Central Perk

marți, 1 noiembrie 2011

Infographic: 650%

Your Daily Snapshot for
Tuesday, November 1, 2011

Infographic: 650%

Yesterday, President Obama signed an Executive Order that will help prevent shortages that lead to prescription drug price gouging and will direct the FDA to investigate illegal price gouging.

Drug shortages drive vendors to charge outragous prices for drugs - one report found that price-gouging vendors mark up prices on drugs in short supply by 650 percent on average.

SEOptimise

30 SEO Myths That Are True or False Depending on Who You Ask

Posted: 31 Oct 2011 07:33 AM PDT

In recent months, a few non-SEO related and one search marketing publication gained significant attention with the good old technique of “SEO myths” posts.

A while ago I argued that I prefer to spread the correct SEO best practices than to repeat SEO myths, even when meaning to debunk them.

You know the brain does not always remember the “no”. It remembers the myths, so writing about them perpetuates them.

Well, the SEO myths posts written recently have been so successful that I had to rethink my approach of not mentioning what’s wrong.

When everybody talks about them anyway, I can do it as well without providing much more publicity. On the other hand, these posts weren’t really all factual. Some SEO myths aren’t myths. Some of the articles even contradict themselves. Other SEO myths are really myths but the explanation why is not really true. Finally, many misleading myths haven’t been mentioned at all while they wreak havoc on websites every day.

So, like it or not, I have to regurgitate the SEO myths mentioned in these posts from 2011:

The first ten SEO myths are taken from one or more lists mentioned above:

You can or can’t guarantee rankings – surprisingly you can, but not as you think. It’s a good old SEO payment model, payment dependent on results measured in rankings. It works like that – you get a guaranteed ranking or you don’t pay. You only pay for the rankings you achieve. Sadly there are strings attached to such a guarantee. Most SEO providers I know who offer such a payment model do it risk-free, for them, not you. They just plug you in to their network aka linkfarm, so you get lots of links from the sites the SEO company has amassed or built up. Then the day you decide to stop paying, the plug gets pulled and you lose all the links.
Google is (not) the only search engine – it depends on where you live. In many countries, no other search engine really matters. The UK, France or Germany are among these countries. This “myth” is still better than the “submit to 1000 search engines” one below.
You need (not) to submit your website to Google – do you really need to “submit to 1000 search engines”? Well, no. Do you need to submit your site to Google? Well, not really. Can you submit it to Google? Yes, in manifold ways. You can submit your site to Google Places, or your inventory to Google Shopping or you can use XML-Sitemaps to “submit” your whole site to Google. Does it make sense? For new sites, ecommerce sites and local sites respectively, it does. On the other hand, what many people probably mean by “submit” is to “push” your site into Google. This is the more apt description. You can do it by link building. Using an actual form and pressing submit is possible, but it makes no real sense.
You can or can’t cheat your way to the top – you can cheat search engines. Many black hat SEOs and spammers do. Why do you think you see all that crap on the Web? It’s because it works and makes money. Do I recommend it? Can you try it yourself? Heck, no. There are a few people out there who are much more tech-savyy, ruthless and money-hungry than I am. Some of these people work all day on perfect spam techniques. They use throwaway domains, hidden whois records and hacked computers for their purposes, to name just a few. Regular business people can buy a few links to get to the top but they may drop even lower than they started once discovered. People who did fail like that ask for my consulting all the time.
Keyword density matters or not – I was surprised to read on SEW that keyword density indeed matters. The other myths lists said it doesn’t. It mattered ten years ago, but for a few years now the more keywords you use the more likely you are to get flagged as spam. Of course it’s nonsense not to use your keywords, but more than a few times is keyword stuffing aka spam. So keyword density matters as a way to raise a red flag.
Your rankings do or don't matter – rankings do not matter as much as they did a few years ago and they are localised and personalised in such a way that you can’t really rely on them. On the other hand, it’s very useful to take a look at your Google Webmaster Tools ranking reports to know why your traffic for certain keywords rises or falls. Rankings still matter in that they bring more traffic than no rankings.
You can or can’t trade links to gain rank – this good old SEO technique makes me feel nostalgia. When I started out in SEO in 2004, quite late, many people had been doing SEO for years by then, and it was all about trading links, especially in Germany where I worked. Many people still trade links and to some extent it even might be beneficial. On the other hand it’s quite tedious and labour-intensive. I can bet that you can gain many more and better links by crafting such a nifty list as the one you read here.
Content is king or not – either everybody is spreading this mantra or people are vehemently denying it. That’s both wrong. The more important question is: why is content king and for whom? I’ve tried to trace the earliest mentions of this phrase and wrote a whole article on it. In short: many large business models depend on the notion that content is king. They need your work to earn money. You are the peasant on their fields. It’s not called content farming by accident. You can SEO sites without writing content all the time. Think about it. I’ve been ranking for years with a site containing just a few pages of content.
Meta tags do or do not matter – meta tags, especially the keyword and description tag, do not matter for rankings, unless you stuff them with keywords, which means you can then probably get banned. The description tag matters for your CTR (click through rate) in SERPs (search engine results pages). The more enticing, the more clicks in theory, but in practice sometimes it’s better to not add them at all and use the time on real SEO. Many clients ask for meta tags among the first things they want to do “for SEO”. That’s the wrong approach. It’s like asking for cosmetic surgery on a dying patient. In contrast, title tags really matter. Google often overrides your meta description by the way.
(Toolbar) PageRank is important or not – many webmasters to this day obsess about PageRank, the visible toolbar PageRank aka green bar. Do you think staring at this bar every day will help your SEO? I don’t think so. It’s like trying to raise the temperature by staring at the thermometer. I’d suggest some heating instead. Let’s extend this metaphor. Do you think all you need is internal PageRank to get to the top in Google? It’s like saying that all you need to survive is blood. You don’t need to drink, eat, sleep, love or take shelter when it’s cold.

