vineri, 8 februarie 2013

SEO Blog

SEO Blog


How Are PPC And SEO Connected?

Posted: 08 Feb 2013 09:52 AM PST

Image by SEOPlanter PPC is a paid ad listing that appears in search results and uses a portion of a company's advertising budget each time it is clicked. SEO is the optimisation of websites to attract searchers through organic listings i.e. anything other than the paid listings. This depends on many...
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Content In An SEO World

Posted: 08 Feb 2013 09:44 AM PST

If you're writing for the internet in today's content-rich, advertising-heavy world you've no doubt come across the acronym SEO, which stands for search engine optimization.  It's a hot term that everyone uses and very few people actually understand, but as a website developer SEO is absolutely critical for the implementation...
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Through The Online Looking Glass: The Future Of Direct Marketing?

Posted: 08 Feb 2013 06:21 AM PST

Regardless of what fate may lie in store for the high street music retailer HMV there was one rather telling piece of information that was reported on when it was announced that the company had been placed in to administration – several news agencies reported that HMV may well be...
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Why Did Your Website Fall Down The Google SERP Rabbit Hole?

Posted: 08 Feb 2013 06:00 AM PST

Over the course of the last few months, businesses the web over have been scrambling to get on Google’s good side. Although it’s old news to members of the SEO and online advertising industries, the ongoing revisions that Google has been making to its site crawler and search engine indexing...
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Co-Citations.The New Anchor Text for SEO Link Building?

Posted: 08 Feb 2013 03:17 AM PST

Since the Google Penguin update we have experience a change forever in the SEO community. Easy to rank for keywords are a game of the past. You can no longer build back links with exact match anchor text and hope to get ranked for such keywords. This brings us to...
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Not All Flowers Are For Valentine’s Day

Posted: 08 Feb 2013 03:07 AM PST

Everyone knows that flowers are one of the best kinds of gifts a man can give to a woman on Valentine's Day. In fact, flowers are the best kinds of gifts a man can give to a woman on any day. Women just simply love flowers, which is why most...
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What To Look For When Choosing An SEO Company

Posted: 08 Feb 2013 02:04 AM PST

If you are active in the world of online advertising, marketing and business, you’ve likely heard of the term SEO. This stands for search engine optimization, and it refers to strategies that are employed to help bring your page to the top of search engine results and to create more...
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Blackberry Business Assistance Apps

Posted: 08 Feb 2013 12:03 AM PST

While the Blackberry is still at the top of the list for business and the corporate people, the company has started a new way of dealing with its niche. The company RIM that was known to be very low on the app side is now marketing out the best apps...
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A Guide to Valentine’s Day Gifts That Have A Sense of Humor

Posted: 07 Feb 2013 11:24 PM PST

Valentine's Day is a day to remember. It is when couples reaffirm their love to one another;spend time together, or even for people to start new relationships with each other. It is truly a day of hearts and love. However, Valentine's Day isn't necessarily serious business; it is about having...
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How To Shrink Your Travel Budget Using Video Conferencing

Posted: 07 Feb 2013 10:46 PM PST

These days, businesses, organizations, and professionals have to spend a lot more time thinking about the bottom line than they did just a few short years ago. Whereas extensive travel may have been a necessity before the advent of high quality, economical video conferencing, today it's becoming less and less...
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SEO Fundamentals: Finding link-building opportunities

Posted: 07 Feb 2013 10:40 PM PST

Search engines rely on links to determine whether your web pages are trustworthy and authoritative. And to earn and uphold that status, it’s important to always be on the lookout for new link building opportunities that you can take advantage of. One simple way to find new opportunities is to...
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5 Minute Guide To Pinterest Secret Boards

Posted: 07 Feb 2013 10:20 PM PST

In November of 2012, Pinterest unveiled its new Secret Boards feature. Up until then, if you pinned an item to a Pinterest board, anyone could view it. Those pins you made about your favorite spring fashion trends, the car you wish you could buy or that special project you were...
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How Small Businesses Can Benefit From Great Web Design

