Central Perk: 09/01/2012

duminică, 30 septembrie 2012

Mish's Global Economic Trend Analysis

What If I Am Wrong About Europe?
At Some Point the Hat Runs out of Rabbits; First Catalonia, Now Basque Separatists Call for Independent Country; El Pais Survey Shows 43% Catalans For Independence, 41% Opposed
Austerity Programs Hit France; Marchers Demand Vote on Treaty; Hollande Reneges on Campaign Promise

Posted: 30 Sep 2012 08:59 PM PDT

I have long stated the eurozone will breakup. Historically speaking, no currency union has ever survived in the absence of a political union.

Moreover, in It's Just Impossible I noted

The Bundesbank said there should be no banking union until there is a fiscal union.
Angela Merkel said that there should be no fiscal union until there is political union.
François Hollande said that there should be no political union until there is a banking union.
The German supreme court will not allow a political union nor a fiscal union, nor a banking union without a German referendum.

Mathematically Speaking

Mathematically speaking, I also fail to see how the eurozone can stay intact.

Specifically, please consider point number nine of Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions

9. Disruptive European Politics

European politics will become much more difficult and disruptive. The historical precedents are clear. During a debt crisis the political system becomes fragmented and contentious. If the major parties don't become radicalized, smaller radical parties will take away their votes.

Remember that the process of adjustment is a political one. We all know someone has to pay for the massive adjustment countries like Spain must make. The only interesting question is about who will be forced to take the brunt of the payment – workers in the form of unemployment, the middle classes in the form of confiscated savings, small businesses in the form of taxes, large businesses in the form of taxes and nationalization, foreigners, or creditors.

Deciding who pays is a political process, and because the stakes are so high it will be a very bitter process. This means, among other things, that politics will degenerate quickly, and of course if Europe doesn't arrive at fiscal union in the next year or two, it probably never will. This conclusion is also the reason for my next prediction.

That prediction was made by Michael Pettis, and I am in complete agreement.

But what if I am wrong?

Can Politics Triumph Over Math and History?

What if the eurozone in spite of all obstacles stays intact? Daniel Hannan is a writer and journalist, and Conservative MEP for South East England since 1999 offers an interesting viewpoint for The Telegraph in Spain teeters on the brink

All of a sudden, the talk is of the breakdown, not just of the single currency, but of the parliamentary system on which it rests. Commentators across Europe fret that Spain, which emerged from dictatorship less than 40 years ago, might give up on multi-party politics.

Every round of economic figures is worse than the last. The deficit is massively larger than forecast. A bailout of unprecedented size is becoming inevitable, even as the prime minister gives his countrymen a 'one hundred per cent assurance' that he won't apply for one. (He said much the same thing a few days before applying for the last one.)

Hundreds of thousands of people are protesting, some violently. ....

The real tragedy of the euro is not that it will come crashing down upon the financial system, as Smaug upon Esgaroth, splintering it to sparks and gledes. The tragedy, rather, is that the monetary union will limp on, condemning hundreds of millions to gradual immiseration.

I am still trying, as gently as I can, to suggest that there is an alternative to the euro-imposed bailout racket. I did so again in our most recent parliamentary session, as you can hear in the clip above.

The trouble is that, while Spaniards recognise the folly of imposing cuts while at the same time bailing out banks, they shy away from the logical conclusion: that leaving the euro is now the least bad option.

The real threat to Spanish democracy is not internal but external; not a pronunciamiento but a Brussels-imposed civilian junta, as happened in Italy. Mario Monti, the EU's proconsul in Rome, indicated yesterday that he 'might seek a second term'. Oddly, I don't remember him seeking the first.

Sad Reality

The sad reality is Spain and Italy may linger on just as Greece did, destroying their countries in the process.

Consider once again what I said on September 26, in Firebombs, Teargas, Riots Near Greek Parliament; 57% Say Greece Should Abandon Pledges Made to Troika

Sentiment Has Turned

Sentiment in Greece has turned, and likely turned for good. 57% of Greeks have had enough of austerity to the point they would rather default.

