Mish's Global Economic Trend Analysis

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• Athens Burning: Tens of Banks in Flames After Athens Passes Austerity Bill
• China Instructs Banks to Roll Over $1.7 Trillion in Debt to Avoid Mass Default
• Obama Seeks to Prove He is More Like Romney; Obama vs. Romney - What's the Difference?

Athens Burning: Tens of Banks in Flames After Athens Passes Austerity Bill Posted: 12 Feb 2012 05:30 PM PST The Financial Times reports Athens passes demanded austerity bill. Greek lawmakers on Thursday approved a tough austerity package aimed at averting a default, but the vote was overshadowed by violent street protests in central Athens and dozens of arson attacks against shops and banks. The legislation passed by 199 votes in favour to 74 against, a convincing majority for Lucas Papademos, the caretaker prime minister who has been given the job of pushing through painful reforms demanded by the European Union and the International Monetary Fund in return for a second €130bn bail-out. Athens Burning: Tens of Banks in Flames From the Greek Streets reports Athens, the long night of February 12: "burning and looting tonight" Tens of banks and other buildings are burning across Athens after today's demonstrations. There are huge riots in Thessaloniki and Patra as well. The situation seems to be spiralling out of control. We will try to summarise key developments through the night, below: ..... 23.10 GMT+2 It is entirely impossible to estimate the number of people who have taken to the streets in Athens tonight. They are definitely in the hundreds of thousands – there are simply people everywhere. 23.07 GMT+2 The building of Marfin bank (the same building where three bank workers died on May 5, 2010) has been burnt to the ground. 23.05 GMT+2 A gun shop in Omonoia, Athens, has been looted. 23.02 GMT+2 Information about the alleged occupation of the town hall is confirmed: a group of people entered the building, only to be evicted and arrested by riot police a few minutes later. 22.42 GMT+2 The town hall of Athens has allegedly been occupied. 22.40 GMT+2 Police attack and cut off people in the Law school. At least 200 people are trapped inside. 22.30 GMT+2 At least 20 demonstrators and another 30 police have been injured during the day's clashes. Promises No Longer Suffice Earlier today Schaeuble warns Greek promises no longer suffice Greek promises on austerity measures are no longer good enough because so many vows have been broken and the country that has been a "bottomless pit" has to dramatically change its ways, German Finance Minister Wolfgang Schaeuble said. In a hard-hitting interview with the Welt am Sonntag newspaper, Schaeuble also said it is up to Greece whether the country can stay in the euro zone as part of its efforts to restore its competitiveness. "The promises from Greece aren't enough for us anymore," Schaeuble said. "With a new austerity programme they are going to first have to implement parts of the old programme and save." Schaeuble said there was quite a difference between Greece and other euro zone strugglers. "The Greeks are a special case...The Portuguese government is doing a decent job," he said, adding that Portugal's problem is that the country needs more economic growth. Greece a "Special Case"? Give it time and Portugal and Spain will follow. Greece is in an economic depression (as are Spain and Portugal), and things are about to get much worse. Greece's technocrat Prime Minister Lucas Papademos does not have the support of the people. His support has dwindled to nothing. Moreover, the political parties that passed this bill will not be in power after the next elections (assuming of course there is a next election). Recall that Papademos is a puppet not voted into office by Greek citizens, but rather an unelected politician forced onto Greeks because he would do what the EMU and IMF want. Greece is burning in every sense of the word. It is both politically and economically bankrupt yet Europe attempts to extract blood from a dried up turnip. 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.

China Instructs Banks to Roll Over $1.7 Trillion in Debt to Avoid Mass Default Posted: 12 Feb 2012 09:59 AM PST A few years ago local Chinese municipalities had little debt. Today they have a $1.7 trillion mountain of it, nearly all of it financing economically non-viable projects in the name of "stimulus". The proposed "solution" of course is to roll the debt over, while adding still more to the debt mountain, hoping things will get better. Please consider China tells banks to roll over loans China's stimulus response to the global financial crisis saddled its provinces and cities with Rmb10.7tn ($1.7tn) in debts – about a quarter of the country's GDP – and more than half those loans are scheduled to come due over the next three years. Since the principal on many of the loans is not repayable, banks have started extending maturities for local governments to avoid a wave of defaults, bankers and analysts familiar with the matter told the Financial Times. One person briefed on the plan said in some cases the maturities would be extended by as much as four years. Extending Maturities to Avoid Default A few more details emerge in China extends loans to avoid mass default A mountain of debt is coming due and the principal is unpayable, so governments have agreed to extend maturities. This could be a description of a bail-out package for Greece. Instead, it is what China is doing to prevent scores of provinces and cities from defaulting on bank loans. The flaws in China's fiscal system were savagely exposed during the global financial crisis when Beijing introduced a stimulus package that was largely implemented by local governments. Lacking sufficient funding and prohibited from even borrowing money because of past excesses, provinces and cities created thousands of financing vehicles to get around the rules and raise capital in the quickest way possible. They tapped state-owned banks which, encouraged by Beijing, were happy to oblige with enormous loans. From relatively little debt at the start of 2008, local governments finished 2010 owing Rmb10.7tn ($1.7tn). The national auditor has reported that more than a third of that debt will have matured by the end of this year. "We are not talking about a cash flow problem. We are talking about a big cash shortfall problem," said Zhu Ning, deputy director of the Shanghai Advanced Institute of Finance. Critics have pointed to dangers in the loan rollover plan. Repayment delays will hinder banks' lending abilities. Some bad loans will simply be prolonged instead of recognized. Problems will remain concealed. Standard & Poor's has warned the extension would be a "backward step" for the Chinese banking sector that could "shake investors' confidence". Eventually China Will Print to Cover the Losses Most of these loans will never be paid back. Eventually China will just print money to make the banks solvent. For more on the folly of loans to State Owned Enterprises (SOEs) from a Michael Pettis email, please see China Financial Markets: When Will China Emerge From the Global Crisis? Pettis is working on getting his site back up at another service provider. The outage may be provider related rather than state related as I first suspected. 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.

Obama Seeks to Prove He is More Like Romney; Obama vs. Romney - What's the Difference? Posted: 12 Feb 2012 12:54 AM PST Inquiring minds are reading Obama budget seeks to boost trade enforcement, ratchet pressure on China President Barack Obama's new budget proposal will ask Congress to devote millions of dollars for a new trade enforcement center and more U.S. inspectors in China as the administration takes aim at unfair trade practices abroad, a senior administration official said Saturday. It's all part of Obama's focus on boosting U.S. manufacturing and exports as he tries to win over voters and improve the economy in this election year. Romney talks tough on China CNN reports Romney talks tough on China Calling the country a "cheater," Romney promised to impose a variety of trade restrictions if China doesn't comply with intellectual property laws and allow its currency to float freely in foreign exchange markets. "I'll clamp down on the cheaters, and China is the worst example of that," he said as he presented his top ideas for job creation in Las Vegas. "If they cheat, there is a price to pay," he added. "I don't want a trade war, but I don't want a trade surrender either." Obama vs. Romney - What's the Difference? If you like Obamacare, then vote for Romney or vote for Obama. It really does not matter. If you support war-mongering then vote for Obama or vote for Romney, it really does not matter. On Mideast policies,  it does not matter. On trade, it does not matter. Other than a small number of social issues like abortion, it simply does not matter. If you want a change, then vote for Ron Paul. Otherwise, let birth control and abortion be your guide because otherwise (as I have said repeatedly) President Obama and Mitt Romney are Nearly One and the Same! 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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