Central Perk

luni, 14 martie 2011

Photostream: Behind the Scenes in February

Your Daily Snapshot for
Monday, March 14, 2011

Photostream: Behind the Scenes in February

The White House Photo Office recently released a series of behind-the-scenes photos from the month of February. Take a look at President Obama handling turmoil across North Africa and the Middle East, working on budget issues with Congressional leadership, and meeting innovators, educators, and builders around the country.

See more photos.

President Barack Obama walks through the door to the Outer Oval Office at the start of the day, Feb. 24, 2011. (Official White House Photo by Pete Souza)

Seth's Blog : Bring me stuff that's dead, please

Bring me stuff that's dead, please

RSS is dead. Blogs are dead. The web is dead.

Good.

Dead means that they are no longer interesting to the drive-by technorati. Dead means that the curiousity factor has been satisfied, that people have gotten the joke.

These people rarely do anything of much value, though.

Great music wasn't created by the first people to grab an electric guitar or a synthesizer. Great snowboarding moves didn't come from the guy who invented the snowboard... No one thinks Gutenberg was a great author, and some of the best books will be written long after books are truly dead.

Only when an innovation is dead can the real work begin. That's when people who are seeking leverage get to work, when we can focus on what we're saying, not how (or where) we're saying it.

The drive-by technorati are well-informed, curious and always probing. They're also hiding... hiding from the real work of creating work that matters, connections with impact and art that lasts. I love to hear about the next big thing, but I'm far more interested in what you're doing with the old big thing.

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Mish's Global Economic Trend Analysis

Shocking Tsunami Footage, Cars and Houses Swept Away Like Corks; Nuclear Reactor Explosion Video; Heartbreaking Aftermath Images
Japanese Futures off 2.5%; Yen Spikes to 1.2444, Mostly Retraced; Gold Firm, Crude Lower, S&P 500 Futures off Modestly; Explaining the Yen's Rise
Earthquake Moves Japan Eight Feet, Shifting Earth's Axis; Entire Villages Vanish Under Wall of Water; Nuclear Crisis Expands to 2nd Reactor
Scramble to Avert Meltdowns; Death Toll Estimate Tops 10,000; Industries Shut Down; Japan Goes Deeper in Debt; Keynesian Stimulus Nonsense

Shocking Tsunami Footage, Cars and Houses Swept Away Like Corks; Nuclear Reactor Explosion Video; Heartbreaking Aftermath Images

Posted: 13 Mar 2011 11:14 PM PDT

I have seen many Tsunami videos over the past few days but the video that follows is the most heart-wrenching by far. Quality is superb.

I do not know the origin. A friend passed it to me in a different format and I uploaded it to YouTube.

URL if video does not play: http://www.youtube.com/watch?v=TBSiO8T5EcA

URL if video does not play: http://www.youtube.com/watch?v=T_N-wNFSGyQ&feature=player_embedded

Japan Earthquake Aftermath

The Boston Globe has a stunning series of 44 images on the Earthquake Aftermath. Here are a few of them.

A resident is rescued from debris in Natori, Miyagi, northern Japan March 12 after one of the country's strongest earthquakes ever recorded hit its eastern coast March 11. (Asahi Shimbun, Noboru Tomura/Associated Press)

Rescue workers search for victims from the rubble in Rikuzentakata, northern Japan, March 13 after the magnitude 8.9 earthquake and tsunami struck the area. (Toru Hana/Reuters)

People in a floating container are rescued from a building following an earthquake and tsunami in Miyagi Prefecture, northeastern Japan March 12. (Kyodo News/Reuters)

An official in protective gear talks to a woman who is from the evacuation area near the Fukushima Daini nuclear plant in Koriyama March 13. Japanese Chief Cabinet Secretary Yukio Edano confirmed on Saturday there has been an explosion and radiation leakage at Tokyo Electric Power Co's (TEPCO) Fukushima Daiichi nuclear power plant. (Kim Kyung-Hoon/Reuters)

A man who was trapped by a tsunami is rescued by a Japan Self-Defense Force soldier in Kesennuma City in Miyagi Prefecture in northeastern Japan March 12. Japan confronted devastation along its northeastern coast on Saturday, with fires raging and parts of some cities under water after a massive earthquake and tsunami. (Kyodo/Reuters)

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Japanese Futures off 2.5%; Yen Spikes to 1.2444, Mostly Retraced; Gold Firm, Crude Lower, S&P 500 Futures off Modestly; Explaining the Yen's Rise

Posted: 13 Mar 2011 04:55 PM PDT

Japanese futures are down about 2.5% this evening while S&P 500 futures are off a modest .6%. The Yen surged at the Forex open but has now retraced most of the move.

