Central Perk: 23 sept. 2012

duminică, 23 septembrie 2012

Mish's Global Economic Trend Analysis

France Set to Implode; Troika Soap Opera; Grappling with Neo-Nazis

Posted: 23 Sep 2012 07:41 PM PDT

The soap opera in Greece continues with Germany and France tugging on opposite sides of the rope, and support for Golden Dawn, an alleged neo-Nazi party rising in the wake.

French president François Hollande is on the sidelines, not wanting another battle with German chancellor Angela Merkel who has her own set of problems.

However, the French Prime Minister says Give Greece More Time.

Jean-Marc Ayrault, the prime minister, taking a clear swipe at those in Germany insisting on a hard line against Athens, warned that a Greek exit from the eurozone would be "unmanageable" and could be "the beginning of the end of the European project".

Speaking in an interview with the French news website Mediapart, Mr Ayrault said: "We can already offer [Greece] more time . . . on the condition that Greece is sincere in its commitment to reform, especially tax reform."

France's chief fear is that a compounding of the eurozone crisis would turn the spotlight of the financial markets on itself and the country's public debt, which is set to exceed 90 per cent of GDP.

France Set to Implode

France wants to give Greece more time because it needs more time. Of course France will not admit that, instead insisting it will meet its deficit targets, primarily by hiking taxes.

Forget about it. France has no chance of meeting its deficit reduction targets because ridiculous tax hikes in the middle of a recession, while simultaneously making it harder for businesses to fire workers are exactly the wrong things to do.

Instead of meeting its targets, I propose Hollande's policies have made it highly likely France is poised to implode. It should not take more than a few months, if that.

Troika Soap Opera

Please consider Paris focuses on Athens' Achilles heel

Greek media have called the negotiations – which have seen late-night sessions at the finance ministry and departures at short notice of senior EU and IMF officials – the "troika soap opera".

"The troika had to put up with two previous governments' attempts to delay, dilute and mislead on the reform programme, so the pressure is quite understandable," said a former government economic adviser.

Yannis Stournaras, the finance minister, had what Greek officials called a "shortlived confrontation" with the troika last week, refusing to make further cuts in pensions and salaries. After that, the heads of mission left, giving Athens an extra week to wrap up the alternative measures.

Meanwhile, Antonis Samaras, the prime minister, has been unofficially seeking a two-year extension in talks with European leaders, hoping to promote a modest economic recovery by 2016. The country's recession is deeper than forecast – with the economy projected to shrink by almost 7 per cent this year and another 1.5 per cent in 2013 – and he argues that is causing unprecedented hardship for ordinary Greeks.

Opposition to the latest round of cuts, which will knock another 20-30 per cent off pensions and public sector salaries, is already mounting, with public sector unions due to hold a 24-hour strike on Wednesday.

One opinion poll published at the weekend showed the leftwing Syriza coalition, which calls for abandoning the reform programme, narrowly ahead of Mr Samaras's conservative New Democracy party for the first time since the June general election. Several polls put the far-right Golden Dawn party, which is steadily making gains among newly impoverished voters, in third place.

Grappling with Neo-Nazis

While the bickering between France, Germany, and the Troika continues, Greece grapples with shadow of Golden Dawn

Golden Dawn, which won 7 per cent of the vote in June's election and entered parliament for the first time, is on a roll, pulling established parties to the right – including Corinth's socialists.

Polls suggest the party has gained ground since the election as anxiety deepens over a possible Greek expulsion from the euro. A poll this week showed a near doubling in the number of people expressing "positive opinions" about Golden Dawn, up from 12 per cent in May to 22 per cent now.

In Corinth, where immigrants sacked from jobs in local vineyards and wineries because of the recession are blamed for a rise in crime against property, the party polled almost 10 per cent – one of its highest scores across the country.

"They went round the villages saying that if they got into parliament they'd call for every immigrant to be deported," says Panos Damalos, an activist with Anti-Racist Initiative, an immigrant support group.

"There is no such person as a legal immigrant," says Mr Kassidiaris, a former Greek army commando whose approval rating soared after he slapped a female Communist parliamentary candidate on a breakfast television talk-show.

Yet Golden Dawn has also tried to build an image of social responsibility, through regular food distributions to needy Greeks registered with the party and by providing a service to accompany pensioners to the bank in neighbourhoods where muggings – which they blame on immigrants – are frequent.

Maria Tsalpatura, a 75-year-old retired schoolteacher, says she calls Golden Dawn every month before she goes to collect her pension. "They come on time and they're very polite, I think they offer a real service," she says.

This cannot possibly end well, whether or not Greece gets a time extension.

