luni, 16 aprilie 2012

How Authorship (and Google+) Will Change Linkbuilding

How Authorship (and Google+) Will Change Linkbuilding


How Authorship (and Google+) Will Change Linkbuilding

Posted: 15 Apr 2012 02:18 PM PDT

Posted by Tom Anthony

Google's relationship with links has changed over the last 15 years - it started out as a love affair but nowadays the Facebook status would probably read: "It's Complicated". I think Google are beginning to suffer from trust issues, brought about by well over a decade of the SEO community manipulating the link graph. In this post I'm going to lay out how I think Authorship, and Google+ are one of the ways that Google are trying to remedy this situation.

I'll move on to what that means we should be thinking about doing differently in the future, and am sharing a free link-building tool you can all try out to experiment with these ideas. The tool will allow you to see who is linking to you rather than where is linking to you, and will provide you with social profiles for these authors, as well as details of where else they write.

To start I want to quickly look at a brief history of Google's view of links.

Are links less important than they were?

Back in the early days Google treated all links as being equal. A link in the footer was as good as a link in the main content, a link in bad content was as good as a link in good content, and so on. However, then the new generation of SEOs arrived and started 'optimizing' for links. The black hats created all sorts of problems, but the white hats were also manipulating the link graph. What this meant was now Google had to begin scrutinizing links to decide how trust-worthy they were.

Every link would be examined for various accompanying signals, and it would be weighted according to these signals. It was no longer a case of all links being equal. Reciprocal links began to have a diminished effect, links in footers were also not as powerful, and so it went for a variety of other signals. Over the last decade Google have begun using a wide range of new signals for determining the answer to the question they have to answer for every single link: How much do we trust this link?

They've also introduced an increasing number of signals for evaluating pages beyond the link based signals that made them. If we look at the ranking factors survey results from SEOmoz for 2011 we see that link based factors make up just over 40% of the algorithm. However, in the 2009 survey they were closed to 55% of the algorithm.

So in the last 2 years 15% of the algorithm that was links has been replaced by other signals in relative importance. The results are from a survey, but a survey with people who live and breathe this stuff, and it seems to match up well with what the community as a whole believes, and what we observe with the increasing importance of social signals and the like.

This reduction in the relative power of links seems to imply that Google aren't able to trust links as much as they once did. Whilst clear they are still the backbone of the algorithm, it is clear Google has been constantly searching for other factors to offset the 'over-optimization' that links have suffered from. 

Are social signals the answer?

The SEO community has been talking a lot about social signals the last couple of years, and whether they are going to replace links. I'd argue that social signals can tell you a lot about trust, timeliness, perhaps authority and other factors, but that they are quite limited in terms of relevancy. Google still need the links - they aren't going anywhere anytime soon.

To visualise this point in a different way, if we look at a toy example of the Web Graph. The nodes represent websites (or webpages) and the connections between them as the links between these websites:

Illustration of the Web Graph

And a corresponding toy example of the Social Graph:

Illustration of the Social Graph

We can now visualise Social 'Votes' (be they likes/tweets/+1s/pins or shares of some other type) for different websites. We can see that nodes on the Social Graph send their votes to nodes on the Web Graph:

Illustration of Social Votes

The Social Graph is sending signals over to the websites. They are basically saying 'Craig likes this site', or 'Rand shared this page'. In other words, the social votes are signals about web sites/pages and not about the links -- they don't operate on the graph in the same manner as links.

Whilst social signals do give Google an absolute wealth of information, they don't directly help improve the situation with links and how some links are more trustworthy than others.

Putting the trust back into links

So Google have needed to find a way to provide people with the ability to improve the quality of a link, to verify that links are trust-worthy. I believe that verifying the author of a link is a fantastic way to achieve this, and it fits neatly into the model.

In June last year Google introduced rel author, the method that allows a web page to announce the author of the page by pointing to a Google+ profile page (which has to link back to the site for 2 way verification).

We're seeing the graphs merge into a new Web Graph augmented by author data, where some links are explicitly authored links:

WebGraph showing Authored Links

With this model it isn't: 'Distilled linked to SEOmoz' but it is 'Tom Anthony linked on Distilled to Rand Fishkin on SEOmoz'. It's the first time there has been a robust mechanism for this.

