| Political Poker in Germany; Grand Coalition Possibilities Increase Posted: 13 Sep 2013 07:06 PM PDT On several occasions I stated there would not be a "grand coalition" following the next Germany election. The "grand coalition" is defined as a Merkel's CDU/CSU party forming an alliance with the opposition SPD party. The reason I came to that conclusions for five reasons. - The leader of SPD ruled out a grand coalition
- The eurosceptic AfD party was (and still is) likely to make parliament
- There is a chance SPD + Greens + the Far Left (Die Linke) could put together an unstable majority
- CDU/CSU + AfD (with or without FDP) could form a stable coalition
- Even if the grand coalition thesis had the highest probability, the odds were still under 50%
Odds Change I am not changing my prediction, but I am changing the odds. When the data changes, you have to reconsider. And the data changed. SPD leader Peer Steinbrück has changed his mind about entering a grand coalition. Via unmodified choppy Google-Translate from Der Spiegel, please consider Discussions about possible grand coalition: Steinbrueck rises leadership. The goal of Peer Steinbrueck choice is clear: The SPD's top candidate wants after the election on 22 September chancellor of a red-green coalition will. Should there not be enough for it, he has a cabinet post in a grand coalition with the CDU have always excluded. Nevertheless Steinbrueck wants to be in the event of an election defeat SPD negotiator in talks with the Union.
"I'll stay in the driver's seat after the election," the challenger Angela Merkel said after SPIEGEL ONLINE information on recently familiar. Even if it is not enough for red-green, wants Steinbrueck the possible coalition negotiations with the CDU and CSU say in authoritative. Political Poker Was Steinbrück lying then, or now? Or both? Is this a game to win votes? Or a real change of heart? Or no change of heart, just a lie the entire time? Quite frankly, I do not know. What I do know is that, in general, politicians will lie cheat and steal to stay in power. Should the opportunity present itself, would Steinbrück enter a coalition with Die Linke even though he said he wouldn't? Why not? He said he would not enter one with CDU/CSU and changed his mind. Might not he do so again? Might this all be a game of political poker? Perhaps Steinbrück is angling for a small CDU/CSU turnout – hoping all the SPD voters show up. Regardless, there is some chance Steinbrück really did change his mind. And if so, the odds just shifted. How much I do not know. For now, I am still sticking with "no grand coalition", even though the odds of a "grand coalition" just got better, perhaps on a political bluff. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Men in Black Return to Spain; ECB Complains of Too Much Leeway; Alarm Bells Ring "More Tax Hikes Coming" Posted: 13 Sep 2013 01:17 PM PDT Men in Black Return Via translation, La Vanguardia reports Men in Black Will Examine Bank Bailout on Monday A mission of experts from the International Monetary Fund (IMF) will arrive in Madrid on 16 September to discuss with government and private sector rescue progress and Spanish banking sector reform, reported a spokeswoman for the international institution.
The IMF and inspectors from the European Commission and European Central Bank (ECB) will investigate if Spain meets the conditions required by the Eurogroup for the bank bailout and to examine the situation of the banks.
The expert mission of the institution headed by Christine Lagarde expects to publish its preliminary conclusions about the 30th of September, while the publication of the final report could take place in early November. ECB Complains of Too Much Leeway to Spain, Portugal Via translation, El Confidencial reports Brussels Gives Too Much Leeway to Spain and Portugal The European Central Bank (ECB) today launches a critique of the European Commission for being too lax in their setting requirements for Spain and Portugal. As a result of this laxity, doubt that Spain can meet this year's public deficit limit imposed Brussels (6.5% of GDP this year), despite the improvement seen in the first half of the year, as some fiscal consolidation measures will be relaxed in the latter part of the year.
"In several cases, the decrease in average annual structural adjustment required is substantial. For some countries (particularly Portugal and Spain), including cumulative structural adjustment effort has been reduced future the latest recommendations of the EDP (Excessive Deficit Procedure) This could intensify the risks to the sustainability of public finances "are the literal words of the monetary authority in its September monthly bulletin.
