Mish's Global Economic Trend Analysis

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• Treaty of Debt - An Eye Opening Video on the ESM Bailout Mechanism
• Chanos Interview: China Slowdown Just Beginning
• Absurd Comment of the Week; Peter Principle in Action
• Spain's Unemployment "Unexpectedly" Rises to 21.52%; Expect Market Focus to Shift from Greece to Portugal, Spain, Italy

Treaty of Debt - An Eye Opening Video on the ESM Bailout Mechanism Posted: 29 Oct 2011 03:14 PM PDT Inquiring minds are interested in the terms of the European Stability Mechanism (ESM) accord scheduled to replace the EFSF. The following video highlights the key sections of the proposed treaty. Link if video does not play: Treaty of debt (ESM) - stop it now! There are comments on The Telegraph article A German view of the bailout deal which is where I found the video. Key Details of ESM Accord Article 8 says "Authorized Capital stock 700 billion Euros" Article 9 says "ESM members irrevocably and unconditionally undertake to pay capital calls on them within 7 days" Article 10 allows the ESM board of governors to "change the authorized capital and amend article 8 accordingly" Article 27 says ESM shall enjoy "immunity from every form of judicial process". Thus the ESM can sue member countries but no one can challenge it. No governments, parliament or any other body or laws apply to the ESM or its organization. Article 30 says "Governors, alternate governors, directors, alternate directors, the managing director and staff shall be immune from legal process with respect to acts performed by them (...) and shall enjoy inviolability in respect of their official papers and documents" There are no independent reviewers and no existing laws apply. Thus Europe's national budgets will be in the hands of one single, unelected body that is accountable to no one and immune from all legal actions. Is this the future of the EU or will the German supreme court and other governments put an end to it? 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.

Chanos Interview: China Slowdown Just Beginning Posted: 29 Oct 2011 02:21 PM PDT Jim Chanos Says China Slowdown has just begun. There is not much new in the video actually. I just happen to think he is correct. The link came in an email I played while stuck in an airport on a plane delay back to Chicago. URL if video does not play: http://www.macrobusiness.com.au/2011/10/chanos-china-slowdown-just-beginning/ 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.

Absurd Comment of the Week; Peter Principle in Action Posted: 29 Oct 2011 08:55 AM PDT The absurd comment of the week goes to Larry Summer for his statements on the irony of the financial crisis. The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending. Most policy failures in the United States stem from a failure to appreciate this truism... Anyone who thinks the cure is the same as the disease (as Larry Summers clearly does) is incompetent (at best). I found the reference when Zerohedge posted the Summers link with no comment. I suspect the Summers comment was so asinine that ZH did not even see a need to state it. Because he did not comment, I will. Peter Principle in Action Larry Summers may be one of the best examples of the Peter Principle that you can ever find. However, I suspect a case can be made that Summers did not rise to his level of incompetence, that he was never competent in any position, ever, and that he got where he is out of sheer luck, birthright, bribery, or some combination thereof. 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.

Spain's Unemployment "Unexpectedly" Rises to 21.52%; Expect Market Focus to Shift from Greece to Portugal, Spain, Italy Posted: 29 Oct 2011 12:32 AM PDT With news of a "voluntary" haircut on Greek bonds of 50%, it's time to look ahead to the next big trouble spots. By measure of 10-Year government bond yields, Portugal at 11.8%, Italy at 6.02%, and Spain at 5.51% (as compared to Germany at 2.18%), Portugal, Italy, and Spain clearly have critical issues. Moreover, the economic data from Spain is continuously awful. For example Spain's Unemployment "Unexpectedly" Rises to 21.52% The number of unemployed persons increased by 144,700 in the third quarter, bringing the total number of unemployed amounted to 4,978,300 people, according to Labour Force Survey (EPA) released today by the National Statistics Institute (INE). Spain has not seen such a high unemployment rate since the fourth quarter of 1996. Austerity measures and economic reforms in the "Club-Med" Euro states are much needed. However, the short and intermediate-term effect will not be good for sovereign debt yields, budget targets, or GDP. Spain and Portugal are accidents waiting to happen (sooner rather than later), and judging from bond yields alone, it is safe to add Italy to that mix. The euphoria of a "settlement" (that fixes nothing) in regards to the crisis in Greece will soon give way to the massive number of even larger problems elsewhere in the Eurozone. 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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