Mish's Global Economic Trend Analysis |
- Good News: EU Budget Talks Collapse, France Rejects Compromise; Still Time to Snatch Defeat From Jaws of Victory
- Hostess to Liquidate if Bakers' Strike Continues Through Thursday; End of Twinkies Hours Away?
- Spain's Unpleasant Choice: Accept Lower Wages and Still Higher Unemployment, Leave the Euro and Default
Posted: 15 Nov 2012 08:42 AM PST I have a bit of good news today. The efforts of European Council president Herman Van Rompuy to mollify the UK and other budget hawks have created such a stir that France rejects EU budget compromise. Jean-Marc Ayrault, the French prime minister, objected to deep cuts to agriculture spending included in the proposal, but also expressed displeasure with reductions in the development money, known as cohesion funds, that benefit poorer regions.Good News Talk is now so cantankerous that EU budget talks collapsed completely. This is not only good news, it's excellent news. Half the EU budget is dedicated to a preposterous system of crop supports as noted in my post Common Agricultural Idiocy. The sooner the CAP blows sky high, the better off citizens in Europe will be. Bear in mind the fallback position of the EU is an automatic budget increase of 2% if no agreement is reached. Should an automatic increase happen, UK prime minister David Cameron may be forced into an up-or-down vote on UK membership in the EU. As it sits now, British citizens would reject the EU, as it should. Self-Serving Brussels Nannycrats The Telegraph explains ... David Davis, a former shadow Home Secretary, condemned the "self-serving, inflation-busting bonus for Brussels" that would force Britain to pay an extra £1.3 billion next year in annual EU contributions, on top of the existing £11 billion.Still Time to Snatch Defeat From Jaws of Victory The bad news is the EU still has some time to work this mess out, and Cameron may not put the EU to a vote if a compromise is reached. In the meantime, just remember, the more bickering the better. Anything that cuts the power and the budget of the nannycrats in Brussels is a good thing. The sooner this mess blows sky high the better. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Hostess to Liquidate if Bakers' Strike Continues Through Thursday; End of Twinkies Hours Away? Posted: 15 Nov 2012 07:33 AM PST It's do or die for 18,000 Hostess workers including 5,000 in the bakers' union. Hostess, the maker of Twinkies, Ding-Dongs, Ho-Ho's, and Wonder Bread has given the union a firm order to accept wage cuts, else the company will liquidate. Only fools would voluntarily vote for liquidation, but with the clock ticking down to mere hours to come to agreement, it appears the fools will win the day. Please consider Hostess to liquidate if bakers' strike continues through Thursday. Hostess Brands said Wednesday that it will go into liquidation unless bakers striking in protest against a new contract imposed in bankruptcy court return to work by the end of the day Thursday.End of Twinkies? The bakers' union would rather have no job than reduced wages. Lovely. Good luck finding another job in this environment. I have little sympathy for those who voluntarily walk away from their jobs in these trying times. However, this is probably not the end of Twinkies, Ding-Dongs, or Ho-Ho's. Not that anyone needs to be eating such non-nutritional junk food, but those names and recipes will likely be sold and produced elsewhere, probably at a lower cost to consumers, especially if the buyer does not have to deal with the bakers' union. The union will likely have to deal with the Pension Benefit Guarantee Corporation (US Taxpayers) and I expect massive haircuts in their plan (as well as screams from the union when it happens). Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Posted: 14 Nov 2012 11:32 PM PST On the near 100% probability that Germany will not voluntarily give money to Spain, nor will Germany voluntarily modify its trade policies, the choices facing Spain are quite bleak. Michael Pettis, writing for Carnegie Europe describes Spain's unpleasant choices in Spain Will be Forced to Choose. In the great debate over the economy we sometimes forget the simple arithmetic of economic rebalancing. This arithmetic, like it or not, severely limits the options open to Spain. Simple Math The only good options from Spain's point of view are for Germany (or Germany and France) to bail out Spain with free money (not a loan) or for Germany to go on a massive sustained spending spree (no doubt accompanied by higher inflation), such that Germany's trade surplus turns into a deficit. However, those are not options Spain can choose. Those are options that only Germany can choose. The odds Germany voluntarily selects those options are roughly zero percent. Spain gets to decide between these two choices
For now, Spain has selected choice number one. How long can it last? Yesterday I wrote Looking Ahead, Spain Worse Than Greece; Only One Realistic Solution. The realistic solution of course is to "leave the euro and simultaneously undertake structural reforms" but in spite of 25.8% unemployment, Spain still sees things differently (for now). Brussels Blinks The nannycrats in Brussels are starting to get worried because following massive protests in Spain, Portugal, Italy, Greece, and Belgium, the nannycrats decided Spain will not need further austerity measures in 2013. For details please see Anti-Austerity Protests Sweep Europe, Sparking Violence; Brussels Blinks, No Further Austerity for Spain; Economic Burnt Toast However, a one year suspension in austerity is not going to do a thing for Spain in the long run. Greece has missed budget target after target (see Greece Allegedly Gets Time, Not Money; Mish Says Time Is Money) and Spain is following smack down the same path. Eventually Spanish citizens will have had enough and will force a change. The only question is how much pain Spanish citizens can take before that happens. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com "Wine Country" Economic Conference Hosted By Mish Click on Image to Learn More |
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