Central Perk

luni, 13 iunie 2011

SEOmoz Daily SEO Blog

Why Clients Have the Same Issues/Questions - It's Not About SEO... But About the People!

Posted: 13 Jun 2011 06:31 AM PDT

Posted by aleyda

This post was originally in YOUmoz, and was promoted to the main blog because it provides great value and interest to our community. The author's views are entirely his or her own and may not reflect the views of SEOmoz, Inc.

I really enjoyed the recent Whiteboard Friday about Top 5 SEO Questions from SEOmoz customers and I was surprised by mainly two things:

1. Most of the questions were basic

As Cyrus commented in the video some of the questions were basic and focused on the "technical" (non-content) fundamentals of SEO. I think that this doesn't mean by any means that the SEOmoz community is not technically savvy: during my SEO consulting experience I have found that even with large organizations that have a strong Web development and system administration team these same "basic" errors -that cause the questions- still happen. Sometimes it is because SEO recommendations are seen as a set of activities that should only be performed once (when you provide them and afterwards are forgotten), instead of guidelines that should be integrated into the overall development process to validate any new web work.

2. The same questions are asked in other very different countries, languages and markets

I used to work with clients focused on the travel, education and online gaming sectors, with SEO processes mainly in Spanish (for Spain and Latin American countries) and in English (for the UK and USA). Now I work for the local business market in Spain. And still, the SEO questions that are asked are pretty much the same. No matter which sector, language or country. I felt totally identified with the questions of that Whiteboard Friday because the day-to-day support I have given usually cover those same issues.

It was definitely interesting to find out how the members of one of the strongest online SEO communities usually ask the exact same basic questions that I have been asked by my SEO clients –something that I wouldn’t expect-.

Then a couple of days ago Dana Lookadoo tweeted a SEO “suggestion” that I related with these kind of issues:

More and more Web developers, Web designers and even "traditional" marketers are getting interested on SEO, which is great, but instead of doing what you recommend they start following any SEO advice they find online... that even if it is about a generally effective technique (don't even mention when it's a black hat or smoke selling stuff), its implementation can ruin your SEO efforts simply because it doesn't fit into your specific process.

So I commented to her how sad it was for me to find out that SEO consultants from the other side of the world find the same "basic" issues and Dana, wisely answered me:

I think her answer shows a fundamental truth in our work: The usual problems we find are not caused by the complexity of the own SEO process, but by a human behavior related issue. It has to do more with the way we think and make decisions and this is why these issues are found in any sector, language or country.

Moreover, the fact that our clients usually don’t see this principle can explain why it seems that even very experienced, business savvy marketers or business owners –those who make the decision to hire you as a SEO consultant and start a SEO process- have problems to consistently “relate” their “offline” business strategy with the SEO one.

This happens because they fail to clearly see that SEO is much more than a set of technical and content “tricks” that you can use to rank well on search engines. They don’t see that SEO should “reflect” and work along well with their “offline” marketing strategy and correspond to their customer trends and behavior, since at the end of the day, it is about the people (their target market) that the website should be looking to attract and convert.

Because of this, at the end of the day, the marketing manager of a large company and the local business owner usually end up asking the same basic SEO strategy related questions. Some of them are questions that have to do more with the business and less with SEO, that I would have never thought of being asked.

SEO Business Questions

For example, some of them are:

1. I'm starting a new business: Could you please suggest some SEO friendly names?

Issue Background:

A client was going to start a new business –I’m not talking about buying a new site, but to create a whole company- and in order to select the name of its new business wanted me to perform a keyword research to suggest him SEO friendly names.

Solution:

I asked the client if he really wanted to name his new business prioritizing SEO instead of branding principles he could be recognized with.

I explained that if his brand (and domain) didn’t include highly relevant keywords, it didn’t mean the site wouldn’t be able to rank well: through an effective website architecture along with well organized, relevant content and many other on-page optimization techniques I could make sure the site is relevant and attractive not only to search engines but to the users.

Additionally, I commented how it seems that Google is going to stop putting so much weight to the keywords on the domain and that the best was to base the SEO strategy in long-term principles.

