Central Perk

sâmbătă, 16 iunie 2012

Mish's Global Economic Trend Analysis

Sacramento "Teacher of the Year" Laid Off; Who is to Blame?
You Don’t Need to be a Lefty to Support Krugman (You Just Need to be Economically Illiterate)
Greeks Rail Against "Crude" German Editorial; Merkel Ally Tells Greece "Vote right or Euro's Gone"; Initial Estimates 2:30 ET Sunday
Europe Will Splinter Regardless of Greek Election Outcome; "France Has At Most Three Months Before Markets Make Their Mark" says German Official

Sacramento "Teacher of the Year" Laid Off; Who is to Blame?

Posted: 16 Jun 2012 10:44 PM PDT

I have a great deal of sympathy for Michelle Apperson, the Sacramento "Teacher of the Year" who was laid off. Assuming she deserved the award, she should not have been laid off.

Sixth-grade teacher Michelle Apperson passed down a simple message to her students.

"My favorite teachers growing up were the ones who challenged me to go out of my comfort level a little bit, strive for the stars, and work hard," the veteran California educator wrote on her school's bio page.

Despite just being named Sacramento's "Teacher of the Year," Apperson was laid off as part of a massive budget cut.

"It hurts on a personal level because I really love what I do," Apperson, who taught all subjects, told KXTV-News 10. "But professionally and politically or economically, I get why it happens."

Her pink slip comes just days after President Barack Obama prodded Washington lawmakers to help cash-strapped states with education funding.

The Sacramento City Unified School District has suffered approximately $143 million in budget cuts in recent years. School spokesperson Gabe Ross told News 10 that who gets laid off is mandated by state law and is based on seniority, not performance.

"It's an awful situation," Ross said. "It's another sign of how education's funding really needs an overhaul."

According to her bio, Apperson's goal was to teach her students "how to solve problems with peers, other adults, and the world around them."

Now they know firsthand how difficult that can sometimes be.

Does Apperson Really "Get Why it Happens"?

I like Apperson's Bio, her experience, and her message to her 6th grade class.

However my sympathies end there.

She says she "gets why it happens". Does she? If so why doesn't she explicitly say so?

Who is to Blame?

Teachers' unions are 100% to blame for this mess. Unions protect the under-performers at the expense of those like Apperson. Unions even protect repeated sexual predator teachers.

From the New York Times article Give Schools the Power to Punish

In one case, a male teacher in Manhattan was accused of inappropriately touching a female student in 2010, but the arbitrator imposed only a suspension without pay. And now — after more disturbing episodes — we've filed charges against this individual for a third time.

As it stands, public school teachers accused of sexual misconduct enjoy protections that no other city employee has. That puts children in danger, and we cannot allow it to continue.

Rest assured there are thousands of cases like that nationwide. Want some articles?

The Huffington Post reports New York Teachers Paid To Do Nothing: 700 Of Them

Hundreds of New York City public school teachers accused of offenses ranging from insubordination to sexual misconduct are being paid their full salaries to sit around all day playing Scrabble, surfing the Internet or just staring at the wall, if that's what they want to do.

Because their union contract makes it extremely difficult to fire them, the teachers have been banished by the school system to its "rubber rooms" _ off-campus office space where they wait months, even years, for their disciplinary hearings.

The 700 or so teachers can practice yoga, work on their novels, paint portraits of their colleagues _ pretty much anything but school work. They have summer vacation just like their classroom colleagues and enjoy weekends and holidays through the school year.

Because the teachers collect their full salaries of $70,000 or more, the city Department of Education estimates the practice costs the taxpayers $65 million a year. The department blames union rules.

Here is a Google search of Teachers Paid to Sit if you want more examples.

Now factor in incompetent teachers and poor teachers. The union protects them too.

Overhaul Needed

Yes, indeed. An overhaul is truly needed. Teachers should be hired, fired and receive pay raises based on merit, not seniority.

School spokesperson Gabe Ross told News 10 that who gets laid off is mandated by state law and is based on seniority, not performance.

Ross then whines "It's another sign of how education's funding really needs an overhaul."

An overhaul is indeed needed. It's time to get rid of collective bargaining of public unions, and it's time for merit pay for teachers.

