Mish's Global Economic Trend Analysis

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• Shanghai Prepares for Property Tax to Curb ‘Speculative’ Buying; China Addresses Symptom NOT Problem
• MP3 of My WLS AM Saturday Evening Session on Quinn and Illinois Taxes
• Baby Steps or Simply Mush from Christina Romer Regarding "What Obama Should Say About the Deficit"

Shanghai Prepares for Property Tax to Curb ‘Speculative’ Buying; China Addresses Symptom NOT Problem Posted: 16 Jan 2011 06:08 PM PST China's problem is rampant growth in money supply. Instead of curbing the problem, China prepares to address the symptoms, city by city it appears. Please consider Shanghai Prepares for Property Tax to Curb 'Speculative' Buying Shanghai, China's financial center, will this year prepare for a trial property tax, becoming one of the first cities in the nation to introduce the measure aimed at curbing "speculative" investment. Mayor Han Zheng announced the move in a speech to the Municipal People's Congress yesterday, without giving details of how much the tax would be or when it would be implemented. Shanghai and southwestern Chongqing are the two cities that will begin trials of a property tax, according to a Jan. 10 report by Nomura Holdings Inc., which expects China to selectively introduce a tax rate of about 0.8 percent. "We will step up macro-control measures, prioritize the supply of non-luxury residential units to be owned and occupied by ordinary citizens, and prepare for the trial reform on property tax as required by the central government," Han said. China has pledged to speed up property tax trials to rein in surging prices that have made housing too expensive for an increasing proportion of the population. Premier Wen Jiabao said on Dec. 26 that measures control housing costs weren't well implemented and that he would introduce more policies to crack down on speculation. China has tightened rules on down payments, suspended mortgages for third homes last year. Shanghai will begin building 220,000 units of subsidized housing as it pushes plans to create affordable homes, Han said in a report to the congress in Shanghai. The municipality aims to add 1 million units of subsidized housing from this year to 2015, he said. Beijing won't join the property tax trial, the Beijing News reported today, citing Deputy Mayor Ji Lin. The Chinese capital will try to finish 100,000 units of subsidized housing this year, acting "firmly" to curb rising property prices, Xinhua said, citing Mayor Guo Jinlong. Home prices in Shanghai jumped 26.1 percent in 2010 and those in Chongqing surged 29.4 percent, according to Soufun Holdings Ltd., the country's biggest real estate website owner. Unworkable Measures 1. Offering subsidies to control housing prices adds to the demand for houses. 2. Taxing houses to curb prices is complete silliness if you are just going to turn around and subsidize the tax. 3. Even without the subsidy, the problem is not prices. Rapidly rising home prices are a symptom of too much credit. In case you missed it, please see Chinese Bank Lending Spree Continues; $75 Billion New Loans First Week in January Alone; Inflation Gone Amuck China's official inflation is 5%. Unofficially, estimates are 10% as noted in China's Foreign Exchange Reserves Jump by Record $199 Billion; Cost Push Inflation from China? Don't Count On It! However, that does not count increases in home prices. It is an enormous mistake to ignore property bubbles, as the US found out, and as China, Australia, Canada, and the UK are going to find out. Vacant China City Stories Implosion of the China "Fabric City" Frenzy 10 Signs of Speculative Mania in China Email from a Chinese on China's Real Estate Bubble China property bubble will overheat until it implodes. In the meantime, regardless of what China reports on the CPI, inflation remains a huge problem. Once again, those looking for inflation can find it in China, not the US, where consumer credit is contracting. You cannot fight problems by attacking the symptom. It is tantamount to putting a person in a meat cooler to fight a fever. In this case, excess credit will go somewhere else. Perhaps more commodity speculation. Chinese Pig Farmers Speculate In Copper This story is a little dated as it is from September 17, 2009, but it exemplifies the problem with fighting symptoms. Please consider China's Pig Farmers Amass Copper, Nickel Pig farmers and other speculators may have amassed more than 50,000 metric tons, Jeremy Goldwyn, who oversees business development in Asia for London-based Sucden, wrote in an e- mailed report after a visit to China. That's about half the level of inventories tallied by the Shanghai Futures Exchange, which stood last week at a two-year high of 97,396 tons. Sucden's estimate underscores the difficulty analysts face in gauging metals demand in China amid increased speculation by retail investors, whose holdings remain outside the reporting framework undertaken by exchanges. Private investors in China also had as much as 20,000 tons of nickel, Goldwyn wrote. Also see Pig Farmers are Making Brent Nervous, from November 11, 2009. Before getting into to the relationship between copper and pork products, I want to draw your attention to what makes me nervous, have a look at these photos from China. They are excerpted from a China Central Television Channel (CCTV) program documenting private speculation and hoarding of metals throughout the country. According to an associate of mine at an Asia-focused hedge fund who was just in China, "It's pervasive; people are piling this stuff up in their backyards." Michael Pettis on Lending Quotas Inquiring minds are reading China's lending quota? by Michael Pettis. It seems to me that if Beijing wants GDP growth in 2011 to come in at the expected 9%, the amount of new investment in China – which is determined in large part by the banking system – is really not something they can decide today. It is going to be whatever it needs to be given developments in household consumption growth and the trade surplus. This is why I argued a few weeks ago that at whatever level the new loan quota was set, I was not going to think of it as constraining new lending in any way. Either the loan quota would be adjusted (upwards, almost inevitably) or more new lending would occur outside the banks' balance sheets, as it did in 2009 and 2010. Investment this year I suspect is going to be extremely high, as high as in 2009 and 2010, because it is only with very high levels of investment that we are likely to manage GDP growth rates high enough to keep Beijing happy. So my guess is that 2011 will be yet another year in this increasingly strained investment-driven party. Chinese GDP growth will continue to be the envy of the world, while those of us who worry about the sustainability and quality of the growth will worry more than ever. The banks will probably rush to expand lending in the first quarter, out of fear that they may be restricted later in the year. And of course we will all be watching the trade account very closely. On the topic of trade I am going to put on my broken-record hat and say what I have been saying for two years. Forget about momentary thaws, feel-good speeches, and pious posturing. The global trade environment is not about to get better. All of the distortions and strains remain, and the crisis in Europe is putting more pressure than ever on a resolution. .... China is overheating, it needs to slow the growth of credit. Instead, it is hell-bent on idiotic measures that cannot possibly work. So, China is going to overheat until it implodes. In the meantime everyone is going gaga over China's growth and growth targets that are not possibly sustainable. How do we know that? Easy, China's property bubble and inflation problem (massively understated at that), tells us all this "growth" is nothing but malinvestment, quite similar to the "growth" the US saw in its property bubble. We know how that ended, and it will end the same way in China, Australia, Canada, the UK, and India as well. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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.

