Central Perk: 08/01/2014

duminică, 31 august 2014

Mish's Global Economic Trend Analysis

Putin Calls for Eastern Ukraine Statehood

Posted: 31 Aug 2014 04:20 PM PDT

Putin threw fat into the Ukrainian fire today by calling for Talks on Eastern Ukraine Statehood.

The question at hand is" What precisely does Putin mean by "statehood" ?

Russian President Vladimir Putin called on Sunday for immediate talks on the "statehood" of southern and eastern Ukraine, although his spokesman said this did not mean Moscow now endorsed rebel calls for independence for territory they have seized.

The Kremlin leader's remarks, two days after a public appearance in which he compared the Kiev government with Nazis and warned the West not to "mess with us", came as Europe and the United States prepared possible further sanctions to halt what they say is direct Russian military involvement in the war in Ukraine.

Germany aired suspicions that Moscow might be trying to create a land corridor to supply Crimea, which it annexed from Ukraine in March, while the four-month conflict moved onto the sea for the first time on Sunday. The separatists said they had fired on a Ukrainian vessel in the Azov Sea using land-based artillery, and a military spokesman in Kiev said a rescue operation was under way.

Ukrainian troops and local residents were reinforcing the port of Mariupol on Sunday, the next big city in the path of pro-Russian fighters who pushed back government forces along the Azov Sea this past week in an offensive on a new front.

Talks should be held immediately "and not just on technical issues but on the political organization of society and statehood in southeastern Ukraine", Putin said in an interview with Channel 1 state television, his hair tousled by wind on the shore of a lake.

Moscow, for its part, he said, could not stand aside while people were being shot "almost at point blank".

Putin's spokesman Dmitry Peskov said there was no new endorsement from Moscow for rebel independence. Asked if "New Russia", a term pro-Moscow rebels use for their territory, should still be part of Ukraine, Peskov said: "Of course."

"Only Ukraine can reach an agreement with New Russia, taking into account the interests of New Russia, and this is the only way to reach a political settlement."

Federation or Totally Independent Eastern State?

If one takes the statements from Russia at face value, it appears Putin is calling for a loose federation of some sort, with far more autonomy for the regions. Regardless, previous statements from Kiev shows Ukraine will not go for that.

Perhaps the threat of outright victory by the rebels will change their mind.

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

Eurozone Currency Dispute Intensifies: France Wants More ECB Action to Correct Overvalued Euro, Germany Doesn't

Posted: 31 Aug 2014 09:06 AM PDT

The currency and fiscal battleground front lines in Europe remains the same. France wants QE, fiscal stimulus, and more leeway on meeting fiscal deficit targets. Germany doesn't. And the fighting has strengthened.

The idea that ECB can produce nirvana by devaluing the euro is ridiculous. Yet, that's the battle cry of the day.

Bloomberg reports France Asks for More Action From ECB to Correct Overvalued Euro.

French Prime Minister Manuel Valls called for more action from the European Central Bank to lower the value of the euro, amid concerns the 18-nation region might be headed toward deflation.

"The monetary policy has started to change," Valls said today in a speech made at the Socialist Party's summer school in La Rochelle, France. While he called the ECB's package of measures taken in June a "strong signal," he also said that "one will have to go even further."

Valls's comments come after ECB President Mario Draghi, who'll meet French President Francois Hollande tomorrow in Paris, signaled that declining inflation expectations are pushing the central bank toward introducing quantitative easing. Policy makers will gather in Frankfurt on Sept. 4 for their monetary-policy meeting.

Inflation in the currency bloc slowed to 0.3 percent in August from a year earlier, the lowest since 2009, compared with an ECB target for price growth of just under 2 percent. Draghi has said that the ECB stands ready to embark on unconventional measures such as broad-based asset purchases to avoid a deflationary spiral of falling prices and households postponing their spending plans.

In his speech, Draghi also called for complementary action on a European level and "a large public investment program." German Chancellor Angela Merkel was disgruntled with the comments and called Draghi to ask if the ECB had changed course on austerity, Der Spiegel reported, without saying where it got the information.

The magazine's assertion that Merkel "demanded answers" from Draghi "in no way corresponds to the facts," Merkel spokesman Steffen Seibert said in a text message.

Inflation Won't Cure France

Contrary to popular belief, inflation will not spur consumer spending. Nor will inflation create any jobs or cause wage inflation.

Nonetheless, France demands the ECB wizards fix something that cannot be fixed by monetary policy.