Enormous Sense of Entitlement

With very few exceptions, public union members have an enormous sense of entitlement.

Public union members need to put themselves in the average taxpayer's shoes. Public union members also need to realize promised benefits cannot possibly materialize.

Teachers' Unions Do Not Give a Damn About Kids

Here is the deal, straight up. Teachers' unions do not give a damn about the kids.

Please read that carefully. I said "Teachers' unions" NOT teachers.

Most teachers do care about the kids. However, those teachers are sucked into believing garbage fed by union organizers. That garbage inevitably leads to cannibalization of the lowest on the seniority totem pole, regardless of skills or talent.

Union mentality is also to blame for inability of school districts to get rid of sexual predators and grossly incompetent teachers.

Time For Reflection

This is a time for serious reflection. We all need to think about what government owes us (or doesn't), what taxpayers owe public union workers (or don't), and what promises have been made by politicians at taxpayer expense that cannot possibly be met.

The problem is not a lack of education funding.

The problem is absurd expectations as to what benefits public union workers receive, coupled with inability to get rid of union workers, except on the basis of seniority, even in the face of repeated sexual predator behavior.

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

You Don’t Need to be a Lefty to Support Krugman (You Just Need to be Economically Illiterate)

Posted: 16 Jun 2012 04:45 PM PDT

Financial Times writer Samuel Brittan says You Don't Need to be a Lefty to Support Krugman.

Brittan kicks off with "The remedy for too little spending is more spending. Everything else is commentary."

Who Decides?

Just who gets to decide there is "too little spending?" Krugman? Brittan?

How about the free market?

Look at what promotion of spending got us. The mother of all housing bubbles is what.

In a 2002 New York Times editorial Krugman said "To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

Krugman claims "that wasn't a piece of policy advocacy, it was just economic analysis." Yeah right. For further discussion please see Krugman's Intellectual Waterloo

Look at what government spending did to Japan and its debt-to-GDP ratio of 220% and climbing. Look at what spending did to Spain and Greece.

Japan proves that things might not matter for a long time, but anyone who does not think Japan is going to pay a very hefty price for that debt is just not thinking.

Brittan asks "Why has this message been so difficult to accept?"

The answer is that anyone with a 6th grade education knows that one cannot spend one's way to prosperity when the problem has been too much spending.

Unfortunately, academia goes to great lengths to promote what governments inevitably want to hear (that one can spend one's way to prosperity).

What did Stimulus do for the US and Japan?

Trillions of dollars of fiscal stimulus has already been thrown at the problem and as soon as the spending stopped so did the rebound. Krugman and Brittan now want government to spend still more money as if the results will be any different.

Nowhere does Krugman or Brittan explain how the money will be paid back, how governments can determine there is "too little spending" especially when it is crystal clear they surely did not see there was far too much spending on housing.

Government Spending is the Problem

Government spending, not the lack of it, is the problem. Nowhere did Brittan or Krugman suggest that public union workers are overpaid, that prevailing wage laws have crippled cities and states. Rather they just want to spend.

Austrian economists have a word for useless spending: "malinvestment". Instead of spending more, how about pension reform, labor reform, getting rid of useless bureaucrats, and putting more money in the average taxpayer's pocket?

How about eliminating crop subsidies? How about lowering drug costs by allowing imports from Canada and Mexico? How about ending collective bargaining for all public unions right here, right now?

Scrap prevailing wage laws and end collective bargaining and there is a chance governments will not overpay when they do spend. The second benefit is the lower the costs, the more workers can be hired for the same amount of money. Those wanting to lower unemployment ought to think about that simple point.

But no! Krugman and Brittan just want to spend, never stating when or how it stops, why the stimulus will not dry up as soon as spending does stop, or how the debt will ever be paid back.

Details. Details.

"Dark Arts" Economic Illiteracy

Before throwing more money at the problem, how about some real structural reforms and attempting something that has not been tried: letting the free market handle the problem rather than government bureaucrats and economic wizards in ivory towers, most of whom have no real world experience at all.

Keynesian theory is nothing more than "dark arts" economic illiteracy. I suggest Britton read and attempt to understand Modern Day Fairy Tale of 3 Economic Wizards (Except It's True)

Remedy For Too Little Thinking

I occasionally agree with Krugman but my general advice is if you agree with Krugman, it's best to stop and think again.

