| Trillion Dollar Coin Idea Dies Sudden Death; Treasury, Fed Oppose Using Platinum Coin; Republican Strategy Posted: 12 Jan 2013 05:15 PM PST At long last, a stupid, as well as illegal idea dies on the vine. Bloomberg reports Treasury, Fed Oppose Using Platinum Coin to Avoid Debt Limit The U.S. Treasury Department and Federal Reserve oppose the idea of minting platinum coins as a way to avoid the U.S. debt ceiling, according to a statement from Treasury spokesman Anthony Coley.
"Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit," Coley said in an e-mailed statement.
"There are only two options to deal with the debt limit: Congress can pay its bills or it can fail to act and put the nation into default," according to a statement today from the White House.
"When Congressional Republicans played politics with this issue last time, putting us at the edge of default, it was a blow to our economic recovery, causing our nation's credit rating to be downgraded," the e-mailed White House statement says. "The President and the American people won't tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy. Congress needs to do its job." Hopefully that will stop the downright silly, if not idiotic commentary regarding the coin, but don't count on it. I suggest this seven-step charade is what we will see. Politics of the Debate - Obama will chastise Congress with talk of financial Armageddon if Congress does not raise the debt ceiling.
- Congress will pretend to hold the president hostage
- The secretary of the Treasury will get into the act with its own version of the default debate
- Perhaps a few payments on non-critical budget items will be temporarily skipped
- Wall Street will feign panic
- Constituents will pressure Congress to approve a new debt ceiling
- Congress will raise the ceiling with another useless warning about next time
To understand why a default is completely out of the question, please see Silly Worry of the Day: US Will Default; Politics of the Debate Republican Strategy As far as Republican strategy goes, I am in favor of shutting down the government unless there are significant budget cuts. Unfortunately, that will not happen. Republicans will cave in once heat from Wall Street begins. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| France, the Hidden Zombie in Europe Posted: 12 Jan 2013 08:13 AM PST Via Google Translate from Spanish, GurusBlog asks and answers the question Is France the zombie hidden in Europe? Although still quite outside the focus of the media and investors as its risk premium relative to German bonds remains relatively low, for me, leaving aside the PIIGS, which are marked by blood and fire, France, is really the real zombie Europe, an economy that has been losing competitiveness rather quickly. Here are some data for me is the great Zombie in Europe and also on the legacy of Sarkozy Hollande mandate goes straight to the precipice.
In 1999 France sold 7% of world exports. Today only sells 3% and the figure continues to deteriorate.
In 2005 the trade balance was positive in France +0.5% of GDP today is negative -2.7% of GDP. Ie imports far exceed exports. The French economy is becoming less competitive, for example in cars and machinery equipment sales to China are seven times lower than the annual sales volume of these products from Germany.
High labor costs, which combine high wages, little flexibility to fire and high taxes. French workers are uq emenos hours work in the developed world and 86% of the contracts are fixed. 42 of every 100 euros of wage costs of a company are social charges or taxes in Germany are 34 out of 100 €, in UK 26 out of 100.
Since 2005, unit labor costs in France have not only increased, and the cost to produce a car in France have incrmeentado 17%, Germany 10%, Spain 5.8% and 2% in Ireland . In France a worker earns on average € 35.3 per hour worked, in Italy the average is 25.8 € and 22 € in UK and Spain.
The most immediate results: The results of French companies have fallen to 6.5% of GDP, a level that puts them at 60% of the European average. The reason is simple, French exports lost market share and the only way for companies to survive is to lower margins. But less margins means less money to invest in new plants or technology. So the R & D of French companies has fallen 50% in the last four years.
To top off the circle, Hollande government has decided that the state must suck more companies and limited part of the tax deductions they had. The result will be less profit and less investment.
Against this background, it seems difficult that economic growth sneaks by France in the coming years. In 2012, French GDP grew a measly 0.2%, the average increase of French GDP in the last 3 years was 1.2%, in Germany 2.7%. By 2013 it is expected that France into technical recession. Unemployment is highest in the last 14 years at a rate of 10.9% verus the German rate of 6.7% and is expected to Public Debt to GDP reached 97% in 2013, higher than the debt Spanish public.
Currently the French economy is the French state. The French state spending accounts for 57% of GDP. In the last eight years France's GDP has increased by a sad 7.3% (inflation adjusted). All growth has come through increased public spending and not the development of the private economy.
And with all the monster Papa French State refuses to stop growing. In 2011 and 2012 has presented a budget deficit of 5% of GDP, a level likely to be repeated in 2013 That is a very well presented set of statistics by Guru Huky, founder of GurusBlog. Indeed, French president Francois Hollande has made matters so much worse for France, as I have commented many times. The remaining question at this point is how much longer France will remain a "hidden" zombie. It will be interesting to see the results (and the panic) once the bond market turns on France. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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