Policies have driven Greece straight into the hands of extreme radicals on the right and left, both of which have had enough of the Troika and Germany.

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

Fair Trade is Unfair; In Praise of Cheap Labor; Are Bad Jobs at Bad Wages Better than No Jobs at All? Are Paul Krugman and Mitt Romney On the Same Page?

Posted: 23 Sep 2012 10:15 AM PDT

Are bad jobs at bad wages better than no jobs at all? Should the US demand third world economies pay "living wages"? If so, and if countries don't oblige, should the US impose tariffs so the US does not lose jobs to such countries.

Moral Outrage Over Free Trade

This is what I think....

Moral outrage is common among the opponents of globalization--of the transfer of technology and capital from high-wage to low-wage countries and the resulting growth of labor-intensive Third World exports. These critics take it as a given that anyone with a good word for this process is naive or corrupt and, in either case, a de facto agent of global capital in its oppression of workers here and abroad.

But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.

Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to endure terrible working conditions. I say "inevitably" because their employers are not in business for their (or their workers') health; they pay as little as possible, and that minimum is determined by the other opportunities available to workers. And these are still extremely poor countries, where living on a garbage heap is attractive compared with the alternatives.

And yet, wherever the new export industries have grown, there has been measurable improvement in the lives of ordinary people. Partly this is because a growing industry must offer a somewhat higher wage than workers could get elsewhere in order to get them to move. More importantly, however, the growth of manufacturing--and of the penumbra of other jobs that the new export sector creates--has a ripple effect throughout the economy. The pressure on the land becomes less intense, so rural wages rise; the pool of unemployed urban dwellers always anxious for work shrinks, so factories start to compete with each other for workers, and urban wages also begin to rise. Where the process has gone on long enough--say, in South Korea or Taiwan--average wages start to approach what an American teen-ager can earn at McDonald's. And eventually people are no longer eager to live on garbage dumps.

The benefits of export-led economic growth to the mass of people in the newly industrializing economies are not a matter of conjecture. A country like Indonesia is still so poor that progress can be measured in terms of how much the average person gets to eat; since 1970, per capita intake has risen from less than 2,100 to more than 2,800 calories a day. A shocking one-third of young children are still malnourished--but in 1975, the fraction was more than half. Similar improvements can be seen throughout the Pacific Rim, and even in places like Bangladesh.

Why, then, the outrage of my correspondents? Why does the image of an Indonesian sewing sneakers for 60 cents an hour evoke so much more feeling than the image of another Indonesian earning the equivalent of 30 cents an hour trying to feed his family on a tiny plot of land--or of a Filipino scavenging on a garbage heap?

The main answer, I think, is a sort of fastidiousness. Unlike the starving subsistence farmer, the women and children in the sneaker factory are working at slave wages for our benefit--and this makes us feel unclean. And so there are self-righteous demands for international labor standards: We should not, the opponents of globalization insist, be willing to buy those sneakers and shirts unless the people who make them receive decent wages and work under decent conditions.

This sounds only fair--but is it? Let's think through the consequences.

First of all, even if we could assure the workers in Third World export industries of higher wages and better working conditions, this would do nothing for the peasants, day laborers, scavengers, and so on who make up the bulk of these countries' populations. At best, forcing developing countries to adhere to our labor standards would create a privileged labor aristocracy, leaving the poor majority no better off.

And it might not even do that. The advantages of established First World industries are still formidable. The only reason developing countries have been able to compete with those industries is their ability to offer employers cheap labor. Deny them that ability, and you might well deny them the prospect of continuing industrial growth, even reverse the growth that has been achieved. And since export-oriented growth, for all its injustice, has been a huge boon for the workers in those nations, anything that curtails that growth is very much against their interests. A policy of good jobs in principle, but no jobs in practice, might assuage our consciences, but it is no favor to its alleged beneficiaries.

You may say that the wretched of the earth should not be forced to serve as hewers of wood, drawers of water, and sewers of sneakers for the affluent. But what is the alternative? Should they be helped with foreign aid?

And as long as you have no realistic alternative to industrialization based on low wages, to oppose it means that you are willing to deny desperately poor people the best chance they have of progress for the sake of what amounts to an aesthetic standard--that is, the fact that you don't like the idea of workers being paid a pittance to supply rich Westerners with fashion items.

In short, my correspondents are not entitled to their self-righteousness. They have not thought the matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty.

Purposeful Plagiarism to Make a Point

By the way, I need to point out that everything written above following "This is what I think...." was not written by me (but it does reflect my exact beliefs).

Believe it or not, Paul Krugman wrote that, and here is the link: In Praise of Cheap Labor.