To paraphrase Britton, "The remedy for too much writing and too little thinking is to think before one writes. Everything else is useless commentary."

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

Greeks Rail Against "Crude" German Editorial; Merkel Ally Tells Greece "Vote right or Euro's Gone"; Initial Estimates 2:30 ET Sunday

Posted: 16 Jun 2012 11:34 AM PDT

In the past week, as I expected, the ECB, Troika, German officials and others have all warned Greeks to not vote for Alexis Tsipras and his radical-left party Syriza. Will those tactics backfire?

I suggest they already have. The pertinent question is whether they have backfired enough to matter.

Please consider Greeks rail against 'crude' German editorial.

Greek parties reacted with outrage on Friday after the German edition of the Financial Times made a front-page call on Greeks to vote for the New Democracy conservatives in the upcoming election.

"Dear Greeks, create clear political conditions. Vote courageously for reforms instead of angrily against the necessary, painful structural changes," read the Financial Times Deutschland's editorial, published in Greek and German.

"Your country will only be able to keep the euro with parties that accept the conditions of the international creditors," the daily said, adding: "Resist the demagoguery of Alexis Tsipras and his (radical-left party) Syriza."

It endorsed the New Democracy party led by 61-year-old Antonis Samaras.

Syriza condemned the editorial as "a crude and unprecedented intervention, which offends national dignity and tries to undermine democracy."

The only thing left now is for German Chancellor Angela Merkel to "come and hand out ballots for the right," said top Syriza official Dimitris Papadimoulis.

Merkel ally tells Greece: Vote right or euro's gone

Also from The Local, please consider Merkel ally tells Greece: Vote right or euro's gone

A leading German right-wing politician warned Saturday that if the far left wins Greece's elections this weekend, the country's exit from the eurozone "will be only a matter of time."

"If the radical left carries on saying it wants the help of all the other countries in the eurozone but does not offer anything in return, then it will only be a matter of time before Greece exits" the eurozone, said Wolfgang Bosbach, chairman of the interior ministry committee in parliament and a close ally of Chancellor Angela Merkel.

Even without Sunday's elections, Greece is not fit to be a member of the eurozone, the top Christian Democratic Union official said.

"The country's economy lacks dynamism, competitiveness and efficient governance. And billions more aid will not change that fundamentally," he said in excerpts from an interview with Frankfurter Allgemeine Zeitung, to be published in full on Sunday.

Results 2:30 ET Sunday

Bloomberg reports Greek Vote Outcomes Range From Coalition to Euro Exit: Scenarios

Election and polls close at 7 p.m. Athens time (5 p.m. in London, 12 p.m. in New York). Exit polls will be published immediately, and initial estimates of the result will come in around 9:30 p.m. local time.

Many expect there will be no workable coalition. I believe Syriza will be able to secure one if it wins, and I believe it will win. Should New Democracy win, however, there is a good chance party leader Antonis Samaras will be forced to step aside as part of a coalition with Pasok.

There are really no good choices for Greece. However, a Syriza win has the huge advantage of getting what needs to be done (a Greek exit) much sooner, with at least some chance of recovering in a couple years as opposed to a decade from now.

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

Europe Will Splinter Regardless of Greek Election Outcome; "France Has At Most Three Months Before Markets Make Their Mark" says German Official

Posted: 15 Jun 2012 11:34 PM PDT

All eyes are focused on the Greek election on Sunday. However, a fundamentally far more important election (for the long term) will take place in France on Saturday.

If socialists take control of both houses in French parliament as expected, president François Hollande would have free rein to carry out his stated policies such as hire more public workers, raise taxes on the rich, and Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It"

Tensions Between France and Germany Mount

If Hollande is serious, and I think he is, France is going down the tubes fast. Moreover, the already strained relations between Hollande and German chancellor Angela Merkel mount as Merkel attacks French economy.

Deepening splits between Angela Merkel and François Hollande erupted into the open on Friday as the German chancellor attacked Paris for allowing the French economy to stall.

Mrs Merkel warned the policies of the new Socialist president could destroy the eurozone by bringing the sovereign debt crisis to France itself.

