Central Perk: Mish's Global Economic Trend Analysis

duminică, 19 iunie 2011

Mish's Global Economic Trend Analysis

Vote For Whoever You Want, Bailout Policies Won´t Change One Bit; A Look at Eurozone and US Politics; Would it Have Mattered if McCain Won in 2008?
Der Spiegel Claims Merkel-Sarkozy Agreement Has Collapsed; Bloomberg Reports Europe May Withhold Half of Greek Payment
UK Banks Abandon Eurozone; Greek PM Seeks Constitutional Changes; Trichet Blames Everyone but Europe for Global Imbalances; Credit Crunch Coming Up?

Vote For Whoever You Want, Bailout Policies Won´t Change One Bit; A Look at Eurozone and US Politics; Would it Have Mattered if McCain Won in 2008?

Posted: 19 Jun 2011 05:52 PM PDT

Take a good look at policies in Ireland, in Spain, in Portugal, in Greece. In Ireland, voters overwhelmingly rejected the policies and leadership of Prime Minister Brian Cowen in the biggest rout in history as noted in Timeline Ireland.

Did it matter? How?

Enda Kenny, the new prime minister quickly caved-in to the ECB and EU regarding haircuts on government bonds.

Similar setups are underway in Portugal, Spain, and Greece.

Also, take a look at policies in Germany where chancellor Angela Merkel completely and totally caved-in to French president Nicolas Sarkozy and ECB president Jean-Claude Trichet regarding rollover of Greek debt.

If ever, if ever a ~~wizard~~ wimp there was, Merkel is it.

Simply put, bankers insist on being bailed out, and under threats of Armageddon they are. Taxpayers foot the bill regardless of who they vote for.

Socialize the Losses, Privatize the Gains

The EU Observers reports The junta of experts tells us: 'Vote how you like, but policies cannot change'

The formal trappings of clean elections - in which political parties with competing manifestoes contest a ballot free of voter intimidation - are all still there, but someone else has decided in advance what the result will be.

It's not the voters that are intimidated any more: it's the parties that are.

The count of EU member states now tallies to four - Ireland, Portugal, Finland and Greece - where this post-political phenomenon has materialised, but committed democrats across the Union should wonder which country is next.

This has not happened by putsch or coup d'etat, at least not one involving any guns or tanks. There are no colonels or partisans who have captured the garrisons and seized the telephone exchange.

Yet a junta has installed itself nonetheless, a junta of 'experts', technocrats, those educated in the knowledge of What Needs To Be Done. Wherever these masters of the European universe happen to be hovering at any one moment, the refrain in effect is the same: 'Of course, there is no question that you are still allowed to vote however you like. Nevertheless, the policies absolutely cannot change even if the government does.'

Apart from a handful of Irish democrats, on a European level, the democratic implications of this orchestration went largely unnoticed. It was only when Portugal became the focus of the European engineers that ears pricked up.

One week in April, Portuguese banks announced they would stop buying government bonds if Lisbon did not seek a rescue. Later that week, the head of the country's banking association, Antonio de Sousa, admitted that he had been given "clear instructions" from the ECB and the Bank of Portugal to cut off the tap.

Without the support of domestic banks, Socrates had no choice but to request an external lifeline. Days before, the opposition Social Democrats withdrew their support for the government over an austerity programme they would later sign up to, forcing the minority government into a snap election.

The very day that Portugal finally capitulated, EU and ECB experts demanded that even though the parties were in the middle of an electoral campaign, all main parties sign an accord endorsing the bail-out memorandum, no matter the result of the vote.

Letting the people decide what was best for them was out of the question. "Let's not have a public dialogue every day," [Irish Economy Commissioner] Olli Rehn declared.

His ECB colleague, Jean-Claude Trichet, echoed his concerns, saying simply that bail-out negotiations were "certainly not for public" discussion.

Experts and colonels

And here's the kicker.

According to a poll conducted by Greece's Kappa Institute two weeks ago, 30 percent of Greek respondents actually want the country to be led by "a group of experts and technocrats."

