Mish's Global Economic Trend Analysis

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• Goldman Sachs Plunges in Late Trading on News CEO Blankfein Hires High-Profile Defense Attorney; Perjury Regarding Testimony Before Congress Proposed
• Bank of America Tanks; Gold Goes Parabolic, No Telling Where It Stops
• Global Trade Wars, Smoot-Hawley, and Peak Oil Followup to 12 Predictions from Michael Pettis
• Last Chance to Oppose the Obama's Labor Board Union Elections Scheme
• Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions

Goldman Sachs Plunges in Late Trading on News CEO Blankfein Hires High-Profile Defense Attorney; Perjury Regarding Testimony Before Congress Proposed Posted: 22 Aug 2011 02:16 PM PDT Shares of Goldman Sachs hit the skids in late trading so much so that people were asking "what's up?" GS - Goldman Sachs 15-Minute Chart Reuters explains in Goldman CEO hires high-profile attorney Goldman Sachs Chief Executive Lloyd Blankfein has hired Reid Weingarten, a high-profile Washington defense attorney whose past clients include a former Enron accounting officer, according to a government source familiar with the matter. Blankfein, 56, is in his sixth year at the helm of the largest U.S. investment bank, which has spent two years dodging accusations of conflicts of interest and fraud. The move to retain Weingarten comes as investigations of Goldman and its role in the 2007-2009 financial crisis continue. The U.S. Securities and Exchange Commission scored a $550 million settlement against the bank in a fraud lawsuit in July 2010, but other investigations continue. "Why do you bring in someone like that?" said the source, who was not authorized to speak publicly. "It says one thing: that they're taking it seriously." Blankfein has not been charged in any civil or criminal case, and it was not immediately clear why he hired Weingarten. One former federal prosecutor, who was not authorized to speak publicly, said Blankfein may have hired outside counsel after receiving a request from investigators for documents or other information. The Senate report raised questions about inconsistencies between testimony from Blankfein and other Goldman executives to Congress and emails unearthed in the Senate investigation. The subcommittee's chairman, Senator Carl Levin, has said the question of whether Blankfein and others committed perjury is up to the relevant federal agencies. The former prosecutor cautioned that perjury cases were difficult to prove, adding that prosecutors would not bring charges unless they had a "rock solid case. GS - Goldman Sachs Monthly Chart Whatever the reasons, Goldman Sachs is revisiting a share price last seen in 2009. I truly hope they nail Lloyd Blankfein and the New York Fed along with him. Do [not] count on it. No one has paid a price yet. Note: That was supposed to say do "not" count on it. I accidentally left out the "not" and just added it in. 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.

Bank of America Tanks; Gold Goes Parabolic, No Telling Where It Stops Posted: 22 Aug 2011 12:51 PM PDT I am somewhat amused by the lack of commentary on the latest advance in gold. Did people sell, waiting for a correction that did not come? I do not know the answer to that, but I can see that financials have been clobbered, led by Bank of America, while gold has soared. These events are not unrelated. Bank of America Daily click on any chart for sharper image Bank of America Weekly Questions Abound Who would have believed in 2007 that a 44 cent drop in share price would amount to a 6.3% move? How long before Bank of America tests that spike low of $2.51? How much is CEO Brian Moynihan worth? I suggest the answer to question number three is a negative number on the basis that Moynihan and former CEO Ken Lewis drove the company into the ground with excessive risk-taking and stupid-beyond-belief mergers. The best I can report however, is that Moynihan has voluntarily reduced his bonus to $0, suffering the pain and agony of having to live on salary of a mere $950,000. This of course brings up question number four. How can CEOs possibly scrape by on such meager sums of money? Note: Bank of America closed down 55 cents (7.89%). Gold Goes Parabolic While pondering the brutal injustice of ridiculously low CEO wages, we now must turn our focus to gold. Gold Daily Chart This is no longer an orderly-looking move, but a weekly chart can help maintain perspective. Gold Weekly Chart If this is the start of gold-bugs long awaited extreme move, there is no telling where it stops. Is it? I don't know (and they don't either). What should be plain to see is that financial stocks, especially banks have been clobbered this year. Banks are under-capitalized, over-leveraged and realistically bankrupt. Mistrust of fiat currencies is high and rising. Global Banking System Insolvent For more on banks please see ... August 21, 2011: Is Germany's Commerzbank in Need of Another Bailout? August 20, 2011: Bank of England Regulator Argues "Banks Need to Take More Risks" to Underpin Economy; Revisionist Roosevelt History August 15, 2011: BNP Paribas leveraged 27:1; Société Générale Leveraged 50:1; Sorry State of Affairs of U.S. Banks; Global Financial System is Bankrupt August 10, 2011: European Banks Hammered; Societe Generale "Denies All Rumors"; French Bank Option Prices Soar; Credit Default Swaps on France Under Attack July 18, 2011: Bank of America Clobbered on $50 Billion Capital Shortfall Related to Mortgage Losses The entire global financial system is balanced on a mountain of debt, and that debt cannot be paid back. That is the message of gold, not the popularly believed fallacy regarding massive inflation. Is gold reflecting a chance it once again has a role in international trade? I believe so, and let's hope that happens. 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.