Posted: 07 Feb 2013 10:09 PM PST

With so many people shopping online it is now more important than ever for your small business to have its own professional website. The internet has enabled businesses to market their products to a much wider audience and breakthrough the geographical barriers that were once in place. Having a website...
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The Importance Of Online Reputation Management For A Successful Business

Posted: 07 Feb 2013 09:41 PM PST

Business owners know that no matter how large or small their business is, integrating Internet technologies is important for its success. It’s an easy way to advertise and offer the services and products of a company and to provide information to possible consumers. However, that doesn’t mean that there aren’t...
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High-Value Tactics, Future-Proof Link Building - Whiteboard Friday

High-Value Tactics, Future-Proof Link Building - Whiteboard Friday


High-Value Tactics, Future-Proof Link Building - Whiteboard Friday

Posted: 07 Feb 2013 05:23 PM PST

Posted by Cyrus Shepard

The past 12 months have been brutal for many traditional forms of link building. Techniques that once worked are now penalized. Webmasters wonder what tactic will fall under the hatchet next - infographics, guest post blogging, or something else?

Never fear! In this week's Whiteboard Friday, we discuss how to future-proof your links from penalties and, at the same time, deliver higher rewards - no matter what tactic you use. Be sure to check out the supplemental links included in the transcription below!

Video Transcription

"Howdy SEOmoz. Welcome to another edition of Whiteboard Friday. I'm Cyrus Shepard here at the world famous SEOmoz studios. Today we're going to be talking  about building high reward, future proof links.

There's a lot of comments and discussion in the SEO world today about what link strategies work and don't work. I want to kind of shift the focus away from what works now, because Google keeps changing what works now. I want to shift the focus into what Google is rewarding, to get the most bang for our buck from the links that we're building.

The last year has been really, really brutal for links. It used to be, prior to 2012, SEOs would say, "Links can't hurt you." Google would say, "Links can't hurt you." There was no worry about negative SEO or building bad links. They may not work that well, but they wouldn't have a negative effect.

But then in the last year, in 2012, Google brought the hammer down. I made a list of different link building strategies that people have tried over the years, from good to bad, all the way from paid links and link wheels up to content marketing and user generated content and real company stuff.

In 2012, we saw Google draw a line in the sand. Pretty much after that point if you were using these unnatural, low quality types of links, for the first time, in the history of SEO, bad links could hurt you. It really confused and scared a lot of webmasters.

Google started sending out unnatural link warnings. It's kind of hard to define what an unnatural link warning is, but they generally have three characteristics. Unnatural links, the kind that Google doesn't like, are typically scalable. They can be automated somehow sometimes. They create patterns that Google can detect through their algorithms, either over-optimized anchor text or network of blogs or something like that. But they create patterns that aren't found in the wild. More often than not, they're the types of links where you, the SEO, the webmaster controls the anchor text. That's kind of a funny concept, that you're building links, you're putting links out there on other people's sites, but yet you're the one that controls the anchor text. That's a pretty defining characteristic of what Google would call an unnatural link.

The high reward link on the other hand, the kind that Google seems to reward with higher rankings, better indexing and crawling are links that aren't easy to scale. You can't just pop them into a crawler and scale them out throughout the web or pay somebody to build them for you. There are very few patterns that Google can detect, and more often than not you don't control the anchor text, which is a completely more natural state if you think about it. If people are linking to you, if it's an editorial type link, you probably don't have control over how people are linking to you. Those are the high reward type links that people like.

One of the hardest things that I do as an SEO, people come to me and they ask for consulting, is talking to webmasters that have been building up their site, working hard building up their family business for a year, 5 years, 10 years and doing the things that worked. Then all of a sudden the hammer is laid down and they're done. Their business has evaporated. They're laying off people. They don't know what to do, and they have to start over. Their income is up. That is so hard.

We know from Google statements, from watching Google over the past year, that this line is moving. The threshold for unnatural links keeps getting broader as Google gets better and better at finding these patterns and rooting out these unnatural links. So, as SEOs, we need to stop asking what works now and think about high reward links, because if you're just working on what works now, this line is going to keep jumping, and we're going to be left on the other side of that line.