The second group of ten SEO myths are quite common fallacies I’d like to see debunked (more often) but mostly haven’t been covered by the recent lists:

What Google or Matt Cutts says is the ultimate truth – they have to represent the Google agenda, obviously. They will only say what is in the interest of the corporation. As Google is no charity or NGO, their foremost goal is to make money – so they will tell you things that benefit their business even if they are not entirely true. In most cases they will just tell you what they want you to know and leave out the rest.
Google ads do not impact your organic rankings – while it’s not as simplistic as saying that Google can be bribed to rank you up in organic results, Google ads, especially on-page ones aka Adsense, can both have a positive or negative impact on your SEO performance. Too many Adsense ads can get you downranked. Also, the number and position of Google Adwords in the search results influence how far your organic results get pushed down. Last but not least there is conversion attribution, and thus we know that people who see your ads might already know your brand and thus be more likely to click or even +1 your organic results next time.
Google is your friend or enemy – many people identify so deeply with Google that they treat the mega-corporation like a person, a friend or enemy. It’s like loving or hating the road infrastructure. On the Web, Google is part of the infrastructure. It’s huge and impersonal even if there are some familiar faces. I’m known to be critical of Google but nonetheless I use many Google services. Isn’t that hypocritical then? Well, I don’t love or hate roads either but I know when not to cross them and that you have to look out. It’s the same with Google.
The most important page for a query is on top – most normal people to this day have no clue how Google determines the ranking of search results. Even SEOs do guesswork. Most average users assume though that the most important or “best” search result is number one or on top. That’s simply not true. #1 is reserved for the best optimised, most popular or the site with the biggest budget to buy links. Just consider Wikipedia, is it really the most relevant when you search for [films]? Of course not, you don’t want to know what a film is. You want to know what films are new or get recommended.
SEO is only about search, search engines or Google – many people who tend to pronounce SEO dead are doing it because they assume that SEO is about search, search engines or Google only, as the acronym suggests. So whenever Google changes something significant the voices appear again telling us that SEO is dead. SEO is about optimisation for traffic, conversions or ROI, so whatever route Web users take there will always be SEOs paving the way. Be it search, social media or whatever is next.
SEO is about manipulating search results – this is another ages old SEO myth that is still prevalent. I wonder why nobody attempts to debunk this misconception. Manipulation sounds not only negative, it also implies a harmful motivation, as if to trick people or search engines. There are SEO practitioners who believe it, but they are doing it wrong. Optimisation is not manipulation. It is, as said above, paving the way, improving both search results and the user experience. You have to grasp that to become successful as an SEO in the long run. Otherwise you will be always a step behind Google and its changes, like many of the Google Panda victims.
SEO is only good when there is already a demand for your product or service – part of it is true – when nobody knows that there is a product with a particular name they can’t search for it directly. They will search for something more descriptive though, for example [hair loss solution]. So you simply have to rank for a more generic phrase before people start searching for your product. There are lots of resources on SEO for startups by the way.
You have to hoard PageRank and thus can’t link out – the heyday of PageRank is long gone. Toolbar PageRank is largely meaningless, while internal PageRank is just one ranking signal among at least 200+, yet many webmasters assume that having PageRank and keeping it at all costs will help them rank well in Google. Such black hole sites don’t link out at all or only use nofollow on outgoing links. They are an anomaly that Google treats like a dead end. Google needs links for its algorithm, so when a site does not have any of them leading to other sites it’s an island. It has disadvantages beyond the simple ranking factors. Sites that don’t link out also get much fewer incoming links. It’s like people who never talk with others and when they do only perform a monologue. They are called loners. Google does not like loner sites.
Google is only about search – Google is not even solely an Internet company anymore. It has so many products and services in all kinds of areas and industries that you will soon have difficulty in finding something that Google does not yet do. Energy, space, cars and even agriculture is part of Google! In manifold ways SEO will adapt to it. Right now there are already specialists for numerous Google services and offerings. Local SEO, mobile SEO and ecommerce SEO are just the beginning.
SEO is dead or will die eventually – as mentioned above already, the notion that SEO is dead or will die eventually stems from the assumption that it’s a discipline depending on Google, search or search engines. Even if all three disappear, SEO will in one way or another still be there as long as people try to find things and don’t know everything.

