Economy News

24.9.14

Mish's Global Economic Trend Analysis

Housing Prices, "Real" Interest Rates, and the "Real" CPI
Law of Excuses: It's Always Something (But Never the Right Thing)!
The Moderate's Prayer; Applications Now Being Taken; Distinguishing Friends From Enemies

Housing Prices, "Real" Interest Rates, and the "Real" CPI

Posted: 24 Sep 2014 01:35 PM PDT

With housing prices still rising, albeit more slowly, inquiring minds might be wondering about "Real" interest rates and the "Real" CPI?

CPI Distortions

I believe the CPI is hugely distorted, but not for the same reasons as everyone else. Home prices used to be in the CPI but the BLS now uses OER (Owners' Equivalent Rent). OER is a measure of actual rental prices as well as fiction.

The BLS determines OER from a measure of rental prices and also by asking the question "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?"

If you find that preposterous, You are not the only one. Regardless, rental prices are simply not a valid measure of home prices.

OER Weighting in CPI

OER has the single largest weight of any component in the CPI, at 23.957%.

Let's play "What If?" Specifically, "What if the BLS used actual home prices instead of OER in calculating the CPI?"

HPI-CPI

Periodically, Black Knight Financial Services provides the actual data behind their HPI (Home Price Index), a measure of actual prices.

We can use that data to see what the CPI would look like if we put actual home prices in the CPI instead of OER.

I call this the "HPI-CPI".

I passed on an Excel spreadsheet of the Black Knight HPI aggregate housing prices to Doug Short at Advisor Perspectives and we produced the charts below.

Notes

Click on any chart to see a sharper image
Data as of June 2014
Annotations in purple by me

Let's start with a look at the rate of increase in home prices vs. the rate of increases in OER.

Comparative Growth in HPI vs. OER

From 1994 until 1999 there was little difference in the rate of change of rent vs. housing prices. That changed in 2000 with the dot.com crash and accelerated when Greenspan started cutting rates.

The bubble is clearly visible but neither the Greenspan nor the Bernanke Fed spotted it. The Fed was more concerned with rents as a measure of inflation rather than speculative housing prices.

Two Inflation Indexes Year-over-Year

The above chart shows the effect when housing prices replace OER in the CPI. In mid-2004, the CPI was 3.27%, the HPI-CPI was 5.93% and the Fed Funds Rate was a mere 1%. By my preferred measure of price inflation, real interest rates were -4.93%. Speculation in the housing bubble was rampant.

In mid-2008 when everyone was concerned about "inflation" because oil prices had soared over $140, I suggested record low interest rates across the entire yield curve. At that time the CPI was close to 6% but the HPI-CPI was close to 0% (and plunging fast).

As measured by HPI-CPI real interest rates were positive from mid-2006 all the way to 2010, even when the Fed Funds rate crashed to .25%. That shows the power of the housing crash and how badly the Fed misplayed the housing bubble.

Real rates went positive again in mid-2010 until early 2011.

CPI and HPI-CPI Variance From Fed Funds Rate

The above chart shows two measures of "Real" interest rates. The Blue line is the Fed Funds Rate minus the CPI. The Red line is the Fed Funds Rate minus the HPI-CPI.

Both measures show how the Fed has pushed real rates into negative territory.

However, the rate of growth in home prices is slowing. If home prices actually start to decline, which I believe likely, HPI-CPI will show outright deflation.

And even with the Fed Funds rate at 0.25%, real rates will again be positive as measured by HPI-CPI, but perhaps not by the Fed who uses the CPI as its measure of price inflation.

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

Law of Excuses: It's Always Something (But Never the Right Thing)!

Posted: 24 Sep 2014 10:11 AM PDT

The out-of-the-blue excuses countries come up with for not making budget deficit targets are rather amusing.

For example and via translation from La Vanguardia, France Blames Deficit on Jihadist Terrorism, Lack of Inflation.

French Prime Minister, Manuel Valls, said today that his country's military missions against jihadist terrorism, along with public investment in education and security make it difficult to meet deficit limits.

"If we reduce our military budget, where are we going?"

In regards to "where are we going?", I have a proposal: If France would cut public spending in general, by a third, reduce taxes by as much, and roll back all socialist regulations, I suggest "up", and in a very dramatic fashion.

Instead, Valls proposes Wimpy's philosophy Eat Now, Pay Later.

The "spiral of debt" which is France, which has not achieved a balanced national budget in four decades, is "unsustainable".

However, the French prime minister stressed his commitment to fiscal stabilization and fiscal consolidation, and explained to a large group of German businessmen reforms to labor, tax and administrative level, which aims to save up to 50,000 million for 2017 .

2017 - I Can Hardly Wait

I will gladly pay you in 2017 for a hamburger today.

Between now and then, how how many excuses can France come up with to push the date back further?

Valls vs. Wimpy

Law of Excuses

Shockingly, no one has yet proposed "The Law of Excuses", so I get to claim it.

I dedicate the law to France: It's Always Something (But Never the Right Thing)!

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

The Moderate's Prayer; Applications Now Being Taken; Distinguishing Friends From Enemies

Posted: 23 Sep 2014 11:39 PM PDT

Distinguishing Friends From Enemies

It's tough distinguishing friends from enemies, especially when allies don't agree who the enemies are, and our enemies have the same primary goal as us!

For example, please note Syria Rebels Dismayed by US Air Attacks on Non-Isis Groups.

In the course of Syria's nearly four-year civil war, Ahmed Hamadi an anti-regime rebel, often hoped western intervention would help his cause. But when it finally came, it killed his neighbours and their children.

"We asked for western strikes to come and support our fight to free Syria, not to kill us," sighed the Army of Islam fighter. He described by phone how he pulled out the bodies of women and children from the wreckage of a residential building destroyed in the village of Kafr Daryan, about 50km west of Aleppo.

Collateral Damage to Moderates

The problem for Ahmed Hamadi was that no one could possibly tell him and the moderate 3-year old kids from real extremists and their extremist 3-year old kids.

This may be shocking news, but not even John McCain can tell the difference.

Want proof?

Well, who doesn't these days? So here goes: Oops! Sen. McCain Met Syrian Rebels Accused of Kidnapping.

If you want more proof, please see Strange Bedfellows: To Fight ISIS, US Now Supports Iranian Revolutionary Guard, Other Terror Groups.