This is incredibly powerful for Google as it allows them to do exactly what I mentioned above - they can now verify the author of a web page. This gives 2 advantages:

  • Knowing this is an authored link, by a human who they have data about, they can place far more trust in a link. Its likely that a link authored manually by a human is of higher quality, and that a human is unlikely to claim responsibility for a link if it is spammy.
  • Furthermore it allows them to change the weighting of links according to the AuthorRank of the author who placed the link.

The latter point is very important, it could impact how links can pass link juice. I believe this will shift the link juice model towards:

AuthorRank x PageRank = AuthoredPageRank

I've shown it here as a simple multiplication (and without all the other factors I imagine go into this), but it highlights the main principle: authors with a higher AuthorRank (as determined by both their social standing and by the links coming into their authored pages, I'd imagine):

Examples of Authored PageRank

The base strength of the link still comes from the website, but Rand is a verified author who Google know a lot about and as he a strong online presence, so multiplies the power of links that he authors.

I'm a less well-known author, so don't give as much of a boost to my links as Rand would give. However, I still give links a boost over anonymous authors, because Google now trust me a bit more. They know where else I write, that I'm active in the niche, and socially etc.

Where to Who

So what does all this imply that you do? The obvious things are ensuring that you (and your clients) are using authorship markup, and of course you should try to become trustable in the eyes of Google. However, if you're interested in doing that stuff, you probably were already doing it.

The big thing is that we need a shift in our mindset from where we are getting links from to who we are getting links from. We need to still do the traditional stuff, sure, but we need to ask start thinking about ‘who’ more and more. Of course, we do that some of the time already. Distilled noticed when Seth Godin linked to our Linkbait Guide. I noticed when Bruce Schneier linked to me recently, but we need to begin doing this all in a scalable fashion.

With OpenSiteExplorer, Majestic and many other linkbuilding tools we have a wide array of tools that allow us to look at where we are getting links from in a scalable way.

I hope I've managed to convince you that we need to begin to examine this from the perspective that Google increasingly will be. We need tools for looking at who is linking to who. Here's the thing - all the information we need for this is out there. Let me show you...

Authored links - A data goldmine

Gianluca's Dear Google PostWe'll examine an example post from GIanluca Fiorelli that he posted in December. Gianluca is using Google's authorship markup to highlight he is the author of this post.

Lets take a look at what information we can pull out from this markup.

The rel author attribute in the HTML source of the page points to his Google+ page, from there we can establish a lot of details about Gianluca:

Authorship Markup leads to Google+ profile info

 

We can from his Google+ profile establish where Gianluca lives, his bio, where he works etc. We can also get an indicator of his social popularity from the number of Circles that he is in, but also by following examining the other social profiles that he might link to (for example following the link to his Twitter profile and seeing how many Twitter followers he has).

We've talked a lot in the industry in the last couple of years about identifying influencers in a niche, and about building relationships with people. Yet, there is an absolute abundance of information available about authors of links we or our competitors already have -- why are we not using it!?!

All of this data can be crawled and gathered automatically, exactly in the way that Google crawls the authorship markup, which allows us to begin thinking about building the scalable sorts of tools I have mentioned. In the absence of any tools, I went right ahead and built one...

AuthorCrawler - A tool for mining Author Data for Linkbuilding

I first unveiled this tool a couple of weeks ago at LinkLove London, but I'm pleased to release it publicly today. (As an aside, if you like getting exclusive access to cool toys like this then you should check out SearchLove San Fran in June or MozCon in July).

AuthorCrawler is a free, open-source tool that pulls the backlinks to a URL, crawls the authorship markup on the page, and gives you a report of who is linking to a URL. It is fully functional, but it is a proof-of-concept tool, and isn't intended to be an extensive or robust solution. However, it does allow us to get started experimenting with this sort of data in a scalable way.

When you run the report, you'll get something similar to this example report (or take a look at the interactive version) I ran for SEOmoz.org:

AuthorCrawler Single URL report

It pulls the top 1000 backlinks for the homepage, and then crawled each of them looking for authorship markup, which if found is followed to crawl for the authors data (no. Circles, Twitter followers), and very importantly it also pulls the 'Contributes to' field from Google+ so you can see where else this author writes. It might be that you find people linking to your site that also write elsewhere, on maybe more powerful sites, so these are great people to build a relationship with - they are already aware of you, warm to you (they're already linking) and could provide links from other domains.