A plurality of Greeks have now become so disillusioned with sovereignty and democracy that they think at least the experts could deliver something better than the seemingly insurmountable unemployment, corruption and economic collapse they see around them.

The same survey said that less than a quarter believed that a democratically-elected government will be able to overcome the ordeal they are going through.

But if the experts, the technocrats who are sidelining democracy in their subtle way, feel heartened by such polls, they should pause when they read the rest of this census.

A full 22.7 percent want "a strongman" to resolve the ongoing crisis.

There is much more in the Observer article, especially in regards to Ireland. Inquiring minds may wish to give it a closer look.

Is it Any Different in the US?

For all the political bickering in the US would it have mattered if McCain won the last election? If so how?

Would McCain have bailed out the banks and voted for nonsensical stimulus programs? Of course. Indeed McCain voted for bailouts while the 2008 election campaign was still in progress.

Flashback October 01, 2008: Obama, McCain Vote for $700B Bailout Bill in Senate

McCain now says he was "misled" as noted in Talking Points Memo McCain Rewrites Own History On Bailout Vote

McCain said recently that he only voted for the $700 billion package because Henry Paulson and Ben Bernanke misled him, by assuring him it would focus on the housing meltdown, rather than on Wall Street. But that appears to be directly contradicted by the record.

McCain said recently that he only voted for the $700 billion package because Henry Paulson and Ben Bernanke misled him, by assuring him it would focus on the housing meltdown, rather than on Wall Street. But that appears to be directly contradicted by the record.

Regardless, the key point is nothing about the bailouts would have changed.

Would Iraq or Afghanistan be Different?

Would US troops still be in Afghanistan? You bet! Would US troops still be in Iraq? You bet! Would the US still be wasting money stationing troops in 140 countries? You bet!

McCain Supports Obama on Libya

Please consider McCain uneasy over Republican 'isolationism'

US Senator John McCain on Sunday expressed concern about growing isolationism in the Republican party, particularly among those vying for the 2012 presidential nomination.

"There's always been an isolation strain in the Republican party, that Pat Buchanan (a former Republican presidential contender) wing of our party. But now it seems to have moved more center stage, so to speak," he said.

There is no question that President Barack Obama, a Democrat, made the right choice in lending US military support to the NATO mission in Libya, McCain told ABC's "This Week" program.

McCain tries to differentiate on war policy but for all practical purposes McCain and Obama are twins.

Moreover, Obama promised "change you can believe in" but carried out similar economic policies and warmongering of president Push.

McCain on Balancing the Budget

Would McCain have balanced the budget? Hardly. We would have the same Senatorial impasse we have today.

Worse yet, the senator proposed a nonsensical plan in 2008 to Balance Budget by 2013.

In his proposal, Mr. McCain said he would hold overall spending growth to 2.4 percent a year. That is a tall order because federal spending has been growing an average of more than 6 percent a year in the last five years.

Mr. McCain said he would also slow the growth of Social Security, Medicare and Medicaid, and fiscal experts agree that he would need to do that to achieve his goal. But Mr. McCain did not give details of how he would alter those benefit programs, which have powerful constituencies, including older Americans, a huge health care industry and state and local government officials.

A longtime foe of pet projects known as earmarks, Mr. McCain said he would stop such spending. The Bush White House says earmarks this year total $17 billion, a comparatively small share of a $2.9 trillion budget.

Mr. McCain proposed a one-year freeze in most domestic spending subject to annual appropriations, "to allow for a comprehensive review." This proposal would affect education, scientific research, law enforcement and scores of other programs.

Would any of McCain´s proposals have done a thing to balance the budget? Only a fool would answer yes. So what would have changed regarding the budget? The sad answer is next to nothing.

Obamacare

To be fair, Obamacare would not have passed under McCain. However, it is also fair to point out Obamacare passed only because of a procedural move, and the Supreme Court may soon invalidate key provisions of that legislation.

Bailouts, Budgets, Warmongering

The sad state of affairs is that when it comes to the bailouts, budgets, and warmongering trifecta, things would not be much different under president McCain than we see right now under president Obama.

There are many reasons for this, but at the top of the list are campaign contributions from bankers, warmongers, homebuilders, etc, to candidates of both parties.