Now some of these tactics on the border, a lot of people are asking, "Well, what about infographics? I hear those are going to be next? What about guest blogging? I hear that's going away. Or press releases, are those working?"

Well, let me share some startling news with you. It's already happened. It's already happened. Now, I know what you're saying. You're saying, "Cyrus, wait, people are using infographics. They're ranking for it. I'm using guest blogging, and it's working for me." Yes, of course, these tactics do work. But the problem is a lot of people are using these techniques the unnatural way. We see this all the time, people spammy guest blogging with those unnatural author profile links or infographics with all the exact same anchor text over 100 blogs, and they aren't ranking for their terms. But the people who are doing it the right way, using these on the border techniques the natural way, those are going to work every time. They're not only going to work every time, but they're high reward, and Google is going to continually encourage this sort of behavior.

But as an SEO, as a webmaster, how do we know if our technique is working or not? Well, Google doesn't care about the type of link building you do. They care about the implementation. So it's never a matter of comment spam, because you can make comments on blogs. That doesn't make it spam. But when you scale it, when you create patterns, when you use unnatural anchor text, it's the implementation that matters and not the method itself.

There is one rule. I call it the golden rule. How do you know if you're building high reward links or unnatural links? 80% of the time, the golden rule, you want to pursue links where you do not have control over the anchor text. If you stick to that strategy, 80% to 90% of the time, you're going to be building links that are high reward, not just what works, because what works may help you a little bit, but high reward links. Not all links are created equal. Different links help you in rankings much more than certain types of links. So we want to focus our link building here, pursuing links where you don't control the anchor text.

Now a link builder that I really admire, Eric Ward, he's been building links ever since this industry started, 10 year career. He's one of the most sought after link builders in this industry. I'll link to him in the post below. He has never been affected by any of this, and he has never had to ask for links removed. How has he done it? When he builds links, he has never once asked for anchor text. Never. He can ask for a link, but he never demands the anchor text. When he stared doing this years ago, that was unheard of. It has rewarded him today, and all of his links have been in this zone. His clients are very happy. He used to have a newsletter. I think if he still does I think it is well worth subscribing to.

The cool thing about this strategy is, though, you don't have to give up any of your techniques. You can still use the same techniques you're using, and it applies to any method of link building that you want.

I brought up some examples right here. So you're doing infographics. You don't have to give up doing infographics. You can turn these links, which are potentially unnatural, into high value links. The old way of infographic links was you put the widget in. It had the exact match anchor text, and it got spread out to a 100 blogs. But that can trigger Penguin penalties, over-optimization.

So the smart way of doing it and the way I would recommend now, if you want to be more clever about it, is you rotate the anchor text. Mike King, of iAcquire, wrote a great post a few weeks ago about how to rotate anchor text in WordPress, and there's a WordPress plugin. Sorry, the plugin is for WordPress. Mike King wrote about different implementations. I will link to that in the post below too.

If you really want to future proof your links, keep it in this natural zone. Even rotating anchors can create some patterns. So if you really want to future proof your links, the way you do it is you just simply ask for attribution. You don't use a widget or a text box. You just simply give the file to someone and say, "Here download this, link to us, and please give us attribution." Or use Google's reverse image search to find who's already posting your infographic and reach out to them and ask for the link. That way the anchor text becomes natural, and you don't control it anymore. So high value anchors.

Press releases have gotten a lot of bad rap lately. Matt Cutts saying that press release links don't add a lot of value, because people abused them and people spammed them. You would have exact match anchor text in those press releases going out to dozens of low quality sites. Wham, you're not going to rank for that phrase.

The smart way to do it now is in your anchor text, in the press release, you just use your URL – Example.com, SEOmoz.org – or you use something branded – SEOmoz. The smart way to do it, the high value way is you're not using the press release for links at all. That's what press releases were intended for. Use your press releases to draw attention to some linkable asset on your site, not the press release itself. Then the press release goes out to hundreds of journalists. Hopefully, if your linkable asset is strong enough, say a new tool or a company announcement or stats or a report that you put out, then all these journalists and news organizations start linking to your work. So it's not the press release you want links from, it's your linkable asset. If you don't have a linkable asset, now is the time to start working on one because they earn more links than anything else.

