In this post we’re going to be looking at blog categories, why they matter, and how to use them most effectively as publisher.To be honest, I get asked about date, category, and tag archives fairly regularly. It creates a lot of potential for duplicate content, which is why so many people have things set up incorrectly and do more damage than good.
In my opinion as a publisher the most important pages on your website are the single page or single post. Any of the archive pages are secondary in value. Your most effective strategy is to conserve your link equity and have your category pages act as a pass through using the noindex, follow meta tags. That said, if you do have a significant amount of link equity, trust, and site authority, you can get your category pages to rank, as long as you are mindful of how you do it.
The number one mistake people make is putting full posts on the archive pages. This exposes search engines to the entire content on the single post page and category page. Google has to make a choice about which is the ordinal page. Now if you haven’t used the noindex, follow meta tag, you will have set your self up for a failure here. Because the category pages will have more internal links (ie link equity), search engines will often give them credit as the ordinal point. Your single post page will get a secondary indented listing or have no listing at all. If you’ve ever landed on an archive page with lots of full posts and been unable to find what you are looking for, you’ve seen this in action. Now this can still happen if you use snippets, but the words/phrases will have to be in the title or first few sentences. IMHO it’s such a small condition, the fix does more damage than the problem, and it’s not worth worrying about. Here’s a screen shot of it in action if you are curious [snergilitude]
What if you’ve got an old blog with several hundred posts? Do you have to go back and put in the “more” tag on all of those posts? You could–but there are better ways. If you use thesis (see thesis theme review), you can use a built in feature called teasers to make the magic happen for you. Not a thesis user? Shame on you. But there is a solution: go grab the teaser plugin. It will make all of your posts display snippet style.
The next issue is a WordPress issue. WordPress forces the word category into the URL string for category pages, so you have something like this:
example.com/category/key-word/
Sine you only have a few words to work with, why give up one, especially the first and most important one. So use the category no base plugin to remove it and end up with:
example.com/key-word/
A word of warning: depending on your permalink structure, it’s possible to end up with a post and category page trying to use the same URL, so be careful. As a side benefit, this plugin can make it a lot less apparent you are using WordPress, making it much more like a cms.
Last comes a bit of usability. When someone lands on your category page, you have the ability to show them some special content. If you are using Thesis, it gives you the ability to have a custom title, meta description, headline, and body copy for each category. In fact, here’s my blogs category page. There are ways to accomplish this with other theme’s, though with less elegance. I may have used an editorial shot but you could just as easily use a banner ad or an affiliate banner.
Blog Category Page - Click to Enlarge
The last point I want to address is whether category posts can rank for terms people use. While category posts may not rank for ultra-competitive terms, they can rank for lots of mid level and long tail terms. While I’m not big on pointing out commercial site’s ranking, I think this example is fairly safe. I recently switched to Mac and was looking for some tips, so tried [Mac 101] and got the category page from Tuaw.com
So what are the takeaways from this post:
If you are on a new blog or a blog with low trust, authority, and link equity, make the category pages crawling points, and block them with noindex, follow meta tags
Control duplicate content by using only snippets on your archive pages (both category and tag archive pages)
Remove superfluous keywords from your category pages URLs if possible
Use your category pages as a selling spot with customized content, introduction, banners, or affiliate offers.
SEO Power Suite is a series of tools I have been using for years. I have reviewed the individual products such as SEO SpyGlass and Rank Tracker. They are now offering an exclusive 7 day trial of all the enterprise software. This is something that’s never been offered anywhere before on the web. The registration information below will work from November 8th 2010 through November 14th 2010. These are tools that I use on a regular basis and have paid for.
Rank Tracker Registered By: Wolf Howl Registration Key: RT-2aRMtgFc67YaaD66
Website Auditor Registered By: Wolf Howl Registration Key: WA-2aXr5CI1Fkgcv600
SEO SpyGlass Registered By: Wolf Howl Registration Key: SSG-2aQdD1Ci5Zk2Bge6
Rank Tracker is a program from the SEO Power Suite of tools and, obviously enough, is used to track the ranks of one or more keywords and phrases for multiple websites.
I’ll get the two obvious questions out of the way first. This is a piece of software I have been using for years and paid full price for. Since we’re being completely honest, I’m even using the enterprise level. The second question is, in an age of personalized and localized SERP’s, is there even a need to run and use ranking reports? IMHO the answer is yes.
You have to realize that it’s impossible to run a report that will tell exactly what position you are in at every place on the globe at any given time. Google simply doesn’t work like that any more. What you can do is get a good approximation of your rankings and monitor their movement over time. And IMHO that’s very important information to have.
