vineri, 18 noiembrie 2011

Mapping Keywords to Content for Maximum Impact - Whiteboard Friday

Mapping Keywords to Content for Maximum Impact - Whiteboard Friday


Mapping Keywords to Content for Maximum Impact - Whiteboard Friday

Posted: 17 Nov 2011 01:01 PM PST

Posted by Kenny Martin

When keyword targeting is approached separately from a content creation strategy, the concocted results can often leave us scratching our heads and pointing fingers at the malformed "Frankenpages." By fostering a more cohesive relationship between these traditionally detached endeavors, we can greatly enhance our results and deliver considerable value to our audience.

This week Rand shows us how we can move past conventional keyword targeting practices and generate web pages that won't leave us "running for the hills."



Video Transcription

Howdy SEOmoz fans! Welcome to another edition of Whiteboard Friday. Thrilled to have you with us. Today we're talking about mapping keywords to content for maximum impact.

Now the problem is that a lot of folks think about the world of keyword research and keyword targeting separately from the worlds of content creation. This can happen a lot of the times because the SEO person is not always involved in the design of the content strategy or what's going to go on the website. They're brought in after the fact, maybe in an internal role or in an external consulting role. That can be super frustrating. Let me show you, give you an example of, sort of the traditional keyword targeting process and why this is so bad.

So here's Mr. Biz Owner, and he would like to rank well for oven mitts. A perfectly reasonable request, want to rank for oven mitts. Great. All right. So the SEO person is brought in, and the SEO person goes, "Well, you know, I want to be able to make some changes. I need to add some content to your website." The business owner is like, "No, no, no, no, no. I already have a page. I just want it to rank for oven mitts." Well, okay. Let's chose the best page you've got for oven mitts and we'll try to make that one rank better. The business owner is like, "All right. All right. Good job. Good job. I appreciate that. You did good work. Now I want to rank well for heat retardant oven mitts." The SEO is like, "Well, okay. You know what? We can modify that page again and target that particular phrase."

But this cycle goes on and on and on. Soon enough you'll have Frakenpage, ooh, super scary. He's trying to target ridiculous terms like "advanced kid- friendly oven mitts for hardcore baked lentils." You're like, "How did this happen? How did this Frakenpage get here?"

Well, it got there because of this process, this broken process of the SEO not being the person with the authority or the influence to be able to choose what content needs to be existing on the website and what content needs to be targeting which keywords. This happens all over the Web. You can click on tons of search results in all sorts of verticals and sort of be like, "What were they thinking when they made this page?" It's not that the website is all that bad or they have done something terrible in SEO. It's just that it is not strategic. It is a very tactical approach to SEO, and that tends to lose out over time to pages that are built specifically for users searching for those things that deliver everything they want in the content.

So, let's talk about a strategy to do exactly that. Over here we have a better process. No Frakenpages.

Step one: Establish the full list of keywords. Rather than going sort of one by one and saying, oh, we want to target this, we want to target that, it's nice to be able to start with that full list of keywords. As you refine, if you need to refine that keyword list, beginning again with this process and making sure that the new keywords that you need to be targeting work into the process in this way. We've got our full list of keywords to target. Hopefully, we've figured out how valuable and important they are so we have our spreadsheet. We say, "Well, these are the top converting keywords. These are the ones that send the most traffic, and these are the ones with the lowest difficulty. So based on those three factors, this is how we want to target them." Then we'll map the keywords to existing content based on their relevance. So this means does the page's content actually serve the needs of a keyword phrase that they are targeting? So, if you have a heat-retardant oven mitts page, does that actually contain heat-retardant oven mitts? Is that a full category page? Is it a subcategory page? Is it a single item that happens to be the most heat- retardant oven mitts? Is it a brand page? What is it? We make sure that it is relevant.

Second, we're going to target user intent. This means not just thinking about whether the page is relevant for the keyword, but thinking about, "What does the user want when he gets to this page?" If I am searching for heat-retardant oven mitts, I probably want a bunch of information about why it's heat retardant, what it's made from, explaining to me what kind of temperatures it can handle. I want to know information about where I can buy these magical oven mitts, what the sources are, what the different brands are. I'd like to be able to filter on that data. Maybe I even want tutorials and demos on like, oh, well, this is the kinds of things that you could cook with them. Cool.

