Central Perk: 17 nov. 2014

luni, 17 noiembrie 2014

Mish's Global Economic Trend Analysis

Grubergate: Obama Caught Lying About Obamacare at G20 Summit, Kerry Provides the Proof
"Mystery of the Unexpected" Explained; Japan Slides Into Recession Yet Again; Blue Ribbon Panel in Review
"Debt Trap" Nonsense; Eurosceptics on Rise; Demise of the EU: "Soon There Won't be a Europe" Says Telegraph

Grubergate: Obama Caught Lying About Obamacare at G20 Summit, Kerry Provides the Proof

Posted: 17 Nov 2014 07:34 PM PST

The "Grubergate" scandal will just not go away.

For the background to this story and a startling video clip, please see my November 11 post, Obamacare Architect Explains "Stupidity of American Voter" Needed to Pass ACA.

Video clip shown below.

At the recent G20 conference, a reporter asked Obama to explain his role, what he knew, and the role of Jonathan Gruber. When the heat is on, politicians do what they do best: lie.

Here's proof, in a second video clip published on November 16.

Please play the first and second video. They are short and easy to understand.

Gruber commented twice (at least) on the "stupidity of the American voter". Now Gruber calls his statements "speakos", verbal typos.

Anyone believe that? Anyone believe Obama?

Regardless, it's too late. Obamacare passed and now (like it or not) we are stuck with it.

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

"Mystery of the Unexpected" Explained; Japan Slides Into Recession Yet Again; Blue Ribbon Panel in Review

Posted: 17 Nov 2014 01:04 PM PST

With two consecutive quarters of contracting Gross Domestic Product, Japan is officially back in recession. GDP shrank 1.6% annualized.

Unadjusted for price changes, the Japanese economy contracted an annualized 3 percent, the Cabinet Office said.

None of this was "expected". We will explore "why" in a moment. First consider some headlines.

Bloomberg: Japan Unexpectedly Enters Recession as Abe Weighs Tax.

Wall Street Journal: Japan Falls Into Recession. GDP Declines 1.6%, Setting Stage for Delay in [Another] Sales-Tax Increase.

Time: Japan Sinks Into Recession (Again).

Time Reports ...

An unexpected contraction in quarterly GDP shows that Prime Minister Shinzo Abe's radical economic program is badly broken. GDP in the quarter ended September shrank by an annualized 1.6% — far, far worse than the consensus forecasts. That followed a disastrous 7.3% contraction in the previous quarter. Speculation in Japan is that the bad results will push Abe to call a snap election only two years after taking office.

Financial Times: Sales Tax Tips Japan Back Into Recession

Financial Times Reports ...

Japan is poised for a snap election after its economy tipped into a technical recession, increasing the odds that prime minister Shinzo Abe will delay plans to raise the country's sales tax next year and appeal for a fresh mandate.

Monday's preliminary data for the period between July and September was far worse than markets expected, showing the economy shrank 1.6 per cent quarter-on-quarter on an annualised basis. Analysts had expected growth of 2.2 per cent.

The dip is a blow for "Abenomics", the most ambitious attempt to revive Japan's economy since it fell into stagnation two decades ago.

Expectation vs. Reality

Expectation: Last quarter's huge plunge was a one-time affair.
Expectation: 2.2% growth this quarter.

Instead, Japan's economy shrank 1.6% and last quarter was revised lower from negative 7.1% to negative 7.3%.

Blue Ribbon Panel in Review

Flashback August 31, 2013: Japan Seeks to Hike Taxes then Waste Money on Stimulus to Make Up for Decline in Spending.

My comment: "When you cherry pick a panel, and the panel has a pre-determined outcome, the answer always comes out the way you expect. Thus Abe's blue ribbon panel concluded tax hikes won't hurt. And for good measure, if by some chance they do, the panel suggested wasting those tax dollars on stimulus. Good grief!"

Flashback April 30, 2014: Japan Output and New Orders Decline at Fastest Pace Since 2012; Abenomics in Review

My Comment: "Abenomics said Japanese stimulus efforts would offset tax hikes. I disagreed. Although one month is not proof, Markit reports Japanese Output and New Orders Decline For First Time in 14 Months Following Tax Hike."

Flashback September 8, 2014: Japanese Economy Contracts Bigger than Expected 7.1% in 2nd Quarter; Really Bad Theories

My Comment: "By now it should be pretty clear that Abenomics is a complete failure. Abenomics did not spur lending, investment, hiring, or wage growth. It's one touted 'success' is that prices have gone up. And for cash-strapped consumers facing higher taxes, that alleged "success" is actually a disaster."

In September, I also commented on "really bad theories".

Really Bad Theories

"Theoretically, there should be no impact from the consumption tax increase on corporate spending or long-term corporate planning, but a large number of Japanese corporations seemed to see a large impact from the hike on final demand," said Junko Nishioka, an economist at RBS Japan Securities in Tokyo.

Good grief. Nishioka has theories, but they are as sound as a home foundation in a swamp. Here's an easy to understand explanation.

Eight Point Explanation

Japan's sales tax increased from 5% to 8%.
Wages did not go up.
Consumers have 3% less money to spend.
Consumers with less money, spend less.
Businesses faced with a slowdown in consumer spending reduce future plans.
Abe plans to hike the sales tax again and businesses know that as well.
Business sentiment sours.
Japanese demographics are such that businesses already have substantial worries.

What is it about those eight points that economist Nishioka fails to understand?

Mystery Explained

Why all of this is so "unexpected" is an apparent mystery. Sales tax hikes do not spur the economy, no matter how much of it government wastes. And it should not take a genius or an 8-point synopsis to figure that out.

