Central Perk

marți, 24 decembrie 2013

Mish's Global Economic Trend Analysis

Merry Christmas From the TSA
Lawyer Advises Me "Don't Go to France"; French Pub Fined €9,000 for Using "Undeclared Labor" after Customers Returned Empties to Bar
Economic Illiterate Proposal: "Inflation Creates Jobs"; Inflation Economics 101

Posted: 24 Dec 2013 06:08 PM PST

Traveling this holiday season? Whether yes or no, the TSA has 12 helpful hints about what you can and cannot carry on planes.

Link if video does not play: TSA's 12 Banned Items of Christmas

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Lawyer Advises Me "Don't Go to France"; French Pub Fined €9,000 for Using "Undeclared Labor" after Customers Returned Empties to Bar

Posted: 24 Dec 2013 11:05 AM PST

A few days ago my lawyer advised me "Don't go to France" (not that I had any plans to of course). The advise, coupled with the message "First amendment rights stop at the US border", was in reference to my November 20 article Mish Fined 8,000 Euros for Quoting French Blog.

All I did was quote a French blogger on bank leverage, and the numbers I quoted were matched by the Wall Street Journal.

Wolf Richter at the Testosterone Pit commented on Gagging Doubt: French Crackdown On French And American Bloggers Who Question Megabank Balance Sheets

The France's Financial Markets Authority (AMF) announced on Nov. 14 that its Sanctions Commission had decided to slap fines on two bloggers, Frenchman Jean-Pierre Chevallier and American Mike "Mish" Shedlock, "for having spread inexact information about the level of indebtedness" of megabank Société Générale.

The same bank, incidentally, that entered the annals of the silly when it blamed and successfully hounded a low-level trader, the hapless Jérôme Kerviel, for its €5 billion zinger of a loss during the financial crisis, while other banks blamed their toxic assets.

Digging through financial statements and coming up with conclusions that differ from those that the almighty bank serves up is just a sign of not having yet imbibed too much of its Kool-Aid.

Freedom of speech, bien sûr, somewhat, kinda. But not when it comes to French megabanks. Nope. No one is allowed to doubt anything. Are they in that bad of a shape that they cannot withstand the doubt of a blogger?

In its decision, the Sanctions Committee stated that it had jurisdiction to rule on the dissemination of inaccurate information about a financial instrument that can be traded in a regulated French market, whether or not it was disseminated in France, and regardless of whether it was disseminated by a Frenchman or a foreigner. And for the first time, the commission applied Article 632-1 of the AMF's General Regulations to information posted on the Internet by financial bloggers; it reads: "Everyone must refrain from disclosing or knowingly disseminating information, regardless of the medium used, that gives or may give inexact, inaccurate, or misleading indications about financial instruments, including spreading rumors or broadcasting false or misleading news, when that person knew, or should have known, that the information was false or misleading."

A blatant attempt to gag doubting bloggers.

Shooting Yourself in the Foot

Automatic Earth had some interesting comments in How To Fine A Fine Blogger And Shoot Yourself In The Foot in reference to the quote from Testosterone Pit.

Everyone of course should include SocGen itself, because they too "may give" inexact, inaccurate, or misleading indications. And the AFM is the only institution with the legal powers to check if SocGen's financial statements are correct. Have they? How are we to even know? By accepting SocGen's statement, the AFM makes itself a potential accomplice if any irregularities appear in that statement, either today or in the future. But they don't seem to care.

Instead, they turn around and fine two bloggers who write they think those numbers are not correct, and who might otherwise, had they not been "investigated", have been more than happy to retract their words if either SocGen or the AFM had published numbers that were both correct and transparent. Where is the AFM report on its investigation into SocGen's numbers?

SocGen will never be attacked on its statements no matter how wrong they are, simply because it is among the richest hence most powerful hence must lawyered up entities on the planet.

If the bank and/or the regulator don't like that criticism, all they need to do is to issue a press release that explains where the numbers go wrong. They don't do that. The regulator doesn't respond by investigating the numbers the banks publish, but by going after the people who question them.

French Pub Fined €9,000 for Using "Undeclared Labor"

Clearly I had enough reasons already to not go to France. Looking for more?

Please check out the latest French idiocy: French Pub Fined €9,000 for Using "Undeclared Labor" after Customers Returned Empties to Bar.

French officials have fined a pub in Brittany €9,000 for "undeclared labour" after a customer returned some empty glasses to the bar.

Owner Markya Le Floch told Le Télégramme: "Around half-past midnight, a customer returned a drinks tray. She passed by the bar to go to the toilets. That was when it all kicked off. My husband was pinned against the glass by a man. A woman lept on me, showing her ID card and that's when I realised it was a URSSAF check. They told me I had been caught using undeclared labour."

The authorities initially fined the pub owners €7,900 and briefly placed them in police custody. Customers vouched for the owners and they escaped charges, but URSSAF are still pursuing a social case and are now seeking €9,000 due to non-payment of the original fine.

France is acting like some third-world basket case, and the stories get more ridiculous over time.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Economic Illiterate Proposal: "Inflation Creates Jobs"; Inflation Economics 101

Posted: 24 Dec 2013 01:09 AM PST

Those looking for economically illiterate proposals can have a field day reading Ezra Klein's "Wonkblog" on the Washington Post.

