Mish's Global Economic Trend Analysis |
- Growing Isolation in Germany as Merkel's Allies Abandon Her; Polls Show 75% of Germans Oppose More Bailouts; Clock Ran Out of Time
- Government and the Power to Issue Fiat Currency Out of Thin Air
- Harrisburg Heads for Receivership in New Pennsylvania Bill; Crisis Will Linger Because State Legislature is Clueless
- Merkel Prepares Market for Bigger Haircuts; Split opens Over Greek Bail-Out Terms; Needs vs. Fantasies
- Brazil Seeks to Tax Derivatives; No BRIC Decoupling
- Chris Christie Mulls Presidential Run; Independents Key to Election, and Christie can Rally Independents
Posted: 28 Sep 2011 09:53 PM PDT German Chancellor Angela Merkel will likely survive a key vote on Thursday to expand the EFSF bailout fund, but passage now depends on support from the opposition. Even more telling is the increasing isolation sentiment in Germany. Polls show shows three-quarters of Germans are against the expanded European rescue fund that's subject to Thursday's vote. So, who is it that politicians represent? The Wall Street Journal reports Germans Reconsider Ties to Europe When German lawmakers vote Thursday on whether to put more money into Europe's bailout fund—a step many investors see as essential to prevent a market panic—several conservative deputies, including Wolfgang Bosbach, a prominent champion of European integration, are expected to vote "no." Mr. Bosbach, a high-ranking conservative in Ms. Merkel's Christian Democratic Union, has recently become an outspoken critic of the bailout strategy.Merkel's Clock Ran Out of Time The vote in Germany is a foregone conclusion, but it is the end of the line for Merkel, whether or not she needs opposition votes for passage. She is taking a stance 75% of the nation does not agree with, and that stance is guaranteed not to work. The German court nixed Eurobonds, permanent bailout funds, and leveraged use of the EFSF. Greece is going to need more and there is no more to give. Time will not improve this situation but it's a moot point. The clock ran out. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Government and the Power to Issue Fiat Currency Out of Thin Air Posted: 28 Sep 2011 01:42 PM PDT Here is an excellent video on fiat currencies by my friend Dominic Frisby at Frisby's Bulls and Bears. Bear in mind we are in credit based economy, and credit markets can override the Fed's ability to create inflation, assuming of course a definition of inflation that encompasses credit. Please see Yes Virginia, U.S. Back in Deflation; Inflation Scare Ends; Hyperinflationists Wrong Twice Over for a discussion. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 28 Sep 2011 12:01 PM PDT The state of Pennsylvania continues to take half-ass measures in resolving the budget crisis in Harrisburg. New legislation fails to address two badly needed action items. Please consider Harrisburg Might Get a Receiver Thanks to Pennsylvania Bill Harrisburg may become Pennsylvania's first municipality to fall under receivership.There is no point in reading further. The facts as presented show why the crisis will linger on and on, at taxpayer expense.
Strong Message Legislature is Clueless Representative Glenn Grell said "the vote sends a strong message to elected officials in Harrisburg". Actually it sends a strong message the Pennsylvania legislature is clueless about what needs to be done. Harrisburg has numerous problems, and untenable union wages and benefits are a huge part of that problem. Once again, it's time to stop Fantasyland dreams and Take The Loss. Bondholders and unions alike have losses to take. Until they do, the crisis in Harrisburg will linger on. For needed loss-taking in Europe, please see Merkel Prepares Market for Bigger Haircuts; Split opens Over Greek Bail-Out Terms; Needs vs. Fantasies. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 28 Sep 2011 09:37 AM PDT French and German banks know a good deal when they have one. They have one in the 21% haircuts they "voluntarily" accepted. The problem is even 50% haircuts are likely insufficient. The bondholders are upset at this reality. Tough. Yahoo! Finance reports Merkel says Greek bailout terms may be changed German Chancellor Angela Merkel hinted that the second Greek bailout package might have to be renegotiated amid increasing market speculation Wednesday that European leaders want to force private holders of Greek bonds to take bigger losses.Needs vs. Fantasies The banking industry says there is no "need" to change the terms. Of course there is a need to change the terms. Banks are not going to be paid back what they are owed. Let's not confuse "needs" with pie-in-the-sky fantasies. Split Opens over Greek Bail-Out Terms The Financial Times reports Split opens over Greek bail-out terms A split has opened in the eurozone over the terms of Greece's second €109bn bail-out with as many as seven of the bloc's 17 members arguing for private creditors to swallow