Tensions are running so high that Jean-Marc Ayrault, the French prime minister, was forced to deny that Paris had broken off the Franco-German partnership, following Berlin anger at a Franco-Italian summit in Rome on Thursday.

There was a growing sense of crisis in European capitals after David Cameron, the Prime Minister, took part in a tense conference call with Mrs Merkel, Mr Hollande and Mario Monti, the Italian prime minister.

As tensions within the eurozone deepened on Friday, the German chancellor dismissed "quick fixes" and refused to consider any discussion on pooling debt for eurobonds or Germany underwriting bank deposits in other eurozone countries.

She hit out at Mr Hollande for blocking EU supervision of national spending and supporting eurobonds, which she warned would "mask" divergences between Germany and "mediocre" or declining eurozone economies, such as that of France.

"If you look at the development of unit labour costs between Germany and France, differences have now been growing a lot more strongly, a topic that must be discussed," Mrs Merkel said.

Merkel and former French President Nicolas Sarkozy did not see eye-to-eye on many important issues, but they did not openly feud like Hollande and Merkel. The differences between the latter pair are major in every way.

Major Differences

Hollande wants Eurobonds, Merkel says no
Merkel wants a tighter political union, Hollande says no
Hollande wants bank recapitalizations by the ECB and Merkel says no
Hollande wants more stimulus, more government workers, increased difficulty to fire workers and Merkel disagrees on all counts
Hollande is more willing than Merkel to make concessions to Greece
Hollande wants bigger "firewalls", Merkel does not.

Do they agree on anything other than the desire to keep the eurozone intact?

Franco-Italian Pact Against Germany?

The Financial Times chimes in on the feud with its take:Merkel warns on French economy

Jean-Marc Ayrault, French prime minister, said on Friday that he saw the need for a public assurance that Mr Hollande's visit to Rome the day before was "absolutely not" part of an attempt to form a Franco-Italian pact against German fiscal rigour. "That would be a serious political error which would not lead to any solution," Mr Ayrault said.

Wolfgang Schäuble, German finance minister and a conservative like Ms Merkel, raised eyebrows in Paris when in an interview this week with Italian newspaper La Stampa he criticised Mr Hollande's decision to restore the right of some workers to retire at 60 at a time when most European countries were extending the retirement age.

"France has at most three months before the markets make their mark," said one German official.

France Has At Most Three Months

If Hollande carries out his stated programs, it won't take three months.

Step back for a moment and look at that enormous fundamental rift between France and Germany. Regardless of the outcome of the Greek election, that rift is not going away.

Hollande already threatened to renegotiate the so-called Merkozy treaty (which by the way France has not yet ratified).

Also note that last Thursday, the Bundesbank (Germany's central bank) came flat out and stated Policymakers Should Refrain From "Wild Goose Chase" of Higher Firewalls and Merkel Warned "Limited German Resources"

Assume France does ratify the treaty. Major revisions down the road are virtually impossible.

Dead Before Arrival

Thus, I was highly amused when a group of eurozone Nannycrats agreed to meet later this month to devise a master plan for a eurozone fiscal and banking union. (see Details of the Secret "Nannyplan" Emerge; Proposed Nannygroup Uniforms)

My response was "Dead Before Arrival": Bundesbank Shoots Down EU Banking-Union Proposal; Eight Lessons the EU Needs to Learn

Greek Election Analysis

If Syriza party leader Alexis Tsipras wins the Greek election on Sunday, it may speed up the shattering of the eurozone, but it certainly will not cause it. Nor will a Syriza win cause "contagion" as frequently cited by mainstream media (and nearly everywhere else too).

Alternatively, if New Democracy wins the election on Sunday, the market may throw a 3-day party (or not). However, there will be no lasting effect.

There are simply too many cultural and philosophical differences between countries in the eurozone to make the euro work. What can't last won't. The eurozone cannot last as we know it today.

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

Damn Cool Pics

Britney Spears vs Lady Gaga [Infographic]
How to Dance in The Club
Goal Celebrations FX

Britney Spears vs Lady Gaga [Infographic]

Posted: 15 Jun 2012 09:12 PM PDT

In a battle between sexy and unique, who would be the one to come out on top?

Click to Enlarge.