You can sort the report by the PA/DA of where the link was placed, or by the social follower counts of the authors. You can also click through to the authors Google+ and Twitter profiles to quickly see what they're currently up to.

I'm pretty excited by this sort of report and I think it opens up some creative ideas for new approaches to building both links and relationships. However, I still felt we could take this a little bit further.

I'm sure many of you will know the link intersect tool, in the labs section of SEOmoz. It allows you to enter your URL, and the URLs of other domains in your niche (most likely your competitors, but not necessarily), and it examines the back links to each of these and reports on domains/pages that are linking to multiple domains in your niche. It also reports whether you currently have a link from that page - so you can quickly identify some possible places to target for links. Its a great tool!

So, I took the principle from the link intersect tool and I applied the authorship crawling code to create an Author Intersect tool. It will give you a report that looks like this (you can check the interactive example report also):

Multi URL report from AuthorCrawler tool

Now what you have is really cool - you have a list of people who are writing about your niche, who are possibly linking to your competitors, whose social presence you can also see at a glance. These are great people to reach out to build relationships with - they are primed to link to you!

The tool is pretty simple to use - if you're unsure there is an instructions page on the site to get you started.

Wrap Up

We are in the early days of authorship, but I think Google are going to keep on pushing Google+ hard, and I think authorship's importance is just going to increase. Correspondingly - I think tools such as this re going to become an increasing part of an SEOs toolkit in the next 12 months, and I'm excited to see where it goes.

I've only just begun to dig into the ways we can use tools like these - so I'd love to hear from others what they get up to with it. So go and download the tool and try it out. Have fun! :)


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How to Check Which Links Can Harm Your Site's Rankings

Posted: 15 Apr 2012 03:35 AM PDT

Posted by Modesto Siotos

Matt Cutts' statement in March 2012 that Google would be rolling out an update against “overoptimised” websites, caused great turmoil within the SEO community. A few days later thousands of blogs were removed from Google's index and Matt tweeted confirming that Google had started taking action against blog networks.

Even though thousands of low-quality blogs of low or average authority were manually removed from Google's index, they weren't the only victims. For instance, www.rachaelwestdesigns.com, a PR7, DA70 domain was also removed, probably due to the very high number of blog roll (site-wide) backlinks.

These actions indicate that the new update on "overoptimised" websites has already begun to roll out but it is uncertain how much of it we have seen so far.

At around the same time Google sent to thousands webmasters the following message via message via Google's Webmaster Tools:

In the above statement, it is unclear what Google’s further actions will be. In any case, working out the number of “artificial” or “unnatural links” with precision is a laborious, almost impossible task. Some low quality links may not be reported by third party link data providers, or even worse, because Google has started deindexing several low quality domains, the task can end-up being a real nightmare as several domains cannot be found even in Google's index.

Nevertheless, there are some actions that can help SEOs assess the backlink profile of any website. Because, in theory, any significant number of low quality links could hurt, it would make sense gathering as many data as possible and not just examine the most recent backlinks. Several thousand domains have already been removed from Google's index, resulting in millions of links being completely devalued according to Distilled's Tom Anthony (2012 Linklove).

Therefore, the impact on the SERPs has already been significant and as always happens in these occasions there will be new winners and losers once the dust settles. However, at this stage it is be a bit early to make any conclusions because it is unclear what Google's next actions are going to be. Nevertheless, getting ready for those changes would make perfect sense, and spotting them as soon as they occur would allow for quicker decision making and immediate actions, as far as link building strategies are concerned.

As Pedro Dias, an Ex-Googler from the search quality/web spam team tweetted, "Link building, the way we know it, is not going to last until the end of the year" (translated from Portuguese).

The Right Time For a Backlinks Risk Assessment

Carrying out a backlinks audit in order to identify the percentage of low-quality backlinks would be a good starting point. A manual, thorough assessment would only be possible for relatively small websites as it is much easier to gather and analyse backlinks data – for bigger sites with thousands of backlinks that would be pointless. The following process expands on Richard Baxter's solution on 'How to check for low quality links', and I hope it makes it more complete.