Solution Offered

Far be it from me to stand back and criticize others without offering solid proposals at least as good as those coming from Washington D.C., especially senator McCain, president Obama, and Hillary Clinton.

The clear solution to the problem at hand is to come up with a simple scheme that will allow us to identify the good guys and the bad guys.

I propose shirts that say "I am a moderate", or better yet "I am a good guy" and "I am a bad guy".

In addition, I also propose shirts that say "I am a 3-year old Potential Extremist" and "I am a 3-year old Probable Moderate" to separate the bad 3-year old kids from the good 3-year old kids.

Shirts may be difficult to read, so we need to color-code them.

Finally, before we can pass out the color-coded shirts, we need to take applications.

Moderate Rebel Application Form

New Yorker columnist Andy Borowitz devised the perfect Moderate Syrian Rebel Application Form.

To eliminate potential mistakes by all involved, there are only six questions on the application:

1. As a Syrian rebel, I think the word or phrase that best describes me is:
A) Moderate
B) Very moderate
C) Crazy moderate
D) Other

2. I became a Syrian rebel because I believe in:
A) Truth
B) Justice
C) The American Way
D) Creating an Islamic caliphate

3. If I were given a highly lethal automatic weapon by the United States, I would:
A) Only kill exactly the people that the United States wanted me to kill
B) Try to kill the right people, with the caveat that I have never used an automatic weapon before
C) Kill people only after submitting them to a rigorous vetting process
D) Immediately let the weapon fall into the wrong hands

4. I have previously received weapons from:
A) Al Qaeda
B) The Taliban
C) North Korea
D) I did not receive weapons from any of them because after they vetted me I was deemed way too moderate

5. I consider ISIS:
A) An existential threat to Iraq
B) An existential threat to Syria
C) An existential threat to Iraq and Syria
D) The people who will pick up my American weapon after I drop it and run away

6. Complete the following sentence. "American weapons are…"
A) Always a good thing to randomly add to any international hot spot
B) Exactly what this raging civil war has been missing for the past three years
C) Best when used moderately
D) Super easy to resell online

Sheer Brilliance

If the above application form by Andy Borowitz is not brilliant, what is?

Coupled with passing out color-coded shirts based on the results, the overall process seems foolproof. A couple of questions will easily explain:

Q1: If this plan had been in place would McCain have had his picture taken with kidnappers?
Q2: If Obama had this plan in place, would he have blown up the friends and neighbors of Ahmed Hamadi?

The answer of course is "clearly not".

Fallback Plan

Nonetheless, I can hear the naysayers spoofing my plan already. For example, some may claim color-coding will fail because Obama, McCain, and some fighter pilots are color blind. Others may wonder if Obama can read without a teleprompter.

As for ability to read, rest assured, Obama is not going anywhere near Syria.

Admittedly, color-blindness is a legitimate concern. However, I am quite sure if we all pray hard enough, color blindness can be cured overnight.

It takes the perfect prayer, and I penned it just this evening.

The Moderate's Prayer

Al Qaeda Who Art in Syria
Moderates Be Thy Name
Damascus Come
Assad Be Done
The Almighty Obama Has Said
Give us this Day
Our John McCain
And Lead us Not into China
But Deliver us from Russia
Amen

It's Foolproof!

My plan is not only far better than anything Obama and McCain have come up with, it's actually foolproof!

In fact, the Moderate's Prayer alone is so good, I now propose we not waste money on applications, shirts, or bombs.

All we have to do is recite the above prayer enough times and moderates will win the day. Please do your part!

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

23.9.14

Mish's Global Economic Trend Analysis

Eurozone Composite Signals Slowdown; French Private Sector Output Decline 5th Month; German Manufacturing Approaches Stagnation
Battle for Perpetual War is Won; US Admits Attacks on ISIS Could Last Years; Expect an Accident
Miracle Not Enough to Save Italy; Disruptive Eurozone Breakup Awaits

Eurozone Composite Signals Slowdown; French Private Sector Output Decline 5th Month; German Manufacturing Approaches Stagnation

Posted: 23 Sep 2014 09:53 PM PDT

French Private Sector Output Decline 5th Month

The demise in France continues. Markit reports French Private Sector Output Falls Further in September.

Key points:

Flash France Composite Output Index(1) falls to 49.1 (49.5 in August), 3-month low
Flash France Services Activity Index(2) drops to 49.4 (50.3 in August), 3-month low
Flash France Manufacturing Output Index(3) rises to 47.9 (45.8 in August), 4-month high
Flash France Manufacturing PMI(4) climbs to 48.8 (46.9 in August), 4-month high

The latest flash PMI data indicated a fifth consecutive monthly decline in French private sector output during September.

Underlying reduced activity was a drop in the level of new business received by French private sector firms during the latest survey period. Although slight, the reduction in new orders reversed a rise in August. Whereas manufacturers signalled a solid decline in new work, service providers registered a fractional fall. Panellists commented on subdued demand conditions both domestically and in certain export markets. Manufacturers recorded a drop in foreign orders for the fifth month running.

Employment in the French private sector continued to fall in September, extending the current period of job shedding to 11 months. Moreover, the rate of contraction quickened to the sharpest since February. Similar rates of decline were indicated in the services and manufacturing sectors.

Backlogs of work in the French private sector decreased for a fifth successive month in September, although the rate of contraction eased to a fractional pace. Slight growth of outstanding business at service providers was offset by a marked reduction of backlogs at manufacturers.

Comment:

Jack Kennedy, Senior Economist at Markit, which compiles the Flash France PMI ® survey, said: "French economic performance weakened in September, as a return to contraction of the service sector outweighed an easing rate of decline in manufacturing. Anaemic demand continues to hold back the private sector, with further price cutting insufficient to prevent new orders from falling. Firms responded to the continued weakness by lowering employment at the sharpest rate since February."

Eurozone Composite Signals Slowdown

Markit reports Flash Eurozone PMI Signals Further Waning of Growth.

Key points:

Flash Eurozone PMI Composite Output Index(1) at 52.3 (52.5 in August). 9-month low.
Flash Eurozone Services PMI Activity Index(2) at 52.8 (53.1 in August). 3-month low.
Flash Eurozone Manufacturing PMI(3) at 50.5 (50.7 in August). 14-month low.
Flash Eurozone Manufacturing PMI Output Index(4) at 51.0 (51.0 in August). Unchanged.

