Mish's Global Economic Trend Analysis

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• Brussels Threatens Spain With Fines of 0.1% of GDP
• S&P 500 May Fall More Than 40% By Fall Says Chris Martenson in Interview with Lauren Lyster
• Fools in Cyprus to Sell Gold, Hike Corporate Taxes to Finance Small Part of Bailout

Brussels Threatens Spain With Fines of 0.1% of GDP Posted: 10 Apr 2013 11:59 AM PDT Never mind that Spanish unemployment is 26.6% and youth unemployment exceeds 55%. The nannycrats wants Spain to hike taxes even more to make up for budget shortfalls. Hiking taxes and levying fines in a severe depression is of course sheer idiocy, nonetheless, Brussels issued a new warning to Spain for serious imbalance risks, threatening Spain with fines of 0.1% of GDP. Via Mish-modified Google translate from El Economista. The European Commission launched a new warning to the country for "serious risks" to economic imbalances. Spain needs to submit a corrective action plan to Brussels on the 26th of this month. Brussels wants Spain to raise the VAT (limit use of a reduced rate for some items), raise fuel taxes, and continue labor reforms. If Brussels considers Spain's reforms insufficient, it will consider taking sanctions in late May, according to sources. The excessive imbalances procedure provides for fines of up to 0.1% of GDP (1 billion euros in the case of Spain) for countries that do not follow the recommendations of EU economic policy. The preliminary report published last November, Spain exceeded the maximum thresholds in 6 of the 11 indicators used to detect economic risks Brussels. Only Ireland, Portugal and Cyprus, all rescued countries, have many risk indicators such as Spain, while Greece exceeds the thresholds in 5 cases. What worries the EU executive of Spain is the continued rise in unemployment, the average rate in the past three years is now at 19.9% ​​(versus 10% threshold considered healthy). The other indicators in which Spain exceeds the risk threshold are loss of export market share (-7.6% vs. 6%), private debt (218% of GDP, compared to a limit of 160% ), public debt (69% versus 60%) and the net international investment position (-91.7% of GDP, compared to up to 35%). Amazing Arrogance and Idiocy Brussels is supposedly concerned about rising Spanish unemployment. Yet the nannycrats in Brussels demand actions from Spain guaranteed to make unemployment worse. This is amazing arrogance as well as amazing idiocy. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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.

S&P 500 May Fall More Than 40% By Fall Says Chris Martenson in Interview with Lauren Lyster Posted: 10 Apr 2013 10:59 AM PDT In another interview from the Wine Country Conference, Chris Martenson says S&P 500 May Fall More Than 40% By Fall. Even though the S&P 500 and Dow Jones Industrial Average are hovering at all-time highs, Chris Martenson, author of PeakProsperity.com and the "Crash Course" Series, is forecasting a major market correction. Martenson predicts the S&P could fall 40% to 60% to the 600-800 level by this fall. His last major market call was in March 2008, before the financial crisis. The Daily Ticker's Lauren Lyster sat down with Martenson at the 2013 Wine Country Conference in support of Les Turner ALS Foundation to get his market and economic predictions. "I see recessionary signs all over the landscape. In particular, Europe is already in recession [and] Japan is already in recession," he says. "We are looking at global economic slowdown." As for corporate earnings, a stronger U.S. dollar could bring down profits this year, Martenson believes. Corporate profits currently account for 11% of GDP, which is way outside the norm of 6% of U.S. growth. He's also bearish on the U.S. economy and sees weakness in sectors that have shown improvement like the housing market. "Fundamentally there always has to be some connection between where markets actually are and their price," Martenson says. He believes the Fed's monetary policy has reached a point of diminishing returns and could result in "a pretty significant" market pullback. Click on the first link at the top for a video interview. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com  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.

Fools in Cyprus to Sell Gold, Hike Corporate Taxes to Finance Small Part of Bailout Posted: 10 Apr 2013 09:49 AM PDT Whether out of complete stupidity or pressure from the IMF or Brussels (I suspect all three) Cyprus to sell around 400 mln euros worth of gold to partially fund its bailout. Cyprus has agreed to sell excess gold reserves to raise around 400 million euros and help finance its part of its bailout, an assessment of Cypriot financing needs prepared by the European Commission showed. The draft assessment, obtained by Reuters, also said that Cyprus would raise 10.6 billion euros from the winding down of Laiki Bank and the losses imposed on junior bondholders and the deposit-for-equity swap for uninsured deposits in the Bank of Cyprus. Nicosia would get a further 600 million euros over 3 years from raising the corporate income tax rate and the capital gains tax rate. Out of the total Cypriot financing needs of 23 billion euros between the second quarter of 2013 and the first quarter of 2016, the euro zone bailout fund will provide 9 billion euros, the International Monetary Fund 1 billion and Cyprus itself will generate 13 billion, the assessment said. Road to Hyperinflation Raising taxes in the middle of a recession is bad enough. Cyprus actually needs a lower tax rate to attract business following its banking debacle. Selling gold is downright idiotic. Gold backing can prevent a currency from going completely worthless. Should Cyprus leave the eurozone, its small holding of gold would at least put some bid on its currency. Selling of gold and hiking of corporate taxes puts another noose through the nose of Cyprus (just what the nannycrats in Brussels wants and precisely what the average Cypriot should fear). A Greek-like implosion with massive unemployment and endless recessions is on the way. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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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