MP3 of My WLS AM Saturday Evening Session on Quinn and Illinois Taxes Posted: 16 Jan 2011 04:00 PM PST Saturday Evening I was on "The Eddie & JoBo Show" WLS 890 AM talking about the Quinn recall and Illinois taxes. I have an MP3 of the session. Click here to Download and Listen. The segment is about 14 minutes long and was a lot of fun. Play it to the end. It goes on for about a minute after the stated cutoff. They took one ad-hoc call that's pretty funny. For more on the Quinn Recall please see Campaign To Recall Illinois Governor Pat Quinn Is Underway Business Owners Blast IL Tax Hikes;Quinn's Blatant Lies;Neighboring States Gleeful, Mayor Daley Whines;Escape to Wisconsin; Arrogance,Greed,Corruption Hello Mayor Daley ... About Your Plan to Poach Business from Oregon and Other States: No Business Owners in Their Right Mind Would Move to Illinois Please click on the first link in the above list to volunteer help. Also pass a link to this post to your friends and have them do the same. Illinois Pension Funding Worst In Entire U.S. To gain an understanding of the sorry state of Illinois pension funds please see Interactive Map of Public Pension Plans; How Badly Underfunded are the Plans in Your State? Once the map pops up, click on Illinois. Taxpayers ought to be scared to death by Illinois pension plan funding with governor Quinn at the helm. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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.