Problem number one is the eurozone itself. The euro is fatally flawed. In addition, France's problem is that it is not competitive with Germany and arguably even Spain, not that the Euro is too high.

France desperately needs structural reforms.

It is nearly impossible to fire someone in France, so businesses are reluctant to hire.
Government and union rules on everything are sheer madness.
France seeks to save local bookstores by taxing online retailers and elimination of free shipping.
Agricultural subsidies to save inefficient French farms (at great expense to the rest of Europe) are inane.
Pension rules need fixes, and the retirement age needs to increase.
The "French way of life" is incompatible with rising productivity, especially on a relative basis, so France is increasingly left behind.

How is QE supposed to fix all that? It can't and it won't, but it increasingly looks as if the ECB may give it a try.

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

Seth's Blog : It's a great book, it has no typos!

It's a great book, it has no typos!

And you really have to check out this hotel, it's dark in your room at night. And quiet, too.

Quality is now a given. Quality alone is not remarkable.

Surprise and delight and connection are remarkable.

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sâmbătă, 30 august 2014

Mish's Global Economic Trend Analysis

More Mindless Sanctions? Merkel a Liar or a Fool?

Posted: 30 Aug 2014 09:58 PM PDT

As the tide in the Ukraine civil war turns, the EU threatens Russia with more mindless sanctions.

Bloomberg reports EU Vows More Russia Sanctions If War in Ukraine Worsens.

European Union leaders agreed to impose tougher sanctions on Russia, possibly targeting energy and finance, if the war in Ukraine worsens.

Leaders early today gave the European Commission a week to deliver proposals for the penalties. The EU left open the precise trigger for further sanctions, contrasting with a four-point ultimatum issued to Russian President Vladimir Putin on June 27 that preceded the latest curbs.

"We are close to the point of no return," Ukrainian President Petro Poroshenko told reporters at the EU summit. "Thousands of foreign troops and hundreds of foreign tanks are now on the territory of Ukraine."

Earlier, EU leaders selected Polish Prime Minister Donald Tusk as the bloc's next president and Italian Foreign Minister Federica Mogherini as chief diplomat after a bitter contest that showed the 28-nation EU's divisions on how to deal with the Kremlin. Tusk has pushed for tougher sanctions on Russia while Mogherini has favored diplomacy. Leaders also met with Poroshenko.

The EU and the U.S. have already slapped visa bans and asset freezes on Russian individuals and companies, and since July have imposed steadily tougher sanctions targeting the country's energy, finance and defense industries.

Merkel said the EU is looking at more measures to target Russia's energy and finance industry.

Leaders disagreed about possible military assistance to Ukraine, with Lithuanian President Dalia Grybauskaite telling reporters before the meeting: "We need militarily to support and send military materials to Ukraine."

Disagreements Everywhere

The entire, yet unstated, gist of the above article is there are disagreements everywhere: On sanctions, on military aid, on diplomacy vs. sanctions, and on triggers.

If this is a bluff, it is easily transparent. If it's not a bluff, it's economically stupid.

Merkel a Liar or a Fool?

Who is fooling whom when it comes to Merkel's claims "the EU is looking at more measures to target Russia's energy and finance industry."

Merkel is either a liar or a fool. I believe Merkel knows full well sanctions are a losing game.

Target Russian energy and Russia will likely shut off natural gas supplies to Europe.

It was reckless enough to suggest that possibility in April. This is September. Winter is on the horizon. Want to risk it now?

My guess is that Merkel is a liar. If you prefer, call it an "obvious bluff".

Politically, Merkel has played her hand very well at every turn, with countless lies, bluffs, reversals, and opportunistic moves along the way, on countless eurozone issues.

Why should this time be any different?

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

Obamacare Fine Print: Beware the Medicaid and Medi-Cal Clawbacks and Liens

Posted: 30 Aug 2014 10:49 AM PDT

Obamacare greatly expanded Medicaid coverage, but there is a hidden gotcha that may come back and haunt your heirs for benefits you receive from age 55-64.

This is not new news, but few read and understand the "fine print".

In a warning about the "fine print" and in response to Moral Dilemma: Should a Libertarian Who Does Not Need Food Stamps, but Qualifies for Them, Take Them? reader "TL" writes ...

Hello Mish,

Your friend Steven may want to carefully research taking Medi-Cal benefits.

