joi, 7 noiembrie 2013

Seth's Blog : What "no" means

 

What "no" means

  • I'm too busy
  • I don't trust you
  • This isn't on my list
  • My boss won't let me
  • I'm afraid of moving this forward
  • I'm not the person you think I am
  • I don't have the resources you think I do
  • I'm not the kind of person that does things like this
  • I don't want to open the door to a long-term engagement
  • Thinking about this will cause me to think about other things I just don't want to deal with

What it doesn't mean:

  • I see the world the way you do, I've carefully considered every element of this proposal and understand it as well as you do and I hate it and I hate you.
       

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miercuri, 6 noiembrie 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Bank of Spain "Discovers" €20.50 Billion in Hidden Non-Performing Loans, Warns Against "Destabilizing Effects" of "Preemptive Bail-In"; Bank of Spain Translated

Posted: 06 Nov 2013 11:14 PM PST

Via translation, El Economista reports the Bank of Spain Discovers Hidden Delinquencies of €20.50 Billion. Emphasis on the word "discovers" not added.
Non-performing loans of Spanish banks to the end of September totaled €92.224 billion euros, 29% more than the €71.660 billion according to preliminary data included in the last Bulletin Financial Bank of Spain.

The Bank of Spain urged banks to review loan portfolios before the September 30 deadline
. [Mish note: Once again, emphasis, this time in bold, is not added]

The document published today reveals that all segments of activity shows the same pattern as before. In general, institutions have shown a high recognition of credit risk deterioration.

Late payments in June rose to 11.9%, from 10% the previous year, and thereafter continued to rise, reaching 12% in August.

The same report notes that Spanish banks have a loss absorption capacity that exceeds €28.600 billion expected in the worst case scenario described by the Bank of Spain until 2015.
Bank of Spain Warns Against "Destabilizing Effects" Bail-In

Given that "hidden" losses were much greater than expected (except of course in this corner), it should not be surprising to see this headline: Bank of Warns Preemptive Rescue of Banks May Have "Destabilizing Effects"

Once again via translation from El Economista.
The governor of the Bank of Spain, Luis Maria Linde, warned today about the destabilization that may involve too hasty implementation of a preemptive "bail-in" rescue of nonviable financial institutions.

Linde believes that too much advance application of acquittals to senior debt can have "potentially destabilizing" effects.
Bank of Spain Translated

"Banks lied. No, strike that. We mean to say conditions unexpectedly deteriorated. And who coudda possibly thunk that? Smelly stuff happens. Don't worry, we will sniff deeper next time, and with a bigger nose. We promise! But the safe thing to do now (as always) is protect senior bondholders. Rest assured, there will be no bail-ins until we are 100% certain senior bondholders don't need to be bailed in."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

It Can't Be Done

Posted: 06 Nov 2013 08:51 PM PST

I picked the title of this post from the Reuter's headline story "China needs 7.2 percent GDP growth for employment: premier".

Curiously the same story now appears under the recycled headline China premier warns against loose money policies, a statement (in isolation) that I would agree with.

Let's take a look at the details.
China needs to sustain economic growth of 7.2 percent to ensure a stable job market, Premier Li Keqiang said as he warned the government against further expanding already loose money policies.

In one of the few occasions when a top official has specified the minimum level of growth needed for employment, Li said calculations show China's economy must grow 7.2 percent annually to create 10 million jobs a year.

That would cap the urban unemployment rate at around 4 percent, he said.

"We want to stabilize economic growth because we need to guarantee employment essentially," Li was quoted by the Workers' Daily as saying on Monday

Yet even as authorities keep an eye on growth, Li sounded a warning on easy credit supply, which he said had topped 100 trillion yuan ($16.4 trillion) in the world's second-biggest economy.

"Our outstanding M2 money supply has at the end of March exceeded 100 trillion yuan, and that is already twice the size of our gross domestic product (GDP)," Li was quoting as saying.

"In other words, there is already a lot of money in the 'pool'; to print more money may lead to inflation."
Perils of Loose Money

I certainly concur with Li on the perils of loose money, while also pointing out three things.

