marți, 27 martie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Mish vs. Jo Weisenthal: Debate on Capital Account Regarding Gold

Posted: 27 Mar 2012 01:08 PM PDT

In response to a Tweet by Capital Account host Lauren Lyster regarding my post Ben Bernanke: Inflationist Jackass, Devoid of Common Sense, and Clueless About Trade, Debt, History, and Gold, Jo Weisenthal at Business Insider proposed a debate.

We had that debate yesterday and here is the video.



Link if video does not play: Mish vs. Weisenthal: Bernanke's Class Lecture on Money Leads to After-School Blog Brawl

In the course of a quick 15 minute debate broken into a series of 30 second sound bites, it is sometimes difficult to get everything said that needed to be said. One point I did not get a chance to mention again, but I did bring up in my Blog rebuttal to Weisenthal, is that central bank planning of money supply and interest rates is in and of itself ridiculous. Repeat bubbles and bailouts prove it.

Soviet Style Planned Economies Do Not Work

It makes as much sense for a group of guys in a room to attempt to set a price and amount of money as it did for inept Soviet-style central planners to run an economy, setting the price and amount of steel production and other goods - precisely none.

Certainly the Greenspan Fed ignored (cheerleaded is a better word), the housing bubble every step of the way. Bernanke defended the housing bubble and failed to see its consequences.

Stability and Flexibility

The most amazing, and galling thing, is Bernanke has the nerve to preach about "price stability" in the wake of that collapse.

Jo wants the flexibility for the Fed to step in and cleanup messes. I don't want the flexibility of fractional reserve lending and fiat currencies because that is what created these messes in the first place.

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.

US Promotes "Market-Determined Exchange Rates" at WTO Forum; Translation: "China Float the Yuan"

Posted: 27 Mar 2012 12:27 PM PDT

In a move that is likely to get general agreement, yet go absolutely nowhere fast, United States Promotes Market-Determined Exchange Rates at World Trade Organization Forum.
Deputy U.S. Trade Representative Michael Punke and Treasury Deputy Assistant Secretary for International Monetary and Financial Policy Mark Sobel today began a two-day series of meetings at the World Trade Organization's (WTO) seminar on the relationship between exchange rates and trade, where they will advocate for market-determined exchange rates as a foundation of an open global trading system.

U.S. participation in the WTO seminar is premised on the importance of trade liberalization and recognition that persistently misaligned exchange rates and competitive devaluations undercut an open trading system.

Ambassador Punke stated: "Real exchange rates that are aligned with fundamentals are a necessary foundation for the global trading system."
The discussion is useless. China will float the Yuan when it is ready and not before.

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.

Australia Roundup: 25% of Small to Medium-Sized Businesses Struggle to Pay Bills; Bank of Queensland Hit by Surge of Real Estate Losses; Labor Party Routed in Elections

Posted: 27 Mar 2012 10:43 AM PDT

One sure way to know voters are fed up with the economy is when politicians are thrown out on their asses en masse. That is exactly what happened down under as Australia PM surprised by Labor rout in state election.
Australian Prime Minister Julia Gillard said on Monday she was surprised at the scale of her ruling Labor party's defeat in state elections, widely seen as a dire warning for her fragile government.

Labor, which has ruled for 20 of the past 22 years in northern Queensland, suffered an unprecedented rout at weekend elections, taking so few seats that its official party status in the state is under threat.

When Labor came to power nationally in 2007 it also controlled all the state parliaments, but since then the four major east and west coast states have fallen to the Liberals, complicating passage of its policies and reforms.

After the Queensland vote, Labor is expected to have just seven seats in the state to the conservative Liberal National Party's 78.
The Labor Party is aptly named but US readers need to be aware that the strangely named Liberal National Party has a conservative connotation.

Compounding the irony, the World Socialist Web bemoans the alleged "pro-business" program of the Labor Party. You cannot make this stuff up.

Small Firms Struggle With Bills

Australian businesses are going to crash and burn as a result of Labor initiatives and a property bubble headed for a "big flush".

The Australian reports Small Firms Struggle With Bills.
MORE than a quarter of small to medium-sized firms face going under because they are unable to pay their tax bills and outgoings, the latest survey by Bibby Financial Services says.

The study found that 26 per cent of firms struggled to pay their bills to suppliers, while 24 per cent faced an uphill task meeting their tax payments.