Then you can think about yourself, about conversion goals. So you make them happy and they'll make you happy. The conversion goal can be we want them to sign up for an email, we want them to click on a button, we want them to add this to their cart, we want them to convert out of the store. Great. Whatever that is, fine, super.

Then we have step two and a half, which is sort of an interim here. The reason we've got it is because a lot of the times when you're mapping keywords to content, it is not a 1:1 ratio. This again can make for Frakenpages unless you're careful. So, you want to be selecting is this a multiple or a singular keyword page focus. Meaning for the oven mitts, for just that broad keyword phrase, I might suggest, in fact, I'd probably be very strongly suggesting to a business owner who has a website about oven mitts, that that should be one page in and of itself. We should not try to make this a multiple keyword targeting page because we don't know what the user intent is. Someone who has that broad of a phrase is going to need to do a lot of research and discover whether they want heat retardant ones or they want ones for grills or pit fires, or they're looking for a certain material, they want it to withstand certain temperatures, they're looking for kid-friendly gloves, they want gloves for certain sizes, they want gloves with fingers on them or gloves that are just the classic mitt form. Whatever that is, we need to be providing them with a ton of different sorts of data. So, this page is going to have all sorts of selections and things. That has to map to A, B, and C here, or we're going to lose out and that's why I wouldn't try to get a bunch of different phrases ranking for this.

You could conceivably, maybe it's possible that you would have a page for oven mitts and oven gloves and target both on the same one. So oven mitts and gloves could be a page title, could be the target. But I don't know. I think gloves specifies fingers and mitts specifies just like this, and then they're the hybrid ones that has the one finger. I don't know where those go. Kitchen people will figure that out. Don't worry.

Then you have things like, oh, well, this page, oven mitts for kids, that can target lots of keywords like child-friendly oven mitts or kid-friendly oven mitts or children's sizes, oven mitts in children's sizes. So you take the user intent and the relevance of the keyword and you add those onto the page and then you can figure out what are all the pages that the kid- friendly one should target. We'll make the most important ones in the title. We'll put maybe the secondary ones in the body content. We'll try and make that page work for that combination because we don't want to build one that's child friendly and one that's kid friendly when they are exactly the same page just to be able to target different keywords. That generally makes no sense, because again, the link equity gets split up and Google does a lot of things with topic modeling anyway to figure out that those two are probably really similar. So that doesn't make good sense. We can do this. So I'll draw a tiny little oven glove right there. Oh adorable, for kids.

Then you have high-temperature oven mitts. These are, oh, they're big and strong. They can handle a bunch of high temperatures. Oh, look at all that heat they can take. The high-temperature oven mitts could be ones that include phrases like heat resistant, heat retardant, for advanced chefs, for foodies, whatever it is. Those high-temperature oven gloves, they can target a bunch of phrases as well, but we have to go back to relevance and user intent for those.

Then finally, maybe we'll have something in the longer tail, like pit fire mitts or pit fire gloves, and those for people who need to dig around in coals or who are doing the fancy smoking in a backyard barbecue. Whatever it is. Professional grade stuff. Fine. Cool. I don't know. I'll put a hammer there to indicate they're, like, hardcore professionals. I'm not sure why.

Once you have done this process, you can then take the map of keywords that you created to content and actually go build that content to make searchers happy. This works so much better than the Frakenpage approach. I can't even describe to you how well this will work. It doesn't have to be right from the start. You can take an existing site right now, run through this process, and have just a huge win both in terms of your ability to target searches and rank for those keywords as well as your ability to better convert those visitors because of how you've targeted the relevance and the user intent.

I hope you've enjoyed this edition of Whiteboard Friday. We'll see you again next week. Take care.

Video transcription by Speechpad.com


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What Does your Ideal Rank Tracker Look Like? We Want to Know!

