Central Perk

sâmbătă, 15 noiembrie 2014

Mish's Global Economic Trend Analysis

John Major Sees 50% Chance UK Leaves EU, Sides With Cameron on Need for Immigration Reform

Posted: 15 Nov 2014 02:30 PM PST

Former UK Prime Minister John Major warns of Split Between UK and European Union.

The split is blatantly obvious, but since we have a major new voice chiming in, let's take a look.

The case for leaving the European Union will be fuelled further if EU countries do not help the UK limit immigration, Sir John Major has said.

The former prime minister said there was a "very real risk of separation" that would damage Britain and Europe.

David Cameron wants to renegotiate the UK's membership of the EU and hold an in/out referendum by 2017.

In a speech in Germany, Sir John said the UK had a "compelling" case to change the free movement of people.

Addressing German Chancellor Angela Merkel's Christian Democrats in Berlin, Sir John - whose Conservative government was dogged by rows over Europe - put the chance of a British exit from the European Union at "just under 50%".

But he said the probability would rise if Mr Cameron, who has promised the referendum if he is prime minister after the general election, could not secure reforms beforehand.

British governments were always willing to work with Europe on "the big issues", Sir John said, but added: "Our people deeply resent interference in the day to day activities that have been part of the British way of life for generations."

The UK's concerns are "not a political ploy" he said, warning of a "breach that is in no-one's interest".

He said he hoped other European countries would understand Britain's "dilemma", saying: "It can only inflame resentment if we are told our concerns are non-negotiable and we must toe the line."

Assessing the Odds

Major thinks the odds are "just under 50%" now but "probability will rise" is Cameron cannot get reforms.

That's a curious position because the odds Cameron secures a significant rule change are slim to none.

"'Point of No Return"

Cameron already received a "Point of No Return" Warning From Merkel.

Angela Merkel, the German chancellor, has said that she would not support any plans to change the freedom of movement rules that allow an unlimited number of EU migrants to live and work in the UK. br />
At a recent summit in Brussels, Mrs Merkel is reported to have told Mr Cameron that Germany would not accept any of his demands of freedom of movement and told him: "That's it."

Both Merkel and Cameron change their colors like Chameleons, but Merkel is far more adept. Regardless, it's Cameron who is on the hook (assuming he holds a vote).

As part of his anemic promise to hold a referendum, Cameron first has to win reelection. Then he has to live up to his promise, whether or not he gets concessions from Merkel.

Since those concessions are highly unlikely, does Major have the odds at 50-50 partly based on the chance there will not be a referendum?

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

Seth's Blog : Crowding the pan

Crowding the pan

One thing you'll discover when you start pan roasting brussel sprouts or tomatoes (or running a theater or an airline, or just about anything for that matter) is that more is not always better.

Sure, I know that you have three uncooked sprouts left, and it would be a shame to not serve them, but if you add those three to the pan with the others, the entire batch will suffer.

Adding one more is just fine, until adding one more ruins everything.

Greed costs.

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Mish's Global Economic Trend Analysis

France Fesses Up: "Deficit in 2014 Much Higher than Expected", Budget Needs Revisions Yet Again
Beppe Grillo Seeks Referendum to Abandon Euro, "At War with ECB Scum, Not ISIS or Russia!"
Businesses Moving Too Quickly to Robots? Will 1 in 3 Jobs Vanish by 2025?

France Fesses Up: "Deficit in 2014 Much Higher than Expected", Budget Needs Revisions Yet Again

Posted: 14 Nov 2014 06:28 PM PST

France has been in constant violation of eurozone deficit rules for years, but then again, so has nearly every other eurozone country.

Spain and France Deficit Violations

Both Spain and France have constantly pushed back goals to meet stated targets. Spain has pushed back deficit targets at least six times by my count (official count may vary).

I also have pages on France violations of deficit rules.

Broken Promises

Other sources report similar stories. For example, please consider this Reuters September 2014 headline: France Breaks 2015 Deficit-Cutting Promise.