Guest posting is a huge topic. A lot of SEOs are recommending it as one of the number one tactics for 2013 as a way to build links. But guest posting can also get you in trouble. The old way of doing it, you have this over-optimized anchor text in that author profile box. If you look at the type of links targeted by Penguin, targeted by over-optimization penalties, those over-optimized text links get you in trouble. If your text link is "Dental Hygienist Dallas" over and over and over again, across hundreds of blogs, that's going to get you in trouble.

The smart way to do it . . . Kate Morris wrote an excellent post last week about how to format these links and guest post. Basically, you don't want to use exact match, money keywords for your anchor text if you're going to be repeating them over and over and over again. But the really smart way to do it is sort of like the press release, a natural anchor text in the middle of the guest post, that links to your linkable asset. Say you publish a report or you have a new tool or you have an infographic, this is what you should be linking to. If you don't have that, you should create that first before you write your guest post. Don't just link to your blog, to your company website. Create something on your company website that is valuable that is related to your guest post that you want.

Finally outreach, general old writing emails asking for links. I learned a lot about this from Rand Fishkin, who is not here today. Rand doesn't ask for a lot of links, but he's a very clever link builder. In the old days, people would write outreach letters, and they would just ask for anchor text. "Could you please link to me, and do it this way?"

Today the smart way is you might influence the anchor text. "Hey, check out my blog about SEO tactics," and you'd link to SEO tactics hoping that they would link to it the same way.

The really smart way of doing outreach in a natural, not controlling anchor text sort of way, is simply don't ask for a link. Ask for a share instead. When you write an email, say, "Hey, we have this great resource. We want to get the word out. Would you share it with your audience?" If they're going to, six times out of ten they'll actually put it on their blog or their website, and you'll get the link anyway, with that natural anchor text. The other times they'll share it with their social network on Twitter or Facebook, exposing it to thousands of people, and potentially getting many, many more of these natural anchor texts than you would have received otherwise.

Going forward, you have a choice. You can ride this line and do what works today and risk continually getting bombed and overtaken by Google's algorithms. But really I want to encourage us to go for the high value, high reward links for higher rankings, safe SEO so we're happy, wealthy, and sunny."

Video transcription by Speechpad.com


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"What’s Up, Camera Man?"

The White House Your Daily Snapshot for
Friday, February 8, 2013
 

"What’s Up, Camera Man?"

This week, the President honored our nation's top scientists and innovators, nominated a new Secretary of the Interior, and worked toward reducing gun violence, enacting immigration reform, and reducing our deficit in a balanced way.

Watch this week's West Wing Week.

West Wing Week 02/08/13

In Case You Missed It

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

President Obama Calls for Humility at the National Prayer Breakfast
In discussing his faith at the National Prayer Breakfast, President Obama made a call for humility -- a trait which, he noted, Washington could embrace more fully.

Keep Up to Date on President Obama's Immigration Proposal
Want to learn more about comprehensive immigration reform? Check out this new issue section.

President Obama Names Sally Jewell to Lead the Department of the Interior
Speaking in the State Dining Room at the White House, President Obama on Wednesday announced that he has chosen Sally Jewell to be the next Secretary of the Interior. In his remarks at the White House, the President also highlighted the accomplishments of outgoing Interior Secretary Ken Salazar

Today's Schedule

All times are Eastern Standard Time (EST).

10:30 AM: The President and the Vice President receive the Presidential Daily Briefing

1:00 PM: The President and the Vice President meet for lunch

3:55 PM: The President delivers remarks at the Armed Forces Farewell Tribute in honor of Defense Secretary Leon Panetta WhiteHouse.gov/live

WhiteHouse.gov/live Indicates that the event will be live-streamed on WhiteHouse.gov/Live

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joi, 7 februarie 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Oil Consumption Analysis: Jobs, Robots, Manufacturing, Gas Mileage Improvement; What's the Explanation for Declining Oil Consumption?

Posted: 07 Feb 2013 11:07 PM PST

I have posted many charts by reader Tim Wallace that highlight declining oil consumption in the US.

