Central Perk: 20 iul. 2011

miercuri, 20 iulie 2011

Mish's Global Economic Trend Analysis

China PMI in Contraction; IMF Wants Further China Tightening to Combat Inflation
Jim Grant on going forward with a gold standard, "This is not a threat, this is not a promise, it's going to happen"
Sad State of Employment - Employees Covered by Unemployment Insurance Still Below 2001 Recession Low; How the BLS Determines Employment Revisited

China PMI in Contraction; IMF Wants Further China Tightening to Combat Inflation

Posted: 20 Jul 2011 08:54 PM PDT

China is overheating on the backs of massive property speculation, needless infrastructure building, and rampant credit growth. In spite of that inflation, HSBC's China flash PMI points to contraction.

HSBC's China "flash" Purchasing Managers' Index fell to a 28-month low of 48.9 in July, down from 50.1 in June, marking the first time the guage has indicated a contraction since July 2010. The preliminary version of the PMI output index also showed further deterioration, dropping to 47.2 in July from 49.8 in June. HSBC economists said the PMI data seemed to indicate an industrial-production rebound seen in last month's data was temporary. "We expect industrial growth to decelerate in the coming months as tightening measures continue to filter through," said HSBC economist Hongbin Qu. HSBC's final version of the PMI is due out at the beginning of next month.

China Overheating

MarketWatch reports China should tighten further, IMF says

The International Monetary Fund on Wednesday said China should continue to withdraw stimulus in part to combat risks of higher-than-expected inflation.

In its annual review of China's economy, the IMF directors "saw room for further tightening of monetary conditions" and suggested "greater reliance on interest rates and nominal exchange rate appreciation."

In addition to possible inflation risks from food supply shocks, the IMF staff said China also faced the risk of a possible property bubble and a decline in credit quality in the lending undertaken to protect the economy from the financial crisis.

The IMF board repeated its recommendation that China should allow its currency, the yuan, to strengthen further.

China's representative at the IMF, Jinxiong He, had the rare opportunity to rebut the report. He disagreed sharply with the suggestion that the yuan was below fundamentals, saying the staff analysis is based on a flawed benchmark.

The Chinese official also complained that the IMF did not mention that the U.S. Federal Reserve's quantitative easing had fueled inflationary pressures and constrained options regarding the policy mix.

The IMF seriously understates the the Chinese property bubble, credit bubble, and risk of a Chinese economic implosion.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Jim Grant on going forward with a gold standard, "This is not a threat, this is not a promise, it's going to happen"

Posted: 20 Jul 2011 12:10 PM PDT

Jim Grant speaks about going forward with gold standard, and away from a "PhD Standard" ruled by academics like Fed chairman Ben Bernanke.

Link if above video does not play: U.S. Debt Crisis Is Contrived, James Grant Says

Select Quotes

Debt crisis is contrived
Treasury market operating on muscle memory, up in price down in yield for 30 years.
People have come to view treasuries are intrinsically safe when in fact pieces of paper emitted by a government that is cash-flow negative and the printer of the world's reserve currency.
On going forward with a gold standard, "This is not a threat, this is not a promise, it's going to happen"
The gold standard is a better alternative for money management. The historical evidence is incontrovertible.

Jim Grant essentially describes the problems and solutions presented in Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited. Please give that a read if you have not yet done so.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Sad State of Employment - Employees Covered by Unemployment Insurance Still Below 2001 Recession Low; How the BLS Determines Employment Revisited

Posted: 20 Jul 2011 07:52 AM PDT

Here are some interesting charts from reader Tim Wallace regarding "covered employees", those employees that have unemployment insurance.

Covered Employees by Quarter Since 2000

click on any chart for sharper image

Note that the number of covered employees is still below the 2004 trough and that it took 16 quarters in the wake of the 2001 recession to get back above the pre-recession highs.

It has now been 11 quarters since the 2008 high. However, we are still not back to the previous recession dip.

Change in Covered Employee Coverage by Quarter

Cumulative Change in Coverage Since 1st Quarter 2000

No Driver for Jobs

The number of covered employees soared during the housing and commercial real estate bubbles and at the end of the dot-com bubble.

What will be the next big driver for employment? I cannot come up with any nor do I think there will be any in the midst of a Schumpeterian Depression phase of the Long Wave trough.

That is one of the reasons I proclaimed three years ago "expect structurally high unemployment for a decade". The others reasons are global wage arbitrage, tax policy, and massive consumer debt.

For a detailed explanation of Schumpeterian Depression please scroll down to the sections of Creative Destruction labeled Comments From "BC" followed by Schumpeterian Depression.

Slowing Global Economy

Bear in mind the global economy is slowing with many structural problems as noted yesterday in Gold Reacts With "Big Yawn" to ECB Announcement

Partial List of Problems

Sovereign debt default crisis in Eurozone PIIGS: Portugal, Ireland, Italy, Greece, and Spain.
US debt ceiling concerns
US fiscal deficit concerns
US total debt concerns
Reckless, unsustainable credit growth in China
Rampant inflation in Brazil, Russia, India, and China, the BRIC countries.
Yuan peg to the US dollar
Debt and deficit concerns in the UK
Japan interest rate and total debt concerns
Massive global trade imbalances

I could easily add another 10 items related to global housing bubbles, demographics, unfunded future liabilities, state pension plans etc.

