Mish's Global Economic Trend Analysis |
- Brilliant Moves by Papandreou; EMU Mentions Eurozone Exit Possibility First Time Ever; Who the Hell is Merkozy to Dictate Terms of a Greek Referendum?
- Hilarious Video of Eurocrats in Action, Ripping Off Taxpayers and Running Into Walls to Avoid the Cameras
- Europe Undeniably in Recession; Germany Manufacturing PMI Contracts for First Time in Two Years, New Orders Collapse
- EFSF Bond Sale Postponed Because of Market Conditions; Fake Haircuts, Fake Help
- In Praise of Papandreou's Referendum Decision; Eurocrats Terrified of Democracy; Parade of Cowards
| Posted: 02 Nov 2011 06:20 PM PDT As the days progress, the strategy of George Papandreou has become increasingly clear. He does not like the terms forced on him by Eurozone bureaucrats especially French president Nicolas Sarkozy and German Chancellor Angela Merkel. Not only is he fed up with Eurocrats, he is fed up with Greek protests as well as pressure from political opposition. I talked about this previously in my post In Praise of Papandreou's Referendum Decision; Eurocrats Terrified of Democracy; Parade of Cowards Who the Hell is "Merkozy" to Dictate Terms of a Greek Referendum? The reaction to Papandreou's referendum proposal was swift and severe, not only in the markets, but also at the emergency meeting Cannes between Merkel, Sarkozy, and Papandreou. Sarkozy and Merkel proclaimed the Referendum was about an exit from the Eurozone. Really? I ask again, Really? Who the hell is "Merkozy" to dictate terms of a Greek referendum? That said, I appreciate the fact that Merkozy now accept the simple fact that an exit from the Eurozone is possible. This is a major step in the right direction, even if it constitutes effective blackmail on Greece. Blackmail by IMF, Merkozy The IMF upped the ante saying Greece will not get the next tranche of money until after the referendum. Hmmm. It seems the IMF and EMU should have thought about that before the last release of funds. By the way, this helps explain the timing of Papandreou's announcement. Papandreou's Timing Perfect Papandreou cleverly waited until he had the funds and anti-Papandreou sentiment was extreme before announcing his referendum ploy. What transpired immediately following his announcement was a series of on-off-on referendum announcements culminating with Papandreou convincing his cabinet to go along with the idea (please see Greek Referendum Off or On? Who is in Control? Anyone?) That was an incredibly gutsy but also exceptionally well-timed move by Papandreou. Yes or No, But to What? With the above backdrop, please consider Greece to Decide Euro Membership in December Vote as EU Cuts Aid Payments European leaders cut off aid payments to Greece and said a referendum in five weeks will determine whether the debt-strapped nation becomes the first to exit the 17-country euro area.Who Has the Upper Hand? Quite frankly that Bloomberg headline is nothing but bullsheet until Papandreou relents. But why should he? Who is it that has the upper hand? I encourage Papandreou to go "All In". He has nothing to lose. He will not win the next election and he is tired of playing puppet to Merkozy. Bear in mind Greece desperately needs reforms. However, the manner in which the IMF, EMU, and Merkozy have forced various issues is in a manner that helps only Greek and French banks, and not Greece at all. Most Greeks would agree with that assessment, whether it is truer or not. That is the likely reason Papandreou's cabinet went along with the referendum idea, after initially rejecting it. In short, this was a brilliant series of perfectly timed maneuvers that shoves the ball smack back into the face of of the arrogant Merkozy coalition. Stuff the Ball Down Merkozy's Thoat Until they Puke Papandreou's next move should be to stuff the ball down the throats of Merkozy so hard that both of them puke. All he has to do to accomplish that would be to go ahead and word the referendum how he wants. In short, the referendum needs to include a proposal to stay in the Eurozone, as well as a proposal to reject the terms of the EFSF as presented. Look at the beauty of this setup from the point of view of Papandreou. Assuming the proposal to stay in the Eurozone passes but approval of the terms of the EFSF does not, Merkel and Sarkozy will have to do one of two things:
Either way, Papandreou wins. Explanation of My Position Please do not read any more into this than exists. The facts of the matter are French, German, and other European banks made stupid loans to Greece, Portugal, Spain, Ireland, etc. Banks that make stupid lending decisions (and not taxpayers) should pay the price for those actions. Greece desperately needs reforms, particularly in the public union area. I support those reforms. However, I do not support the bailing out of banks. Unfortunately, all this alleged "help" to Greece is nothing more than an obvious attempt to bail out banks at the expense of Greece and European taxpayers in general. 