Mish's Global Economic Trend Analysis |
- End of the End of Colonel Qaddafi; "Decisive Battle to Liberate Tripoli Started"; Rebels Encircle Tripoli; Rats Flee Sinking Ship
- European Roundup: Germany Nixes Eurobonds Once Again, So Does EU President Herman Van Rompuy; Belgium Wants Eurobonds and Bigger Bailouts
- Bank of England Regulator Argues "Banks Need to Take More Risks" to Underpin Economy; Revisionist Roosevelt History
- Private Consumption in Portugal Plunges 3.4%, Biggest Drop in 30 Years; Expect Rest of Europe to Follow
| Posted: 20 Aug 2011 10:37 PM PDT Colonel Qaddafi's days as dictator of Libya are numbered, not in months but perhaps days. Bloomberg reports Libyan Rebels Launch Offensive to Seize Tripoli "The decisive battle to liberate Tripoli started," Abdel Hakim Belhaj, a rebel brigade commander, said in an interview with Al Jazeera. "I would like to tell our families inside the capital that we are coming and call upon Qaddafi's troops to abandon their weapons tonight and to join us to get rid of Qaddafi and his regime."Rats Flee Sinking Ship The New York Times reports Heavy Fighting Reported in Tripoli; Rebels Encircle City For the first time in months, witnesses in Tripoli reported heavy fighting across the capital late Saturday night, even as rebel forces claimed to have encircled the city by taking major towns to its east, west and south.This is the "End of the End of Colonel Qaddafi" and a new beginning for Libya. The question is "a beginning of what?" At this stage there are far more questions than answers. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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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| Posted: 20 Aug 2011 07:38 PM PDT This weekend Belgium finance minister came out in support of Eurobonds. He may as well have come out in support of the "Great Pumpkin" theory. Belgium and the PIIGS (Portugal, Ireland, Italy, Greece, Spain) may want Eurobonds but if Germany, France, Finland and other countries don't want them it is not going to happen. The vote must be unanimous. Interestingly, EU President Herman Van Rompuy just nixed Eurobonds but a rumors of an EU Eurobond feasibility study ignited a rally on Friday in Europe. That rally faded quickly in the US. Here is a weekend roundup of European news starting with a look at what's not going to happen. Belgium adds to call for euro bonds, bigger bailout Reuters reports Belgium adds to call for euro bonds, bigger bailout Pressure on Germany and France to take radical action on the euro zone debt crisis mounted on Friday, as financial markets sagged further and Belgium added its support to calls for the region to issue debt jointly.EU President Opposes Common Euro Bonds Inquiring minds note that EU President Van Rompuy Opposes Common Euro Bonds European Union President Herman Van Rompuy ruled out issuing common bonds as a cure for the debt crisis, saying any joint borrowing should wait until European economies and budgets are better aligned.12th of Never The day everyone is in balance is the 12th of never. It's not going to happen. Rumors that the EU commission was studying Eurobonds ignited a faded rally in Europe on Friday. For details, please see Yet Another 2.5 Hours, 2.3% Hour Rally, This Time on Silly Rumors Eurobonds Back in Play Germany Rebuffs Renewed Euro Bond Debate The future of Eurobonds is with Germany. Here is the present as well as the projected future: Germany rebuffs renewed euro bond debate BERLIN | Sat Aug 20, 2011 12:28pm EDTAnyone paying any attention to Eurobond rumors that do not include support from Germany is wasting their time. Eurobonds also need support from French President Nicolas Sarkozy. Eurobonds do not have that support neither. As it stands, both Chancellor Angela Merkel and finance minister Wolfgang Schaeuble oppose Eurobonds. I suspect the former is out of political expediency. Merkel realizes she does not have the votes. Until this setup changes, Eurobonds are dead, no matter how many others support them. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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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| Posted: 20 Aug 2011 11:54 AM PDT In case you need additional proof that more regulators is the last thing we need, please consider Banks 'should take more risk' argues BoE executive director Banks should be allowed to take more risk to underpin the recovery in spite of the lasting damage caused by the financial crisis, a leading regulator has suggested.Foolish Thinking and Revisionist History More risk will mean more losses. The world is flooded with overcapacity in nearly everything except energy. Encouraging more production and expansion in this environment when overspent boomers heading into retirement are not about to go on a spending spree is a mistake. Moreover most of these comparisons to the 1930's are nonsensical. FDR did so many stupid things, some of which were blatantly illegal if not treasonous including confiscation of gold, forced crop burning, and the National Industrial Recovery Act (NIRA) of 1933 that was found unconstitutional. However, and as is typically the case, various stimulus efforts in the 30's (numerous "CCC" type programs) died out by 1937 and the economy went back into recession. Of course Keynesian clowns now argue a pissy tightening action "caused" the relapse, when then as now, stimulus ran its course. Contrary to popular fantasy, the unemployment picture following Roosevelt's policies is not as rosy as is often cited. Here is a table from Wikipedia on Franklin D. Roosevelt
Derby counts Works Progress Administration (WPA) workers as employed, Lebergott as unemployed. Of course you can have 100% employment if the government employed everyone. War Recovery vs. Austrian Economic Theory Unemployment did not really drop until 1941 or 1942. WWII started with the invasion of Poland in September 1939. It was war that started the recovery, not the policies of Roosevelt. That statement may sound contrary to Austrian economics but it's not. Destruction of productive capacity and assets is always a net loss. War is never a good thing in this regard. To believe otherwise is to believe in the Broken Window Fallacy. However, the US was the only major country that did not suffer major losses in production capacity. Following WWII, the US became the growth engine of the world, further fueled by war-weary soldiers who returned home and started families, kicking off the "baby boom" and all of its ramifications. Europe followed eventually, but no one in their right mind could suggest that WWII or wars in general are a good thing for stimulating economies. Saddled with the Failed Policies of FDR Today we are saddled with the consequences of Roosevelt's inept actions.
Finally, this is not 1939 in terms of demographics, in terms of public debt, or in terms of private debt. To suggest otherwise displays incompetence. In general, to expect anything but incompetence, greed, corruption, or graft from regulators is a mistake. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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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| Posted: 20 Aug 2011 01:08 AM PDT Courtesy of Google translate, please consider Private consumption in Portugal is suffering the biggest drop in 30 years The indicator of private consumption in Portugal in July recorded a fall of 3.4% compared to the homologous months of 2010, the lowest since data collection began in 1978.Translation of that last paragraph is a bit choppy, but essentially the 78 billion "bailout" loans coupled with forced austerity measures is to blame for the massive plunge in private consumption. Expect Rest of Europe to Follow Contraction in Greece is arguably factored in (although hugely rising deficits are not). More importantly, worsening conditions in Spain and especially Italy are not accounted for. The ECB forced Italy into various austerity measures in return for providing a backstop to Italian debt. That backstop has worked for now (it won't last), driving 10-year Italian government bond yields down from well over 6% to 5%, still a mighty spread vs. Germany. Low growth for Italy is penned in. It will not happen. Expect a plunge in Italian GDP and personal consumption. If Italy, Spain, Greece, and Portugal contract (all but Italy are already), spillover into France and Germany is a given. Moreover, even France has pledged some budget tightening. Expect more social unrest and a huge recession in Europe because both are on the way. Germany will not be immune. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List 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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