  1. Identify as many linking root domains as possible using various backlinks data sources.
  2. Check the ToolBar PageRank (TBPR) for all linking root domains and pay attention on the TBPR distribution
  3. Work out the percentage of linking root domains that has been deindexed
  4. Check social metrics distribution (optional)
  5. Repeat steps 2,3 and 4 periodically (e.g. weekly, monthly) and check for the following:
  • A spike towards the low end of the TBPR distribution
  • Increasing number of deindexed linking root domains on a weekly/monthly basis
  • Unchanged numbers of social metrics, remaining in very low levels

A Few Caveats

The above process does come with some caveats but on the whole, it should provide some insight and help making a backlinks' risk assessment in order to work out a short/long term action plan. Even though the results may not be 100% accurate, it should be fairly straightforward to spot negative trends over a period of time.

Data from backlinks intelligence services have flaws. No matter where you get your data from (e.g. Majestic SEO, Open Site Explorer, Ahrefs, Blekko, Sistrix) there is no way to get the same depth of data Google has. Third party tools are often not up to date, and in some cases the linking root domains are not even linking back anymore. Therefore, it would make sense filtering all identified linking root domains and keep only those still linking to your website. At iCrossing we use a proprietary tool but there are commercial link check services available in the market (e.g. Buzzstream, Raven Tools).

ToolBar PageRank gets updated infrequently (roughly 4-5 times in a year), therefore in most cases the returned TBPR values represent the TBPR the linking root domain gained in the the last TBPR update. Therefore, it would be wise checking out when TBPR was last updated before making any conclusions. Carrying out the above process straight after a TBPR update would probably give more accurate results. However, in some cases Google may instantly drop a site's TBPR in order to make public that the site violates their quality guidelines and discourage advertisers. Therefore, low TBPR values such as n/a, (greyed out) or 0 can in many cases flag up low quality linking root domains.

Deindexation may be natural. Even though Google these days is deindexing thousands of low quality blogs, coming across a website with no indexed pages in Google's SERPs doesn’t necessarily mean that it has been penalised. It may be an expired domain that no longer exists, an accidental deindexation (e.g. a meta robots noindex on every page of the site), or some other technical glitch. However, deindexed domains that still have a positive TBPR value could flag websites that Google has recently removed from its index due to guidelines violations (e.g. link exchanges, PageRank manipulation).

Required Tools

For large data sets NetPeak Checker performs faster than SEO Tools, where large data sets can make Excel freeze for a while. NetPeak checker is a standalone free application which provides very useful information for a given list of URLs such as domain PageRank, page PageRank, Majestic SEO data, OSE data (PA, DA, mozRank, mozTrust etc), server responses (e.g. 404, 200, 301) , number of indexed pages in Google and a lot more. All results can then be exported and processed further in Excel.

1. Collect linking root domains

Identifying as many linking root domains as possible is fundamental and relying in just one data provided isn't ideal. Combining data from Web master tools, Majestic SEO, Open Site Explorer may be enough but the more data, the better especially if the examined domain has been around for a long time and has received a large number of backlinks over time. Backlinks from the same linking root domain should be removed so we end up with a long list of unique linking root domains. Also, not found (404) linking root domains should also be removed.

2. Check PageRank distribution

Once a good number of unique linking root domains has been identified, the next step is scrapping the ToolBar PageRank for each one of them. Ideally, this step should be applied only on those root domains that are still linking to our website. The ones that don't should be discarded if not too complicated. Then, using a pivot chart in Excel, we can conclude whether the current PageRank distribution should be a concern or not. A spike towards the lower end values (such as 0s and n/a) should be treated as a rather negative indication as in the graph below.

3. Check for deindexed root domains

Working out the percentage of linking root domains which are not indexed is essential. If deindexed linking root domains still have a positive TBPR value, most likely they have been recently deindexed by Google.

4. Check social metrics distribution (optional)

Adding in the mix the social metrics (e.g. Facebook Likes, Tweets and +1s) of all identified linking root domains may be useful in some cases. The basic idea here is that low quality websites would have a very low number of social mentions as users wouldn't find them useful. Linking root domains with low or no social mentions at all could possibly point towards low quality domains.

5. Check periodically

Repeating the steps 2, 3 and 4 on a weekly or monthly basis, could help identifying whether there is a negative trend due to an increasing number of linking root domains being of removed. If both the PageRank distribution and deindexation rates are deteriorating, sooner or later the website will experience rankings drops that will result in traffic loss. A weekly deindexation rate graph like the following one could give an indication of the degree of link equity loss:

Note: For more details on how to set-up NetPeak and apply the above process using Excel please refer to my post on Connect.icrossing.co.uk.