a bigger writedown on their Greek bond holdings, according to senior European officials.Take the Loss One look at the DAX, or European bank stocks suggests major shock waves have already been felt. More are coming. However, the shock waves would have been far less had banks, the ECB, and the EU accepted realistic losses two years ago and simply let Greece default. Losses will now be four to 10 times as large, depending on how much more money everyone is willing to throw at the problem. Thus, upping the ante to shelter bondholders from losses was exactly the wrong thing to do then, and it is still the wrong thing to do today. Barry Ritholtz had an excellent article on this theme just today: Take The Loss. The fear should have been in hiding losses not taking them. Unfortunately, I expect some wishy-washy compromise will up the losses one reportedly "final time" to 30-35% not the needed 60% or so. It won't work. Hiding losses by not reporting them only makes matters worse. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Brazil Seeks to Tax Derivatives; No BRIC Decoupling Posted: 28 Sep 2011 08:38 AM PDT In response to Europe Plans to Tax Stock and Bond Transactions .1%, Derivatives .01% Despite US Objections; Expect More Crashes Should it Pass I received a response from a reader in Brazil about BRIC decoupling (more specifically, the lack thereof). LTBR writes ... Hi Mish,Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 28 Sep 2011 12:29 AM PDT Over the past week or so I have seen several stories about the possibility of Chris Christie running for president. Here is one such story from today from CBS News Political Hotsheet: Chris Christie confidante says N.J. gov. mulling WH run New Jersey Gov. Chris Christie has repeatedly said he is not running for president. But one of his predecessors who has known Christie for decades says he is now at least thinking about it.Kean Confirms Christie Boomlet: 'It's Real' The National Review Online reports Kean Confirms Christie Boomlet: 'It's Real' Former New Jersey governor Tom Kean, who has known Chris Christie since he was a teenager and remains an informal adviser, tells National Review Online that the governor is "very seriously" considering a presidential bid.Unsatisfactory Field I'm not satisfied with the field. I think it's safe to say independents in general are not satisfied with the field. I back Ron Paul but do not think Paul can win. Furthermore, I may write in Ron Paul even if he does not win the nomination. That is how much I dislike the rest of the Republican field. My position was the same in 2008. I could not stomach a McCain/Palin ticket. I wrote in Ron Paul. However, if Christie is the nominee, I will do whatever I can to help the Governor. In spite of long-odds Christie has helped turn the state of New Jersey around. Moreover, he has above a 50% rating in spite of the fact that he has stepped on many unions toes. I see no indication that Christie is beholden to banks, and he certainly is not beholden to unions. Independents Need Someone to Rally Around It is highly likely independents will swing the next election. They voted overwhelmingly for Obama in 2008 and abandoned Democrats in the mid-term elections. Can independents rally around Mitt Romney? I can only speak for myself, not independents in general. I can't support Romney. Nor can I support Perry who has made an enormous number of gaffes recently, anyone of which can sink him in the general election were he to win the nomination. On the other hand, Chris Christie is honest, does not mince words, is not beholden to anyone and has a tremendous fiscal track record in New Jersey. If he can stay away from the political hotbed issues of abortion by taking a modest, middle-of-the-road stance, that too would help him with independents. Light My Fire The Republican nominee will capture the far-Right vote. They are not going to vote for Obama, nor will they stay away from the election. Thus, it would be a serious mistake for Republicans to rally around a far-Right platform when it may cost them dearly with independents. A fiscal conservative like Christie can light a fire with independents in a way the other Republicans can't. Battle for the Middle Not much is known about Christie on other than Fiscal issues. He can easily put together a platform that would appeal to everyone but unions, the far-Left, and the far-Right. The far-Right will vote for Christie 8-days a week. The far-Left and unions will vote for Obama 8-days a week. The middle, not the Left or Right is where the battle will be won or lost. All we need now is a decision from Christie to throw his hat in the ring with a strong, fiscally conservative message, and middle-of-the-road ideas elsewhere. If Christie does that, he will not only ignite enthusiasm, he will win the nomination and the general election as well. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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