Euro area business activity grew in September at the lowest rate seen so far this year, according to the preliminary 'flash' PMI survey data.

At 52.3, down from 52.5 in August, the Markit Eurozone PMI™ Composite Output Index fell for a second month running, dropping to its lowest since December of last year. At 52.9, the average quarterly reading for the three months to September was also the lowest so far this year.

Inflows of new orders rose only modestly, with the rate of increase waning for the third successive month to register the smallest monthly improvement since August of last year.

Manufacturing fared worse than the service sector with the headline PMI falling to 50.5, its lowest since July of last year and edging closer to the 50.0 mark that signals stagnation. Although factory output grew slightly, new orders fell for the first time since June of last year. Employment was unchanged and prices charged by factories fell for the first time since April.

By country, faster growth in Germany, led by the service sector, was offset by an ongoing downturn in France and slowing of growth elsewhere in the region.

Comments

Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said:

"The survey paints a picture of ongoing malaise in the eurozone economy. With growth of output and demand slowing, employment once again failed to show any meaningful increase. Such torpor meant prices continued to fall as firms fought for customers, which will inevitably heighten concerns that the region is facing deflation. "For a central bank hoping that the economic data flow will start to improve, the ECB will be disappointed by the ongoing weakness of the PMI. The survey data suggest GDP is on course to grow by 0.3% at best in the third quarter, buoyed by a 0.4% expansion in Germany but dragged down by stagnation in France and sluggish growth in the rest of the region."

German Manufacturing Approaches Stagnation

The Markit Germany Flash PMI shows Private sector growth maintained in September, but manufacturing edges closer to stagnation.

Key points:

Flash Germany Composite Output Index at 54.0 (53.7 in August), 2-month high.
Flash Germany Services Activity Index at 55.4 (54.9 in August), 2-month high.
Flash Germany Manufacturing PMI at 50.3 (51.4 in August), 15-month low.
Flash Germany Manufacturing Output Index at 51.1 (51.5 in August), 15-month low.

September data signalled a continuation of the ongoing expansion in German private sector output, as highlighted by the seasonally adjusted Markit Flash Germany Composite Output Index rising slightly from 53.7 in August to 54.0. The current period of growth now stretches to 17 months and surveyed companies generally linked this to increased order intakes. However, the gap between manufacturing and services widened further in September. Production growth in the goods-producing sector slowed to a 15-month low, while service sector output rose at a slightly faster pace compared to August.

Comment:

Oliver Kolodseike, Economist at Markit and author of the Flash Germany PMI®, said: "September's flash PMI results paint a mixed picture of the health of the German economy at the end of the third quarter. Total private sector output continued to rise at an above average rate and employment growth picked up again, attributed in both cases to a strong service sector. However, new order growth slowed for a fourth month running and was the weakest in one year, suggesting that activity growth might slow in the near-term. "The introduction of a national minimum wage in January 2015 meanwhile weighed on service sector sentiment, with business expectations the lowest in nearly two years. "Moreover, recently weak manufacturing data have become one of the most conspicuous features of the fragility of a broad-based recovery. Production growth slowed further and new orders contracted for the first time in well over a year amid reports of a weakening economic environment. It remains to be seen if Germany's goods-producing sector is in the midst of a slowdown or whether recent poor data present just a temporary soft patch."

Soft Spot or Something Else?

I have been calling for a downturn in Germany for some time but it has not happened yet. However, the reports pretty much speak for themselves.

The near stagnation of German manufacturing coupled with contraction in France and a slowdown in growth elsewhere tells the story.

Germany cannot forever disconnect from the rest of the eurozone, especially France and Italy (Italy report not out yet but it is highly unlikely to be any good.)

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

Battle for Perpetual War is Won; US Admits Attacks on ISIS Could Last Years; Expect an Accident

Posted: 23 Sep 2014 12:58 PM PDT

Victory Announced in Battle "for" Perpetual War

The warmonger dream of perpetual war has been won: US says Attacks on Isis Could Last Years.

The multiple airstrikes launched by the US and its Arab allies against Islamist militants in Syria were the "beginnings of a sustained campaign" that could last for years, the Pentagon said on Tuesday.

The airstrikes represent a dramatic volte face for a president who has spent three years battling pressure in Washington to get more involved in Syria and who was elected on a promise to bring the country's wars in the Middle East to an end.

The US separately bombed facilities controlled by the al-Qaeda affiliate Khorasan group in Syria, near Aleppo, after receiving intelligence it was planning "imminent" attcks on Europe and possibly the US, the Pentagon said.

The bombing of non-Isis militants angered some Syrian rebels groups who feared any Islamist group could be targeted, even if they had no intention of mounting attacks outside Syria, to the benefit of Bashar al-Assad's regime.

"We did not request the regime's permission. We did not co-ordinate our actions with the Syrian government. We did not provide advance notification to the Syrians at a military level, or give any indication of our timing on specific targets," said Jen Psaki, the state department spokeswoman.

No Permission, No Coordination, From "Natural Allies"

Syrian president Assad is fighting ISIS so is the US. Please consider Syria's Deputy Foreign Minister: We're 'Fighting the Same Enemy'

Syria has "no reservations" about U.S. airstrikes against ISIS and wants to team up with Washington to tackle the militants, the country's deputy foreign minister told NBC News.

Faisal Mekdad called Syria's President Bashar al-Assad "a natural ally" for the U.S. in its battle against ISIS, saying in an exclusive interview that both countries are "fighting the same enemy" and should be working together — not antagonizing each other.

"When it comes to terrorism, we should forget our differences… and forget all about the past," Mekdad said. "It takes two to tango...We are ready to talk."

Obama Threatens Assad if US Planes Downed

Ready to Talk? The US is not ready to talk. Why talk when the battle for perpetual war has been won?

Instead Obama Threatens Assad if US Planes Downed in Syrian Airspace.

US President Barack Obama has threatened to wipe out Syria's air defense system and topple the Syrian government if President Bashar al-Assad ordered his forces to shoot American planes entering Syrian airspace.

He made the remarks during a meeting in the White House before his speech about Washington's strategy about the ISIL terrorist group, The New York Times reported on Sunday.