The third batch are SEO myths that are often perceived as truths even within the SEO industry. I have discovered them to be not true though, even if many people might disagree.

SEO is only about money – while the ultimate goal of commercial SEO is to make people earn more money from their websites, SEO can be used for all kinds of endeavours, non-profit or activist sites among them. You can use SEO for the common good. For example, you can be an SEO for a holocaust memorial, which was work that I considered once. SEO is also about friendship. There are few industries, niches or even subcultures so closely knit as the SEO industry. Ultimately SEO is about giving, and the more you give away, the more links you get and the better you rank. Does your site consist only of sales copy? Well, that’s bad for SEO.
Ethical SEO is about not cheating search engines – for years the term ethical SEO has been used as an synonym for the industry-specific term “white hat SEO”. The only ethical thing about being white hat is that you don’t cheat search engines and clients. According to this definition, you can optimise a weapons manufacturer’s site and be perfectly ethical. In my opinion ethics in SEO is about much more than not cheating. It’s why, how and for whom you work and whether you exploit sweatshop employees in Asia to spam blog comments as well.
You can’t link out to competitors – nobody seems to really contest this widespread myth even though many SEO blogs actually link out within the SEO industry. Just check the heavily interlinked backlink profiles of many SEO publications including this one. Even if your link pushes your competitor, your site sends additional ranking signals to Google saying “this is a balanced resource”, whereas sites that only link their own properties get classified as “linking schemes”. Generally speaking I prefer to consider other people from the SEO industry as my colleagues. Sites that stand in the way, such as Wikipedia, or compete for clicks, such as Google itself, are sometimes better suited to compete with.
You have to hide your advanced techniques as a competitive advantage – one of the oldest SEO myths is that you have to hide your best techniques like a secret so that your competition doesn’t use them against you. That’s ridiculous. I doubt that there is a single SEO tactic nobody else knows about that only you have discovered and use. Most techniques are in use by many people at once, even when they are not yet widespread. If you think you are the first it’s best to proclaim it as quickly as possible so that everybody considers you an expert for having discovered it. Those who have been hiding it won’t get the publicity, links and respect.
Social media and blogging are not part of SEO – some people consider SEO to be artificially limited to some strictly search engine related measures. When they use social media or blogs they are convinced that these measures are separated from SEO. In reality social media, blogs and SEO are highly intertwined. Of course social media and blogs are more than just about SEO in the traditional sense, but more modern definitions of SEO and internet marketing recognise the fact that all three are part of a bigger process sometimes referred to as inbound marketing.
Google employees are not responsible for search results, the algorithm is – whenever an algorithm update hits the Web and website owners lose traffic and business to the point where some businesses go bankrupt, Google is quick to point out “it wasn’t us, it was the algorithm”. The algo is seemingly like the ghost in the machine. Once you start it, it develops a life of its own. Of course that’s just the official version to protect Google from class action suites. Both search engineers and human quality raters decide how the algo works, so it’s people who are responsible not robots.
Optimisation for Facebook is not SEO – this is a strange one. As Facebook is not a search engine by definition, many people don’t think that optimisation for Facebook can be referred to as SEO. Well, Facebook has a search engine and even an algorithm. So at the end of the day I don’t care whether it’s called a vegetable. As long as users use it to find things and visit websites I’m into it.
Search engines fight SEO – for many journalists who write about SEO, to this day every update Google performs is like a battle in the everlasting “war on SEO”. They like to ignore the fact that Google publishes SEO advice itself and that SEO practitioners actually do Google’s work of fulfilling their guidelines so that that search engine can index and rate website content correctly. Search engines depend on the SEO industry for fixing the mistakes they commit.
You have to write boring headlines for Google – another SEO myth spread by misguided journalists is that SEO or Google “kills the witty headline”. SEO and Google only kills the nonsensical headline. People on the Web don’t want puns, they want to understand what a post is about. You can add a pun anyway. You can have more than one headline or optimise the title tag for SEO while leaving the headline for hipsters.
SEO myths lists are great to spread awareness about SEO – as mentioned in the beginning, there is a widespread assumption that by spreading the myths somehow miraculously people will only remember the best practices. You just have to say meta tags and keyword density often enough for people to realise that they do not matter, right?