  1. China's monetary policy is among the loosest in the world
  2. Credit growth is insane
  3. China is not going to grow at 7.2%


Risky Experiment

The New York Times reports Chinese Leader's Economic Plan Tests Goal to Fortify Party Power
China's president, Xi Jinping, is about to plunge the country and himself into a risky experiment: an attempt to carry out market-driven economic overhauls while reinforcing the Communist Party's pillars of political and ideological control. This mixed agenda has magnified doubts about whether he can deliver on his promises of transformation.

At a meeting, or plenum, of the party's Central Committee that starts Saturday, Mr. Xi will enumerate his plans for an economic overhaul, and state-run news media has promoted the event as a turning point. Mr. Xi and Prime Minister Li Keqiang have indicated that they want to nurture healthy, sustained growth by encouraging more market competition, private business, financial liberalization and individual consumption, leaning away from the state-focused policies of the past decade.

Yet, Mr. Xi wants to achieve this economic shift away from the state while strengthening the ruling party, which derives power and wealth from its extensive role in the economy.

"There are inescapable contradictions that Xi Jinping will have to face," said Wu Wei, a former aide to central party leaders who was involved in planning China's market overhauls in the 1980s.

"In one hand, they're holding up the leftist banner. On the other hand, they say there must be reform," Mr. Wu said. "They don't show any desire to take on political issues, but if you don't take on issues at the political level, most of these economic reform measures will fall apart before they're completed."
Inescapable Contradictions

Holding up the leftist banner, promising market reforms, and expecting 7.2% growth on top of it, is quite silly.

It Can't Be Done.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Lunatic Howls for Competitive QE Debasement; Another Swan Dive Into Cesspool of Economic Silliness; Following Lemmings Over The Cliff; It's Madness!

Posted: 06 Nov 2013 12:20 PM PST

In spite of the facts ...

  • That QE causes economic distortions that benefit the already wealthy at the expense of everything else
  • That QE tends to create asset bubbles that eventually bust
  • That printing has never in history permanently solved anything ...

monetarist fools clamor for more of it.

ECB Really Must Act

Reuters writer Hugo Dixon says ECB Really Must Act on Deflation
In September, inflation was above 2 percent in only two of the euro zone's 17 countries, the Netherlands and Estonia. It was negative in Greece, and in Latvia, which is to join the single currency in 2014.

A looser monetary policy might push inflation in other countries, such as Germany, above 2 percent. But this would be a good thing.

What then are the best tools for the ECB to use? Shaving another quarter of a percentage point off its main interest rate, to bring it down to 0.25 percent, is the obvious first step. But it won't achieve much and, after that, the ECB will have exhausted its conventional arsenal.

Fortunately, the central bank has unconventional tools too. In Draghi's words, "we have a vast array of instruments". Two, in particular, come to mind.

The first is the so-called long-term refinancing operation. This involves lending cheap long-term money to banks. The ECB lent 1 trillion euros two years ago in this way, to keep the banks afloat. Much has been repaid. But given that the rest is due to be repaid in just over a year, it would make sense to launch a new operation to ensure banks don't run out of cash.

A more dramatic instrument would be to initiate a programme of quantitative easing (QE). This would involve the ECB going into the market and buying up large quantities of government bonds, in the same way that the U.S. Federal Reserve and the Bank of England do.

Last year, the ECB promised to buy unlimited quantities of peripheral governments' bonds in order to preserve the euro. But QE would be different. It would involve buying bonds issued by all governments, including Germany's, and its aim would be to push euro-wide inflation up to its target.

There would be two other beneficial consequences: the euro would fall, boosting the zone's competitiveness; and the anemic growth rate would pick up. QE would be a departure for the ECB. But now's the time to embrace it.
"Ensure Banks Don't Run Out Of Cash"

Dixon wants to ensure banks don't run out of cash.

Let me remind Dixon that banks aren't lending due to lack of demand, the pool of willing borrowers primarily consists of poor credit risks, and finally, banks are capital impaired.

Thus, any suggestion that banks need more cash to lend is ridiculous.

That said, banks could need more cash if there is a run on the banks. And in that regard, the only surprising thing is there hasn't been such a run, especially in Spain.

As for pushing euro-wide inflation up to its target, why does anyone think 2% is a magic target? Because central banks say so?

Dixon fails to consider the flaws in the Euro itself. The aggregate inflation rate of 2% led to housing bubbles in Ireland and Spain, and inane economic policy in Greece and Portugal.

One size does not fit all. And we have seen the resultant bubbles time and time again, with disastrous consequences each time. Only economic literates demand more of the same.