Global Trade Wars, Smoot-Hawley, and Peak Oil Followup to 12 Predictions from Michael Pettis Posted: 22 Aug 2011 10:25 AM PDT In response to Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions Reader Craig writes ... "I was shocked by your commentary on 12. I thought for sure you would come out blasting U.S. trade restrictions as protectionist and leading to economic slowdown in the U.S. Instead, you basically said what Trump has been saying in every interview, and that is that China is playing us for fools and that we need to recapture our manufacturing from them. I thought you were a "free trader" to the max." Craig, I am indeed a free trade advocate and I certainly do not agree with Donald Trump and other protectionists such as Paul Krugman. I simply failed to point out every nuance in the article I disagree with. It is a mistake to assume I agree with "everything" in an article just because I agree with 90% of it. I made no specific comments on protectionism so there should not have been an implication of agreement. I do not think the US gains by protectionism. Other countries will do the same and US exports will dive if imports dive as other countries retaliate. There is serious potential for another Smoot-Hawley with equally devastating consequences if Congress goes overboard. Where I did comment and where I agree with Pettis' contrarian thinking is that the brunt of the adjustment will be felt on trade surplus countries. Mathematically it has to, in any kind of rebalancing. Not every country can run a trade surplus. It is impossible. Moreover, and as Pettis points out, the imposed austerity measures in Europe will impact Germany's ability to export. The slowdown in China and the US will also impact Germany. The question is whether or not adjustments come about in a reasonable manner or by trade wars and currency devaluations. No one wins in another Smoot-Hawley setup. I have pointed out what I believe is the solution on many occasions. Rather than tariffs I have supported a return to the gold standard. I saw no need to bring it up yet again, but perhaps I should have. Here are the pertinent links once again. Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited Michael Pettis Warns of "Virulent Political Turn Against Euro", Adds Clarification to "Gold's Honest Discipline" To that I would add we desperately need to get rid of fractional reserve lending. I also want to add a note that peak oil (some say "peak everything") will impact China's ability to have an investment led economy based forever expanding infrastructure. Add peak oil to the list of reasons China will slow, whether they like it or not. 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.

Last Chance to Oppose the Obama's Labor Board Union Elections Scheme Posted: 22 Aug 2011 10:07 AM PDT The National-Right-to-Work foundation notes that Monday is your Last Chance to Oppose the Obama's Labor Board Union Elections Scheme Dear Concerned American, Through Monday August 22, the National Labor Relations Board (NLRB) is accepting public comments on its proposed rule changes to union certification election procedures. The new election guidelines would make union certification elections as one-sided as possible by ambushing workers with quick-snap elections and invading workers' privacy by forcing companies to hand over their addresses, phone numbers, and shift schedules to union bosses. So far, the Board has received over 8,000 comments -- overwhelmingly pro-Right to Work and against the ambush election procedures. Tell the Obama Labor Board that, as a concerned citizen, you oppose: 1. Ambush elections that allow aggressive union organizers to conduct one-sided unionization campaigns and deny workers sufficient time to educate themselves and coworkers about the effects of unionization and organize in opposition to the union; 2. Invading workers' privacy and exposing them to intimidating "home visits" by forcing employers to provide to union organizers the name, home address, phone number, email address, and shift schedule of each worker; 3. Abusive card check campaigns in which union organizers lie, trick, or harass workers into signing "union authorization cards" -- a practice that could become significantly more prevalent under the proposed rules because union organizers may withdraw the election petition but keep the list of employees' personal information to launch a card check campaign at a later date. Click here to register your opposition to the NLRB's latest union-boss power grab The bureaucrats at the Obama Labor Board are out of control. Demand they stop acting as an organizing tool for Big Labor. I hope you'll act right away. Sincerely, Mark Mix President, National Right to Work Foundation Click here to register your opposition to the NLRB's latest union-boss power grab. It will only take a few minutes to register your opposition this blatant abuse of power by the Obama administration. 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.

Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions Posted: 22 Aug 2011 01:56 AM PDT Via email, Michael Pettis at China Financial Markets shared his outlook for China, Europe, and the world. The overall outlook is not pretty, and includes a breakup of the Eurozone, a major slowdown for China, and a smack-down of the much beloved BRICs. Pettis Writes ... August is supposed to be a slow month, but of course this August has been hectic, and a lot crueler than April ever was. The US downgrade set off a storm of market volatility, along with bizarre concern in the US about whether or not China will stop buying US debt and the economic consequence if it does, and equally bizarre bluster within China about their refraining from buying more debt until the US reforms the economy and brings down debt levels. What both sides seem to have in common is an almost breathtaking ignorance of the global balance of payment mechanisms. China cannot stop buying US debt until it engineers a major adjustment within its economy, which it is reluctant to do. Until it does, any move by the US to cut down its borrowing and spending will trigger a drop in global demand which will cause either US unemployment to rise, if the US ignores trade issues, or will cause Chinese unemployment to rise, if the US moves to counteract Chinese currency intervention. The Big Picture Rather than try to wade through all the news this month, much of which doesn't seem to have much informational content, I thought I would duck out altogether and instead make a list of things I expect will happen over the next several years. We are so caught up in noise and market volatility – as the market swings first in one direction and then, as regulators react, in the other direction – that it is easy to lose sight of the bigger picture. My basic sense is that we are at the end of one of the six or so major globalization cycles that have occurred in the past two centuries. If I am right, this means that there still is a pretty significant set of major adjustments globally that have to take place before we will have reversed the most important of the many global debt and payments imbalances that have been created during the last two decades. These will be driven overall by a contraction in global liquidity, a sharply rising risk premium, substantial deleveraging, and a sharp contraction in international trade and capital imbalances. To summarize, my predictions are: BRICs and other developing countries have not decoupled in any meaningful sense, and once the current liquidity-driven investment boom subsides the developing world will be hit hard by the global crisis. Over the next two years Chinese household consumption will continue declining as a share of GDP. Chinese debt levels will continue to rise quickly over the rest of this year and next. Chinese growth will begin to slow sharply by 2013-14 and will hit an average of 3% well before the end of the decade. Any decline in GDP growth will disproportionately affect investment and so the demand for non-food commodities. If the PBoC resists interest rate cuts as inflation declines, China may even begin slowing in 2012. Much slower growth in China will not lead to social unrest if China meaningfully rebalances. Within three years Beijing will be seriously examining large-scale privatization as part of its adjustment policy. European politics will continue to deteriorate rapidly and the major political parties will either become increasingly radicalized or marginalized. Spain and several countries, perhaps even Italy (but probably not France) will be forced to leave the euro and restructure their debt with significant debt forgiveness. Germany will stubbornly (and foolishly) refuse to bear its share of the burden of the European adjustment, and the subsequent retaliation by the deficit countries will cause German growth to drop to zero or negative for many years. Trade protection sentiment in the US will rise inexorably and unemployment stays high for a few more years. 1. No BRIC Decoupling Since most global consumption comes from the US, Europe and Japan, the collapse in their demand will ultimately be very painful for the BRICs and the rest of the developing world. The latter have postponed the impact of contracting consumption by increasing domestic investment, in some cases very sharply, but the purpose of higher current investment is to serve higher future consumption. In many countries, most notably China, the higher investment will itself limit future consumption growth, and so with weak consumption growth in the developed world, and no relief from the developing world, today's higher investment will actually exacerbate the impact of the current contraction in consumption. 2. Near-Term Decline in Chinese Consumption By 2013 Chinese household consumption will still not have exceeded the 35% of Chinese GDP reached in 2009. In fact it will probably be lower. Premier Wen listed the need to raise the consumption share of GDP second in his speech last March before the unveiling of the new Five-Year Plan. But I remain very, very skeptical. Low consumption levels are not an accidental coincidence. They are fundamental to the growth model, and the suppression of consumption is a consequence of the very policies – low wage growth relative to productivity growth, an undervalued currency and, above all, artificially low interest rates – that have generated the furious GDP growth. You cannot change the former without giving up the latter. Until Beijing acknowledges that it must dramatically transform the growth model, which it doesn't yet seemed to have acknowledged, consumption will continue to be suppressed. 3. Chinese Debt Levels will Continue to Rise Very Quickly The attempts to rein in debt growth will fail because they address specific areas of debt and not the overall tendency of the system to generate debt. China funds almost all of its major investments with bank debt, and it long ago ran out of obvious investments that are economically viable – at least investments that are likely to be generated by what is a distorted system with very skewed incentives – so increases in investment must be matched by increases in debt. To the extent that investments are not economically viable, this means that the value of debt correctly calculated must rise faster than the value of assets. By definition this results in an unsustainable rise in debt. 4. By 2013-14 Chinese GDP Growth will Slow sharply I don't expect a significant growth slow-down until after the new leadership takes power in late 2012, but my guess (and hope) is that by 2013 the stubborn refusal of consumption to rise as share of GDP, and the continuing surge in debt, will have convinced all but the most recalcitrant that China needs a dramatic change of policy. Why do I say we will be talking about 3% growth soon? Two reasons. First, I am impressed by the bleakness of historical precedents. Every single case in history that I have been able to find of countries undergoing a decade or more of "miracle" levels of growth driven by investment (and there are many) has ended with long periods of extremely low or even negative growth – often referred to as "lost decades" – which turned out to be far worse than even the most pessimistic forecasts of the few skeptics that existed during the boom period. I see no reason why China, having pursued the most extreme version of this growth model, would somehow find itself immune from the consequences that have afflicted every other case. Second, I just use a very simple calculus. Remember that rebalancing is not an option for China. It will happen one way or the other, and the sooner the less disruptive. And for China to rebalance in a meaningful way, consumption growth is going to have to outpace GDP growth by at least 3-4 full percentage points (and even then, at that rate, it will take China over five years to return to the 40% that was not long ago considered astonishingly low). 5. Non-Food Commodities Disproportionately Affected The decline in Chinese growth will fall disproportionately on investment and, because of this, it will severely impact the price of non-food commodities. The implications are inescapable, although I think many people, especially in the commodities sector, have missed them. 6. Significant Slowing Could Start in 2012 What happens to real interest rates will determine when the process of Chinese adjustment begins. In fact there is a chance that we may see growth in China slow significantly in 2012, perhaps even to 7%, although I suspect that it will probably be in the 8-9% region. What the PBoC does to interest rates is likely to be the outcome of a struggle in the State Council between policymakers that are worried about growth and those that are worried about imbalances. If the PBoC can hold off the former, and especially if wages continue rising, we might begin to see Chinese rebalancing taking place a little earlier than expected. Of course this must, and will, come with much slower GDP growth. 7. Social Unrest Not a Given Growth rates of 3% will not necessarily lead to social and political instability. Most analysts argue that China needs annual growth rates of at least 8% to maintain current levels of unemployment. Anything substantially lower will cause unemployment to surge, they argue, and this would lead to social chaos and political instability. I disagree. The employment effect of lower growth depends crucially on the kind of growth we get. Since rebalancing in China requires less emphasis on heavy investment and more on consumption, and since rebalancing also means a sharp reduction in free credit provided to SOEs and local governments and cheaper and more available credit for efficient but marginal SMEs, a rebalancing China would presumably see much more rapid growth in the service sector and in the SME sector, both of which are relatively labor intensive. Much lower growth, in that case, could easily come with minimal changes in overall employment. Japan is a useful reminder of what can happen. 8. Large-Scale Privatization Because of its rapidly rising debt burden, the only way for China to manage a smooth social transition will be through wealth transfers from the state sector to the household sector. In the past, Chinese households received a diminishing share of a rapidly growing pie. In the future they must receive a growing share. This will probably be accomplished through formal or informal privatization. 