It’s not enough just to read about the myths.

You need to learn proper SEO and practice it yourself by testing, trial and error plus rinse and repeat. You have to find out what works yourself and employ the tactics that actually work for you, no matter whether some consider them myths or not. The more people you ask in the SEO industry, the more potentially different opinions you get.

Get 15% Off Conversion Conference London 2011

Posted: 31 Oct 2011 05:13 AM PDT

We’ve managed to get our readers a discount to this years Conversion Conference in London.

This is running across two days (30 November – 1 December) at The Business and Design Centre in London and has a great line-up of conversion optimisation speakers, it looks like it’s going to be a very interesting event!

To get a 15% discount off ticket prices, all you need to do is sign-up using the promo code: SEOPTIMISE011 – see you there!

luni, 31 octombrie 2011

Mish's Global Economic Trend Analysis

Australia Cuts Rate .25%, Core Inflation on Weakest Pace in 14 years; China PMI Lowest in 3 Years; Wen Pledges to "Firmly" Maintain Property Curbs
Merkel Sells Soul for Applause from the Devil
Papandreou Calls for Voter Referendum on EU Debt Deal
In 2009, Greek Debt-to-GDP was 127%; Target for 2020 is now 120%; Is this Progress?
Dear Christina: Reflections on Economic Fools and the Policies they Espouse
Europe to Recapitalize Banks Without Raising any Capital; Berlusconi Defiant as Focus Shifts to Italy; Sarkozy Under Fire for Seeking China’s Help

Australia Cuts Rate .25%, Core Inflation on Weakest Pace in 14 years; China PMI Lowest in 3 Years; Wen Pledges to "Firmly" Maintain Property Curbs

Posted: 31 Oct 2011 11:23 PM PDT

The Reserve Bank of Australia cut rates .25% as housing weakens and core inflation was a tame .3%, the lowest in 14 years.

I have been saying for quite some time the next move would be a cut, and here it is. I expect more, as do interest rates futures, but some others do not see it that way.

Please consider RBA rate cut sparks bank response

The Reserve Bank of Australia has cut interest rates for the first time in more than two and a half years, bringing relief to households and corporate borrowers.

The Australian central bank today lowered its key cash rate by 25 basis points to 4.5 per cent. The move reversed the increased imposed on Melbourne Cup Day last year, the most recent time the RBA has shifted rates.

More to come?

Some economists say the moderate language used in the RBA's accompanying commentary suggest today's move may be a one-off by the central bank for now.

"There are no hints in the statement that the RBA is considering further moves at this time," said HSBC chief economist Paul Bloxham. "In large part it seems to be characterised as a shift back to 'neutral' given that the inflation concerns that the RBA had previously seemed to have dissipated."

Financial turmoil

RBA Governor Glenn Stevens noted that recent sharp moves on financial markets were likely to drag on Australia's economy. "The effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households," he said in a statement accompanying today's decision.

"Over the past year, the Board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation. With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2-3 per cent inflation over time," he said.

Last week, core inflation data - the measure watched by the RBA - slowed to 0.3 per cent in the September quarter, the weakest pace in 14 years.

Financial markets were earlier today pricing in four cuts of today's size over the next 12 months, with three more now to come. That estimate remains little changed after the verdict.

Expect Australian Dollar to Weaken

The Australian dollar weakened from 1.10 to .94 in the "risk off" trade but soared back to 1.06 in October in the "risk on" trade. If Australian housing and retail sales weaken, and I expect both will, look for more cuts by the RBA, sooner, rather than later. In turn, rate cuts will put downward pressure on the Australian dollar.

China PMI Drops to Lowest in Almost 3 Years

Bloomberg reports China PMI Drops to Lowest in Almost 3 Years

A Chinese manufacturing index dropped to the lowest level since February 2009, bolstering the case for fiscal or monetary loosening to support the expansion of the world's second-biggest economy.

The Purchasing Managers' Index fell to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement today. That was lower than any of 16 economist estimates in a Bloomberg News survey that had a median forecast of 51.8. A reading above 50 indicates expansion.

An index of export orders contracted for the second time in three months as Europe's failure to resolve its debt crisis dims the outlook for shipments to China's biggest market.

Weakening PMI Suggests Weakening Commodity Prices

Exports are down because of the slowdown in both Europe and the US. Europe is clearly in recession, the US headed towards recession. Moreover, the Chinese slowdown suggests more weakness to come in commodity prices which should be good for the US dollar.

Chinese PM Pledges to 'Firmly' Maintain Curbs

Bloomberg reports China's Property Stocks Decline as Wen Pledges to 'Firmly' Maintain Curbs

China property stocks fell for the first time in six days in Shanghai trading after Premier Wen Jiabao doused speculation the government will ease curbs on the industry.