Remedies & Actions

So far, several websites have seen ranking drops as a result of some of their linking root domains being removed from Google's index. Those with very low PageRank values and low social shares over a period of time should be manually/editorially reviewed in order to assess their quality. Such links are likely to be devalued sooner or later, therefore a new link building strategy should be devised. Working towards a more balanced PageRank distribution should be the main objective, links from low quality websites will keep naturally coming up to some extent.

In general, the more authoritative & trusted a website is, the more low quality linking root domains could be linking to it without causing any issues. Big brands' websites are less likely to be impacted because they are more trusted domains. That means that low authority/trust websites are more at risk, especially if most of their backlinks come from low quality domains, have a high number of site-wide links, or if their backlink profile consists of unnatural anchor text distribution.

Therefore, if any of the above issues have been identified, increasing the website's trust, reducing the number of unnatural site-wide links and making the anchor text distribution look more natural should be the primary remedies.

About the author

Modesto Siotos (@macmodi) works as a Senior Natural Search Analyst for iCrossing UK, where he focuses on technical SEO issues, link tactics and content strategy. Modesto is happy to share his experiences with others and posts regularly on Connect, a UK digital marketing blog.


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Nominate a Hero for the 2012 Citizens Medal

The White House Your Daily Snapshot for
Monday, April 16, 2012
 

Nominate a Hero for the 2012 Citizens Medal

The Citizens Medal is one of our nation's highest civilian honors. For the past two years, President Obama has relied on you to identify heroes in your community – extraordinary Americans whose work provides inspiration for others to serve.

Nominations for the 2012 Presidential Citizens Medal are now open, and you can nominate a hero in your community until Tuesday, April 24th:

Nominate a hero for the 2012 Citizens Medal

In Case You Missed It

Here are some of the top stories from the White House blog:

President Obama at the Summit of the Americas
In his opening remarks at the Summit on the Americas, President Obama laid out the issues for discussion -- including trade.

President Obama Wants You to Know How Your Tax Dollars Are Spent
The Federal Taxpayer Receipt shows how your tax dollars are being spent.

Weekly Address: It’s Time for Congress to Pass the Buffett Rule
President Obama urges Congress to pass the Buffett Rule -- which asks those who make more than $1 million a year to pay at least the same percentage of their income in taxes as middle class families -- as a principle of fairness.

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Seth's Blog : Come to New York on May 16th (Pick Yourself)

Come to New York on May 16th (Pick Yourself)

For the first time in a long time, I'm doing an all-day public event. It's not something I do often, and I hope you'll consider coming.

[If you know someone who might benefit, I'd appreciate it if you would forward or tweet this post].

I'm calling it Pick Yourself and it's the culmination of months of preparation. It won't be webcast or recorded, as we've tried to create something that works best precisely because it's live--not just as a result of what I'm saying on stage, but due to the people you meet and sit next to and connect with over your challenges and projects and dreams.

Digital scales, of course, because it spreads effortlessly and without cost. Real life, alas, doesn't work that way. What we've tried to do is create an event that's better precisely because you came, because you're in the room, because someone on a similar journey is sitting next to you. A beautiful big theatre filled with intimate one on one connections.

Assembling a group of six (friends, colleagues or strangers) makes it even more likely that you'll come to the event ready to share and scheme and plan, taking action after it's over.

If you're interested in coming, please read all the details and be sure to get your confirmation after you've registered in order to join the exclusive online community we're building for attendees.

You can discover the details of the event right here.

Early bird and group tickets are significantly less expensive than regular tickets will be in a week, so if you're interested, I hope you'll grab it now.

See you in Tribeca.



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duminică, 15 aprilie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin?

Posted: 15 Apr 2012 10:43 PM PDT

Michael Pettis at China Financial Markets has Two Bets with the Economist.
  1. Pettis bets growth in China will average less than 3.5% for the rest of the decade
  2. Pettis bets the Chinese economy will not overtake the US by 2018 

I side with Pettis and said so in The Dating Game: Michael Pettis Challenges The Economist to a Bet on China

I came up with 2030 and with peak oil considerations I would not count on that.

Now Pettis is back at it with 12 predictions. Via email ...
Perhaps my bet with The Economist has caused me to throw caution to the winds, since a smart economist never makes his predictions explicit, but here they are:

1. China will be the last major economy to emerge from the global crisis. My basic argument was that the global crisis was caused by the necessary reversal of the great trade and capital imbalances of the past decade, and a country can only be said to have emerged from the crisis when those underlying imbalances had been resolved.

