Mish's Global Economic Trend Analysis

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• Merkel's Own Party Ready to Give Up on Greece; Another Week of Deadlines; Reflections on Can Kicking
• Capitalism for Me, Socialism for Thee; Progressive Capitalism?
• What Remains of the UK Middle?

Merkel's Own Party Ready to Give Up on Greece; Another Week of Deadlines; Reflections on Can Kicking Posted: 10 May 2015 11:12 PM PDT German Chancellor Angela Merkel is increasingly isolated in her stance on Greece. Growing Pressure From Within the ranks of her own party bloc to give up on Greece for the sake of the euro. Members of Merkel's Christian Democratic bloc are openly challenging her stance of keeping Europe's most-indebted country in the 19-nation currency region. Even some officials in the Finance Ministry are leaning toward the conclusion that the euro area would be better off without Greece, two people familiar with the matter said. "The euro would be strengthened if Greece left," Alexander Radwan, a Merkel-affiliated lawmaker who voted for granting Greece a temporary extension of its bailout in February, said in an interview. "The other countries could then move closer together and apply the rules more strictly." Finance Minister Wolfgang Schaeuble, a prominent German advocate of European unity for decades, has given plenty of signs of exasperation with Greece since Tsipras and Finance Minister Yanis Varoufakis took office in January on an anti-austerity platform. He told an Austrian television interviewer on March 12 that he could envisage a Greek exit from 19-nation currency. On a panel in Berlin the next week, he accused Greek authorities of lying to voters by failing to tell Greeks that they "lived way above their means" for decades. As talks between Greece and its creditors drag on, the view that the euro would be stronger without Greece is gaining ground in Merkel's Christian Democratic-led bloc, according to two lawmakers. They asked not to be identified because they don't want to publicly challenge Merkel. "Having its own currency could help Greece get back on its feet," Hans-Peter Friedrich, one of 29 lawmakers from Merkel's bloc who voted against extending Greece's aid program, said in an e-mailed answer to questions. Another Week of Deadlines Bloomberg reports Greece Readies for Another Week of Deadlines. Warnings of an accidental default loom over debt-swamped Greece as Prime Minister Alexis Tsipras' anti-austerity government heads for another confrontation with an increasingly testy German-led bloc of creditors. Greece needs at least a symbolic show of progress at Monday's meeting of euro-area finance ministers in Brussels to persuade the European Central Bank to keep emergency funds flowing to Greek banks at the current pace. The next hurdle comes just a day later, when Greece has to pay about 750 million euros ($840 million) to the International Monetary Fund. "Experience elsewhere in the world has shown that a country can suddenly become unable to pay its bills," German Finance Minister Wolfgang Schaeuble said in an interview with Frankfurter Allgemeine Sonntagszeitung published Saturday. Schaeuble said if Greece is forced out of the euro "it won't be because of us." An accord "will surely not be reached at the Eurogroup meeting on Monday," Dutch Finance Minister Jeroen Dijsselbloem, the meeting's chairman, told Italy's Corriere della Sera newspaper. "We will need more time, but I don't know how much." The meeting starts at 3 p.m. Whether Greece yields before the northern creditor governments' patience snaps is an open question. Inevitable Taking Forever The inevitable default is damn near taking forever. Even if all the parties come to some sort of agreement for June, Greece is going to need a third bailout and the whole process starts over. This time though, everyone needs to seal the deal on not one but two agreements in a very short period of time. Why has this taken forever? Because Merkel's position appears to be "not on my watch", and no one in Greece wants to take the blame. So everyone pretends that some sort of lasting solution is possible. Can kicking can only last as long as there is a can to kick. This can is nearly rusted away. 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.

Capitalism for Me, Socialism for Thee; Progressive Capitalism? Posted: 10 May 2015 04:25 PM PDT A self-proclaimed "progressive capitalist" (hypocrite) store owner in San Francisco complains about Proposition J which voters passed with a 77% approval rate hiking the minimum wage to $15. Capitalism for Me Socialism for Thee The National Review details the plight of Brian Hibbs, owner and operator of Comix Experience, an iconic comic-book and graphic-novel shop on San Francisco's Divisadero Street, of the city's new minimum-wage law. Hibbs says that the $15-an-hour minimum wage will require a staggering $80,000 in extra revenue annually. "I was appalled!" he says. "My jaw dropped. Eighty-thousand a year! I didn't know that. I thought we were talking a small amount of money, something I could absorb." He runs a tight operation already, he says. Comix Experience is open ten hours a day, seven days a week, with usually just one employee at each store at a time. It's not viable to cut hours, he says, because his slowest hours are in the middle of the day. And he can't raise prices, because comic books and graphic novels have their retail prices printed on the cover. Hibbs is not the first person to encounter this problem. On February 1, San Francisco's renowned science-fiction bookstore Borderlands Books published the following on its website: Although all of us at Borderlands support the concept of a living wage in principle and we believe that it's possible that the new law will be good for San Francisco — Borderlands Books as it exists is not a financially viable business if subject to that minimum wage.  Consequently we will be closing our doors no later than March 31st. Its plight eventually drew the attention of The New Yorker, and a crowdfunding campaign thought up by concerned customers found some 300 sponsors, all of whom agreed to pay $100 to help keep the store afloat until at least March 31, 2016. Hibbs has considered doing the same but notes two problems: "By saying, 'Give me money,' you're sort of saying you're not viable." Furthermore, "There's a limitation on how much crowdfunding can be done. When you're the tenth one, I don't know if it's going to be easy for you." "Despite being a progressive living in San Francisco, I do believe in capitalism. I'd like to have the market solve this problem." "We're for a living wage, for a minimum wage, in principle. . . . But I think any law that doesn't look at whether people can pay may not be the best way to go." "Why," he asks, "can't two consenting people make arrangements for less than x dollars per hour?" Progressive Capitalism? There is no such thing as "progressive capitalism". The idea is as ridiculous as being a Jewish Christian Atheist. Curiously he asks "Why can't two consenting people make arrangements for less than x dollars per hour?" Yes, good question. I have another: did you vote for that inane proposition? "By saying, 'Give me money,' you're sort of saying you're not viable", says Hibbs. Then, to stay in business Hibbs launched a "Graphic Novel-of-the-Month Club". The website does little more than beg for money disguised as a campaign to "HELP KEEP COMIX EXPERIENCE ALIVE!". Just as with crowd sourcing, such tactics may help one or two businesses for a while, until the novelty of the "save the bookstore" mentality wears off. With Proposition J, San Francisco put thousands of small businesses out of business. That's what "progressive" living wages do, no matter what ridiculous label you put on it. One thing is for sure, it isn't capitalism. 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.

What Remains of the UK Middle? Posted: 10 May 2015 10:55 AM PDT In regards to the UK election, a friend recently commented something along the lines of "this is a victory for the middle" whereas I stated Clean Sweep by UK Conservatives Masks Huge Rifts. Here's a nice Tweet by Simon Hix that shows a more polarized election. Result SNP, the Scotland National Party, is just as extreme if not more extreme than the Labour income distribution fruitcakes. The difference is SNP wants out of the UK. Thus, the left went more left albeit with a nationalist twist. UKIP is the third largest party and they want out of the EU. This was a victory for Cameron's election strategy. It was not a victory for the "middle" in any realistic sense. If Cameron keeps his word, an up-down vote on the UK leaving the EU is around the corner. 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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