Once installed (there are Windows and Mac versions) you put in the domain you want to check, then choose the keyword and engine. Depending on how many keywords and how many engines you choose, you’ll have the results in a few minutes.
Rank tracker startup screens
Here is the results tab:
The real value, of course, comes in looking at the results over time as in the sanitized shot below.
Rank Tracker Screen Shot
I find the progress graph down in the lower right corner particularly helpful.
Progress Graph
In addition to basic ranking info, it tracks movement up/down, visibility, KEI, and lot of other information. You can also set up the program to create reports. Here’s a Sample Report. If you use the enterprise version, you can completely customize the reports.
I’ve set up the program to run on a Mac-mini I’m using as a server. I’ve scheduled the reports to run once a week. IMHO having it run more than twice a week is looking for trouble. I can log in and view the reports using remote desktop from my laptop or on my iPad using LogMeInIgnition. There are also settings you can use to emulate human behavior. While this does slow the program down, it also keeps your IP from getting blocked or from hitting the captcha/malware warning.
Human Emulation Screens
If you’re looking for software to monitor and check rankings, Rank Tracker is software that I can recommend.I have paid for my version and have been using it for years without any problems.
Tammy Duckworth, Veterans Affairs Assistant Secretary for Public and Intergovernmental Affairs, answers your questions on the Administration's commitment to supporting our service members and their families. Submit your questions and watch live.
Photo of the Day
President Barack Obama and Prime Minister Manmohan Singh talk during the State Dinner at Rashtrapati Bhavan, the presidential palace, in New Dehli, India, Nov. 8, 2010. (Official White House Photo by Pete Souza)
Today's Schedule
All times are Eastern Standard Time. Western Indonesian Time is 12 hours ahead of Eastern Standard Time.
4:25 AM: The President and the First Lady arrive in Jakarta, Indonesia
5:05 AM: The President and the First Lady participate in arrival ceremony
5:25 AM: The President holds a bilateral meeting with President Yudhoyono
5:50 AM: The President holds an expanded bilateral meeting with President Yudhoyono
6:45 AM: The President and President Yudhoyono hold a joint press conference
8:00 AM: The Vice President hosts a breakfast meeting with Senator Chuck Hagel
8:35 AM: The President and the First Lady attend state dinner
11:45 AM: The Vice President holds a Middle Class Task Force event to announce a series of federal actions designed to lay the groundwork for a strong, self-sustaining home energy efficiency retrofit industry
2:15 PM: The Vice President meets with Earl Devaney, Chairman of the Recovery Accountability and Transparency Board
2:15 PM: Tuesday Talk with Tammy Duckworth
5:00 PM: The Vice President attends the White House Diwali reception
Here are some of the top stories from the White House blog.
Vote Now: The President's 2010 SAVE Award Finalists Last year, President Obama launched the first ever SAVE Award to get ideas from federal employees on the frontlines to make government work smarter for the American people and to make sure taxpayer dollars are spent wisely. Help us select this year’s winner.
Have a Question About the Economy and Job Growth? Ask us. November 8-14, Monster will take questions directly from job seekers about the Administration's economic recovery efforts. Submit a question now, and the White House will answer a sampling next week.
First, everyone has good ideas. Maybe not as fast or as often as others, but are you telling me that in your entire life, you've never had one good idea? Ever?
Second, and way more telling, what happens if I give you a good idea. Here. Take it. Now what? You have it, right?
Now you need to find a second reason for not making things happen. "I don't have enough time." "I can't get the resources." "I'm not sure, really sure, guaranteed, that this is a good idea." "My boss won't let me."
And so the lizard brain speaks up, and so the cycle continues, and so the Resistance wins.
There are more good ideas, right here, right now, for free, than ever before. More opportunities to connect and lead and make a difference and an impact and a living. Fewer guarantees, sure, but more ideas.
It's your choice about whether or not you do anything with them, but please don't tell me you don't have any good ideas.
Ben Bernanke and the Fed have great belief in academic models whether they make any real world practical sense or not.
Indeed, Bernanke's reliance on formulas instead of common sense is what told him there was no housing bubble, that unemployment would not get above 8.5%, and that Quantitative Easing in massive force would cause the unemployment rate to drop. He was wrong on all counts.
Nonetheless Bernanke is sticking to his models. With a hat tip to Zero Hedge, here is yet another article from the Fed (not Bernanke), that places great reliance on academic formulas. The article concludes structural unemployment is "likely to be transitory rather than permanent".
