy" and "ghost companies" to escape tax collectors in the U.S. and Ireland, the base of the firm's international operations outside the Americas.

"Apple has sought the Holy Grail of tax avoidance," said Mr. Levin. "Apple is exploiting an absurdity, one that we have not seen other companies use."

Who is responsible to tax code, Levin or Apple?

The "Golden Goose"

Barron's reports 'You Shifted Your Golden Goose, It's Not Right,' Says Levin

Apple (AAPL) CEO Tim Cook's offered his testimony on Capitol Hill, before the U.S. Senate Permanent Subcommittee on Investigations, regarding tax policy and overseas earnings, followed by questions from the Senators.

Senator Carl Levin comes back and presses Apple's tax administration head, Phillip Bullock, as to whether the company effectively "shifted economic rights" to intellectual property, the "crown jewels of Apple Inc," as Levin puts it, to Apple's Irish subsidiaries.

Levin persists: "You shifted something, the most valuable thing you have, the economic rights to the most valuable thing you own, intellectual property, the thing that produces the profits, to those three Irish corporations that you own. 70% of the profits worldwide now end up with those Irish corporations. Of course you can bring those profits home. The only reason you're not is because they're transferred to those three Irish companies."

Hypocrite McCain

Fortune magazine says Senators Carl Levin and John McCain were careful to balance praise for Apple's (AAPL) achievements with outrage over its "convoluted and pernicious" (McCain's words) tax avoidance strategies. Sen. Rand Paul showed no such balance. He lit into his own committee's leadership for "dragging" one of America's great success stories into what he called a "show trial."

Mish says McCain is one of the biggest hypocrites you can find when it comes to tax avoidance.

There are two reasons companies keep profits overseas.

Tax law (for which McCain has voted for)
Tax repatriation holidays for which McCain has personally sponsored

McCain Sponsors Repatriation Tax Holiday

Accounting Today reported on October 6, 2011 McCain and Hagan Introduce Repatriation Tax Holiday Bill.

Senators John McCain, R-Ariz., and Kay Hagan, D-N.C., introduced legislation Thursday allowing multinational corporations to repatriate their foreign earnings at a reduced tax rate. The bipartisan bill, known as the Foreign Earnings Reinvestment Act, aims to trigger the flow of $1 trillion from the foreign subsidiaries of U.S.-based multinationals at a reduced tax rate of 8.75 percent, as opposed to the statutory corporate income tax rate of up to 35 percent. It would accomplish this through a temporary dividends received reduction of 75 percent.

As an incentive to create jobs, the bill would allow companies to further lower the tax rate they pay to 5.25 percent if they grow their domestic payroll during 2012.

McCain Should Apologize to Paul

It seems to me that hypocrite Senator John McCain should apologize to Senator Rand Paul as well as to Apple.

Instead The Hill reports Sen. John McCain (R-Ariz.), also defended the Senate inquiry, calling it "offensive" for anyone to accuse Levin of bullying.

Final Thoughts

It is absolutely absurd for taxes to be lower overseas than in the US.

Current policy encourages movement of jobs and capital to foreign countries. If anything, taxes ought to be higher on foreign profits than lower. That would encourage investment in the US.

I have been writing about this for years. Levin acts as if this is something new. Perhaps he is dumb enough that he just figured this out. Regardless, he still is not bright enough to realize where to point the finger.

Finally, and as I also pointed out, tax repatriation policies do not help at all. And on that score Senator McCain is personally responsible. He does not know where to point the finger either.

I will be glad when McCain retires. Rand Paul is the future of the party, McCain is the past.

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

Bernanke's Semi-Annual Tap-Dance of Distortions, Half-truths, Lies, and Hypocrisy to U.S. Congress

Posted: 22 May 2013 11:50 AM PDT

Inquiring minds with extra time on their hands this morning are plodding through the Full Transcript of Bernanke's Testimony To Joint Economic Committee, U.S. Congress looking for the usual collection of half-truths, distortions, and outright lies it usually contains.

Here are some point-by-point statements by Bernanke with my comments immediately following each set of statements.

Bernanke: Conditions in the job market have shown some improvement recently. The unemployment rate, at 7.5 percent in April, has declined more than 1/2 percentage point since last summer. Moreover, gains in total nonfarm payroll employment have averaged more than 200,000 jobs per month over the past six months, compared with average monthly gains of less than 140,000 during the prior six months.

