Mish's Global Economic Trend Analysis

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• How to Lie Without Saying a Thing
• 1984 EU Style: EU Launches "Independent" News Agency Because 172 EU Spokespersons "Do a Lousy Job"
• World's Dumbest Idea

How to Lie Without Saying a Thing Posted: 22 Jul 2013 12:33 PM PDT There are rare exceptions, but the general way to tell when a politician is lying is if his lips are moving. Another way to tell is if the politician's lips aren't moving. Chancellor Merkel and finance Minister Schäuble have said Germany will not agree to a transfer union. But what about mountains of unrepaid southern European debt held by public creditors? By now, both Merkel and Schäuble know that debt cannot and will not be paid back. They also both know that German taxpayers will soon be on the hook. But as a matter of political expediency, Schäuble keeps quiet on mounting cost to Germany of Europe's woes. When Mr Schäuble visited Athens last week, the leftist Greek newspaper Avgi welcomed him with the abrasive headline: "Hail Schäuble! We who are about to die salute you." Aware of the acrid political atmosphere in Athens, Mr Schäuble came bearing gifts: €100m in state-backed loans for small and medium-sized Greek businesses. But what Greece really needs, to kindle a flame of hope in its future, is another restructuring of its foreign debt. Conventional wisdom holds that it would be suicidal for Mr Schäuble, or any German politician, to speak this unpalatable truth to voters before Germany's September 22 national election. Unlike the Greek debt haircut of March 2012, which clipped private sector lenders, any future restructuring would shear the locks of official creditors, including Germany, which now hold over 90 per cent of Greece's debt. So far, the bailouts of Greece, Ireland, Portugal, the Spanish financial sector and Cyprus have cost German taxpayers much in loans and guarantees, but not one cent in hard, unrecoverable cash. Indeed, the €110bn EU-International Monetary Fund rescue of Greece in May 2010 was as much about protecting German banks, which had lent recklessly across southern Europe, as it was about restoring Greece's financial health. A second Greek debt restructuring would not shock German taxpayers and destabilise the political scene, although legal hurdles might need to be jumped at the nation's constitutional court. More dangerous, for its impact on German political and public opinion, would be the dropping of a different penny: the growing possibility that debt write-offs, or extra financial aid, will have to be made available not just to Greece but to Portugal and Cyprus. Spain's banks are not wholly out of the woods, either. As for Cyprus, the duration and intensity of its economic and social collapse are unmeasurable. The question, then, that threatens to dominate German public debate is: "Greece, Portugal, Cyprus . . . Where will we Germans draw the line?" The only certainty is that no answer will come before September 22. Certainties Chancellor Merkel and finance Minister Schäuble will continue to lie, before, during, and after the election. German taxpayers will be on the hook for bailouts in Greece, Cyprus, Spain, and Portugal.  The entire mess will unravel soon. The major uncertainty is the trigger country is not yet known. It could be Greece, Portugal, Spain, Italy, or even Germany (the latter if Germans come to their senses and vote for AfD in a huge 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.

1984 EU Style: EU Launches "Independent" News Agency Because 172 EU Spokespersons "Do a Lousy Job" Posted: 22 Jul 2013 10:06 AM PDT If you are a bureaucrat who does not like the way news is reported, the 1984-style thing to do is launch your own "independent" news agency to make sure someone reports the news the way you want the news reported. The EU did just that in an attempt to 'filter' the news to its own liking. The European Commission is launching its own "independent" news service, complete with editors, web designers and "experts in journalism/journalists." In its call for tenders, the Commission laments that "reporting on EU affairs is often scarce, irregular, lacks a broader European perspective and citizens do not have any specialized platform where they can find and share quality content on EU affairs." By our count, the Commission employs 122 Already spokespersons, press officers and media secretaries to talk up its policies, and another 50-odd staffers in its Directorate General for Communications. That department's € 103.7 million annual budget covers funding for the Presseurop clipping service, Euranet Euronews TV and Radio broadcasts. The EU Also Boasts its own YouTube channel, several newsletters and even a bookstore, que Publishes everything from posters to children's literature. But Europeans still lack "critical understanding of EU affairs," says the Commission, que is why it needs its own agency to "filter, select, and explain the news to the U.S. Citizens, and to do it with quality journalism standards." The successful bidder will receive an annual budget of up to €3.2 million and offer third-party and original content "with a balanced and neutral point of view." Translation The successful bidder agrees to publish only the propaganda the EU sees fit. Bear in mind, the European commission's latest opinion poll finds That 57% of European citizens "distrust" EU Institutions, while only 30% have a "positive" impression. Supposedly, having its own news propaganda agency will help those stats. Instead, I propose the move will create more distrust. How can it not? 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.