Crude is down about $1.50 and gold is up around $7. Of these moves the Yen is the most interesting.

Yen Daily Chart

click on chart for sharper image

Yen 15 Minute Chart

click on chart for sharper image

Explaining the Yen's Rise

I received several emails from people wondering why the Yen might rise given the Japanese government pledge to create "massive liquidity" as well as increase the deficit with "stimulus" money to repair the damage.

The answer in general terms is events of this type increase the demand for money. In this case, businesses and individuals affected by the earthquake need Yen, not whatever carry trade they may have been in.

There will be a repatriation of Yen for sure, although the magnitude is unknown.

Fundamentally, there is little reason to like the Yen, although significant short-term forces are in play. If the Yen does not rally in the face of increased demand, it could be a very telling signal.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Earthquake Moves Japan Eight Feet, Shifting Earth's Axis; Entire Villages Vanish Under Wall of Water; Nuclear Crisis Expands to 2nd Reactor

Posted: 13 Mar 2011 12:35 PM PDT

Scientists upgraded the devastating earthquake that struck Japan from 8.8 or 8.9 to 9.0 on the Richter Scale. That may not sound like much but the scale is logarithmic effectively doubling the estimated size of the quake.

Regardless of what the number is, the quake was devastating enough to move the main island of Japan 8 feet while shifting the earth on its axis. Entire villages in Northern Japan are missing, swept away by the resultant tsunamis.

Meanwhile Japanese authorities struggling with additional meltdowns have flooded a second reactor with seawater hoping to cool the plant. This is a desperate action that will probably ruin both facilities.

Power outages and lack of fresh water add to the misery.

Villages, Trains Vanish Under Wall of Water

The New York Times reports Japan Pushes to Rescue Survivors as Quake Toll Rises

While nuclear experts were grappling with possible meltdowns at two reactors after the devastating earthquake and ensuing tsunami in northern Japan, the country was mobilizing a nationwide rescue effort to pluck survivors from collapsed buildings and rush food and water to hundreds of thousands of people without water, electricity, heat or telephone service.

Entire villages in parts of Japan's northern Pacific coast have vanished under a wall of water, and many communities are cut off, leaving the country trying to absorb the scale of the destruction even as fears grew over the unfolding nuclear emergency.

In the port town of Minamisanriku, nearly 10,000 people were unaccounted for, according to the public broadcaster NHK. Much of the northeast was impassable, and by late Saturday rescuers had not arrived in the worst-hit areas.

JR, the railway company, reported that three passenger trains had not been accounted for as of Saturday night, amid fears that they were swept away by the tsunami. There were reports of as many as 3,400 buildings destroyed and 200 fires raging. Analysts estimated that total insured losses from the quake could hit $15 billion, Reuters reported.

Even as estimates of the death toll from Friday's quake rose, Japan's prime minister, Naoto Kan, said 100,000 troops would be mobilized for the increasingly desperate rescue recovery effort. Meanwhile, several ships from the United States Navy joined the rescue effort. The McCampbell and the Curtis Wilbur, both destroyers, prepared to move into position off Miyagi Prefecture.

One-third of Kesennuma, a city of 74,000, was reported to be submerged, the BBC said, and photographs showed fires continued to rage there. Iwate, a coastal city of 23,000 people, was reported to be almost completely destroyed, the BBC said.

Crisis Expands to Second Nuclear Plant

MarketWatch reports Japanese nuclear-power crisis expands to second plant

Citing Japan's Fire and Disaster Management Agency, Kyodo News reported the cooling system failed at the Tokai No. 2 Power station. No additional information was available. Tokai, about 75 miles from Tokyo and the site of nuclear-research facilities as well as the power plant, was the site of a 1999 radiation leak, known as the Tokaimura accident, that killed two technicians.

