Mish's Global Economic Trend Analysis

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• Early Elections in Greece Increasingly Likely, So Is Grexit; Promises, Promises
• ISIS Waves Black Flags of Victory Over Kobani; US Strategy in Ruins; Where Does ISIS Get Funding?
• Revealing Look at Hours Worked and the Number of Employees Working Those Hours

Early Elections in Greece Increasingly Likely, So Is Grexit; Promises, Promises Posted: 07 Oct 2014 07:10 PM PDT Talk is in the air, but it's not to the liking of eurozone Nannycrats. Please consider Idiosyncratic Risk Looms For Greek Assets, Citi Says. Citi Research said in a note today that: "Possible deadlock in the early-2015 vote among MPs to choose the next Greek President could trigger early national parliamentary elections in Greece in spring 2015, in our view, with a distinct possibility that the next government will be led by the opposition, anti-bailout party Syriza." Syriza has gained seats in the European Parliament, with one more than the ruling New Democracy party of Prime Minister Antonis Samaras. Syriza's leader, Alexis Tsipras, has campaigned against budget cuts tied to Greece's 240 billion euro ($303 billion) bailout from the International Monetary fund and Euro area. Tsipras and Syriza have been calling for immediate national elections since May. Syriza's Leader Could Win the Next Election The Economist spells things out a bit more clearly in Syriza's Leader Could Win the Next Election. Talk of an early general election is in the air: New Democracy and the PanHellenic Socialist Movement need 180 votes in parliament next February to choose a new president to replace the incumbent, Karolos Papoulias, who is retiring from politics. With only 154 lawmakers between them, it will be a struggle to round up the extra votes from a pool of fractious independents and moderate left-wingers. If they fail, an early general election will be held. Mr Tsipras is in pole position to win. Three recent opinion polls showed Syriza's lead over New Democracy widening to up to five percentage points, which, if replicated at a general election, would leave Syriza just ten seats short of a parliamentary majority. One of the latest polls, published on September 27th, shocked the government: it gave Syriza a lead of 11 percentage points over New Democracy. Mr Tsipras is no longer pledging to rip up Greece's bail-out agreement, yet many are still suspicious of his new €11 billion ($14 billion) tax-and-spend economic programme. It calls, among other things, for restoring the minimum monthly salary to €750 (about 60% higher than the average salary now being paid by cash-strapped private employers), cracking down on tax evasion, creating 300,000 new jobs and restoring Christmas bonuses for pensioners. "It's much too good to be true," sighed Koula Peristeri, an unemployed factory worker who nonetheless supports Syriza. Antonis Samaras, the centre-right prime minister, has riposted with his own promises. Next year's budget will include tax breaks for hard-pressed households, including cuts in levies on property and heating fuel. There is even talk of reducing the corporate tax rate from 26% to 20%. Mr Samaras would like to go further but he is constrained by the "troika" of bail-out monitors from the EU, the European Central Bank and IMF. Promises Cannot Be Met Both parties are making promises they cannot keep. There is no realistic way Samaras can keep his promises. If he could, he would have already. And there is no realistic way for Tsipras to raise salaries by 60%. But that is precisely what people want to believe. People Have Had Enough The important factor is people have had enough, and when they have, the tendency is to vote out politicians who did not keep promises for the next set of leaders who also are 100% guaranteed to break promises. Thus, if there is an early election, and that seems increasingly likely, Tsipras will win. If so, please bear in mind that Greek Elections Rules are such that the overall winner, even by a slight plurality, gets an extra 50 seats in parliament. The law helps the party or coalition that wins a plurality to achieve an absolute majority (151 out of 300 parliamentary seats). That is how Samaras came to rule, and it will be how Tsipras will come to rule unless early elections do not happen. Primary Account Surplus There are questions over accounting, but Greek Budget Records 1.2B Euro Primary Surplus in Jan-May‏. A primary surplus is quite important. It means that Greece no longer needs external funding to pay its bills. Excluding the debt repayment program, Greece's primary surplus totaled 1.6 billion euros. If accurate, and sustainable, Greece is actually in a position to tell the Troika "Go to Hell" declaring all debt repayment null and void.  Yet to do that, Greece would have to abandon the euro and put up with God knows what in sanction retaliations. If Tsipras chooses that path, there is no way for salaries to rise 60% with the account surplus intact. Which Promises will Tsipras Keep? Keep Greece on the Euro. Raise Pay by 60%. None of the Above. I vote for door number 3. Time will tell. Meanwhile, I have a musical tribute for the upcoming election. Promises, Promises Link if video does not play: Dionne Warwick - Promises, Promises 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.