James Beck, Lead Analyst, Weekly Petroleum Supply Team for the Energy Information Administration has also chimed in on the subject.

For example, please see my September 16, 2012 article Email From Lead Analyst, Weekly Petroleum Supply Team on Possibility of Recession.

Some readers have suggested improved gasoline mileage in cars is the primary reason.

However, that explanation is faulty (as Wallace and I have pointed out on numerous occasions) because mileage rates have steadily climbed over the years while the plunge in oil consumption happened abruptly at the start of the recession and never recovered.

OK, So Why the Drop?

Gail Tverberg on the "Our Finite World" blog explains in her excellent post Why is US Oil Consumption Lower? Better Gasoline Mileage?

Gail analyzes gas prices, miles driven, increased fuel mileage, and a decrease in industrialization. She concludes ...
Summary of Where Oil Savings Comes From

As stated at the beginning of the post, United States oil consumption is about 4.7 million barrels a day lower in 2012 than would have been expected based on pre-2005 patterns. The way that this savings breaks out by product grouping is as follows:



click on chart for sharper image

Decreased gasoline usage due to improved gasoline mileage amounts to 7% of the total, decreased gasoline usage because of fewer miles traveled amounts to 25% of the total, and a decrease in distillate use amounts to 17% of the savings. The majority of the decrease, 51%, comes from a decrease in the "All Other" category, which is most closely related to a decrease in industrialization.

Going forward, fuel efficiency changes are likely to play a larger role in fuel savings, because CAFE (Corporate Average Fuel Efficiency) Standards have been unchanged for about 20 years. For model years 2012 to 2016, they are again increasing, so auto makers are again making more of an effort to improve mileage.

Actual fuel efficiency gains in the next several years for the US fleet of cars will depend partly on the mileage improvements incorporated by manufacturers, and partly on how many of these more efficient (but also more expensive) cars are purchased.

I have recently forecast that we will be entering another very-long recession in 2013. The recently announced decline in US GDP in the fourth quarter of 2012 is another indication in this direction.
Recession Track

We certainly agree regarding the recession track, but our overall analysis is quite similar as well.

We do have the timing a bit different. Gail states the "drop in consumption is no doubt related to a rise in oil prices starting about 2004."

The price of oil is likely a factor, but I do not show a dip there.  


Gasoline Usage in Summer Months



click on chart for sharper image

The above chart is one of many by reader Tim Wallace from my September 11, 2012 article Petroleum And Gasoline Usage Charts for June, July, August; Unemployment vs. Gasoline Usage.

Attitudes and Jobs

Are gasoline prices a huge factor now? You bet!

Prices are high, unemployment is high, and younger kids have completely different attitudes towards cars, transportation, and debt.

Robots and Looking Ahead

I gave Gail a call asking about the use of robots. We are in agreement on that score as well.

Some manufacturing is in the process of returning to the US. In isolation, that is an improvement in demand.

However, if manufacturing returns but the jobs don't (and thanks to robots that is the current state of affairs), then the net effect (for as long as that setup lasts) is for a decrease in oil consumption.

For more on robots (with obvious implications on gasoline consumption) please see ...

  1. January 22, 2013: Meet "Baxter" the Robot Out to Get Your Minimum-Wage, No Benefits, Part-Time Job
  2.  
  3. February 04, 2013: Robot Wars in China; Burger Flipping Robots Serve 360 Gourmet Burgers an Hour
  4.  
  5. December 08, 2012: Mine-Sniffing Dolphins Lose Their Jobs to Robots; Sea Lion Jobs Safe for Now
  6.  
  7. Monday, August 20, 2012: Robots to Rule the World? Taking All Jobs? Replace Women? 
  8.  
  9. Tuesday, August 21, 2012: Part II - Robots to Rule the World? Taking All Jobs? Replace Women?


If you think the return of manufacturing to the US means a guaranteed increase in US demand for oil, please read some of the above links and rethink your position.

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

"Wine Country" Economic Conference Hosted By Mish
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Platitudes, Promises, and the Failed Pro-Union Policies of Illinois Governor Pat Quinn; Five Recommended Solutions

Posted: 07 Feb 2013 02:34 PM PST

I received an interesting email moments ago from John Tillman at the Illinois Policy Institute, a non-partisan watchdog of the ongoing mess in Illinois.