Word of the problem at Tokai came as Japanese nuclear authorities continued working Sunday to avert nuclear meltdown at an earthquake-damaged power plant, Prime Minister Naoto Kan warned Japan of large-scale power blackouts and said the disaster was the country's biggest crisis since World War II. That came as Japanese scientists increased their estimate of the largest earthquake in the nation's history to magnitude 9.0 from 8.8, more than doubling the size and the destructive energy release in the Friday afternoon, local time, quake off the coast of Honshu.

[Officials] began flooding the second reactor with seawater, a drastic move that scientists have said might render the units unusable. But the water gauge in the No. 3 has stopped functioning, making it impossible to tell whether the procedure is succeeding, The Wall Street Journal reported.

Earthquake Moves Main Island Eight Feet and Shifts Earth on its Axis

CNN reports Earthquake Moves Japan Eight Feet, Shifting Earth's Axis

The powerful earthquake that unleashed a devastating tsunami Friday appears to have moved the main island of Japan by 8 feet (2.4 meters) and shifted the Earth on its axis.

"At this point, we know that one GPS station moved (8 feet), and we have seen a map from GSI (Geospatial Information Authority) in Japan showing the pattern of shift over a large area is consistent with about that much shift of the land mass," said Kenneth Hudnut, a geophysicist with the U.S. Geological Survey (USGS).

Reports from the National Institute of Geophysics and Volcanology in Italy estimated the 8.9-magnitude quake shifted the planet on its axis by nearly 4 inches (10 centimeters).

The Japanese quake comes just weeks after a 6.3-magnitude earthquake struck Christchurch on February 22, toppling historic buildings and killing more than 150 people. The timeframe of the two quakes have raised questions whether the two incidents are related, but experts say the distance between the two incidents makes that unlikely.

"I would think the connection is very slim," said Prof. Stephan Grilli, ocean engineering professor at the University of Rhode Island.

Bank of Japan Readies "Massive Liquidity"

Bloomberg reports Japan Readies 'Massive' Liquidity as BOJ Gauges Risk to Post-Quake Economy

Governor Masaaki Shirakawa told reporters late yesterday he's ready to unleash "massive" liquidity starting this morning in Tokyo, as the BOJ seeks to assure financial stability.

Shirakawa and his board could opt to accelerate asset purchases, including government bonds and exchange-traded funds, within the existing credit programs, particularly if the yen climbs and stocks tumble, said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank.

The economic hit from the March 11 quake will depend on how long it shuts down factories and the distribution of goods and services, with the potential meltdown at a nuclear power facility clouding the outlook. For now, the central bank is likely to ensure lenders have enough cash to settle transactions, and aim any additional steps at providing credit in the areas of northeastern Japan devastated by the temblor, analysts said.

Japan's currency rose 1.4 percent to 81.84 per dollar March 11 amid prospects for Japanese investors to repatriate assets, bringing its gain in the past year to 10 percent. The government may order the BOJ to sell yen if it soars, Mansoor Mohi-uddin, head of global currency strategy at UBS AG in Singapore, wrote in a note.

Japan is already struggling with huge fiscal deficits and a debt-to-GDP ratio of 200%, highest in the G-20 group of nations. In response, government officials had been planning a series of tax hikes. You can now safely toss those hikes straight into the ashcan.

There is never a good time for a natural disaster, but this one could hardly have come at a worse time. Best wishes to all those affected by this crisis.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Scramble to Avert Meltdowns; Death Toll Estimate Tops 10,000; Industries Shut Down; Japan Goes Deeper in Debt; Keynesian Stimulus Nonsense

Posted: 13 Mar 2011 03:42 AM PDT

Ever since the earthquake and tsunami hit Japan, news has been flowing from the country, nearly all of it bad.

Partial Meltdowns Likely Occurred

The New York Times reports Japanese Scramble to Avert Meltdowns as Nuclear Crisis Deepens After Quake

Japanese officials struggled on Sunday to contain a widening nuclear crisis in the aftermath of a devastating earthquake and tsunami, saying they presumed that partial meltdowns had occurred at two crippled reactors and that they were facing serious cooling problems at three more.