Medi-Cal, and many other state Medicaid programs include a 'claw-back' provision for recovery of costs incurred by the state to provide medical care. While there is much variation in particulars from one state to another, the bottom line is these costs include a monthly 'administrative fee'

The 'claw-back' mechanism functions via the state placing 'liens' on individual assets at the point the Medicaid recipient reaches age 55, then recovers the money at the point the Medicaid recipient dies by 'seizing' the money from the estate.

When first put into effect, these 'claw-back' provisions were primarily intended to recover costs to the state of providing long term nursing home care for older recipients.

ObamaCare's expanded Medicaid has, of course, now waived the assets portion of the 'means test'. But under current law, those assets are subject to 'claw-back'.

At the moment, the monthly 'administrative fee' amount for Medi-Cal is $611. Those who sign up for Medicaid may not be doing themselves any favors.

Medi-Cal Clawbacks and Liens

The California Healthcare Foundation explains the rules in Estate Recovery Under Medi-Cal

Medi-Cal estate recovery refers to state action to reclaim certain Medi-Cal costs from the estates of beneficiaries after their death. This program, which has been in place for decades, has received renewed attention from policymakers because of reports that some individuals newly eligible for Medi-Cal as expanded under the Affordable Care Act (ACA) may not enroll for fear that their house and assets could later be seized.

... States also have the option to take a more expansive approach and seek recovery of costs for other covered services, not just LTSS, provided to beneficiaries age 55 and older. California has chosen this option and seeks recovery of Medi-Cal costs for all covered services provided to beneficiaries age 55 and over, with the exception of personal care services provided through the state's In-Home Supportive Services (IHSS) program. California has elected to use property liens to protect its claim in cases where the beneficiary was permanently institutionalized and not expected to return home. Medi-Cal places a lien against the beneficiary's property while the beneficiary is still alive so it can seek recovery when the individual passes away or when the property is sold.

Medicaid Fine Print

The Seattle Times discusses the fine print in Expanded Medicaid's fine print holds surprise: 'payback' from estate after death

With an estimated 223,000 adults seeking health insurance headed toward Washington's expanded Medicaid program over the next three years, the state's estate-recovery rules, which allow collection of nearly all medical expenses, have come under fire.

Medicaid, in keeping with federal policy, has long tapped into estates. But because most low-income adults without disabilities could not qualify for typical medical coverage through Medicaid, recovery primarily involved expenses for nursing homes and other long-term care.

The federal Affordable Care Act (ACA) changed that. Now many more low-income residents will qualify for Medicaid, called Apple Health in Washington state.

But if they qualify for Medicaid, they're not eligible for tax credits to subsidize a private health plan under the ACA, which requires all adults to have health insurance by March 31.

Unclear rules

One reason this snafu has become so troublesome is that ACA rules appear to give those who qualify for Medicaid little choice but to accept the coverage.

People cannot receive a tax credit to subsidize their purchase of a private health plan if their income qualifies them for Medicaid, said Bethany Frey, spokeswoman for the Washington Health Benefit Exchange.

Obama Care "Final Payment"

Paul Craig Roberts chimes in with Obamacare: The Final Payment–Raiding the Assets of Low-Income and Poor Americans

Kevin Knauss highlights Expanded Medi-Cal costs $611 per member per month

California Math

Under California recovery rules, $611 per month for 10 years (age 55-64), amounts to $73,320 (minimum) that would come from the estate.

Those signing up thinking Medicaid is free, better learn the rules.

It appears that Steven who now gets foods stamps is also trapped in a Medi-Cal program with claw-back rules, when he would simply prefer his prior medical plan, at his old rate.

Obamacare gotchas keep piling on.

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

Damn Cool Pics

A Hospital For Dolls

Posted: 29 Aug 2014 10:38 PM PDT

The Chapman family have been running this toy restoration business for over 3 generations. Working in Sydney, Australia they give they do transplants and other types of work for toys that need it. It's kind of a cool profession but they are making it look really creepy.

This Labor Day, Let's Talk About the Minimum Wage

Featured

Weekly Address: This Labor Day, Let's Talk About the Minimum Wage

In this week's address, the President wished Americans a happy Labor Day weekend, highlighted the important economic progress we've made, and reaffirmed his commitment to accelerate our progress and ensure that our growing economy fuels a strong middle class.

To do this, the President reiterated that Congress should do right by hardworking Americans across the country and raise the minimum wage, and he praised the 13 states and Washington, D.C. as well as employers large and small who have heeded his call and taken action to provide their citizens and employees a fair wage.