Mind to Mush

Paul Krugman won his Nobel Prize for trade, and in terms of trade, I agree with everything above he said. In fact, there is nothing at all in the article I would disagree with.

At some point since he wrote that, his mind turned to complete mush. Now he is in agreement with Mitt Romney about the need for the US to raise tariffs on China.

All [Freely Entered] Trade is Good!

The fact of the matter is all [freely entered] trade is good. It has to be. For there to be trade, both buyer and seller get something they want at a price they agree on.

However, assume for a second that is not true.

Assume China or whoever is willingly selling us good "too cheap". Who benefits from that? Why the American consumer of course.

Would "Fair Trade" Bring Back Jobs?

Unfortunately, Krugman and Mitt Romney alike would rather the cost of underwear, auto parts, toys, shoes, etc. cost double what they cost, in the foolish belief it would bring back US jobs.

Well it won't. Manufacturing would simply move jobs from China to Vietnam or other places unless the US is willing to start a trade war with the world.

Assuming Romney-sponsored tariffs worked (they wouldn't) and even assuming the jobs returned (that wouldn't happen either), would the tradeoff be worth it?

The answer is of course not. A protected few union workers might benefit, but the cost of everything would skyrocket. Those on fixed income and those in non-protected jobs would be hammered. Unemployment would soar.

And that is looking on the bright side. The jobs would not come home, even if the manufacturing itself did. The first reason is robots, and the second reason is a too cheap cost of money.

Blame the Fed

Flip-flop the order if you like. In a yield starved world with Bernanke pushing down interest rates, the cost of money is ridiculously cheap (assuming of course businesses can find a legitimate use for it).

And what better use is there for money at 1% than for manufacturers to buy robots to replace humans, especially when Krugman and Romney are united in driving up the cost of labor?

I have written about robots before. Here are parts one and two of a recent set of posts I did.

Now consider another article that just came my way: This Robot Could Transform Manufacturing.

Please read that article at your leisure. The point is tariffs are not going to bring jobs back to the US, at least jobs by living, breathing human beings.

Rather all tariffs will do is slow global trade and raise costs on everyone.

Krugman and Romney in Same Boat

No one will benefit from a trade war, except perhaps a miniscule percentage of union workers. Everyone else will lose big time.

This is exactly why Romney should be a champion of free trade. Instead he agrees with the new "conscious of a liberal" Paul Krugman who somehow forgot everything he ever knew about the benefits of free trade.

Fair Trade is Unfair

The unions howl they want "fair trade". Fair to whom? The answer is fair to their self-interests, damn the enormous costs to everyone else.

Romney should see that, but he doesn't. Alternatively he does, and is pandering for votes. So which is it?

Here is a key question of the day: Does Mitt Romney Really "Know Better" Than the Silly Things He Says?

You tell me. I don't know if Romney believes the foolish things he says or not.

What I do know is Romney and Krugman are now in the same boat in regards to tariffs on China and both of them are completely wrong.

Addendum:

I modified the line "All Trade is Good!" to "All Freely Entered Trade is Good!". It should have been clear from the context, but when I said "All Trade is Good!" I was talking about "freely entered" trade. If someone forces you to sell your cow for $10 and you do not want to, that is not "free trade".

Wage and price controls are not "free trade" and either. Sure enough, someone brought up slave trade in an email.

Speaking of which, forced collective bargaining, forced union membership, and union rules that apply to the general population are all forms of slavery and should be abolished. For details, please see Paul Krugman, Stephen Colbert, Bill Maher, others, Ignore Extortion, Bribery, Coercion, and Slavery; No One Should Own You!

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

Seth's Blog : Truth and consequences

Truth and consequences

There's a huge chasm in most markets: People who want to be isolated from the consequences of their actions, and those that are focused (sometimes too much) on those consequences.

For years, Paula Dean sold cooking shows to an audience that refused to care about what would happen if they regularly ate what she cooked.

Rep. Anthony Weiner wasn't open to buying warnings about what would happen to his photos and tweets.

At the same time, there's the audience of new moms that are overeager to baby-proof their home (just in case), the conscientious recycler who doesn't want to know about the actual costs of picking up that bin out front, and the passionate teacher who sacrifices every day so his students can thrive a decade from now.

If you are selling tomorrow, be very careful not to pitch people who are only interested in buying things that are about today. It's virtually impossible to sell financial planning or safety or the long-term impacts of the environment to a consumer or a voter who is relentlessly focused on what might be fun right now.

Before a marketer or organization can sell something that works in the future, she must sell the market on the very notion that the future matters. The cultural schism is deep, and it's not clear that simple marketing techniques are going to do much to change it.