Central Perk: 7 oct. 2012

duminică, 7 octombrie 2012

Mish's Global Economic Trend Analysis

Merkel Protected by 6,000 Police; Expect Huge Anti-Austerity Protest; Greece Needs Time and Money (And Something Else)

Posted: 07 Oct 2012 06:21 PM PDT

German chancellor Angela Merkel is visiting Greece this week in an alleged show of solidarity. Reuters notes it will take 6,000 police to protect her.

German Chancellor Angela Merkel will tell Greeks she wants to keep their country in the euro when she visits Athens this week, but she faces a hostile reception from a people worn down by years of austerity and recession.

Many Greeks blame Merkel, who has publicly chastised them for much of the past three years, for the nation's plight. Opponents, some of whom have caricatured her as a bullying Nazi, have promised protests on Tuesday during her first visit to Greece since the euro zone crisis erupted there in 2009.

"She does not come to support Greece, which her policies have brought to the brink. She comes to save the corrupt, disgraced and servile political system," said Alexis Tsipras, who leads the opposition Syriza alliance. "We will give her the welcome she deserves."

About 6,000 policemen will be deployed in the capital for her 6-hour visit, turning the city centre into a no-go zone for protest marches planned by labour unions and opposition parties.

"We don't want her here," said Yannis Georgiou, 72, who has seen his pension cut by one third. "We will take to the streets against austerity and against the government. Maybe Merkel will hear something and see what we're going through."

Solidarity? Really?

Is Merkel's visit really a show of solidarity? Solidarity between whom? Between politicians conspiring to screw Greeks for the benefit of banks?

Merkel Arrival in Athens to Be Met by Anti-Austerity Protesters

Bloomberg reports Merkel Arrival in Athens to Be Met by Anti-Austerity Protesters

"Mr. Samaras said we should welcome Mrs. Merkel as she deserves," said Alexis Tsipras, the head of Syriza party, which finished second in the June elections and has urged workers, the unemployed and young people, to join the rallies. "We completely agree."

Samaras has warned that soaring unemployment and political unrest risk the kind of upheaval that undermined the Weimar Republic in post-World War I Germany and ushered in the Nazis. His coalition is currently negotiating a new round of budget cuts to unlock the next aid payment to keep the country afloat.

GSEE and ADEDY, the umbrella organizations for private and public-sector unions, have called for a three-hour walkout tomorrow in the Athens metropolitan area and a rally in the center of the capital. From the nationalist Golden Dawn Party, which evokes Adolf Hitler's Nazis with their stiff-armed salutes and free-food drives for "pure Greeks," to the Greek Communist Party, Merkel is persona non grata.

Tsipras urged Samaras to show Merkel the real Greece: "The 40 patients for each nurse, and then see if she asks for more state employees to be sacked. I propose she visit a commercial street so she can see the padlocks on stores. And then she can propose more austerity measures."

The Independent Greeks, formed by lawmakers who broke from Samaras's New Democracy party, made the demand Germany pay reparations part of their election campaign in May and June.

Reparations Petition

Now the fourth-largest parliamentary group, Independent Greeks have called for a protest outside the German Embassy in Athens during the chancellor's visit. The German ambassador will be handed a petition outlining the party's opposition to Merkel "transforming Greece into a German protectorate" and calling for war reparations and "the return of an occupation loan," the party said.

The Greek Finance Ministry has set up a committee to calculate for the first time the country's World War II claim against Germany. Estimates for the claims range. A group of 28 lawmakers who petitioned parliament on the issue in February said it was 54 billion euros; the Golden Dawn party estimates 510 billion euros.

Germany paid 115 million deutsche marks to Greek victims of Nazi crimes under a 1960 treaty, in addition to funds paid to victims of forced labor under the Third Reich, German Foreign Ministry spokesman Andreas Peschke told reporters in 2010. Germany's Constitutional Court ruled in March 2006 it didn't have to pay compensation to individuals seeking damages over war crimes committed during World War II.

Very Risky Maneuver

Samaras says Greece needs time and money. He fails to mention that Greece also needs a mountain of reforms and an exit from the eurozone.

Greece has no chance of recovery as long as it is subject to the whims of the Troika.

The trip is a very risky maneuver by Merkel, and it is not about solidarity, at least with the average citizen of Greece.