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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| Posted: 02 Nov 2011 12:17 PM PDT The following must see video shows Eurocrats in action, ripping off taxpayers and inadvertently running into walls to escape the lights of the camera. The video is in German but has English subtitles. A second video follows with French Subtitles. The YouTube link Expense Allowance Abuse by MEPs contains additional noteworthy information. Hans-Peter Martin and RTL in the fight against abuse of expense allowances:French-Speaking readers may be interested in a similar video French subtitles. I got the links from Swiss blogger Olivier Crottaz, who has a blog in French, La Chronique de Crottaz Finance. Inquiring French readers may wish to check it out. Matter of Perspective Ironically, the only thing worse than paying outrageous sums of money to these worthless MEP officials for not showing up to work is paying them to show up to work. Europe would be better off if these guys did nothing at all and the parliament building sold or turned into condos. Addendum: Linus from Switzerland writes ... Switzerland also faced a number of so called EU turbos whose main objective was to join the EMU. Luckily we have constitutional referendums that allowed people to express their opinion. The result was a decision to not to join this most undemocratic structure that will make people hate each other much more than when they were on their own with their own country and currency.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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| Posted: 02 Nov 2011 10:26 AM PDT Berlin halved its 2012 German economic forecast for 2012 to one percent. What does that say for the rest of Europe? Will Germany even grow at all? While pondering those questions please note German manufacturing shrinks in Oct for 1st time in 2 years Germany's manufacturing sector contracted in October for the first time in more than two years as new orders fell for a fourth month in a row, data showed on Wednesday in the latest sign Europe's bulwark economy is set for a sharp slowdown.Trend Not Your Friend Unless you are hoping for recession, the trend is not your friend as this table of October Final Manufacturing PMI shows.  Europe Undeniably in Recession With China slowing, the US slowing, and much of the rest of Europe in widely-recognized contraction, the vaunted German export machine has a shrinking pool of able and willing buyers. Europe is clearly in recession now, including Germany. Expect a dramatic and escalating turn for the worse, because it's coming. 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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| EFSF Bond Sale Postponed Because of Market Conditions; Fake Haircuts, Fake Help Posted: 02 Nov 2011 09:46 AM PDT When was the last time the Fed postponed a US treasury sale due to market condition? I cannot find one although it is possible it happened at some point in a debt ceiling issue. Today Bloomberg reports the EFSF Delays 3 Billion-Euro Bond Sale simply because it does not like market conditions. Europe's bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou's request for a referendum on the rescue pact for his country roiled markets.Fake Haircuts In response to the action by the EU on EFSF bonds, Peter Tchir at TF Market Advisors pinged me with this set of statements. The EFSF pulling a 3 billion bond sale due to market conditions is pretty bad. These bonds are cleaner and safer than the binary default options the EFSF plans to be selling in the future.My only quibble with that analysis is that Geithner did not fall for fake haircuts, he actively promoted them. Otherwise it is spot on. Fake Help And note the preposterous and often repeated hype in the Bloomberg article the bond sale is to "help" Ireland. No, it's not unless I add a few word to the sentence such as "the bond sale is to help rape Irish taxpayers". Ireland would be far better off right now if it had taken the Icelandic approach, calling for a national referendum, giving its voters the chance to tell the EU and IMF to go to hell. I am sure they would have done so, just as Icelandic voters did. 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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| In Praise of Papandreou's Referendum Decision; Eurocrats Terrified of Democracy; Parade of Cowards Posted: 02 Nov 2011 02:15 AM PDT I do not know what motivated Greek Prime minister George Papandreou to call for a voter referendum on the Greek bailouts (and no one else does either) with the exception of Papandreou himself. However, there are some rather interesting possibilities (as well as a simple explanation). The Slog outlines a scenario that Papandreou's bailout referendum bombshell was inspired by Merkel in order to trigger major losses in French banks, causing France to lose its AAA rating, culminating in a total Merkel victory and German revenge over France. Wow. As convoluted and conspiratorial as that sounds, it makes for highly entertaining reading (and it's also well presented). On the other hand, my readers know I am a firm believer in "Occam's Razor" which suggests the simplest explanation (the one making the fewest assumptions) is likely to be the correct one. Certainly, one should never rule out stupidity when that is one of the possibilities. An even simpler explanation is that Papandreou is simply tired of the beatings, and the meetings, and the riots, and has simply decided to "walk away" from the mess by handing the decision over to the voters. I believe that is the "most likely" explanation even though The Slog presents a very good case that Papandreou