Baby Steps or Simply Mush from Christina Romer Regarding "What Obama Should Say About the Deficit" Posted: 16 Jan 2011 01:41 PM PST Christina Romer is the out-going Chair of the Council of Economic Advisers in the Obama administration. She is now member of the President's Economic Recovery Advisory Board. She has an Op-Ed economic view in the New York Times, What Obama Should Say About the Deficit. This year, instead of being on the floor of Congress with the rest of the cabinet, I will be watching on television with the rest of the country. Instead of knowing what is coming, I can write about what I hope the president will say. My hope is that the centerpiece of the speech will be a comprehensive plan for dealing with the long-run budget deficit. I am not talking about two paragraphs lamenting the problem and vowing to fix it. I am looking for pages and pages of concrete proposals that the administration is ready to fight for. The recommendations of the bipartisan National Commission on Fiscal Responsibility and Reform that the president created are a very good place to start. The need for such a bold plan is urgent — both politically and economically. Voters made it clear last November that they were fed up with red ink. President Obama should embrace the reality that his re-election may depend on facing up to the budget problem. The economic need is also pressing. The extreme deficits of the last few years are largely a consequence of the terrible state of the economy and the actions needed to stem the downturn. But even with a strong recovery, under current policy the deficit is projected to be more than 6 percent of gross domestic product in 2020. By 2035, if the twin tsunami of rising health care costs and the retirement of the baby boomers hits with full force, we will be looking at deficits of at least 15 percent of G.D.P. Such deficits are not sustainable. At some point — likely well before 2035 — investors would revolt and the United States would be unable to borrow. We would become the Argentina of the 21st century. So far so good. Romer is saying all the right things. That is the Romer we knew and loved. However, watch the article morph into compete mush in a matter of sentences. She continues... So what should the president say and do? First, he should make clear that the issue is spending and taxes over the coming decades, not spending in 2011. Republicans in Congress have pledged to cut nonmilitary, non-entitlement spending in 2011 by $100 billion (less if recent reports are correct). Such a step would do nothing to address the fundamental drivers of the budget problem, and would weaken the economy when we are only beginning to recover. Instead, the president should outline major cuts in spending that would go into effect over the next few decades, and that he wants to sign into law in 2011. Respected analysts across the ideological spectrum agree that rising health care spending is the biggest source of the frightening long-run deficit projections. That is why the president made cost control central to health reform legislation. He should vow not just to veto a repeal of the legislation, but to fight to strengthen its cost-containment mechanisms. One important provision of the law was the creation of the Independent Payment Advisory Board, which must propose reforms if Medicare spending exceeds the target rate of growth. But the legislation exempted some providers and much government health spending from the board's purview. The president should work to give the board a broader mandate for cost control. The fiscal commission recommended that military spending — which has risen by more than 50 percent in real terms since 2001 — grow much more slowly in the future. It also proposed thoughtful ways to slow the growth of Social Security spending while protecting the disabled and the poor. And it recommended caps on nonmilitary, non-entitlement spending. President Obama needs to explain that while these cuts will be painful, there is no way to solve our budget problem without shared sacrifice. Did you catch that? Romer did not name one cut! Instead she called for ... Cost-containment mechanisms in healthcare An Independent Payment Advisory Board, which must propose reforms if Medicare spending exceeds the target rate of growth. Slower growth in military spending Thoughtful ways to slow the growth of Social Security spending while protecting the disabled and the poor. Caps on nonmilitary, non-entitlement spending Complete Mush For starters, the Independent Payment Advisory Board would be another totally useless board that will cost taxpayers money because the study would be tossed in the gutter by Congress before anyone even reads it. We know that simply from the title of it (see word #3). Sadly, Romer tells the President what he needs to do in plain simple English then drafts a proposal for a speech that calls for nothing of the kind. Since when is a slowing of growth called a "cut". Since when is a "cap" a cut? Worse yet, note the proposed cap is on "nonmilitary, non-entitlement spending". It is mandatory we CUT military spending and she cannot even mention cap except for piddly nonmilitary, non-entitlement spending. Budgetary Delusions: Federal Deficit Charts from CBO Budget Projections Let's review Budgetary Delusions: Federal Deficit Charts from CBO Budget Projections Can the budget deficit be solved by cutting earmarks? How about cutting 100% of all federal non-defense discretionary expenditures? US Federal Revenues and Expenditures 2000-2020 click on chart for sharper image That chart is from reader "David" and is based on budget projections from the CBO. The main point is from now until 2020, we could eliminate 100% of all federal non-defense discretionary expenditures and still run a deficit. Romer's proposed "cut" is to cap it. Meanwhile check out the following chart. Entitlement Spending Growth click on chart for sharper image Both charts are from David who posts on the No Money No Worries blog. Mind To Mush Romer's mind has clearly gone to mush. Let's see if we can figure out when that happened. In 2007 her mind appeared to be in working order. I make that claim based on a review of The Macroeconomic Effects of Tax Changes, an article regarding "Exogenous Tax Changes" classified as "any tax change not motivated by a desire to return output growth to normal". Here are a few select quotes. Exogenous Tax Change Effects "We find that exogenous tax increases have a large, rapid, and highly statistically significant negative effect on output." "Among exogenous tax changes, we find that tax increases motivated by a desire to reduce an inherited deficit appear to have much smaller effects on output than tax changes taken for long-run reasons." "Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent." "We examine how exogenous tax changes affect the components of real GDP, such as consumption, investment, and imports. The most striking finding is that tax increases have a large negative effect on investment." "The estimated maximum effect of an exogenous tax increase of one percent of GDP is a fall in output of 3.9 percent." "The response to a long-run tax increase is negative, large, and highly statistically significant. In contrast, the response to a deficit-driven tax increase is positive, though not significant." "For all legislated tax changes, controlling for spending has a larger effect." Romer's Conclusion Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent. Our many robustness checks for the most part point to a slightly smaller decline, but one that is still well over two percent. Second, these estimated effects are substantially larger than those obtained using broader measures of tax changes, such as the change in cyclically adjusted revenues or all legislated tax changes. This suggests that failing to account for the reasons for tax changes can lead to substantially biased estimates of the macroeconomic effects of fiscal actions. Third, investment falls sharply in response to exogenous tax increases. Indeed, the strong response of investment helps to explain why the output consequences of tax changes are so large. Fourth, the output effects of tax changes are highly persistent. The behavior of inflation and unemployment suggests that this persistence reflects long-lasting departures of output from its flexible-price level, not large effects of tax changes on the flexible-price level of output. Romer on the Unemployment Rate Please consider Figure 1 from The Job Impact of the American Recovery and Reinvestment Plan by Christina Romer, January, 9, 2009. As Figure 1 shows, even with the large prototypical package, the unemployment rate in 2010Q4 is predicted to be approximately 7.0%, which is well below the approximately 8.8% that would result in the absence of a plan. Mind Mush Disease Romer's mind appears to have turned to mush sometime slightly before or slightly after she was appointed as Chair of the Council of Economic Advisers. Either way, we can see that Romer's mind is still mush after she left that position. Proof if the New York Times column she just wrote. Then again, it's fair to point out she is now member of the President's Economic Recovery Advisory Board. Perhaps that explains the continued progression of MMD "Mind Mush Disease". Regardless, somehow, somewhere along the way, she started thinking that slowing growth was the same thing as a cut. Somehow, somewhere along the way, she started thinking that "capping" nonmilitary, non-entitlement spending" would make a difference. For the sake of macroeconomists everywhere, we must answer the crucial question "Did Romer's mind turn to mush slightly before she was appointed (explaining why she was appointed), or did her mind turn to mush after she was appointed? Either way, the safe thing for economists to do is refuse such appointments. Then again, if all economists acted on that simple principle, only those whose minds are already mush would accept such appointments. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To scroll Thru My Recent Post List 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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Seth's Blog : Self-destructive instructions