Via Pagerage

How to Dance in The Club

Posted: 01 Jun 2012 09:57 PM PDT

A video posted by is going viral on youtube with almost 1.5 million views..It showcases different dance moves and to be specific he said "A tutorial on how to dance in the CLUB".

How to Dance in the Club 1

How to Dance in the Club 2

Goal Celebrations FX

Posted: 31 May 2012 10:47 PM PDT

Surrender Monkeys teams up with advertising agency Buzzman and brings us this special effects video of soccer players celebrating their goals. So, if you ever wanted to see Christiano Ronaldo shooting lasers from his eyes and Wayne Rooney literally on fire, now is your chance.

Weekly Address: Ending the Stalemate in Washington

Your Daily Snapshot for
Saturday, June 16, 2012

Weekly Address: Ending the Stalemate in Washington

President Obama tells the American people that the stalemate in Washington is holding our economy back during this make-or-break moment for the middle class.

Watch the President's weekly address:

President Barack Obama tapes the weekly address in the Map Room of the White House, June 15, 2012. (Official White House Photo by Chuck Kennedy)

Weekly Wrap Up

Your quick look at this week on Whitehouse.gov:

Why Refinance: This past week we heard from Americans who support President Obama's proposal to make it easier for responsible homeowners to refinance their mortgages, an item on his To-Do-List for Congress. We asked you to speak up about the issue and share your stories. Many of you fall into the category of responsible home owners that just need a break from your housing loan's high interest rate, and you should know that we are listening to your voices and concerns.

Fatherhood Buzz: On Wednesday, the President sat down for lunch with four dads to chat about the importance of a father's role in a child's life. He also discussed the "Fatherhood Buzz" initiative and how the U.S. Department of Health and Human Services partnering with barbershops to discuss the importance of fathers with their communities. This week the White House also released a report, Promoting Responsible Fatherhood, and honored several Champions of Change for their work in the fields of fatherhood and low-income men and boys.

Unbreakable bonds: The President also welcomed Israeli President Shimon Peres to the White House and presented the leader with the Medal of Freedom for his work to protect the security of Israel as well as his efforts to strengthen the U.S.-Israel alliance.

What's Right for Americans: On Friday, President Obama addressed a new policy from the Department of Homeland Security aimed at making the nation’s immigration policy more fair and more efficient --by removing the threat of deportation for young people who are low enforcement priorities.

West Wing Week: Your video guide to everything that's happened this week at 1600 Pennsylvania Avenue: Watch here.

Stay Connected

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Seth's Blog : Note for note

Note for note

I'm listening to an obscure CD of the Silver Beats, a group of four Japanese lads who play note for note renditions of Beatles songs. They don't speak a word of English. And yet they sing beautifully.

I saw them as an opening act a few years ago, and the novelty was extraordinary.

The thing is, I don't want to see them again. Why would I? It's note for note. No chance for random rhapsodic moments. No chance for total disaster.

Part of the magic of our work is that it's not guaranteed. As soon as it is, we can digitize it or mechanize it or outsource it.

• Email to a friend •

vineri, 15 iunie 2012

Mish's Global Economic Trend Analysis

IMF Pressures Spain to Lower Salaries, Raise the VAT, Eliminate Housing Deduction
Institutional Advisor Bob Hoye Explains Why Gold Miners are Winners During Deflation
Casino Bar Shall Remain Open: ECB "On Standby" Promising Liquidity for Greek Election Fallout; Bank of England Launches Two New Stimulus Packages
100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits

IMF Pressures Spain to Lower Salaries, Raise the VAT, Eliminate Housing Deduction

Posted: 15 Jun 2012 08:18 PM PDT

My friend Bran reports from Spain that IMF urging Spain to raise VAT, reduce public pay and positions, and eliminate housing deduction is the headline of every main news broadcast and newspaper.

The International Monetary Fund (IMF) has recommended Spain to cut the salaries of employees and increase the VAT and excise duties temporarily to compensate for the uncertainty over planned spending cuts, while the Government has claimed that eliminate the deduction of home buying and accelerate privatization. The report comes the same day it is known that the country's debt in the first quarter reached a record high of 72.1%.