I traced the source back to an excellent article on Illinois Review written by Ben VanMetre, a Senior Budget and Tax Policy Analyst at the Illinois Policy Institute.

Please consider a repost of Quinn's Illinois: regulations and cronyism crush entrepreneurship by Ben VanMetre.
In Gov. Pat Quinn's State of the State address, he said, "In our Illinois, small business means big business. Driving economic growth for small businesses requires doing all we can to make sure government is not in the way."

Quinn is right. Illinois' economic future depends on a vibrant economy where entrepreneurs can start and grow businesses, create jobs and compete.

Unfortunately, Quinn's policy solutions contradict his rhetoric. Quinn has been fighting for more government involvement in business, not less.

Despite the fact that Illinois already has $9.3 billion in unpaid bills, in his State of the State address Quinn advocated more government involvement in job creation and business activity: spending for roads, bridges, construction, high-speed rail, water infrastructure, technology, manufacturing and clean energy. More money for government projects requires higher revenues – this leads to calls for higher taxes, on top of the state's highly regulated business climate. These factors explain why Illinois has one of the least competitive economies in the nation.

Illinois ranked 45th in gross domestic product growth from 2000 to 2010. Illinois' combined federal and state corporate income tax is the fourth-highest in the industrialized world. And entrepreneurship in Illinois consistently lags behind the rest of the nation.

Illinois' exploding government debt is crowding out business investment. Need evidence? Illinois has been downgraded 11 times since Quinn took office. The state has the worst credit rating in the nation.

The driver of Illinois' disastrous business climate is a government that embraces corporate welfare, and continually increases taxes and burdensome regulations.

Illinois can lead the nation in economic output and job creation. But it must start by balancing the state budget, reining back out-of-control spending and taking government handouts off the balance sheets of politically connected businesses.
The Problem in Illinois

Illinois is bought, controlled, and owned by public unions and politicians on the take from public unions.

The unions do not want reform, nor do they want reasonable budgets. They do want more handouts and higher taxes.

Taking control of government in Illinois will not be easy, even with a Republican governor.

The only way to treat unions is the way Chris Christie treated them in New Jersey and the way Scott Walker treated them in Wisconsin. Bear in mind, the Walker solution was only the tip of the iceberg of the five things that need to happen.

Five Recommended Solutions

  1. Scrapping of all collective bargaining agreements
  2. National right-to-work laws
  3. Scrapping of Davis-Bacon and all prevailing wage laws
  4. End defined benefit plans for public employees
  5. Renegotiation of existing benefits in public defined benefit pension plans

Those recommendations would fix problems nationally, not just in Illinois.

Numbers 1-3 will bring down labor costs, not just for the state, but for every city and municipality in the state (an if implemented nationally, in every state). Numbers 4-5 are needed to solve massive pension underfunding.

Like the Illinois Policy Institute, I do not care if it's a democrat or a republican that gets the job done, but I do care that it does get done.

Unfortunately, I fully expect the Illinois pension problem will not be solved until the fund is within a few years of running out of money. However, that may happen far sooner than anyone thinks.

Some plans may be broke by 2020 in my estimation. All it will take is another big decline in the stock market with the pension plans overweight the wrong areas.

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

Non-News of the Day: "Draghi Says Risks to Downside"; Investigating the Non-Nascent Recovery in Spain; Two Things Spain Needs (and Won't Get)

Posted: 07 Feb 2013 09:45 AM PST

Today's non-news that has the currency markets in a flux with a rising dollar and a sinking euro is a revelation by ECB president Mario Draghi that Eurozone Growth Risks are on the "Downside".

Really? Downside?

Yes, really. It would have been shocking to hear otherwise in spite of all the happy fluff talk that the "worst is behind".

Before Draghi spoke I wrote about Illusions of Stabilization, with a spotlight on France and Germany. Please check it out.

Let's now dig deeper into the non-nascent recovery in Spain.