Turn back the hands of time a bit and think how this might have played out if Greece simply left the euro and defaulted three years ago as it should have. Tourism would likely have increased and if Greece had implemented true structural reforms rather than tax hikes, its economy would be stable or recovering now.

Instead, the country is in ruins, tourism is down, and in an on-again-off-again fashion, absolute chaos breaks out.

Another round of austerity and tax hikes can only make things worse at this point, and the people know it. This will pressure political parties to not go along with Samaras.

If another round of elections were held today, there is no way Samaras would win. Instead, the radical left, and radical right (both of which want to exit the euro), would be fighting over the pieces.

The nannycrats in Brussels and Chancellor Merkel are to blame for this sad state of affairs.

Finally, please note that the big fear of the nannycrats and Merkel is not that Greece leaves the euro per se, but rather Greece leaves the euro and the Greek economy starts to recover.

Well, here's the deal and it is something I said years ago: the sooner Greece abandons the euro, tells the Troika to go to hell, and defaults, the better off it will be

Same Track, Wrong Track

Spain, Greece, Portugal, and Italy are all on the same track and the wrong track. All need work rule reform and lower taxes. Instead, the countries have been short on productivity improvement, short on pension reform, short on work rule reform, and long on tax hikes.

It is no wonder their economies are imploding. It is no wonder protests are getting louder. Yet the political class, beholden to the banks and the IMF have taken the wrong track.

In the end, I highly doubt I will be wrong.

In the meantime, however, Telegraph writer Daniel Hannan appears to be correct in his assessment the "the tragedy is that the monetary union will limp on, condemning hundreds of millions to gradual immiseration."

Mike "Mish" Shedlock

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At Some Point the Hat Runs out of Rabbits; First Catalonia, Now Basque Separatists Call for Independent Country; El Pais Survey Shows 43% Catalans For Independence, 41% Opposed

Posted: 30 Sep 2012 12:27 PM PDT

Calls for the splintering of Spain have picked up steam. Euskal Herria Bildu (EHB, a left-wing, Basque nationalist party) has called for "A Great National Act" in Favor of Independence according to El Pais.

EH Bildu has called "a great national political act" in favor of the independence of the Basque Country for the next October 13 in the BEC Barakaldo (Bizkaia), announced its candidate for lehendakari, Laura Mintegi in an appearance before the media at EA headquarters in Bilbao.

Mintegi explained that the purpose of the meeting is to claim a free Basque state in Europe. The nationalist left has led in recent times to BEC, in a space with a capacity for 15,000 people, some of his most important acts to demonstrate their ability to mobilize. force.

The sovereignist coalition vindicate independence there to say "clearly and directly" to those "who do not want to hear, who kidnap our rights in the name of the Constitution imposed on us" you want "a free state in Europe."

Mintegi has defended "the pressing need to build a framework sovereign" in the Basque country that allows this community to have the tools to address their own economic, social and employment. "Only from the sovereignty we orient our policies towards true social justice," said the candidate.

In his view, "it is truly reckless remain at the expense of a corrupt system like Spanish, you're sacrificing the rights and freedoms of all the people to ensure the interests of a political and economic elite." With the "corrupt system" called on "break ties".

El Pais Survey Shows 43% Catalans For Independence, 41% Opposed

According to El Economists, Catalan Separatists Not Quite at Absolute Majority.

About the option of independence for Catalonia, El País published a survey in which, in case of a referendum, 43% would vote for secession, compared with 41% who would decide against.

The complete data interpretation contrasted with other numbers registered in June, when only 21% of respondents said anti-secession and another 21% abstained. The current difference can be understood as a translation of abstention towards not to Catalan independence, which in June this survey enjoyed the favor of 51%.

Various surveys seem to be fluctuating wildly so I am not sure any of the are accurate at the moment. That said, it is clear anger over austerity measures is picking up steam. Protests in numerous countries is proof enough.

At Some Point the Hat Runs out of Rabbits

I am sticking to my long held belief that "Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected."

Yields have come down since my July 24, appearance on Capital Account: Discussion of Social Media Panic in Italy, Soaring Yields in Spain, and the Upcoming 20th Euro Summit, Bound to be Another Failure so it appears there was another rabbit left at the time.

