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Mish's Global Economic Trend Analysis

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• Mish with Gordon Long: Video Interview on the Troubles in Illinois and Greece
• Tax Revenue Collapses in Greece; Government Denies Capital Controls; Citizens Pull €2bn in Three Days
• CPI Jumps 0.4% on Gasoline Prices, Still Flat From Year Ago; Debt Deflation Dynamics

Mish with Gordon Long: Video Interview on the Troubles in Illinois and Greece Posted: 18 Jun 2015 07:35 PM PDT A week ago, Gordon Long at Macro Analytics interviewed me for the third time on Financial Repression. Long made the interview available today. The subject this time is Illinois pensions and turmoil in Greece. I believe a minimum of seven Illinois cities are in serious and immediate trouble, unable to meet current obligations. Numerous others cities are in serious trouble over pensions eventually. We also discussed Greece. I stated, as I have on my blog, that it appears Greece is stringing the Troika along, purposely giving Greek citizens time to pull deposits. Today we learned Tax Revenue Collapses in Greece; Government Denies Capital Controls; Citizens Pull €2bn in Three Days. Link if video does not play: Mish Comes Out Swinging on State of Illinois, Public Pensions and Greece. Previous Interviews with Gordon Long April 20, 2015: America's Pension Problem: Gordon Long Interview of Mish October 2, 2014: Financial Repression (and How to Defend Yourself From It) Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Tax Revenue Collapses in Greece; Government Denies Capital Controls; Citizens Pull €2bn in Three Days Posted: 18 Jun 2015 08:40 AM PDT Knowing that a default is now inevitable, Greek citizens made a decision to stop paying taxes. The result was foreseeable: Greek Government Suffers Collapse in Revenue in May. The Greek government suffered a collapse in revenue in May after companies and individuals delayed filing tax returns amid fears that emergency levies were imminent in order to secure a deal with bailout creditors. The news of the sharp drop in receipts comes as eurozone finance ministers held a crunch meeting to discuss the country's bailout. Greek government revenues in May were €900m, or 24 per cent, short of the monthly target, according to preliminary budget figures. It had met projections for the previous three months. But Greece still ran a primary budget surplus — before making payments on the public debt — amounting to €1.5bn for the first five months after slashing payments to suppliers and outlays for public investment. "There appears to be a complete freeze on domestic payments apart from wages and pensions as the government rounds up cash to pay international creditors," a senior Athens banker said. "This is starting to have a knock-on effect on revenue collection." A government spokesman on Wednesday denied reports Greece was considering imposing capital controls, perhaps as early as next week. Cash withdrawals from local banks have picked up pace, with almost €2bn pulled out in the past three days, the same banker said. "This week's gloomy scenarios have affected depositors . . . We are back where we were in January [when about €10bn left Greek banks]," he said. Capital Controls? On one hand, we have an official denial. Please recall the expression: "Never believe anything until it's officially denied". On the other hand, it makes sense for Greece to allow citizens to pull cash as long as the ECB does not remove ELA. Sooner or later, either the ECB or the Greek government will impose capital controls. I suspect it will be the ECB that forces the issue. Meanwhile, my oft-repeated message takes on increased urgency: "Get your money out of Greek banks while you still can!" Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

CPI Jumps 0.4% on Gasoline Prices, Still Flat From Year Ago; Debt Deflation Dynamics Posted: 18 Jun 2015 07:43 AM PDT The headlines on today's CPI jump of 0.4% are all over the map. If you want a slant one way or another you can find it. For example: Reuters says U.S. consumer prices post largest gain in more than two years. Bloomberg says U.S. Consumer Prices Fall Short of Expectations at 0.4% In reality, this is pretty much an expected jump due to rising gasoline prices. The above Bloomberg headline is all the more interesting because the Bloomberg Consensus Estimate was nearly spot on at 0.5%. I have been mocking economists' estimates for most of the year, but it seems to me they got this one correct. The entire consensus range was reasonable for a change. From Bloomberg Econoday: Just about all the readings in the May consumer price report point to very soft price pressures with the overall monthly gain, at plus 0.4 percent, and the ex-food ex-gasoline core gain, at only plus 0.1 percent, at or near the low-end of the Econoday forecasts. The 0.4 percent overall gain may look a bit high compared with prior months including April's 0.1 percent rise, but it reflects an unsurprising jump in energy costs specifically gasoline which jumped 10.4 percent in the month. But energy prices are still very low, confirmed by the year-on-year rates which for all energy products are down 16.3 percent and for gasoline, down 25.0 percent (no misprint). But the look at the year-on-year rates shows one element of pressure, a plus 1.7 percent rate for the core. This is down from 1.8 percent in April but is still skating a bit close to the 2.0 percent hawk barrier at the Fed. The overall year-on-year rate, however, is as benign as can be at zero percent. Components of note include a second month of declines for apparel, down 0.5 percent in May after falling 0.3 percent in April which is not good news for the nation's retailers. Education & communication also fell, down 0.1 percent. Showing pressure is a 2.7 percent rise for transportation that reflects a jump in airfares. This follows, however, a 0.3 percent dip in transportation for April. Food costs and housing costs show no increase in May. The lack of pressure through most of this report gives the Fed plenty of waiting time before raising rates, especially given what have been even more benign rates in the more closely watched PCE index. Year-Over-Year CPI Debt Deflation Dynamics Year-over-year prices are benign, but the CPI ignores asset inflation in stocks, land, homes, bonds, etc. On that basis, inflation is hardly benign. Moreover health-care is hardly benign, and probably under-reported. Finally, one can and should question food substitution and other anomalies that suppress the stated rate. The real problem though is asset inflation. When various bubbles pop, rate hikes by the Fed are going to come much slower than economists expect. Even after the housing bust, few economists understand the dynamics of debt-deflation, bubbles popping, and the overall burden of debt itself. Round after round of counterproductive QE created asset bubbles, but most economists (including the Fed) will not see the problem until those bubbles pop. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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