9. Disruptive European Politics European politics will become much more difficult and disruptive. The historical precedents are clear. During a debt crisis the political system becomes fragmented and contentious. If the major parties don't become radicalized, smaller radical parties will take away their votes. Remember that the process of adjustment is a political one. We all know someone has to pay for the massive adjustment countries like Spain must make. The only interesting question is about who will be forced to take the brunt of the payment – workers in the form of unemployment, the middle classes in the form of confiscated savings, small businesses in the form of taxes, large businesses in the form of taxes and nationalization, foreigners, or creditors. Deciding who pays is a political process, and because the stakes are so high it will be a very bitter process. This means, among other things, that politics will degenerate quickly, and of course if Europe doesn't arrive at fiscal union in the next year or two, it probably never will. This conclusion is also the reason for my next prediction. 10. Spain, other PIIGS Leave Euro Spain will leave the euro and will be forced to restructure its debt within three or four years. So will Greece, Portugal, Ireland and possibly even Italy and Belgium. The only strategies by which Spain can regain competitiveness are either to deflate and force down wages, which will hurt workers and small businesses, or to leave the euro and devalue. Given the large share of vote workers have, the former strategy will not last long. But of course once Spain leaves the euro and devalues, its external debt will soar. Debt restructuring and forgiveness is almost inevitable. 11. Germany Will Not Voluntarily Share Costs Unless Germany moves quickly to reverse its current account surplus – which is very unlikely – the European crisis will force a sharp balance-of-trade adjustment onto Germany, which will cause its economy to slow sharply and even to contract. By 2015-16 German economic performance will be much worse than that of France and the UK. For one or two years the deficit countries will try to bear the full brunt of the adjustment while Germany scolds and cajoles from the side. Eventually they will be unable politically to accept the necessary high unemployment and they will intervene in trade – almost certainly by abandoning the euro and devaluing. In that case they automatically push the brunt of the adjustment onto the surplus countries, i.e. Germany, and German unemployment will rise. I don't know how soon this will happen, but remember that in global demand contractions it is the surplus countries who always suffer the most. I don't see why this time will be any different. 12. Expect US Rising Trade Protection Sentiment As the US fights over the fiscal deficit and whether or not it is the right way to expand domestic demand, more and more politicians will focus on the expansionary impact of trade protection. There will be an increasing tendency to intervene in trade – in fact I think of quantitative easing as a policy aimed at trade and currency imbalances as much as one aimed at domestic monetary management. As unemployment persists, and as the political pressure to address unemployment rises, the US will, like Britain in 1930-31, lose its ideological commitment to free trade and become increasingly protectionist. Also like Britain in 1930-31, once it does so the US economy will begin growing more rapidly – thus putting the burden of adjustment on China, Germany (which will already be suffering from the European adjustment) and Japan. Trade policy in the next few years will be about deciding who will bear the brunt of the global contraction in demand growth. The surplus countries, because they are so reliant on surpluses, will be very reluctant to eliminate their trade intervention policies. Because they are making the same mistake the US made in the late 1920s and Japan in the late 1980s – thinking they are in a strong enough position to dictate terms – they will refuse to take the necessary steps to adjust. But in fact in this fight over global demand it is the deficit countries that have all the best cards. They control demand, which is the world's scarcest and most valuable commodity. Once they begin intervening in trade and regaining the full use of their domestic demand, they will push the adjustment onto the surplus countries. Unemployment in deficit countries will drop, while it will rise in surplus countries. That is a lengthy clip of ideas, yet hopefully within the spirit of Pettis' guidelines on these emails. His PDF is 14 pages and will appear on his blog shortly. I added the bold headlines in the detailed discussion points above. Six Key Ideas China Will Slow Much More than China Bulls and Commodity Bulls Think Non-food Commodities Take Big Hit Eurozone Experiment Ends in Breakup US Protectionism Takes Hold Deficit Countries Control Demand, Thus Have the Best Cards Disaster Hits BRICs Contrarian Thinking Except perhaps for points three and four (and perhaps for all six points) investors and analysts have taken the opposite view. Most are looking to buy the dip, invest in commodities, invest in commodity producing currencies, and invest in the BRICs. We did not have commodity producer decoupling in 2008 and there is no reason to expect it as debt-deflation plays out and China abandons its reckless investments in infrastructure. I suspect China slows sooner than Pettis thinks, but no sooner than the next regime change in China. Markets, however, may react well in advance. Global Deflationary Outlook Pettis does not use the word "deflation" in his writeup, but he describes a very deflationary global outlook complete with protectionism, beggar-thy-neighbor policies, currency wars, and falling non-food commodity prices. Pettis did not discuss energy, but the forces are clear: peak oil. vs. global slowdown. Given peak oil and the possibility of war over it, energy is a wildcard. What Country Leaves Eurozone First? The current political path including the dismissal of Eurobonds by Germany and France certainly indicates a breakup of the Eurozone. However, I wonder if Germany abandons the Euro first, rather than one of the PIIGS. I doubt it matters much, at least from the perspective of Germany. However, should Germany leave the Euro, France would then be in the position Germany is in now, certainly unable to bailout the rest of the Eurozone. One way or another, the grand experiment will fail. Historically speaking it never had a chance. There has never been a successful currency union in history that did not also include a fiscal union. The question at hand is how much more will governments force down the throats of taxpayers (hoping to bail out the banks and the bondholders) before this mess cracks in pieces. The more politicians force down taxpayer throats, the bigger the eventual repercussions. Shrink to Survive Just as I typed the above thoughts a Bloomberg headline came in on this very subject: Prospect of New Core Euro Gains Traction The euro area may need to shrink to survive. As its sovereign-debt crisis nears a third year and rescue efforts fail to stop the rot in financial markets, economists from Pacific Investment Management Co.'s Mohamed El-Erian to Harvard's Martin Feldstein say ensuring the euro's existence may require members to leave the 17-nation currency region. The result would be what El-Erian, Pimco's Newport Beach, California-based chief executive officer, calls a "smaller, much better integrated, fiscally strong euro zone." While leaders such as German Chancellor Angela Merkel consistently rule out that option, El-Erian told "Bloomberg Surveillance" with Tom Keene on Aug. 17 that they eventually may embrace it over the fiscal union required to maintain the status quo. Don' expect rational thinking from EU leaders. Instead, expect politicians to act in their perceived best interests and secondarily in the perceived bests interests of the banks and bondholders. All it takes is for any country to leave, even Greece, before other countries consider the same thing. There are lots of ideas in this post to consider, and I thank Michael Pettis for sharing his thoughts. Addendum: Reader Craig writes: "I was shocked by your commentary on 12. I thought for sure you would come out blasting U.S. trade restrictions as protectionist and leading to economic slowdown in the U.S. Instead, you basically said what Trump has been saying in every interview, and that is that China is playing us for fools and that we need to recapture our manufacturing from them. I thought you were a "free trader" to the max." Craig, I am indeed a free trade advocate and I certainly do not agree with Donald Trump and other protectionists such as Paul Krugman. I simply failed to point out every nuance in the article I disagree with. It is a mistake to assume I agree with "everything" in an article just because I agree with 90% of it. I made no specific comments on protectionism so there should not have been an implication of agreement. I do not think the US gains by protectionism. Other countries will do the same and US exports will dive if imports dive as other countries retaliate. There is serious potential for another Smoot-Hawley with equally devastating consequences if Congress goes overboard. Where I did comment and where I agree with Pettis' contrarian thinking is that the brunt of the adjustment will be felt on trade surplus countries. Mathematically it has to, in any kind of rebalancing. Not every country can run a trade surplus. It is impossible. Moreover, and as Pettis points out, the imposed austerity measures in Europe will impact Germany's ability to export. The slowdown in China and the US will also impact Germany. The question is whether or not adjustments come about in a reasonable manner or by trade wars and currency devaluations. No one wins in another Smoot-Hawley setup. I have pointed out what I believe is the solution on many occasions. Rather than tariffs I have supported a return to the gold standard. I saw no need to bring it up yet again, but perhaps I should have. Here are the pertinent links once again. Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited Michael Pettis Warns of "Virulent Political Turn Against Euro", Adds Clarification to "Gold's Honest Discipline" To that I would add we desperately need to get rid of fractional reserve lending. I also want to add a note that peak oil (some say "peak everything") will impact China's ability to have an investment led economy based forever expanding infrastructure. Add peak oil to the list of reasons China will slow, whether they like it or not. 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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Myths and Facts About Breast Cancer [Infographic] Posted: 22 Aug 2011 12:00 PM PDT Each year over 200,000 women are diagnosed with breast cancer in the United States. Doctors recommend that women over the age of twenty undergo a breast examination every three years. Although there is no known way to prevent breast cancer, understanding the disease is an important part of beating the odd. Take a look at this infographic to learn more about breast cancer and the facts and myths associated with it. Click on Image to Enlarge. Source: asbestosnews