Unfortunately, it's far too easy to find economic illiteracy. Next up ...

ECB's Easing Dilemma

Izabella Kaminska on Financial Times Alphaville speaks of the ECB's Easing Dilemma.

The text suggests the dilemma is which tool to use, putting her squarely in a camp with Dixon.

Another Swan Dive Into Cesspool of Economic Silliness

Telegraph writer Ambrose Evans-Pritchard took another swan dive into the cesspool of economic silliness, singing the praises of France's industry minister, Arnaud Montebourg.

Please consider Pritchard's article Southern Europe is on a precipice.
EMU-wide inflation fell to 0.7 per cent in October. Yet this is only half the story. Once austerity taxes are stripped out, prices have been falling in 10 of Euroland's 17 states over the past four months, including Italy and France. They are one shock away from outright deflation.

The euro exchange rate is far too high for two-thirds of the euro states, a key reason why unemployment hit an all-time peak of 12.2 per cent in September. It is pushing Europe's crisis states into Thirties-style deflation, making it almost impossible for Italy, Spain and Portugal to dig their way out of debt.

France's industry minister, Arnaud Montebourg, asks why Europe is letting the euro stay so high, alone in refusing to protect its societies while others steal a march. The US Federal Reserve and the Bank of England have nudged down their currencies by printing money. The Bank of Japan has carried out a devaluation putsch. The Swiss have trumped them all, printing à outrance to cap the franc. "Every 10 per cent rise in the euro costs France 15,000 jobs. Britain, the US, Japan, all have a strategy of monetary stimulus, but in the EU we have nothing but hard money. The currency doesn't belong to bankers, and it doesn't belong to Germany, it belongs to all members of the eurozone," Mr Montebourg said.

The north-south split has many causes. Germany sells machines and prestige cars with a fat profit margin. "Club Med" (the south) competes lower down, against China. Yet it is also because Germany screwed down wages in the early years of EMU, gaining 25 per cent in competitiveness against its peers. How this happened is an old story. But the consequences are toxic, so toxic that François Heisbourg, French head of the International Institute for Strategic Studies, is calling for the euro to be "put to sleep" in order to save the European project. "We must face the reality that the EU itself is now threatened by the euro," he said.

 Mr Heisbourg is pro-Europe. His point is that conflicting narratives of the crisis are emerging, pitting creditor and deficit states against each other. He compares them to the black legends after the First World War, when twisted views fed an ideological backlash, and fears that it will end in "a nervous breakdown and an uncontrolled disintegration of the euro".

This year's euro surge has brought that closer. The European Central Bank can force it to back down any time by ending its contraction policies, and switching to reflation. The ECB's Club Med governors act like rabbits in headlights, frozen as the juggernaut hurtles over them, unwilling to say "boo" to the German Bundesbank.

We will find out this week if they are at last willing to take charge of monetary policy and avert disaster. If they recoil, the euro will push back up again and they may as well sign a deflationary death sentence for southern Europe.
The Euro Is Doomed

The euro is fatally flawed. Pritchard knows as much. He was one of the original eurosceptics.

Yet time and time again, he espouses economic insanity in an attempt to save what cannot be saved.

Hard Currencies

Those looking for a "hard currency" should consider gold or silver.

Montebourg call the euro a "hard currency". If that's not the sign of a severely twisted mind, what is?

Following Lemmings Over The Cliff
 
The US, Japan, England, and Switzerland all engage in printing or other currency manipulation schemes.

Like lemmings over a cliff, Montebourg wants to follow. And Pritchard wants to follow Montebourg.

I have asked Pritchard this question before, on numerous occasions, and never received an answer. Here it is again: How can any country gain advantage if they all engage in competitive debasement?

Mathematically, there cannot possibly be any benefit (but there can be severe economic distortions), which is of course why Pritchard ignores my question.

Sheer Madness

All competitive currency devaluations can possibly do is create asset bubbles and other economic distortions. Unfortunately, such bubbles can be found everywhere you look: in US stocks, corporate bonds, global equities, Japanese government bonds, etc.

When those bubbles burst, we will likely see asset price deflation in spades, with severe economic consequences.

Full speed ahead anyway suggests Pritchard, purportedly to save something Pritchard knows full well cannot be saved.