The emergency appeared to be the worst involving a nuclear plant since the Chernobyl disaster 25 years ago. The developments at two separate nuclear plants prompted the evacuation of more than 200,000 people. Japanese officials said they had also ordered up the largest mobilization of their Self-Defense Forces since World War II to assist in the relief effort.

On Saturday, Japanese officials took the extraordinary step of flooding the crippled No. 1 reactor at Fukushima Daiichi Nuclear Power Station, 170 miles north of Tokyo, with seawater in a last-ditch effort to avoid a nuclear meltdown.

Then on Sunday, cooling failed at a second reactor — No. 3 — and core melting was presumed at both, said the top government spokesman, Chief Cabinet Secretary Yukio Edano. Cooling had failed at three reactors at a nuclear complex nearby, Fukushima Daini, although he said conditions there were considered less dire for now.

A meltdown occurs when there is insufficient cooling of the reactor core, and it is the most dangerous kind of a nuclear power accident because of the risk of radiation releases. The radiation levels reported so far by the Japanese authorities are far above normal but still too small to pose a hazard to human health if the exposure continued for a brief period. The fear was that more core damage would bring bigger releases.

Death Toll Likely Exceeds 10,000

Yahoo!Finance reports Japan quake-tsunami death toll likely over 10,000

The death toll in Japan's earthquake and tsunami will likely exceed 10,000 in one state alone, an official said Sunday, as millions of survivors were left without drinking water, electricity and proper food along the pulverized northeastern coast.

Although the government doubled the number of soldiers deployed in the aid effort to 100,000, it seemed overwhelmed by what's turning out to be a triple disaster. Friday's quake and tsunami damaged two nuclear reactors at a power plant on the coast, and at least one of them appeared to be going through a partial meltdown, raising fears of a radiation leak.

The police chief of Miyagi prefecture, or state, told a gathering of disaster relief officials that his estimate for deaths was more than 10,000, police spokesman Go Sugawara told The Associated Press. Miyagi has a population of 2.3 million and is one of the three prefectures hardest hit in Friday's disaster.

Teams searched for the missing along hundreds of miles (kilometers) of Japanese coastline, and hundreds of thousands of hungry survivors huddled in darkened emergency centers that were cut off from rescuers and aid. At least 1.4 million households had gone without water since the quake struck and some 2.5 million households were without electricity.

Japanese Trade Minister Banri Kaeda said the region was likely to face further blackouts and that power would be rationed to ensure supplies go to essential needs.

Large areas of the countryside remained surrounded by water and unreachable. Fuel stations were closed and people were running out of gasoline for their vehicles.

Auto Industry and Sony Shuts Down

The Telegraph reports Japan shuts down as economic fears grow

The three largest motor manufacturers – Toyota, Honda and Nissan – said they would stop production at almost all of their domestic assembly plants. The safety of the workforce and deaths were cited as reasons behind the decision. The electronics giant Sony also said it would be shutting down production.

Economists warned that the closures staged by the motor and electronics companies could be the tip of the iceberg, with other parts of industry likely to feel knock-on effects in the coming days.

"Temporary closures of factories and oil refineries and the shutting down of power stations are likely to affect output throughout the country," said Wolfgang Leim of Commerzbank. "Economic output may therefore shrink again slightly in the first quarter."

Japan Set to Go Deeper in Debt

Japan's national debt is 200% of GDP. Of the G20 nations, that is the highest percentage in the world in terms of Debt-to-GDP. Japan cannot afford more debt, but more debt is coming regardless.

Bloomberg reports Japan Plans Spending Package as Quake Slams World's Most Indebted Economy

Japan aims to compile a package to fund the rebuilding effort after its strongest earthquake on record, a step that may worsen the challenge of reining in the world's biggest public debt.

Policy makers will need to compile a spending package "over the medium to long-term" to cope with the aftermath of the 8.9-magnitude earthquake and the tsunami it triggered, Chief Cabinet Secretary Yukio Edano told NHK Television.

"A supplementary budget is like the last thing that people watching the JGB market want to hear," said Ogawa, adjunct professor at Columbia University's School of International and Public Affairs in New York, and a former Japanese banking analyst who lived in the nation for 15 years. The prospect of rebuilding "signals another leg down in Japan's fiscal health. So I'm concerned that in the short to medium run, there's going to have to be more borrowing," she said.