Mish: What Bernanke failed to say is real wages are anemic and the Fed's low interest rate policy is making it easy for corporations to borrow at excessively low rates and use the money to invest in hardware and software robots to fire workers. Excessively low rates also punish savers and those on fixed income.

Bernanke: Payroll employment has now expanded by about 6 million jobs since its low point, and the unemployment rate has fallen 2-1/2 percentage points since its peak.

Mish: Even if those were all full-time jobs, this was a very anemic recovery by historic standards.

Bernanke: Despite this improvement, the job market remains weak overall: The unemployment rate is still well above its longer-run normal level, rates of long-term unemployment are historically high, and the labor force participation rate has continued to move down. Moreover, nearly 8 million people are working part time even though they would prefer full-time work. High rates of unemployment and underemployment are extraordinarily costly: Not only do they impose hardships on the affected individuals and their families, they also damage the productive potential of the economy as a whole by eroding workers' skills and--particularly relevant during this commencement season--by preventing many young people from gaining workplace skills and experience in the first place.

Mish: That is a reasonably accurate set of statements but nowhere does the Fed admit its role in creating those conditions with its boom-bust, moral-hazard monetary policies.

Bernanke: The loss of output and earnings associated with high unemployment also reduces government revenues and increases spending on income-support programs, thereby leading to larger budget deficits and higher levels of public debt than would otherwise occur.

Mish: The fiscal deficit is high because of perpetual overspending by Congress on top of the Fed's boom-bust, moral-hazard monetary policies.

Bernanke: Consumer price inflation has been low. The price index for personal consumption expenditures rose only 1 percent over the 12 months ending in March, down from about 2-1/4 percent during the previous 12 months. This slow rate of inflation partly reflects recent declines in consumer energy prices, but price inflation for other consumer goods and services has also been subdued. Nevertheless, measures of longer-term inflation expectations have remained stable and continue to run in the narrow ranges seen over the past several years. Over the next few years, inflation appears likely to run at or below the 2 percent rate that the Federal Open Market Committee (FOMC) judges to be most consistent with the Federal Reserve's statutory mandate to foster maximum employment and stable prices.

Mish: The Fed has no idea what inflation is or why because the Fed ignores asset bubbles in stocks, in bonds, and in houses. It uses fatally flawed definitions of inflation, inaccurately measured at that.

Berrnanke: Over the nearly four years since the recovery began, the economy has been held back by a number of headwinds. Some of these headwinds have begun to dissipate recently, in part because of the Federal Reserve's highly accommodative monetary policy. Notably, the housing market has strengthened over the past year, supported by low mortgage rates and improved sentiment on the part of potential buyers. Increased housing activity is fostering job creation in construction and related industries, such as real estate brokerage and home furnishings, while higher home prices are bolstering household finances, which helps support the growth of private consumption.

Mish: Housing sentiment has indeed improved, but that is of course what happens when central banks artificially suppress rates with the purposeful intention of creating asset bubbles, not to help consumers, but to bail out banks still stuck with housing inventory they need to unload.

Bernanke: Over the past four years, state and local governments have cut civilian government employment by roughly 700,000 jobs, and total government employment has fallen by more than 800,000 jobs over the same period. For comparison, over the four years following the trough of the 2001 recession, total government employment rose by more than 500,000 jobs.

Mish: At best, that's a start. And it fails to address untenable union wages and benefits and absurd collective bargaining agreements of public workers.

Bernanke: At the same time, though, fiscal policy at the federal level has become significantly more restrictive. In particular, the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of the sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year. The Congressional Budget Office (CBO) estimates that the deficit reduction policies in current law will slow the pace of real GDP growth by about 1-1/2 percentage points during 2013, relative to what it would have been otherwise.

Mish: It is preposterous to whine about pissy cuts in spending when the cuts have all been back-end loaded, and there are no real cuts in the first place. Congress did not really cut anything. It decreased the amount of expected budget increases and called that a cut.

Bernanke: In present circumstances, with short-term interest rates already close to zero, monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.

Mish: Headwinds? From non-existent cuts? From a rollback of tax cuts that should never have happened in the first place?

Bernanke: Although near-term fiscal restraint has increased, much less has been done to address the federal government's longer-term fiscal imbalances. Indeed, the CBO projects that, under current policies, the federal deficit and debt as a percentage of GDP will begin rising again in the latter part of this decade and move sharply upward thereafter, in large part reflecting the aging of our society and projected increases in health-care costs, along with mounting debt service payments. To promote economic growth and stability in the longer term, it will be essential for fiscal policymakers to put the federal budget on a sustainable long-run path.