The government will "firmly" maintain restrictions on real estate and local authorities should continue to strictly implement its policies, Wen said according to a statement following a State Council meeting.

Treadmill to Hell

China is on "a bigger and faster treadmill" than ever as property sales slow, Jim Chanos, president and founder of $6 billion hedge fund Kynikos Associates Ltd., said in a Bloomberg Television interview from Singapore on Oct. 28.

Chanos has forecast since at least February 2010 that the property market will slump, saying that China is Dubai times a thousand and on a "treadmill to hell" because of its reliance on real estate. Property transactions in the past two months in so-called tier one, two and three cities his firm tracks are down 40 percent to 60 percent year on year, said Chanos, who predicts "the property slowdown or worse has started."

The hedge-fund manager's views are at odds with those of Stephen Roach, non-executive chairman of Morgan Stanley Asia, who said in New York last week that the government has had some success in deflating a housing bubble and that concerns of a hard landing are "overblown."

Expect Property Bubble Implosion

I will side with Chanos over Roach. China's property bubble is the largest in the world and it will crash hard. Once again, the bursting of the Chinese property bubble as well as the credit bubble suggests more weakness to come in commodity prices.

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

Merkel Sells Soul for Applause from the Devil

Posted: 31 Oct 2011 06:58 PM PDT

German Chancellor Angela Merkel Merkel went out of her way to prove she is just like the vast majority of vote-buying hypocrite politicians willing to say or do anything to advance personal agendas and get reelected.

Those looking for proof can find it in Der Spiegel article Another U-Turn For Merkel.

Chancellor Angela Merkel has performed another big U-turn by calling for a minimum wage, which she had opposed until now. She is sharpening her party's social profile in response to the euro crisis -- and, possibly, to secure her power by preparing another 'grand coalition' with the Social Democrats.

Angela Merkel has a reputation for playing the long game. But the German chancellor is no stranger to U-turns either, if it serves her political goals. There are some striking examples of Merkel vacating positions that had long been core to the agenda of her conservative Christian Democratic Union (CDU) party.

Mandatory military service, that bedrock of CDU policy for decades? Merkel ditched it last year. Nuclear power? She arranged for an early exit just months after extending the lifetimes of reactors. The three-tiered system of secondary schools? A thing of the past.

And now it's the turn of social policy. At its party congress in November, the CDU plans to pass a motion that has long been the exclusive domain of the left-wing opposition parties: a minimum wage.

The new approach fits in with Merkel's drive to sharpen the CDU's social profile in response to the euro crisis , which has triggered a wave of public anger at the financial industry and concern that ordinary taxpayers are being made to foot the bill for profligate high-debt euro member states.

Together with Labor Minister Ursula von der Leyen, and much to the annoyance of the center-left Social Democrats, Merkel has been wooing voters with decidedly leftist policies of late. Von der Leyen plans to give pensioners a financial boost to combat old-age poverty, she has taken on discount supermarkets that exploit temporary staff and has criticized German companies for resisting her plans for a minimum quota of women on company boards.

"The question is no longer whether we're going to have a minimum wage but how one negotiates the right level," von der Leyen said in a recent interview with the Süddeutsche Zeitung newspaper published on Monday. It sounded like she had been taking lessons from SPD leader Sigmar Gabriel.

Applause From Trade Unions

The trade unions are predictably elated by Merkel's leftward shift. A general minimum wage had been expressly ruled out in the coalition agreement reached between her conservatives and their junior partner, the pro-business Free Democratic Party (FDP), after the 2009 election.

Reflections on Integrity and Core Principles

So much for agreements, integrity, and core principles. Things change of course, but core principles shouldn't, at least not on a routine basis.

With this latest U-turn, Merkel just made it perfectly clear she has no core principles, that everything is for sale, including her soul and her integrity.

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

Papandreou Calls for Voter Referendum on EU Debt Deal

Posted: 31 Oct 2011 01:35 PM PDT

In an extremely risky move, Papandreou calls for referendum on EU debt deal

Prime Minister George Papandreou has stated his intention to hold a referendum on last week's agreement in Brussels for Greece's bondholders to accept a 50 percent haircut and the country to receive some 130 billion euros in loans from its eurozone partners.

Speaking to PASOK MPs, Papandreou also said that he would ask for a vote of confidence in Parliament. This is likely to take place next week. The referendum could happen later this year.

Papandreou said he had faith in Greeks making the right decision. "Let us allow the people to have the last word, let them decide on the country's fate," he said. He said handing the vote over to Greeks was «an act of patriotism."

The premier insisted that calling snap polls - ahead of elections scheduled for 2013 - would be "simply dodging the issue."

The vote of confidence - likely to be held next week - would come just over four months after a similar vote that Papandreou sought, and won, to bolster his government ahead of a Parliamentary vote on austerity measures.