France announced on Wednesday it was breaking the latest in a long line of promises to European Union partners to cut its public deficit, conceding it now would take until 2017 to bring its finances in line with EU rules.

The statement by Finance Minister Michel Sapin follows weeks of hints by Paris that weakness in the euro zone's second-largest economy would prevent it bringing the deficit below the EU ceiling of 3 percent of output next year as promised.

The Agreement

France agreed to cut its budget deficit to 3% by 2015. I am sure we can find agreements for prior years.

Here's the humorous part (from September):

Sapin insisted France was not seeking to change or suspend the rules but wanted the deteriorating outlook for growth and inflation this year and next to be taken into account.

No Change in Rules?

On November 1, and in regards to France, The Economist says Budget, Fudge It.

France had set itself up for a collision in September, when President François Hollande's government unveiled its growth forecast. This showed that the country would fail to cut its budget deficit, as it had promised, to 3.8% of GDP this year and 3% next. Instead, the deficit would rise to 4.4% in 2014, before dropping back to 4.3% next year. France, announced Michel Sapin, the finance minister, would not reach the euro zone's 3% ceiling, originally promised by 2013, until 2017.

Amid rising frustration with France, Jyrki Katainen, the outgoing economics commissioner, asked Mr Sapin to explain why they were planning to miss their targets. Having initially insisted that they would not be bossed about by Brussels, the French then gave in. Two days before the commission's verdict was due, Mr Sapin told Mr Katainen he would find an extra €3.6 billion ($4.6 billion) in revenues in 2015, enabling him to cut the budget deficit next year to 4.1%.

4.1% Next Year? Really?

The compromise, as usual, was to give France more time if France went half-way.

After rounds of infighting, France said something to the effect "OK we will reduce our deficit from 4.4% to 4.1% in 2015".

Flashback April 10, 2014: Bloomberg reports France Must Meet 3% Budget Deficit Target for 2015, Sapin Says

French Finance Minister Michel Sapin said his country needs to stick to a budget deficit target next year of 3 percent of gross domestic product to follow European Union rules.

The goal to reduce the shortfall from 4.3 percent in 2013 "is a target that we must maintain," Sapin said today to reporters in Washington, where he is attending the spring meetings of the International Monetary Fund and the World Bank. "This is in the feasible range."

In September we learned the shortfall rose!

Today we learn ....

Deficit Much Higher than Expected

Le Monde reports Government Deficit in 2014 Much Higher than Expected.

The government presented Wednesday, November 12, a draft amending budget for 2014, which represents slippage in the deficit. The deficit will reach 88.2 billion euros at the end of 2014, 4.3 billion more than what was expected this summer.

Weak business growth has indeed resulted in less revenue than expected in tax on company's VAT and taxation of financial products individuals.

Compared to the first's expectation Amending Finance Act passed in late July, 6.1 billion euro revenue is missing.

On the expenditure side, Bercy also found overruns of about 2.1 billion euros, mainly due to the cost of military operations abroad, personnel costs and mechanisms of solidarity as the income of active solidarity or the aid of State Medical.

Bercy also left unchanged its forecast deficit - which encompasses that of the State, social protection and local authorities - made in early September, which already included the deteriorating economic environment. Deficit will be 4.4% of gross domestic product this year, up from 4.1% in 2013, and then flow back slightly to 4.3% in 2015.

Weak consumer spending? A deteriorating economic environment? VAT shortfalls? Extra government spending? Deficit shrinkage to 4.3% instead of 4.1%?

Gee who coulda thunk?

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

Beppe Grillo Seeks Referendum to Abandon Euro, "At War with ECB Scum, Not ISIS or Russia!"

Posted: 14 Nov 2014 11:24 AM PST

Beppe Grillo, leader of M5S (Five Star Movement), Italy's second largest political party, seeks a referendum for Italy to leave the Euro.

