Central Perk: 23 aug. 2012

joi, 23 august 2012

Mish's Global Economic Trend Analysis

Trends in Interest Rates on National Debt Suggest Currency Crisis is Coming

Posted: 23 Aug 2012 10:40 AM PDT

Here are a couple of charts from Tim Wallace regarding interest on the national debt. The first chart shows the interest rate is falling as debt skyrockets.

Interest Rates vs. National Debt

click on any chart for sharper image

Key Questions

How long can the trend last?
How low will the rate go?

I do not know the answers to those questions, nor does anyone else. However, a rise in interest rates would cause a shocking increase in interest on the national debt.

Interest on National Debt at Current Rate vs. Historical Average

Should interest rates rise to the long-term average, interest on the national debt would more than double from the 2011 figure of $454 billion dollars.

Here is a chart from the National Debt Clock site.

The site notes "Maturity of U.S. debt ranges from less than a year to over 20 years, with the average maturity about 3 years. More than half of the debt, however, is short term, maturing in less than a year."

That is an interesting assertion short-term debt is at .09%, 10-year notes yield 1.67%, and the 30-year bond yields a mere 2.79%.

However, interest is on outstanding securities. A bond with a 6% yield maintains that yield until maturity. The average yield in Wallace's charts paid comes from Treasury Direct.

Currency Crisis Coming

If you get the idea a crisis of some sort is coming, fueled by out-of-control deficit spending as well as the Fed's ridiculous "Operation Twist Policy", then you get the right idea.

The Fed ought to be selling long-term bonds at these rates, locking in financing at attractive rates, not buying those bonds hoping to drive yields still lower.

Of course, that latter statement assumes there should be a Fed or deficit spending in the first place, neither of which I believe.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Eurozone PMI Declines 7th Month; German Private Sector Output Falls at Faster Rate; New Business Declines 13th Month

Posted: 23 Aug 2012 08:52 AM PDT

As easily predicted, at least in this corner, the Markit Flash Eurozone PMI® shows Downturn in Eurozone economy extends into seventh month.

Key Points

Flash Eurozone PMI Composite Output Index(1) at 46.6 (46.5 in July). Seventh straight contraction.

lash Eurozone Services PMI Activity Index(2) at 47.5 (47.9 in July). Two-month low.

Flash Eurozone Manufacturing PMI(3) at 45.3 (44.0 in July). Four-month high.

Flash Eurozone Manufacturing PMI Output Index(4) at 44.6 (43.4 in July). Two-month high.

The Markit Flash Eurozone PMI® Composite Output Index – based on around 85% of usual monthly replies – was broadly unchanged at 46.6 in August, from a final reading of 46.5 in July. The index has now signalled a contraction of the Eurozone private sector for seven successive months.

The decline in total activity was widespread across the currency union. Flash readings for France and Germany pointed to contractions, with the rate of decline easing in France but gathering pace in Germany. There was also a further marked decline in output outside of the big-two economies.

The latest decline in overall output mainly reflected a further marked drop in new orders. Incoming new business fell for the thirteenth consecutive month, although the rate of contraction was less sharp than July (which was the steepest for over three years). Rates of decline slowed at both manufacturers and service providers.
The export performance of manufacturers also remained in the doldrums during August. New export orders (including intra-Eurozone trade) declined for the fourteenth month running, with the rate of reduction the sharpest since last November. This reflected not only the ongoing weaknesses of the Eurozone market, but also a softer rate of global economic expansion.

The ongoing downturn in the Eurozone economy filtered through to the labour market. Staffing levels declined for the eighth consecutive month, with payroll numbers cut at both manufacturers and service providers.

Prevailing Amusement and Misguided Hope

As is typical, comments from economists provide a source of entertainment.

Commenting on the flash PMI data, Rob Dobson, Senior Economist at Markit said: "The August Markit Eurozone Flash PMI reinforces the prevailing view of the economy dropping back into recession during the third quarter of 2012. ...

The real interest inevitably comes from the national breakdown. Hopes that German economic strength will aid recovery in the broader currency union were dealt a blow by its rate of economic contraction accelerating, and further signs that its export engine has slammed into reverse gear. France may be edging closer to stabilisation, while conditions outside of the big-two remain weak overall."

Notice the silliness of the "prevailing view" the eurozone will "drop back into recession".

The eurozone is without a doubt in a full blown recession. As called in this corner, it was foolish to believe Germany would not join the party. Moreover, talk that "France may be edging closer to stabilisation" is also nonsense as Hollande's policies will soon start to take a big toll on the French economy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Damn Cool Pics

Dogs Being Shamed With Signs
Video Game Characters vs. Real Life
The Most Influential People Made in the USA [Infographic]
Humpback Whale Scares Kayakers in Avila Beach
30 Back to School Fails

Dogs Being Shamed With Signs

Posted: 23 Aug 2012 12:14 PM PDT

A new on Tumblr called "Dog Shaming" collects the pictures of bad dogs being shamed by posing with a sign that describes their wrongdoings. Here are some of the best pictures from it.

Video Game Characters vs. Real Life

Posted: 23 Aug 2012 10:30 AM PDT

This is a cool list of famed video game characters and the facial models that inspired them. Many heroes and villains are created from scratch, but with facial mapping tech these days, there's no reason that a real human shouldn't be used.

The Most Influential People Made in the USA [Infographic]

Posted: 23 Aug 2012 08:50 AM PDT

The following infographic from Victor Pest Control takes a look at some of the world's most influential people, all of who were "Made in the USA."Learn who has made significant impacts on history both nationally and globally.

Click on Image to Enlarge.

Humpback Whale Scares Kayakers in Avila Beach

Posted: 22 Aug 2012 08:32 PM PDT

A woman kayaking in the middle of a California bay has captured the moment a massive whale unexpectedly jumped out of the water just metres away from her daughter.

Rhonda Burmeister was out paddling with her daughter at Port San Luis on the weekend when a swarm of seagulls started diving into a nearby patch of water.

Moments later a humpback whale jumped out of the water right beside them.

While she admits the up close encounter could have ended badly, Ms Burmeister said it was one of the best experiences of her life, television station KSBY reports.