Spain's Public Debt Doubles to €1 Trillion Since 2007; Debt-to-GDP Ratio Hits 96.2%

According to El Confidencial, Spain's public debt crossed the €1 Trillion marker for the first time.

Public debt is now $1,015 trillion euros and growing at a rate of €100 billion euros a year. Public debt stood at €503.906 billion in 2007.

Recall that the eurozone Stability and Growth Pact places a limit on government deficit at (3% of GDP) and debt (60% of GDP).

Spain's Unemployment Rate



Spain's seasonally adjusted unemployment rate is 26.6% according to Eurostat data as mapped by Google. The BBC reports Youth unemployment is a record 55%.

Deficit Targets Missed Again and Again

Spain was supposed to reduce its deficit to 6.3% by the end of 2012. That number had to be raised twice.

On October 1, 2012 EU Economic and Monetary Affairs Commissioner Olli Rehn said Spain's 2012 deficit target achievable. I laughed out loud when I read that.

The official results are still not in, but expectations are now in the range of 8%. On the over-under line, I will guess higher.

Spain's deficit targets were 4.5% for 2013 and 2.8% in 2014. Odds of success are zero.

Not to worry, Brussels extended the deadline and reduced the targets once again. We are now looking at 2015 or 2016 for compliance.

At last count, Brussels now expects for 6.1% in 2013. I expect that target will be revised up. It won't matter. Spain will still need more time.

Two Things Spain Needs (and Won't Get)

Spain cannot recover until it sheds the shackles of the euro and defaults, or Germany and Northern Europe forgive hundreds of billions of Spain's euro denominated debt.

Bear in mind neither of those is sufficient. In addition, Spain needs many structural reforms related to work rules, unions, and pensions in addition to one of the above choices.

Since none of this is likely in the short-term, Spain will continue to sink. And France with Hollande at the helm is like "going to hell in a handbasket". Simply put, the French economy won't thrive, to say the least. And Germany can hardly rebalance on its own.

So ignore all this happy talk about the worst being behind. It's all an illusion based on stabilization of bond rates in Europe, and that won't last either.

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

Illusions of Stabilization

Posted: 07 Feb 2013 12:21 AM PST

In Germany Rebounds but ... I noted a recovery "of sorts" in Germany, a contraction in France at the steepest rate in four years, and a record decrease in services employment in Italy.

Thus, it should be no surprise to see the Markit Eurozone Composite PMI® shows national divergence hits record high.

Yet, in aggregate, the eurozone contraction decelerated with the eurozone composite PMI rising from 47.2 to 48.6.

So, what's it all mean?

Chris Williamson, Chief Economist at Markit offered this interpretation: "The eurozone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilisation in the first quarter. ...."

No Signs of Healing

I disagree with Williamson. Those divergences show the eurozone is getting sicker, not healing.

If there was any healing, and certainly if there was any rebalancing, manufacturing and export growth would be picking up in Spain, in Italy, and in France at the expense of Germany.

A quick check of the Markit Eurozone Manufacturing PMI will show that is not what's happening.



There are certainly a lot of highs. However, Italy and Spain are still in deep contraction and France is a certified zombie.

How much of the recent growth in Germany and the Northern European countries (and a decline in contraction in Italy) is simply a result of shifts due to the unsound economic policies of French president Francois Hollande rather than "stabilization" per se in Germany and elsewhere?

Regardless of "why", it's not "stabilization" that's needed, but rather rebalancing, and on that score things are headed in the opposite direction, with France leading the way.

Economic Implosion of France

The implosion in France was easy to see and I called for it well in advance.

June 08, 2012: Hollande About to Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It".

The results are as expected. Companies that cannot fire workers will not hire them in the first place.

July 16, 2012: Peugeot Has 51% Chance of Debt Default; Hollande Says France Will Not Let Peugeot Lay Off Workers

October 03, 2012: French Economy Implodes
As expected, at least in this corner, the French economy has started to implode. Service sector business activity is dropping at fastest rate since October 2011.