In Full Employment Gives People Jobs Klein states (citing two others) "The Federal Reserve Bank's focus on keeping inflation below 2 percent effectively sacrifices the other half of its dual mandate: full employment."

It's difficult to know where to start debating such economic lunacy, but let's briefly discuss the notion of a "dual mandate".

Dual Mandate Equals Mission Impossible

Here's the deal.

1. The Fed can control money supply but it will have no control over interest rates (or anything else).

2. The Fed can control short-term interest rates, but then it would have no control over money supply (or anything else).

That is the full and complete extent of the Fed's "control". Note that neither price stability nor unemployment is in either equation. The reason is the Fed controls neither.

That is a mathematical certainty, yet people have preposterous beliefs that the somehow the Fed can not only control inflation but also unemployment.

If the Fed, the Bank of Japan, the Reserve Bank of Australia, the ECB, or the Bank of England, or the central bank of China could control the unemployment rate, rest assured they would have done so long ago.

The economic illiterates will point out the unique nature of the Fed's dual mandate, but I will counter with the mathematical stupidity of such an idea.

At best, the Fed can control (using the word loosely) a maximum of one thing at at time, and employment is not one of those things.

Does Inflation Create Jobs?

If inflation creates jobs, where are the jobs right now in Venezuela? Where were they in Zimbabwe? Argentina?

No doubt the economic illiterates will state "wait a minute, we don't want massive inflation, just the right amount of inflation".

But depending on which economic illiterate you ask, the alleged "right" amount of inflation may be 2%, 3%, 4%, or even higher.

So the debate rages "what is the right amount of inflation?"

The debate itself is economic insanity. Inflation does not and cannot create jobs in the long term.

Inept Monetarist Choir

In the short term, inflation can create the illusion of economic prosperity, but Klein and his monetarist choir cannot manage to see their own noses even while looking in a mirror.

Yes, inflation helped create a massive housing boom. Builders employed like mad. Speculators built condo towers in Florida, Phoenix, Las Vegas, and numerous cities in California. It was a grand party. All based on inflation.

Then the bubble burst. Then a consortium of economic jackasses came along saying we need more inflation (as if the cure was the same as the disease). The Fed tried, and tried and tried. However, the Fed did not create enough inflation to satisfy the monetarist jackasses, but it did create bubbles in stocks and bonds.

Benefits flowed to the banks, the corporations, and the already wealthy. That gave rise to still more economic lunacy regarding income distribution.

Inflation Economics 101

Ezra Klein needs to brush up on inflation economics 101. I have a simple, easy to understand crash course.

Practical Examples

Economic illiterates will tell you that deflation (for this example defined as falling prices) is a bad thing. They will tell you that when prices fall, people will delay purchases waiting for still more falling prices, and then consumers will not buy goods and employment will drop and a downward economic spiral will ensue.

That is the theory of people in ivory towers who read books and articles by economists who cannot find their ass with two hands and a road map.

If falling prices stopped people from buying goods, no computers, TVs, monitors, or electronic goods would have been purchased for years.

Just yesterday I bought a 27 inch high-end NEC monitor for $800. It was one of the top-rated monitors for digital photography display that I could find.

It beats hands down my Dell 24 inch monitor I bought a few years ago for $2400. Will monitors be better and cheaper next year. Of course. Did that make me wait? Not in the slightest.

Lower Prices Spur Sales

People hold on to things when replacement costs are high. Lower prices, not higher ones, spur sales. Sales spur employment!

Think about cars. If prices dropped 20% would that spur cars sales? I think so. If you could replace your aging car 20% cheaper and it had more features, would you do so?

What if they rose 20%? My guess is that, all thing being equal, car sales would plunge

All Things Never Equal

Not to fear, socialist fools don't want all things to be equal. They want prices and wages to go up. Well, history shows, and Klein even has charts to prove it, that wages have not risen with prices.

To compensate for the fact that wages have not kept up with inflation, socialists and monetarists want higher minimum wages. They also want inflation targets and they expect businesses to pay more in wages than prices go up!

How do businesses respond? They outsource or replace humans with software and hardware robots that do not complain about minimum wages.

In short, Klein proposes exactly more of the same policies that caused the massive rise in income inequality in the first place. His solution is more government controls, more Fed controls, and more command-economy nonsense similar to what sunk the Soviet Union.

The Real Problem

The problem is not falling prices, but rather the inability to pay back debt as prices fall. The irony is inflation encourages more and more debt, with bubbles of increasing magnitude over time. And each time the bubbles burst, complete fools shout for more of the same policies that caused the bubbles.

I propose getting rid of economic jackasses at the Fed and in Government. I propose falling prices are a good thing. Who doesn't want falling prices (except of course in asset prices). And who owns the bulk of the assets? Here's a hint: It's not those who Klein thinks will be helped by more inflation.

Unfortunately, Klein is more likely to get his way than I am my way. As a direct result, expect more bitching from Klein and others in his camp about rising income inequality. Also expect more inane inflation proposals that will destroy still more jobs and the middle class.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

The Worst Christmas Pictures Ever

Posted: 24 Dec 2013 11:34 AM PST

It's amazing the torture a family will put its members through come holiday time, especially when the memories can't be erased thanks to some fool snapping a picture to document the humiliation for posterity. On the plus side, at least everyone who got one of these pictures in a holiday card got a good laugh (before they called Child Protective Services).