Mish's Global Economic Trend Analysis

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• "Euro Death Wish" and Global Finger-Pointing: U.S. Senior Official Blames Eurozone for "75% of the Dark Things Happening in the World"
• Papandreou's Top Priority "Save the Country from Bankruptcy"; It's Impossible, Greece is Already Bankrupt; Papandreou's Speech Greeted with Protests
• Can Government Lies Calm the Markets?

"Euro Death Wish" and Global Finger-Pointing: U.S. Senior Official Blames Eurozone for "75% of the Dark Things Happening in the World" Posted: 10 Sep 2011 08:15 PM PDT Anyone expecting a productive G7 meeting has instead been treated to a massive round of global finger-pointing as noted by the Telegraph article Eurozone blamed by US for world's economic plight Finance ministers of the G7 group of industrialised nations have gathered in the French city of Marseille this weekend to discuss how to avert a looming global economic catastrophe, as markets continue their relentless plunge and deep divisions tear apart the European Central Bank (ECB). But instead of the predicted economic debate, it emerged on Saturday that the bad-tempered meeting was dominated by American and British warnings that political failures and broken promises in the euro zone were in danger of triggering a wider crisis. "Seventy-five per cent of the dark things happening in the world economy are because of the euro zone," said a senior US official after a round of talks ended in the early hours of yesterday morning. George Osborne, the chancellor, also waded into the discussion, upbraiding the French, German and Italian finance ministers and central bankers for failing "convincingly" to implement measures agreed at an emergency euro summit in July - guaranteeing the size and powers of the eurozone rescue fund, and ensuring that Greece will not be allowed to default. The clashes at G7, which put Britain and the US together on the sideline as members of the European single currency struggle to resolve its internal contradictions, foreshadow an autumn of disarray within the EU. Their parliaments must ratify the plan for the new EU rescue fund, which is unpopular with many voters, especially in the richer countries. And just when scepticism among its population is at its greatest, there is finally a realisation among eurozone members that the only way to save the single currency may be a dramatic move towards more integrated economic governance. To underline the growing fears that the single currency is heading for an existential crisis or crash - and as the G7 sat down at the conference table - the news broke on Friday afternoon that Jurgen Stark, one of the EU's most important policymakers, had resigned as the chief economist of the ECB. Officials described the development as a "bombshell" timed to go off at the "worst possible moment" for French, German and EU attempts to bolster the fraying and tarnished credibility of the euro zone institutions. "There must be some kind of a euro death wish," said one official. It seems bureaucrats are at long last realizing that a monetary union without a fiscal union cannot possible survive. This presents a two-choice dilemma. Two Choices Save the Euro and Destroy Sovereign Governments Save Sovereign Governments and Destroy the Euro Given the propensity for government bureaucrats to mangle everything, there is a third possibility: Destroy the Euro and Destroy Sovereign Governments. 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.

Papandreou's Top Priority "Save the Country from Bankruptcy"; It's Impossible, Greece is Already Bankrupt; Papandreou's Speech Greeted with Protests Posted: 10 Sep 2011 06:26 PM PDT Greece is bankrupt and the entire world knows it. Even ECB president Jean-Claude Trichet cannot be so dense as to not understand Greece is bankrupt, although he is too big a liar to openly admit it. Nonetheless the Greek Prime Minister refuses to throw in the towel. Please consider Papandreou Pledges to Avoid Default. Prime Minister George Papandreou said he'll fight to avoid a default and keep Greece in the euro, as resistance builds to extending more aid to the European Union's most-indebted nation. The government's top priority is "to save the country from bankruptcy," Papandreou said in a speech in the northern Greek city of Thessaloniki last night. "We have taken the decision to fight to avoid a catastrophe for our country and its citizens: bankruptcy. We will remain in the euro. And this meant and means difficult decisions." The speech was greeted with protests and police battled demonstrators with tear gas in Thessaloniki as Greeks marched against the austerity measures that have cut incomes and driven unemployment to a record. Police in Athens also used tear gas to disperse protesters near the Parliament building. A total of 4,500 police officers were deployed in Thessaloniki as 15,000 people protested, including students marching against education reforms and taxi drivers opposed to new licensing rules. Police detained 94 and arrested two. Guests ran the gauntlet of protesters to reach the venue and were pelted with eggs. The government now expects the economy to shrink 5 percent this year, worse than the June estimate of 3.8 percent from the EU and International Monetary Fund, and a deeper contraction than in the past two years. The forecast damps hopes that Greece will meet its pledge to lower its budget deficit to 7.5 percent of gross domestic product in 2011, with the government blaming the slump for a budget gap that widened 25 percent in the first seven months of the year. Finance Minister Evangelos Venizelos, who on Sept. 6 promised to speed austerity measures pledged in return for the emergency loans, said yesterday the situation was "critical" and that the next two months would be "decisive for our existence." Nine in 10 Greeks are dissatisfied with the way the government has handled the country's economic crisis, according to a poll by researcher VPRC for Epikaira magazine on Sept. 8. Greek opposition New Democracy party's lead over the governing Pasok party is widening, while a majority of voters don't want early elections, according to opinion polls published last week. Simple Logic Logic dictates, one cannot prevent what has already happened. Greece is bankrupt and it is asinine to deny it. Clearly Greek citizens have had enough. Here is an interesting statement from the article "Germany is preparing a plan to shore up the nation's banks in the event that Greece fails to meet the terms of its aid package and misses a payment on its debt, three members of Chancellor Angela Merkel's coalition said Sept. 9." In and of itself that statement is not newsworthy. However, as noted in Can Government Lies Calm the Markets?, German Finance Minister Wolfgang Schaeuble denied the claim. Ironically, the fear should not be that Schaeuble is a liar, but rather that he is telling the truth. If Germany is not making preparations for a Greek default, Germany is well beyond foolish. My conclusion: Schaeuble is a blatant liar. 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.