Posted: 17 Nov 2011 04:59 AM PST

Posted by Megan Singley

You know that corner sandwich shop that you love so much because they'll make you the exact sandwich you crave? Yea, so this is kinda like that... well, but not. Here at SEOmoz we think a lot about how we can not only come out with new features, but also improve existing tools so our members can get the most value out of PRO.  As a part of the help team, I can’t stress enough how much we crave feedback from our users, so we thought we’d take this opportunity to get your two cents.  Please take a moment to fill out the survey below and help make our Rank Tracker that perfect sandwich.

Thanks for completing the survey!  For everyone out there that's curious about the results, we'll be sure to post them in about 1 week.  Now you deserve to go and get yourself a delicious club sandwich with extra bacon.  Mmmmm, bacon.

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Video: On the Road with the President

The White House Your Daily Snapshot for
Friday, Nov.18, 2011
 

Video: On the Road with the President

This week, President Obama is in the Pacific. He traveled to Hawaii for the Asia Pacific Economic Cooperation conference, visited Australia for meetings with Prime Minister Julia Gillard and an address to Parliament, and he's currently in Indonesia for the East Asia Summit.

We'll be back next week with a special edition of West Wing Week, but for now, check out a few clips from the road:

West Wing Week

In Case You Missed It

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

Planning for the Second Nuclear Security Summit Underway
Progress since the first summit includes removal of over 400 kg of highly enriched uranium from over 10 countries and more than a dozen new nuclear security training and research “centers of excellence” opening their doors.

By the Numbers: 443,000
Cigarettes are the leading cause of preventable disease in the United States, and cause 443,000 deaths each year.

From the Archives: Establishing Equal Hospital Visitation Rights
On this day last year, Centers for Medicare and Medicaid Services announced new rules that allow hospital patients to decide who they want at their bedside when they are sick. 

Today's Schedule

All times are Eastern Standard Time (EST).

3:30 AM: The President participates in a US-ASEAN meeting

4:40 AM: The President hosts a bilateral meeting with President Yudhoyono of Indonesia

7:00 AM: The President joins leaders at the East Asia Summit gala dinner

9:15 PM: The President participates in Embassy and U.S. Mission Meet & Greet

9:55 PM: The President hosts a bilateral meeting with Prime Minister Yingluck of Thailand

10:40 PM: The President participates in East Asia Summit Plenary Session

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

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Introducing the new Verbatim search tool from Google

Posted: 17 Nov 2011 04:45 AM PST

Google announced a new tool this week – Verbatim, which is essentially a fast way to find results which exactly match your search queries.

This tool replaces the use of the + key in searches when you want to force it to include certain words in the results it brings up. According to Google, this is because:

users typed the "+" operator in less than half a percent of all searches, and two thirds of the time, it was used incorrectly.

In addition to this, one surmises that the move is not entirely unrelated to the domination of the + character by Google+ and +1.

What the tool does highlight is that it's very easy to forget just how much work the Google algorithm puts in without you even realising it. As Google points out on the official Inside Search blog, when you search for something on Google without Verbatim, the algorithm approaches your query in an amazingly intelligent way to make sense of what you've typed. For example, it:

  • Corrects spelling (and sometimes even grammar)
  • Personalises your results using data on what other sites you've visited recently
  • Looks for synonyms of terms you've written and similar terms/phrases
  • Looks for words with the same root (e.g. optimise, optimising)
  • Drops some words, e.g. "circa"

The Verbatim tool drops all these features and just gives you the raw results containing all the words you've typed.

So does it look very different?

For most searches, the results are essentially the same with or without Verbatim. That's because the algorithm is already good enough to understand what you meant most of the time, so you don't actually need to specify greater precision. Furthermore, Verbatim will still ask you if you meant to search for the correct spelling, such as:

The situations in which Verbatim will be a useful tool are likely to be occasions where:

  • A slight difference in terminology makes a big difference to the meaning
  • You've visited a lot of websites recently which might skew the results for a different but vaguely related query in personalised search

Obviously, this tool is unlikely to have any impact on the SEO industry. It's buried in the "more search tools" section to the left of the search results and, given that fewer than 0.5% of searches ever actually used the + button to make them more exact, the tool isn't likely to be utilised by a significant number of searchers.

