Mish's Global Economic Trend Analysis

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• Sarkozy Dumps Financial Transaction Tax After Pressure From Banks
• Greek Debt Talks Stall, More Negotiations "By Phone" Later Today; IMF Germany Think 4% Coupon Too High; Greek Haircut Calculator
• Is Ron Paul an Isolationist as Newt Gingrich and Rick Santorum Claim?

Sarkozy Dumps Financial Transaction Tax After Pressure From Banks Posted: 21 Jan 2012 03:58 PM PST French President Nicolas Sarkozy is once again setting himself up to look like a fool, this time over his pledge to implement a tax on all financial transactions, popularly referred to as the "Tobin Tax". Just days after pledging to proceed with a tax on all financial transaction tax in France if the rest of the Europe would not go along, he walked away from the "Tobin Tax" idea completely after receiving pressure from French banks. Via Google Translate, please consider Sarkozy waiver of the Tobin Tax by pressure from the banks, according to the German press The French government had abandoned its demand to impose a tax on financial transactions, also called Tobin Tax, after pressure from the country's largest banks, which have threatened to relocate their businesses in other territories, as confirmed by sources in the banking sector Germany's Handelsblatt. According to newspaper reports, Paris would replace the tax on financial transactions by a "tax on stock negotiations", similar to that established in the UK, after having held talks with French banks. Earlier this week, the Spanish prime minister, Mariano Rajoy, expressed his support for the imposition of a tax on financial transactions, but admitted to be studied "some details". Not only does it look like Sarkozy caved under pressure from French banks, it appears the Spanish prime minister Mariano Rajoy caved in as well. Will this flip-flopping by Sarkozy, especially after being adamant that France would go it alone if necessary help his election chances? For a discussion of Sarkozy's dwindling election chances please consider Le Pen Inches Closer to Bumping Off Sarkozy in First Round of French Elections; Interesting Crossover Vote Opportunity for Hollande Supporters to Dump Sarkozy Never before has a sitting French president been dumped in the first round of elections. That outcome is now a strong possibility. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Greek Debt Talks Stall, More Negotiations "By Phone" Later Today; IMF Germany Think 4% Coupon Too High; Greek Haircut Calculator Posted: 21 Jan 2012 09:28 AM PST For weeks we have been hearing "agreement soon" on Greek bond haircuts. The theme for the day today as it was yesterday and as it was a week ago is "tomorrow". One problem with all of these "deal is close" announcements is none of them have included an agreement from those who stand to benefit if there is a credit event. Until those CDS holders are made whole, or at least the CDS holders are satisfied, there is no deal, just noise. The Wall Street Journal reports UPDATE: Greek Debt Talks Appear To Stall Saturday Talks between Greece and its private sector creditors over a debt writedown plan appeared to stall Saturday as the banks' top negotiator left Athens amid signs of fresh disagreements over how much Greece would pay its bondholders in the future. Institute of International Finance chief Charles Dallara, who has been negotiating with Greek officials on the bond swap plan for the last two days, left Athens Saturday as hurdles remained over the interest rate the new bonds would pay private sector creditors. "Right now there are no talks. There will be consultations with the EU and the IMF to determine where we stand and then we'll see. It (negotiations) has again become complicated with the new demands over the coupon," said a person with direct knowledge of the talks. Earlier, people familiar with the matter said that the IMF and Germany don't believe Greece's debt would return to sustainable levels if the average coupon on the new bonds is around 4%, pushing for a lower coupon. "We were discussing technical and legal issues having agreed in principle to an average coupon of 4%, but the IMF insists this won't be enough to bring (Greece's) debt back to sustainable levels," said another person with knowledge of the talks. This is the second intervention by Germany and the IMF in debt talks in the last eight days over the coupon rate. IMF Germany Think 4% Coupon Too High It's hard to say whether it's the CDS holders who are the only holdouts here. Rather it's possible, there is no general agreement at all. Interestingly, both German and the IMF think Greece cannot recover with a 4% or higher coupon rate. Germany had been arguing for a 2% rate. At a 2% coupon on new debt, assuming a 10% Greek haircut rate, existing bondholders (except the ECB) would suffer 76% losses plus whatever losses it would take to make the ECB whole on the garbage it is holding on its balance sheet. Reuters has an interesting "Greek Haircut Calculator" to see what losses might be at varying rates on new debt. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Is Ron Paul an Isolationist as Newt Gingrich and Rick Santorum Claim? Posted: 21 Jan 2012 12:41 AM PST Both Newt Gingrich and Rick Santorum have accused Ron Paul of being an isolationist. Is that really the case? Ironically, I propose that Newt Gingrich, Mitt Romney, and Rick Santorum are the isolationists. However, before one can make a case for or debate anything, there must be an agreement on terms and an understanding of what isolationist means. The best place to start is a compelling article written by Sheldon Richman on the Future of Freedom Foundation website. Opposing Imperialism Is Not Isolationism I am going to take liberty and post Richman's Opposing Imperialism Is Not Isolationism in entirety. If he objects, I will condense it down. Here goes. When pundits and rival politicians call Ron Paul an "isolationist," they mislead the American people — and they know it. They know it? How could they not: Ron Paul is for unilateral, unconditional free trade. He believes any American should be perfectly free to buy from or sell to any person in the world. In that sense — the laissez-faire sense — he favors globalization, which, applied consistently, would require a worldwide free market. He's such a strong advocate of free trade that he objects to the world's governments, led by the U.S. government, setting up international bureaucracies, such as the World Trade Organization, to manage trade. He thinks trade should be a totally private matter. That's a solid classical-liberal, or libertarian, position. So why is Paul repeatedly called an isolationist? Apparently in today's political world, being an isolationist means opposing the U.S. government's policing the rest of the world through invasion, occupation, and war — that is, militarism. The word "isolationist" has always suggested a fear of foreigners, and no doubt those who apply the word to Paul want to cash in on that sense. So we are left with the daffy conclusion that Ron Paul is a xenophobic, head-in-the-sand isolationist precisely because he prefers peaceful trade with foreigners rather than invasion, occupation, and demolition of their countries. If that's what it means to be an isolationist, count me as one too. It's easy to understand why this inappropriate label is stuck on Paul. Establishment conservatives and progressives are terrified by him and desperately want him to go away. They're terrified because he has done the worst thing imaginable: he has held up a mirror and reminded them of what they are. He has shown establishment conservatives and even so-called Republican moderates (such as Mitt Romney and Jon Huntsman) that they are, and long have been, apologists for empire and therefore betrayers of the republican (small-r) ideals they say they embrace. When Paul condemns past, present, and future aggressive wars (such as the one being planned for Iran); when he calls for closing America's 900 military installations in over 40 countries and removing America's troops from 130 countries; when he advocates an end to all economic and military aid to foreign governments (including Israel's); and when he opposes wholesale violation of the Bill of Rights (see the PATRIOT Act and the National Defense Authorization Act), he is saying to his Republican rivals, You have helped destroy individual liberty by shamefully supporting the U.S. global empire, which brutalizes foreign populations, fosters an exploitative military-industrial complex, violates civil liberties, and burdens the American people with obscene debt, taxation, and Federal Reserve monetary manipulation. That charge must be hard to take from a fellow Republican. So his rivals strike back in the way they know best: they smear Paul. The thought of a staunch antiwar, pro-Bill of Rights candidate running against Barack Obama scares the daylights out of them, because they know only one way to run against a Democrat: accuse him of being an appeaser and a socialist. This is absurd, however, because Obama is neither. He has steadfastly carried on the empire's program of global militarism and corporatism. If you doubt it, look at his foreign-policy record and the long list of Wall Street people who advise him and give him money. Which brings us to the progressives. If you think establishment conservatives are scared of Ron Paul, imagine how Obama and his supporters must feel. Can you imagine their having to run against a staunch antiwar, pro-Bill of Rights opponent? This is the same Obama who has maintained Guantanamo, launched more deadly drone attacks than George W. Bush, signed into law the authority to detain individuals indefinitely without charge or trial, claimed he may kill even American citizens without due process, cracked down harshly on whistle-blowers, protected torturers from legal consequences, invoked state secrets to quash lawsuits by torture victims, and on and on. Most progressives live in a fantasy world where they are champions of peace, tolerance, and the rule of law, when in fact they support — and refuse to criticize — a man who has mimicked George W. Bush in virtually every way. How can they tolerate a man — Ron Paul — who reminds them of that? Sheldon Richman is senior fellow at The Future of Freedom Foundation in Fairfax, Va., author of Tethered Citizens: Time to Repeal the Welfare State, and editor of The Freeman magazine. Visit his blog Free Association at www.sheldonrichman.com. Send him email. Is Ron Paul an Isolationist? I was going to title my post "Is Ron Paul an Isolationist?" but after perusing the Future of Freedom Foundation website that I just discovered this evening, I noticed that title was already taken. Here