Since China's contribution to the global imbalances has been its excessively high savings rate, China could not emerge from the crisis until the high savings rate had been reduced to a more reasonable level. Since 2007-08, of course, the opposite has happened, as Beijing has exacerbated its domestic imbalances in order to keep growth rates high.  But without infinite debt capacity this cannot go on.  I think it is pretty clear that over the next few years China will be forced to address and reverse the high savings rate, and it will only be after this happens that China can be said to have emerged from the crisis.  This may take a decade or more.

2. Chinese consumption will continue to stagnate or decline as a share of GDP until the growth model is abandoned.  By "abandoning" the model I mean that transfers from the household sector to subsidize rapid growth must be eliminated and reversed. 

This is really a continuation of the first prediction.  It is too early to say, but 2012 may be the first year in which consumption growth will outpace GDP growth, but only if GDP growth turns out to be much lower than expected – say below 7%.  As long as GDP growth rates exceed 7%, there can be no real rebalancing of consumption.

3. Although there were many factors that explained both rapidly rising GDP and the contracting consumption share, financial repression would eventually be recognized to be the key factor.  It took many years to make this point, but it has become pretty clear to everyone that financial repression is at the heart of China's problem.  This may explain Premier Wen's recent and rather shocking attack on the banks, although in my opinion it will still be at least another year or two, if ever, before we see any real liberalization of interest rates. 

Remember that the more debt there is, the harder it is to raise interest rates, and the longer we take to raise interest rates, the more debt we run up.  In the end I suspect that financial repression will be eliminated not by an increase in nominal rates but rather by a decline in GDP growth (remember that the size of the financial repression tax is a function of the difference between nominal GDP growth and the nominal lending rate).

4. Investment is being misallocated on a massive scale and this was not due to any special Chinese characteristic but was rather a fundamental requirement of the way the system operated. Although there are still some economists who disagree that investment is being massively wasted, I think this is so well understood by now that there is no need to belabor the point.

5. Debt is rising at an unsustainable pace and debt levels will become unsustainable well before the end of the decade.  This follows from the above point – if investment is debt funded and if it is being wasted, then by definition debt must be increasing at an unsustainable pace – i.e. faster than debt-servicing abilities.

I suspect nonetheless that in another year or two no one will doubt that the Chinese growth model tends towards unsustainable debt and that we are rapidly reaching the limit.

6. When specific debt problems are identified, resolute attempts by Beijing to resolve them would be warmly welcomed by analysts but wholly irrelevant – because the problem of debt was systemic, not specific.  This follows from the above.  The issue is not that specific borrowers may run into debt problems.  It is that the run-up in debt is systemic and cannot be prevented as long as China maintains the existing growth model.  If there is rapid GDP growth, say anything above 6% or 7%, debt within the system must be rising at an unsustainable pace.

7. Privatization, a topic all but forbidden in polite company, would become a very hot topic of conversation by 2013-14.  I have discussed why in this issue of the newsletter.

8. As some policymakers gradually became aware of the problem with the growth model and the risk of crisis, a fundamental political split would emerge between those that demanded rapid reform and those that wanted to maintain control of resources.  The problem is that continuing the growth model will lead to a debt crisis, but abandoning the model will lead to much slower growth, and especially to much slower growth in the accumulation of state sector assets.  This is politically very difficult for many to accept and will lead to more political conflicts over the next few years.

9. Chinese government debt will continue to balloon through the rest of this decade.  Privatization is the best way to effect the transfer of wealth from the state sector to the private sector, and would be especially efficient if privatization proceeds were used to extinguish debt, but for the reasons discussed above it will be extremely difficult to do it.  This means that debt build-up and the state absorption of private sector debt will continue for many years.

10. If the transition is not mismanaged, average Chinese GDP growth rates will drop to 3% for the 2010-20 decade.  As my bet with The Economist suggests, this is one prediction that is still an outlier.  The Economist(and many others) still believe that Chinese growth will make it the largest economy in the world before the end of the decade, but much slower growth is what rebalancing requires and it is hard to make the numbers work at growth levels much above 3%.  By the way if I am wrong and Chinese growth this decade is materially higher than 3%, my prediction is that the "lost decade" of much lower growth stretch out over two decades.