However, Verbatim is interesting as a response to searcher behaviour (it was apparently requested by many a user) and as a reminder that it's a good idea to target variations of keywords in order to be picked up in as wide a range of searches as possible. For example, a book seller might target the whole range of "buy" and "sell" words:  books for sale, buy books, second hand books bought and sold, buy a book, book seller and so on. You never know when someone might be looking for an exact phrase – and if you're in e-commerce, these super-precise searchers are likely to be nearer the end of the buying cycle, and therefore more likely to convert.

© SEOptimise - Download our free business guide to blogging whitepaper and sign-up for the SEOptimise monthly newsletter. Introducing the new Verbatim search tool from Google

Related posts:

  1. Salespeople: the free SEO tool every agency has
  2. Google Test: Multiple Meta Descriptions Work as Expected, Social Search Does Not
  3. 9 Ways to Sharpen Up Your Paid Search

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No, that's not good enough. Will you please do it again?

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joi, 17 noiembrie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


By Any Objective Measure, the Euro is a Failure

Posted: 17 Nov 2011 07:29 PM PST

Nigel Farage once again blasts Eurocrats in front of European Parliament, emphatically stating "By Any Objective Measure, The Euro is a Failure"



Link if YouTube video does not play: http://www.youtube.com/watch?feature=player_embedded&v=bdob6QRLRJU#t=35s

Farage also called various unelected EMU officials a "pack of hyenas".

It is an entertaining video as well as the truth.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


LME Warehouses in US Overloaded with Copper, Zinc, Aluminum, Steel because of Economic Downturn

Posted: 17 Nov 2011 11:41 AM PST

Here is an interesting story from a reader about huge stockpiles of metals building up, right here in the US, because of limited demand from manufacturers.
Dear Mish,

The link below is to a recent article in the New Orleans newspaper, the Times Picayune. I have read a lot about metal stockpiling in China, but nothing about how it is happening here, too. I did not know that New Orleans is the second largest London Metal Exchange site in the country behind Detroit, and now has more copper, zinc and steel in storage than any other place in the United States. This nicely fits into your deflation thesis.

Keep up the good work,
Harry
LME Warehouses in US Overloaded with Metals

Please consider Local warehouse space is bursting with stored metals
Long-vacant New Orleans warehouses are bursting with metals such as copper, lead, aluminum and zinc as manufacturing slows down with the economy. The stockpiles that are accumulating are good news for owners of local warehouses, but the trend has touched off a rare scramble for specialized warehouses in certain parts of the metro area.

New Orleans is now the second-largest London Metal Exchange site in the country behind Detroit, according to the exchange, and has more copper, zinc and steel in storage than any other place in the United States.

With the global economic slump continuing for longer than anyone imagined, metals are now piling up in the 53 New Orleans-area warehouses certified with the London Metal Exchange because they're not needed around the world for manufacturing.

Kevin Kelly, owner of Port Cargo Service, a metals warehousing business, said it may take years to run down supplies. He says the city is running out of suitable warehouse space.

"We're probably close to 98 percent occupancy, which is the best ever," Kelly said. "I'm considering buying property and building warehouses if I can find good land to build it on."

The metal has sopped up lots of space in New Orleans area warehouses. Warehouses that sat empty for years between Jackson Avenue and downtown are full of it. And because the London Metal Exchange only allows metal to be stored on the east bank of Orleans, Jefferson and St. Bernard parishes in areas close to the Mississippi River and rail lines, warehouse owners like Kelly are booting tenants from Elmwood to make room for the lucrative metals business, sending many movie production companies that occupied those east bank warehouses over the Huey P. Long to the West Bank.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


IMF Downgrades Portugal GDP Outlook to -3.0%; Barclays Capital Cites Downside Risks

Posted: 17 Nov 2011 10:45 AM PST

The IMF is nearly always late and nearly always overly optimistic in its assessment of global growth. Today the IMF downgraded its forecast of Portugal, something that should have been obvious six months ago.

