Central Perk: 22 mar. 2011

marți, 22 martie 2011

Mish's Global Economic Trend Analysis

Portuguese Government on Verge of Collapse
Court Rules Gov. Christie's Budget Cuts Left N.J. Schools Unable to Provide 'Thorough and Efficient' Education
Fed Gov. Richard Fisher Sees Signs of "Speculative Excess", Warns of "Intoxication on Ambrosia of Cheap Capital"
Cato Institute Discusses "The Origin of Central Banking and Possible Alternatives"

Portuguese Government on Verge of Collapse

Posted: 22 Mar 2011 09:03 PM PDT

Unless there is an unexpected breakthrough within hours, it's likely the end of the line for Portugal's Prime Minister who has threatened to resign if parliament does not approve austerity measures he seeks.

Please consider Portugal Braces for Govt Collapse Over Debt Vote

Portugal's government is on the verge of collapse after opposition parties withdrew their support for another round of austerity policies aimed at averting a financial bailout.

The expected defeat of the minority government's latest spending plans in a parliamentary vote Wednesday will likely force its resignation and could stall national and European efforts to deal with the continent's protracted debt crisis.

The vote comes on the eve of a two-day European Union summit where policymakers are hoping to take new steps to restore investor faith in the fiscal soundness of the 17-nation eurozone, including Portugal.

The governing Socialist Party's parliamentary leader Francisco Assis made an 11th-hour appeal for opposition rivals to negotiate changes to the latest austerity package and ensure the government's survival. Prime Minister Jose Socrates, who heads the government, has said he will no longer be able to run the country if the package is rejected.

But opposition parties say the center-left government's latest austerity plan goes too far because it hurts the weaker sections of society, especially pensioners who will pay more tax. The package also introduces further hikes in personal income and corporate tax, broadens previous welfare cuts and raises public transport fares.

The leader of the main opposition center-right Social Democratic Party, Pedro Passos Coelho, said late Monday that the political deadlock made an early election "inevitable."

As in Greece, the austerity policies have prompted numerous strikes, with train engineers set to walk off the job during the morning commute Wednesday.

Portugal's plight stems from a decade of miserly growth. While growing at the tepid rate of 1 percent a year, it ran up debt to finance its western European lifestyle.

Bloomberg reports Portugal Faces Lawmaker Vote Threatening to Push Toward Election, Bailout

Portuguese Prime Minister Jose Socrates will today face a vote in parliament against his deficit-cutting plan which threatens to push the country toward early elections and the need for a European Union bailout.

Lawmakers will discuss the government's so-called stability and growth program of austerity measures at 3 p.m. in Lisbon. The opposition Social Democratic and Communist parties both pledged yesterday to table resolutions against the plan.

"If parliament decides on a motion against the stability and growth program, that means the government is not in a condition to make commitments internationally," Socrates said on March 15. "That would mean a political crisis. In my understanding, the consequence of a political crisis is the worsening of the financing risks of our economy and would lead Portugal to request external intervention."

Portugal is going to fail. Wednesday is as good a day to do it as any.

Thus, sooner, rather than later, another bailout is coming. However, it will not be Portugal who is bailed out, but rather German, French, and UK bank that lent money to Portugal.

Eventually Greece, Ireland, and Portugal will default, even though pretending otherwise may continue for a while.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Court Rules Gov. Christie's Budget Cuts Left N.J. Schools Unable to Provide 'Thorough and Efficient' Education

Posted: 22 Mar 2011 04:01 PM PDT

Education spending in New Jersey is the highest in the nation. Yet, Superior Court Judge Peter Doyne rules Christie's budget cuts left N.J. schools unable to provide 'thorough and efficient' education

Gov. Chris Christie's deep cuts to state school aid last year left New Jersey's schools unable to provide a "thorough and efficient" education to the state's nearly 1.4 million school children, a Superior Court judge found today.

Judge Peter Doyne, who was appointed as special master in the long-running Abbott vs. Burke school funding case, today issued an opinion that also found the reductions "fell more heavily upon our high risk districts and the children educated within those districts."

"Despite spending levels that meet or exceed virtually every state in the country, and that saw a significant increase in spending levels from 2000 to 2008, our 'at risk' children are now moving further from proficiency," he said.

The Abbott vs. Burke case landed back in court after the Education Law Center, a Newark-based school advocacy group, filed a motion charging that Christie's aid cuts violated the state's school funding formula.

Christie slashed state aid by $820 million last year, and Doyne found that altogether, the state would have needed twice that much — $1.6 billion — to fully fund the School Funding Reform Act formula.

