Mish's Global Economic Trend Analysis |
- Scranton Mayor Slashes All Public Worker Wages to $7.25 per Hour, Including Police, Fire, His Own; City Effectively Bankrupt
- Negative Yields In France For First Time, Record Negative Rates in Germany; 10-Year Yield Back Above 7% in Spain, Above 6% in Italy
- Global Collapse In Auto Sales Coming Up
| Posted: 09 Jul 2012 03:23 PM PDT Scranton, Pennsylvania's, the state's sixth-most-populous city (population of 76,089 in 2010 census), is down to its last $5,000 and has no way to pay salaries. The mayor wants an immediate tax hike of 29% and 78% over three years. In every sense of the word, Scranton is bankrupt. NPR reports Scranton's Public Workers Now Paid Minimum Wage. The city of Scranton, Pa., sent out paychecks to its employees Friday, like it does every two weeks. But this time the checks were much smaller than usual. Mayor Chris Doherty has reduced everyone's pay — including his own — to the state's minimum wage: $7.25 an hour.Scranton Mayor Slashes City Workers' Pay Filling in a few more details, IBT reports Scranton Mayor Slashes City Workers' Pay To Minimum Wage Doherty wants to raise taxes by 29 percent immediately and by as much as 78 percent over the next three years, while the council wants the city to borrow money. The Scranton Times-Tribune reported there's no way for the city to take out a loan because it is unable to show it is capable of paying it back.City Effectively Bankrupt It should be perfectly obvious to every soul on the planet that Scranton is bankrupt. Tax hikes are not the answer. The solution is filing bankruptcy with the hope of killing public union wages and benefits. However, inane rules in Pennsylvania prohibit cities from filing bankruptcy without state approval. On October 12, 2011 I reported Pennsylvania State Capital Files for Bankruptcy Unfortunately, City of Harrisburg chapter 9 bankruptcy dismissed The US Bankruptcy Court for the Middle District of Pennsylvania has dismissed the bankruptcy petition filed on behalf of the City of Harrisburg, Pennsylvania, finding that the city failed to meet eligibility requirements under the Bankruptcy Code to be a chapter 9 debtor.Inept city management, with public union wages and benefits at the heart of it, killed Scranton. The city is bankrupt. Period. Will the state once again deny the obvious? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. 
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| Posted: 09 Jul 2012 10:52 AM PDT Add France to the list of eurozone countries with negative short-term interest rates. The Wall Street Journal reports France Joins Germany to Sell T-Bills At Negative Yield France joined a handful of euro-zone countries Monday in selling short-term debt at negative interest rates as investors seek alternatives to expensive German and Dutch debt.Select Yields From WSJ
Supposedly, French yields of -.005% are a veritable "bargain" compared to German yields at -.0344% Unforeseen Consequences The Journal notes "Several large money-market funds restricted or closed their European funds to new investments after the ECB cut the deposit rate to zero, as they have struggled to provide returns to investors. This emphasizes the unforeseen effects of the extreme monetary policy actions that are currently being carried out by the ECB," said Rabobank's fixed-income strategists. Unforeseen or Ignored? It should be easy to foresee such effects. In the US, the seen effects are the impacts of low rates for those on fixed income. In addition, record low rates makes it impossible for pension plans to meet their over-optimistic goals of 8% annualized returns when interest rates are near zero. Bernanke has to understand these things. If so, he simply chooses to ignore them for the benefit of banks over everyone else. What he fails to understand is he is doing no one any favors! 10-Year Yield Back Above 7% in Spain, Above 6% in Italy As short-term yields plunge in Germany, France, and the Netherlands, long-term yields are soaring elsewhere in Europe. Yield on 10-Year Spanish Government Bond closed at 7.062% Yield on 10-Year Italian Government Bond closed at 6.015% As I have repeatedly said, nothing has been solved. It took less than a week this time for yields to head back North. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. 
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| Global Collapse In Auto Sales Coming Up Posted: 09 Jul 2012 09:26 AM PDT In response to my post Plunging New Orders Suggest Global Recession Has Arrived I received a couple of interesting emails from readers, one from the US, the other from an employee of the world's largest automotive parts manufacturer. Small US Distributor Responds Dear Mish,Employee of German Manufacturer Robert Bosch Responds Hi Mish,Notes About Bosch Wikipedia has these details about Robert Bosch. Robert Bosch GmbH (commonly known as Bosch) is a German multinational engineering and electronics company headquartered in Gerlingen, near Stuttgart. It is the world's largest supplier of automotive components.Global Auto Sales Collapse On The Way Anecdotes are personal by definition, and thus cannot tell the full story. However, anecdotal evidence is in sync with a collapse in new manufacturing orders globally as noted in Plunging New Orders Suggest Global Recession Has Arrived (same as link at top, repeated for convenience). For more details on the US specifically, please see US Manufacturing ISM Contracts for First Time in Three Years; New Orders and Prices Plunge; Perfect Miss: 0 of 70 Economists Polled By Bloomberg Expected Contraction Given the nature of Bosh's business, the reported slowdown in that business, and a plunging collapse in new manufacturing orders virtually everywhere, a collapse in global automobile sales is coming. Perhaps there is one more channel-stuffing rise in sales coming up in the US (sales are reported when cars are delivered to dealers, not when consumers buy them), but if so, it will be the last big hurrah. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. 
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