Obama ordered the US military on Wednesday to expand its bombing campaign against ISIL terrorists and launch airstrikes in Syria.

"If he [Assad] dared to do that, Mr. Obama said he would order American forces to wipe out Syria's air defense system, which he noted would be easier than striking ISIS (or ISIL) because its locations are better known," the newspaper said.

"He went on to say that such an action by Mr. Assad would lead to his overthrow, according to one account," the Times said.

Expect an Accident

Assad has no interest in downing a US aircraft. Syria even offered cooperation (not that Syria had much to cooperate with - but at least the position of Assad towards ISIS is credible).
The US responded with a credible threat to flatten Syria's air defense system.
The only group happier than the warmongers with that prospect would be ISIS.
Thus, the top priority of ISIS is now clear. Shoot down any US military aircraft.
If ISIS can succeed or if something (even a friendly fire accident) happens to cause a US pilot to eject, the US will flatten Syria's air defense system.

Anyone smell an accident coming up?

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

Miracle Not Enough to Save Italy; Disruptive Eurozone Breakup Awaits

Posted: 23 Sep 2014 10:36 AM PDT

Analysis of what's happening and what to do about problems are two different things.

Financial Times writer Wolfgang Münchau provides an excellent example in Italy Debt Burden is a Problem For Us All.

Münchau's opening gambit is "We need extreme and co-ordinated policy to make it possible for Italy to ultimately stay in the eurozone."

Münchau states, "I think it is high time to address the consequences of failure with more clarity than is usually done. Put bluntly, Italy's economic position is unsustainable and will result in eventual debt default unless there is a sudden and durable change in economic growth. At that point, Italy's future in the eurozone would also be in doubt – and indeed the future of the euro itself."

High Time For Honest Assessment

Actually, it is indeed "high time" for something. What we need is an honest assessment from political leaders and euro puppets that the euro is doomed.

The flaws of the euro are well understood. I am 100% certain that Münchau could write a playbook on them with ease.

Münchau even admits that it would be "naive" to believe economic reforms can save Italy.

"The economic adjustment needed goes much beyond a few structural reforms. Italy needs changes in the legal system, it needs to bring taxes down to the eurozone average, and to improve the quality and efficiency of the public sector. It needs, in other words, to change the entire political system. Even that may not be enough."

According to Münchau (and I wholeheartedly agree), Italy needs economic reform, a new legal system, lower taxes, less government spending, pension reform, and more productivity. And even that might not be enough!

Nonetheless, to support his political beliefs, he seeks a miracle.

Miracle Requested

"I could see the ECB buying a wide range of debt instruments, starting with asset-backed securities and covered bonds as already announced. On top of that, it could buy other types of financial securities – bonds from the European Stability Mechanism, the eurozone's rescue umbrella, and from the European Investment Bank. The Commission could use the EIB to launch a big programme of infrastructure bonds. The best hope for Italy is that some of that trickles down into the real economy. I am optimistic that these programmes will have a noticeable positive effect on the eurozone as a whole, but much less certain of their effect on Italy."

Miracle Might Not Be Enough!

Münchau asks for that set of miracles from the ECB, yet is "less certain of their effect on Italy". Why? because "radical reform is not enough".

Note the irony in Münchau's conclusion "Italian debt sustainability requires policies at eurozone level that have so far been ruled out. This is where the eurozone's success or failure will be decided."

Eurozone Already Failed

Spain's unemployment rate is close to 25%. Its growth and unemployment prospects are nil.

Spain has no chance of meeting budget targets. Nor do France and Italy. Greece and Cyprus are in depressions. France is waiting on deck with problems as big as Italy's.

Any thinking person with an ounce of common sense he would readily admit the eurozone has already failed and it cannot and will not be revived by wishful thinking.

Miracles are not coming. However, there are choices, all of them unpalatable, to the eurozone nannycrat.

Eurozone Choices

1. Voluntarily dismantle the eurozone in the least destructive manner
2. Dismantle the eurozone by populist choice with huge financial disruptions
3. Suffer through decades of stagnant growth and extremely high unemployment

Option 4, pray for a miracle is not a logical choice.

Unless done voluntarily, it's easy to predict what will eventually happen: After suffering long enough in option 3, a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and declare all the bailouts and debt foisted on their country to be null and void. That person will be elected.

What to Do About It

No miracle that can keep the eurozone project intact. If Münchau was honest with himself, he would admit it.

The only thing that makes any sense to do is dismantle the eurozone, by choice, before someone like Marine Le Pen in France, Beppe Grillo in Italy, or an unknown person in Spain or elsewhere does it by force.

Disruptive Eurozone Breakup Awaits

Instead of seeking miracles that won't work and are not coming in the first place, how about an honest dialog on the best way to break up the eurozone?

Unfortunately, that will not happen because it is politically unacceptable. A disruptive breakup of the eurozone awaits.

Addendum

Reader Marian states "If indeed Italy's problems are it's legal system, tax rates, quality and efficiency of the public sector, then simply dissolving the EU, even in an orderly way, would not address these fundamental issues."

Marian is of course correct! But why should the rest of Europe have to suffer with bailing out Italy when that approach cannot possibly fix the problem?

Can-kicking exercise only make the problem worse for all involved. By dissolving the eurozone, countries would be forced to address the real issues instead of praying for miracles from the ECB.

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

22.9.14

Mish's Global Economic Trend Analysis

Video: The Bizarre Reason Your Health Insurance Plan Was Cancelled
Bidding Wars Stop; Millennials Leave Their Parents' Basements, But Not For Homes; Pent Up Demand?
Spain Mandates Public Companies "Stop the Bleeding" No More Layoffs
Strange Bedfellows: To Fight ISIS, US Now Supports Iranian Revolutionary Guard, Other Terror Groups

Video: The Bizarre Reason Your Health Insurance Plan Was Cancelled

Posted: 22 Sep 2014 10:01 PM PDT

There are lots of reasons why your health care plan may have been cancelled but this one is arguably the most bizarre.

Please play the video or the following discussion will not make much sense.

Link if video does not play: Why Your Plan Was Cancelled: Health Insurance and the Affordable Care Act.

I am automatically skeptical of such videos and articles. So I did some digging. It appears the video has it right.

