Mish's Global Economic Trend Analysis

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• Is Merkel in "Cloud-Cuckoo Land" or Simply a Hypocrite? How About a Chameleon?
• Deposit Insurance: Lauren Lyster Interviews Mish at Wine Country Conference
• First Quarter Petroleum Usage Charts: Total Distillates, Gasoline, Jet Fuel, Fuel Oil
• Gold, Silver Hammered; End of the Precious Metals Bull Market? What's Next?
• Demographics in Pictures: Peak Earning (and Peak Spending Years)

Is Merkel in "Cloud-Cuckoo Land" or Simply a Hypocrite? How About a Chameleon? Posted: 15 Apr 2013 08:54 PM PDT Today my spotlight is not on the implosion in Spain, Portugal, France, Cyprus, or Italy. Rather, my focus is on a statement made by Paul Krugman that "senior German officials are living in Wolkenkuckucksheim - cloud-cuckoo land." Please consider Double Standards: Europeans Are Right to Be Angry with Merkel Chancellor Angela Merkel has tenaciously insisted that austerity is the only way out of the crisis for ailing EU countries. She doesn't practice what she preaches in Germany, though, which makes growing anger toward her understandable. The question is not about whether Krugman is right when he almost obsessively labels Merkel "dim-witted" and writes that "senior German officials are living in Wolkenkuckucksheim -- cloud-cuckoo land." No, it is not the know-it-alls from abroad who spark doubts. It is Merkel's own policies here at home that prove the error of the measures she champions for the ailing economies of Southern Europe -- and feed the suspicion that the outrage directed at the German taskmaster is wholly justified. Hypocritical Examples Merkel insists German deposits are sacrosanct. Cypriot deposits are not. Merkel insists stimulus measures are out of the question for club-med states, but they were not out of the question for Germany in 2009. In regards to fiscal stimulus, when the financial crisis threatened Germany, "Merkel allotted €1.5 billion to a car-scrapping bonus plan. More than half a million used cars were crushed by the junk press, and 600,000 new cars were purchased, each of them subsidized by €2,500 in government funds." Merkel was a huge supporter of nuclear energy until the German population wasn't in the aftermath of the nuclear disaster in Japan. Merkel the Chameleon Economically speaking, it's easy enough to make the case that it is Krugman who is in "Cloud-Cuckoo Land" and that Merkel is simply a hypocrite. However, Merkel is so good at changing the color of her spots, I propose chameleon is an equally good description. 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.

Deposit Insurance: Lauren Lyster Interviews Mish at Wine Country Conference Posted: 15 Apr 2013 06:08 PM PDT I have another interview to present from the Wine Country Conference. This is an interview of me by Lauren Lyster of Yahoo! Finance regarding FDIC deposit insurance. I did not discuss deposit insurance in my presentation, however, deposit insurance was the focus of a five minute interview with Lauren Lyster. You can play the interview at the Daily Ticker site Don't Depend on Bank Deposit Insurance: Mike Shedlock SitkaPacific Capital Management's Mike Shedlock, who is also the author of the Global Economic Analysis blog, says the Cyprus fiasco is an example of what can happen in a banking system that really can't guarantee everything it's promised. He argues these are issues that exist in the U.S. banking system too. "Here in the U.S. we have something like $3 trillion worth of monetary base, with $50 trillion worth of money out there that's lent on that monetary base," Shedlock told The Daily Ticker on the sidelines at the Wine Country Conference in Sonoma. "So how are we going to pay this all back? We can't." Shedlock argues that deposit insurance - guaranteed by the FDIC for accounts up to $250,000 - can't possibly cover all bank deposits. "The whole idea of insurance... is fraudulent," he says. Shedlock points to New Zealand, which does not promise to insure depositors, as a better system. Depositors may be forced to figure out if the banks they put their money in are solvent. Shedlock says the current system creates "moral hazard." I have gone on record stating that FDIC will be honored, up to the stated limits. If necessary, the Fed will print money to paper over losses. However, amounts in excess of FDIC will not be honored. Those not wanting to trust FDIC at all may be seeking alternatives. Given global happenings, I cannot really fault anyone for that attitude. I presented some ideas regarding deposit insurance in Five Alternatives to FDIC "Insured Deposits". 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.