"We will probably need a supplementary budget to work on this," Sadakazu Tanigaki, who heads the Liberal Democratic Party, told reporters March 11 after Kan convened a meeting of party leaders. "We will cooperate with all our might."

Japan's borrowing burden is a legacy of economic stagnation following the bursting of its stock and property bubble in 1990. Financial-industry bailouts and repeated attempts to revive growth through fiscal stimulus contributed. The debt is set to reach 210 percent of GDP in 2012, the highest among countries tracked by the Organization for Economic Cooperation and Development, compared with an estimated 101 percent for the U.S.

One potential positive from the earthquake is the chance to revive a less-populated area of the nation. Provincial regions outside of Tokyo have borne the brunt of the decline in Japan's population since 2006. The prefectures of Akita and Aomori, within Tohoku, have had the biggest decline in residents in the five years through 2010. Miyagi, where Sendai is located, accounts for 1.7 percent of the nation's people, according to economist Richard Jerram at Macquarie Securities Ltd.

"This is a Keynesian stimulus program that nobody can argue with: just rebuilding the city of Sendai," said Marcus Noland, deputy director of the Peterson Institute for International Economics in Washington, co-author of the 2001 book "No More Bashing: Building a New Japan-United States Economic Relationship." "Rebuilding Sendai could actually be an opportunity to try to create a growth pole in northern Japan."

Keynesian Nonsense

I had been wondering how long it would take before some Keynesian clown would make a case that there is some economic benefit to be derived from the earthquake.

The idea is complete nonsense of course. There is nothing economically stimulating about tsunamis or earthquakes, or the destruction of any useful property.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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duminică, 13 martie 2011

Seth's Blog : Seven questions for leaders

Seven questions for leaders

Do you let the facts get in the way of a good story?

What do you do with people who disagree with you... do you call them names in order to shut them down?

Are you open to multiple points of view or you demand compliance and uniformity? [Bonus: Are you willing to walk away from a project or customer or employee who has values that don't match yours?]

Is it okay if someone else gets the credit?

How often are you able to change your position?

Do you have a goal that can be reached in multiple ways?

If someone else can get us there faster, are you willing to let them?

No textbook answers... It's easy to get tripped up by these. In fact, most leaders I know do.

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sâmbătă, 12 martie 2011

Mish's Global Economic Trend Analysis

Michael Moore Manipulates Student Fools Who Buy His Self-Serving Socialist Message; Mooore Declares "War" and Calls for "Student Walkout"

Posted: 12 Mar 2011 09:13 AM PST

Several seriously misguided socialist fools sent me links to a Michael Moore video clip appearance on the Rachel Maddow Show. They thought the video was some kind of "proof" that public unions were being mistreated.

Please consider Michael Moore Reacts To Wisconsin Union Vote: "This Is War"

Michael Moore is enraged after the Wisconsin State Senate voted to strip public unions of the ability to collectively bargain. Speaking on MSNBC's "Rachel Maddow Show," Moore said "they think they can get away with this."

Moore also calls for a "student walk-out" across the nation on Friday in response to the Wisconsin vote.

"This has to continue day after day and these governors have to step down," Moore declared.

"The rich have committed these crimes and the people will demand your ass is in jail," Michael Moore said with a pair of handcuffs on the set of Maddow's show.

Moore also shocked the audience by telling the rich and bankers that "we have a right to your money!"

Self-Serving Claptrap

Please click on the above link to see the video.

The sad reality is Moore makes hundreds of millions with his self-serving political claptrap and students are all the worse off for it. Student loans and public unions drive up the cost of education.

Moreover, public unions drive up taxes and that is why parents of many of these kids are in serious economic trouble.

Finally, as noted in Paul Krugman, Stephen Colbert, Bill Maher, others, Ignore Extortion, Bribery, Coercion, and Slavery; No One Should Own You! the issue is one of slavery.

No matter what grievances (legitimate or not) that Moore may have, slavery is never the answer. Yet Moore supports slavery as the solution.