"De Minimis Variation"

PDF page 36 of 40 of Federal Register, Vol. 78, No. 37 / Monday, February 25, 2013 / Rules and Regulations, spells things out nicely.

§ 156.140 Levels of coverage. (a) General requirement for levels of coverage. AV, calculated as described in § 156.135 of this subpart, and within a de minimis variation as defined in paragraph (c) of this section, determines whether a health plan offers a bronze, silver, gold, or platinum level of coverage. (b) The levels of coverage are: (1) A bronze health plan is a health plan that has an AV of 60 percent. (2) A silver health plan is a health plan that has an AV of 70 percent. (3) A gold health plan is a health plan that has an AV of 80 percent. (4) A platinum health plan is a health plan that has as an AV of 90 percent. (c) De minimis variation. The allowable variation in the AV of a health plan that does not result in a material difference in the true dollar value of the health plan is +- 2 percentage points.

Outside of the video, the above obscure government doc was the only place I found an accurate discussion of bronze, silver, gold, and platinum ranges.

Since I did not have the term "de minimis variation" in my search, it took me a while to find that doc.

As Typically Presented

Most sites offer woefully inadequate explanations. For example Medical Mutual accurately defines Actuarial Value (AV) as "the percentage of total spending on Essential Health Benefits (EHBs) that is paid by the health plan," yet, falls woefully short in describing the various metals as follows.

Bronze: 60 percent of Actuarial Value
Silver: 70 percent of Actuarial Value
Gold: 80 percent of Actuarial Value
Platinum: 90 percent of Actuarial Value

That is what we have come to believe, and similar explanations appear on numerous healthcare sites. Ten percent ranges seem reasonable, but they are against the law.

Health Insurance AVs

0-57 Invalid
Bronze AV: 58-62
63-67 Invalid
Silver AV: 68-72
73-77 Invalid
Gold AV: 78-82
83-87 Invalid
Platinum 88-92
93-100 Invalid

Range Analysis

Number of 1-Point Ranges: 100
Acceptable Ranges: 16
Invalid Ranges: 84

Competition Not

If for any reason, health care providers do not want to modify pre-existing plans that are just outside the acceptable ranges, their only option under the law is cancellation.

The legislation guarantees "If you like your plan you may not be able to keep it."

What reason might insurers have to cancel plans?

Thanks to ACA, the providers all have captive audiences. They all understand that no other provider can offer a plan in anything but the 16 of the 100 possible ranges.

If a plan outside one of the allowed ranges makes a smaller percentage profit than something inside one of the ranges, there is a huge incentive for providers to simply dump the plan.

And Obamacare was supposed to increase competition!

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

Bidding Wars Stop; Millennials Leave Their Parents' Basements, But Not For Homes; Pent Up Demand?

Posted: 22 Sep 2014 02:25 PM PDT

Bidding Wars Stop

With cash-paying investors on full retreat, existing home sales dropped 1.8% in August, according to the National Association of Realtors.

Lawrence Yun, NAR chief economist says that's a good thing because "first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country."

While I agree it's a good thing that bidding wars stopped, the fact of the matter is home prices are once again in la-la land, especially for cash-strapped millennials loaded up with student debt, in low-paying jobs.

Pent Up Demand?

Yun states, "As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying."

There is arguably a pent-up demand for homes by millennials if wages do catch up, but that assumes millennials have the same value-set and attitudes towards debt as their parents.

In reality, median wages have not gone up much but home prices have. More importantly, attitudes of millennials are not the same as that of their boomer parents.

Millennials Leave Their Parents' Basements, But Not For Homes

Fortune reports Millennials Finally Leave Their Parents' Basements.

Jed Kolko, chief economist at Trulia, put together this graph, which shows that Millennials are finally moving out of their parents' houses, after years of living at home:

But that's where the good news ends. Over the past two years, Millennials have been moving away from home, but they don't actually have enough money, or desire, to form their own households. The homeownership rate among Millennials continues to fall:

The falling homeownership rate and falling "headship rate"—which is the share of Millennials who are the head of a household regardless of whether they own real estate—suggest that this generation is still doubling up with friends or other relatives even if they aren't living with Mom and Dad.

The one bright spot in the Census data for the youngest workers: between 2012 and 2013, median income for those aged 15 to 24 shot up by 10% from $31,000 per year to roughly $34,000 per year. But this is the first time since 2006 that this age group has seen any increase in income at all, meanwhile the cost of shelter has risen 16% since that time. Income for the older half of the Millennial generation rose just 1.1% between 2012 and 2013.

This poor performance could mean that the housing industry is building too many homes, according to Kolka. This is quite the surprise given that single-family housing construction is still well below pre-crisis and even pre-bubble norms.

Census Data

I commend Fortune for linking to the actual data. Few mainstream media articles do.

For those who wish to take a closer look: Income and Poverty in the United States: 2013, Issued September 2014. Here are a couple of charts and stats that caught my eye.

Real Median Income

Full-Time Employment

Real Medium Income Notes

Real median household income for those 15-24 shot up by 10.5% but only from $31,049 to $34,311. That's not enough to support buying a nice house in most areas. Moreover, the 15-24 demographic has 6.3 million households and typically that age group does not buy houses anyway.
Real median household income for those 25-34 (about 20 million households) was only up 1.1% to $52,702. Home prices rose more, making homes less affordable.
Real median household income for those 35-44 (about 21 million households) was only op 0.7%, but to a better looking to $64,973.
Those aged 45-54 and 55-64 actually saw incomes declines of 0.3% and 3.3% respectively on household populations over 23 million each.

Attitudes, Wages, Home Prices

That data is from 2013, but it's very safe to conclude nothing much changed in 2014. None of the income data is supportive of more household formation. Wages have not kept up with home prices in the key demographic groups. Things are far worse if you factor in attitudes.

Attitudes - Fed's Biggest, Most Futile Fight

I have been talking about attitudes for years. For example, please consider Please consider Teenagers Scared Over Plight of their Parents; Attitudes - Bernanke's Biggest, Most Futile Fight

That 2010 post contains an email from "Nancy Drew" about her daughters, aged 15 and 17 with their friends scared half-to-death about their parents' financial woes.

Such memories last a long time.