Via Email (no link available) Barclays Capital offers these comments ...
Portugal: 2nd IMF programme review revises down 2012 growth forecasts

The IMF released yesterday a press statement on its second mission review of Portugal (see link at end). Overall, the conclusion is that the "programme is on track" for this year but headwinds will require additional fiscal measures to meet 2012 targets. The 2012 "headwinds" are reflected in IMF's downward revision to its growth forecast from -1.8% to -3% (in line with the EC).

In our view, there are downside risks to this scenario. Meeting the 2012 fiscal target may prove challenging as tax revenue may disappoint on account of weaker growth than expected (BarCap 2012 GDP growth -3.6%.)

The growth outlook 

The IMF expects real GDP to contract -3.0% next year, down from -1.8% projected in the WEO and at the programme inception in May 2011 (BarCap: -3.6%). According to the technical mission, weak domestic and external demand will impair the economy. Specifically:

  • Private consumption will suffer as fiscal austerity and elevated inflation (reflecting significant indirect tax and tariff increases) take their toll on consumers. Moreover, the ongoing deleveraging by the financial sector is likely to weigh on household consumption and investments, which will further impair real GDP growth prospects.
  •  External demand: A slowdown in global growth could weaken the contribution to real GDP growth. As the IMF noted, in a context of low competitiveness, "key measures, particularly nominal cuts in public wages and pensions and increases in indirect taxes, are also appropriate in view of the need to switch from a consumption-based to a more export-led growth model". 

Fiscal outlook

On the fiscal front, the IMF assessed that implementation of the 2011 budget has proven difficult. In particular, it pointed out that while preliminary data indicate that the end-September ceiling on the cash deficit was met, spending overruns relative to program objectives for the whole year could add up to 1.5% of GDP on an accrual basis. According to the technical mission, these unexpected budget pressures reflect in large part slippages in expenditure controls and insufficient corrective measures.
The link Barclays referred to is Statement by the EC, ECB, and IMF on the Second Review Mission to Portugal

All of Europe is degrading rapidly. Portugal will not come close to IMF growth estimates. Alternatively, Portugal will not come close to meeting IMF budget goals, most likely both.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Whack-a-Mole Euphoria Wears Off

Posted: 17 Nov 2011 10:05 AM PST

On November 11, I commented on Whack-a-Mole Euphoria and 6-Sigma Events
Hooray! The Borg Technocrats have saved us already, even though they have yet to lift a metallic finger.

The Borg took a huge whack not at a mole actually, but an Italian Elephant. This event instantaneously brought upon mass-euphoria.

The market has more-or-less been in a continual state of euphoria recently having been saved (by something), for the 83'rd time in the last 63 days.

Today's euphoria is about falling yields on Italian government debt. The yield on 10-Year Italian bonds is down 44 basis points to 6.45%. The yield on 2-year government bonds is down a whopping 70 basis points to 5.70%.

....

S&P 500 Futures 10-Minute Chart



I expect that gap to fill sooner rather than later as whack-a-mole euphoria wears off.
Gap Fills

It took five trading days, but today the gap filled and the S&P sits at 1212.



Noty to worry, more euphoric moments are sure to be on the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Official Denial Signals Spanish Bailout Imminent; Dreadful Result in Spanish Bond Auction, 6.975% Yield on 10-Year Debt; Merkel says "ECB Cannot Solve Euro Crisis"

Posted: 17 Nov 2011 09:06 AM PST

The ECB stepped into the fray once again today but the the results of the Spanish debt auction today speak for themselves. The rate on 10-year bonds is close to touching the 7% mark.

The BBC reports on the "Dreadful Result"
The Spanish government sold 3.56bn euros (£3.04bn; $4.79bn) worth of bonds out of a maximum target of 4bn euros.

The auction attracted bids worth 1.5 times the securities offered. The so-called bid-to-cover ratio was down from 1.8 in October.

"The result was dreadful. They didn't manage to raise the full amount and the bid-to-cover is really poor," said Achilleas Georgolopoulos, rates strategist at Lloyds in London.