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Self-destructive instructions

If you ever have to say 'lighten up' to someone, you've failed twice. The first time, when you misjudged an interaction and the other person reacted in a way you're unhappy with, and the second time, when you issue this instruction, one that is guaranteed to evoke precisely the opposite reaction you're intending.

I'll add "I was joking," to this list, because it's an incredibly lame excuse for a failed interaction.

One more: Raising your voice while you say, "You're just going to have to calm down!" (And I'll add librarians yelling at kids to be quiet...)

It's completely valid to come to the conclusion that someone else can't be a worthy audience, conversation partner or otherwise interact with you. You can quietly say to yourself, "this guy is a stiff, I'm never going to be able to please him." But the minute you throw back instructions designed to 'cure' the other person, I fear you're going to get precisely the opposite of what you were hoping for.

(Generally speaking, the word "oh" is so neutral, it's a helpful go to pause while you wait for things to calm down.)

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Mish's Global Economic Trend Analysis

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• Pimco CEO says "Europe is Kicking the Can, Bondholder Haircut Coming"
• Streaming Error
• Eddie & JoBo Show - WLS 890 - 8:05 PM Saturday - I 'm on Discussing Governor Quinn Recall
• Chinese Bank Lending Spree Continues; $75 Billion New Loans First Week in January Alone; Inflation Gone Amuck
• Hello Mayor Daley ... About Your Plan to Poach Business from Oregon and Other States: No Business Owners in Their Right Mind Would Move to Illinois

Pimco CEO says "Europe is Kicking the Can, Bondholder Haircut Coming" Posted: 15 Jan 2011 08:26 PM PST Pimco co-CEO Mohammed El-Erian says European Bond Investors Must Accept Losses "The main issue right now is the integrity of the eurozone is getting weaker and weaker as we delay the problem," El-Erian tells CNBC. "They are simply kicking the can down the road." "Ultimately there will be a haircut to bonds issued by certain governments in the eurozone, and the longer we delay that recognition the bigger the problem and the more disorderly the process will be." El-Erian believes U.S. municipal bonds are an especially interesting market now. "We are in the midst of a massive adjustment in the state and local level that we're going to have to undertake," he says. "The key issue when you invest in municipals is two things: It's not just in the rate risk, it's interest rate and credit risk, and therefore be highly differentiated. You want to be very high up in the credit curve." In regards to Europe, El-Erian is not saying anything I did not say a year ago. In regards to Munis, he brings up several factors. 1. Rate Risk 2. Default Risk 3. Differentiation I certainly agree. However, even if one can navigate number 3 (and I expect PIMCO to be able to do just that), you still have rate risk and you have something he did not mention, sentiment. While sentiment will certainly impact rates, if several major municipalities blowup, or even if people think they might, there could be a massacre in munis across the board. I see little reason to invest in munis until that happens. In the meantime, default risk is unappreciated in general, even though I disagree with Meredith Whitney who I believe overstates the problem. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To scroll Thru My Recent Post List 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.

Streaming Error Posted: 15 Jan 2011 08:26 PM PST In reference to Eddie & JoBo Show - WLS 890 - 8:05 PM Saturday - I'm on Discussing Governor Quinn Recall ... Unfortunately there was a streaming error with the audio on WLS 980. WLS did not point to the live feed but a prior show. I am told this was only the second time it happened. I may be able to get an MP3 of my segment. If so I will post it. I was on 18 minutes. Time went by very quickly. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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.

Eddie & JoBo Show - WLS 890 - 8:05 PM Saturday - I 'm on Discussing Governor Quinn Recall Posted: 15 Jan 2011 03:47 PM PST I received an email moments ago from Eddie Volkman at WLS AM 890 Chicago asking me to be on for a live 18-20 minute segment tonight. The discussion will be on Governor Quinn, the tax hikes, how those tax hikes will impact the state of Illinois, and what we can do about it. Hey Mike... I'm Eddie Volkman from "The Eddie & JoBo Show" now on WLS-AM, 7-9pm Saturdays. Wondering if we could get you on with us to talk about your Quinn recall. The whole tax thing is obviously a huge topic right now and listeners are fuming. We'll be talking about it in the 7 o'clock hour tonight. Sorry for short notice but I came across your blog and it's quite intriguing! Thanks! Eddie Volkman Click here to listen live Call in 312-591-8900 Or text "WLSAM" to 68683 or tweet to @wlsam890 Tune in, it should be fun. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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.