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Panda 2.4 and Analytics Session Update Rolled Out Simultaneously Posted: 21 Aug 2011 02:15 PM PDT Posted by MikeCP On August 12, Google announced that their high-quality sites algorithm, otherwise known as "Panda", had been rolled out for all languages save for Korean, Chinese, and Japanese. The change is said to impact 6-9% of users' queries, down from the 12% seen in the initial Panda update back in February. Though the official announcement post doesn't make mention of this update's effect on English queries, Vanessa Fox at Search Engine Land reported that a few minor changes were made, but there shouldn't be a substantial impact. Only 9 hours earlier, the Google Analytics blog announced a change to the way visits are to be calculated, effective immediately. We'll get into just how this changed in a bit, but according to the announcement post, "most users will see less than a 1% change". So, with all of of my clients being US based, I wasn't expecting to see much of a change from Panda, and I can deal with a 1% change in Google Analytics. However, apparantly two insubstantial impacts make a big one, because upon checking Analytics on Monday night, I was surprised to see this: Organic traffic is up 30% week over week This particular client saw a 20% drop from the initial Panda update back in February, and we've been working to get back to previous levels ever since. Was this the recovery we'd been hoping for?! After all, the site in question hardly fit the mold of the typical 'Panda-lized' site. Though we were told not to expect much change to English SERPs, I was hopeful. Google's decision to push Panda 2.4 and the Google Analytics update on the same day wreaked havoc on my ability to see what was really going on. I can only imagine that some of the first-time Panda sites using Google Analytics are reeling right now. Google pretty frequently points out that many of their teams do not share information intentionally. As an example, the search team has stated time and again that sites that run AdSense advertisements do not receive preferential treatment in the SERPs, despite the fact that this would positively affect Google's bottom line. Similarly, Google's other web properties like Maps, Places and Knol (purportedly) aren't given any special treament, either. Perhaps this is a similar case, but it's borderline irresponsible for Google to have pushed these two updates simultaneously. I believe the onus falls more on the Analytics team, but it's hard to know really. Seeing Through Pandalytics 1.0 In trying to get to the bottom of this issue, it's important to understand how visit calculation in Google Analytics had changed. Straight from the announcement blog post: What’s changing? Currently, Google Analytics ends a session when: More than 30 minutes have elapsed between pageviews for a single visitor. At the end of a day. When a visitor closes their browser. If any of these events occur, then the next pageview from the visitor will start a new session. In the new model, Google Analytics will end a session when: More than 30 minutes have elapsed between pageviews for a single visitor. At the end of a day. When any traffic source value for the user changes. Traffic source information includes: utm_source, utm_medium, utm_term, utm_content, utm_id, utm_campaign, and gelid. Ultimately, this change is about assigning proper attribution for conversions and engagement. As Michael Whitaker points out in his blog post, previous to August 11, it was possible to find plenty of keywords with pageviews and unique visitor counts but 0 visits. Grab the custom report from his post to see for yourself, or take a look here (with filter applied so that visits = 0): Now, each new keyword is going to count as a visit, which is really the right move. See this same report set to a date after the change: Some Examples So what is actually going on here? Well, here are a few real-world scenarios where the way that visits is calculated is changing. Scenario 1:   User searches Google for "Product Name" and clicks on your AdWords advertisement. User leaves site and searches a few more times, click on competition and comparing prices and features. User ultimately decides to with your product, Googles "Your Brand + Product Name", clicks your organic listing, and buys the product. This whole process takes less than 30 minutes.   Previously, the second visit to your site would still count towards the original query, "Product Name". The conversion is attributed to the most recent non-direct source, so "Your Brand + Product Name" gets the credit, but would not appear in your organic keyword report (or would with 0 visits attached). Now, this counts as 2 separate sessions, and "Your Brand + Product Name" will appear in your organic keyword report with 1 visit. Scenario 2:   User searches "Product Name" and lands on your site. User exits and visits a few other sites. User searches "Slightly Refined Product Name", lands on your site, and buys.   Again, now this counts as two visits, where it used to be one. In fact, for this particular client, I believe this scenario was pretty common, as average query length increased significantly, suggesting users were refining their queries. So Is My Traffic Up Or What!? Still, in my example above organic visits were up over 30%. This is quite a bit more than the expected 1% change from Google Analytics, and the "insubstantial impact" from Panda 2.4. How can I know if there is any Panda recovery at play? If I want to compare apples to apples, the answer is going to have to come from my visit-agnostic numbers: Pageviews and Unique Visitors. Visits up 30% Unique Visitors only slightly up Pageviews also only slightly up So it is pretty obvious from the images above that while traffic is on the rise, it's not quite up 30%. It does remain pretty difficult to tell if there was any sort of Panda impact at all, or just a natural growth from some recent link building successes. Google Pushes an Update to Analytics Another factor at play in some of this data is that Google acknowledged a bug in the original rollout of this change, and updated their announcement blog post on the following tuesday: We identified an issue responsible for unexpected traffic changes following our recent update to how sessions are defined in Google Analytics. A fix was released at 2pm PST Tuesday August 16th. The issue affected some sites using the following configurations: If a user comes to a customer’s site with a space in some part of their traffic source data, then revisit the same landing page during that session by refreshing the page or later pressing the back button, a new session will be created for every hit to that page. (Clicking a link elsewhere on the site that leads back to the page should not matter.) Google Analytics implementations using multiple trackers (an unsupported configuration) are also affected when a space is included in the traffic source data. These sites will see fewer visits from new visitors, and more visits from returning visitors (with some variation due to different implementations). Taking a look again at the visits report above, this bug obviously affected the site in question, as visits after Tuesday dropped considerably. Still, the overall effect here is a change significantly higher than a 1% increase. Again, non-English sites using Google Analytics that are seeing Panda for the first time may be in for a bit of a headache. I'm hoping I was able to shed some light on this problem. Do you like this post? Yes No