"The fiscal profiles of Spain and Italy are different but their yields seem to be aligning now."
Volatility on Spanish Bonds Soars

Bloomberg reports "Volatility on Spanish sovereign debt was the highest among developed-country markets today, according to measures of 10- year bonds, two-10-year spreads and credit-default swaps. The cumulative change was 5.1 times the 90-day average, the Bloomberg gauge showed"

Official Denial Signals Spanish Bailout Imminent

An official denial from a ranking Spanish government official suggests a bailout of Spain is now imminent.
Spain is "absolutely not at risk of a bailout," Salgado said on Cadena Ser radio, after rates for the government to borrow money rose to dangerous levels.

"The sustainability of our debt is beyond all doubt."
For a discussion of the "official denial" concept, please see Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied)

Systemic Nonsense

In "Debt Crisis Live" The Telegraph reports Spain's finance minister Elena Salgado says there is a "systemic attack" on European sovereign debt going on, and that the ECB must keep on supporting government bonds by buying them until some other instrument is put in place.

Clearly Salgado is talking systemic nonsense. Yields in Spain are approaching 7% for a simple reason: Spain cannot possibly pay back what is owed.

The Telegraph also reports on huge protests in Italy and Greece:"We will throw all of them out," promised a banner held aloft by students, while another carried by anarchists read: "In the face of tyranny, one must choose between chains and arms."

Here is a picture of a protest turned violent in Italy.




Merkel Rules Out Everything

Here is a nice quote at the 10:45 mark from Debt Crisis Live.
10.45 Mrs Merkel has been speaking in Berlin this morning, and she seems to be ruling out everything. She said neither joint euro-area bonds nor using the European Central Bank will solve the debt crisis.

Apparently a "snappy debt cut" is also out of the question. She said:

Quote I'm convinced that none of these approaches, if applied right now, would bring about a solution of this crisis.

Which is all very well - but what the markets want to know is, what IS the solution?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


To Save the Euro we Must Destroy Germany

Posted: 17 Nov 2011 12:59 AM PST

Yesterday German Chancellor Angela Merkel came flat out and said, "To save the Euro we must Destroy Germany".

Well not exactly, but she may as well have because that is the implication. This is what she did say: Germany Is Ready to Cede Some Sovereignty to Save the Euro
Chancellor Angela Merkel said that Germany is ready to cede some sovereignty to strengthen the euro area and restore confidence in the common currency.

European Union treaty changes to strengthen EU institutions and patrol tighter budget rules are needed "to make the euro zone more crisis-proof," Merkel told reporters in Berlin today at a joint briefing with Irish Prime Minister Enda Kenny.

"Germany sees the need in this context to show the markets and the world public that the euro will remain together, that the euro must be defended, but also that we are prepared to give up a little bit of national sovereignty," Merkel said. Germany wants a strong EU and a euro "of 17 member states that is just as strong and inspires confidence on international markets."
Not Merkel's Decision

For starters Merkel is saying what she wants. It is debatable if that is what Germany wants at all. I rather doubt it.

Moreover, even if it is what Germany wants, it is not Merkel's decision. Such decisions, as the German supreme court has ruled are up to voters of Germany, not politicians with an axe to grind about what they want.

If German voters want to cede power and form a European nanny state, then so be it. But it will be the end of Germany and the end of Europe as well should they do so.

Desperate Attempt to Save Something Not Worth Saving

As the crisis lingers the cries for more intervention get louder and louder, even though the massive intervention to date has only made matters worse.

Ambrose Evans-Pritchard highlights the cries for intervention in Latin showdown with Germany over ECB
The EU's €440bn EFSF bail-out fund was supposed to take over on the rescue task, relieving the central bank. It has been a disastrous flop, unable to raise money itself at a viable cost after toying with leverage plans that greatly concentrate risk for creditor states. The net effect has been to accelerate contagion to the core.

Germany's constitutional court has ruled that "open-ended" and "automatic" liablities violate the country's Basic Law. So only the Germans can save monetary union, yet the Germans cannot legally do so. Europe's crisis has reached an impasse, the result of the original design flaws of EMU.