I wrote then and I repeat now ... "Those fretting over base money supply and foolishly screaming hyperinflation (or even inflation), simply do not understand the dynamics of debt deflation, nor do they understand how small the increase in base money is compared to debt that will be written off, nor do they understand the role of changing social attitudes towards spending."

Clash of Generations

On May 30, 2014 I wrote Clash of Generations - Boomers vs. Millennials: Attitude Change Will Disrupt Wall Street and Corporate America

If you haven't read that, please do. And if you have, I suggest it's well worth another look.

Pent Up Demand to Sell

Yun thinks another housing boom is just around the corner. He talks of a pent-up demand to buy.

I suggest there's a pent-up demand to sell for three reasons:

Aging boomers seeking to downsize
All-cash equity buyers looking to take profits
Some of those who were underwater and hoping to get out will do so if and when they get a chance

Will millennials be able to plug all of that pent-up selling pressure? I think not.

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

Spain Mandates Public Companies "Stop the Bleeding" No More Layoffs

Posted: 22 Sep 2014 11:28 AM PDT

In a concern over votes, regional government spending is on the rise. In addition, Spain Mandates "Stop the Bleeding" No More Layoffs in Public Companies.

"Stop the Bleeding" via translation ...

Nine months after the local elections, the government has begun to show signs of needing a push to overcome the electoral polls. The unemployment remains, along with public debt, macroeconomic data that further tarnishes their results. For this reason, some sources claim that the Government has called on companies possessing some control to hire staff or fail to fire.

Although the discourse of government is to "rationalize public spending" and "reduce the number of officials," the fact is that regional governments are the largest employer in the country. Together, they have more than 2.5 million workers, and despite successive cut plans, thirteen regions have increased their spending on staff.

According to sources, some companies linked to State or investments through the State Society for Industrial Holdings (Sepi), have begun to put the brakes on the dismissal of staff working at the express request of the Government.

Government Tentacles

Here's the essence: Public companies where the Spanish government has tentacles have been ordered "don't fire".

By the way, companies that can't fire, won't hire. Of course that does not apply to the government itself.

Austerity? Where is it?

With government spending going up in 13 of 17 autonomous regions in Spain and with a slowdown in Europe at large, it's quite easy to predict another budget deficit target miss by Spain.

IMF Forecasts 19% Unemployment in 2019, Asks Spain to Increase VAT

Here's one I missed from July: IMF Improves Forecast for Spain, but Expects Unemployment Rate of 19% in 2019.

Also via translation ...

According to projections by the institution in the medium term, growth will remain at around 1.5 or 2% and unemployment will drop significantly but at 18.7%

The IMF however has improved its growth forecasts, but also stressed the need to raise VAT and cut contributions to Social Security.

The governing body of Christine Lagarde, the Spanish economy expected to grow 1.2% in 2014 and 1.6% in 2015 compared with 0.9% and 1% previously. Also forecast a steady pace of expansion will allow GDP growth of 1.7% in 2016 and 1.8% in 2017, while in 2018 would lead to 1.9% and 2% a year later.

Unemployment

Spain's unemployment rate is 24.5% according to Eurostat.

The scary thing is the IMF is typically overoptimistic on everything. If Spain actually raises the VAT as the IMF wants, it 99% certain Spain will not hit even the IMF's lowered growth targets.

Here's the question of the day: If the IMF is overoptimistic on its 2019 assessment of employment and growth, how long can Spain put up with this?

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

Strange Bedfellows: To Fight ISIS, US Now Supports Iranian Revolutionary Guard, Other Terror Groups

Posted: 22 Sep 2014 12:04 AM PDT

Strange Bedfellows

US Mideast relationships get stranger every day. The US has come to the defense or has given aid to three rather unlikely groups in the past few weeks.

Iranian Revolutionary Guard
Kurdish Workers Party (PKK), which directly supports the YPG, on Washington's list of proscribed terror groups
"Moderates" fighting to overthrow Syrian president Assad. Those moderates just signed a non-agression pact with ISIS

70,000 Kurds Seek Refuge in Turkey

The Guardian reports Kurds Flee into Turkey to Escape Isis Offensive

More than 70,000 Kurds fled from northern Syria into Turkey at the weekend and tens of thousands more are trying to cross the border as the terror group Islamic State (Isis) intensified its assault on a crucial Kurdish safe haven near the border.

Previous attacks have targeted Yazidis, Christians, Kurds and Shia Turkomans in Iraq, and Alawites, Shias and Christians in Syria, forcing most to flee. Those captured have been given the stark choice between converting to the jihadists' hardline view of Sunni Islam or being killed.

The refugee agency UNHCR said it was preparing for up to several hundred thousand more refugees to cross into Turkey in the coming days and called on Ankara to provide space for the Kurds to shelter. The global aid body said its staff were helping provide refugees with immediate needs.

The Kurdish YPG militia now defending Kobani crossed into Iraq in mid-August to help rescue up to 50,000 Yazidis who were besieged by Isis on Mount Sinjar. That escape was aided by US airstrikes, which scattered the jihadis from the northern base of the mountain.

YPG forces say they are being outgunned by Isis, which is using heavy weapons supplied by the US to the Iraqi military, who surrendered them when they abandoned northern Iraq in June.

The Isis rampage through Iraq has already led to some unlikely alliances being formed, with US jets flying air cover over the Shia Turkoman town of Amerli earlier this month in support of Shia militias led by the Iranian Revolutionary Guard. An elite leader of the guards, General Qassem Suleimani, was on the ground in Amerli as the US jets attacked Isis positions.

Potentially complicating US support for the Syrian Kurds is the fact that the Kurdish Workers Party (PKK), which directly supports the YPG, is on Washington's list of proscribed terror groups.

Obama's "Moderate Rebels" Sign Deal With ISIS

Inquiring minds may also wish to consider Obama's "Moderate Rebels" Sign Deal With ISIS.

The supposed "moderate" rebels fighting Syrian dictator Bashar al-Assad — self-styled jihadists whom the Obama administration and Congress plan to supply with even more support under the guise of battling the Islamic State (ISIS) — recently signed a non-aggression pact with ISIS (also known as ISIL), according to reports from human-rights groups and French news agency Agence France-Presse (AFP). Lawmakers on Capitol Hill pointed to the news as yet another reason why supplying U.S. arms and support to Islamic forces to battle Islamic forces was a dangerous idea. The foreign-policy establishment, however, plans to proceed with arming and training jihadists anyway.

