Central Perk: 14 apr. 2013

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Mish's Global Economic Trend Analysis

"Wise Men" Propose Theft to Bail Out Banks

Posted: 14 Apr 2013 08:01 PM PDT

Far be it from bondholders or banks that caused the debt crisis to be punished for their sins, German 'Wise Men' push for wealth seizure to fund EMU bail-outs.

Two top advisers to German Chancellor Angela Merkel have called for a tax on private wealth and property in eurozone debtor states to force the rich to fund rescue costs, marking a radical new departure for EMU crisis strategy.

Professors Lars Feld and Peter Bofinger said states in trouble must pay more for their own salvation, said arguing that there is enough wealth in homes and private assets across the Mediterranean to cover bail-out costs. "The rich must give up part of their wealth over the next ten years," said Prof Bofinger.

The two economist are members of the Germany's Council of Economic Experts or "Five Wise Men", a body that advises the Chancellor on major issues. There is no formal plan to launch a wealth tax but the council is often used to fly kites for new policies.

Prof Feld said a new survey by the European Central Bank had revealed that people in the crisis countries are richer than the Germans themselves. "This shows that Germany has been right to take a tough line of euro rescue loans," he said.

Study Details

Supposedly the median or midpoint wealth level, stripping out the super-rich is as follows:

Spain €183,000 for Spain
Italy €172,000 for Italy
Portugal €102,000
Cyprus €671,000
Austria €265,000
Germany €195,000
Holland €170,000
Finland €161,000

One look at the data is all it takes to conclude the report does not pass the "sniff test". A closer look shows the study was also undertaken before the Spanish property bubble imploded and that it ignores pensions.

Yet, the "Wise Men" embraced the study. Why?

The answer is simple. The study gave them the incentive to propose what they wanted to propose all along: theft to bail out failing banks that made stupid loans.

As Ambrose Evans-Pritchard points out in his article "Any serious move to a wealth tax could the erode the pro-euro ardour of South Europe's uber-rich."

Indeed. So just how wise are the alleged "wise men"?

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

Five Alternatives to FDIC "Insured Deposits"

Posted: 14 Apr 2013 11:09 AM PDT

In the wake of capital controls in Cyprus and statements by the Dutch finance minister Jereon Dijsselbloem that brought into question the entire notion of deposit insurance in the eurozone, readers are wondering where to safely keep their money.

Concerns heightened when people discovered New Zealand banks have no insurance (see Fraudulent Guarantees; Fictional Reserve Lending; Comparison of US to Cyprus; What About New Zealand?).

Reader Sam asks ...

Hey Mish

What alternatives to "FDIC insured deposits" are out there so we can protect our money?

I'm a daily huge fan and thanks for all your wonderful work.
Sam P

In the US, I do believe deposit insurance will be honored, but it shouldn't be, at least on interest bearing accounts. And the only way deposit insurance could realistically work on non-interest bearing accounts was if there were regulations that banks could not lend deposits available on demand (checking accounts).

Keeping money under the mattress is one obvious answer, but not one that I recommend. Here are some better choices to consider.

Five FDIC Alternatives

Treasury Direct: You can safely buy short-term US treasuries directly.
Short-Term Treasury Funds: The iShares Short Treasury Bond ETF (SHV) holds Short-term U.S. Treasury bonds with remaining maturities between 0 and 1 year.
Brokerage account at places that hold excess cash in treasuries. Not all brokerages hold client cash safely. Interactive Brokers is one of the better ones in my opinion. ETrade nearly went under because of risks it took. See E*Trade Heads For Bankruptcy?
Physical gold or silver in your possession
GoldMoney, Bullion Vault, and other places that store precious metals for you.

I prefer GoldMoney to other precious metal holding companies but that is an admittedly biased opinion as I have a relationship with them. Anyone wanting additional information on GoldMoney: Please Email Mish

Again, I do believe deposit insurance will be honored, whether or not it should be, but you certainly do not want to exceed the FDIC limit at any one bank.

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

SEO Blog

Top Tips For Improving Your Social Media Experience In 2013

Posted: 14 Apr 2013 10:01 AM PDT

Social media is an important influence in today’s world. From business marketing to personal communication social media is vital. Whether it’s Facebook, Twitter, Pinterest or LinkedIn, most people are part of some sort of social media community. And if you want to improve your social media experience for 2013, then...
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Seth's Blog : The brand is a story. But it's a story about you, not about the brand.

The brand is a story. But it's a story about you, not about the brand.

Why prefer Coke over Pepsi or GE over Samsung or Ford over Chevy?

In markets that aren't natural monopolies or where there are clear, agreed-upon metrics, how do we decide?

Yes, every brand has a story—that's how it goes from being a logo and a name to a brand. The story includes expectations and history and promises and social cues and emotions. The story makes us say we "love Google" or "love Harley"... but what do we really love?

We love ourselves.

We love the memory we have of how that brand made us feel once. We love that it reminds us of our mom, or growing up, or our first kiss. We support a charity or a soccer team or a perfume because it gives us a chance to love something about ourselves.

We can't easily explain this, even to ourselves. We can't easily acknowledge the narcissism and the nostalgia that drives so many of the apparently rational decisions we make every day. But that doesn't mean that they're not at work.

More than ever, we express ourselves with what we buy and how we use what we buy. Extensions of our personality, totems of our selves, reminders of who we are or would like to be.

Great marketers don't make stuff. They make meaning.