However, the government of Portugal recently had to back off announced austerity measures following a mass protest, and additional protests elsewhere have become more frequent and more violent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Austerity Programs Hit France; Marchers Demand Vote on Treaty; Hollande Reneges on Campaign Promise

Posted: 30 Sep 2012 10:16 AM PDT

Following protests in Portugal, Spain, and Greece, a wave of Leftists march in Paris against austerity.

Thousands of leftists marched through Paris on Sunday demanding a referendum on the EU's new fiscal discipline treaty in the latest of a series of anti-austerity protests in countries hit by the eurozone crisis.

The demonstration, the biggest political rally in France since May elections brought Socialist president François Hollande to power, followed protests on the streets of Madrid and Lisbon on Saturday.

The communist-backed Left Front and 60 other organisations backing the Paris march said tens of thousands of supporters turned out for the protest, timed to coincide with the opening this week of a parliamentary debate on ratification of the fiscal treaty, which Mr Hollande had originally vowed to renegotiate.

Jean-Luc Mélenchon, the Left Front leader, said austerity policies were "dangerous for all the people of Europe". Demanding a vote on the treaty, he added: "Democracy is sicker than we thought."

analysts worry that the recent upsurge in political unrest in Portugal, Spain and Greece – where the neo-Nazi Golden Dawn party has risen to third in national surveys – could be a sign of more trouble ahead as repeated rounds of austerity bite even further into daily lives.

"The cracks are showing in Spain's social and economic fabric," said Nicholas Spiro, a London-based sovereign risk consultant. "The risk is that in seeking to retain as much domestic ownership of the terms attached to any [EU rescue] programme, the government [of prime minister Mariano Rajoy] overdoes it and sparks an even more intense social and political backlash."

In Portugal, tens of thousands of trade unionists turned out in Lisbon's central square for a peaceful protest against terms of the country's €78bn EU-IMF bailout.

Greek unions have also vowed to hold big protests if the government moves forward with a new €13.5bn austerity programme agreed last week by the coalition government.

The recent upheavals in Portugal – where there had been widespread bipartisan support for the bailout since it was launched 16 months ago – has come as a particular shock to eurozone leaders, forcing Lisbon to reverse a rise in social security taxes designed to hit mandated budget targets.

Hollande Reneges on Campaign Promise

Recall that Hollande ran on a platform to rework the Merkozy Treaty.

We now clearly see that was just another campaign lie. However, Hollande has followed through on all of his economically destructive ideas including massive tax hikes, lowering retirement age, and pressuring companies to not lay off workers.

Destructive follow-through of the worst ideas, with no follow-through on the best campaign ideas is typical of presidential elections everywhere.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Damn Cool Pics

A Brief History of Weddings [Infographic]

Posted: 29 Sep 2012 09:28 PM PDT

Over the course of history weddings have evolved quite a lot. The ceremony where two are united as one vary greatly between cultures, nations and religions, but most wedding ceremonies invoke an exchange of vows and gifts between the bride and the groom. Traditionally a couple exchanges wedding bands, but there have been some pretty extravagant gifts given. Moissanite takes a look at some of the most over-the-top gifts of all time and also examines how wedding traditions began and what they signify.

Click on Image to Enlarge.

Via: Moissanite

Google's EMD Algo Update - Early Data

Posted: 29 Sep 2012 05:21 AM PDT

Posted by Dr. Pete

Recently, I wrote about changes we’ve been tracking in how Google treats Exact-Match Domains (EMDs). Yesterday (Friday, 9/28), Matt Cutts tweeted the following message:

Matt Cutts Tweet - September 28

It was initially unclear what “upcoming” meant and whether the change was in progress or would roll out later in the weekend. Matt went on to say that the change “affects 0.6% of English-US queries to a noticeable degree,” but didn’t pin down the timeline. This morning, our new MozCast "Top-View" metrics showed the following:

EMD Influence Graph

We measured a 24-hour drop in EMD influence from 3.58% to 3.21%. This represents a day-over-day change of 10.3%. While the graph only shows the 30-day view, this also marks the lowest measurement of EMD influence on record since we started collecting data in early April.