"at the end of June 2013, the general government debt stood at around 90% of GDP per year [the highest figure of History], up from 84% at the end of 2012" Alarm Bells Ring "More Tax Hikes Coming" ECB complaints of laxity, coupled with missed budget targets means one thing... more tax hikes are on the way. Via translation, El Economista reports alarm bells ring for tax increases to meet deficit targets. Data through July triggered an alarm in the government and international agencies, especially the downturn in revenue due to the contraction of social contributions and income tax, which will force Treasury to increase the tax burden to meet the revised deficit target of 6.5% of GDP in 2013 committed to Brussels.
Given this situation the government has already prepared a package of tax increases for 2014 that would help meet the deficit of 5.8 percent committed for next year. A VAT increase would raise health additional 1 billion euros and a 21% VAT tax on notaries would raise 100 million more.
Authgorities also ponder more "green taxes" on businesses. Tax hikes will doom whatever slim chance Spain had for an economic recovery (which was not much chance in the first place). Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| India Housing Bubble Bursts; Panic Coming Next Posted: 13 Sep 2013 11:17 AM PDT On August 1, in India Housing Bubble Still Expanding I posted a series of charts by Deepak Shenoy, an economic blogger at Capital Mind in India. Those charts showed the bubble in India was alive and growing. Here is one of the charts and a small bit of commentary .... As of March 2013, Prices have more than doubled since 2009. The All-India Index is at 211, from 100 in March 2009.
The bubble is intact.
But is the bubble bursting? QoQ growth is the second lowest since the data has been recorded – an all India QoQ growth level of 2.1% (versus 6.4% last quarter).
Credit will be constrained from July onwards, so it is quite likely that price growth is hit. Already, rental prices have flattened or reduced, and commercial rents and prices are down (speaking of the June quarter, from anecdotal information). A credit crunch could well cause developer defaults, and then prices will truly fall. For now, the bubble is well and truly visible. The Bubble Bursts On Wednesday, the New York Times reported A Housing Slump in India The Orbit Grand, a block-size complex designed to have at least 26 floors of elegant apartments, an extensive array of ground-floor stores and abundant parking for the chauffeured cars of residents and shoppers, was supposed to be a diadem of India's real estate market.
Now it is turning into a symbol of the slumping fortunes of property developers and owners in a once-promising emerging economy. Construction of the Orbit Grand has almost completely stalled at the 10th floor, the tower crane at the site seldom moves and the builder has defaulted on its loan.
"There's no real work going on right now. There's just a minimum number of workers coming in to do small things," said Alam Sheikh, an electrician who is one of just 14 builders left at the site.
The volume of real estate transactions has slumped in India as developers have refused to offer discounts for fear of starting a market rout.
"If they drop prices, investors will panic and it will be a self-fulfilling prophecy," causing further declines in prices, said Siddharth Yog, a co-founder and managing partner of the Xander Group, a large international real estate investment firm started in 2005. That was the year India began allowing foreign institutional investors into its real estate market.
But with sellers refusing to cut prices, many potential buyers are losing interest. So... Work stops, builders default, condo complexes stall in mid-air, transaction volumes plunge, buyers lose interest, and sellers (for now) refuse to cut prices out of fear of causing panic. Have we seen this picture before? Yes indeed. It was supposed to be "different in India", just like it was supposed to be different in Las Vegas, Miami, Phoenix, San Diego, etc., etc. India Economy in Serious Trouble In September all hell broke loose. Here are some links. Those links were from early September. On August 18, I noted Official Denials Run Rampant in India; "No Question" of Economic Crisis; Rupee Plunges to Record Low; Gold Coin Imports Banned Panic Coming Up Builders refuse to offer discounts for fear of starting a market rout, causing investors to panic in a self-fulfilling prophecy. Yet, it's far too late to stop panic. Moreover, the faster and steeper the panic, the better. Prices need to plunge to reasonable levels, and attempts to halt that process are counterproductive. Meanwhile, I will see if I can get a housing update from Deepak. The next few months may look interesting. Bear in mind, history suggests that transaction volumes will completely dry up, before the real plunge in price occurs. That may take another month or two of no demand from buyers. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Where are the Jobs? Who Has Them? Who's Likely to Get Them? Posted: 12 Sep 2013 11:39 PM PDT Inquiring minds who notice the alleged drop in the unemployment are asking "Where the hell are the jobs?" It's a good question. And I have details, by demographic age group, from reader Tim Wallace. click on any chart for sharper image Change in Number of Jobs Since 2007  Civilian Non-Institutional Population by Age Group  Work Force by Age Group  Number Employed by Age Group  Percent of Population Group in Work Force  Percentage in Age Group Employed  Tim Wallace writes ... Hello Mish
In the 16-19 age group, the population has shrunk by 239,000, while the number of jobs in this age group has shrunk by 1,415,000!