Even so, a growing chorus of economists within Germany itself is calling for a strategic change. Wurzburg professor Peter Bofinger wants the ECB to cap Italian and Spanish yields.

"We are in an emergency situation; this isn't plastic surgery. If worse comes to worst, the ECB has to act before the financial system falls. And if it acts, it should act properly and set an upper limit for sovereign yields. It's naive to believe that Italy can solve its problems on its own. Structural reforms can't be implemented overnight."

Dennis Snower, head of the Kiel Institute, said the ECB must act to stem the crisis, even if this means straying into fiscal policy. Thomas Mayer from Deutsche Bank said Italy's new government will fail unless the ECB buys time by holding down yields, perhaps as low as 5pc.
Euro Experiment is Over

Pritchard concludes with a couple of paragraphs that I whole-heartedly endorse...
David Heathcoat-Amory, Britain's former Europe minister, said Berlin will do whatever it takes to try to save EMU.

"The Germans will pay up, accept eurobonds, and mobilise enormous firepower. But this won't save monetary union in the end because it is not a debt crisis. It is a currency crisis. The weaker states are uncompetitive and you cannot force them to deflate their way back to competitiveness by cutting wages 30pc. The EU elites won't admit it, but the euro experiment is over," he said.
Merkel is willing to destroy Germany (and Europe) to save something that is doomed anyway.

Top Orwellian Comments Of All Times

  • An American major after the destruction of the Vietnamese Village Ben Tre: "It became necessary to destroy the village in order to save it."
  • Vice President Joe Biden: "We Have to Go Spend Money to Keep From Going Bankrupt."
  • President George W. Bush: "I've abandoned free-market principles to save the free-market system."(For a discussion please see The Most Redeeming Feature of Capitalism is Failure)
  • Nancy Pelosi said "We have to pass the health care bill to see what's in it." (YouTube Video)
  • Larry Summers says "The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending." (Reuters

We can safely add "To Save the Euro we Must Cede Sovereignty" to that list.

Unlimited Supply of Hare-Brained Ideas

There have been more hare-brained ideas in the last 6 months on how to save the Euro and the global economy than in the prior three years combined.

Ceding sovereignty to save the unsavable is one of them. A leveraged EFSF is another hare-brained idea. It has already blown sky high.

Here are some more examples.

  • Alan Beattie proposes the ECB lend money to the IMF so that the IMF can take on Eurozone credit risk, in order to get around ECB statues regarding bailing out insolvent nations. Allegedly that needs to happen or it will be another Great Depression. (Financial Times)
  • In one of the looniest ideas in history, economist Brad DeLong proposes "The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash before the increase in eurorisk leads American finance to tighten credit again and send us down into the double dip. The Federal Reserve Needs to do so now." (DeLong Typepad)
  • In an absurd idea since abandoned, EU officials actually proposed that rating agencies be barred from rating countries with "excessive volatility"

Quack Ideas

In regards to Beattie's proposal EuroIntelligence writes
In the never-ending search for quack solutions to the eurozone crisis, European leaders come up with ever desperate attempts. After the silly idea of leveraging the EFSF, the G20 summit discussed – and failed to agree on – the notion of leveraging the EFSF through the IMF's special drawing rights (SDRs).

Alan Beattie writes in the FT it is illusory to think that one could bolster the EFSF to €1 trillion through SDRs as such a decision would require approval by the US Congress, with a success chance of between low and zero, he writes. He concludes that the only thing that currently prevents a crisis resolution is ideology. The ECB could lend money to the IMF, which in turn could set up a fund to buy Italian debt.

Interventionists Man the Barricades

In response to DeLong's proposal, my friend Pater Tenebrarum comments in Interventionists Are Manning The Barricades
Another quite funny missive reaches us via the always amusing Keynesian statist Brad DeLong, who argues that given the euro area crisis escalation, the US Federal Reserve should immediately proceed to crank up its printing press. In terms of sheer lunacy his proposal is hard to beat.

