Mish's Global Economic Trend Analysis |
- Spain Predicts 4.3% Increase in Tax Revenues, Actual Results are 3.5% Drop; Proposed "Solution" is More Tax Hikes
- ECB Printing Press Door Is Open
- Part II - Robots to Rule the World? Taking All Jobs? Replace Women?
| Posted: 21 Aug 2012 04:40 PM PDT Spain has been devastated by round after round of tax hikes. Another one is on the way. Via Google-translate, please consider this non-modified translation of government shuffles new tax increases to reduce the deficit Never two without three. The brutal tax increases approved by the Government of Mariano Rajoy in late 2011, increasing the income tax and the tax on savings , among other figures, and the recent increase launched last July, with the increase in VAT , Taxes -special rate you could add soon a new tax hike to reach the deficit target of 6.3% of GDP set for this exercise. This, with an eye on a country's total bailout, whose application could occur next September.Spain's economy minister says "there is no room for further cuts in spending", a position I believe is preposterous. However, my position does not matter. What does matter is Spain is in an economic downward spiral and tax hikes will make matters worse. Sadly that is the primary option on the table. 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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| ECB Printing Press Door Is Open Posted: 21 Aug 2012 09:39 AM PDT Every day I get links from Spain, Italy, Germany, and Australia. The first three frequently cause problems. Translation from German is particularly difficult. For example, a Google-translated headline on Welt Online reads ECB chief demonstrates German banker. A cyberspace friend, "EM" writes Google has a tough time with much in this one - title boils down roughly to "Draghi holds Bundesbank President Weidmann Up To Ridicule". Clearly that is an entirely different meaning. Also from the same article, a Google-translated paragraph reads "Thus, the investor inclined saw with great astonishment, as at the last ECB press conference Jens Weidmann by Mario Draghi and the Portuguese Vitor Constancio, the vice president of the ECB, namely the ridiculousness was abandoned. An absolute rarity in the history of the ECB." Here is a better translation from "EM". "Thus, the willing investor saw with great astonishment at the last ECB press conference Jens Weidmann was held up to ridicule by Mario Draghi and the Portuguese Vitor Constancio, the vice president of the ECB. An absolute rarity in the history of the ECB." The point of the article was the increasing isolation of Weidmann, up to the point of open ridicule by the president and vice-president of the ECB. With the help of Bran from Spain, Andrea from Italy, and "EM" from Germany I can frequently provide much better translations of foreign articles than I could otherwise. Of course, articles from Tony and others from Australia and Canada are appreciated but require no translation. Official Denial The key point of the Welt Online story is the increasing isolation of Weidmann, including an official denial by the Bundesbank. Consider this quote from yesterday as reported by Bloomberg. ... "Nobody should try to create the impression that the Bundesbank or its president are isolated," German ECB Executive Board member Joerg Asmussen told the Frankfurter Rundschau in today's edition. Mish Translation: "The Bundesbank and its president Jens Weidmann are without a doubt isolated and essentially ignored. The printing press door is open and the presses ready for operation." However, there are a few open questions as follows. Open Questions
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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| Part II - Robots to Rule the World? Taking All Jobs? Replace Women? Posted: 21 Aug 2012 12:55 AM PDT In part I of Robots to Rule the World? Taking All Jobs? Replace Women? I took a deep look at numerous robot and computer technologies that are displacing workers at a rapid pace. Will Robots to Rule the World? Right now it appears that way. Manufacturing may be returning to the US, but automation has eliminated the human workers. And it's not just manufacturing. For example, consider, JCPenney to Eliminate All Checkout Clerks, Instead Using RFID Chips and Self-Checkout. If that idea catches on for major retail stores, tens-of-thousands of jobs will vanish. Will anything replace those jobs? Two Viewpoints What follows is a pair of widely-differing viewpoints from an email exchange with a couple of friends regarding technology and robots. One friend talks about a collapse of society, the other sees unimaginable numbers of jobs in industries we cannot even conceive of now. Collapse of Society One friend writes ... When the vast bulk of production and services can be produced and delivered by computers, robotics, smart systems, and ubiquitous computing devices with only a small fraction of the human labor force we have today, we have no choice but to devise a system of income creation and distribution radically different than we have today or face unprecedented scale of labor underutilization, loss of purchasing power, collapse of the economy, and the risk of systemic societal collapse.Unimaginable Numbers of Jobs in Unimaginable Industries In response a second friend commented ... 10 and 20 years from now, there will be jobs we cannot even conceive of now. Just as today there are jobs and industries no-one could conceive of 20 years ago. Only 70 or 80 years ago, about 70% of the population worked in agriculture. Today not even 2% of the population works in agriculture and it produces an output that is an order of magnitude greater. This is the very definition of economic progress - to free up people from the drudgery of manual labor, so they have the time to do things that add far more value to our world.Case for Optimism I completely understand both viewpoints but side with the second with a caveat about government and Fed interference in the free market. I too am biased by personal experience. I made a living at computers for 20 years, then remade myself out of necessity. I could not have done it without the internet. As a side note, if anyone told me at high school graduation that I would be writing for a living and have an international audience I would have responded they were out of their mind. Looking back a couple of decades, the internet, and PC revolution created millions of jobs. Currently, technology is at a saturation point of sorts where further advances generally cost jobs. Yet, I believe that some new technology will eventually come along that will again create enormous numbers of jobs. I strongly suspect it will be energy related. In the meantime, however, until something does come along, we are in a creative destruction phase in which technological advancement destroys more jobs than it creates. Unfortunately this current phase can last quite some time, perhaps even a decade or more. Those looking for jobs now do not have a decade, and the wait is extremely painful. Case for Pessimism Technology cannot be stopped, and advances will lead to a new source of jobs eventually, but governments, fractional reserve lending, and Keynesian madness are making a mess of things now. The irony is the cheap money the Fed supplies (allegedly to create jobs), instead creates huge incentives for companies to shed workers while brutally punishing savers on fixed incomes. Robots are not inherently cheap. However cheap financing can make them seem so, even to the point of encouraging outright malinvestment to shed workers. Conclusion The case for pessimism is not that robots will rule the world, taking all the good jobs that humans need, but rather all the cries for the government and the Fed to "do something" leads to trade wars and other inept policy decisions setting back the global economy for a prolonged period. 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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