Does any candidate really want reform? The answer is "Yes, until they are elected and start receiving campaign contributions".

Fear of touching the "third rail" of messing too much with Medicare and Social Security is another piece of the puzzle.

Republicans do want to do something about public unions.

However, Republicans lack the votes or bargain the votes away in compromises to get other things they want. The result is "no progress" on something that would genuinely help: national right-to-work laws and scrapping of Davis-Bacon.

Senator Rand Paul had a proposal to balance the budget. It gathered 7 of 100 votes in the Senate. President Obama´s proposal gathered 0 out of 100 votes. Does anyone really want to do anything or do they just want to pretend they do?

I look at the Republican presidential candidates other than Ron Paul in dismay.

I see little hope in balancing the budget or getting out of Iraq and Afghanistan soon. I see nothing on campaign finance reform. I see nothing on reducing military spending. I see no structural reforms on pensions or public unions.

Most of all, I see how little it would have mattered if McCain won the last election or how any candidate other than Ron Paul promises genuine solutions about the mess we are in today.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Der Spiegel Claims Merkel-Sarkozy Agreement Has Collapsed; Bloomberg Reports Europe May Withhold Half of Greek Payment

Posted: 19 Jun 2011 12:02 PM PDT

Two interesting stories regarding Greece have hit the wires today. It´s difficult to know if they are related.

First, Der Spiegel claims the agreement negotiated between German chancellor Merkel and French president Sarkozy has collapsed; Second, Bloomberg reports Europe will pressure Greece by withholding half of the next tranche of money.

The pattern is for Eurozone officials and the IMF to deny Der Spiegel claims, only to find out later that Der Spiegel sources were impeccable.

Is it different this time?

Voluntary Rollover Plan Off the Table?

Please consider Germany 'dismisses Greek debt compromise plan'

A German compromise plan to resolve a dispute with the European Central Bank over the Greek rescue that was reported by Der Spiegel magazine is no longer on the table, a government source said Sunday.

Der Spiegel had reported ahead of its Monday issue that the German finance ministry called for a beefed-up version of Europe's temporary bailout mechanism lending to Greek banks to insure they have adequate collateral with the ECB.

It would boost the effective lending capacity of the Emergency Financial Stability Facility (EFSF) to 440 billion euros ($629 billion) and see member states double the amount of guarantees they provide the fund.

Germany's share of guarantees would climb to 246 billion euros from 123 billion euros, according to the report.

But a German official, who spoke on condition of anonymity, said that while "several options" were being debated to involve private creditors in an Athens rescue, the reported proposal was "no longer on the agenda".

The source added that the initial plan had differed from the reported proposal in "key aspects".

German officials say they seek a plan with as few "unwanted side effects" as possible.

Europe May Withhold Half of Greek Payment

Bloomberg reports Europe May Withhold Half of Greek Payment

European governments weighed withholding half of Greece's next 12 billion-euro ($17.2 billion) aid payment, seeking to keep the country solvent while maintaining pressure on the government to slash the debt that pitched the euro area into crisis.

Euro-area finance ministers may authorize only a 6 billion- euro loan to tide Greece through bond redemptions in July, while further aid hinges on Greek budget cuts, Belgian Finance Minister Didier Reynders said.

"We will in any case try to release the necessary funds for the short term," Reynders told reporters before a meeting of euro-area finance ministers in Luxembourg tonight.

Tonight's euro-area finance ministers' meeting coincided with the start of a three-day Greek parliamentary debate in Athens over a confidence vote in a new cabinet at what Papandreou called a "critical crossroads." Papandreou has 155 seats in the 300-seat parliament.

Germany, which as Europe's largest economy is the biggest guarantor of aid packages to Greece, Ireland and Portugal, insists on an "ambitious" economic overhaul in Athens, Finance Minister Wolfgang Schaeuble said.

"We will surely work on laying the groundwork for paying out the tranche," Schaeuble said. "It also depends on Greece making the necessary decisions with a fundamental consensus of the political parties so that we can be confident that Greece will live up to its commitments."