Mish: Note the blatant hypocrisy of Bernanke whining about non-existent cuts and about tax rollbacks the country could not afford, while warning Congress that something must be done to put the federal budget on a sustainable long-run path.

Bernanke: Importantly, the objectives of effectively addressing longer-term fiscal imbalances and of minimizing the near-term fiscal headwinds facing the economic recovery are not incompatible. To achieve both goals simultaneously, the Congress and the Administration could consider replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.

Mish: Yeah, right. Like what? Of course that's not his problem. He just begs Congress to kick the can down the road, which of course is all the Fed ever does too, while ignoring every asset boom-bust cycle along the way.

Bernanke: With unemployment well above normal levels and inflation subdued, fostering our congressionally mandated objectives of maximum employment and price stability requires a highly accommodative monetary policy. Normally, the Committee would provide policy accommodation by reducing its target for the federal funds rate, thus putting downward pressure on interest rates generally. However, the federal funds rate and other short-term money market rates have been close to zero since late 2008, so the Committee has had to use other policy tools. The first of these alternative tools is "forward guidance" about the FOMC's likely future target for the federal funds rate.

Mish: Got that? Forward guidance is supposedly a tool. In reality, the Fed is totally clueless about the economy, about housing, about jobs, and about where interest rates should be (as directly evidenced by repeat bubble-blowing exercises).

Bernanke: The second policy tool now in use is large-scale purchases of longer-term Treasury securities and agency mortgage-backed securities (MBS). These purchases put downward pressure on longer-term interest rates, including mortgage rates. For some months, the FOMC has been buying longer-term Treasury securities at a pace of $45 billion per month and agency MBS at a pace of $40 billion per month. The Committee has said that it will continue its securities purchases until the outlook for the labor market has improved substantially in a context of price stability. The Committee also has stated that in determining the size, pace, and composition of its asset purchases, it will take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

Mish: Note the dual mandate nonsense of jobs and inflation. It is impossible for bureaucrats and central planners to target one factor of the economy accurately. Two is insane. Yet, price stability is easy enough to achieve. Simply get rid of the Fed and fractional reserve lending. Here are some links on the absurdity of dual mandates.

Bernanke: At its most recent meeting, the Committee made clear that it is prepared to increase or reduce the pace of its asset purchases to ensure that the stance of monetary policy remains appropriate as the outlook for the labor market or inflation changes.

Mish: That makes sense (in a perverse sort of way). The Fed has no idea what it is doing so it needs to be prepared to do anything. Also note the irony of being prepared to do anything while promoting "forward guidance" as a tool.

Bernanke: In the current economic environment, monetary policy is providing significant benefits. Low real interest rates have helped support spending on durable goods, such as automobiles, and also contributed significantly to the recovery in housing sales, construction, and prices. Higher prices of houses and other assets, in turn, have increased household wealth and consumer confidence, spurring consumer spending and contributing to gains in production and employment. Importantly, accommodative monetary policy has also helped to offset incipient deflationary pressures and kept inflation from falling even further below the Committee's 2 percent longer-run objective.

Mish: What a bunch of self-serving nonsense. Higher asset prices have primarily benefited the wealthy. For discussion, please see Who Won? the 93% or the 7%? Why?

Moreover, Bernanke does not understand the simple math of 2% inflation over time. When wage growth does not keep up, and it hasn't, huge economic distortions arise along with dependency on food stamps, disability, and other programs. In short, 2% stability, is very destabilizing. I spoke about this at length in Fallacy of Inflation Targeting.

Here is the key chart.

Inflation Targeting at 2% a Year

Over time, prices rise, but wages for the masses do not. Worse yet, Bernanke's cheap money philosophy makes matters worse because it encourages businesses to invest in hardware and software robots that will enable companies to fire more workers.

There are no benefits of artificially low rates, at least to the average worker.

Economist Steve Keen commented on that chart in Exponential Credit Petri Dish; Steve Keen Responds to "World Economic Forum Endorses Fraud" Post

Bernanke: That said, the Committee is aware that a long period of low interest rates has costs and risks. For example, even as low interest rates have helped create jobs and supported the prices of homes and other assets, savers who rely on interest income from savings accounts or government bonds are receiving very low returns. Another cost, one that we take very seriously, is the possibility that very low interest rates, if maintained too long, could undermine financial stability. For example, investors or portfolio managers dissatisfied with low returns may "reach for yield" by taking on more credit risk, duration risk, or leverage.