Chinese Bank Lending Spree Continues; $75 Billion New Loans First Week in January Alone; Inflation Gone Amuck Posted: 15 Jan 2011 11:10 AM PST China wants to rein in inflation, or so it says. It also wants 10% growth per year as far as the eye can see. It does not want to float the Yuan, and it does not want to hike interest rates. Nor does China want to do anything about credit gone amuck. In other words, China wants the proverbial "free lunch". Given there is no free lunch, China is overheating. Please consider China bank loans near 500 billion yuan in January Chinese banks continued their lending frenzy in the beginning of the year, doling out 500 billion yuan ($75.6 billion) in new loans in the first week of January alone, putting fresh pressure on the central bank to tighten policy to put a lid on inflation. The loan figure includes about 210 billion yuan extended by the "Big Four" state lenders, sources with direct knowledge of the figures told Reuters on Wednesday. The overall lending figure would roughly equal the new loans extended during all of December. New lending in December reached 480.7 billion yuan, meaning China overshot the government's target of keeping bank loans to 7.5 trillion yuan in 2010. Banks lent 7.95 trillion yuan ($1.2 trillion) in 2010, overshooting Beijing's target and highlighting the need for more decisive policy tightening. In the past, China used loan quotas to keep a handle on lending. This year, the central bank has pledged to refine that system with regular calibrations of reserve requirements. Rampant, Understated Inflation 7.5 trillion yuan is about 1.14 trillion US dollars. You are not going to have that kind of credit expansion, while building entirely vacant cities in the process. China's official inflation is 5%. Unofficially, estimates are 10% as noted in China's Foreign Exchange Reserves Jump by Record $199 Billion; Cost Push Inflation from China? Don't Count On It! However, that does not count increases in home prices. It is an enormous mistake to ignore property bubbles, as the US found out, and as China, Australia, Canada, and the UK are going to find out. China's Vacant Cities In case you missed it, please consider Amazing Satellite Images Of The Ghost Cities Of China on the Business Insider. "There's city after city full of empty streets and vast government buildings, some in the most inhospitable locations. It is the modern equivalent of building pyramids. With 20 new cities being built every year, we hope to be able to expand our list going forward." More Vacant China City Stories Implosion of the China "Fabric City" Frenzy 10 Signs of Speculative Mania in China Email from a Chinese on China's Real Estate Bubble China property bubble will overheat until it implodes. In the meantime, regardless of what China reports on the CPI, inflation remains a huge problem. Once again, those looking for inflation can find it in China, not the US, where consumer credit is contracting. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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.