So, Who Got Hit?

Across our data set of 1000 SERPs, 41 EMDs fell out of the Top 10 (5 new EMDs entered, so the net change was 36 domains). Please note that we can’t prove that a domain lost ranking due to the algorithm change – we can only measure what fell out. Here are 5 examples of domains that lost ranking as of this morning (9/29) – all had previously ranked for at least the past 7 days:

www.bmicalculatormale.com (#4)
www.charterschools.org (#7)
playscrabble.net (#3)
www.purses.org (#3)
www.teethwhitening.com (#4)

The parenthetical value shows the EMDs ranking on 9/28 (the day before the drop). Again, all we know is that these domains fell out of the rankings for their exact-match phrases as of this morning – I’m not making any statements about the quality of the domains as a whole. As you can see, the affected domains cover a range of phrase length and TLDs (including .com’s).

There’s no clear pattern in the size of the drop – some fell out of the top 100 entirely, while others slipped a couple of pages. For example, www.charterschools.org fell from #7 to #23, whereas playscrabble.net dropped from #3 down 18 pages to #183.

What About The #1s?

You may have noticed that none of my example domains were previously ranked in the #1 spot. Across the 41 EMDs that dropped out of the top 10 in our data, none of them ranked #1 the previous day. Three domains held the #2 spot prior to their fall, including www.mariogamesonline.net, which is no longer in the top 100. It’s interesting to note that, of the 41 EMDs affected, 5 of them had “games” in their domain name, but this could just be a fluke (or a sign of an industry with too many low-value sites).

What’s The Pattern?

It’s not my goal to call these sites out – some may have dropped in ranking due to factors that had nothing to do with this algorithm update (and were only coincidentally EMDs). For example, www.charterschools.org appears to be a legitimate site representing a professional organization: the Michigan Association of Public School Academies (MAPSA). At first glance, it appears that their only crime may be choosing a keyword-focused domain over their own brand. The site doesn’t really target the phrase “charter schools” particularly strongly and is tied to one state. It’s not a bad site, but one can argue whether it deserves to rank in the top 10 for a competitive keyword simply because of its domain name.

Other sites in the mix do appear to exhibit more traditional low-quality signals – aggressive keyword usage, low-authority, spammy link-building, etc. – and seem to have been ranking solely by virtue of their EMDs. There’s no one clear signal in play, though – at this point, we have to assume that Google is weighing multiple factors. Again, it is interesting to note that no EMDs previously at #1 were affected, but our data set is still relatively small.

If you have specific questions about the data, please feel free to ask in the comments, and I’ll do my best to follow up. These patterns are surprisingly complex, and I wanted to dig in for a quick first look while the data was still fresh.

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sâmbătă, 29 septembrie 2012

Mish's Global Economic Trend Analysis

JPMorgan, Bank of America Forgive Debts that No Longer Exist; Wonderful News! But For Whom?

Posted: 29 Sep 2012 06:18 PM PDT

In February, five of the nation's largest banks agreed on a $25 billion settlement over widespread, systemic mortgage fraud and related issues.

The $25 Billion Deal, announced with huge fanfare, was supposed to help up to a million struggling homeowners, primarily via debt forgiveness.

Let's flash forward a few months to see how debt forgiveness is working out in practice.

Today, the New York Times notes Banks Forgive Debt That Isn't There.

GREETINGS, unhappy homeowners! Here's some wonderful news: "We are canceling the remaining amount you owe Chase!" says a letter that JPMorgan Chase sent recently to thousands of home loan borrowers. "You are approved for a full principal forgiveness of your Home Equity Account," says another, from Bank of America.

Jackie Esposito, of Guilford, Conn., got a letter like that. But she wasn't elated — because she doesn't owe the money anymore. She and her husband filed for bankruptcy three years ago. The roughly $64,000 they owed Chase has been legally wiped out.