While Germany bowed to European Central Bank and French demands not to compel investors to buy new Greek bonds as old ones expire, the lines are blurry between a "voluntary" and "compulsory" rollover that would lead rating companies to declare Greece in default.

On the table are incentives for bondholders to maintain their exposure to Greece, said Luxembourg Prime Minister Jean- Claude Juncker, chairman of the talks. He ruled out an agreement tonight on a new three-year package for Greece, pointing to July for a "final and overall answer."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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UK Banks Abandon Eurozone; Greek PM Seeks Constitutional Changes; Trichet Blames Everyone but Europe for Global Imbalances; Credit Crunch Coming Up?

Posted: 19 Jun 2011 05:40 AM PDT

The Telegraph reports liquidity dries up as UK banks abandon eurozone over Greek default fears

Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.

Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.

Barclays has also cut its exposure in recent months as senior managers have become increasingly concerned about developments among banks with large exposures to the troubled European countries Greece, Ireland, Spain, Italy and Portugal.

Moves by stronger banks to cut back their lending to weaker banks is reminiscent of the build-up to the financial crisis in 2008, when the refusal of banks to lend to one another led to a

seizing-up of the markets that eventually led to the collapse of several major banks and taxpayer bail-outs of many more.

While the funding position of UK banks is far stronger now than it was back in 2008, the banking systems of several other major European countries, including Spain, Germany and Italy, are showing increasing signs of weakness.

Analysts at UBS have warned that eurozone banks are "particularly exposed" having not done enough since the crisis to cut their reliance on the wholesale funding markets and remain acutely sensitive to the withdrawal of liquidity from the inter-bank market.

Simon Adamson, a banks analyst at CreditSights, said it was clear many eurozone banks had been having trouble funding themselves for several months.

Trichet Blames Everyone but Europe for Global Imbalances

Lately, every time ECB president Jean-Claude Trichet opens his mouth, something silly come out. Please consider Trichet warns of widening global imbalances

European Central Bank President Jean-Claude Trichet on Sunday raised concern about widening global imbalances after the financial crisis, calling them one of the main challenges for the economy.

He said the euro area does not contribute to global imbalances, pointing to projections by the International Monetary Fund which see the region's current account broadly balanced this year and up to 2015.

Trichet added: "The euro area has a significant stake in effective global rebalancing, notably through sounder domestic policies worldwide which, in turn, would contribute to global external stability."

The euro's international role underscores a high degree of stability, he added.

The Eurozone is at risk of imploding, Greece needs another bailout, Spain and Italy are on the brink of disaster, and we are to believe Europe is adding stability?

Greek PM Seeks Constitutional Changes

Yahoo Finance reports Greek PM calls for referendum on constitution

Greek Prime Minister George Papandreou called on Sunday for a fall referendum on "changes to the political system," including to the country's constitution.

Opening a three-day parliamentary debate that will culminate in a confidence vote late Tuesday, Papandreou blamed Greece's bloated and inefficient state sector for bringing the country to its knees and vowed to effect deep changes.

"I ask for a vote of confidence because we are at a critical juncture...the debt and deficits are national problems that have brought Greece into a state of (diminished sovereignty) that may have protected us from bankruptcy, but which we need to get out of," Papandreou said.

Papandreou told parliament Greece is also in talks for a new bailout package "roughly equal" to the first package agreed to in May 2010.

He said the original package's projection that Greece would be able to borrow from the markets in 2012 had been disproved, but said this was not the fault of his government, which had done all it was required to, passing painful measures and reducing the deficit as a percentage of GDP by 5 percent in 2010.

Instead, he blamed ratings agencies, tax havens, "derivatives speculators" and the media, which have spread panic and discouraged potential investors.

Opposition leader Antonis Samaras called for early elections and said Papandreou's referendum proposal was an evasive maneuver masking his inability to govern.

Blaming rating agencies and derivatives speculators for the mess Greece is in is exceptionally lame.

Papandreou is hanging on by a thread. If he fails the vote of confidence, this mess will become unglued in a hurry. I think that would actually be a good thing because the longer EU officials kick the can down the road, the bigger the systemic losses.

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