Mish: The committee would not recognize risk if it jumped up and spit in Bernanke's face. Low interest rates have already undermined future financial stability by encouraging "reach for yield" excessive credit risk, duration risk, and leverage.

Bernanke: Because only a healthy economy can deliver sustainably high real rates of return to savers and investors, the best way to achieve higher returns in the medium term and beyond is for the Federal Reserve--consistent with its congressional mandate--to provide policy accommodation as needed to foster maximum employment and price stability. Of course, we will do so with due regard for the efficacy and costs of our policy actions and in a way that is responsive to the evolution of the economic outlook.

Mish: Bernanke took one last opportunity to hide behind a ridiculous dual mandate while turning a blind eye to the destabilizing asset bubbles it creates.

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

Abenomics in Review: Yen, Inflation, Exports, Imports

Posted: 22 May 2013 12:52 AM PDT

With the Yen collapsing vs. all other currencies, inquiring minds may be wondering how prime minister Shinzo Abe's inflation policy is working out in practice. Let's start with a look at the Yen.

Yen Daily Chart for One Year

In the last year, the Yen has fallen from 124.79 to 97.56. That is a decline of 21.82%. Recall that Abe's policy is an attempt to raise inflation and spur exports.

Japan Still in Deflation

On May 19, Reuters reported Japan's Amari: core core CPI showing signs of turning positive due to BOJ.

Japanese Economics Minister Akira Amari said on Monday that core-core consumer prices, which exclude fresh food and energy, are showing signs of turning positive due to the Bank of Japan's aggressive monetary easing. Amari, speaking to reporters, also said the government still judges Japan to be in mild deflation as other measures of consumer prices are still falling when compared to the same period a year ago.

Fancy that. Consumer prices are still falling in spite of a 21% plunge in the currency. OK, but what about exports and imports?

Good question. I'm Glad you asked.

Japan Exports Disappoint

Please consider Japan Exports Disappoint, Full Benefits of Weak Yen Yet to Show

Japan's exports rose less than expected in April from a year earlier due to weak demand from Europe and China, highlighting the challenges confronting the world's third-biggest economy as policymakers try to engineer a sustained revival.

The 3.8 percent annual increase in exports in April was below the median estimate for a 5.9 percent rise and followed a 1.1 percent increase in the year to March.

The result also underscores the limitations of a weak yen in bolstering the trade sector, especially as external headwinds crimp demand for exports.

The uncertainty was underlined recently by a string of weak data from the United States and China, Japan's major export markets.

Imports jumped 9.4 percent year-on-year in April, up for a sixth straight month, due to an increase in liquefied natural gas purchases, compared with a 6.7 percent gain expected by economists.

That has brought the country's trade balance into a deficit of 879.9 billion yen, the biggest trade gap for the month of April under comparable data series going back to 1979, according to the finance ministry.

It compared with the economists' forecast for 621.1 billion yen deficit, leaving the trade balance in the red for ten months in a row, the longest such run since 1979-1980 when Japan was hit by surging oil prices.

Abenomics Synopsis

Year-over-year the is Yen down 21.82% vs. the US Dollar
Japanese consumer prices are still falling
Imports jumped 9.4%, up for a sixth straight month
Exports up 3.8%
Trade balance negative for 10 straight months
Largest April trade deficit since 1979

People think Shinzo Abe is a hero because the Nikkei is up.

I think Abe is an absolute economic nutcase who is going to create a currency crisis in Japan if he succeeds in changing the constitution like he desires (and quite possibly even if he doesn't).

For further discussion, please see Will Shinzo Abe Succeed with Constitutional Changes to Militarize Japan and Further Destroy the Yen?

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

21.5.13

Mish's Global Economic Trend Analysis

What Is California Attempting to Hide?
Gold ETF Liquidates 300 Tons of Gold This Year; Reflections on Momentum Trading
Merkel Pins Cameron in Corner; Will Cameron Bury His Head in the Sand, Pretending to Not Notice?

What Is California Attempting to Hide?

Posted: 21 May 2013 12:21 PM PDT

An interesting article on a recently passed law in California came my way today regarding Obamacare secrecy in California.

Please consider California exchange granted secrecy.

A California law that created an agency to oversee national health care reforms granted it broad authority to conceal spending on the contractors that will perform most of its functions, potentially shielding the public from seeing how hundreds of millions of dollars are spent.

The degree of secrecy afforded Covered California appears unique among states attempting to establish their own health insurance exchanges under President Barack Obama's signature health law.