ISIS Waves Black Flags of Victory Over Kobani; US Strategy in Ruins; Where Does ISIS Get Funding? Posted: 07 Oct 2014 12:21 PM PDT Those looking for proof that massive US bombing missions in Syria cannot stop ISIS now have it. Highlighting the complete failure of US containment policy, Isis Set to Take Syrian Town of Kobani. Warplanes dropped huge payloads on their positions and determined, battle-hardened Kurdish fighters fiercely stood their ground. But the fighters of the Islamic State of Iraq and the Levant (Isis) still managed to win territory and hoist their signature black flag atop buildings and hills in the battle for the town of Kobani. The city, which once had a population of 200,000 and was surrounded by villages inhabited by perhaps the same number, was all but deserted by Tuesday morning, according to the Syrian Observatory for Human Rights. "There's no co-ordination between the US and the Kurdish forces on the ground. The US air strikes are not helping that much," he [Wladimir Van Wilgenburg, an analyst at the Jamestown Foundation think-tank, based in Iraqi Kurdistan] said. Political disputes that plague the anti-Isis coalition have hampered the war effort in Kobani. The US listing of Turkey's Kurdistan Workers' Party (PKK) as a terrorist organisation has complicated communications between forces. Syrian Kurds affiliated with the PKK have pleaded with Turkey to allow them to move their military vehicles from their Rojava enclave through southern Turkey to Kobani but have been rebuffed. "For us, the PKK is the same as Isil (Isis). It is wrong to consider them as different from each other," Turkish president Recep Tayyip Erdogan said this week. Kurds Fighting ISIS Same as ISIS Supposedly, Kurds fighting ISIS are the same as ISIS. Meanwhile the US trains moderates that are ISIS or will hand their weapons over to ISIS. Moreover, instead of bombing ISIS tanks or ISIS-held refineries the US Bombed the Wrong Syrian Refineries, owned by civilians. US Strategy in Ruins The Independent reports Isis on Verge of Victory in Kobani as US Strategy Lies in Ruins. Kurdish militiamen are battling to stop Isis capturing Kobani, but a Kurdish spokesman in the city was quoted as saying that the town "will certainly fall soon". Fighting has reached the eastern outskirts of Kobani where Isis fighters raised their black flag over one building at the entrance to the town. The battle for Kobani has united Kurds across the region who see it as their version of the battle of Thermopylae, with their heroic soldiers fighting to the end against Isis forces superior in numbers and armed with heavier weapons. Isis is using tanks and artillery it seized from the Iraqi and Syrian armies when it overran their bases during the summer. Are Tanks Invisible? Apparently tanks and artillery are invisible to US planes. No matter, bombing the wrong refineries is much easier. Turkey Willing to Sacrifice Kurds Moving right along, the politics of this war gets messier and messier. President Bashar al-Assad withdrew his forces from these enclaves earlier in the war, leaving them in the hands of the Democratic Unity Party (PYD) whose militia is the YPG. Both are effectively the Syrian branch of the PKK that has been fighting for Kurdish self-rule in Turkey since 1984. The long-running peace process between the PKK  and the Turkish government could be one casualty of  the fall of Kobani. Turkish forces have done nothing to help the Syrian Kurds hold the town and there is no sign of powerful Turkish military forces along the border intervening. The leader of the PYD, Salih Muslim, is reported to have met officials from Turkish military intelligence to plead for aid but was told this would only be available if the Syrian Kurds abandoned their claim for self-determination, gave up their self-governing cantons, and agreed to a Turkish buffer zone inside Syria. Mr Muslim turned down the demands and returned to Kobani. Vice President Biden Complains [US Vice-President Joe Biden] told a meeting at Harvard University's Institute of Politics on 2 October that the Turks, Saudis and UAE "poured hundreds of millions of dollars and tens of thousands of tons of weapons against anyone who would fight Assad, except that the people who were being supplied were al-Nusra and al-Qaeda and the extremist element of jihadis coming from other parts of the world." Hmm. Didn't the US do the same? Where Does Isis Get Its Money? Let's wrap up the discussion with a look at ISIS funding. Initially ISIS received money from our alleged ally Saudi Arabia as well as Sunni religious groups. Syrian president Assad receives aid from Iran. Assad and Iran are both enemies although both want to stop ISIS. Currently, ISIS gets most of its money from refined oil that it controls. The Oil Connection In an interesting video-embedded