Labor demand has been growing in the United States, reflected in a modest increase in private payroll employment this year and a more substantial increase in private-sector job vacancies over the past 12 months. Despite these signs of improvement, the unemployment rate has declined only slightly. Some analysts have raised the specter of a fundamental mismatch between the supply of labor in terms of workers' skills and demand for labor in terms of employers' skill requirements. Such a mismatch between available workers and available jobs could increase the level of structural unemployment. To the extent that structural unemployment is actually rising, the phenomenon poses a dilemma for policymakers. It cannot be ameliorated through conventional monetary and fiscal policy. And it implies an increase in the lowest unemployment rate associated with stable inflation, often identified by the acronym NAIRU, which stands for the non-accelerating inflation rate of unemployment.
The Beveridge curve and mismatch
Policymakers and analysts who have posited a rise in structural unemployment have largely focused on the Beveridge curve, a representation of the relationship between the unemployment and job vacancy rates. The Beveridge curve is displayed in Figure 1 for the period since December 2000 when consistent data on vacancies became available from the Bureau of Labor Statistics (BLS) Job Openings and Labor Turnover Survey (JOLTS). The blue dashed line represents an estimation of the empirical relationship between the unemployment and vacancy rates that accounts for the shape of the curve. The sample used for the estimation ends in June 2009, which corresponds to the end of the recession, according to the National Bureau of Economic Research's Business Cycle Dating Committee. ...
Figure 2 displays the long-term Beveridge curve, relying on a vacancy series constructed using historical data available prior to the introduction of JOLTS (see Valletta 2005 for the methodology). The Beveridge curve shifted rightward about 4 percentage points between the 1960s and the early 1980s and then shifted back about 2.5 percentage points between 1984 and 1989. Based on available estimates, the variation in the NAIRU over these periods was much smaller than the horizontal movement in the Beveridge curve (for example, see Table 1 in Orphanides and Williams 2002).
Credible estimates of the NAIRU over these earlier periods suggest that it may have changed about half as much as the Beveridge curve. This implies that any increase in the NAIRU associated with recent movements of the curve is limited to about 1.25 percentage points, based on the average 2.5 percentage point Beveridge curve shift from January to August 2010.
.... Conclusion
We examined evidence in favor of the view that structural unemployment and the NAIRU have increased during and after the recent recession. Based on historical patterns, the recent shift in the relationship between unemployment and vacancies reflected in the Beveridge curve is consistent with an increase in the NAIRU of about 1¼ percentage points or less. The impact of extended unemployment insurance benefits likely explains about 0.4 to 0.8 percentage point of this increase. The remainder is probably associated with the bursting of the residential real estate bubble and the need for many unemployed construction workers to find work in other sectors. The effects of both of these factors are likely to be transitory rather than permanent.
If You Understood That Congratulations!
If you know what Beveridge Curves are and you understood the article, congratulations, you are an academic wonk. More importantly, If you believe there is any merit in the conclusion, you are a fool.
With unemployment stuck at 10% for about a year now, and with the real unemployment rate probably well over 20% if one removes all the BLS gimmicks, by now it is rather clear even to 2 year olds, that the New Abnormal is one where unemployment of 5% is merely a pipe dream, and that the Fed's attempt to revert to an abnormal mean, and blow the biggest bubble ever in the process, will do nothing to fix what is now a new structural baseline unemployment level. And yet, just to prove that the Fed will take taxpayer money and spend it on the most Captain Obvious topics ever, has just released a paper titled "Is Structural Unemployment on the Rise?" Adding insult to monetary injury, paper authors Rob Valetta and Katherine Kuang conclude that not only are worries about a "new normal" misplaced, but that jobs will promptly revert back to old levels. Sure, why not - as we showed previously, it will only take the creation of over 230,000 jobs a month for about 6 years straight to get back to the old unemployment level.
Zero Hedge is correct, but let's investigate why that is so.
Conditions Have Changed
Common sense suggests that if you are going to model data and make predictions based on previous events, current conditions need to be the same.
Every one of those curves represents a typical economic slowdown, not a consumer-led credit and housing implosion the likes of which has not been seen since the great depression. Thus, the San Francisco Fed's conclusion is as likely to be correct as concluding a robust housing rebound is likely to start any time based on analysis of housing charts from prior recessions.
Well a housing rebound is not likely, and if it's not, neither is a hiring spree, nor a rebound in commercial real estate nor any other meaningful increase in jobs.
In short, the study is invalid because conditions have changed. No one has modeled a credit crunch or a housing bust because we have not seen one since the Great Depression.
Structurally High Unemployment For A Decade
I am not an economist, nor do I place any current relevance in prior Beveridge curves, nor do I think it makes sense to model this recession compared to any other recent recession.
"It takes GDP growth of about 2.5 percent to keep the jobless rate constant. But the Fed expects growth of only about 1 percent in the last six months of the year. So that's not enough to bring down the unemployment rate."
Pray tell what happens if GDP can't exceed 2.5% for a couple of years? What about a decade (or on and off for a decade)?
