Mish's Global Economic Trend Analysis

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• 47% of Chinese Billionaires Want to Leave China Within 5 Years, Only 6% of US Billionaires Seek to Leave US
• Stiglitz vs. Krugman on Scotland; Polls Diverge; New Fearmongering Tactics in Waning Moments of Campaign
• Toothless Barking Dogs; Don't Like the Rules? Then Ignore Them: French Style

47% of Chinese Billionaires Want to Leave China Within 5 Years, Only 6% of US Billionaires Seek to Leave US Posted: 14 Sep 2014 10:36 PM PDT A Barclays' survey of over 2,000 individuals with a net worth over $1.5 billion contains some pretty interesting results. Those in China and Singapore are most likely to leave their country, while those in the US and India were most likely to stay. Please consider Almost Half of Wealthy Chinese Want to Leave. Nearly half of wealthy Chinese are planning to move to another country within the next five years, according to a new Barclays survey. Singaporeans were the second-most eager to flee home, with 23% planning to relocate in five years, followed by 20% for the U.K. and 16% for Hong Kong. Indian and American rich are the least likely to move, with only 5% and 6% of respondents saying they would relocate. The top reasons Chinese cite for moving abroad are better educational and employment opportunities for children (78%), economic security and desirable climate (73%), and better health care and social services (18%). Hong Kong is their top destination (30%), followed by Canada (23%). I am not surprised that a large percentage of extremely wealthy Chinese hope to relocate to another country within 5 years. However, I am surprised by the reasons given. I would have expected air and water pollution to be a one of the top reasons. Instead, education, employment opportunities, and economic security headed up the list. For health reasons alone (air and water pollution), I could never live in China. Politics, freedom of expression, food, and the sheer number of people living in the country add to my list of reasons. Curiously, China was the top choice of 30% of those who would leave Singapore. 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.

Stiglitz vs. Krugman on Scotland; Polls Diverge; New Fearmongering Tactics in Waning Moments of Campaign Posted: 14 Sep 2014 10:12 AM PDT New Fearmongering Tactics In the waning moments UK prime Minister David Cameron warns Scots "Leave and You Go Forever". Actually, the warning probably should be "Stay and you stay forever" because the UK will never allow such a vote again. Regardless, no country should want to be under the thumb of another. Polls Diverge The vote for Scottish independence is now too close to call. In a Scottish Poll Roundup one new poll over the weekend shows the "Yes" vote with a substantial 54-46 lead, but most polls show the "No" vote with a tiny lead. ICM (online) 54% Panelbase (online) 49% ICM (phone) 49% TNS (face to face) 49% YouGov (online) 48% Opinium (online) 47% Survation (online) 47% Survation (phone) 46% If we ignore undecided voters, then judging from the last US presidential election when Nate Silver proved preponderance and clustering more important than margins-of-error which purportedly showed the election "too close to call", one might assume the "No" vote will carry the day. I sided with Silver and called for an easy electoral college blowout, and that is precisely what happened. But this is Scotland not the US, the undecided voters are many, and this is an overall vote not a state-by-state electoral college total. Which way the undecideds break will determine the outcome. Stiglitz vs. Krugman on Scotland Bloomberg reports Scots Independence Campaign Nears Climax as Polls Diverge. Activists were out in force across Scotland during the final weekend before the Sept. 18 ballot that might trigger the breakup of the union after more than three centuries. With opinion polls showing contradictory findings, both the "yes" and "no" campaigns said they were poised to win, introducing further uncertainty to financial markets fixed on Scotland. Scottish First Minister Alex Salmond, the head of the pro-independence campaign, and Alistair Darling, the former U.K. chancellor of the exchequer who fronts the Better Together group, reprised arguments today over the economy, the pound and state-funded health care if Scots back independence. With the debate increasingly polarized, the focus now is on appealing to undecided voters in the final three days of the campaign. "Independence may have its costs, although these have yet to be demonstrated convincingly; but it will also have its benefits," Joseph Stiglitz, the Nobel laureate economist who was part of a panel that advised Salmond, said in an op-ed published in the Glasgow-based Sunday Herald newspaper. Stiglitz, in his op-ed, cast doubt on the assertions made about Scotland post-independence, singling out fellow Nobel laureate Paul Krugman's comments about economies of scale. "By an order of magnitude, far more important than size is the pursuit of the right policies," said Stiglitz. "There is, in fact, little basis for any of the forms of fear-mongering that have been advanced." Stiglitz or Krugman? Both Stiglitz and Krugman are Nobel Prize winning economists. I seldom side with either of them. In this case they take opposite views, so one of them must have the better argument. Stiglitsz is the clear winner. Economies of scale don't matter if the underlying policies are inefficient. Scotland would have the chance to come up with its own corporate tax policies that would eventually attract far more businesses and jobs than the alleged financial jobs it would lose if it votes for independence. That said, given the Labour party dominates Scotland, it is highly debatable whether Scotland would make the right corporate tax policies (but at least they would have a chance). And over time, voting preference can change. Cameron Scared, UKIP Delighted Moreover, and what probably has Cameron and Labour scared half to death, is that a "Yes" vote strongly increases the odds the UK leaves the EU. Why? This has not been widely discussed in mainstream media, but those Labour votes vanish from UK parliament and from UK in general. As a result UKIP and the anti-EU vote would get a big boost. That would be a good thing. 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.