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Video: Vice President Biden Has Lunch at a Snack Shop in Beijing

Your Daily Snapshot for Monday, August 22, 2011   Video: Vice President Biden Has Lunch at a Beijing Snack Shop Vice President Biden continues his tour of Asia this week. Last week, as part of the cultural exchange, the Vice President took some time to visit a local snack shop in Beijing after meeting with his counterpart, Vice President Xi of China. On the menu? Traditional pork buns, zhajiang noodles and cucumbers -- plus a chance to meet some locals. Check out the full video.  In Case You Missed It Here are some of the top stories from the White House blog. Watch: Vice President Biden's Opening Remarks at Business Roundtable in Beijing On Day Two of his stay in China, the Vice President and his counterpart, Vice President Xi of China, participated in a roundtable discussion with U.S. and Chinese business leaders. Weekly Address: Putting Country Ahead of Party From a farm in the Midwest, President Obama talks about the determination and integrity of the American people and calls on Congress to put aside their differences to grow the economy. The White House Internship Program: My Transformational Experience Jeremiah Glenn, a previous White House intern, describes his experience and encourages others to apply for the internship program. Today's Schedule All times are Eastern Daylight Time (EDT). 4:00 AM: The Vice President attends a cultural demonstration of traditional Mongolian sports 9:55 AM: The Vice President arrives in Tokyo, Japan   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

Seth's Blog : Short-term capitalism

Short-term capitalism

There are a few reasons why one might not care what happens in the long run:

• You don't intend to be around
• You're going to make so much money in the short run it doesn't matter
• You figure you won't get caught

Short-term marketing involves using deception to make a quick sale, or using aggressive promises to get a quick hit. Having a price war counts as well. Linkbait is on that list as well.

Short-term architecture means putting up a cheap building, a local eyesore, something that saves money now instead for building something for the long haul. The guys who put up the Parthenon in Rome weren't doing short-term anything. Hard to say that about a big box store.

Short-term manufacturing ignores the side effects of pollution, bad design and worker impact because it's faster money in the short run to merely make the product (and the sale) in the most direct way possible.

Short-term investment banking invests in transactions that are unsustainable and eventually blow up (after commissions are paid).

Short-term sales involve spamming as many people as you can, as fast as you can.

Short-term hiring requires you to hire cheap, train as little as possible and live with turnover.

Bernie Madoff was a short-term capitalist, of course.

Left to their own devices, (particularly during difficult economic times) too many people misunderstand the essence of capitalism, and rationalize a do what it takes mindset that is ultimately self-defeating. The reason we need the SEC, the EPA, transparent operations, a free press that cares about its mission and people willing and able to speak up is that they make it expensive to choose the short-term option.

The short-term capitalist is betting that someone else will clean it up.

One of the worst things you can call a business person, I think, is a short-term capitalist. He selfishly takes for now and fails to contribute in return.

The internet has opened two doors. First, it's easier than ever to do the short-term thing, anonymously if you choose, with a big splash, internet ads, eBay scams and more. On the other hand, since there's a revolution going on, it's also easier than ever to build something that matters, something that lasts.

The thing to remember about the short-term is that we'll almost certainly be around when the long-term shows up.