If this is "War", I say it's about time. The nation needs to abolish slavery, and the action in Wisconsin is a good start.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

European "New Deal" Debt Agreement is Same Useless Peer Pressure Model

Posted: 12 Mar 2011 12:52 AM PST

Eurozone leaders met in Brussels on Friday hoping to solve the European sovereign debt crisis. At the last minute Europeans Reach New Deal to Fight Debt Crisis.

European leaders agreed early Saturday to new measures intended to end the euro zone debt crisis, offering the debt-laden Greece a cut in its interest rate and injecting more flexibility into the way a bolstered bailout fund for the euro can be used.

The deal, which went further than had been expected at Friday's meeting of 17 euro zone leaders, came after a fierce dispute over corporate tax — pitting France and Germany on one side against Ireland on the other.

Because of the standoff, Ireland, which like Greece has accepted a bailout from the European Union and the International Monetary Fund, has not been offered a reduction in its interest rate, now about 6 percent.

The early morning agreement came alongside a deal on a pact called for by Germany and France to tighten discipline in the euro zone.

As expected, the current, temporary fund will be extended to allow it to lend its full 440 billion euros ($608 billion). The permanent fund that will replace it in 2013 will grow to 500 billion euros.

Under the latest agreement, the European Union's bailout fund will be able to buy bonds on the primary market but not on the secondary one.

However, those seeking a more comprehensive solution had pressed for more far-reaching changes, such as allowing the bailout fund to extend lines of credit to countries or letting it be able to buy bonds on the secondary market. Those ideas were not accepted.

Greece was given a concession on the length of its loan repayments to 7.5 years and agreed to a package with the European Union under which it would raise around 50 billion euros through privatization to cut its debt.

Trichet's Rulebook Two-Step

In clear violation of the "no-bail-out clause" in the Maastricht Treaty, the group voted to allow the ECB to directly purchase sovereign bonds.

Note that the ECB is is already stuffed with sovereign bonds. It bought them in the secondary market because buying them in the primary market was against the rules.

Flashback May 4, 2010: Trichet, a Monetarist Pussycat at Heart, Throws ECB Rulebook Out the Window

While the ECB is prohibited from buying assets directly from authorities, it can buy them on the secondary market. Trichet said on May 2 that "at this stage, we have absolutely no decision on the purchase of government bonds."

I said at the time "No Decision" means pussycat-hearted Trichet is considering it. And so it was. "No decision" quickly became a decision, in clear violation of the intent of the treaty.

With strong objections from German central bank president Axel Weber, Trichet started loading up the ECB's balance sheet with garbage.

Now the EU has voted to allow the ECB to buy bonds in the primary market but not the secondary one.

As noted above, this bond buying debacle is not part of the Maastricht Treaty. Thus German voters need to ratify this provision. In effect, German Chancellor Angela Merkel just sold Germany down the river to meet her political goals. She will not survive this.

Greece Gets Interest Rate Reductions, Ireland Doesn't

The EU group also decided to stick it to Ireland, refusing to lower its interest rate although it did agree to modify the terms for Greece.

Bloomberg reports Europe Boosts Bailout Fund With Primary-Market Purchases, Eases Greek Pact

Euro-area leaders retooled their rescue fund to stamp out the debt crisis, authorizing the facility to spend its 440 billion-euro ($611 billion) capacity and enabling it to buy debt in primary markets, while cutting the cost of bailout loans to Greece.

The officials rejected Ireland's bid for relief as Prime Minister Enda Kenny refused to yield to calls to raise its 12.5 percent company tax rate. The leaders also declined to permit the fund to finance bond buybacks of debt-strapped states.

The accord was unexpected, coming at the end of a session that began after 5 p.m. following daylong talks among the 27 European Union heads on a response to the uprising in Libya. Officials in Germany and France this week said they didn't expect a comprehensive agreement until a summit March 24-25.

In return for the euro region acceptance of her conditions on controlling debt, Merkel swung Europe's biggest economy behind plans to allow greater flexibility and firepower in the EU rescue fund, the European Financial Stability Facility.

With two weeks to the March 24-25 summit endgame, Merkel and Sarkozy clashed with Kenny over corporate taxes. They had insisted on a common corporate tax base as the condition for agreeing to ease the terms of Ireland's 85 billion-euro bailout. Kenny rejected that position, calling it "harmonization of taxes through the back door."