By now it should be perfectly clear that Merkel does not give a rat's ass about Greece or Greek citizens. Rather, Merkel's sole concern is in regards to preservation of her legacy. If the trip blows up in her face, it is exactly what she deserves.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Lost Bet

Posted: 07 Oct 2012 11:16 AM PDT

On Friday, I lost a bet made in March of 2010 regarding unemployment. I bet that the unemployment rate would not dip below 8% before June 2015.

I crunched numbers many ways and simply decided there is no way the economy could possibly grow enough jobs. It didn't and still won't.

I posted this chart at the time.

Monthly Job Growth 1999-2009

At the height of the housing bubble, the economy only added 212,000 jobs a month. I figured we would not come close to that, yet even if we did, that still would not be enough.

A miscalculation got into my way, otherwise known as a plunge in the participation rate. I knew full well the participation rate would drop on account of boomer demographics. But I never expected the plunge we got.

Were it not for millions dropping out of the labor force, the unemployment rate, even with the September barrage in part-time jobs would still be over 10%.

Had I made a similar bet on employment, rather than unemployment, the bet would still be going on. Interestingly, that bet would not have seemed as good to me at the time because the economy is naturally growing and employment with it.

Total Nonfarm Employment

Employment Just About at June 2005 Level

As you can see, employment has only recovered to a level seen in 2005. That is in spite of the fact the worker population expands every month (at least in theory). Bernanke thinks it takes 100,000-125,000 jobs a month to keep the unemployment rate steady.

I think because of demographics, it probably only takes 75,000 jobs a month.

However, at some point in a recovery, the participation rate starts to rise as discouraged workers return to the work force. Accounting for the return of those discouraged workers to the job force, assume it takes 100,000 jobs a month to hold the unemployment rate steady.

That amounts to 1.2 million per year and 3.6 million in three years (3.9 million since the recession ended).

Month-by-Month Employment Totals (in Thousands)

Month	Employment
2010-01-01	129279
2010-02-01	129244
2010-03-01	129433
2010-04-01	129672
2010-05-01	130188
2010-06-01	130021
2010-07-01	129963
2010-08-01	129912
2010-09-01	129885
2010-10-01	130105
2010-11-01	130226
2010-12-01	130346
2011-01-01	130456
2011-02-01	130676
2011-03-01	130922
2011-04-01	131173
2011-05-01	131227
2011-06-01	131311
2011-07-01	131407
2011-08-01	131492
2011-09-01	131694
2011-10-01	131806
2011-11-01	131963
2011-12-01	132186
2012-01-01	132461
2012-02-01	132720
2012-03-01	132863
2012-04-01	132931
2012-05-01	133018
2012-06-01	133063
2012-07-01	133244
2012-08-01	133386
2012-09-01	133500

Number Flashback

Jun 2009 employment: 130,503,000
Jan 2010 employment: 129,279,000
Sep 2012 employment: 133,500,000
Jun 2005 employment: 133,607,000

Numbers and chart from Fred - St. Louis Fed - PAYEMS.

The recession ended in June of 2009, and here we are, over three years into a recovery, with actual employment below where it was in June of 2005.

Starting from the end of the recession, and looking to hold the unemployment rate flat since then (assuming 100,000 jobs per month required), employment would need to be at 130.503 million + 3.9 million (a total of 134,403 million). As you can see, we are about 900,000 jobs short!

Statistically speaking, the expectation is the unemployment rate should have risen from the level it was at in June 2009. It would have, except for the amazing drop in the participation rate. In terms of employment, I had the right idea but made the wrong bet. Bryan Caplan wins $100.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Seth's Blog : The curse of incremental improvement

The curse of incremental improvement

In an industrial, competitive culture, most things are just barely good enough.

Cell phone calls, if they were any worse, would be unusable. MP3 files sound not nearly as good as they could. Car mileage goes up, but really slowly. When something makes a huge leap (like the iPad did), it's headline news, because it's so rare.

The market will switch to a competitor when the competitor is just good enough to warrant switching (I know that's obvious, but it's worth stating). As a result, R&D departments ship a product out the door the moment it is just barely good enough to grab enough share to pay for itself. The thought of, for example, working on the CD for six more months before declaring it 'done' would have been considered short-term economic stupidity. As a result, we are saddled with thirty years of sub-par music--if they'd just held on a bit longer, it would all sound so much better.

The challenge kicks in for the individual or organization who thinks what they've launched is just barely good enough--and it's not. Prematurely declaring that it's done means that your incremental improvement doesn't seem important to anyone else. And so you flop.

Better to make it better than it needs to be.