2. I don't want to be related with a type of business but I want to rank with its keywords.

Issue Background:

A very niche but highly profitable line of business of the company started to get bad reputation because of fraudulent activities of the competition with that service. This service was practically known by a very specific term. Other companies stopped using that term to refer to this service they also provided to prevent being related with the well-known fraudulent activities of the competition. My client did the same in the “offline” world –eliminated any reference to that line of business using the term that had bad reputation- but asked me if he could still ranking in the search engines with it… even if he wanted to eliminate any reference to it from the website.

Solution:

I asked him to extrapolate the situation to the “offline” world. If he didn’t specifically add that term in the company advertising materials there wouldn’t be any possibility that his target market would know he provided it and get any benefit from it.

The same happened in the online world. If he eliminated the term completely from the website, search engines and users wouldn’t have any means to identify that it’s relevant for that term.

He asked me if there was any “technical trick” that could prevent that to happen and I answered that if he wanted to add to its reputation problem a search engine penalization one and possibly lose the site’s rankings there was always a way… but not a business consistent one, since even if he didn’t mind to be penalized, if visitors would reach its site with a term that was not shown in the content at all they possibly would feel deceived and leave the page.

I suggested that he could keep an internal but visible and well optimized, quality page on its site describing that he had previously given that type of service, using the term he wanted to rank with, providing proof and warranties of his services, explaining how his business was different from the competition and why visitors should trust his business.

3. My business has diversified. I have internal sections in my site featuring the different areas where I provide my services but I want to keep ranking for a specific set of them with my home page.

Issue Background:

The client business had started providing a specific service in one city, so the home page featured it –since it was all what the company had-. After sometime the home page started to rank for those specific terms. A couple of years later the company had diversified and provided the same service for a dozen of cities. They enabled specific sections of the site for each one of them. The problem was that for the initial city they still were ranking with the Home Page. They had also enabled an internal section for it with unique content, so they had a content cannibalization problem. Sometimes they were ranking for that city related terms with the Home Page, others with the internal page. When asked to optimize the Home Page for more general business terms –and avoid the cannibalization problem- the client refused since he didn’t want to lose the Home Page rankings for the specific city related terms.

Solution:

I showed the client how the city internal page that was ranking for a very similar keyword than the home page had much better conversion rate since it gave much more information and arguments and optimized conversion channels to visitors.

I also mentioned the client how the fact that the home page was optimized for that city specific terms instead of more general (but very relevant) ones, was preventing the possibility to rank with them which represented a very good (and feasible) SEO opportunity.

Finally I commented how we could gradually optimize the Home Page for those general keywords and give more “signals” to search engines (from inside and outside the site) indicating how the most relevant page for the city related keywords was the internal one that would start gaining more popularity and ranking instead of the home page.

If my assumptions are right some of you should have received similar questions from your clients! Have you? If so, have you suggested other ways to fix these same problems? Which other “fundamental” SEO strategy related questions that you would like to share have you been asked?

Image under Creative Commons license taken from Flickr.

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11 Analytics Metrics That Are Actionable

Posted: 12 Jun 2011 01:58 PM PDT

Posted by Paddy_Moogan

Last month I spoke at SAScon in the UK on the topic of getting actions from analytics. It's something that I feel quite strongly about so I wanted to write a post on here to talk about it a little and expand upon what I talked about at SAScon.

The key question I want to answer is -

"What key metrics should I be tracking?"

I can break the answer down pretty quickly by saying the following -

Metrics that are actionable - why measure stuff you can't do anything about?
Metrics that help you get stuff done - using data to fight internal battles is vital
Everything else - meh, wouldn't worry about it too much!

Whilst I love diving into data and getting into the how and why trends appear in analytics, I have to remember that my time is limited, in particular when looking at a clients analytics account. I need to understand as much as I can, but ultimately I need to focus on the metrics that make a difference. Also if you are a bit of a newbie in SEO or analytics, the amount of data available to you can be very overwhelming. Far too many people make the mistake of focusing on the wrong metrics which can be costly to a project. It can sometimes look like you are doing a bad job if you are measuring the wrong metrics.

Metrics that are actionable

If a metric isn't actionable, then its just fluff that fills up space in a report and doesn't mean very much. Whilst metrics can be interesting, there is a difference between a metric that is interesting and one that is actionable. Below I've listed a number of metrics that I define as actionable.