The President underscored that America built the world's greatest middle class by making sure that everyone who's willing to work hard and play by the rules can get ahead -- an economic patriotism worth remembering this Labor Day, and every day.

Click here to watch this week's Weekly Address.

Seth's Blog : Turning passion on its head

Turning passion on its head

Instead of, "do what you love," perhaps the more effective mantra for the entrepreneur, the linchpin and maker of change might be, "love what you do."

If we can fall in love with serving people, creating value, solving problems, building valuable connections and doing work that matters, it makes it far more likely we're going to do important work.

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vineri, 29 august 2014

Mish's Global Economic Trend Analysis

Moral Dilemma: Should a Libertarian Who Does Not Need Food Stamps, but Qualifies for Them, Take Them?

Posted: 29 Aug 2014 07:53 PM PDT

Here's the moral dilemma of the day:

Suppose you are a staunch Libertarian, doing reasonably well and you don't need food stamps. Yet, under perverse rules, you qualify for them. Should you take them?

Reader Steven faces that exact question. Steven writes ...

Hi Mish

In response to your article 40% of U.S. on Welfare; Obamacare Expands Welfare by 23 Million; More on Welfare Than Full-Time-Employed I confess my own moral dilemma.

I am the beneficiary of trusts left to me by my parents. They are not huge, but they sustain me and my children. I prefer to spend time with my kids rather than pursue regular employment.

Until the beginning of this year, I was purchasing my own health insurance under a high deductible plan, that cost nearly $300 per month. It had risen steadily from $169 when I first obtained it two years ago. On December 31, my plan was essentially made illegal, with another plan costing nearly $600 put in its place.

I didn't have that much of a medical budget so I cancelled the plan. Three months later and in desperation for coverage, I spoke with an insurance agent who was sure, based on what I was telling her, that I would not qualify for Obamacere subsidies, but I would qualify for Medicaid which was a "better' program as it covers more services. She told me to march down to Medicaid with all my documentation and apply for coverage, which I did.

Because my trusts make all the money, my personal income is well below poverty line. Nevertheless I live quite comfortably. All the same, they eliminated the asset test for both Medicaid and food stamps, and am now receiving both.

I told my social worker the truth. I do not want to deal with a benefits fraud rap.

Because I have two dependent teens in my home, I now receive almost $500 per month for food in addition to the Medicaid coverage, which is pretty convenient. You should see the look on the cashiers' faces when, after paying for my food with the EBT card, I then pay for the non-food items with an American Express card, or even my black Visa card.

On the minus side, there are very few doctors in San Francisco worth visiting who accept Medi-Cal. I have yet to choose a doctor or a plan, and have been on the phone with state assemblymen and the Medi-cal ombudsman seeking better healthcare alternatives.

I wish I could just go back to my old, lousy plan that didn't pay for more than half of anything but which was accepted almost everywhere.

As a Libertarian, I face a moral dilemma. Should I accept benefits I don't really need?

In the case of Medicaid, I have to, or else live without coverage and/or be penalized by the IRS. But in regards to free food money, I am in a quandary.

This is also is a great story, which is why I am relating it to you now. Nothing says "broken" more than a welfare system that gives trust fund kids EBT cards.

Thanks for your awesome blog. I read it regularly.

Steven

Do What's Best For Your Family

My advice is simple: In general, you should do what is best for you and your family as long as it is legal.

I offered the same advice in regards to "Walking Away".

February 07, 2008: Moral Obligations Of Walking Away
June 05, 2009: Walking Away Revisited - Reader Mailbag - Moral Dilemma
January 16, 2010: Walking Away Goes Mainstream; Yes It's OK; Moral Obligations Yet Again
August 29, 2010: Email From "Morally Conflicted" One Year Later After Walking Away

Comments from a Staunch Libertarian

I pinged Steven's question off Pater Tenebrarum at the Acting Man blog. Pater is one of the staunchest libertarians one could possibly find.

Pater replies ...

Ayn Rand has once addressed this question in the context of "should you accept research grants from the government". Essentially, her point is this: If the government has taken your taxes, you have every right to receive some restitution. Why should only the supporters of redistribution and statism get something, and you be left nothing but a paying victim?

So if your correct libertarian viewpoint is that you have been robbed, then getting something back is nothing but you claiming back some of what has been looted from you. You weren't in agreement with your wealth being appropriated by force, so it is only fair to get some restitution, however small.