An Associated Press review of the 16 other states that have opted for state-run marketplaces shows the California agency was given powers that are the most restrictive in what information is required to be made public.

It's routine in government to keep bids secret until contracts are awarded, so one vendor does not get an unfair advantage over others. After a bid is awarded, contracts generally become fully public.

In setting up the California exchange, lawmakers gave it the authority to keep all contracts private for a year and the amounts paid secret indefinitely. "Except for the portion of a contract that contains the rates of payment, contracts entered into pursuant to this title shall be open to inspection one year after their effective dates," reads the code specifying what exchange records are exempt from public disclosure.

According to agency documents, Covered California plans to spend nearly $458 million on outside vendors by the end of 2014, covering lawyers, consultants, public relations advisers and other functions.

Other exchange records that are allowed to be kept secret include those that reveal recommendations, research, strategy of the board or its staff, or those that provide instructions, advice or training to employees. Minutes of the board meetings also are exempt from disclosure.

So what does California have to hide? More specifically what do the legislators (especially California Assembly Speaker John Perez, D-Los Angeles) have to hide? Contracts awarded to the non-low bidder? Contracts awarded to friends and family of legislators? Kickbacks?

With $458 million on outside vendors by the end of 2014, there are plenty of non-legitimate reasons for wanting to keep everything a secret.

With all the secrecy it's hard to say precisely who is covering up for whom, or why, but one thing is crystal clear: This secrecy is good for someone on the take and bad for taxpayers.

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

Gold ETF Liquidates 300 Tons of Gold This Year; Reflections on Momentum Trading

Posted: 21 May 2013 08:46 AM PDT

Investors in the Gold ETF - GLD liquidated 300 tons of the metal this year.

The reason? People are tired of losing money watching gold sink while the S&P soars.

Tom Lydon, the editor of ETF Trends, says the disposal of over 600,000 pounds of gold so far this year "amazing" and "incredible." Click on above link for a video interview with Lydon.

Gold vs. S&P 500

GLD data by YCharts

Reflections on Momentum Trading

Since late 2012 the S&P 500 has been on a nonstop rise, while gold has gone the other way. People have thrown in the towel on gold in favor of momentum trading in stocks.

It seems nearly everyone is a momentum trader now, one of the consequences of inept central bank bubble-blowing policy.

Louise Yamada says it's Time for Gold Bulls to Abandon Hope. See my response in Wild Swings in Gold and Silver; Time to Give Up Hope?

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

Merkel Pins Cameron in Corner; Will Cameron Bury His Head in the Sand, Pretending to Not Notice?

Posted: 20 May 2013 11:59 PM PDT

UK prime minister, David Cameron, promised to hold a referendum on whether Great Britain should remain in the EU, but only on two conditions. The first condition, that Cameron be re-elected as prime minister is iffy enough.

The second condition, that Cameron renegotiate the Lisbon Treaty, I said would never happen. And it won't.

German Chancellor Angela Merkel sealed the fate on that score as Berlin plans to streamline EU but avoid wholesale treaty change.

Berlin is drawing up plans for treaty changes to streamline decision-making in the eurozone, while stopping short of any wholesale renegotiation that would allow the UK to repatriate powers from Brussels.

Although Angela Merkel, German chancellor, has expressed her desire to keep the UK inside the EU, the move being discussed in Berlin would thwart a plan by David Cameron, UK prime minister, to piggyback on eurozone reforms to renegotiate the British relationship with Brussels.

Mr Cameron had hoped to exploit renewed interest in Berlin for wholesale EU treaty changes as a way to renegotiate the UK's membership terms. But Berlin's strategy for a new, narrowly focused treaty could force the UK premier into a repeat of the dilemma he faced in December 2011, when Mr Cameron rejected the fiscal compact treaty but most other EU countries went along without him.

Senior German officials acknowledged that they were isolated on treaty change, which is fraught with political landmines in several countries – particularly France, which would probably require a national referendum if major changes were made to EU law.

The timing of treaty changes remains a matter of debate but it could come as early as next year, after elections to the European parliament in May. The way ahead is due to be discussed at a summit next month.

Pinned in the Corner

The sooner Merkel proceeds with her strategy, the better for everyone involved, especially UK citizens. Merkel has effectively preempted Cameron's strategy in a way he cannot realistically deny.

Since there is now no possible hope of wholesale renegotiation (not that there ever really was in the first place), there is no reason for the UK to avoid a referendum now.