1. Beat Panda - Measure Content

Whilst the Google Panda updates of 2011 have looked to address a number of quality issues, one of the key ones in my opinion was the amount of good, quality content on a page. Many pages of thin or duplicate content across your site could potentially cause your entire site to fall foul of Panda. One way to assess this on your own site is to use custom variables to measure the content on your page. This works very well if you have an ecommerce site or any site where you collate reviews:

Action to take -

Measure the number of reviews on your pages and see if pages with little or no content are as visible in Google

If you want to learn more about using Google Analytics custom variables, checkout this tutorial video.

2. % Visitors who view product pages

The reason this is important is quite simple, no view of a product page = no product sale.

This is one that is usually taken for granted by many ecommerce sites. They assume that because they have lots of product pages, that visitors will automatically find them. However there can be barriers to a visitor getting to your product pages, for example poorly designed navigation, poor internal site search, unclear category names etc. Also lets now forget that many ecommerce sites have other sections of their site such as a blog, a news section, buyers guides, videos and help pages, so a visitor can easily get distracted by one of these and end up leaving your site without ever seeing a product page.

Actions to take -

Improve internal site search
Improve navigation menus

Pro tip - make sure your internal site search works for both plural and singular product names. A classic mistake I've seen over the years is exact matching of queries to product names which means either singular or plural returns no results.

3. % of people who search your site then exit

If a visitor has made the effort to type in what they are searching for on your site and still left without buying, then you should take a closer look into why. So many internal site searches are not only badly designed, but also return bad results. If your website is like this, then you are losing sales. Actively improve your search results pages to make them more relevant and useful. it still amazes me that SEOs obsess over Google SERPs, yet neglect to take a look at the quality of their own despite having control over them!

Actions to take -

Test it and make sure it actually works
Do the results you see make sense
Include special offers or discounts in results
Enhance results with images - see Apple for a good example:

If you haven't got it setup on your site yet, check out this information on setting up site search for Google Analytics.

4. Page load speed

If it isn't already clear to you, Google is obsessed with speed. I can see why, a faster web is better for everyone and we all get frustrated if a page takes longer than a few seconds to load. Google have confirmed that site speed is part of the algorithm, albeit a small part. They've also made it measurable in Webmaster Tools and more recently they made it available in Google Analytics.

Now that we can measure load speed in analytics, it becomes much easier to see the results of the actions you take. Its also easier to see which pages of your site are slower than others, which allows you to try and work out why and fix the issues.

Something I wanted to point out here too is that you shouldn't be worrying about site speed because it forms a small part of the Google Algorithm. You should be worrying about it because it is important to your visitors, they will not come back to your website if they are left hanging around waiting for the page to load.

Actions to take -

Look at which pages or sections of your site are the slowest
Focus on improving the speed of your money pages
Bug your developers and educate them on why its so important

If you want to learn more about what you can actually to do speed up your site, take a look at Craig Bradford's site speed for dummies part one and part two on the Distilled blog.

5. Average Order Value

This metric is all about squeezing as much revenue as you can from each order. Quite often, an SEO will start a project and the first thing they do is assume they make more revenue for the client by getting more traffic. Whilst this can be true, the quickest wins can often come from taking a good look at ways to get more value from the existing traffic.

There are actions you can take though if you are looking to drive traffic that will increase your order value.

Actions to take -

Add up sells as much as you can to the buying process - Amazon are awesome at this
Look at keyword trends to see which ones drive a higher order value
Look at traffic sources to see which ones drive a higher order value

6. Measure SEO Variables

Similar to point one above, you can also use custom variables to track various SEO variables of your website such as -

Pages tagged with Rel=canonical
Pages that are linked to sitewide
Tag certain "types" of content across your site

Action to take -

Measure things such as the above and see how these pages perform in search results

7. Completion of Tasks

This one falls outside Google Analytics but I still wanted to measure it as it can be a great way of getting quick feedback about your site. I'd recommend taking a look at 4Q survey for this one, they offer a free trial so you can give it a test drive and see what you think. Avinash wrote a pretty in depth review of it on his blog if you want to read a bit more into it.