are snips from The Future of Freedom article Is Ron Paul an Isolationist? written by Laurence Vance. Speaking in South Carolina just before Christmas, Newt Gingrich "sharply criticized Mr. Paul for what he said were his isolationist views on foreign policy." While stumping in Iowa the week before the Iowa caucuses, Rick Santorum "urged Republicans to carefully study Mr. Paul's isolationist foreign policy views." Tune in to the leading conservative talk-show hosts or read the comments posted by their followers on right-wing websites and you will hear and see Ron Paul regularly described as an isolationist. Okay, so what would an isolationist America look like? What if the United States really retreated from the world stage, avoided engagement with the rest of the world, and actually did isolate itself from every other country? Under a real foreign policy of isolationism, the United States would refuse to participate in the Olympics, refuse to make treaties, refuse to issue visas, refuse to allow foreign goods to be imported, refuse to allow U.S. goods to be exported, refuse to allow foreign students to study at American universities, refuse to allow American students to study at foreign universities, refuse to allow foreign investment, refuse to extradite criminals, refuse to exchange diplomats, refuse to allow cultural exchanges, refuse to participate in disaster-relief efforts, refuse to allow travel abroad, refuse to engage in diplomacy, refuse to deliver mail to or receive mail from foreign countries, refuse to allow emigration, and refuse to allow immigration. Here is Rick Santorum on Ron Paul's "dangerous" foreign policy: "One thing he can do as commander in chief is he can pull all our troops home. He can shut down our bases in Germany. He can shut down the bases in Japan. He can pull our fleets back." According to Santorum and his fellow conservative and Republican warmongers Gingrich, Rick Perry, Michele Bachmann, Herman Cain, Mitt Romney, Rush Limbaugh, Mark Levin, Sean Hannity, and the Weekly Standard, Ron Paul is an isolationist, not because he wants America to be isolated from the rest of the world, but because he wants to terminate the empire, stop fighting foreign wars, close the foreign military bases, cut the bloated military budget, end foreign aid, halt all offense spending, bring all the troops home, limit the military to the actual defense of the United States, and stop being the policeman of the world. A noninterventionist foreign policy is a policy of peace, commerce, travel, cultural exchange, diplomacy, neutrality, and free trade. A noninterventionist foreign policy means no preemptive strikes, invasions, occupations, bombings, threats, sanctions, embargoes, foreign aid, assassinations, imperialism, meddling, bullying, regime changes, nation building, entangling alliances, spreading democracy, NATO-like commitments, peacekeeping operations, forcibly opening markets, policing the world, and no foreign military bases. It is a sad day for America and Americans when not supporting an aggressive, belligerent, interventionist, and meddling foreign policy means that you are an isolationist. Is Ron Paul isolationist? Is France isolationist because its navy doesn't patrol our coasts? Is Canada isolationist because it doesn't have military bases below the 49th parallel? Is Germany isolationist because it doesn't have tens of thousands of troops stationed in the United States? Is Brazil isolationist because it doesn't kill Americans with drone strikes? Is Russia isolationist because it doesn't build military bases in scores of countries? Is Moldova isolationist because it doesn't send its soldiers to fight foreign wars? Was Ronald Reagan an isolationist because he pulled U.S. troops out of Lebanon? Noninterventionism is not isolationism. It is practical, sane, moral, just, and right. It is the foreign policy of the Founding Fathers — and Ron Paul. Laurence M. Vance is a policy advisor for the Future of Freedom Foundation and the author of The Revolution That Wasn't. Visit his website: www.vancepublications.com. Send him email. That was a lengthy, yet incomplete snip. With those two compelling articles, I added a link to The Future of Freedom Foundation under the category "Taxpayer Friendly Sites" on the left hand side of my blog. Mission Statement I wholeheartedly endorse the Mission of FFF.ORG as follows. Mission The mission of The Future of Freedom Foundation is to advance freedom by providing an uncompromising moral and economic case for individual liberty, free markets, private property, and limited government. Please give the site a good look and help spread the word. Who are the "Real" Isolationists? The irony of the Ron Paul "isolationist" accusation is the other republican candidates, especially Mitt Romney, are the true isolationists. Mitt Romney has come flat out and said he will increase tariffs on China which would likely start protectionist trade wars much like the Smoot-Hawley Tariff act that intensified the downturn of the great depression. Republicans who campaign on the basis of "small government" and "constitutional principles" yet support troops in 140 countries, manipulation of interest rate by the Fed, and isolationist tariff policies are nothing but enormous hypocrites. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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