Will Cameron bury his head in the sand like an ostrich once again? We will find out shortly.

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

20.5.13

Mish's Global Economic Trend Analysis

Obamacare Premiums 47% Higher But Deductibles 27% Lower Than Grandfathered Health Plans; Obamacare Lies

Posted: 20 May 2013 11:34 AM PDT

Here's the question of the day: If you have a choice (and you many not for long because companies are abandoning grandfathered plans) Should you skip Obamacare and keep your old plan?

Any policy in place on March 23, 2010, the day health reform was enacted, falls under the grandfather exemption. As the Obama administration put it, if you like your plan, your doctor or both, you can keep them. Last year some 60 percent of employers, large and small, offered at least one grandfathered plan during open enrollment, according to the Kaiser survey. New employees can also join a grandfathered plan so long as the company has maintained consecutive enrollment in it.

For old plans as well as new ones, premiums are likely to rise next year - though the old plans still could be considerably more affordable than the newer ones.

Technically, a plan can stay grandfathered indefinitely, but few, if any, will. Most grandfathered plans have gone away already, according to the human-resources consultancy Mercer, which estimates only about a third of employers are expected to offer one in 2013.

Across the board, it is costs that will lead to the disappearance of most grandfathered plans. If employers or individual plans want to keep grandfathered status, they will have little leeway to pass higher costs along to policyholders. Any policy that increases co-payments, deductibles or co-insurance forfeits its grandfathered status.

Comparison Points

Grandfathered plans don't have to provide full, co-payment-free coverage of preventive services, such as flu shots, mammograms and cholesterol screenings.
Grandfathered plans don't have to cover a government-designated "essential benefits package" of procedures and treatments.
Grandfathered plans may require prior authorization for out-of-network emergency care, unlike with new plans.
Grandfathered policies bought by individuals carry their own exclusions, like a $750,000 annual cap on reimbursement for the aforementioned essential benefits, including hospitalization, emergency services or pediatric care.
The online insurance broker eHealthInsurance found that premiums were 47 percent higher and deductibles were 27 percent lower than for individual plans that will incorporate all of PPACA's new rules.
Average monthly premiums for individuals in plans without the newly required benefits — the closest equivalent to grandfathered plans — were $190 versus $279. Average deductibles for individuals were $2,257 versus $3,079.

Obamacare Lie: "You Can Keep Your Existing Plan"

That difference in monthly premiums of $190 vs. $279 will entice many to keep their existing plan, assuming it is still offered. However, that setup won't last very long because companies cannot raise premiums on grandfathered plans.

Simply put, Obama lied when he said "you can keep your existing plan", knowing full well the law was purposely written to make sure that would not happen over time.

Eventually you will be stuck with a new Obamacare plan and higher premiums whether you like your existing plan or not.

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

Wild Swings in Gold and Silver; Time to Give Up Hope?

Posted: 20 May 2013 10:03 AM PDT

Overnight action in gold and silver was interesting to say the least. Silver plunged 10% and was halted four times in a flash crash, of sorts, yet is now in the green.

Silver 10-Minute Chart

click on chart for sharper image

Silver hit as low as $20.25 and as high as $23.24. The maximum rally from the low was 14.8%

Gold 10-Minute Chart

click on chart for sharper image

Action in gold was also pronounced, but not quite as wild as silver. Gold fell $25 from the open but is now up $22 and and in the second-to-last 1--minute candle (about 10 minutes ago from this posting) was up another $10.

Time to Give Up Hope?

Louise Yamada says it's Time for Gold Bulls to Abandon Hope. Is it? I think most already have. There is amazing pessimism in the sector already, and abandonment of hope is what it takes to set a bottom.

Are We There Yet?

I don't know if we have reached the point of extreme pessimism yet, but nor does anyone else.

Are we close? I believe so.

Large Specs Trim Gold, Silver Net Longs

Please consider Large Specs Trim Gold, Silver Net Longs.

Large speculators continued to pare their net bullish positioning for gold and silver futures and options but increased it for platinum and palladium during the most recent reporting period for data compiled by the Commodity Futures Trading Commission.

Money managers in the CFTC's "disaggregated" report were net long by 39,216 contracts for futures and options combined, but this is down from 49,260 the prior week and is the lowest tally since this reporting format began in 2009. In the longer-running "legacy" report, the non-commercials – commonly referred to as the funds – cut their net long to 68,942 lots from 78,871 the prior week. This now stands at the lowest level since late 2008.