Quick sidenote, if you are into Analytics and not following Avinash on Twitter or reading his blog, you should be! He is also speaking at Mozcon in July and I've heard great things about his presentations.

Actions to take -

Ask your visitors questions that matter using this software and feed the answers back into your strategy

8. Share of Search Landscape

I really like this metric. The main reason I like it is that it is a metric that anyone can understand, even people who don't get SEO will understand this. This is because its very similar to a traditional marketing metric of market share, so it can be used when demonstrating SEO growth and targets to your clients.

Here is an example of how this may look (dummy data!):

9. Form Field Tracking

This is such an easy one to action and can make a big difference to your conversions. If you are able to identify fields that are consistently confusing customers and perhaps making them abandon the form, then you are able to look into why and remove these barriers to conversion. You can even take a step back and ask yourself if that field is even required at all.

Action to take -

Identify form fields that are causing problems and either remove them or improve them

Pro Tip - you can use Google Analytics events to track which form fields are causing problems. Here is a good thread over on the Analytics help forum which points you in the right direction for setting this up.

10. Branded vs Non-branded Search Traffic

If you are an SEO, or you employ an SEO agency, you should be measuring this metric. The great thing about measuring non-branded traffic is that pretty much 100% of the credit can be given to SEO efforts. Whilst credit for branded search increases can be credited to a number of marketing channels such as PR, offline advertising or online display advertising.

Action to take -

Measure non-branded keywords and see which ones convert best, then focus on increasing rankings for these

11. Conversion Rate

I'm pretty sure you are all looking at this metric, but I bet that some of you are not using it properly. By not measuring it properly I mean that you are probably looking at this overall figure:

You can't take any actions from this figure. In order to take actions, you need to segment by relevant dimensions such as traffic source, type of visitor, location, keyword etc.

Action to take -

Segment conversion rate by best performing dimensions and invest more resource into those dimensions

Metrics that help you get stuff done

The following metrics are focusing more towards helping you get stuff done. You should really make sure you use all available data to fight internal battles and give the business case to effect change at your clients company. Make sure that you backup your recommendations with solid data, however be careful not to confuse key stakeholders with complicated stats or fancy graphs. Just give them the data they need and visualise them in a meaningful way.

I'm going to give a couple of client examples here, whilst I can't give away the client themselves, hopefully these examples will demonstrate the power of data in getting things done.

1. Client didn't appreciate the value of content

A client of mine launched a microsite which had lots of good content on it about their upcoming releases and products. When their main site went live, they took down a lot of this content. This was despite our best efforts to stop them! We saw traffic drop slightly and growth wasn't as fast as it had been in previous months. After a few months (yes I know!) we finally got the content put back up and we pretty much instantly saw an increase in traffic.

So the next chance I got, I did a short presentation to one of the company directors who had the power to make things happen at the client. He wasn't involved much in day-to-day SEO but still had the power to influence the rest of the company's attitude towards SEO. I showed him a simple bar chart showing the traffic drop and the subsequent increase.

It worked a treat and he now understands the power of content and how it effects organic traffic. This means that future tasks that involve content won't be buried deep at the bottom of the developers list and will be slightly closer to the top. Influencing change ftw.

2. Developers didn't like SEO tasks

One client of mine has a team of developers who are probably the smartest I've ever worked with. However they'd previously worked with SEO companies who had got them doing work which didn't make any difference to traffic or revenue. These guys are super busy and didn't want to spend their valuable time on tasks which didn't make a difference. This made them a little resistant to future SEO tasks.

So when we had a situation where it was possible for Google to crawl literally billions of pages on their site, most of which we didn't really want Google spending their time crawling. After some work, we managed to make some changes with the help of the developers to solve this problem and make Google focus on the important pages and spend more time crawling those.

A month or so later, we saw some very good results both in terms of increased traffic and could also see through server logs that Google were doing exactly what we wanted them to do.

With the help of the client, these results were shown to the developers and they were given credit for the increased traffic. They were able to see the results of their work which makes it much easier now to get them to work on SEO tasks.

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There's a new sheriff in town

Good morning,

Did you know that the government spends millions to maintain buildings that have sat vacant for years? Or that your tax dollars pay to needlessly ship copies of the Federal Register to thousands of government offices across the country even though the same information is available online?