Hello Mayor Daley ... About Your Plan to Poach Business from Oregon and Other States: No Business Owners in Their Right Mind Would Move to Illinois Posted: 15 Jan 2011 12:34 AM PST Mayor Daley had a plan to persuade businesses to come to Illinois. Unfortunately for Illinois, it was a horrendously executed plan. Mayor Daley forgot to lift a finger in the last election against Governor Quinn. Now Daley is whining. This is a piss poor time to be whining about higher taxes. Had Daley made any appropriate remarks regarding tax hikes by Quinn before the election, Illinois would have had a different governor. About That Plan ... Oregon Live reports So much for Chicago talk of poaching Oregon business In the wake of the Measure 66 and 67 tax increases approved by Oregon voters a year ago, Chicago Mayor Richard Daley quickly said he'd be recruiting Oregon businesses to move to his own supposedly more business-friendly city. Wonder what Daley is saying now that Illinois legislators have approved a stunning 66 percent increase in the state's income tax? Here's some of the fine print, if you want to more deeply compare the two states: Under the new bill, the Illinois personal income-tax rate - 5 percent - will still be much lower than Oregon's. But Illinois has high sales taxes. In 2008, just as the recession was first hitting, the total state and local tax burden in Illinois $4,346 per capita compared to $3,719 in Oregon, according to the Tax Foundation. Because Oregon had a lower per capita income, however, Illinois residents paid 9.3 percent of their income in state and local taxes and Oregonians paid 9.4 percent. Blatant Lies By Governor Quinn The Daily Herald notes that On the campaign trail, Gov. Pat Quinn told voters he'd veto any income tax hike that would raise Illinois' rate over 4 percent. I believe this is one of the fastest proven lies political history. Sales Taxes Illinois has a middle of the road sales tax, at least until you consider various local surtaxes. Here is a nice table from Wikipedia. Home Rule With "Home Rule" Illinois has the top sales tax rate in the nation. With that, inquiring minds might be wondering about "Home Rule". To help explain, please consider the following snip courtesy of the Illinois Department of Revenue. Depending upon the location of the sale, the actual sales tax rate may be higher than the fundamental rate because of home rule, non-home rule, water commission, mass transit, park district, and county public safety sales taxes. Lovely, isn't it. Note that sales taxes may rise because of home rule or non-home rule. Businesses moving into Illinois just might beware of moving into cities or counties with high "Home Rules". Which places might that be? Well Mayor Daley's Cook County of course, but it could be anywhere. Gasoline Taxes January 2011 Diesel Taxes January 2011 Gasoline and Diesel Charts courtesy of the American Petroleum Institute. Truckers, Take The South Central Route As a courtesy to my trucker friends, it appears avoiding fillups in California, Illinois, Indiana, New York, and Pennsylvania is of paramount concern. My advice to Wisconsin would be to drop Diesel taxes to match Missouri's 41.7 in order to secure the Northern fillup route. Any trucker going cross country and filling up in Illinois, Indiana, New York, or Pennsylvania is clearly nuts. Truckers probably know this, but state legislatures don't. Property Taxes Fiscal insanity goes beyond massive personal income and corporate tax hikes. Cities in Illinois have among the highest property taxes in the nation. I pay over $14,000 a year on a home I think I could sell for $600,000. Bear in mind about four years ago I challenged the assessment (and won), which reduced my taxes to about $12,500. My taxes are now back up to over $14,000. Does anyone think property valuations have risen in the last four years? Gubernatorial Bribery, Corruption - Elect, Indict, Repeat Illinois Issues Online is asking Will democracy, Illinois style, ever change? Illinois' reputation for corruption is well-documented. Nine men have served as governor in the past 50 years. Two — Democrat Otto Kerner and Republican George Ryan — were convicted of crimes they committed while in office. (Ryan is appealing his conviction.) Democrat Dan Walker also was imprisoned after he left office, but for crimes unconnected to his tenure as governor. And Republican William Stratton was indicted for tax evasion in connection to his use of campaign funds, but he was ultimately acquitted. As Democratic Gov. Rod Blagojevich begins his second term, federal investigations of his administration's hiring and contract practices continue. His fundraiser and political adviser Antoin "Tony" Rezko has been indicted for an influence-peddling scheme. Though Blagojevich has not been charged with any wrongdoing himself, based on the persistent federal prosecutor's previous record, it's fair to say that could change. It is possible, in