The premier's bombshell came a day after an opinion poll, carried out by To Vima, found that 60 percent of Greeks regard last Thursday's EU debt deal as «negative» or «probably negative."

Things will become unglued in a hurry if Greek voters decide to tell the EU where to go. Moreover, but less importantly, Papandreou just may not survive the next vote of confidence.

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

In 2009, Greek Debt-to-GDP was 127%; Target for 2020 is now 120%; Is this Progress?

Posted: 31 Oct 2011 12:50 PM PDT

Depending on your point of view, your holding of Greek debt, and whether or not you live in Greece, here is a humorous (or not so humorous) Google Translation on the Past and Future of Greece.

Based on official data from the Eurostat in 2009, when was the last census that pushed the deficit above 15%, Greece's debt was 127% of GDP. Today, the Government is making earnest efforts to pull Greece out of the crisis according to statements of Chancellor Angela Merkel, mortgaging much to get the debt-to-GDP ratio to 120% by 2020.

And the obvious question that arises for all is, what is so much effort for a decade? To get to where we were in 2009?

The numbers and figures, unfortunately, speak for themselves.

Eurostat census estimates real unemployment will reach 20% by the summer of 2012, Greece will close 183,000 companies, increase cuts in wages and pensions, and over-tax all its citizens just to get 2020 debt to 2009 levels.

All Pain and No Gain

The author, George Kouros perfectly describes the ramifications of stretching out debt for a decade in pretense that a 50% "voluntary" haircut on bonds will solve anything.

Greece surely does need structural reforms, but the average Greek on the street sees all pain and no gain.

A hard default and debt forgiveness of 80% by the EU would show Greek citizens they were at least getting something in return for forced (but badly needed) structural reforms and austerity measures.

Instead, the average Greek understands everything is being done to protect German and French banks, and anything that helps Greece is nothing but a fortuitous accident.

Moreover, by fooling itself, the EU hurts itself. The longer the EU pretends haircuts are voluntary, that Greece can pay back these loans, and that Greece can be competitive with Germany, and there will be no hard default, the worse the crisis will become.

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

Dear Christina: Reflections on Economic Fools and the Policies they Espouse

Posted: 31 Oct 2011 09:10 AM PDT

The New York Times headline reads Dear Ben: It's Time for Your Volcker Moment.

I expected the article to be about inflation. It starts out as such, praising Volcker for his commitment to lower inflation. A third of the way through came an innocuous looking sentence "Mr. Bernanke needs to steal a page from the Volcker playbook."

From there it went straight downhill.

Here are a few snips ...

To forcefully tackle the unemployment problem, he needs to set a new policy framework — in this case, to begin targeting the path of nominal gross domestic product.

More specifically, normal output growth for our economy is about 2 1/2 percent a year, and the Fed believes that 2 percent inflation is appropriate. So a reasonable target for nominal G.D.P. growth is around 4 1/2 percent.

It would work like this: The Fed would start from some normal year — like 2007 — and say that nominal G.D.P. should have grown at 4 1/2 percent annually since then, and should keep growing at that pace. Because of the recession and the unusually low inflation in 2009 and 2010, nominal G.D.P. today is about 10 percent below that path. Adopting nominal G.D.P. targeting commits the Fed to eliminating this gap.

Who is this Monetarist Fool?

At that point I stopped reading and asked "who is this monetarist fool?" I went to the bottom of the article to find out it was none other than Christina D. Romer, an economics professor at the University of California, and former chairwoman of President Obama's Council of Economic Advisers.

Dear Christina ...

In case you have not noticed, interest rates are zero percent. The Fed cannot lower them any further. The Fed can of course print, but in case you did not notice again, the Fed already tried that and all it did was increase the price of food, gasoline, gold, and the stock market.

Moreover, and in case you did not notice, here is a chart of excess reserves sitting at the Fed.

You see Christina, there is 1.6 trillion dollars parked at the Fed already. Printing money in and of itself does nothing if it just sits there.

Moreover, and in case you did not notice, Japan over a 20 year period tried both quantitative easing and Keynesian stimulus (fiscal spending), and that did not stop Japan's deflation. All Japan did was dig itself a 200% debt-to-GDP hole that will at some point destroy the country.

Bernanke, a Complete Dunce, "Puzzled by Weak Consumer Spending"

On September 8, 2011 Bernanke said he was "surprised by how cautious consumers remain more than two years since the recession officially ended."

I responded with Bernanke, a Complete Dunce, "Puzzled by Weak Consumer Spending"

It does not take a genius to understand why consumer spending is weak.