Others have received similar letters about phantom debts. A borrower in Florida received word this month that Chase was erasing $190,065.10 of debt that had already been wiped out. Bank of America told a Virginia resident that a $231,767 home equity loan was being forgiven, even though the debt was discharged last May.

Are the banks' forgiveness letters a way to gain credits for debts these institutions are improperly claiming to have extinguished? The banks say no.

But Chase appears to be claiming to release a lien on Ms. Esposito's property that it does not hold. And under the mortgage settlement, it could receive a credit.

As for Ms. Esposito, she said she found the bogus loan forgiveness letter from Chase especially upsetting because of the years she has spent trying to have the bank modify her first mortgage. She pays 9 percent on her loan and cannot refinance it into a lower-rate mortgage, given her recent bankruptcy.

Chase won't help her modify her loan, Ms. Esposito said, but it is happy to help by forgiving a loan that has already been discharged and releasing a lien that is already gone.

Wonderful News! But For Whom?

If these events are happening on a broad scale, and I suspect they are, that $25 billion settlement will end up costing peanuts.

Bear in mind, I have little sympathy for people who themselves purposely took out loans they knew they could never pay back, nor do I have sympathy for people who were willing partners in bank fraud.

Regardless, I wondered at the time how the banks would take a $25 billion hit without getting crushed. Well, now we know.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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China New Export New Orders Decline At Fastest Pace in 42 Months; China's Precarious Rebalancing Act

Posted: 29 Sep 2012 09:29 AM PDT

HSBC China Manufacturing PMI™ shows Output falls at fastest pace since March.

Key points

New export orders fall at fastest rate in 42 months

Output and input prices continue to fall

Purchasing activity declines amid weak demand and lower production requirements

Data in September signalled a stronger decline in Chinese manufacturing output, as the volume of new orders fell for the eleventh consecutive month. New export orders declined at the sharpest rate in 42 months amid reports of weak international demand, while lower workloads were linked to a fall in backlogs of work.

After adjusting for seasonal factors, the HSBC Purchasing Managers' Index™ (PMI™) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – posted 47.9 in September, up slightly from 47.6 in August, and signalling an eleventh successive month-on-month deterioration in Chinese manufacturing sector operating conditions. However, the latest data signalled the rate of deterioration eased marginally.

The rate of reduction in manufacturing output in China accelerated during September, signalling the strongest contraction since March. A number of respondents that reported a fall in production levels attributed this to lower order volumes as both domestic and international demand weakened. However, the rate of reduction in new export orders remained stronger than the decline in overall new orders. Panellists commented on tough trading conditions in a number of key trading markets.

China's Precarious Rebalancing Act

Discounting the continually over-optimistic comments from Markit economists in general, I would otherwise be puzzled by comments of Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC who said: "Chinese manufacturing growth is likely to be bottoming out. However, the sharper contraction of new export orders and the lingering pressures on job markets mean that Beijing should step up easing to support growth and employment. Fiscal measures should play a more important role in the coming months."

What indication is there that manufacturing growth is bottoming out? In the first place, China manufacturing is in contraction, not growth. Moreover, the European recession is strengthening and a US recession is underway (just not recognized yet in my opinion). Thus it would be logical to assume China's export-driven economy is going to take another hit.

Trade matters with Japan, and the debate over ownership of islands in the East China Sea are also unsettling. For a discussion, please see Japan PMI: Output and New Orders Contract Further

Is Beijing going to step up and support employment and growth? I do not have the answer to that, but China needs to rebalance, and that rebalancing act will be painful. The transition to a consumer-led economy from an export and infrastructure-building economy will be slow and painful, but also very necessary.

For further discussion of the need to rebalance and the problems facing China please see.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Damn Cool Pics

Safety? Never Heard that Word!

Posted: 28 Sep 2012 08:44 PM PDT

This gallery proves that there is probably not a single safety instruction in this world that wasn't violated in some crazy way.

WTF Tablet PC from China

Posted: 28 Sep 2012 08:23 PM PDT

At the end of its event China Mobile handed out free tablet computers. It has 4 USB ports and at the first sight it's just another rip-off of the iPad. But all the event guests who got these tablets were very disappointed. Let's see why.