Take the Money and Run

There is no moral dilemma. Take the money and run.

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

"Economic Pilot in Reverse": US Consumer Spending Unexpectedly Dips; Zero for 79

Posted: 29 Aug 2014 09:46 AM PDT

Mainstream media headlines in the last two days offer an amusing look at GDP forecasts.

GDP Stronger Than Expected

Yesterday, the Financial Times reported US Rebound Stronger than First Thought.

The US economy's second quarter bounce was stronger than previously thought, with the official annualised growth estimate increased from 4 per cent to 4.2 per cent.

The revision is more evidence of robust underlying growth in the world's biggest economy as it swung back from a weather affected 2.1 per cent fall in the first quarter.

"Economic Pilot in Reverse"

Today, the Wall Street Journal reported U.S. Consumer Spending Declines 0.1% in July.

Consumer spending fell in July and income growth was weak, signs that cautious consumers could restrain economic growth in the second half of the year.

Personal spending, which measures what Americans pay for everything from sneakers to doctor visits, declined a seasonally adjusted 0.1% in July from a month earlier, the Commerce Department said Friday. It was the first time spending fell in a month since January.

Personal income, reflecting income from wages, investment, and government aid, rose 0.2% in July—the smallest monthly increase of the year.

"Looks like the pilot threw the economy's engines into reverse at the start of the third quarter," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. Forecasts that the economy would grow at a strong 3% clip in the third quarter "look increasingly unrealistic if consumers don't return to the shops and malls."

Economists surveyed by The Wall Street Journal had predicted personal spending would increase 0.1% and incomes would rise 0.3% in July.

Barclays lowered its forecast for third-quarter growth by a half-percentage point to a 2.2% pace. Goldman Sachs economists lowered their estimate to a 3.1% annual rate from a 3.3% pace.

Diving Into the Numbers

Please consider Personal Income and Outlays: July 2014 by the BEA.

Personal income increased $28.6 billion, or 0.2 percent, and disposable personal income (DPI) increased $17.7 billion, or 0.1 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $13.6 billion, or 0.1 percent. In June, personal income increased $67.1 billion, or 0.5 percent, DPI increased $62.9 billion, or 0.5 percent, and PCE increased $50.5 billion, or 0.4 percent, based on revised estimates.

Real PCE Highlights

Real PCE -- PCE adjusted to remove price changes -- decreased 0.2 percent in July, in contrast to an increase of 0.2 percent in June.
Purchases of durable goods decreased 0.6 percent, in contrast to an increase of 0.5 percent. Purchases of motor vehicles and parts accounted for most of the July decrease.
Purchases of nondurable goods decreased 0.2 percent in July, in contrast to an increase of 0.3 percent in June.
Purchases of services decreased 0.1 percent, in contrast to an increase of 0.1 percent.
The price index for PCE increased 0.1 percent in July, compared with an increase of 0.2 percent in June.
The PCE price index, excluding food and energy, increased 0.1 percent in July, the same increase as in June.

Zero for 79

Bloomberg reports U.S. Consumer Spending Falls for First Time in Six Months.

Consumer spending in the U.S. unexpectedly dropped in July for the first time in six months, a sign households are lagging behind as wages fail to accelerate.

Household purchases decreased 0.1 percent after increasing 0.4 percent in June, Commerce Department figures showed today in Washington. None of the 79 economists in a Bloomberg survey projected a decrease.

Rounding out the differences between GDP analysis yesterday and today, ZeroHedge reports Here Come the Q3 GDP Downgrades.

Growth Engine

By the way, and in contrast to widespread economic thought, consumer spending is not the "engine of economic growth". Savings, investment, and production are.

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

Damn Cool Pics

Facts About McDonald's That Will Blow Your Mind
Life Hacks For Dog Owners
Brutal Combat Weapons Throughout History

Facts About McDonald's That Will Blow Your Mind

Posted: 29 Aug 2014 12:53 PM PDT

McDonald's is the most popular fast food restaurant in the world, but how much do you really know about it?

Life Hacks For Dog Owners

Posted: 29 Aug 2014 12:47 PM PDT

Taking care of a dog can sometimes feel like a full time job. Don't let the responsibility drag you down. Make your life easier with these life hacks for dog owners.

Brutal Combat Weapons Throughout History

Posted: 29 Aug 2014 09:56 AM PDT

Back in the day technology was nothing like it is today. People had to get creative with their weapons and the things they created were extremely brutal.