So why was this news so "unexpected" in nearly every quarter? I have two answers.

Economists are the most optimistic lot on the planet. They believe what they want to believe.
The average economist also believes in Monetarist and Keynesian fairy tales.

Japan is living proof of the absolute stupidity of Abenomics (a combination of Keynesian and Monetarist stupidity), yet academia, let by economist Paul Krugman concludes "Japan did not do enough".

Apparently, debt to the tune of 250% of GDP fighting deflation was not enough. 500% would not have been enough either, for obvious reasons.

But don't expect any Keynesian or Monetarist clowns to admit that. They will never stop believing in fairy tales.

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

"Debt Trap" Nonsense; Eurosceptics on Rise; Demise of the EU: "Soon There Won't be a Europe" Says Telegraph

Posted: 17 Nov 2014 11:08 AM PST

Eurozone Breakup Coming

Telegraph writer Jeremy Warner moans Soon, There Won't be a Europe to be Part Of.

"It's not a question of in or out, but of whether Britain can avoid the flames of destruction," says Warner.

On that I certainly agree. In general, Warner has the "what's happening" part correct has but his synopsis of what to do about things is exactly the same tried-and-failed Keynesian and monetarist clatrap the Telegraph always sponsors.

Warner's nonsense culminates with "It is an economic truth pretty much universally acknowledged that you cannot deflate your way out of a debt trap, yet it seems entirely lost on the eurozone high command."

Europe is really attempting deflate? Really? In what alternate universe?

Debt Trap Nonsense

The entire notion there is such a thing as a "debt trap" is a Keynesian-sponsored fallacy.

The facts of the matter are simple:

Central bank Monetarists in conjunction with Keynesian fiscal fools created the "debt problem" with absurd inflationary policies.
Now that debt-bubbles have burst, Jeremy Warner, like his Telegraph counterpart, Ambrose Evans-Pritchard and multitudes of writers and academics, expect the same polices that created the debt problem to cure it!

Attempts to inflate out of alleged "debt traps" are nothing more than absurd can-kicking exercises that defy common sense. Japan is real-life proof.

Rise of the Eurosceptics

Let's leave the "why" and the "what to do about things" aside and instead focus on Warner's perception of what is happening right now on the eurosceptic front.

Across the continent, traditional centrist politics are in a state of meltdown. Nowhere is this more apparent than in Spain, where a radical Left party that didn't even exist 10 months ago is now topping the polls. Ill-judged attempts by the Rajoy government to use the crisis as a means of strengthening Madrid's grip on the country have meanwhile reignited Spain's centuries old centrifugal forces. It's not just the Catalans who threaten to break away.

What goes for Spain is just a proxy for Europe as a whole, where attempts to impose fiscal discipline from the centre have resulted only in growing public alienation and anger. In France, the polls are led by an anti-European crypto-fascist with a Left-wing agenda that makes even the disastrous François Hollande look moderate.

In Italy, the only viable alternative to the beleaguered Matteo Renzi is a professional comedian, Beppe Grillo, with no apparent policies at all, or few that make any sense. Even in Germany, the protest vote is fast gaining momentum. As with Ukip, Alternativ für Deutschland has taken off like a rocket since it widened its appeal from the single purpose of bringing back the beloved Deutschmark to an anti-immigrant, law and order, agenda.

Brainwashing Messages and Fake Tories

In the Telegraph comment section, "Richard N" offers this accurate assessment of what Warner wrote.

To say Grillo's party doesn't have any policies is just stupid: he is expending most of his time and energy - very noisily - on getting a referendum on Italy leaving the euro.

He says that Italy's desperate financial straights are due in large part to being in the euro. That is a policy - and an eminently sensible one for Italy.

As for Le Pen being a crypto-fascist - that's an equally stupid thing to say. She is a left-wing nationalist - it's that simple.

You guys at the Telegraph do the same thing as the fake eurosceptic MPs in the Tory party - mouth the eurosceptic stuff - but inject the EU's brainwashing messages in between the lines, to attack those new political parties which threaten the power of the incompetent, power-hungry goons running the EU.

Keynesian and Monetarist Silliness

Actually, its not just brainwashing efforts by the EU, but also by central banks, politicians who want more taxes and more spending, academics like Paul Krugman, and monetarists such as Ambrose Evans-Pritchard and Harvard professor Greg Mankiw.

Harvard Professor Greg Mankiw wins the prize for making the most inane monetarist proposal in history. Mankiw proposed that 10% of money be made worthless every year via a lottery in which the the Fed would pull a number out of a hat each year and all currency ending in the digit drawn would immediately be worthless. I called Mankiw out in Economist Mankiw Defends Policy of Theft
Ambrose Evans-Pritchard also constantly sings a preposterous monetarist tune. For example, please see Monetarists Accuse ECB of "Dangerous Game of Chicken"; The REAL Dangerous Game
While on the subject of foolish economic policies, I have yet heard a reply to my October 19 Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit"

Status Quo is Dead

Aside from the ad hominum and personal attacks, Warner has the eurosceptic trend correct. His conclusion is also accurate:

"The European Union is failing. Whether we are in or out scarcely seems to matter any more. In imagining it does, many of our leading businesses and politicians are woefully behind the curve. Something will eventually emerge from the wreckage. But whatever it is, it won't be the status quo."

Indeed. Something will emerge from the inevitable wreckage, and it will not be the status quo.

On one hand, that's encouraging. However, I must warn: never underestimate the propensity of central bankers and politicians to make matters worse, with Keynesian and Monetarist fools cheering every step of the way.

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