In the 20-24 age group, the population has grown by 1,625,000 while the number of jobs has shrunk by 362,000. So, for the under 25 age group we have 1,777,000 less jobs with 1,386,000 more people.
In the 25 to 54 age group that everyone focuses on, we see a loss in population of 1,382,000 people since August of 2007, but an even greater loss in jobs - 5,940,000!
Since we know that the population has grown by over 13,000,000 since 2007 yet we have 1.8 million less jobs since then, what does this tell us?
Jobs were lost in every age bracket but the 55+ group, with 16-19 dropping 22.6%, 20-24 falling 2.6%, 25-54 going down 5.9% and 55+ going up 22.7%.
The second graph shows the Civilian Non-institutional Population by age - note the basic flat lines on all but 55+. The graph shows the Work Force by age - note once again only 55+ goes up.
The fourth graph shows the number employed by age group. Note that it's only the 55+ age group that has done anything in the current "Recovery". The other groups are all down from 2007, with 16-19 devastated. Just go in Walmart and McDonald's and you will see it first hand - senior citizen workers abound.
The fifth graph shows the percentage of an age group that is also in the work force. Note the plunges in every age group except 55+.
The last graph shows the percentage of the age group employed. It follows the exact trend of the fifth, as it must.
So, if you are in sales and marketing you should be focusing your products on the 55+ age group, they are the ones earning the cash. Forget the teenagers, they are contributing little, and their parents are sliding fast! The millennials aged 20-24 hope those 55+ will retire but the trends do not look promising.
As typical with my charts, data is not adjusted for seasonality. Instead, I compare the same month every year to prior years.
Tim Structural Demographics Poor Flashback May 22, 2008: In Demographics Of Jobless Claims I wrote ... Structural demographic effects imply that prospects in the full-time labor market will be poor for those over age 50-55 and workers under age 30.
Teen and college-age employment could suffer a great deal from (1) a dramatic slowdown in discretionary spending and (2) part-time Boomer reentrants into the low-paying service sector; workers who will be competing with younger workers.
Ironically, older part-time workers remaining in or reentering the labor force will be cheaper to hire in many cases than younger workers. The reason is Boomers 65 and older will be covered by Medicare (as long as it lasts) and will not require as many benefits as will younger workers, especially those with families.
In effect, Boomers will be competing with their children and grandchildren for jobs that in many cases do not pay living wages. So, where are the jobs? They went exactly where I said they would: Boomers now compete with their children and grandchildren for jobs that do not pay living wages. I certainly did not envision the "Obamacare effect" in 2008, but the trend was already set in stone due to rising health-care costs and the age 65 kick-in of Medicare. Obamacare enhanced the trend I had already expected. Who is to Blame? Don't blame corporations or minimum wage laws. Blame the Fed, central bankers, fractional reserve lending, and Congressional silliness including Obamacare. For further discussion, please see ... Top 1% Received 121% of Income Gains During the Recovery, Bottom 99% Lose .4%; How, Why, Solutions Reader Asks Me to Prove "Inflation Benefits the Wealthy" (At the Expense of Everyone Else) Near-Record 20% of Americans Struggle to Afford Food and Basic Necessities; Who's to Blame? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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