Planned this Referendum in Advance with help of his interior minister. However, planning for a referendum and being prepared for one in advance (if necessary) are two different things. Thus, I suggest (and so would Occam's Razor) that Papandreou saw a potential need for a referendum down the road, and that potential need turned into reality. One final puzzling aspect to this mess is that just three days ago Papandreou affirmed his commitment to the EU/IMF Troika solution. So what's up with that? Once again no one knows except Papandreou but I will stick with the assessment there is a simple explanation that is not readily apparent right now. In Praise of Democracy and Choices With that backdrop, and with the statement I do not like Papandreou personally, I praise Democracy, and by implication, Papandreou's decision. Is there any reason Greek voters should not be given a choice? I think not. They may not make a wise choice but what is the likelihood that political hacks and political opportunists will? Iceland Referendum a Winner Take a good look at Iceland. In repeated attempts, political hacks (with banker's interests in mind) attempted to sell Icelandic citizens into debt slavery. A referendum saved the day. Sadly, voters were forced to repeat the referendum, and once again voters made the correct decision. Iceland is now in full recovery simply because it told the EU and IMF to go to hell. No Easy Way out for Greece Greece does not have an easy way out. However, its problems are no doubt far worse than if it told the Troika to go to hell two years ago. Greece should have gone bankrupt long ago. Heck, Greece should not be in the European Monetary Union (EMU - Eurozone) in the first place, and EMU bureaucrats are primarily to blame even though Greece lied to get in. Speaking Against Political Hypocrisy Peter Tchir at TF Market Advisors (and one of the best authors on Zero Hedge) also praises democracy. Yesterday he pinged me with this set of comments. If a leader in the Middle East finally gave into months of protest and decided to give the people a real say on an important issue, the Western leaders would be rejoicing. Obama would have a podium and be uttering his support for the Courage of the people who stood up and give the Arab spring his full blessing.Eloquent Praise for Democracy Pater Tenebrarum at the Acting Man blog eloquently discusses democracy in his post Papandreou Calls For Referendum On Bailout Embattled Greek prime minister Papandreou has found a way to stick it to the eurocrats in a most elegant manner: instead of continuing to serve as everyone's favorite whipping boy, he has decided it is time to let the Greek people themselves speak out on the future of their country. In a surprise announcement yesterday, he told parliament that Greece is to hold its first referendum since 1974 and that the population would be asked whether it wants to accept the conditions of the bailout plan or not.Eurocrats are Terrified of Democracy Tenebrarum certainly hit the nail on the head and so did Daniel Hannan on The Telegraph with his post Eurocrats are Terrified of Democracy Shall I tell you the truly terrifying thing about the EU? It's not the absence of democracy in Brussels, or the ease with which Eurocrats swat aside referendum results. It's the way in which the internal democracy of the member states is subverted in order to sustain the requirements of membership.Parade of Cowards In contrast to Hannan, Tchir, and Tenebrarum, the parade of bureaucratic cowards terrified of democracy is nearly endless. Here are some prime examples.
Ultimate Irony: Papandreou a Fervent Euro-Enthusiast Here is one more clip by Daniel Hannan on The Telegraph worth reading. Euro-enthusiasts in Brussels and in Athens are ready to bring down an elected government rather than allow a referendum. Yet the funny thing is that Papandreou is a Euro-enthusiast. He fervently wants to remain in the euro, and had been planning to campaign for a Yes vote. His sin, in the eyes of Brussels, was not to hold the wrong opinions, but to be too keen on democracy. Leninists had a term for people who, while they might be committed Bolsheviks, none the less behaved in a way which endangered the movement. They were called "objectively counter-revolutionary". Poor Papandreou finds himself in this category.Help?! What Help? Of all the cowards, the statement by French lawmaker Christian Estrosi is the most galling: "when you are in a situation of crisis, and others want to help you, it is insulting to try to save your skin instead of assuming your responsibilities." Whose Skin Are We Saving? No eurocrat or politician outside of Greece gives a rat's ass about helping Greece. The only skin they want to save is their own. That realization coupled with my earlier proposal that Papandreou was tired of beatings, meetings, and riots is by far the most likely reason Papandreou decided to "walk away" from the mess via referendum. It's a pity he did not do so long ago. Addendum: Reader Jeff Miller, Associate Professor NSU Oklahoma College of Optometry writes ... I am also a firm believer in Occam's Razor and I think Hanlon's Razor also applies: "Never attribute to malice that which can be adequately explained by stupidity." 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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