Toothless Barking Dogs; Don't Like the Rules? Then Ignore Them: French Style Posted: 14 Sep 2014 12:05 AM PDT Don't Like the Rules? Then Ignore Them: French Style When it comes to fiscal policy in the EU, you can break whatever fiscal rules you want, provided you are big enough. France qualifies, so does Germany. If you are small like Greece and Cyprus, then you may find yourself in bed with the Troika. For the third time France Warns of Budget Overshoot France has declared it will heavily overshoot its already twice-delayed budget deficit target next year, setting up tough negotiations with European partners previously reluctant to grant Paris more time to bring its public finances within EU limits. Michel Sapin, finance minister, announced that the required deficit target of 3 per cent of national output was being pushed back a further two years to 2017 in the latest sign of the deep-seated economic problems confronting President François Hollande and his socialist government. Mr Sapin said the deficit would reach 4.3 per cent of gross domestic product in 2015 after a level of 4.4 per cent this year – the latter also a big overshoot of earlier estimates and the first annual rise in the deficit for several years. He blamed the situation on the slow rate of economic growth and low inflation, saying France demanded that the EU "collectively take into account" an economic slump "unprecedented in recent European history". Joke of the Day The German finance ministry said: "We assume that all member countries of the eurozone stick to the rules. Otherwise we risk our credibility." Credibility? What credibility? How can anyone speak about credibility when France , Spain, and Italy miss deficit targets over and over and over again? Toothless Howling Dogs Like toothless howling dogs, Eurozone Leaders Warn on Fiscal Rules, shortly after the French budget announcement. Eurozone leaders warned the currency bloc risks facing a new market backlash if it strays from its fiscal rules, an apparent message to France and Italy that their push for more flexibility will be viewed sceptically when they submit their budgets to Brussels next month. The admonition, from leaders of the European Commission, European Central Bank and eurozone finance ministers, came just 48 hours after the French government announced it would blow through the EU's budget deficit limit of 3 per cent of economic output next year. Instead, Paris projected a 4.3 per cent deficit. EU officials said ministers from smaller countries who have already implemented tough reforms complained during a closed-door session that any loosening of the rules now would be seen as double standards. The debate over how much flexibility the European Commission will allow Paris and Rome threatens to become one of the most contentious political issues facing the EU. An Italian-led group of struggling economies has pushed for the rules to be interpreted leniently, arguing the lack of public spending is exacerbating what is threatening to become a triple-dip recession. In a tweet on Thursday, Matteo Renzi, Italy's prime minister, said his country did not "expect to be lectured by EU," calling for a swift implementation of a €300bn investment plan mooted by the new European Commission president Jean-Claude Juncker. As part of a push to stimulate growth, Mr Draghi last week announced a plan to purchase asset-backed securities held by eurozone banks. He also urged national governments to guarantee the riskier portions of the securities to free up cash for loans to consumers and businesses. Both France and Germany have indicated they oppose such government guarantees, however, and Mr Dijsselbloem said the Netherlands, where banks hold significant quantities of mortgage debt, would also not guarantee such purchases. Expect Nothing But Howls Will the EU do anything about France? Other than yapping and shifting deficit timelines "for the last time" the answer is the same as always: Of course not. And will France, Germany, and the Netherlands do what the ECB wants in regards to guaranteeing debt? Apparently not, and they would be foolish to do so. Will there be any major stimulus efforts like France and Italy want? No again. Germany and the Netherlands won't go along. Instead, expect all the dogs to remain seated in a big circle, howling at each other as well as the moon, without giving the slightest look at one of the basic problems, the euro itself. 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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