First Quarter Petroleum Usage Charts: Total Distillates, Gasoline, Jet Fuel, Fuel Oil Posted: 15 Apr 2013 01:05 PM PDT Here are some first quarter 2013 petroleum usage charts from Tim Wallace. The charts all show first quarter usage in 2013 as compared to first quarter usage in prior years. click on any chart for sharper image Petroleum Usage Q1 2013 Gasoline Usage Q1 2013 Jet Fuel Usage Q1 2013 Fuel Oil Usage Q1 2013 Residual Fuel Oil Usage Q1 2013 Tim Wallace writes ... Hello Mish Here are separate charts for Total Distillates, Gasoline, Kerosene Jet Fuel, Fuel Oil (diesel, etc.) and Residual Oils. Total distillates usage is at a level seen in 1998, and not much higher than 1996. Gasoline usage is at a 2002 level. The drop from the peak year of 2007 is now 8.3%, quite dramatic. Kerosene Type Jet Fuel is now lower in demand than 1992 and is 21.9% lower than the peak in 2001. Distillate Fuel Oil usage which include such things as diesel and heating oils is now all the way back to 1996 levels, down 17.6% from the 2007 peak. Once again that there can be little proof of major economic recovery, and more importantly, although we have apparently reached a bottom it is well off of historical levels. Recall that president Obama said he would reduce our carbon emissions 15% by 2015. He may succeed, not because of "alternative" methods, but rather from demand destruction. Tim 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.

Gold, Silver Hammered; End of the Precious Metals Bull Market? What's Next? Posted: 15 Apr 2013 10:51 AM PDT After drifting slowly lower for months, gold has been crushed in the past few days as the following chart shows. Gold Daily click on any chart for sharper image Gold 30 Minute Silver is pretty much the same story as gold. Silver Daily Silver 30 Minute This certainly is a steep correction, but does this mark the end of the gold and silver bull markets, and the everlasting triumph of paper currency backed by nothing? Before you decide let's look at a historical chart courtesy of Sharlynx Gold. Gold 1974-1979 click on any chart for sharper image After Nixon closed the gold window, gold soared from $35 to nearly $200 in late-1974. Gold then dropped almost to $100 in mid-1976. Was the gold bull market over following a near 50% plunge? The answer is no. Gold topped $250 in 1978 before falling back to under $200 in the same year. Was the gold bull market over then? Hardly, gold then blasted to $850 in 1980. Was the gold bull market finally over? Yes it was, for nearly 20 years until it bottomed near $250 in 1999. My point regards the volatile nature of bull markets, nearly any bull market. What's Next? Is the gold bull market over now for another 20 years? While no one including me can say what happens next, fundamentally I see no reason to believe the gold bull market is over. There is no indication central banks have anything under control. There is no indication central banks are going to stop flooding the world with paper. Indeed, there is every indication they are going to escalate their printing of paper. That said everyone must do their own due diligence and assess market conditions before making investment decisions. The last thing you want to do is go into any market with leverage or greater than your risk tolerance and panic out of a good investment at the wrong time. If you are investing in gold, it's important to understand why! It's also important to understand your risk tolerance, timeframes, and the volatile nature of bull markets. 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.

Demographics in Pictures: Peak Earning (and Peak Spending Years) Posted: 15 Apr 2013 12:29 AM PDT Here is a nice theme from reader "BC" regarding peak earning years that I merged into a single chart. Peak Earning Years click on chart for sharper image The above chart shows what is happening to employment in age groups 35-44 (blue), 45-54 (red), and the combined effect 35-54 (green). Those in age group 35-54 are in their peak earning and spending years. This is the period where people upgrade houses and have a need for larger cars as family sizes grow. Between 34-44 family sizes reach peak. Expenses hit maximum when kids graduate from high school and head to college. Telling Statistics Employment in age group 35-44 peaked just prior to the 2001 recession. Employment in age group 45-54 peaked right at the start of the 2007 recession. Employment in age group 34-54 peaked just after the housing bubble burst. Earning power for boomers has peaked. Yet as a whole, boomers are unprepared for retirement. The effect on spending and GDP should not be hard to figure out. 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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