If you have come to the conclusion that we are going to have structurally high unemployment for a decade, you have come to the right conclusion.
Let's start with a look at the Fed's 2012 forecast where the band is 6.1% to 7.6%.
Using Bernanke's estimate that it takes 100,000 jobs a month to keep up with birthrate and demographics, the economy will have to create 260,000 jobs every month in 2010, 2011, and 2012 to hit an unemployment rate of 6.17% by the end of 2012.
To get to 7.6% by the end of 2012, the economy would have to average 200,000 jobs a month for the next three years.
2000-2009 Perspective
At the height of the internet bubble with a nonsensical Y2K scare on top of that, the economy managed to gain 264,000 jobs a month.
At the height of the housing bubble in 2005, the economy added 212,000 jobs a month.
At the height of the commercial real estate bubble with massive store expansion, the economy added somewhere between 96,000 and 178,000 jobs per month depending on where you mark the peak.
Neither the housing boom, nor the commercial real estate boom is coming back. Nor is there going to be another internet revolution. If anything, outsourcing of internet jobs to Asia is likely to remain intense.
No Genuine Driver For Jobs.
The retail sector has massive overcapacity. We do not need more Home Depots, WalMarts, Lowes, Sears, Pizza Huts, Targets, Safeways, etc etc.
Commercial real estate is flooded with vacant offices and plagued by falling rents.
Housing inventory is enormous.
Boomers will be looking to downsize their lifestyles.
There is not going to be another internet boom.
It is well beyond absurd to expect the economy to average even 200,000 jobs a month, let alone 260,000 jobs a month when neither the housing boom nor the commercial real estate boom could manage those numbers over a sustained period.
In short, the Fed's unemployment projections must be for some other planet or for some other alternate universe somewhere because they do not reflect reality here.
Beveridge Curve Analysis vs. Common Sense
I did not need an analysis of Beveridge curves to trash the Fed's forecast. All I used was a bit of common sense.
You can certainly kiss 6.1% by the end of 2012 goodbye. It is highly likely you can kiss 7.6% by the end of 1012 goodbye as well.
Moreover, I do not think the top in unemployment rate is in. The only reason unemployment is not above 10% right now is the participation rate has been plunging like a rock (people have been dropping out of the workforce).
Heaven help us if the economy slows further, even if it does not technically double-dip.
The bottom line is simple: There is still no driver for jobs, there is little likelihood of a driver for jobs, and reliance on academic wonks for economic forecasts is fraught with error.
Common sense will triumph over academic formulas, 8 days a week.
After a decade of hype over what amounted to nothing more than a fraudulent taxpayer ripoff, Cap-and-Trade is about to turn into a pumpkin. Glen Beck did not even notice.
Global warming-inspired cap and trade has been one of the most stridently debated public policy controversies of the past 15 years. But it is dying a quiet death. In a little reported move, the Chicago Climate Exchange (CCX) announced on Oct. 21 that it will be ending carbon trading — the only purpose for which it was founded — this year.
Although the trading in carbon emissions credits was voluntary, the CCX was intended to be the hub of the mandatory carbon trading established by a cap-and-trade law, like the Waxman-Markey scheme passed by the House in June 2009.
At its founding in November 2000, it was estimated that the size of CCX's carbon trading market could reach $500 billion. That estimate ballooned over the years to $10 trillion.
The CCX was the brainchild of Northwestern University business professor Richard Sandor, who used $1.1 million in grants from the Chicago-based left-wing Joyce Foundation to launch the CCX. For his efforts, Time named Sandor as one of its Heroes of the Planet in 2002 and one of its Heroes of the Environment in 2007.
The CCX seemed to have a lock on success. Not only was a young Barack Obama a board member of the Joyce Foundation that funded the fledgling CCX, but over the years it attracted such big name climate investors as Goldman Sachs and Al Gore's Generation Investment Management.
But a funny thing happened on the way to the CCX's highly anticipated looting of taxpayers and consumers — cap-and-trade imploded following its high water mark of the House passage of the Waxman-Markey bill. With ongoing economic recession, Climategate, and the tea party movement, what once seemed like a certainty became anything but.
CCX's panicked original investors bailed out this spring, unloading the dog and its across-the-pond cousin, the European Climate Exchange (ECX), for $600 million to the New York Stock Exchange-traded Intercontinental Exchange (ICE) — an electronic futures and derivatives platform based in Atlanta and London. (Luckier than the CCX, the ECX continues to exist thanks to the mandatory carbon caps of the Kyoto Protocol.)
The ECX may soon follow the CCX into oblivion, however — the Kyoto Protocol expires in 2012. No new international treaty is anywhere in sight.