11. If China rebalances correctly, then much slower GDP growth rates will be accompanied by only slightly slower growth rates in household income.  In that case there need be no social instability.  The political risk comes from instability at the top, not at the bottom.

12. Non-food commodity prices are set to collapse over the next three to four years.  "Collapse" is not too strong a word.  China's share of global demand for such commodities as iron, cement, copper, etc. is completely disproportionate to its size and almost wholly a function of its very high growth in investment.  As investment growth drops sharply, as it must, global demand for non-food commodities will plummet.
Collapse in Commodity Prices

For years the mantra has been buy what China needs (commodities), sell what China produces.

That strategy worked for a long time but that time is up or soon will be. The implication are far from pleasant for the currencies of commodity producers like Australia and Canada. 

Nails in the Hard Landing Coffin?

One of the sillier stories making the rounds is China currency move nails hard landing risk coffin
China's weekend reform of its currency regime nails shut the coffin on the last remains of doubt about whether the world's second biggest economy has successfully steered a course past a hard economic landing.

"For everybody who thought China was heading for a hard landing, it's over. This move says they are comfortable with the direction the economy is moving in," Paul Markowski, president of New York-based MES Advisers and a long-time investment adviser to China's monetary authorities, told Reuters.

Reform says Beijing is comfortable with the yuan's value and that exporters have sufficient strength to cope with the government relaxing its grip. As the financial crisis deepened in 2008, China squeezed tightly on the yuan to shield the economy as international trade ground to a halt.

It implies confidence that rebounding March indicators in the first-quarter GDP data - such as a jump in steel production, vehicle output, machinery and cement production and a recovery in sales of household electronic appliances - suggest that the floor in economic activity has broad foundations.

So does a huge bounce in new bank lending in March - 25 percent ahead of economists' forecasts at 1.01 trillion yuan - that signals monetary easing since the autumn, creating an estimated 800 billion yuan of new credit, is being put to work.
The fact that China is back to the same unsustainable model certainly does not disprove the hard landing theory. Indeed, the longer China puts off rebalancing its economy, the bigger the crash later on. Moreover, widening the band on its currency is a needed part of that rebalancing, and does not preclude in any way a huge slowdown in growth.

The structural imbalances in China are large and for now, still growing. However, huge cracks have appeared in real estate, and changes are coming up with a regime change. Finally, peak oil alone makes many of the growth estimates we have seen for China outright impossible. Markowski is crowing far too early. One quarter does not prove a thing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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ECB Wants Its Pensions Adjusted For Inflation; Reflections on the Politically Entitled Class

Posted: 15 Apr 2012 06:23 PM PDT

The gall and arrogance of bureaucrats who should not have a job at all, let alone have a pension that no one else gets is rather stunning.

Courtesy of Google translate, please consider Little faith ECB officials
The personal representative of the central bank is now demanding that the employees pensions would be protected against inflation. It requires that an insurance against their own failure.

"Unfortunately, the pensions of the ECB's employees are not protected against inflation," said Carlos Bowles, a spokesman for the staff representatives, the FAS was the retirement of the ECB's staff organized a kind of pension funds.

"We do not understand why the leadership of the ECB refuses to protect our pensions against inflation," complains the Staff Committee. Even a case before the European Court was pending in this matter: A pensioner has complained with the support of the Staff Committee and the central bankers' union IPSO.
Neither the ECB nor the Fed should exist at all. Both present themselves as "inflation fighters" when they are the source of inflation.

Now these arrogant asswipes want to be protected from their own policies while demanding cuts in the pensions of Greece, Portugal, and Spain.

Reflections on the Politically Entitled Class

My friend "fedwatcher" writes ...
"Nothing to see here folks! Move along."

The Politically Entitled Class always seeks to guarantee its benefits while carring nothing for the average man. Many ECB employees show up on Friday Morning to sign-in and then leave for the weekend having secured a full pay check for Friday. They work 4 day weeks, get 18 paid holidays, and 4 to 5 weeks of paid vacations plus per diem payments etc.

The Politically Entitled Class in all nations is growing. It is a cancer.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mish on Max Keiser: European Merry-Go-Round, Rising Yields in Spain, Obamacare, the US Dollar, Student Loans, Gold

Posted: 15 Apr 2012 10:55 AM PDT

I was "On the Edge" last week with Max Keiser discussing various can-kicking exercises, soaring yields on Spanish debt, bailouts coming up for Portugal and Spain, BRICs, reserve currencies, Obamacare, and gold.



