Mish's Global Economic Trend Analysis

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• UK is Bigger Fiscal Mess than Spain or Portugal; Fiat Currencies Don't Float
• 53% Worry About Not Having Enough Money in Retirement; Implications of Boomer Retirement Plans
• Ron Paul to Announce Another Run for President

UK is Bigger Fiscal Mess than Spain or Portugal; Fiat Currencies Don't Float Posted: 26 Apr 2011 03:05 PM PDT For all the attention focused on the US dollar, especially silly hyperinflation calls, one might think there are few problems elsewhere. That is not the case, however, as reckless credit expansion in China is the fastest in the G7 by far, Japan has the highest debt-to-GDP ratio and the UK is a certifiable fiscal-deficit basket-case. With a spotlight on the latter, please consider UK has third biggest budget deficit in Europe Britain's shortfall in its finances amounted to 10.4pc of gross domestic product (GDP) in 2010, according to data for each of the EU's 27 member states from the statistics agency Eurostat. That meant the UK had a bigger deficit, or annual shortfall, than the recently bailed-out Portugal and also Spain, which is viewed as the next euro-using nation to potentially need international aid. The largest deficit in proportion to the size of the country's economy was seen in Ireland, where the extra borrowing needed to shore up the banks left its deficit at 32.4pc of GDP. Greece, which received a €110bn bail-out last year, was second with a deficit of 10.5pc, followed by the UK. Spain, at 9.2pc, and Portugal, at 9.1pc, were in fourth and fifth place. The data showed the Greek finances were in an even poorer state than previously thought, as the latest figure – while trimmed from the previous year's 15.4pc – was higher than the latest 9.6pc estimate from the European Union and the International Monetary Fund. In terms of total debt, the UK fared much better, although it was still among the 14 EU member states burdened with a debt higher than 60pc of GDP last year. EU member states are supposed to keep their debt under the 60pc level. The debt figures, which refer to a government's total borrowing over time, rather than the latest yearly shortfall, showed Greece was again in the worst position with a debt equivalent to 142.8pc of its GDP, followed by Italy at 119pc and Belgium at 96.8pc. The UK was in the ninth weakest position with a debt standing at 80pc of GDP, which was worse than Spain's 60.1pc. The average debt across the 16 members that use the euro hit a record 85.1pc, up from 79.3pc the previous year. Given the fiscal mess in the UK, one might expect the British Pound to be among the weaker currencies in relation to the US dollar. Indeed, the following chart shows that to be the case. British Pound vs. US Dollar Monthly Chart Note that the British pound is 22% down from its 2008 peak vs. the US dollar in spite of retrace of a portion of its loss, and in spite of US dollar weakness against nearly everything else. I suspect the Yen will have a date with sanity at some point as well. Fiat Currency Rule Number 1 The above discussion leads us to saying of a friend of mine "Clyde" who is fond of pointing out "Fiat currencies don't float, they sink at varying rates." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

53% Worry About Not Having Enough Money in Retirement; Implications of Boomer Retirement Plans Posted: 26 Apr 2011 11:18 AM PDT In spite of the massive stock market rally starting March of 2009, worries over retirement are up sharply from 2002. Please consider In U.S., 53% Worry About Having Enough Money in Retirement A majority of nonretired Americans do not think they will have enough money to live comfortably in retirement, up sharply from about a third who felt this way in 2002. Nonretired Americans now project that they will retire at age 66, up from age 60 in 1995. Younger Americans Most Positive Younger Americans are the most optimistic about having enough money to live comfortably when they retire. They are also the least likely to say they will rely on Social Security as a source of income when they retire. This suggests that young Americans are looking optimistically toward other sources of income in retirement. Nonretired Adults Now Project a Retirement Age of 66 Nonretired Americans now project a higher retirement age than in previous years. When Gallup first asked nonretired adults in 1995 when they expected to retire, 12% said they would retire after age 65. That percentage is now up to 37%. The percentage saying they will retire before age 65 is down from 47% in 1995 to 28% today. Implications of Boomer Retirement Plans Note the deflationary aspect of the survey results. Those who fear not having enough money for retirement have a strong incentive to spend less and save more. Also note the number who expected to retire after age 65 has risen from 12% in 1996 to 37% today. In isolation, this would put upward pressure on the participation-rate and therefore unemployment. However, boomer demographics are such that it will take a decreasing number of jobs to hold unemployment constant. In 2000 it took about 150,000 jobs a month to hold unemployment steady. Currently Bernanke expects it takes 125,000 jobs a month to hold the unemployment rate steady. I expect that by 2015 it will only take 90,000 to 100,000 jobs a month to hold the unemployment rate constant. However, there are millions of individuals who want a job and do not have a job but the BLS does not count as unemployed because they stopped looking for a job. Should those workers start looking for jobs, this too would put upward pressure on the participation rate and unemployment rate. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Ron Paul to Announce Another Run for President Posted: 26 Apr 2011 12:27 AM PDT Sound money advocates, small government advocates, Libertarians, and those affiliated with the nebulous "Tea Party" will be pleased to learn Ron Paul Launches Presidential Campaign Rep. Ron Paul, R-Texas, whose outspoken libertarian views and folksy style made him a cult hero during two previous presidential campaigns, will announce on Tuesday that he's going to try a third time. Sources close to Paul, who is in his 12th term in the House, said he will unveil an exploratory presidential committee, a key step in gearing up for a White House race. He will also unveil the campaign's leadership team in Iowa, where the first votes of the presidential election will be cast in caucuses next year. This would seem to be an ideal year for Paul: Since the last election, the Republican Party has moved much closer to his view on deficit reduction, which made him an early tea party favorite. All of the party's top-tier presidential hopefuls are focusing on lowering debt, government spending, and tax rates, issues Paul has long advocated. Welcome Discussion of Key Issues Ron Paul will certainly not be a favorite to win the nomination. However, by running, Dr. Paul will influence the debate on key issues of government spending, currency, sound money, ending the Fed, military spending, US military actions, border control, and welfare. We are all better off from an open discussion of these issues. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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