Ireland's main corporate tax rate is 12.5 percent, compared with an EU average of about 23 percent and even higher rates in Germany and France, which it has used to lure companies such as Hewlett-Packard Co.

The European Commission, the EU's executive body, will present a proposal on a common corporate tax base in the coming weeks, the agency said. Ireland will think it over and come back to the rest of the EU within two weeks, Merkel said.

Talks on a deal for Ireland "will be difficult and detailed but I am convinced and remain convinced that there will be that we can find a way forward," Kenny said.

Kenny Holds The Line

Will the real Kenny please stand up? The previous article makes it appear Kenny is about to collapse. A second Bloomberg article below makes it appear otherwise.

Please consider Ireland Bid for EU Relief Rejected as Kenny Holds Line on Increasing Taxes.

Euro-area leaders rebuffed Irish Prime Minister Enda Kenny's bid for easier bailout terms, demanding that Ireland raise tax rates in return, as they rewarded Greece with a cut in its rescue-loan costs.

"We weren't really satisfied yet today with what Ireland pledged," German Chancellor Angela Merkel said after a summit that ended about 1:30 a.m. in Brussels. "We can only offer the interest-rate cut when we have something in return."

Kenny, arriving for his first summit as Ireland's leader, refused to buckle under pressure from Merkel and French President Nicolas Sarkozy as he pushed for relief on the 5.8 percent interest rate the country pays on the 85 billion-euro ($115 billion) rescue package it received in November.

On raising the tax rate, "I made it perfectly clear on many occasions that this is not something that I could or would contemplate and didn't this evening," Kenny said. He said talks would continue through a summit scheduled for March 24-25.

Ireland's main corporate tax rate is 12.5 percent, compared with an EU average of about 23 percent and even higher rates in Germany and France, which it has used to lure companies such as Hewlett-Packard Co. to set up in the country.

"We're not asking Ireland to put up their corporate taxes to the European average, but to make some effort," Sarkozy said.

Raising Corporate Taxes a Foolish Tradeoff

Kenny is a fool for putting himself in this position. Somehow the discussion is about pissy reductions in interest rates in return for unwise corporate tax hikes. The discussion ought to be on how big the haircuts will be. If Kenny comes to his senses, which is by no means certain, he should put the issue of haircuts to a vote.

I think somewhere in the neighborhood of 15 cents on the dollar is about right. If put to a vote, German and French banks would be lucky to see anything at all.

Watered Down Proposals

In spite of all this talk about agreement to a new deal, no real issues were solved.

It makes little difference if the ECB stuffs itself with garbage via the primary or secondary market. Neither way makes any sense.

Moreover, Germany wanted strict rules on raising retirement ages, aligning corporate tax rates and on debt limit enforcement mechanisms.

Instead, "after objections from a host of smaller countries, the proposals were loosened to allow countries to set their own targets. Sanctions are not envisaged, and the commitments nations enter into will be subject to peer pressure instead."

Agreement To Do Nothing

One way to get agreement is to agree to do nothing, which is essentially what happened.

There is no agreement on tax rates, on retirement age, or on sanctions. As before, everything boils down to "peer pressure". Yet one of the reasons Europe is in a mess is that peer pressure does not work.

Also note that we have not yet heard from Irish citizens who will be irate over favoritism to Greece. Perhaps they will force Kenny to get a backbone.

The same applies to Merkel's willingness to play loosey-goosey with German voters and the Maastricht Treaty.

Thus, for all the brouhaha about a "New Deal", nothing has changed except Greece has a slightly lower interest rate, and a few more years in which to "not" pay back its debts. Odds are still high that Greece and Ireland default. The only question is whether default occurs sooner rather than later.

For additional information, please see yesterday's article ECB Stuck in Sovereign Debt Garbage, Seeks German Help to Unload It; Anger in Greece, Ireland; Germany Sets High Price for Bailout Changes

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

luni, 14 martie 2011

Photostream: Behind the Scenes in February

Seth's Blog : Bring me stuff that's dead, please

Bring me stuff that's dead, please

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Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

duminică, 13 martie 2011

Seth's Blog : Seven questions for leaders

Seven questions for leaders

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sâmbătă, 12 martie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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