Link if video does not play European merry-go-round: Spain's debt crisis & Portugal's bailout.

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


Sarkozy Comeback Bid Falters as French Economy Hits the Skids; Setup Good for Gold?

Posted: 14 Apr 2012 11:36 PM PDT

As goes the French economy, so goes the reelection chances of French president Nicolas Sarkozy. Although Sarkozy leads in round one, polls show that lead is shrinking at a pace that suggests he will not carry round one.

More importantly, Sarkozy is trailing again by double digits in polls for the decisive round two.

For those not familiar with elections in France, round one pits candidates from all the parties against each other on April 22. If no one gets 50%, the top two finishers square off in round two, on May 6.

Sarkozy struggles in polls as French economy sputters

On April 10, Reuters reported Sarkozy struggles in polls as French economy sputters
President Nicolas Sarkozy's drive to persuade voters he is the best man to lead France to economic recovery suffered a blow on Tuesday, with a survey indicating growth has ground to a halt as he struggles to make headway over his Socialist election rival.

Two weeks before the presidential elections begin, the conservative's lead over Francois Hollande is becalmed or shrinking for the first round on April 22 and he is still trailing in the runoff next month, three opinion polls showed on Tuesday.

With unemployment claims at over a 12-year high, people's purchasing power dwindling and France stripped of its prized AAA status with one credit rating agency, the Bank of France offered Sarkozy's economic record little respite.

In his manifesto, Sarkozy promised to achieve a budget surplus for the first time since 1974 and cut France's swelling debt if re-elected, warning that Hollande would lead the country towards the fate of Greece or Spain.

However, his policy of cutting the budget deficit is helping to slow the economy and hurting his election chances.

"You cannot have a tough fiscal adjustment over two years and expect strong growth at the same time," said Michel Martinez, economist at Societe Generale in Paris.
Comeback Hopes Crumble

In an update on April 13, Reuters reported Sarkozy's comeback hopes crumble, polls show
Four polls published in less than 24 hours showed Hollande extending his lead, with the conservative incumbent's modest gains of the past month starting to evaporate ahead of a two-round contest taking place on April 22 and May 6.

A CSA poll showed Hollande winning the May 6 run-off with 57 percent of the vote. Three other polls also indicated that his chances of becoming France's first left-wing president since Francois Mitterrand were improving.

CHANGE OF DIRECTION IN EUROPE

Hollande has raised eyebrows in Berlin and other capitals by criticizing a European Union accord on debt and deficit control - the fiscal compact agreed in an effort to counter the euro zone debt crisis - and by saying he would open talks if elected to amend it with a pro-growth commitment.

"Germany understands that it cannot remain an island of prosperity in an ocean of recession," he told Les Echos daily. "The changeover in France will pave the way for a change of direction in Europe."

The CSA poll showed Hollande taking 57 percent of the vote in the final deciding round, up from a score of 54 previously.

The other three promising polls for Hollande were published by the BVA, LH2 and TNS Sofres agencies on Thursday.

The BVA poll showed Hollande winning the runoff with a score of 54 percent, up two points from a previous sounding. The LH2 poll showed him taking 55 percent of the vote in the second round. The TNS Sofres poll showed him at 56 percent, up 1 point.
Hollande Promises to Rework Merkozy Treaty

Francois Hollande has campaigned on a platform of making needed changes to the fragile treaty hammered out by Nicolas Sarkozy and German Chancellor Angela Merkel.

Good luck with that.

Meanwhile Merkel has tremendous problems of her own. When, not if, Germany's export machine collapses, it will likely sink Merkel's chances right with it.

Setup Good for Gold?

A Hollande victory will add pressures on the euro vs. the US dollar and also elevate fears of a eurozone breakup. A breakup is likely regardless who wins, in my estimation, however, a Hollande victory could easily escalate the timetable.

If that sentiment catches hold, don't be surprised to see gold rise while the dollar strengthens.

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


Seth's Blog : All artists are self-taught

All artists are self-taught

Techniques and skill and even a point of view are often handed down, formally or not. It's easier to get started if you're taught, of course.

But art, the new, the ability to connect the dots and to make an impact--sooner or later, that can only come from one who creates, not from a teacher and not from a book.



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