Can Government Lies Calm the Markets? Posted: 10 Sep 2011 10:50 AM PDT The question of the day (for which everyone should know the answer) is Can Government Lies Calm the Markets? In spite of the fact most of us realize lies will not help, and most often makes matters worse, governments repeatedly resort to lies, platitudes, and wishful thinking. Jean-Claude Juncker, Luxembourg PM and Head Euro-Zone Finance Minister admitted as such in his statement "When it becomes serious, you have to lie" Things are clearly serious, so everyone should expect lies, and lies we have in spades. MarketWatch reports G-7 seeks to calm market fears on Europe, banks The finance ministers and central bankers of the Group of Seven richest industrial countries sought late Friday to calm market fears about Europe's debt crisis. A senior U.S. official told Dow Jones that the G-7 leaders spent most of their time behind closed doors dissecting Europe's problems. The group trumpeted the EU's July 21 agreement to ease financial tensions, saying it would make the European Financial Stability Fund more flexible. At the same time, the euro-zone countries reaffirmed their "inflexible determination" to honor their sovereign debts and their commitments to sustainable fiscal policies and structural reforms. If G-7 really has "inflexible determination" in the face of default of Greece, then they are not doing what they should be doing, which is to prepare for a Greek default and exit of Greece from the Eurozone. For additional comments please see Common Sense from Eurozone Member Estonia: "Illogical to Exclude the Possibility of Bankruptcy". This of course leads to the second question: Is "inflexible determination" a lie or just plain stupidity? MarketWatch: The G-7 said that their central banks "stand ready to provide liquidity to banks as required. … We will take all necessary actions to ensure the resilience of banking systems and financial markets." Mish: That paragraph is a set of half-truths and lies. The half-truth is the ECB will most assuredly attempt to provide liquidity. The problem is banks face capital shortfalls. And regarding capital shortfalls the banks, the ECB, and the EU are all in stupefied denial even after Christine Lagarde, new head of the IMF stated banks were undercapitalized. See Lagarde shows independence from Europe as IMF chief . Sadly Lagarde may have shown independence but the article points out she was immediately attacked by banks for her statements. Christian Noyer, head of the Bank of France, said in response "Either she had been misinformed by her staff at the IMF, that's a possibility, or she did not have French banks in mind." Yeah right. MarketWatch: The group also said it would maintain close consultations about exchange markets. That statement is undoubtedly true, but the implication is not especially pretty. Besides, what can they do but monitor things? If they could do anything the DAX (German equities market) would not be in freefall. MarketWatch: After the meeting, German Finance Minister Wolfgang Schaeuble dismissed a report by Bloomberg News that German officials were readying a plan to recapitalize German banks should their Greek holdings overcome balance sheets. Schaeuble insisted that the agreement reached with Greece in July was still the focus of the government. "To speculate over other outcomes is pointless," he said, according to Dow Jones. Mish: Schaeuble's, statements are blatant lies or seriously discomforting truth. In this case, it is hard to know precisely which. I suspect lies (and we should all be hoping for lies) because unless the EU, ECB, and other government officials are making contingency plans for a Greek bankruptcy, there are going to be some very serious consequences soon. MarketWatch: European Union Commissioner for Economic and Monetary Affairs Olli Rehn told reporters after the G-7 meeting that European banks were better capitalized than they were a year ago. Mish: There's a lie, especially when the new head of the IMF is willing to admit banks need to be recapitalized. MarketWatch: The G-7 statement said that countries must find a way to support the global recovery given the clear signs of a slowdown: "Given the still-fragile nature of the recovery, we must tread the difficult path of achieving fiscal adjustment plans while supporting economic activity, taking into account different national circumstances." Mish: That is the impossible dream, yet probably an implied lie as well. MarketWatch: U.S. officials said that the G-7 offered strong support for President Barack Obama's $450 billion jobs plan. Mish: That statement is believable, yet the implications are disastrous for the US if implemented. Everyone wants the US to dig a deeper debt-hole and wreck its economy for the benefit of the rest of the world. MarketWatch: ECB President Jean Claude Trichet told reporters that Stark resigned for personal reason, Dow Jones said. Mish: That is a blatant lie by Trichet. Stark did not leave for personal reasons, nor did Axel Weber. Neither wanted to go down with a sinking Euro ship. Please see Germany Prepares "Plan B" Default; Top ECB Official Resigns; German-Italy Bond Spreads Widen Again; Dollar Soars, European Equities Hammered MarketWatch: Bundesbank President Jens Weidmann said many of the factors that affected the German economy in the second quarter were only temporary and that no new stimulus was needed. Mish: That is a blatant lie by Weidmann. Europe is imploding, austerity measures without reforms will not help at all, and austerity measures with reform will take a long time to work. There is no way the vaunted German export machine keeps humming along in this global backdrop. The only way "temporary" might be construed as true is if Weidmann means "years". Obama Lies to Congress and the Nation While on the subject of lies, there were plenty of them in Obama's address to Congress. Please see Dissecting the Lies in Obama's $447 Billion "Shock-and-Awe" Reelection Ploy; Dead-on-Arrival in Congress? Alternative Proposal Will Not Cost a Dime Can Government Lies Calm the Markets? It hasn't worked recently as the public and the markets are both fed up with lies. Unfortunately, lies are all the Fed, the ECB, and governments have to offer. Progress on badly needed structural reforms languishes in favor of "impossible dreams", failed stimulus ideas, wishful thinking, and a mass of blatant lies. 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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