Unemployment rate is 9%
Real wages are falling
Income advances go to the wealthy
Middle class is shrinking
Jobs hard to find
Approval ratings of Congress and Obama at record lows
Consumers have high debt ratios
Home prices are still falling
Homeowners are trapped in their homes, unable to refinance
Boomers need to save for retirement

However, those simple facts are far too complicated for a PhD like Fed chairman Ben Bernanke to figure out.

Is it any wonder his policies are so counterproductive when he cannot figure out simple things the average person can see clearly?

Change of Heart in Bernanke?

Christina, in case you did not notice, here are a few sentences by Chairman Ben S. Bernanke, Before the Joint Economic Committee, U.S. Congress, Washington, D.C., on October 4, 2011, regarding Economic Outlook and Recent Monetary Policy Actions
...

Fiscal policymakers face a complex situation. I would submit that, in setting tax and spending policies for now and the future, policymakers should consider at least four key objectives. One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. ...

As a nation, we need to think carefully about how federal spending priorities and the design of the tax code affect the productivity and vitality of our economy in the longer term. Fourth, there is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy. In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed.

Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy. Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector. Fiscal policy is of critical importance, as I have noted today, but a wide range of other policies--pertaining to labor markets, housing, trade, taxation, and regulation, for example--also have important roles to play.

Dear Christina, please read those three paragraphs closely.

What is it you fail to understand about all three of them, but especially the last one?

Bernanke, like yourself is a dyed-in-the-wool monetarist, who hopefully (and at long last) may realize that monetary policy is next to useless at this juncture.

Hello Ben Bernanke, Meet "Stephanie"

Dear Christina, I also invite you to read Hello Ben Bernanke, Meet "Stephanie".

The article is about an email from "Stephanie" who wrote about the difficulty of living on fixed income with rising prices and getting 0% on CDs.

I responded that "Bernanke is a Coward Hiding Behind Mathematical Formulas", that he did not know what he was doing in 2006 and he does not know now. Here is one key snip ...

Fed's Policy Is Theft

Stephanie, it's a little known fact that inflation benefits those with first access to money, such as the banks, the wealthy (via rising asset prices), and the government (think rising sales taxes and property taxes when prices go up).

Everyone else gets screwed. You are right in the middle of the pack of those most hurt by the serial bubble blowing policies of the Fed.

Viewed this way, Bernanke's policies are nothing but theft, robbing the poor, for the benefit of banks and the wealthy.

This is why I support Congressman Ron Paul's effort to end the Fed.

Currency Cranks Agree With Themselves

Christina, I read your reference to The Case for a Nominal GDP Level Target by fellow monetarists Jan Hatzius Sven and Jari Stehn, as well as your reference to Nominal Income Targeting by Robert E. Hall and N. Gregory Mankiw, also monetarists.

The opening paragraph of the latter is quite humorous:

There is increasing agreement among economists on two broad principles of monetary policy. The first principle is that monetary policy should aim to stabilize some nominal quantity. Monetarists have sought to make monetary policy stabilize the growth of the nominal money stock. In some periods of history, policy has been committed to pegging the nominal price of gold. Some economists have proposed stabilizing a bundle of commodity prices or even the consumer price index (CPI).

The second principle, which was taken for granted up until the past fifty years, is the desirability of a credible commitment to a fixed rule for monetary policy. It is now apparent that there are substantial gains if the central bank commits in advance to a set policy, rather than leaving itself free to exercise unconstrained discretion.

Ants and Termites in Increasing Agreement

As with currency cranks agreeing with themselves, there is increasing agreement by ants and termites that anteaters should go vegetarian.

In short, put a bunch of monetarist currency cranks in a room, and the one thing they are sure to propose in an economic decline is currency expansion.

Is it Different this Time?

Dear Christina, in light of the facts I presented above in regards to the experiences of Japan, the excess reserves at the Fed, the increase in inflation with no increase in jobs, and the number of people on fixed income destroyed by the rise in price level while getting 0% on their CDs, you have a hell of a lot more explaining why "It's different this Time".

The ultimate irony of your preposterous proposal, is there is a chance (albeit a small one), that Bernanke's realization that there are limits to monetary policy constitutes his Volcker moment.

For the sake of the country, we should all hope so because history shows that additional monetary and fiscal stimulus will not help, no matter how many Monetarist currency cranks and Keynesian clowns think otherwise.

By the way, anyone wondering why the recovery went nowhere and will go nowhere need only look at who was advising president Obama and who has his ear now (Christina Romer and Tim Geithner, respectively).

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

Europe to Recapitalize Banks Without Raising any Capital; Berlusconi Defiant as Focus Shifts to Italy; Sarkozy Under Fire for Seeking China’s Help

Posted: 31 Oct 2011 12:05 AM PDT

Italy's Prime Minister Silvio Berlusconi denies entering an agreement for early elections and arrogantly insists he is the only one who can possibly save Italy from itself.