In the annual analysis of the Spanish economy for the Article IV of the institution, the IMF notes that spending cuts are planned in the "right areas", but warns that "take time to identify them, will be difficult to implement and the results are uncertain. "

Therefore emphasizes that to assure that the projected savings will materialize, "future cuts in public wages and increases in VAT or excise duties could be approved now and cancel only if the objectives are achieved."

"Given the size of the necessary consolidation, no option should be ruled out," the IMF said in its report, which emphasizes that measures the revenue side should play "a more important role."

Christine Lagarde also suggests that to smooth projections of public debt should be given greater emphasis to privatization and coincides with the European Commission (EC) that the "reintroduced shelter deduction should be eliminated" .

Raising the VAT is Pure Insanity

Raising the VAT or any taxes in the midst of an economic depression is pure insanity. So what will Spain do? My guess is pay lip service to reducing public workers and salaries, pay lip service to badly needed reforms that would make it easier to fire people, but raise taxes as the IMF asks.

In other words, expect Spain to make token attempts to do what is really needed, yet fully embrace tax hikes that will cause major economic damage.

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

Institutional Advisor Bob Hoye Explains Why Gold Miners are Winners During Deflation

Posted: 15 Jun 2012 12:03 PM PDT

In an interview with GoldMoney, institutional advisor Bob Hoye explains Why Gold Miners are Winners During Deflation

Market historian, geologist and Pivotal Events author Bob Hoye, talks to the GoldMoney Foundation's Dominic Frisby about the real price of gold in times of post-bubble deleveraging, and the opportunities in gold mining shares – which he thinks could be on the verge of a great new bull market.

Click on Link For Video

To see a video with Bob Hoye, please click on the above link.

I point out in advance that I do have a relationship with GoldMoney, and that I also own shares of miners as well as physical gold and silver at GoldMoney.

If anyone wants information about GoldMoney or investing in physical gold and silver in general, please Email Mish.

I have been in the same boat with Bob Hoye for as long as I can remember.

Mish Thoughts on Gold in Deflation

It is important to point out upfront what "deflation" means to me.

Deflation is not about rising prices, so please do not send me emails telling me about the price of gasoline or food (or anything else), especially if you are going to ignore trillions of dollars of debt and equity wiped off the books in the housing bust.

My definition of inflation is a net increase of money supply and credit, with credit marked to market. Deflation is a net decrease of money supply and credit, with credit marked to market.

We have been in generally deflationary times since 2007 along with the housing bust. Bernanke and central bankers in general have poured on the liquidity spigots fighting the collapse in credit, and as I expected (but other deflationists like Robert Prechter did not), gold advanced.

Here are some specific references to things I have written:

Dear Nouriel Roubini: The Fundamental Case for Gold Has Not Changed; To Understand, All Roubini Need Do is Look in a Mirror
Dec 14, 2011 ... Reasons to Own Gold Have Not Changed The fact of the matter is gold does well in deflation. It also does well in times of credit stress.

How does one invest for inflation and deflation?
Dec 27, 2007 ... Money is hoarded in deflation so gold should act well in deflation. Do not make the mistake of thinking that gold always does well. It does not.

So What's Behind Moves In Gold?
Sep 2, 2009 ... One final point: Gold does well in "real" terms during deflations. It can do better in nominal terms at other times. "Real" means purchasing power

How Will China Handle The Yuan?
Sep 1, 2009 ... And please don't think that gold does well in times of inflation and deflation because it doesn't. Proof is simple ...

Rear View Mirror Hyperinflation Dec 16, 2007 ... Money does well in deflation. Perhaps there is another big pullback first, perhaps not, but the hyperinflation argument for owning gold does not ...

Bizarro World Inflation; About that 2011 Hyperinflation Call ...
Sep 22, 2011 ... It's not that I am in love with the dollar. Indeed I am not. I like gold. Historically, gold does well in periods of deflation and periods of credit stress.

Is The Inflation Scare Over Yet?
Jun 26, 2008 ... Historically, there are times gold does well: Hyperinflationary times and Deflationary times. Gold does poorly under more normal conditions, ...

Myths About "What's Economically Important"
Sep 17, 2010 ... Gold is money and as money it should do well in deflation in the country of the senior currency. It did. In credit-based system, especially where ...

Ten Pages of References about Gold in Deflation

The above links were from the first of 10 pages of articles searching my blog for the phrase gold does well in deflation.