other words, that the majority of Illinois governors who served during the past half century could end up being indicted on corruption charges. That so many Illinoisans at state government's apex have been accused of crime raises the question of whether there is a culture of corruption. Culture of Corruption That article is from 2007 and is clearly out of date. Blagojevich was convicted on one of 24 counts so add Blago to the convicted list. He stands retrial on 23 deadlocked charges after a Judge Refuses to Overturn Rod Blagojevich Conviction. That story is as of October 27, 2010. How Blago escaped conviction on 23 other charges is quite a mystery to me. The official score is 3 out of the last 10 Illinois governors were convicted of crimes while in office and a 4th convicted after he left. A 5th was charged and acquitted. Can any other state match that? About That Corporate Tax Hike Illinois hiked its corporate tax rate to 7% from the current 4.8%. Several people sent emails stating that 7% did not sound so bad. However, they failed to consider that Illinois collects from all businesses a 2.5 percent "personal property replacement tax". As a result of the decision, small businesses will now be paying a tax rate of 7 percent, up from the current 4.8 percent. However, added together with the 2.5 percent personal property replacement tax Illinois mandates, business owners' tax burden will now reach 9.5 percent. "This will hurt business in the state," Steven Slack, president of Home State Bank, told the Northwest Herald. "I know several manufacturing clients being courted by other states; they could leave and take all those jobs with them." No Business In Their Right Mind Would Move To Illinois If you were a business owner would you want to move to Illinois in the face of huge corporate tax hikes, a whopping 67% personal income tax hike, massive property taxes, and a tax prone political liar as governor? For every incoming business (they will all be trumped up), there will be dozens of corporate downsizings, and several complete exoduses (with little to no fanfare). Illinois desperately needs jobs. However, a culture of corruption and high taxes is driving them away. What You Can Do About It If you are fed up with corruption, vote buying, and massive tax hikes then you need to take a stand. Campaign To Recall Illinois Governor Pat Quinn Underway My Campaign To Recall Illinois Governor Pat Quinn Is Underway I have exciting news this morning. I am launching a campaign to recall Illinois governor Pat Quinn. This is not a frivolous effort. It is a serious undertaking and one in which I intend to see to the end. It will take hard work and lots of volunteers but we will be successful. I need volunteers to ... Gather signatures Talk to state legislative representatives to get them on board Provide legal help Design a website Help with advertising We need to be successful because Governor Quinn has plans that will destroy Illinois. Will You Stand Up To The Injustice? There are many tasks to be performed and I will need volunteers from every county to gather signatures. I estimate we need about 520,000 signatures. My goal is to get 700,000. If you can volunteer, time, web design, advertising, legal help, or any kind of general assistance, I would appreciate it. We need to put a stop to Quinn's proposals that will drive businesses and jobs out of the state and massively raise your taxes as part of the bargain. Call To Action I wrote the above call to action post on Sunday, January 9, 2011. Since then I have had over 200 volunteers (up from a hundred a couple days ago). I have 10 web designers, 3 lawyers (up from 1), and numerous business owners volunteer as well. Work on a website is underway. I have secured the appropriate domain names. One business owner who employs about 100 people graciously volunteered services of his legal department. This is going to be a long slug, no doubt about it. Yet other than leave the state, there is little else we can do. I do need business owners to contact their legislative representatives and pressure them to sign the petition to Recall Quinn. There are 118 state representatives and 59 state senators. To get started, all we need are 20 reps (10 each party), and 10 senators (5 each party), before we start the signature gathering process. Please contact your representatives and get them on board. In the meantime, please email Recall Governor Pat Quinn Today (RecallQuinnToday@gmail.com) and lend your support to the effort to save the state of Illinois from Quinn's fiscal recklessness. Please state in the email what you can do to help. If you live in Illinois or have friends in Illinois, please email this article to them. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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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Your Weekly Address: "Before We are Democrats or Republicans, We are Americans"