It's madness! For still more madness, please see Abe Calls for Wage-Price Spiral to Create "Virtuous Circle"; Shame Shame

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Prime Minister Abe Calls for Wage-Price Spiral to Create "Virtuous Circle"; Shame Shame

Posted: 06 Nov 2013 09:51 AM PST

Japan's prime minister Shinzo Abe managed to get prices to rise. He did that with his policy to destroy the Yen even though Japan is heavily dependent on foreign oil and food imports.

Interestingly, Abe is not precisely pleased with the results. Abe now complains that wages are not keeping up with prices. He wants a wage-price spiral on top of it all.

The Financial Times reports Bank of Japan minutes expose fears over lack of wage rises.
Board members at the Bank of Japan have expressed fears that wages are not keeping pace with higher consumer prices, as the world's third-largest economy tries to haul itself out of more than a decade of deflation.

Minutes of the October 3-4 meeting published on Wednesday showed that members of the policy board agreed it was important that improvements in income keep supporting consumption, which was the main driver of Japan's strong growth in the first half of 2013.

If inflation keeps ticking upwards – as the BoJ's official forecasts suggest – then real incomes would fall, threatening momentum in the economy and casting doubt over the bank's longer term inflation target of 2 per cent.

The disclosure of anxieties at the heart of the central bank is likely to increase pressure on the government to extract concessions from Keidanren, the most powerful of Japan's business groups, which has not recommended a rise in total labour costs since the Lehman crisis.

Shinzo Abe, prime minister, said in October that higher wages were vital to create a "virtuous circle" that spurs consumption and investment. A government forum has met twice with private-sector representatives, including executives from Keidanren, to discuss tax cuts in return for wage increases. 

In October, the Japanese Trade Union Federation, the nation's biggest labour group, said it would take a basic pay-rise demand of at least 1 per cent into the spring labour talks.

"If citizens' income fails to grow with prices increasing, society will plunge into turmoil," said Nobuaki Koga, president of the federation. "Income must be raised."

For now, evidence of a turnround in pay remains thin. Government data last week showed that regular wages excluding overtime and bonuses fell 0.3 per cent in September compared with a year earlier, marking a 16th consecutive month of decline.

Meanwhile, the weaker yen pushed up consumer price inflation to a five-year high of 0.8 per cent in August, effectively sapping households' purchasing power.
Naming and Shaming

Pragmatic Capitalism reports Abe Gets Ready to Start "Naming and Shaming"

Apparently Abe has had enough. According to TV Tokyo, Abe will begin pressuring business leaders directly to raise wages. The goal is to start with a corporate wage survey. How would a survey help? In Japan if the survey is published with the companies' names shown, the strategy of "naming and shaming" just might work."

Shame Shame

I happen to have a musical tribute to such nonsense.



Link if video does not play: Shame Shame- The Magic Laterns- 1968  

"Virtuous Circle" of Nonsense

Incomes are not keeping up with inflation, so Abe wants wants wages to go up. The irony in this madness is "real" wages were rising as prices fell. And consumers everywhere are perfectly happy with falling prices.

It's monetarist fools and government bureaucrats who don't like falling prices.

But here's the deal. Central banks can print money but they cannot dictate where it goes. And typically printing spawns asset bubbles as we saw three decades ago in Japan (which is what triggered Japan's deflationary collapse in the first place).

The same thing happened in the US with the Fed-sponsored Dot-Com boom, the Fed-Sponsored housing bubble, and the Fed-sponsored equity-and-bond bubble now underway.

Who Benefits From Inflation?

The only ones to benefit from this alleged "virtuous circle" are the bankers and those with first access to money.

For further inflation reading and who benefits from it, please see ...


Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

rubodjrmx: "Bobobo - Capitulo 11 - Castellano - Español" and more videos

Damn Cool Pics

Damn Cool Pics


Creative DIY Projects

Posted: 06 Nov 2013 03:23 PM PST

Very nice DIY things.
























French Teens Partying with a Llama

Posted: 06 Nov 2013 02:02 PM PST

Five drunk teenagers from Bordeaux, France, kidnapped a 8-year-old circus llama named Serge and took him to a party. The kids and the llama boarded a subway train but were later stopped by a station agent. They were arrested and Serge was safely returned to the circus.





















The Best Cover-up Tattoos

Posted: 06 Nov 2013 10:15 AM PST