And I bet you didn't know that your tax dollars pay for a website dedicated to the Desert Tortoise. I'm sure it's a wonderful species, but we can't afford to have a standalone site devoted to every member of the animal kingdom. It's just one of hundreds of government websites that should be consolidated or eliminated.

This kind of waste is just unacceptable. Particularly at a time when we’re facing tough decisions about reducing our deficit, it's a no-brainer to stop spending taxpayer dollars on things that benefit nobody.

That’s why President Obama asked me to head up the Campaign to Cut Waste—a new effort to root out wasteful spending at every agency and department in the Federal Government.

Like millions of American families, the Federal Government has to take a hard look at spending and live within its means. Most of these cuts we’re going to make are small. They won’t close our deficit or solve all of our fiscal problems. However, no amount of waste is acceptable, and these cuts will add up over time. This year alone we’ve found $33 billion in savings, but we know there’s a lot more work to be done.

When we passed the Recovery Act back in 2009, President Obama insisted that we use that program to set a new standard in government transparency and accountability. And he appointed me as “Sheriff Joe” to make sure the job gets done.

Now, there were a lot of naysayers back then who said that there was no way we could implement the Recovery Act without massive waste, fraud and abuse.

You know what? They were wrong. Thanks to our diligence (and some help from advanced computer models and sophisticated data analysis), the Recovery Act has had an unprecedentedly low level of fraud, with less than 0.6% of all awards experiencing any waste or abuse.

There’s absolutely no reason why we can’t apply these same principles and techniques to all government spending.

And that’s exactly what I intend to do with the help of a new Government Accountability and Transparency Board, a group composed of independent inspectors general and high-level agency officials who will help me root out waste, fraud and abuse across the government. Helping me ensure that your tax dollars are being spent on things that matter, like investments in education, innovation and improving our infrastructure.

So, folks, we’re changing the way your government does business (and spends your hard-earned tax dollars), and I think you’re going to like the results.

Sincerely,

Vice President Joe Biden

P.S. If you’re interested in keeping up with our progress in hunting down wasteful spending, you can sign up for regular email updates.

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Photo of the Day: President Obama Greets Littlest Constituents

Your Daily Snapshot for
Monday, June 13, 2011

Photo of the Day

President Barack Obama greets children at a day care facility adjacent to daughter Sasha's school in Bethesda, Md., following her 4th grade closing ceremony, June 9, 2011. (Official White House Photo by Pete Souza)

Seth's Blog : Organization vs. movement vs. philosophy

Organization vs. movement vs. philosophy

An organization uses structure and resources and power to make things happen. Organizations hire people, issue policies, buy things, erect buildings, earn market share and get things done. Your company is probably an organization.

A movement has an emotional heart. A movement might use an organization, but it can replace systems and people if they disappear. Movements are more likely to cause widespread change, and they require leaders, not managers. The internet, it turns out, is a movement, and every time someone tries to own it, they fail.

A philosophy can survive things that might wipe out a movement and that would decimate an organization. A philosophy can skip a generation or two. It is often interpreted, and is more likely to break into autonomous groups, to morph and split and then reunite. Industrialism was a philosophy.

The trouble kicks in when you think you have one and you actually have the other.

• Email to a friend •

duminică, 12 iunie 2011

Mish's Global Economic Trend Analysis

Who Should Head the IMF?

Posted: 12 Jun 2011 05:48 PM PDT

Three candidates are touring the globe in their effort to become the next head of the IMF. I believe it is a shoo-in for French finance minister Christine Lagarde but two other candidates have their hat in the ring.

Israel's Stanley Fischer Announces Bid to Head the IMF
Mexico's IMF Candidate is Agustin Carstens

Lagarde backs the ECB stance of no haircuts on sovereign debt. It's certainly the right policy if you are running for the IMF. Otherwise it's flawed.

Note that the French court conveniently delayed a review of charges against Lagarde until after the election.

A French court has postponed a decision on whether to open an investigation into Christine Lagarde, the country's finance minister and front-runner to take the helm at the International Monetary Fund, a judicial official said yesterday.

The Court of Justice of the Republic, a special tribunal that handles legal matters involving government ministers, will announce its decision on July 8, the official said. She was speaking on condition of anonymity, in accordance with French judicial policy.