Your Daily Snapshot for Saturday, Jan. 15,  2011   Your Weekly Address: "Before We are Democrats or Republicans, We are Americans" As Congress returns to work, the President calls on them -- and all of us -- to debate our differences vigorously but to live up to the spirit of common cause we felt following the tragedy in Arizona. Watch the video. Weekly Wrap Up Tragedy in Arizona: On Saturday, January 8th, 2011, senseless acts of violence committed in Tucson, Arizona claimed innocent lives. At a memorial event, President Obama asked Americans to channel their emotions toward the pursuit of a more perfect union, saying that "If this tragedy prompts reflection and debate -- as it should -- let’s make sure it’s worthy of those we have lost." Watch the video. View the photo gallery. Read an open letter to parents from the First Lady. MLK Day: Find opportunities in your community to honor Dr. King and mark the 25th anniversary of the holiday by volunteering with a service project near you. In Numbers: Less than a month after President Obama signs the tax cut compromise, millions of American workers are already seeing the impact show up in their paychecks from the payroll tax cut – here are some numbers to help you understand what that means. Changes for Cuba and America: The President directs the Secretaries of State, Treasury, and Homeland Security to take a series of steps to continue efforts to reach out to the Cuban people in support of their desire to freely determine their country’s future. Read the announcement. Honoring Holbrooke: The President joins countless others in honoring legend of American diplomacy Richard Holbrooke. Read the remarks. West Wing Week: Preview of "Dispatches from Sudan": This week, an historic referendum took place in Sudan and West Wing Week takes you there. Join General Scott Gration, President Obama's Special Envoy to Sudan, for a unique look at the vote that could result in the world's newest nation. Watch the video. VP Visits Afghanistan: Vice President Biden spends the week in Afghanistan to assess progress toward full independence for Afghanistan, meet with our partners, and commend our troops. Read the post. View the gallery. Haiti: One Year Later: A statement from the President. A look back on the last year and on toward the future from the highest-ranking Haitian-American official in the Obama Administration. Get Updates Sign Up for the Daily Snapshot  Stay Connected     Facebook Twitter YouTube Flickr iTunes           This email was sent to e0nstar1.blog@gmail.com Manage Subscriptions for e0nstar1.blog@gmail.com Sign Up for Updates from the White House Unsubscribe e0nstar1.blog@gmail.com | Privacy Policy Please do not reply to this email. Contact the White House The White House • 1600 Pennsylvania Ave NW • Washington, DC 20500 • 202-456-1111