Following a vote earlier this week in the House to approve Obama's plan to arm jihadists in Syria, the Senate just gave the administration a green light for the half-baked plot as well. Despite bipartisan opposition to the plan, senators voted overwhelmingly (78-22) to approve a broader $1 trillion appropriations bill that included authority to back what the establishment refers to as "moderate" forces in Syria. Those same allegedly "moderate" jihadists, according to the AFP and the Syrian Observatory for Human Rights, inked a deal with ISIS outside Damascus last week. The agreement was reportedly brokered by the al-Qaeda affiliate in Syria known as Jabhat al-Nusra.

The non-aggression pact between ISIS and elements of Obama's "moderate" opposition states that "the two parties will respect a truce until a final solution is found and they promise not to attack each other because they consider the principal enemy to be the Nussayri regime," AFP and other media outlets quoted it as saying. The term "Nussayri" is a slur used to describe the Islamic Shia denomination Alawite to which Assad and many Syrians belong. A spokesman for the Obama-backed Sunni "Free Syrian Army" (FSA) rebels had previously vowed on television to exterminate all Shia Muslims, not just Alawites.

In an almost surreal interview with Fox News host Sean Hannity this week, leading congressional warmonger Sen. John McCain (R-Ariz.) demanded even more support for what he calls "moderate" rebels. Sounding confused, McCain lashed out at Sen. Rand Paul (R-Ky.), angrily noting that the senator from Kentucky did not personally know the jihadists fighting in Syria. "Has Rand Paul ever been to Syria? Has he ever met with ISIS? Has he ever met with any of these people? No, no, no," McCain fumed on national television, presumably meaning the FSA rather than ISIS.

Ironically, McCain himself faced an embarrassing scandal after it was revealed that Syrian "rebels" he met and posed with for photographs were actually involved in kidnapping pilgrims. The Arizona senator's spokesman later claimed McCain did not really know whom he was meeting. Calling the incident "regrettable," the spokesman was forced to explain that his boss does not "in any way condone the kidnapping of Lebanese Shia pilgrims." He does, however, condone providing even more weapons to his "moderate" rebels, as he made clear again in the recent Fox interview.

Hannity Interviews McCain

Listen to this confused, embarrassingly tortured response by McCain to Hannity's questions. The best word to describe McCain's performance is "pathetic".

McCain Meets Rebels Accused of Kidnapping

Flashback May 31, 2013: Oops! Sen. McCain Met Syrian Rebels Accused of Kidnapping.

Sen. John McCain (R-Ariz., shown) and his goal of openly intervening in the Syrian conflict on behalf of the foreign-backed rebels — many of whom openly fight under the banner of al-Qaeda — suffered a major setback this week after a public relations stunt backfired in spectacular fashion. Media reports that surfaced Thursday claimed some of the opposition fighters he met and posed for pictures with during a recent trip to Syria were actually extremists. In fact, the radicals are accused of kidnapping Lebanese pilgrims from a village in Aleppo province.

The news, first reported by Al Jadeed and The Daily Star newspaper in Lebanon, sparked widespread ridicule and criticism of the senator as his office scrambled to deal with the embarrassing negative publicity. It also further confirmed long-held suspicions among lawmakers and analysts that, contrary to claims made by Sen. McCain and others pushing for another open U.S. war in the Middle East, rebel forces might be just as bad as the Assad regime — maybe worse.

Rand Paul vs. McCain

McCain fumes Rand Paul did not go to Syria. McCain did, and had his picture taken with extremist kidnappers.

Which makes more sense?

Strangest of All Bedfellows

Arguably the strangest set of bedfellows in this mess is Hillary Clinton and Senator McCain. Both argue we should have armed the "moderates".

Questions of the Day

Do the al-Qaeda "moderates" wear signs that say "I am a moderate"?
If McCain cannot tell the difference without such a sign, how can Obama or Hillary?

"You Have to Begin Somewhere"

Nonetheless, Former Pentagon chief Leon Panetta says Obama should have armed moderate Syrian rebels earlier.

"I think the President's concern, and I understand it, was that he had a fear that if we started providing weapons, we wouldn't know where those weapons would wind up," said Panetta, defence secretary when the US pulled out of Iraq in 2011.

"My view was: you have to begin somewhere," added Panetta, also a former CIA director.

Warmonger Logic

We cannot tell the moderates from the extremists but "you have to begin somewhere".
And by overthrowing Assad, with extreme al-Qaeda rebels aligned with "moderate" Al-Qaeda rebels, things would be better now, not just in Syria but also Iraq!

My Take

We "began somewhere" quite a bit ago, having removed Hussein and spending trillions of dollars to do it.
ISIS formed in the vacuum.
Getting moderates to overthrow Assad in Syria would not have done a damn thing to stabilize Iraq.

Judging from recent US geopolitical stupidity in the Mideast, in Ukraine, and historically everywhere else, there's a high probability things would be even worse now had we done what McCain and Hillary wanted.

Just remember ... To make matters worse, you have to begin somewhere.

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

21.9.14

Mish's Global Economic Trend Analysis

Sarkozy the Self-Appointed Savior Has "No Choice", Must "Reconquer" Voters to Save France

Posted: 21 Sep 2014 07:15 PM PDT

Arrogance cost former French president Nicolas Sarkozy the election in 2012.

Judging from statements he made today, he's just as arrogant, if not more so today. He even brags of a bigger Facebook audience than Francois Hollande and his UMP party opponents, ignoring the fact that 60% of the electorate does not want him to run again.

Self-Appointed Savior Has "No Choice"

The Financial Times reports Sarkozy Pledges to Win Voters Back from French Far-Right.

In a television interview, the former centre-right president who failed to get re-elected in 2012, said: "I am going to reconquer those French people," referring to the voters who in May helped the FN become the country's most successful party in EU elections.

Mr Sarkozy, who on Friday confirmed his long-awaited return to politics less than three years after vowing to never again return to public life, said that his reappearance was due to necessity.

"I had no choice," he said.