Berlusconi ruled out early elections and said the current legislature in Rome will last until 2013, according to an interview published yesterday in Corriere della Sera.

"Only I and my government can achieve this reform program for 18 months, which is why there is no way for me to stand aside," the Italian leader told the newspaper.

Sarkozy Under Fire for Seeking China's Help

Please consider Sarkozy Criticized for Seeking China's Help

French President Nicolas Sarkozy came under fire from opposition leaders for seeking China's help to resolve the euro area's debt crisis.

"It's shocking," Martine Aubry, the general secretary of the Socialist Party, said in the Sunday newspaper, Journal du Dimanche. "The Europeans, by turning to the Chinese, are showing their weakness. How will Europe be able to ask China to stop undervaluing its currency or to accept reciprocal commercial accords?"

Sarkozy reached out last week to his Chinese counterpart Hu Jintao to build support for an enlarged rescue fund designed to solve the region's sovereign-debt crisis. The leaders talked just hours after a euro-region summit on Oct. 27 ended with an agreement to boost the European Financial Stability Facility to about 1 trillion euros ($1.4 trillion), leveraging existing guarantees by as much as five times.

Financial Suicide

Aubry asks "How will Europe be able to ask China to stop undervaluing its currency?" That's a good question for Sarkozy but a far better one for Klaus Regling, head of the European Financial Stability Facility who says "Bailout Fund Could One Day Issue Bonds in Yuan".

Then again, there is a fundamental question as to whether the Yuan is really undervalued in the first place. However, issuing bonds in Yuan would be financial suicide if per chance the masses are correct or if the timing was wrong.

Moreover, begging for help is a big sign of weakness as well as an admission of fear that no other buyers may step up to the plate.

Europe to Recapitalize Banks Without Raising any Capital

Bloomberg reports Europe Tries to Recapitalize Its Banks Without Injecting Capital

European Union leaders ordered banks last week to increase the ratio of "highest quality" capital they hold by the end of June, creating a shortfall of 106 billion euros ($150 billion). Of Europe's 28 largest lenders, only eight will need to raise a total of 11 billion euros from investors, Huw Van Steenis, a Morgan Stanley analyst, wrote in an Oct. 28 report.

Rather than tapping investors or governments, firms are trying to hit the 9 percent core capital target by adjusting risk-weightings, limiting dividends, retaining earnings, reducing loans and selling assets. Banks had threatened to curb lending, risking a recession, to meet the goal rather than take government aid that would bring limits on bonuses and dividends. EU leaders already are pressing banks to restrain payments to employees and shareholders until they meet the capital target.

"Surely, no one thinks that by allowing banks to avoid raising capital in all these various ways it's going to give investors more confidence," said Peter Hahn, a professor of finance at London's Cass Business School and a former managing director at New York-based Citigroup Inc. "Part of the issue for a long time has been the lack of credibility of bank balance sheets and their risk models. This isn't going to help."

Capital Math

Let's go over the math one more time as noted previously in Capital Shortfall Estimates of European Banks Range from 8 to 413 Billion Euros; EU to Offer Additional Extend-and-Pretend Time

Analyst Estimates

Citigroup estimates there is a capital shortfall of between €64 billion and €216 billion for banks to achieve a minimum core Tier 1 ratio of 7% to 9%, respectively.

Credit Suisse came up with a similar figure of €220 billion for the potential 9% scenario.

Analysts at Espirito Santo said write-downs at current market prices on Greek, Portuguese, Irish, Italian and Spanish bonds, along with a higher minimum capital ratio of around 9%, could require as much as €413 billion in new capital across the sector.

Merrill Lynch analysts in turn came up with estimates of between €7.6 billion and €143 billion in required capital for the region's major banks, depending on various scenarios.

The IMF came up with 200 billion Euros, a figure I think is exceptionally low because it ignores writedowns on Portuguese, Spanish, and Irish debt (and of course Italian debt as well). It also presumes Greek losses will be pegged at 50% when losses are likely to be in the 70-90% range.

Nonetheless, the agreement worked out by Merkel reduced that 200 billion euro figure down to 106 billion. Now we see that of that 106 billion euros, banks claim they need only raise 11 billion euros.

Is that before or after Merkel agreed to kick in an extra 21 billion euros of taxpayer money to the banking sector in the recent EFSF agreement?

Regardless, the answer to the question "How Does Europe Recapitalize Banks Without Raising any Capital?" should now be perfectly clear ...

Oh Ho Ho Its Magic!

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

marți, 1 noiembrie 2011

Infographic: 650%

SEOptimise

SEOptimise

luni, 31 octombrie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Pagini

Persoane interesate

Arhivă blog

marți, 1 noiembrie 2011

Infographic: 650%

SEOptimise

SEOptimise

luni, 31 octombrie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Pagini

Persoane interesate

Arhivă blog

Subscribe to