While we don't know how well Al Gore and Goldman Sachs fared on their investments in the CCX, we do know that there's no reason to cry for Sandor. He received $98.5 million for his 16.5% stake in CCX when it was sold. Not bad for a failure that somebody else financed.
Incredibly (but not surprisingly), although thousands of news articles have been published about CCX by the lamestream media over the years, a Nexis search conducted a week after CCX's announcement revealed no news articles published about its demise.
Outside of a report in Crain's Chicago Business and a soft-pedaled article in a small trade publication, the media has entirely ignored the demise of the only U.S. effort at carbon trading. Even Glenn Beck, who has dedicated quite a bit of Fox News airtime to exposing the CCX, has yet to mention the news. ...
With the demise of CCX carbon trading, only the still-pending Waxman-Markey bill is keeping cap and trade alive — technically, at least — in the U.S. According to JunkScience.com's Cap-and-Trade Death Clock, however, Waxman-Markey only has about 60 days of life left before it, too, turns into a pumpkin.
My favorite comment to the article is #9 from B Rubble who writes ...
OMG!!!!! How's Al doing? Is he okay? How will this impact his selfless work in saving the planet? More importantly, how will this impact his new digs in California, and his financial support of hotel masseuses willing to release his "second chakra"???? Will a loss of finances result in less settlement monies to Tipper? Will she have to settle on a crappier drum set to replace the ones she's no doubt beat the bejeesus out of during her last few years of wedded bliss to ManBearPig?
A sad coda to the public life of such a sparkling personality and inspirational speaker.
The death of Cap-and-Trade is one of the reasons I said (in advance) that the election mattered.
In response to Election Predictions - How Big the Blowout? I received a fair number of comments from cynics who say the "election just does not matter, that nothing will change".
Sadly, this defeatist attitude is part of the reason we are in this mess.
To be sure, we are not going to see a return to a gold standard as a result of this election. We are unlikely to rewrite healthcare until it blows sky high (but that may be sooner than anyone thinks). Nor will we eliminate the Fed. And unfortunately, we will not stop war mongering.
Those are certainly very important issues, but they are not the only issues. At stake is the crucial direction of the country in regards to critical issues that desperately need a different direction.
For example, Cap-and-Trade is dead. That is a good thing. Many of Obama's socialist policies are dead in the water as well. The following headline highlights one key issue of critical importance.
Labor Unions Fear Rollback of Rights if G.O.P. Wins
Krugman Whining a Sign of Change in the Right Direction
One way you know the election matters is by the amount of whining Paul Krugman does. That whining gets louder each day. He wants more big government and more spending.
It's not going to happen, thanks to this election.
It should be crystal clear this election is about bailouts and fiscal spending. Conservatives have had enough. Sure there will be waste. However, there will be far less waste with the incoming Congress than the outgoing one.
Unfortunately, the one thing this election will not do is create jobs overnight. Yet in Congress, and in numerous state and local elections across the country we are slowly taking a step in the right direction when it comes to fiscal madness.
It's a start, but an important start.
If more cynics would stop bitching and moaning that nothing will change and start actively helping those like Jack Dean and Steve Greenhut to spread the word, while backing candidates like Chris Christie wherever they are, we would be even further along with this effort.
So yes, this election does matter. Don't let anyone tell you otherwise.
Barring a late stage appearance by Al Gore's fairy-godmother, cap-and-trade is dead. That is a good thing.
When James Renfro had to stop making payments on his two-story fixer-upper in Parma, Ohio, a suburb of Cleveland, he triggered events that were supposed to result in the forced sale of his home.
That Nov. 15 auction has been canceled because of defects in documents submitted by his loan servicer, Ally Financial Inc.'s GMAC Mortgage unit. Two affidavits about Renfro's home were signed by Jeffrey Stephan, a GMAC employee who said in sworn depositions in Florida and Maine that he hadn't read thousands of affidavits he'd signed.
Renfro's case has created a showdown between GMAC and Ohio's Attorney General Richard Cordray. Cordray has asked Cuyahoga County Court of Common Pleas Judge Nancy Russo not to let GMAC simply submit new documents to cure defects without consequences. He's taken the same stand against Wells Fargo & Co., which has said it found defects in 55,000 foreclosures.
"This is just the first," said Cordray, who filed an amicus, or friend-of-the-court, brief in the Renfro case. He argued that Russo should punish GMAC, the fourth-largest U.S. mortgage lender, for its conduct.
"Restoring Equity" vs. Penalization
I am not a lawyer. Indeed I would have a damn hard time being either a defense lawyer or a prosecutor. The former has a duty to get his client off even if he knows full well his client is guilty. The latter pursues cases known to be weak, perhaps even trumped up for political reasons.