The Google search mechanism on the upper right of my blog performs fabulously for things you are looking for. I use it all the time myself.

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

Casino Bar Shall Remain Open: ECB "On Standby" Promising Liquidity for Greek Election Fallout; Bank of England Launches Two New Stimulus Packages

Posted: 15 Jun 2012 10:28 AM PDT

The message of the day is "damn the consequences, the casino bar shall remain open", whatever it takes, no matter the consequences to taxpayers who will be responsible for the bar tab.

Bank of England Launches Two New Stimulus Packages

The BBC reports Bank shares jump on new business support plans

Bank shares have jumped in the wake of plans from the Bank of England to launch two new stimulus packages.

The Bank of England's announcement of the plans on Thursday comes in response to the worsening economic outlook, governor Sir Mervyn King [Chairman of BOE] has said.

Together with the government, it will provide billions of pounds of cheap credit to banks to lend to companies.

Banks will also have access to short-term money to deal with "exceptional market stresses". The chancellor said the measures would "inject confidence".

But Labour's shadow chancellor Ed Balls said the plans did "not go far enough".

Rather than further QE to stimulate the economy, the Bank will now offer cheap loans to banks on the basis that they increase lending.

"Today's exceptional circumstances create a case for a temporary bank funding scheme to bridge to calmer times," Sir Mervyn said.

"The Bank and the Treasury are working together on a 'funding for lending' scheme that would provide funding to banks for an extended period of several years, at rates below current market rates and linked to the performance of banks in sustaining or expanding their lending to the UK non-financial sector during the present period of heightened uncertainty."

More Balls

Clearly Ed Balls is not satisfied with QE, with below market rates loans to banks for an extended period of several years, or anything else the BOE has done.

Apparently Balls is waiting for the BOE to do things even more foolish such as forcing banks to lend or for the BOE to simply drop money from helicopters so that people and businesses can spend.

Meanwhile, please note the Bank of England is committed to the same theory as the Fed. If it doesn't work do more of it, and for longer periods of time.

So much for Balls and the BOE. Let's take a look at ECB promises to keep the casino bar open.

ECB "On Standby" Promising Liquidity for Greek Election Fallout

The Financial Times reports ECB "On Standby" for Greek Election Fallout.

The European Central Bank is on standby to keep banks flush with liquidity if Greece creates fresh financial market turmoil, its president has indicated, joining a chorus of central bankers pledging support ahead of Sunday's elections.

Mario Draghi's comments on Friday followed the announcement by the UK's central bank of plans to pump £100bn into the ailing British economy.

"The ECB has the crucial role of providing liquidity to sound bank counterparties in return for adequate collateral. This is what we have done throughout the crisis . . . and this is what we will continue to do," Mr Draghi said.

Shares rallied in Asia and Europe on hopes that central banks would act to stem any negative impact from Sunday's election in Greece. The euro was stable and the yields on Spanish and Italian government bonds, which had been approaching dangerous levels, fell.

Let's take a look at that reported drop in Spanish bond yields from "dangerous levels".

A quick check on Bloomberg of Spanish 10-Year Bonds currently yield 6.84% - a drop of .04 percentage points since yesterday.

Japan Ready, Willing, Able

Continuing from the Financial Times, it appears Japan wants in on the liquidity drop.

Masaaki Shirakawa on Friday said Japan's central bank was ready to take any necessary steps to maintain financial sector stability. Meeting journalists after a regular bank policy board meeting, Mr Shirakawa did not comment on whether central banks might take co-ordinated action to deal with possible market jitters after the Greek election. But he said central banks had a common understanding of the importance of stability.

Common Understanding

Yes indeed, the common understanding is Central Banks will do whatever it takes to bail out banks, regardless of what stupid lending decisions banks make that get them in trouble.

If that fails (and it has), then central banks work out schemes with varying governments to force taxpayers to pay the bill.

Mike "Mish" Shedlock
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100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits

Posted: 15 Jun 2012 12:44 AM PDT

Here are some charts from Reader Tim Wallace that help explain my report a few days ago that 23% of Small Business Owners (Approximately 6.21 million) Report "No Pay for a Year"; New Zealand, Singapore, US, Best Places to Start and Run a Business

The first chart below shows actual employment of covered workers compared to the civilian population and labor force. Covered employees are those eligible for unemployment benefits (working or not). Some are currently collecting those benefits.

