Mish's Global Economic Trend Analysis |
- Chris Martenson Discusses Shadow Bank Runs With Lauren Lyster on Capital Account; Note on Adobe Flash "Try Later" Message in Firefox
- Spain Has Budget Deficit of 3.41% of GDP Through May (Not Counting Regional Governments); Target for Entire Year was 3.5%
- Monti Threatens to Resign if No Eurobonds; Specter of Early Elections
- EC President Van Rompuy Releases 7 Page PDF "Towards a Genuine Economic and Monetary Union"; Merkel Says "No Shared Total Liability as Long as I Live"
- Zero Hedge Provides Empirical Proof of Deflation (However, He Does Not Even Realize It)
Posted: 26 Jun 2012 10:26 PM PDT Chris Martensen had a nice interview on Capital Account with Lauren Lyster today on shadow banking. Here is the link if embedded video does not play: Chris Martenson on Shadow Bank Runs and how Central Banks are Missing the Boat! I discussed the same topic earlier today as did Zero Hedge. Please see Zero Hedge Provides Empirical Proof of Deflation (However, He Does Not Even Realize It) for a discussion. Adobe Flash Errors By the way, YouTube videos completely stopped playing on Firefox for me after I went to the latest release of Adobe Flash. I had to uninstall flash, then return to version 10.3. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 26 Jun 2012 02:31 PM PDT Spain has reached it budget deficit target of 3.5% of GDP. The problem is, Spain did it in 5 months, not 12. Via Google translate, Spain has Budget Deficit 36.364 Billion Through May. The State had until May a deficit of 36.364 billion euros in national accounting terms, equivalent to 3.41% of GDP, representing an increase of 30.6% compared to 2.59% in the same period 2011. The figure almost touches the 3.5% target it has set the state for the entire year.Regional Debt Not Included in Above Totals My friend Bran who lives in Spain adds this explanation ... Clearly, Spain's deficit is well off track . The primary difference between the "state" and the "whole of the government" is regional government debt.Taxes Going Up, 456 Prescription Drugs Dropped The debate now is over how much taxes will go up and what government services are dropped. Bran supplied a link to 456 prescribed drugs dropped from funding to save €440 million. The Ministry of Health, Social Affairs and Equal propose a list of 456 drugs that may be excluded from public funding and, as calculated by the department led by Ana Mato, would be a net savings to the NHS of 440 million euros.How long before Brussels sends in a team of experts telling Spain what it needs to do? Three hours or three days? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Monti Threatens to Resign if No Eurobonds; Specter of Early Elections Posted: 26 Jun 2012 11:04 AM PDT Courtesy of Google Translate, via a link posted on the Guardian Live Blog, please consider this choppy clip from Monti: EU summit difficult But Knight gives the alarm Perhaps the Prime Minister Mario Monti has finally accepted the ultimatum of Cav and decided to download Frau Merkel. Perhaps the government, dealing with the preparation of the European Council of 28 and 29 June, will have a movement of pride and will be presented in Brussels slamming his fists on the table. Perhaps, indeed. For now, sources close to Palazzo Chigi, Monti wants to ensure that clamped down on the German Chancellor. A professor there to shake the thought that Silvio Berlusconi has decided to launch an ultimatum to the government "should immediately change direction." At the end of the summit with Prime Minister, Cavalieri, the actual government falters in an absolute uncertainty and that, to get himself out of this impasse is to take a firmer line in Europe: "We are left with a feeling of uncertainty about the proposals Italy will do.Specter of Early Elections Early elections in Italy are certainly not on the wish list of nannycrats. Yet early elections appear increasingly likely. Monti would not survive such an election. The economic situation in Italy worsens every week. People are becoming increasingly frustrated, not only with government in general but with the euro itself. For details please see Italy "Gasping Like Beached Whale"; Berlusconi Reiterates Euro Exit "Not Blasphemy"; Beppe Grillo Discusses "Taboo of the Euro" Five Star Movement Beppe Grillo and his Five Star Movement gains momentum every day. Grillo supports an exit from the eruorzone and the Five Star Party is now the second largest party in Italy. Former Italian Prime Minister Silvio Berlusconi is leader of the PDL, Italy's third largest party. Berlusconi is now anti-euro, as is the Northern League. These are very significant events. For more details, please see Six Reasons Why Italy May Exit the Euro Before Spain; Ultimate Occupy Movement. Also note Monti Begs Germany to Stabilize Interest Rates; Merkel Pours Cold Water On "Theoretical Discussions"; Italy Official Denial #1; Why Monti's Days Are Numbered. The nannycrats do not want Monti to resign nor do they want early elections. However, delays in calling for elections actually plays into opposition hands. Each passing day weakens Mario Monti, and each passing day strengthens the anti-euro movement in Italy. "See you in the next Parliament" Beppe Grillo said after the local elections in May. Let's hope so. Addendum: I did not understand the phrase "ultimatum of Cav" so I pinged a friend "Andrea" who is from Italy but now lives in France. Andrea explains ... "Cav is short for Cavaliere, a nickname for Berlusconi. The site Il Giornale (where you found the article) is owned by Berlusconi and is therefore very Berlusconi friendly. The newspaper nickname him the Cav." She also added the article states ... "In a meeting he had with Monti, Berlusconi complained that there is absolute uncertainty about what the EU will adopt at the upcoming summit. Berlusconi sought a much tougher position on Merkel noting the discomfort many of his party representatives and senators face in supporting Monti's government." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 26 Jun 2012 09:44 AM PDT Inquiring minds are reading "Towards a Genuine Economic and Monetary Union" by the gang of four nannycrats: European commission president Herman Van Rompuy, ECB president Mario Draghi, José Manuel Barroso of the European commission, and Jean-Claude Juncker, the leader of the 17-country eurogroup. Don't expect any details. There aren't any. Instead the document consists of a wish list wrapped in a wordy package that says virtually nothing. Wish List