I would not want to be in either situation. I could not send an innocent man to jail, nor could I defend a client who privately admitted to rape or some other crime yet insisted on a plea of "not guilty". My sense of fairness would not allow it.
In this case, a lawyer wants to punish GMAC. I happen to agree with that. Fraud must be punished. Nothing would please me more than to see a bunch of crooks go to jail.
However, we must also deal with the issue of "Restoring Equity".
Definition of "Equity"
By "restoring equity", I do not mean equity in the sense "4. the monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc."
I mean equity as in "3.c an equitable right or claim".
In regards to 3.c, there is no dispute that people have stopped paying on their mortgages for months or years. The equitable thing is for those home owners to lose their homes. The idea that homeowners deserve "equity" (principal) writedowns over robo-signing is potty.
Notice I said "deserve". I have no idea what a court of law might allow. A court of law is not interested in "equity" (fairness), it is only interested in the rule (interpretation) of the law.
What's Equitable?
To restore equity in both senses of the word, the ideal solution is to prosecute fraudulent behavior to the full extent of the law, and to otherwise speed up foreclosures, with new laws if necessary.
There is nothing "equitable" in forcing lenders to give homeowners a break over robo-fraud.
In short, this is what needs to be done:
1. Send the fraudsters to jail 2. Speed up the foreclosure process in cases of default, with new laws if necessary.
Anything else is a travesty of justice.
What to Expect
Expect a travesty of justice in regards to sending fraudsters to jail. Also expect a travesty of justice whereby some judges give breaks to homeowners who successfully game the system over a perverse sense of "justice".
I'm a long time reader of your blog - congratulations on doing such a good work for so long!
I've just read your recent post on international reactions to QE2 and the threat of worldwide capital controls. I have something to add here from my country.
In Poland, there has been a bubble in real estate since 2006-2007 that never really popped. Condo prices in downtown Warsaw (capital of Poland) are comparable to prices in Berlin and Vienna, and of course incomes and standard of living are way way lower.
Real estate prices have fallen 10-15% from the peak alright, but incidentally our currency has recently strengthened, so the net result from the international perspective is nearly zero. Real estate prices has been fueled, as is typical for the whole region of central-eastern Europe and Baltic States, by cheap capital denominated in CHF (Swiss Francs) and EUR (earlier in the decade USD), coordinated mainly by Austrian and Italian banks and originating in Switzerland and ECB.
With this situation, there is a growing pressure, at least a year running, from our central bank and partly from the finance ministry to curb the inflow of cheap money and seemingly - although it is never openly admitted - to try and prick the real estate bubble, the bubble that has indeed reached a ridiculous size and is pushing more and more families into debt servitude.
There has been a series of banking regulations ("recommendations") issued by Komisja Nadzoru Finansowego (Commision of Financial Supervision) that targets inflows of cheap money. The curbing is effected mainly by reining in the mortgage market, that has been - again, as is typical for the whole region - the main venue of external capital inflow. Recently there have been two important regulations issued on that matter. Recommendation SII(effective January 2011) mandates that banks should have no more than 50% mortgage portfolios denominated in foreign currencies and effectively mandates (at least for the not very wealthy customers) that mortgages be issued for no more than 25 years. Recommendation T (effective September 2010) mandates that LTV for forex mortgages should never exceed 80% and that banks must consider harsh changes in the interbank market rates when qualifying customers for such loans.
It has been also recently discussed that possibly somewhere in 2011 a regulation will be passed that completely cuts people off from foreign currency mortgages unless they actually have assets (other than real estate itself) that can balance the Forex risk or Forex earnings.
Such regulation would effectively almost totally cut off cheap external mortgage financing.
There has also recently been a change in language of Polish banking regulators. It is now quite openly said that the practice of selling very long term, adjustable rate mortgages denominated in foreign currency should be literally "brutally and completely curbed" (words of the chairman of NBP, our central bank).
This is a process that is slowly but regularly unfolding and will surely take some more time; cheap EUR mortgages are still widely available and will be at least until the end of 2010. But it seems that the process of curbing capital inflows is gaining pace rapidly in Poland and it should bear very concrete fruits in 2011 and 2012, especially taking into account recent acceleration in Fed lunacy that could (and I expect it will) spur counter reactions in my country analogous to what is happening in Korea or Brazil. There are no reactions as of yet, but I expect them soon.
It should perhaps be added that Polish banking regulator bodies and central bank are quite independent from the government and it seems that this independence is factual, not merely statutory; there have been many episodes in the last decade that NBP was in harsh conflict with the govt.
greets,
Robert
Poland Stats: 62% of Mortgages, 23.9% of Corporate Loans made in Foreign Currencies
In a followup question I asked Robert what percentage of mortgages in Poland were in foreign currencies. Here is Robert's response ...