 

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Mish's Global Economic Trend Analysis

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• Is Germany's Commerzbank in Need of Another Bailout?
• Little Resistance as Rebels Enter Tripoli, Rebels Capture Two Qaddafi Sons, Celebration in Streets
• Video Content and Blogs by Kids, How Kids See Products, Humor, Politics; Meet the Tweeny Bloggers
• Merkel and Sarkozy the "Imperial Couple"

Is Germany's Commerzbank in Need of Another Bailout? Posted: 21 Aug 2011 05:35 PM PDT Inquiring minds are looking at a chart of Commerzbank for clues about the health of the bank, if not the entire banking system. CBK.DE - Commerzbank Weekly A friend "JMC" writes ... Hello Mish In 2009 the German Government put 10 billion Euros into Commerzbank to keep it alive. Its market cap is now far less than the government (taxpayers) put in. Flashback January 9 2009: German government injects €10bn into Commerzbank The German government has stepped in to salvage a multibillion-euro merger between two of the country's largest banks, Commerzbank and Dresdner Bank, with a €10bn (£9bn) cash injection. The announcement, in effect a partial nationalisation of the combined group, came after several days of tense negotiations between executives from the two banks and state officials. "The government just couldn't afford to let this deal fail," one insider said. Yahoo!Finance now cites CBK.DE market cap as 9.75 Billion. But that is as of June 30, when share prices were 3.18 EU. Now share prices are 1.91 EU so you can lop off about 40% of that market cap, which means after an injection of 10 billion EU, the bank is now worth approximately 5.85 billion EU. Last week an unidentified bank needed to tap the ECB for $500 million in emergency funds at a penalty rate, something that only happens when liquidity dries up and banks are distrustful of lending to each other, even overnight. "JMC" wonders if Commerzbank is the bank needing emergency funds. I don't know because the ECB refuses to say. However, note the result. All banks are suspect because the ECB won't say. Actually, all banks are suspect anyway, but hiding problems acts to enhance large and growing distrust. I have to laugh at the PE of Commerzbank, listed at 2.2. With the collapse in share price, its PE is now under two. This is what's known as a "value trap". Share prices seem attractive at a PE of 10, then 8, then 6, then 4, then 2. On June 20, I discussed "value traps" in Value Traps Galore (Including Financials and Berkshire); Dead Money for a Decade. In retrospect, many financials may head to zero. If so, it will not be dead money for a decade, but rather just pain dead money. 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.

Little Resistance as Rebels Enter Tripoli, Rebels Capture Two Qaddafi Sons, Celebration in Streets Posted: 21 Aug 2011 04:39 PM PDT Rebels claim to have captured two Qaddafi sons and streets erupted in celebration as Rebels Enter Tripoli Meeting Little Resistance. Rebels surged into the Libyan capital Sunday night, meeting only sporadic resistance from troops loyal to Col. Muammar el-Qaddafi and setting off raucous street celebrations by residents hailing the end of his 42 years in power. The rebel leadership announced that insurgents had captured two of Colonel Qaddafi's sons, including Seif al-Islam, his heir apparent. The leadership also announced that the elite presidential guard protecting the Libyan leader had surrendered. While there was no independent confirmation of those developments, the rebels were racing through parts of the city with apparent ease, and NATO and American officials made clear that control of Tripoli, which had been the final stronghold of the longtime Libyan leader, was now in doubt. Rebel spokesmen said that their fighters had surrounded the Bab al Aziziya compound where they believed Colonel Qaddafi may still be holding out. Colonel Qaddafi issued a series of defiant audio statements during the night, calling on people to "save Tripoli" from a rebel offensive. He said Libyans were becoming "slaves of the imperialists" and that "all the tribes are now marching on Tripoli." He claimed to be in the Libyan capital and said he would remain there "until the end." But some rebel leaders said they thought he had already left Tripoli. Al Arabiya television aired images of Libyans celebrating in central Tripoli and ripping down Qaddafi posters. Huge crowds gathered in Benghazi, the capital of the rebel-controlled eastern part of the country, as expectations grew that Colonel Qaddafi's hold on power was crumbling. While American officials say they are unsure how the battle for Tripoli will play out, they say they are preparing contingency plans if and when Qaddafi's regime falls to help prevent the vast Libyan government stockpiles of weapons, particularly portable antiaircraft missiles, from being dispersed. It's now clear the rebels have won, but who are they, and what are their plans? 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.