Questions have been raised about Lagarde's role in getting arbitration in 2008 for French businessman Bernard Tapie, who won $449 million as compensation for the mishandling of the sale of sportswear maker Adidas.

Lagarde has denied any wrongdoing.

She is on a world tour to support her bid to be the next managing director of the IMF. Nominations for managing director closed yesterday, and the body's 24-member executive board is to vote June 30.

A poll in The Guardian asks Would Christine Lagarde make the best head of the IMF?

1. Yes, she's got a distinguished record

2. No, emerging nations need more of a say

Sadly, those are the only two choices the Guardian offers. What if someone does not think much of Lagarde, but does not want to give emerging markets more of a say?

Here is a poll with a lot more choices, including "no one". Note: The discussion above has biased my poll, but at least all the relevant answers are listed.

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

Roubini Eyes "Perfect Storm" and Bond Market Revolt; German Central Bank Says Greek Default Would Not Destabilize the Euro; Time to Short Treasuries?

Posted: 12 Jun 2011 11:59 AM PDT

In a radical departure from the viewpoint of Jean-Claude Trichet, the president of the German central banks says Greek Default Would Not Destabilize the Euro

Bundesbank President Jens Weidmann raised the pressure on governments to agree to a Greek bailout without the European Central Bank taking part in easing the country's debt burden, saying the euro can withstand a default.

Weidmann said the ECB was unwilling to turn its emergency bond-buying program into a "lasting institution" and that Greece's implementation of austerity measures and asset sales was crucial to securing the handout to prevent a default. He spoke in an interview with German newspaper Welt am Sonntag.

"If the commitments are not met, that cancels the basis for further funds from the aid package," Weidmann told the newspaper. "This would be Greece's decision, and the country then would have to bear the surely dramatic economic consequences of a default. I don't think this would be sensible, and it would surely put partner countries in a difficult situation. But the euro would even in this case remain stable."

Weidmann's depiction of a default as a liveable outcome contrasts with warnings from fellow ECB officials Lorenzo Bini Smaghi and Christian Noyer, as well as European Union Economic and Monetary Affairs Commissioner Olli Rehn, who described it as a "Lehman Brothers catastrophe" last week.

Zero Hedge commented on the Radical Change To ECB's Tune

Translation: we now believe our banks are well enough reserved for what comes next. It also means that the rift with the ECB, which will be exposed as near-insolvent courtesy of using Greek collateral for tens of billions of loans that will have to be impaired, is now terminal.

I concur that ZH provides one possible answer, and a logical one.

However, my top answer is that at long last, someone (in this case the German central bank) was stricken with an unexpected dose of common sense and recognizes a default is coming. To mitigate the damage, Weidmann may have lied about the consequences, and the preparedness of European banks.

Is there any reason to believe Weidmann is attempting to do anything but contain the damage in case Greece defaults?

I covered the prospect of lies in Politicians 'Lying Through Their Teeth' on Greek Aid (and Everything Else Too).

Thus, while it's possible European banks are prepared for default, it's equally possible, if not more plausible, they are not, and that Weidmann is lying about it.

Will the Default be Orderly or Disorderly?

A default is given. The question now is whether that default will be orderly or disorderly. If a default is coming, it makes no sense to throw more money at it. Indeed history shows the sooner the truth is admitted the less the haircuts.

The sad reality of the matter is the "Tortured Body Will Surrender" because Greece is Insolvent

Prolonging the agony by extending Greece more loans will only increase the losses and I suggest the German central bank has come to that conclusion.

US Reserves Bailing out European Banks?

The discussion on Zero Hedge regarding The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went is more problematic.

The Fed does not give money away, the Fed loans it. Lending money to foreign banks does not prepare them for a Greek default.

Nor does that loan come "at the expense of the domestic economy" as Zero Hedge suggests, except in the general sense that it fueled a liquidity bubble, driving up asset prices and the price of food and gasoline.

In summary, instead of doing everything in its power to stimulate reserve, and thus cash, accumulation at domestic (US) banks which would in turn encourage lending to US borrowers, the Fed has been conducting yet another stealthy foreign bank rescue operation, which rerouted $600 billion in capital from potential borrowers to insolvent foreign financial institutions in the past 7 months. QE2 was nothing more (or less) than another European bank rescue operation!