Hello Mish
This is straight from the central bank's data: 158203.4 M PLN foreign currency (56.64 billion USD, 62.03% total), 96837.7 M PLN domestic currency (34.67 billion USD, 37.97% total). All USD values calculated according to current Forex ask rate.
That was household mortgages. On the other hand, statistics of corporate credit show the exactly opposite behavior: 157110.5 M PLN domestic currency (56.25 billion USD, 76.1% total), 49335.7 M PLN foreign currency (17.66 billion USD, 23.9% total).
Forex corporate credit is quite steadily declining (in nominal terms) since february 2009, as well as domestic currency corporate credit. What is perhaps more alarming (especially that real estate prices are slowly but steadily declining) is that household mortgage credit is relentlessly growing as if no financial crisis occurred at all and the good times roll; domestic currency mortgages are up 29.3% nominally yoy, foreign currency mortgages up 12.3%.
The recent deceleration in growth of Forex household mortgages and acceleration in domestic currency mortgages is attributable entirely to a special government financial program ("Rodzina na Swoim", "Family on its own") that lets you get a domestic currency mortgage with extra payment from government that amounts to 0.25-0.5 of interest paid, so effectively the interest on such mortgages for the final customer is 0.5-0.75 of "normal" market rate; that might finally amount to 2.7-4% - such rates are comparable to what one can get for forex mortgages (in spite of rates in Poland being in theory a healthy 2.5-3.5 percentage points above Switzerland, ECB or USA), so it is understandable that there is a lot of demand for domestic currency mortgages currently.
What should be stressed is that this special payment program is phased out in 2011 (our government has recently a very hard time explaining to the public opinion and independent economists why the deficit and debt grows so quickly; there are indeed many austerity pressures); as of January 2011 it will be offered only to people buying new development real estate and some time in 2011 H2 (don't remember exactly when) the program expires entirely.
It is widely and correctly expected that if this happens and the supply of foreign currency credit is not curbed, people will again widely take on mainly EUR, and to a lesser amount CHF and USD denominated mortgages. This scenario is apparently explicitly targeted by the banking regulators, as I wrote in the earlier mail.
It should be added that nearly all mortgages in Poland are ARMs with interest invariably calculated as WIBOR (polish interbank market rate)+margin or LIBOR/EURIBOR+margin. The margin typically is, depending on LTV and customer's creditworthiness (which actually IS checked quite thoroughly), 1.1-2 percentage points for PLN and EUR mortgages and 2-3.5 percentage points for CHF and USD mortgages.
3-month WIBOR (interbank rate for PLN deposits) is currently at 3.85%, the yield curve is normal and not very steep (both for interbank rates and govt bonds). Polish central bank, as most central banks do currently, targets short term rates which is understandable from their viewpoint as it allows almost full control over both commercial credit and mortgage rates - as I said earlier, almost all mortgages are ARMs indexed to short-term interbank rates. Interest rate swaps for foreign currencies are nearly unavailable to "mere mortals" in Poland and domestic currency IRSes are simply non-existent (no demand I guess, everyone is happy with plain ARMs).
Wow, I just described like a half of Polish financial market. Cheers,
Robert
Thanks Robert! I always appreciate emails like yours so readers in the US can find out what is really happening in Europe.
Mortgages denominated in foreign currencies are a disaster waiting to happen, not only for the debtors but to the banks that made the loans.
With Republicans taking control of the House, Ron Paul becomes the senior member on the Domestic Monetary Policy Subcommittee of the House Financial Services Committee.
"I will approach that committee like no one has ever approached it because we're living in times like no one has ever seen," Paul said in an interview with NetNet Thursday.
Paul said his first priority will be to open up the books of the Federal Reserve to the American people. "We need to create transparency there. To see what it is they are buying and lending, and who it is they are dealing with," Paul said.
Paul mentioned that he hoped to use subcommittee hearings to educate the public about the causes of business cycles—which he believes are mainly attributable to monetary manipulation by central bankers.
Monetary reform is also on the agenda. Paul is a noted advocate of the gold standard.
"We will have to have monetary reform," Paul said. "I think those on the other side of this issue are already planning. They are going to try to replace a bad system with an equally bad system."
Rubio Supports Balanced Budget Amendment
Rand Paul and Marco Rubio, Tea Party backed candidates, both won and both back a balanced budget amendment.
RUBIO: "Growing our economy is essential. We need new jobs in America. New jobs means new prosperity. New prosperity, by the way, leads to more revenue for government. But what would they use this new revenue for?
"Well, I think that unless there are specific provisions in law preventing it from doing it, government, no matter who's in charge – Republicans or Democrats, will use it to grow government. That's why it's so important that spending constraints be put into law and, specifically in today's topic, in the Constitution.