Only 30 per cent of firms said they intended to invest in their business, down from 33 per cent the previous year.

About 40 per cent of firms said managing cashflow, staffing issues, dealing with red tape and tax administration were among the biggest headaches they faced.

The cashflow problems were heightened with almost half of the firms experiencing delays in payment and 27 per cent had to deal with bad debts in the past year.

"Not surprisingly, many remain pessimistic about their future payment terms. Over a third (36 per cent) expect the length of time they must wait to be paid will increase further in the coming quarter," BFS managing director Greg Charlwood said.
Bank of Queensland Halted, Hit By Surge in Real Estate Losses

Please consider Bank of Queensland in H1 loss on higher impairments, to raise $450m
THE Bank of Queensland (BoQ) has been hit by a surge in residential and commercial property loans striking trouble, prompting the board to order a $450 million capital raising to shore up the regional bank's balance sheet.

The stock was put in a trading halt today as BoQ's chief executive Stuart Grimshaw revealed that the bank would record a $91 million after-tax loss for the first half of 2012. The statutory loss follows a $222m normalised underlying profit for the period.
The Party is Over

Turn out the lights, the party is over. Australia is headed for one hell of a hangover in the wake of residential and commercial real estate busts. Retailers will be especially hard hit as consumers throw in the towel on spending and store owners struggle to keep up with absurd labor costs and excessive lease payments or property taxes.

Bloodbath On the Way

No one should be surprised by the election rout or the problems of store owners. On March 4th I stated Australia Services Index Plunges to Significant Contraction; Bleakest of Views From Retail Shops; Retail and Housing Bloodbath Coming Up
Retail prices in Australia are absurd. A 5% reduction in prices is hardly a bargain. As for the notion mining will carry the economy, forget about it. Commodity prices are going to plunge, and besides, commodities are not a big driver of jobs anyway.

There is no "floor" under retail. The bottom is going to fall out, and unemployment is going to soar. In turn, rising unemployment will clobber Australia's already deep-in-trouble housing sector.

As for small shops, they are completely doomed. Store owners with little leeway on wages will not get the income they need to pay taxes, interest, utilities, and rent.

Expect an across the board retail and housing bloodbath because one is 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.

Obama vs. Ryan: Budget Showdown - Deficit and Total Debt Projections Through 2021 - Interactive map; Path to Prosperity or Path to Ruin?

Posted: 27 Mar 2012 01:24 AM PDT

Inquiring minds are asking How does Paul Ryan's budget plan stack up against president Obama's budget plan, item-by-item? With thanks to Ross Perez and Lori Williams at Tableau Software, let's take a look.



The idea for this post came from Lori Williams. I asked for the deficit and debt comparison tables at the bottom. Numbers are rounded to the nearest $100 billion.

Data is from the CBO Analysis of the President's 2013 Budget and Paul Ryan's Path to Prosperity.

In Path to Prosperity I found this interesting chart and commentary.



First, Figure 2 makes it very clear that, absent action, Social Security, Medicare and Medicaid will soon grow to consume every dollar of revenue that the government raises in taxes. At that point, policymakers would be left with no good options.

I happen to agree with that analysis, so what does Ryan propose to do about it? The answer is nothing.

Obama vs. Ryan Medicare Proposal



Note that Medicare expenses soar under both Obama's plan and Ryan's plan. Is this the best Ryan can do?

Obama vs. Ryan Deficit and Debt



Notice how both Ryan and president Obama make progress for three years, then nothing for the next seven. Ryan does a better job, but after 10 years of Ryan's proposal, national debt will rise from 11.5 Trillion to $16.1 trillion and that is if Ryan's revenue assumptions come in.

Here's a hint: They won't. Revenue assumptions for both Obama and Ryan will prove to be way too optimistic.

A point of note: Ryan and Obama use a different starting point for national debt, which coupled with arithmetic rounding, explains the slight discrepancy in the first column of numbers.

Path to Prosperity or Path to Ruin?

It's easy to make a comparison to Obama's budget and do better. Indeed it would be hard to do worse, but that does not make Ryan's budget any good.

Ryan does nothing about Medicare and makes the horrendously over-bloated defense budget even worse.

I happen to like some of Ryan's ideas, and hate others, but the overall budget proposal is not fiscally sound.

I would like to do similar analysis of Romney's plan. Unfortunately Romney does not have a plan, only vague promises of miracles, more far-fetched than what Ryan has proposed.

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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