"The difficulty in addressing New Jersey's fiscal crisis and its constitutionally mandated obligation to educate our children requires an exquisite balance not easily attained," Doyne wrote. "Something need be done to equitably address these competing imperatives. That answer, though, is beyond the purview of this report. For the limited question posed to the Master, it is clear the State has failed to carry its burden."

The finding now goes back to the New Jersey Supreme Court, which can choose to act on it.

Triumph of the Letter of the Law vs. Common Sense

Clearly Judge Peter Doyne's ruling this is a triumph of the letter of a poorly written law vs. common sense. If the issue was money, New Jersey would have the best schools in the nation.

Since the issue is not money, money cannot fix the problem. The easiest solution is for the N.J. legislature to trash the "School Funding Reform Act formula".

It will be interesting to see how this plays out.

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

Fed Gov. Richard Fisher Sees Signs of "Speculative Excess", Warns of "Intoxication on Ambrosia of Cheap Capital"

Posted: 22 Mar 2011 11:04 AM PDT

Fed governor Richard Fisher votes on the FOMC panel on a rotating basis. He has dissented with Ben Bernanke 5 times previously. In a speech today he warned against "speculative excess".

Please consider Fed's Fisher Says No More Stimulus Needed in U.S. After June

Federal Reserve Bank of Dallas President Richard W. Fisher said that no additional monetary stimulus will be necessary after the central bank completes its asset purchase program in June.

"No further accommodation is needed after June," including by tapering the central bank's purchases, the regional bank chief, who votes on monetary policy this year, said in a speech today in Frankfurt. "Doing so would only prolong the injustice that we have inflicted" on savers through inflation, he said.

The comments by Fisher, who since last year has questioned the Fed's $600 billion of Treasury purchases, are the first by a policy maker since the central bank's March 15 meeting in Washington. Officials at the gathering kept the purchase plan in place, while saying the U.S. economy is on "firmer footing." Fisher said he would have voted against the central bank's purchase program if he'd had the ability last year.

"I would have voted against QE2, had I had the vote," the 62-year-old bank president said at the Frankfurt Finance Summit 2011. "We've done a bit too much."

Fisher said he is "beginning to see signs of speculative excess" in the U.S., evidenced in the "fresh flow of money" into the stock market, a surge in so-called covenant-lite loans and the re-leveraging by private equity firms.

Fisher reiterated his view that Congress must undertake fiscal reforms to create prosperity in the U.S.

The Fed's preferred price gauge, which excludes food and fuel, rose 0.8 percent in January from a year earlier, matching December's year-over-year gain, the lowest in five decades of record-keeping.

"There's lots of liquidity sloshing around the U.S. financial system," Fisher said. "We are seeing signs of all the intoxication that typically takes place when we have the ambrosia of cheap and readily available capital."

The last time Fisher was a voting member of the FOMC in 2008, he dissented five times in favor of tighter policy. He has led the Dallas Fed since 2005 and is one of four regional bank presidents who rotated into voting slots this year.

Bernanke Openly Embraces "Speculative Excess"

It is crystal clear Bernanke has purposely embraced speculative excess and will not back off on a date once set. Bernanke has not stopped a single emergency measure ahead of his announced time. Thus, the Fed will continue buying US treasuries until June come hell or high water.

Fed actions have been good for the stock market by fostering a psychology of speculation. However, those actions have been harmful for the average person on fixed income and the average Joe on the street who gets nothing in interest on CDs and savings accounts.

Moreover, once speculation end, crashes occur. There has been no recovery, only an illusion of one. Unemployment is down but it's a mirage based on millions of people dropping out of the labor force.

The real measure of a recovery is employment and this is what it looks like.

Nonfarm Payroll Employment - Seasonally Adjusted Total

The above chart shows the 1.5% drop between February 2001 and February 2011. Note that nonfarm employment is below where it was 11 years ago dating back to February 2000.

For additional grim details about jobs including a comparison to the Great Depression, please see Current Decade of Job Losses vs. Great Depression; How Did Quasi-Public Jobs Fare? Who is Whining?

Another regularly dissenting governor is Thomas Hoenig, who will step down shortly.

MarketWatch Interview With Kansas City Fed's Thomas Hoenig

Inquiring minds are reading a Q&A with Kansas City Fed's Thomas Hoenig

Q: On commodity prices, a lot of people point to Fed policy as the cause.