Bank of America Merrill Lynch pointed out that large speculators continued to unwind long positions. The number of total longs in the disaggregated report fell by 2,986, while the number in the legacy report fell by 5,284.

Further, speculators continue to add short positions, pointed out UBS and TD Securities. TDS said this is occurring amid concerns the Federal Reserve may taper its monetary stimulus, thereby weighing on sentiment. Money managers added 7,057 fresh shorts, while non-commercials added 4,645. UBS reported that total speculative gross short positions in gold are at a record high and double the level from the start of the year.

Meanwhile, net speculative length rose for the platinum group metals. Standard Bank described these metals as "experiencing supply-side distress" that means more potential for increased investor demand.

Money managers bumped up their platinum net length to 23,703 lots from 21,819 the previous week, while non-commercials increased this to 32,734 from 30,641. In both cases, this was largely due to fresh buying. Money managers added 1,421 new long positions, while non-commercials added 1,247.

In percentage terms, the decline from just over 1900 to the $1325 area is just a normal looking correction. Yet, fund speculation is at the lowest level since 2008.

While not a timing mechanism, pessimism seems rather extreme for such a normal looking correction.

Nothing has changed fundamentally as irrational exuberance abounds in nearly all the equity and bond markets, all running on nothing but momentum and unwarranted faith in the Fed to keep the bubbles expanding.

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

19.5.13

Mish's Global Economic Trend Analysis

EU On Collision Course With Germany Over Tariffs; Yet Another Reason for UK to Exit EU

Posted: 19 May 2013 10:41 PM PDT

The threat by the EU to impose huge tariffs on solar panels from China has run into staunch opposition. The Financial Times reports Germany warns EU solar tariffs would be 'grave mistake'

Germany's vice-chancellor and economy minister put Berlin on a collision course with Brussels by warning that imposing anti-dumping duties on solar panels from China would be a "grave mistake".

Philipp Rösler's statement came as Germany's leading manufacturing industry organisation also called for urgent negotiations with China to head off the threatened import duties, which are expected to be announced formally by the European Commission in early June.

The comments risk undermining Karel De Gucht, the trade commissioner, as he faces off against Beijing in the EU's largest ever trade case, based on the €21bn of solar products China exported to Europe in 2011.

Mr De Gucht has recommended that such products face duties averaging 47 per cent after concluding that Chinese manufacturers illegally dumped their products, or sold them below cost, in Europe.

In an interview with the Welt am Sonntag newspa per, Mr Rösler said that "punitive duties are the wrong instrument" to deal with the dispute. "German industry is quite rightly very concerned" about the threatened action, he said, and its potential for retaliatory action by China affecting German exports.

A study commissioned by a group known as the Alliance of Affordable Solar Energy claimed that more than 242,000 jobs would be put at risk in Europe if punitive tariffs were imposed.

The commission's own review, seen by the Financial Times, heaped doubt on those figures, predicting the negative impact would be far more limited.

Damage of Tariffs

I do not believe it is possible to accurately predict the damage caused by inane tariffs. Much depends on how China would respond. But even if China did not respond, there is no advantage to artificially forcing up prices.

Tariffs are simply a bad idea, period. As I have pointed out, much of the European overcapacity that led to the price crash was caused by European subsidies.

Somehow it is OK for Europe to offer subsidies but not China. EU policy is also hypocritical in regards to its stated emphasis on clean energy. For further discussion, please see Paul Krugman "Was" Right.

Yet Another Reason for UK to Exit EU

Note the continual bickering by Germany with the EU and with France over trade, over eurobonds, over a political union, over agricultural policy, over everything.

Why Cameron wants the UK to stay in the EU is a complete mystery, especially when the UK fears additional nannycrat idiocies like financial transaction taxes.

Fortunately the UK tide is changing, as a recent Poll Shows 46% in UK Want to Exit EU, 30% Want to Stay In.

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

Folly of Preserving the Euro at All Costs; Should France Lead Breakup of Euro?

Posted: 19 May 2013 08:47 AM PDT

The Local, a website with German news in English reports Economists warn against German euro exit.

"Even a believable rumour that Germany would exit the euro would result in a massive capital flight from the countries of southern Europe to Germany."

The southern European banking system would then collapse, bringing down entire economies with them, Schmieding said.

The consequences for Germany would be severe. The crisis countries could no longer pay back their debt and Germany's important export markets would drop off. On top of that German taxpayers would be burdened with immense costs, he said.