Less Energy, More Wisdom, More Facebook Hits

The Guardian reports Nicolas Sarkozy Sets Out Comeback Plans for France's UMP party on TV

The former French president Nicolas Sarkozy was given a prime-time television news slot to explain his plans after announcing his return to frontline politics. Sarkozy set out his platform for the race to head the opposition UMP party, which will hold a hotly contested leadership vote in November.

For Sarkozy: The Return Part II, he was given 45 minutes to reintroduce himself to the French public.

If viewers had expected a changed, wiser and less confrontational Sarko, they were to be disappointed. Asking the presenter – twice – if he imagined that the former French leader had "just two brain cells", Sarkozy launched into a vigorous defence of his five years in power and a vehement attack on the state of France and the current Socialist government.

Saying he had "perhaps less energy, but more wisdom", Sarkozy explained that he felt duty-bound to return not through personal ambition, but because of the "lack of hope, the anger and the absence of vision" that François Hollande's government had imposed on his compatriots.

Despite his protestations of apparent humility, Sarkozy, 59, said his announcement had eclipsed those of his UMP rivals. He told the JDD: "My audience on Facebook doubled that of Hollande's press conference, and in a single day I've gained more new friends than [political rivals] Juppé and Fillon put together," he said. "I've read that one third of people are interested in my return. That's still 20 million people. How many would Hollande, Juppé or Fillon get if the same question was asked of them?"

A poll by CSA for the television chain BFMTV before the televised interview on Sunday evening found that six out of 10 French voters disapprove of his comeback.

Flashback May 6 2012

The Daily Mail reports Vulgar, rude and egotistical, President Bling-Bling has met his Waterloo.

Few will mourn the departure of a man who promised so much but delivered so little with his strutting cockiness and super-rich friends.

Nicolas Sarkozy made the right moves politically on the road to the presidency. But then came so many wrong moves in office, starting on the night of his election triumph when he celebrated with rich supporters at one of Paris's most expensive restaurants before jetting off to continue partying on the big yacht of a billionaire businessman.

This set the tone for his tenure. He gave himself a 140 per cent pay rise, taking his annual salary above £300,000, then used state funds for late payment fines on his utility bills and £660 a day on fresh flowers

He spent £240million kitting out a new presidential plane, complete with £1million soundproofed doors on a luxurious double bedroom and £60,000 bread ovens to ensure fresh-baked baguettes. Then he became embroiled in a series of financial scandals, including claims he took illegal donations from the elderly heiress to the L'Oreal fortune.

Then there were pictures of the president checking his Blackberry during an audience with the Pope, which infuriated Roman Catholics, or the notorious occasion he swore at someone who disagreed with him at an agricultural fair.

'His behaviour is vulgar, I'm afraid,' said former defence minister Alain Richard.

'He has lost millions of older and conservative voters with his bad manners. They just do not think it is presidential behaviour.'

During the campaign Mr Sarkozy apologised for his actions. But there was derision when his wife, who earned nearly £5million a year at the height of her modelling career, insisted they were modest folk who just liked watching soap operas.

The campaign culminated with another controversial meal when Mr Sarkozy joined 50 guests at a fund-raising lunch of quails' eggs and blue lobster in Paris's most expensive hotel. Afterwards, he was caught on camera slipping off his £50,000 gold watch, a present from his wife.

What's Changed?

Nothing.

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

ECB Executive Board Urges Germany to Borrow and Spend

Posted: 21 Sep 2014 07:36 AM PDT

In a foolish as well as never-ending attempt to prevent price deflation and revive growth, the ECB Urges Berlin to Cut Taxes and Spend.

Berlin has hit back at calls from a top European Central Bank official urging Germany to spend more to help the eurozone escape from its economic malaise.

In one of the most politically charged statements to come from the central bank, Benoît Cœuré, a member of the ECB's executive board, urged Berlin to increase borrowing in order to support investment and cut taxes.

The article follows calls by ECB president Mario Draghi last month for governments to match the central bank's steps in loosening monetary policy with growth-boosting measures. However, Mr Cœuré and Mr Asmussen have gone further than Mr Draghi, who stopped short of asking Germany to raid its fiscal coffers.

The German government reacted angrily at the op-ed, which comes ahead of French prime minister Manuel Valls' visit to Germany on Monday.

"The article does not reflect current government policy and we don't agree," a spokesperson for Germany's finance ministry said. "Complaints that the German government supposedly does not invest enough are unfounded. We do invest significantly."

One must differentiate between the official views of the ECB and the views of a pair of ECB governors and that of Mario Draghi.

Nonetheless, the position of Benoît Cœuré closely matches that ECB president Mario Draghi who hopes to spur lending, especially to SMEs (small and medium-sized businesses) via a trillion euro TLTRO scheme.

The only difference is that Draghi did not come out and say Germany specifically. Draghi simply wants more spending across the board.

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

20.9.14

Mish's Global Economic Trend Analysis

French Farmers Upset Over Falling Prices, Torch Tax and Insurance Offices, Dump Produce

Posted: 20 Sep 2014 10:18 AM PDT

As a direct result of sanctions on Russia, there is an overabundance of fruits and vegetables in France, Spain, Poland, and elsewhere in Europe. Basic law of supply and demand dictates prices of crops would fall. And they did.

While most foolishly want to stick it to Russia, few actually are willing to pay the price if it affects them.

Here is another case in point: French Farmers Torch Tax Office in Brittany Protest.

French vegetable farmers protesting against falling living standards have set fire to tax and insurance offices in town of Morlaix, in Brittany. The farmers used tractors and trailers to dump artichokes, cauliflowers and manure in the streets and also smashed windows, police said.

Prime Minister Manuel Valls condemned protesters for preventing firefighters from dealing with the blaze.

The farmers say they cannot cope with falling prices for their products.

A Russian embargo on some Western goods - imposed over the Ukraine crisis - has blocked off one of their main export markets.

About 100 farmers first launched an overnight attack on an insurance office outside Morlaix, which they set light to and completely destroyed, officials said. They then drove their tractors to the main tax office in the town where they dumped unsold artichokes and cauliflowers, smashed windows and then set the building on fire.

Everyone Loses

The French protest underscores the stupidity of sanctions. No one wins. Russia does not get fruits and vegetables, but European growers lose income.

France actually the worst end of it, with a tax office destroyed and widespread discontent spreading. In Russia, support for Putin is at all-time high.

Sanctions will never work.

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