I respectfully disagree. US banks are not lending because they are capital constrained (not reserve constrained), and because there are too few qualified businesses that want loans.

Giving more reserves to US banks would not do a thing. As I have pointed out on numerous occasions, lending comes first reserves second.

Fictional Reserve Lending Revisited

Once again let's review Fictional Reserve Lending And The Myth Of Excess Reserves

Inquiring minds are reading BIS Working Papers No 292, Unconventional monetary policies: an appraisal.

The article addresses two fallacies

Proposition #1: an expansion of bank reserves endows banks with additional resources to extend loans

Proposition #2: There is something uniquely inflationary about bank reserves financing

From the article....
The underlying premise of the first proposition is that bank reserves are needed for banks to make loans. An extreme version of this view is the text-book notion of a stable money multiplier.

In fact, the level of reserves hardly figures in banks' lending decisions. The amount of credit outstanding is determined by banks' willingness to supply loans, based on perceived risk-return trade-offs, and by the demand for those loans.

The main exogenous constraint on the expansion of credit is minimum capital requirements.

A striking recent illustration of the tenuous link between excess reserves and bank lending is the experience during the Bank of Japan's "quantitative easing" policy in 2001-2006.

Japan's Quantitative Easing Experiment

click on chart for sharper image

Despite significant expansions in excess reserve balances, and the associated increase in base money, during the zero-interest rate policy, lending in the Japanese banking system did not increase robustly (Figure 4).

The analysis by the BIS is consistent with analysis by Australian economist Steve Keen and Fran Shostak as noted in Fiat World Mathematical Model. The simple fact of the matter is reserves have little to do with bank lending.

That aside, I certainly agree with Zero Hedge that the Fed ought not be doing all this lending to foreign banks.

Rubini Eyes "Perfect Storm" Including a US Bond Market Revolt

Please consider Roubini Says a 'Perfect Storm' May Converge on the Global Economy in 2013

A "perfect storm" of fiscal woe in the U.S., a slowdown in China, European debt restructuring and stagnation in Japan may converge on the global economy, New York University professor Nouriel Roubini said.

There's a one-in-three chance the factors will combine to stint growth from 2013, Roubini, who predicted the global financial crisis, said in a June 11 interview in Singapore. Other possible outcomes are "anemic but okay" global growth or an "optimistic" scenario in which the expansion improves.

"There are already elements of fragility," he said. "Everybody's kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest."

Bond Market 'Revolt'

World expansion may slow in the second half of 2011 as "the deleveraging process continues," fiscal stimulus is withdrawn and confidence ebbs, Roubini also said.

In the U.S., a failure to address the budget deficit risks a bond market "revolt," Roubini said.

"We're still running over a trillion-dollar budget deficit this year, next year and most likely in 2013," Roubini said in a speech in Singapore on June 11. "The risk is at some point, the bond market vigilantes are going to wake up in the U.S., like they did in Europe, pushing interest rates higher and crowding out the recovery."

In Europe, officials need to restructure the debt of Greece, Ireland and Portugal, and waiting too long may result in a "more disorderly" process, Roubini also said.

Time to Short Treasuries?

I discussed the possibility of a bond market revolt on June 1, in a video discussion with Aaron Task and Henry Blodget: Will the Bond Market Eventually Force Congressional Hands?

In response, several people asked me if it was time to short treasuries. The answer is I don't know. In 2008, I advised against that action. In fact, I was steadfast yields would plunge. Shorts were clobbered.

Now, I don't know. There may be a flight to safety trade on, or not. The market could revolt next week or two years from now. This is a big change in my position in 2008 and even 2010.

5-yr, 2-yr, and 1-yr yields all hit new lows in October of 2010. The long-end of the curve did not follow. That was it for me on the long-end, at least for now. The bull market in treasuries is likely over.

The downside is obvious, and the next major move in yields is North. If the Fed does try QE3, the bond market could revolt. Right now, until the Fed does something new, the treasury market can go either way.

I see no particular edge in shorting long-term treasuries now, but that certainly does not mean buy them.

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

luni, 13 iunie 2011

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