Mish's Global Economic Trend Analysis |
- Japan Machinery Orders Fall 13%, Median Expectation Was 1.7% Decline
- Roubini Promotes ECB Currency War and Other Silliness
- Rise of the Eurosceptics in Germany; One in Four Would Vote for Anti-Euro Party
- Demographic Nightmare; Recession Through Recovery in Pictures
| Japan Machinery Orders Fall 13%, Median Expectation Was 1.7% Decline Posted: 11 Mar 2013 06:08 PM PDT Bloomberg reports Japan Machinery Orders Fall 13% in Sign of Limits on Investment. The decline from the previous month, announced by the Cabinet Office today in Tokyo, compared with the median estimate in a Bloomberg News survey of 26 economists for a 1.7 percent fall.I understand the caution about volatility of large orders, but the rest of what Devalier says is suspect. Have demographics suddenly changed? The answer to that question is clearly "no", so what reason is there to believe residential investment will be on the rise? What about public investment? Japan has a debt-to-GDP ratio approaching 250%, and that is the highest ratio of all developed nations. Japan achieved that dubious distinction because it squandered money on "public investment". Since stupidity often strikes multiple times, I would not totally rule out a surge in public investment, however, I rather doubt it's coming. Recall that Japan's government currently seeks massive tax hikes to pay for what it has already squandered. Moreover, Japanese citizens do not want those hikes. Would they stand for more hikes for more bridges to nowhere? Accelerating consumer consumption? Why? I suspect Devalier believes Keynesian claptrap that rising prices are a good thing, but I beg to differ. People do not in general buy things just because the price is going up (there is only so much space to store things). Nor do people avoid buying things simply because prices are falling. If the latter was the case, no one would have bought a computer or a flat screen TV for years. If Japan gets the price inflation it seeks, but exports do not rise enough to pay for rising energy costs, Japanese savers will be royally screwed (but the stock market may do well, especially in nominal terms). Stock market aside, this is a very dangerous situation Japan is in, and for the nation as a whole, it's highly likely to end badly. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Roubini Promotes ECB Currency War and Other Silliness Posted: 11 Mar 2013 01:16 PM PDT Economist Nouriel Roubini is now actively proposing the ECB enter the global beggar-thy-neighbor currency wars as a solution to the eurozone crisis. As reported by Yahoo! Fiance ,Roubini stated ECB must cut rates or risk crisis again The bank would act eventually to avoid the recession getting worse, but risked doing "too little, too late," Roubini said in an interview with CNN's Nina dos Santos.Would Rate Cuts Help? Roubini may have called the crisis (so did many others), but he sure does not know what to do about it. Does it matter to any significant degree if interests rates are .5% or even .25% vs. .75%? I think not. More importantly, the notion that a euro 10, 20 or even 30% weaker would "restore the competitiveness of the periphery" is complete silliness. The problem, as should be obvious, is structural. Rebalancing requires Spain, Italy, Greece (and now France) to become more competitive vs. Germany. The opposite is happening as noted on February 6 in Germany Rebounds but ... France Economic Implosion Accelerates; Record Decrease in Service Employment in Italy. The very nature of the eurozone interest rate structure prevents rebalancing in a sensible manner. Worse yet, Germany insists on policies that will take years, if not decades to bear any fruit. As evidenced by the rise of eurosckptic parties and the Neo-Nazis in Greece, rebalancing cannot and will not wait that long. Illusion of Eurozone Stabilization On February 7, I wrote about Illusions of Stabilization. There is no real stabilization and there is no healing. Rather, the policies of Hollande are so disastrous that some output has shifted to Germany and elsewhere, (coupled perhaps with some inventory replenishment and a temporary stimulus-fueled increase in demand in Asia).On March 6, I wrote Eurozone Downturn Accelerates Despite German Growth; Divergence to France Widest in 15 Years. Would a 10% drop or even a 30% drop in the euro help Italy, Spain, France, or Greece relative to Germany? How would it? Yet that is where the imbalances are. Worse yet, Roubini actively encourages the ECB to engage in currency wars as noted by his statement "If they are the only [central bank] holding out, then the damage economically and politically will be severe." Can the ECB even do what Roubini asks under its charter? Regardless, would Japan, the US, and China all sit for it? Roubini is not thinking clearly. What Gives? It's highly likely Roubini knows what he proposes won't work. If so, what gives? I propose Roubini is grasping at straws, hoping against hope for some miracle, because he is still wedded to the preposterous notion the eurozone must be preserved at all costs. Roubini needs to admit the euro is a fatally flawed currency and the eurozone must break apart before there is any hope of rebalancing. As it stands, he is just another "let's do more of what isn't working" economist, as if doing something stupid works better if done with increasing force. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rise of the Eurosceptics in Germany; One in Four Would Vote for Anti-Euro Party Posted: 11 Mar 2013 10:55 AM PDT With the EU scrambling to contain anti-euro sentiment in Italy, there has been a notable rise of euroscepticism in other places, even Germany. Reuters reports One in four Germans would back anti-euro party. One in four Germans would be ready to vote in September's federal election for a party that wants to quit the euro, according to an opinion poll published on Monday that highlights German unease over the costs of the euro zone crisis.690 followers is certainly not a lot of followers. This leads me to believe most Germans do not even know about the party. Certainly German mainstream media would like to keep it that way. If that poll is accurate however, and I suspect it is, there is plenty of time for AfD to spread like wildfire, just as happened in Italy. In case you missed it, anti-euro sentiment in also on the rise in the Netherlands. Please see Not Enough Fingers to Contain the Leak in the Dike. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demographic Nightmare; Recession Through Recovery in Pictures Posted: 11 Mar 2013 12:42 AM PDT Please consider a table of various employment statistics for February of each year between 2008 and 2013.
Abbreviations and Notes
All of the columns except "SNAP" are BLS Unadjusted Numbers. SNAP data is fiscal year annual data. I used fiscal year 2012 for the 2013 column (and so forth for the other rows). All of the numbers are in thousands. In The Last 5 Years
Non-Workers to Workers Let's consider the ratio of workers to non-workers. Workers are those employed, non-workers are everyone else (the unemployed + those not in the labor force).
Ratio of Employed to Not Working Reader Tim Wallace put together a nice chart showing the ratio of those employed to those not working.  click on chart for sharper image Demographic Nightmare In the year 2000, there were 1.78 workers for every non-worker. Now there are only 1.39 workers for every non-worker. Meanwhile, food stamp usage is up from 17.2 million to 46.6 million, and medical costs are soaring. Wallace comments "the economic burden on the 1.39 is only going to increase unless spending is put under control and the ratio moves back to a higher average number." Things looked OK as long as the ratio of workers to non-workers was rising. It was a demographic "boomer-bubble" illusion fueled by the entry of women taking jobs. The ratio of workers to non-workers is now falling, as are real wages. Meanwhile, part-time employment is rising, and costs as well as promises have soared. The only realistic way to solve this problem is to cut expenses. That means a cut in medical benefits coupled with a hike in the retirement age. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com "Wine Country" Economic Conference Hosted By Mish Click on Image to Learn More  |
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