Video Content and Blogs by Kids, How Kids See Products, Humor, Politics; Meet the Tweeny Bloggers Posted: 21 Aug 2011 11:47 AM PDT Kids are actively into blogging and producing videos, and some of them are surprisingly good. Should parents encourage their kinds to pursue such activities? I think so. The future belongs to those willing to do things, not just sit and play video games. A blog produced by Calvin, my neighbor's son is what got me thinking about this Sunday diversion from my normal tirades about current economic madness. Inquiring minds may wish to check out his blog ReGiz. Calvin reviews all kinds of products his group of friends might be using. He knows far more about the technology that goes into these devices than I do. He has recently rated products and software such as ... Sony XPERIA, Motorola Atrix Cameras HP Touchpads T-Mobile Samsung Hercules Galaxy SII Calvin wants to work in product design. Certainly reviewing products in his spare time while still in highschool gives him a big edge over those wasting time on video games. Video by Kids Calvin directed me to a site by a few of his friends, Andrew, Adrian, and Fernando, three brothers. Calvin writes ... Andrew and Adrian are twins, along with their brother Fernando, they combine to produce videos. Their ambition is to one day go to school to become movie directors, but in the meantime, they are creating their own movies and shows. They have created two feature length movies which can be found on their youtube account. They created their first movie when they were 9, and their second when they were 12. They intend to create a third movie this summer, and are holding auditions. I have read the script, and it has dramatically improved over their previous two. They also do their own monthly web show called Wacky But True in which they examine all of the recent crazy events that go on in today's world. Superhero Battle 2012! Here is a movie review by the brothers called Superhero Battle 2012! Check out the first episode of "The Movie Duo", a show where we tell you the biggest news and answer the biggest questions about movies! In this episode, we discuss which superhero film will get more money and acclaim from critics and audiences alike next year. Will it be The Avengers, Ghost Rider or The Dark Knight Rises? Please do not make the mistake of comparing these websites and videos to those produced by adults, especially professionals, in regards to blog layout, image quality, ect. The point is these kids are doing something positive about their future and those are the kids who will have a huge edge up in getting a quality job some time down the road. Looking back to when I was 12-14 I could not imagine doing such things. The products and even the ideas for many of these products did not exist. Meet the Tweeny Bloggers Children as young as three are firing up their laptops and connecting, says Susie Mesure in The internet comes of age: Meet the tweeny bloggers They are the Generation Net, whose toddler years have spawned countless mummy blogs, whether they liked it or not. Now, they're getting their own back. Children as young as three are turning to blogging to tell their side of the story. The growing army of child bloggers is tackling subjects from politics to new toys, while improving their literacy skills. The interest has triggered a debate on the wisdom of giving children free rein online, as social networking sites aimed at pre-teens soar in popularity. The prospect of making money online – research last week found that 10 YouTube stars, including one 16-year-old, earn more than £65,000 a year from their share of its advertising revenue – is adding to the allure, even if child bloggers are more likely to be posting links to YouTube than collecting fat cheques from the video-clip sharing site. Sonny To – eight when he started TotallySonny is among those who already find blogging rewarding. "People send me things and I review them," he says. Headphones, a new cereal and a toy owl are among the products that Sonny has blogged about. Now nine, he claims he got into blogging for more than just free stuff. "My mum was getting loads of traffic on her blog and it seemed like fun. Blogging has also made my writing much better and I have learnt how to explain things properly. It has made me much more confident." Maelo Manning, who turned 11 last week, says she likes to air her views. So much so that she has two blogs – after all, they are free to set up. "It's fun to say stuff about what you're thinking, especially about politics." Her Lib demchild blog (Libdem Child's) dispels the notion that politics is just for grown-ups, and she made some cogent points about the lack of affordable childcare in one recent post, which she used to bemoan Westminster Council's decision to shut a free play scheme. She keeps to relatively lighter subjects at Life of a Blooming Child so-called because she finds it "lovely that adults think children are blooming. I hear them talking about this all the time, as in: 'Why is that blooming child doing that?' " Despite being relatively new to blogging, Maelo already has hundreds of readers from as far afield as the US, Australia and Russia. Although Sonny and Maelo's mothers are both relaxed about their children's online presence, not all parents feel the same. James Seddon, Wired magazine's GeekDad blogger, said his instant reaction was to turn down his eight-year-old's request for her own blog as the thought of her "sharing who she is with the world" made him "uneasy". Other parents "lock" their children's blogs, handing the passwords only to friends and families. Should You Let Your Child Blog? About.Com addresses the question Should You Let Your Child Blog? The article cites Online Safety Tips some of which are common-sense suggestions for all age groups, yet other tips seem excessively restrictive for highschoolers (for example, screening everything they write). For the youngest bloggers, Blog Hosting for Kids may be a good idea. Encourage, Not Let About.Com asks the wrong question. "Let" is the wrong word. "Force" or "make" is the wrong idea as well. "Encourage" is a much better word, and not necessarily just about blogging, but about doing something that will give kids an edge up on job hunting after graduation. The same applies to free college level classes. I discussed one such opportunity recently in Stanford Offers Free Robotics and Artificial Courses; 10,000 Already Sign Up. Without a doubt, free robotics classes are a fabulous idea, far better than the public union idea of throwing more taxpayer dollars at problems. Repeating what I said above, the future belongs to those willing to do things, not just sit and play video games. 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.

Merkel and Sarkozy the "Imperial Couple" Posted: 21 Aug 2011 09:18 AM PDT After a lengthy delay it's time once again for Sunday Funnies. Please consider The imperial Couple by Peter Schrank a freelance cartoonist. Nicolas Sarkozy and Angela Merkel's proposals for economic government in the eurozone have failed to reassure the markets. Click on link for more cartoons from various cartoonists. Merkel Emphatically Rejects Eurobonds, Debt Unions Using even stronger language, Merkel Says She'll Resist Pressure for Euro Bonds German Chancellor Angela Merkel attempted to shut the door on common euro-area bonds as a means to solve the debt crisis, saying that she won't let financial markets dictate policy. Joint euro bonds would require European Union treaty changes that would "take years" and might run afoul of Germany's constitution, Merkel said today. While common borrowing might arrive at some point in the "distant future," bringing in euro bonds at this time would further undermine economic stability and so they "are not the answer right now." "At this time -- we're in a dramatic crisis -- euro bonds are precisely the wrong answer," Merkel said in an interview with ZDF television from the chancellery in Berlin. "They lead us into a debt union, not a stability union. Each country has to take its own steps to reduce its debt." Merkel has stepped up her opposition to euro bonds since returning from her summer vacation last week, making resistance to common European borrowing a campaign theme of Sept. 4 elections in her home state of Mecklenburg-Western Pomerania. Investor calls for euro bonds intensified last week as concerns about the debt crisis and a stuttering global economy drove European stocks to their lowest in more than two years. "Politicians can't and won't simply run after the markets," Merkel said in the interview, her first since returning from a three-week summer break. "The markets want to force us to do certain things. That we won't do. Politicians have to make sure that we're unassailable, that we can make policy for the people." EU President Herman Van Rompuy sided with Germany and France yesterday, ruling out issuing common bonds as a cure for the debt crisis at least until European economies and budgets are better aligned. With three countries drawing financial aid and national debts ranging from 6.6 percent of gross domestic product in Estonia to 142.8 percent in Greece, this is the wrong time to set up a single borrowing agency, Van Rompuy said in an interview on Belgium's RTBF radio. Merkel, who said that she's confident of a majority to pass the changes in parliament, called for the focus of Europe's crisis-fighting strategy to remain on tackling debt. Decades of deficit spending in euro-area countries has turned the region into a "debt union" that requires each country to slash debt levels, she said. "This is an arduous, difficult path that can't be solved in one fell swoop, for instance with euro bonds," she said. The Eurobond idea is finished. The EU and the market is going to have to deal with it, and the market has been viewing Eurobonds as a savior. I do not care for Eurobonds either, yet the odds of an EU breakup have just increased. 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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