More importantly, the Markit Composite PMI sports the steepest rate of contraction since March 2009 with job losses accelerating at the fastest pace in 33 months and output plunging at the fastest rate in 42 months.
October 4, 2012: "Pigeon" Tax Protest Goes Viral in France
I received an interesting email today from Andrea, who is from Italy but now lives in France. The email is about "pigeons", a movement started by French entrepreneurs in protest of president Francois Hollande's tax policies. The "pigeon" movement has gone viral on Twitter. ....
October 31, 2012: "Google Law" Yet Another Warped Policy by Hollande; Government Motors French Style

November 29, 2012: French Unemployment Highest in 14 Years (And It's Going to Get Much Worse)
Hollande Threatens to Nationalize Steel Plants Over Layoffs

Economic insanity in France continues at a steady pace. The latest bit of insanity is Hollande's Threat to Nationalize Steel-Maker Mittal.
December 20, 2012: France Faces Growing Pension Deficit; French Youth Lose Hope; Politicians in Denial; Bond Market Patience Can't Last

Illusion of Eurozone Stabilization

There is no real stabilization and there is no healing. Rather, the policies of Hollande are so disastrous that some output has shifted to Germany and elsewhere, (coupled perhaps with some inventory replenishment and a temporary stimulus-fueled increase in demand in Asia).

Even that cannot last. How can it?

US growth has stalled (at best) and 2% payroll tax cuts will tip the US into recession (assuming it's not there already).

With employment sinking in France, Italy, and Spain, precisely who will buy German exports?

Properly rebalancing will require a shift in production from Germany to the rest of Europe as well as a shift towards more consumption in Germany from the rest of Europe. That cannot and will not happen with the destructive polices of Hollande, and the lack of reforms in Spain and Italy.

Moreover, and as I have noted on many occasions, the entire Euro construct is flawed. Until those flaws are fixed, there is only the illusion of stabilization, and that based on more unbalanced growth.

The only thing that has stabilized (for now) is interest rates, and even that won't last.

What About Spain?

It will be of no net benefit if Spain heals but France goes down the gutter.  Indeed, it would be a net loss as France is the eurozone's second largest economy, with Spain a distant fourth.

But is Spain about to heal?

The PMI shows a slowing rate of contraction. However, the contraction is still steep and Spain is nowhere near meeting its budget deficit targets.

Any positive divergence is Spain (mostly imaginary) must be viewed in light of missed budget targets, rising unemployment, and falling tax collections smack in the face of higher tax rates. So don't expect much more from Spain, even as France worsens.

Something has to give. And it's something very few people see coming.

Germany Will Pay a Steep Price

One way or another Germany will pay a huge price.

These are the only two eurozone recovery options

  1. Germany gives (not lends) more bailout money to the rest of Europe
  2. The eurozone breaks up

Until one of those things happens, signs of stabilization are nothing but an illusion.

Failed Experiment

The Eurozone is a failed experiment. Structural flaws were too great initially, and they have increased over the years. No currency union in history has ever survived unless there was also a fiscal union. Current politics says it cannot happen, on meaningful terms.

Breakup Inevitable, But How?

A breakup is inevitable, just as it has been from the beginning. The key is to manage a breakup in the least destructive manner.

Breakup Options

Option 1: If Germany (and the northern states) left the eurozone, the Deutschmark (and respective currencies) would immediately be credible. The downside to Germany (and the northern states) is debts to German banks would not be paid back in Deutschmarks but rather deflated (but not worthless) Euros.

Option 2: The second option is a piecemeal, destructive breakup. Should Greece and Spain leave first, those countries might experience a complete loss of faith in currency resulting in hyperinflation. The Northern states would be paid back in worthless notes, if they were paid back at all.

Germany Suffers Regardless

Note that Germany and the Northern creditor nations suffer regardless. Either they keep ponying up bailout money, there is a managed breakup, or a piecemeal destructive breakup. It would be best for all involved if Germany left the eurozone and went back to the Deutschmark.

There are no other options, and no other choices. Meanwhile, imbalances grow and German taxpayers keep funneling tax dollars to the Southern states to keep them afloat.

How long German citizens are willing to put up with this sorry state of affairs (in addition to the shenanigans of the Mario Draghi ECB) remains to be seen.

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

"Wine Country" Economic Conference Hosted By Mish
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