Details are allegedly coming December 12 2012, with an interim report due in October. Van Rompuy "expects to reach a common understanding on the way forward for the EMU at our meeting at the end of the week." I expect more bickering, if not a major battle because Germany was not included in the preparation of the white paper. By the way, this pathetic detail-lacking document is all there is to see from the purposely leaked story on June 3, regarding a "Secret Plan for a New Europe" Germany "Pooh Poohing" Paper Already The Guardian offers these thoughts on the "plan to save the eurozone" [The plan] calls for a quick start on establishing a new European banking union, says that the ECB could be given supervisory authority over EU banks quickly, and proposes common resolution funds (for winding up bad banks, funded by a banking levy to spare EU taxpayers) as well as a common deposit guarantee scheme for Europe's savers.Merkel Torpedoes Idea Please consider these comments from the Guardian Live Blog. 4.13pm: Markets are getting spooked again, and here's one reason. According to Reuters, German chancellor Angela Merkely has said at a coalition party meeting that Europe will not have shared total liability for debt as long as she lives.Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Zero Hedge Provides Empirical Proof of Deflation (However, He Does Not Even Realize It) Posted: 26 Jun 2012 12:28 AM PDT Zero Hedge, citing a Federal Reserve Bank of New York report on Shadow Banking, makes (without even realizing it) a sure-fire case for deflation. I encourage you to visit the link shown above, but also take a look at On The Verge Of A Historic Inversion In Shadow Banking by Zero Hedge. Here is the introduction by ZH. While everyone's attention was focused on details surrounding the household sector in the recently released Q1 Flow of Funds report (ours included), something much more important happened in the US economy from a flow perspective, something which, in fact, has not happened since December of 1995, when liabilities in the deposit-free US Shadow Banking system for the first time ever became larger than liabilities held by traditional financial institutions, or those whose funding comes primarily from deposits.Empirical Proof of Deflation Here are the pertinent charts and commentary. That chart is from the NY Fed. On a similar chart ZH commented ... "As another reminder, US Shadow Banking liabilities - a combination of Money Market funds, GSE and Agency paper, Asset-Backed paper, Funding Corporations, Open market paper and of course, Repos - hit a gargantuan $21 trillion in March 2008. They have tumbled ever since, printing at just under $15 trillion at the end of March 2012, the lowest number since March 2005 when shadow banking liabilities were soaring. This is an epic $6 trillion in flow being taken out of credit-money circulation, with a $143 billion drop in Q1 alone!" Sequential Change in Shadow Bank Liabilities click on chart for sharper image The chart immediately above is from ZH, not the NY Fed article. ZH comments ... "It is precisely this ongoing contraction that the Fed does all it can, via traditional financial means, to plug as continued declines in Shadow Banking notionals lead to precisely where we are now - a sideways "Austrian" market, in which no new credit-money money comes in or leaves." Emphasis in bold by ZH. Deflation It Is There is nothing "sideways" about it. The charts clearly show credit money is indeed leaving (contracting) to the tune of a whopping $6 trillion since March 2008. Interestingly, Zero Hedge did not mention "deflation" once in his post. Yet, those charts, without a doubt, depict deflation if one accurately describes inflation and deflation as measures of credit, not prices. Based on real-world experience of what is most important, here is my definition: Inflation is a net increase of money supply and credit with credit marked to market. Deflation is the opposite, a net decrease of money supply and credit with credit marked to market. If one woodenly sticks to the view that inflation and deflation are about prices (while ignoring a devastating collapse in housing), then yes, the US is still in a period of inflation. Likewise, if one foolishly sticks to measures of money supply like M1, M2, or TMS (true money supply) by Michael Pollaro, then the US is also in a period of inflation. Real World Viewpoint Neither money supply nor the CPI can adequately explain interest rates, housing prices, lack of jobs, and numerous other real-world phenomena. In the real-world, in a credit-based economy, it is credit that matters. The above charts show the real story. That story explains 10-year treasury yields at 1.61% and 2-year yields at .29% even though the CPI is 1.7% year-over-year. Those charts also show why hyperinflationists are in an alternate universe and why proponents of "huge inflation but not hyperinflation" are on Mars. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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