In the following charts, "covered employment" or "net employment" refers to those with benefits and currently working.

Population, Labor Force, Covered Employment

click on any chart for sharper image

Self-employed workers and contractors are not eligible for unemployment benefits even though they have to contribute to state unemployment insurance schemes. It believe it is government-sponsored fraud to have to pay unemployment insurance when there is no chance of ever collecting it.

The next chart shows state level employment data. Net covered employees (those currently with a job covered with unemployment benefits) was calculated by subtracting continuing unemployment claims from the pool of all covered workers.

Covered Employees, Net Covered Employees, Continuing Claims

The next chart compares BLS employment numbers to net covered employees (those actually working).

BLS Employment , Covered Employment, Non-Covered Employment

Notice the widening gap between covered employment and employment as reported by the BLS. In 2008 and again in 2010 the difference between BLS employment and Covered Employment as noted by the green line (right axis) was about 15 million.

This month the difference is nearly 19 million. The table below shows the precise numbers.

Year	Covered Employees	BLS Employment	Non-Covered Employment
2003	123,193,833	137,687,000	14,493,167
2004	123,717,669	138,867,000	15,149,331
2005	124,663,546	141,591,000	16,927,454
2006	127,217,409	144,041,000	16,823,591
2007	129,399,094	145,864,000	16,464,906
2008	130,553,967	145,927,000	15,373,033
2009	127,539,427	140,363,000	12,823,573
2010	124,096,266	139,497,000	15,400,734
2011	122,146,266	140,028,000	17,881,734
2012	123,996,700	142,727,000	18,730,300

Since 2010, the economy has added 3.23 million jobs according to the BLS. Of those 3.23 million jobs, 3.33 million (slightly greater than 100%) have been self-employment, contractor, family-business jobs, or other jobs with insufficient wages and therefore ineligible to collect unemployment insurance.

Since 2009 the numbers look much worse. In that timeframe the economy added 2.36 million jobs according to the BLS. Of those 2.36 million jobs, 5.91 million (250%) were self-employment or jobs otherwise not covered by unemployment insurance benefits.

Unemployment insurance benefits vary state to state. Bouncing around between temporary jobs may also make one ineligible, especially if there are lengthy lapses between jobs.

Inquiring minds may be interested in Unemployment Insurance Eligibility FAQs for Connecticut. You need to consult rules for your state.

Non-Covered Employment Percentage Hits All-Time High

Year	"Non-Covered Employment"
2003	10.5%
2004	10.9%
2005	12.0%
2006	11.7%
2007	11.3%
2008	10.5%
2009	9.1%
2010	11.0%
2011	12.8%
2012	13.1%

Non-Covered Employment in the above table means any job that does not provide unemployment insurance benefits.

Notes About Unemployment (From the Link at Top)

Bear in mind, that making money or receiving a paycheck is irrelevant to the BLS when they compute the unemployment rate. If you work as little as 1 hour, whether you collect a paycheck or not, you are considered employed.

In addition to the 6.21 million business owners with no paycheck, factor in those selling trinkets on EBay out of desperation and collecting a few dimes in the process.

Also factor in all those starting multi-level marketing schemes and calling it a business. How many get sucked into that losing proposition every year? Yet, to the BLS, it's a job if you worked any hours.

The ease of starting a business in the US is a great thing. Unfortunately, making money in a small business startup is not so easy.

Historic trends suggest half of small businesses will fail within 5 years, and I highly suspect future trends will be much worse.

See article for additional stats on working with no pay as well as a county-by-country comparison as to the best places to start and run a business.

Also note that Doing Business offers economic rankings of 183 countries on numerous categories including starting a business, ease of doing a business, getting construction permits, etc.

Conclusion

6.21 million working without pay in conjunction with the reported boom in self-employment looks rather believable in light of excellent charts from reader Tim Wallace.

Factor in disability fraud (see 2.2 Million Go On Disability Since Mid-2010; Fraud Explains Falling Unemployment Rate; Will Higher Disability Taxes Fix the Problem?) and the realistic conclusion is the unemployment rate is much higher than reported while the alleged recovery is much weaker than reported.

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