"Here's the deal: history teaches us that no matter who's in charge of government – Republicans, Democrats, conservatives or liberals – eventually, they will use it to grow government. And if you allow them to, they will borrow money to do it. In essence, every government who's allowed to spend more money than they take in, will do so. They do it because they don't want to make difficult decisions.
"That's why we need a constitutionally balanced budget. That means an amendment to our Constitution that requires the government not to spend more money than it takes in. ....
Senator Jim DeMint on the Balanced Budget Amendment
WASHINGTON, DC – Today, U.S. Senators Jim DeMint (R-South Carolina), Lindsey Graham (R-South Carolina), Tom Coburn (R-Oklahoma), John McCain (R-Arizona) called on their colleagues to support a one-year earmark moratorium and a Balanced Budget Constitutional Amendment. The national debt is more than $12 trillion, the President's budget predicts a $1.6 trillion deficit this year, and the unfunded liability to pay for entitlements in the future exceeds $100 trillion.
According to the Congressional Research Service, last year's pork barrel spending included 11,320 earmarks totaling nearly $32 billion. Cosponsors of both measures include Senators DeMint, Graham, Coburn, McCain, George LeMieux (R-Florida), Richard Burr (R-North Carolina), Mike Crapo (R-Idaho), James Risch (R-Idaho), Saxby Chambliss (R-Georgia), John Cornyn (R-Texas), and John Ensign (R-Nevada). "Our nation is headed for a fiscal catastrophe and we must take bold action to keep the politicians in Washington from running us off the cliff," said Senator DeMint. "Americans want real action to reduce spending, not rhetoric and not gimmicks. They know earmarks are at the heart of the spending addiction in Congress and they cannot understand why we don't have to balance the budget, just like they have to. These two measures will force Congress to shut down the favor factory and begin the process of bold, long-term budget reform.
We hear a lot of talk about the need to be fiscally responsible these days, but very few actually do anything about it. We're giving our colleagues a chance to back up their rhetoric with action." "I believe, now more than ever, the only way Congress will ever really balance the budget is with a Constitutional amendment requiring us to do so," said Senator Graham. "South Carolina has a balanced budget amendment in our state constitution that serves us well. Requiring the state legislature and governor to make difficult spending decisions -- not pass the buck on to future generations -- is an important, but necessary responsibility. Now is the time for Congress to do likewise.
That list contains 11 senators who back a Balanced Budget Amendment. We can safely add Rand Paul, and Marco Rubio to the list.
Case for Compromise
Senator DeMint should capitalize on this opportunity and renew his effort for a balanced budget amendment.
The immediate problem however, is that earmarks are a drop in the bucket. Eliminating all of them will not put a dent in the deficit. To tackle the deficit we need to look at all spending including military and entitlements. We also need to eliminate entire departments such as the department of energy and education.
The US can no longer afford to be the world's policeman with troops in 140 countries. It is time for Republicans to admit that simple fact and do something about it.
My plea to Republicans is to compromise. Cut some military spending in return for cutting some entitlement spending.
To stimulate the economy we desperately need to get rid of public union collective bargaining and scrap Davis Bacon. Whatever the Democrats want in return for ending collective bargaining and Davis Bacon would be worth it, even some extra short-term stimulus.
I am calling on Senator DeMint and Rep. Ron Paul to introduce new measures to kill Davis Bacon and public union collective bargaining. The time is now.
With Republicans reclaiming a majority in the House of Representatives and eroding Democrats' hold on the Senate, Tea Party candidates who campaigned in part against the Fed get an opportunity to call Bernanke to task for taking part in the unpopular financial rescues that helped propel them to office.
"There's certainly going to be more hearings and more pressure," said Mark Calabria, a former Republican Senate Banking Committee aide who is now director of financial- regulation studies at the Cato Institute, a policy research group in Washington that favors free markets.
One new Fed opponent in Congress is Kentucky Senator-elect Rand Paul, who has criticized the Fed for imposing "the sneakiest tax of all -- inflation." He joins South Carolina's Jim DeMint, an advocate for Tea Party candidates who backed an unsuccessful bill to subject the Fed's monetary policy to congressional audits.
Bernanke argued that audits of monetary policy would compromise the independence of the central bank. A letter he sent to DeMint in May warned that audits would "seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation."
Ultimate Irony
Please note the irony in Bernanke's letter to Senator DeMint. Bernanke said audits would "seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation."
The ultimate irony is Bernanke had the gall to preach to Senator DeMint about rising inflation expectations when that is exactly what Bernanke is foolishly attempting to do.
We do not need to Audit the Fed, we need to Abolish the Fed.
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