On the other hand if you add up the expected growth advantages of euro membership between 2013 and 2025 there would be a profit of nearly €1.2 trillion – or about half Germany's gross domestic product in a year.

Thomas Straubhaar of the Hamburg HWWI economic institute thinks a return to the D-mark would be "a worst possible scenario."

"An upward valuation of the D-mark and an accompanying devaluation of the euro would result in a massive debt forgiveness of all other euro-countries – with the costs of that picked up by Germany. This could lead to a currency war and the end of monetary stability."

Complete Rubbish

As is typically the case in such articles, the eurozone proponents ignore the costs of staying in the euro and overly trump up the benefits. The article perpetuates the myth that German taxpayers will suffer the consequences of a breakup, but suffer no costs if the eurozone stays intact.

Nothing could be further from the truth. As I have pointed out on many occasions, Germany is going to pay a steep price either way, and so will Europe.

The cost to Europe on the current path will be another decade of Southern European depression, resentment, and capital controls. Somewhere along the line, citizens in one or more countries will decide they have had enough, and vote to exit the Euro anyway.

It is a huge mistake to believe Germany can impose its will on Southern Europe forever while not paying through the nose with eurobonds or other transfer mechanisms. If Germany returns to the D-mark, it will get paid back in cheaper Euros, but it least its stands a chance of getting paid back.

On the other hand, target-2 imbalances are so great the cost of a destructive piecemeal splintering of the eurozone coupled with outright default, will be much higher.

Many economists don't see this simply because they do not want to.

Should France Lead Breakup of Euro?

I have argued that the best way to breakup the eurzone would be a German exit. Politically speaking that could be doable once Merkel is gone. But then aagin, perhaps not.

The problem is Germany has been the biggest beneficiary of this failed experiment, and will not give up those benefits easily, even if mathematically it must eventually (and destructively) happen anyway.

In a Bloomberg column, authors Brigitte Granville, Hans-Olaf Henkel, and Stefan Kawalec argue France Must Lead Breakup of Euro

Many observers concede that the euro was a mistake but think there's no going back. They reckon that dissolving the monetary union would lead to economic chaos, first in Europe, and then around the world. European leaders are afraid that backtracking on the euro project would also be a lethal blow to the larger cause of European integration and could be the beginning of the end of the EU and the single market. These fears give rise to what we regard as the disastrous strategy of defending the euro at all costs.

Although a controlled segmentation of the euro system through the exit of the most competitive countries would actually be the most effective way to help the deficit countries, it could still be seen as a decision by the strong to abandon the weak. Europe's history makes it difficult for Germany's leaders to initiate such a move.
Protecting France

The deficit countries, struggling with recession and internal political divisions, and trying to get better terms for assistance from the rest of the EU, might be afraid of worsening their negotiating position by taking the lead. EU institutions, such as the European Commission and the ECB, couldn't propose the solution we advocate.

French leadership in advancing this idea might work -- and could be the only thing that will. France has played the leading role in EU integration for more than 50 years. The euro is very much a French product.

In 1990, President Francois Mitterrand won Chancellor Helmut Kohl's support for the single European currency in exchange for France's acceptance of German unification. Persuading Germany to give up the deutsche mark, whose strength had given the Bundesbank de facto control of monetary policy throughout Europe, was a remarkable French success -- or so France believed.

The euro was seen as the ultimate underpinning for the edifice of European integration. The financial crisis and its aftermath have shown that the euro instead has the potential to destroy the whole project. It impedes the reforms necessary to restore France's fading international competitiveness. Retaining the present euro system whatever the cost will cripple the French economy, undo French social cohesion, and weaken France's position in Europe and the world.

As Europe's founding father, only France has the standing to advocate a strategy of dismantling the euro system for the sake of the European Union. The alternative is economic failure, deeper divisions and bitter resentments among Europe's nations, putting the most valuable achievements of European integration at risk. One way or another, Europe's house will be divided.

The question is how much, or how little, this division will sweep away. Splitting the euro in the way we advocate is vital to the survival of the European idea.

(Brigitte Granville is a professor of international economics and economic policy in the School of Business and Management at Queen Mary University of London. Hans-Olaf Henkel is a professor of international management at the University of Mannheim and a former president of the Federation of German Industries. Stefan Kawalec is chief executive officer of Capital Strategy and a former vice minister of finance in Poland. The authors are signatories of the European Solidarity Manifesto.

Read Part One - Save Europe: Split the Euro. The opinions expressed are their own.)

The authors present an interesting viewpoint, well worth a closer look.

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