A: I don't know why not. It has got to be a factor. It is not the whole thing – you have droughts and temporary movements. But it is a contributing factor. There are drought issues, and supply issues and demand issues like the Chinese diet. But also monetary policy is accommodating demand, I think, worldwide.

Q: Is QE2 working?

A: I would say it is having effects but at what price later on? My view is it is not just about intended consequences, it is about unintended consequences.

Q: How about tapering off QE2?

A: I certainly would. I am for tapering them off. If you can do it in the right way without disrupting the markets, then yes, by June or sooner. But that precondition is a pretty tough precondition – doing it in the right way, not disrupting markets.

Bernanke hides behind a "dual mandate" of price stability and jobs as the reason for QE II. However, he has failed miserably.

We have neither price stability, nor job creation. Instead we have excessive speculation that at least two Fed Governors can see.

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

Cato Institute Discusses "The Origin of Central Banking and Possible Alternatives"

Posted: 22 Mar 2011 03:41 AM PDT

Following is part 1 of a series by the Cato institute regarding the origin of Central Banking and whether it is time to end the Fed.

URL if the above YouTube Video does not play: http://www.youtube.com/watch?v=O8Z1H6Q-vhM

The video stops short of answers, but I will post other videos in the series as they become available.

In case you missed it, please see Supreme Court Gives Fed 5 Days to Release Emergency Bank Loan Details; An Important Step in the Right Direction

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

Damn Cool Pics

Rare US Civil War Photos
Miniskirts in 60s and 70s
Feather and Hammer Drop on Moon
Ads with Serious Messages
The Best Passive Aggressive Fridge Notes
Twitter Pics of Ashton Kutcher and Demi Moore
St. Patrick's Day Celebration
Justin Bieber Fans Got Trolled

Rare US Civil War Photos

Posted: 22 Mar 2011 06:35 PM PDT

The American Civil War (1861–1865), also known as the War Between the States (among other names), was a civil war in the United States of America. Eleven Southern slave states declared their secession from the United States and formed the Confederate States of America, also known as "the Confederacy". Led by Jefferson Davis, the Confederacy fought for its independence from the United States. The U.S. federal government was supported by twenty mostly Northern free states in which slavery already had been abolished, and by five slave states that became known as the border states. These twenty-five states, referred to as the Union, had a much larger base of population and industry than the South. After four years of bloody, devastating warfare (mostly within the Southern states), the Confederacy surrendered and slavery was outlawed everywhere in the nation. The restoration of the Union, and the Reconstruction Era that followed, dealt with issues that remained unresolved for generations".

Abraham Lincoln discussing strategy

Miniskirts in 60s and 70s

Posted: 22 Mar 2011 06:21 PM PDT

These are some very good looking girls wearing the miniskirts from the 1960's and 1970's. Those were the days when the skirts were shorts and the girls were hot. There is something to be said for yesterday's fashions.

Source: digilander.libero.it

Feather and Hammer Drop on Moon

Posted: 21 Mar 2011 10:36 PM PDT

Here's the famous footage of the Apollo 15 astronaut that dropped a hammer & feather on the moon to prove Galileo's theory that in the absence of atmosphere, objects will fall at the same rate regardless of mass.

There has been much debate over the years on whether this footage is real, or was faked in a studio. Decide for yourself!

Ads with Serious Messages

Posted: 21 Mar 2011 10:28 PM PDT

Oftentimes advertisers dig in to consumer's serious side by laying out intense and thought provoking advertisements. The following creative but chilling ads will make you think twice before calling the advertising world a vast soulless cesspool. It appears that these ads were meant to catch your attention in a much more meaningful way. To view more images.

The Best Passive Aggressive Fridge Notes

Posted: 21 Mar 2011 10:11 PM PDT

No one place on Earth harbors more passive aggression than an office kitchen. This can lead to some pretty interesting and potentially relationship crushing passive aggressive notes. Here are the 30 most passive aggressive notes found in office kitchens.

Twitter Pics of Ashton Kutcher and Demi Moore

Posted: 21 Mar 2011 09:31 PM PDT

These are some very private photos of Ashton Kutcher and Demi Moore. It seems that they lead normal lives in spite of the fact that they are superstars. It is obvious from these photos that the two are very much in love.

St. Patrick's Day Celebration

Posted: 21 Mar 2011 09:18 PM PDT

Welcome to Ireland, home of the four-leaf clover, Irish flags, leprechauns, and of course St. Patrick's Day. Apparently, lots of people like a lot this holiday. At least you could assume that judging from the numbers of people who come out to celebrate it.