DeLong approvingly quotes an article by Paul Krugman, who bemoans the possibility of the eurocratic moloch falling apart:
"I believe that the ECB rate hike earlier this year will go down in history as a classic example of policy idiocy. We would probably still be in this mess even if the ECB hadn't raised rates, but the sheer stupidity of obsessing over inflation when the euro was obviously at risk boggles the mind."

First of all, who's to say that the euro is worth saving? If saving the euro depends on the central bank rewarding the fiscal profligacy of member nations by monetizing their debt, then obviously we'd be better off without the euro. These nations could then attempt to inflate themselves to prosperity on their own.

Regarding the ECB rate hike earlier this year, it is really hard to argue that it makes any difference whatsoever if the administered interest rate sits at a minuscule 1.25% or a minuscule 1.5%. How can that have any bearing on the insolvency of peripheral governments? Moreover, whether the rate is at 1.25% (where it now is again after the recent rate cut) or 1.5% – in both cases it is well below the official inflation rate of 3%, in other words it represents a negative real interest rate. The ECB is definitely not pursuing a tight monetary policy either way.

The euro system has proven a badly constructed self-destructive system, just as its opponents have claimed from day one. In fact, they have pointed this out well before the euro was introduced. Alas, it does not logically follow from this that it is worth attempting to 'save' it by means of inflation, which is what all the above quoted people evidently want.
Currency Expiration Looniness


For sake of completeness, I need to point out once again Gregory Mankiw's inane proposal to save the economy by expiring 10% of Money supply every year (see Time For Mankiw To Resign)

GDP Targeting Looniness

I also need to point out the preposterous idea by Christina Romer who proposes the Fed institute GDP targeting in which she says Dear Ben: It's Time for Your Volcker Moment.

For starters the Fed cannot spend money, it can only lend it. Thus the Fed has at best an indirect affect on GDP.

Interest rates are at 0% and money is stacking up at the Fed as excess reserves. In such conditions, the Fed has no affect on GDP. However, the price of crude is back over $100.  Food prices are up as well. The Fed has destroyed those on fixed income.

The Fed already has a dual mandate. A dual mandate is stupid enough in and of itself. The reason is the Fed can control at most one variable at a time. For example, the Fed can defend an interest rate target but it then loses complete control over money supply. It can target money supply but lose control over interest rates.

The Fed cannot do a damn thing about jobs other than indirectly. Now Romer appears to seek a triple mandate that is quite frankly economically impossible. 


How Economic Incompetents Rise to Fame and Power

Inquiring minds may be asking "How the hell did such a blazingly incompetent economist ever get picked to Chair Obama's Council of Economic Advisers and why is she on Obama's Economic Recovery Advisory Board?"

Those are excellent questions. The snide answer would be to place the blame on Obama. However, President Bush also had incompetent economic advisors.

The answer is more fundamental. Romer was picked precisely because she was incompetent, not in spite of her incompetence. She says the things government wants to hear.

  1. We need to print more money
  2. We need to spend more money
  3. We do not need to worry about debt
  4. The "Free Lunch" exists
  5. Government is the savior

In short, Romer preaches exactly what presidents want to hear.

Addendum:
I added to my list above one of the biggest Orwellian statements in history: Nancy Pelosi said "We have to pass the health care bill to see what's in it." (YouTube Video)

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Spanish 10-Year Bond Yield Hits Euro-Era Record 6.61%, 2-Year Yield Hits 5.53%; Italian 2-Year Yield Hits 6.54%, 10-Year Yield at 7.04%

Posted: 17 Nov 2011 12:31 AM PST

Yields on Italian and Spanish bonds are up once again, ahead of critical auctions for both countries.

Italy 2-Year Government Bonds



http://www.bloomberg.com/apps/quote?ticker=GBTPGR2:IND

Spain 2-Year Government Bonds



http://www.bloomberg.com/apps/quote?ticker=GSPG2YR:IND

Spain 10-Year Government Bonds



Yield on the 10-Year Italian bond held above 7% up 3 basis points to 7.04%.

Expect the ECB to step in once again if things get much worse.

Note: I was able to get this format back on Bloomberg charts by deleting cookies and clearing cache. One other person experienced the problem I complained about in regards to an interactive map format and I tried his solution. It worked.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List