article, The Guardian answers the question Where Does Isis Get Its Money? Islamic State (Isis) is now the wealthiest militant group in the world, with a reported net worth of $2bn (£1.2bn). Where is all the cash coming from? The group has built up a fortune through a combination of oil resources and wheat production to hostage taking and extortion. Unless the international coalition can cut the flow of Isis funding, it is likely to remain a severe threat Who's Buying ISIS Oil? OilPrice asks Who Is Buying The Islamic State's Illegal Oil? In June 2014, computer files captured from a courier for the Islamic State shortly after the fall of Mosul revealed that the group had assets of $875 million, largely gained in the sacking and looting of Mosul and its central bank. The size of the group's bank account has now risen to an estimated $2 billion dollars, thanks in part to revenues from ransom paid for kidnapped foreigners and more pillaging. However, oil remains the group's primary source of income. Reports show that IS-controlled fields in Iraq produce between 25,000 and 40,000 barrels of oil per day, at an estimated value of approximately $1.2 million, before being smuggled out to Iran, Kurdistan, Turkey and Syria. In an interview with CNN, Luay al-Khatteeb, the director of the Iraq Energy Institute, explained that "IS smuggles the crude oil and trades it for cash and refined products, at a refined price," thanks to its own refineries in Syria. Inane US Sanction Policy A CNN Video explains How Iraq's black market in oil funds ISIS "The crude is transported by tankers to Jordan via Anbar province, to Iran via Kurdistan, to Turkey via Mosul, to Syria's local market and to the Kurdistan region of Iraq, where most of it gets refined locally," Khatteeb explained. "Turkey has turned a blind eye to this and may continue to do so until they come under pressure from the West to close down oil black markets in the country's south." Synopsis Turkey turns a blind eye to ISIS-oil as well as Kurds fighting ISIS.  The US will not cooperate with Assad to fight ISIS because Assad is our enemy. The US Bombs the Wrong Refineries but not ISIS tanks. Biden complains Turkey and Saudi Arabia backed the wrong moderates although the US also backed the wrong moderates. To fight ISIS, US supports Iranian Revolutionary Guard and other terrorist groups (see Strange Bedfellows) The US sponsored crippling sanctions on Iran, and inane sanctions on Russia. Somehow there has been no discussion of sanctions on ISIS assets or day-to-day production of ISIS-controlled oil, from which ISIS profits $2 million a day. One has to wonder, are US oil interests getting a piece of that pie? US foreign policy is well beyond FUBAR. 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.

Revealing Look at Hours Worked and the Number of Employees Working Those Hours Posted: 07 Oct 2014 01:30 AM PDT Inquiring minds may be interested in a set of charts that show trends in hours worked. The charts are as of the latest job numbers from Friday, October 3, 2014. Index of Aggregate Hours All Private Employees The index of aggregate weekly hours of all employees is at a new all-time high. The data only goes back to 2007 so let's also take a look at hours worked by production and nonsupervisory employees. Index of Aggregate Hours Production and Nonsupervisory Employees The indexes are formulated by multiplication of the number of employees by the average number of hours worked. So let's take a look at both sub-components. Average Weekly Hours of Production and Nonsupervisory Employees Number of Production and Nonsupervisory Employees More people working but for how many hours? Employed, Usually Work Full Time In November of 2007, there were 121,875,000 full time employees. Now there are 119,287,000. Fulltime employment is 2,588,000 below the 2007 peak. Meanwhile working age population, 16 and older has gone up from 232,939,000 to 248,446,000. That's an increase of 15,507,000. Simply put, the working-age population has gone up by approximately 15.5 million while fulltime employment has declined by 2.5 million. Some of this is related to boomer demographics and retirement. A lot of it isn't. It takes a detailed look at the number of people in each age group and how those age groups have shifted over time to normalize the data. Tim Wallace and I explored this idea once before, for the time period 2010-2013. For details, see Fed Study Shows Drop in Participation Rate Explained by Retirement; Let's Explore that Idea, in Depth and in Pictures. It's been nearly a year since that post, and with the job data seemingly booming, it's time for an update. I hope to have new graphs later this week or next, for the entire 2007-2014 period. 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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