Not only are there huge US structural debt issues, there are huge global issues. For a suggestion as to how to fix the global imbalances, please see Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited

Reader Question on Covered Employees

Reader Will Worth from Texas also sent in a chart of covered employees similar to one of the charts from Tim Wallace. Will Worth asks ...

Mish,

In the jobless claims data, "covered employed" dropped by 8.3 million people during the recession it has since recovered by only 247,323 people. Yet, as estimated by the monthly "establishment" and "household" surveys, there have been between 1.4 million and 1.7 million jobs created. Why are those not "covered employed" positions?

Will Worth

Closer Look at the Self-Employed

Self-employed are not covered by unemployment insurance. Thus, all of the people who have gone into business working for themselves are not covered.

The "self-employed" group includes all of those selling trinkets on Ebay as a job as well as all of those "working" in their multi-level marketing "business". Others struggle as non-covered employees in family related businesses.

Many of those jobs are not "real" and produce little or no income. However, these people are counted in the workforce if they respond to the BLS in the household survey that they "worked" any hours.

Once again the BLS does not ask directly ask people if they are employed. Rather the BLS determines that answer with a set of questions that likely produce a far different, and higher answer.

How the BLS Determines Employment

I covered this at length previously with a detailed list of actual questions the BLS asks in "Dropping Out of the Workforce"; Implications of the Falling Participation Rate

The key question appears to be question number two: "LAST WEEK, did you do ANY work for (either) pay (or profit)?"

Anyone selling trinkets on Ebay or selling any products in multi-level marketing companies is likely to answer yes. If so, they are "employed" but they certainly are not covered by unemployment insurance.

The implications of the above charts and commentary should be obvious. Things are much worse than the BLS presents.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Damn Cool Pics

How to Cool Down a Car Under Direct Sun with a Japanese Door Trick
Fascist Weddings In China
Funny Poses Above the Pool
Toothpicking Is New Planking
Funny Faces Of People Playing Video Games
Crazy Penalty Kick
US Military Tattoos

How to Cool Down a Car Under Direct Sun with a Japanese Door Trick

Posted: 20 Jul 2011 03:57 PM PDT

It's summer, and if you live anywhere the sun shines, science dictates that it gets stupid hot inside your car when it's closed up and baking in the sun. According to this Japanese video, rolling down one window and opening and closing the opposite door a handful of times will quickly and effectively cool down a hot car.

The video's only two and a half minutes, but unless you understand Japanese (or can read the Chinese subtitles), jump straight to the 1:52 mark to get the picture. Reddit user binarysolo offers this loose translation:

Roll down a window on a side of the car. Let's go with the driver's side window. Go to the opposite side door (in this case, passenger side) and open/close it ~5 times. Just do this normally.

Source: lifehacker

Fascist Weddings In China

Posted: 20 Jul 2011 03:33 PM PDT

Taking into account that for Chinese just-married couples it's almost a cult aim to take memorable wedding photos, maybe it is not that surprising to see such oddities of Asian creativity. If they were wearing a Japanese uniform of the WWII time, this would be much more brave.

Funny Poses Above the Pool

Posted: 20 Jul 2011 02:59 PM PDT

What is the best place for planking on a a hot summer day? Well, of course where the cold water is - The Pool! These are funny photos of people striking comedy mid-air poses before they crash into the pool.

Toothpicking Is New Planking

Posted: 20 Jul 2011 12:26 PM PDT

The phenomenon of planking involves the practice of imitating a wooden plank in various places, both public and private. This has lead to owling which encourages squatting on top of various objects whilst staring owl-like into the distance. The newest craze, spawn from its predecessors is toothpicking, which involves standing on your head. The most important aspect to remember is the more bizarre the place the better the planking, owling or toothpicking.

Funny Faces Of People Playing Video Games

Posted: 20 Jul 2011 12:18 PM PDT

When you're deeply immersed in a video game, the last thing on your mind is what your gameface might look like. But for photographer Phillip Toledano, capturing those funny faces is the best part. Back in 2002, he shot a smile-inducing portrait series of people playing video games. See some of them below:

Crazy Penalty Kick

Posted: 19 Jul 2011 09:15 PM PDT

Last Sunday, the UAE defeated Lebanon 6-2. Awana Diab scored a goal with a creative penalty kick that was struck with his heel:

Diab's setup seemed like any other for a penalty, but as he ran up to the ball, he stopped, turned around and backheeled the it toward the goal. Stunned by the audacity, madness and nerve it takes to try and score a penalty with your back to the goal, the keeper just stood and watched as the ball trickled into the net.

The UAE's coach immediately yanked Diab from the game, asserting that he had acted disrespectfully to the opposing team.

US Military Tattoos

Posted: 19 Jul 2011 06:56 PM PDT

According to studies and polls, armed forces tattoos are the greatest in the Navy, with the Army second, the Marines third, and then the Air Force. The style of tattoo designs seems to differ depending on the specific branch of armed forces.

Tattoos in the US armed forces have a long and colorful tradition. The millions of Americans who have served either as active service personnel or reservists means a countless number of inked war veterans. Many of them have gotten tattoos as a constant reminder that they once belonged to a particular unit or platoon, to acknowledge their loyalty not only to their unit but also to their country, to show feelings of camaraderie they felt, or even to mark the loss of someone close to them.