World's Dumbest Idea Posted: 22 Jul 2013 12:53 AM PDT The title of this post stems from an article on Forbes by Steve Denning who writes about "radical management, leadership, and innovation" Denning says Milton Friedman is the The Origin Of 'The World's Dumbest Idea'. No popular idea ever has a single origin. But the idea that the sole purpose of a firm is to make money for its shareholders got going in a major way with an article by Milton Friedman in the New York Times on September 13, 1970. emphasis mine For starters, the actual title of Friedman's article is "The Social Responsibility of Business is to Increase its Profits". Denning substituted the word "sole" for "social". I did a search of the article and the word "sole" was not to be found. Regardless if it is the "social" or "sole" responsibility, it is preposterous to propose anything other than "The primary goal of a for-profit corporation is to make money for shareholders". To state otherwise may not be the "world's dumbest idea" but it sure is inane. Via email exchange, my friend Pater Tenebrarum at the Acting Man Blog stated "I don't often agree with Friedmann, but on this point I do agree with him. A company's profits are the outward sign that it has successfully served consumers. If not the profit/loss system, by what system should it be determined?" "These screeds all want to replace the plans of consumers and producers with THEIR plan. In the end it always comes down to even more government control over our lives. We know how that has worked out so far." Precisely. Ironies Abound The first irony in Denning's ramblings is precisely the fact that corporations frequently do not put shareholders' interests first, but they should. Instead, corporations frequently put the interests of the CEO and top executives first. One look at the astronomical pay and stock options of executives proves the point. Another problem is corporations frequently buy favors from government to gain unfair advantages over their competition. The second irony is GE, a company Denning praises, is one of the worst offenders you can find. Denning concludes "Shareholder value is obsolete. What we are seeing is a paradigm shift in management, in the strict sense laid down by Thomas Kuhn: a different mental model of how the world works." No Paradigm Shift Denning praises Apple as an example of a paradigm shift. I contend that Apple succeeds precisely because it puts shareholder interest first, the rest follows. For high-tech companies like Apple and Google, that means (as Denning states) "a different way of treating people: a shift from a world in which people are manipulated as things (resources, eyeballs, demand) to a world in which people are interacted with as human beings." High Tech vs. Manufacturing  What applies to certain high-tech companies does not apply to the vast majority of manufacturing and retail sales businesses. Consider a typical drive-up fast-food restaurant. Does it matter if a human passes you a sandwich instead of a robot? If the robot was attractive, friendly and lowered the cost of the sandwich, nearly everyone would choose the robot. And I can point to far more examples of robots replacing humans than Denning can of corporations treating employees a "different way". Shareholders Best Served by Robots The unfortunate fact is shareholders are frequently best served by getting rid of employees and replacing them with robots. The second unfortunate fact is Bernanke exacerbates the problem by holding interest rates so low that it's easy for corporations to make a software or hardware robotic decision. The idea of a "paradigm shift" is in Denning's head. Making money for shareholders is the goal. How companies achieve that goal varies from company to company. Denning cherry picks the examples that suit his misguided model. Robots Don't Complain About Being Mistreated There is no new paradigm, and there won't be one. Making money is the reason companies exist. In some high-tech instances, corporations may treat employees nicer, but in most situations, the profit motive means replacing humans with robots that have no feelings whatsoever about being mistreated. Corporations won't mistreat robots (or people they don't employ). And that is the biggest irony of all in Denning's new paradigm theory that treating people better, not profit, is how the corporate model works. 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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