One might think this would be news, but a search shows that only RT, the BBC, ZeroHedge (where I found the story), and Prison Planet picked up the story.

"Ditch Euro, Defend Sovereignty"

RT had the story first, way back on October 12, so let's start there. Please consider 'Ditch euro, defend Italy's sovereignty!' Eurosceptic leader calls for referendum.

The Italian government is not effective in restoring jobs and helping people, said Beppe Grillo, the leader of Italy's anti-establishment M5S, which burst onto the political scene last year winning 25 percent of the vote in its first parliamentary election in 2013.

"Leave the euro and defend the sovereignty of the Italian people from the European Central Bank," Grillo told his supporters at a M5S event in Rome.

"We have to leave the euro as soon as possible," he said. "We will collect one million signatures in six months and bring them to the Parliament to ask for a referendum to express our opinion."

"This time, we have 150 parliamentarians and senators, and we have time to submit [the signatures] to the Parliament and adopt a law on the referendum," Grillo said referring to 109 seats out of 630 in the Chamber of Deputies and 54 seats out of 315 in the Senate that his party holds.

European Parliament Elections

In the May European Parliament elections, Beppe Grillo's M5S party garnered 21% of the vote, second only to PD's 41% of the vote.

Yet, even though Grillo repeated his "abandon the euro message" recently, the only major news outlet to pick up the story was the BBC.

New York Times, Financial Times, Bloomberg, Washington Post, where are you hiding?

"We're at War with ECB, Not ISIS or Russia!"

The BBC reports Italy's Beppe Grillo Calls for Referendum on Leaving Euro.

Full Transcript

A referendum on the Euro. Next week we start collecting signatures. We will bring to parliament 3 or 4 million signatures, and this time we will have 150 of our own MPs [Members of Parliament] in parliament. And then we will ask for a referendum, something that wasn't done in 1989. We've got all the parties in favor of leaving the euro with us. We have two thirds of the parliament.

So we leave the euro and we bring down this system of bankers, of scum. We are dying and need a plan B. And we are implementing it. We are plan B. This year has become a nightmare. It was never meant to be like this.

We are not at war with ISIS or with Russia, we are at war with the European Central Bank [ECB]. A number of bankers tricked us out of our monetary and economic sovereignty.

"Eventually Will Come a Time"

Somehow this is not news. Not even the BBC provided that transcript, but I do thank the BBC for the embedded translation that I transcribed.

I keep repeating ....

"Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected."

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

Businesses Moving Too Quickly to Robots? Will 1 in 3 Jobs Vanish by 2025?

Posted: 14 Nov 2014 10:26 AM PST

Businesses Moving Too Quickly?

Are businesses are moving too quickly to robots? Is any job safe?

Patrick Thibodeau at Computer World discusses the idea things are moving "too fast" with a review of Nicholas Carr's new book, The Glass Cage, Automation and Us.

Please consider Automation Could Take Your Skills -- and Your Job by Patrick Thibodeau.

The Glass Cage examines the possibility that businesses are moving too quickly to automate white collar jobs, sophisticated tasks and mental work, and are increasingly reliant on automated decision-making and predictive analytics. It warns of the potential de-skilling of the workforce, including software developers, as larger shares of work processes are turned over to machines.

This book is not a defense of Luddites. It's a well-anchored examination of the consequences and impact about deploying systems designed to replace us.

Interview with Carr

Thibodeau posted a lengthy set of interview questions in regards to the book, along with answers from Carr.

Here are a few snips (emphasis added).

CW: What is the worry here? If I can get into my self-driving car in the morning, I can sit back and work on other things.

Carr: There are two worries. One is practical and the other is philosophical. We have to figure out how to best balance the responsibilities between the human expert or professional and computer. I think we're going down the wrong path right now. We're too quick to hand over too much responsibility to the computer and what that ends up doing is leaving the expert or professional in a kind of a passive role: looking at monitors, following templates, entering data. The problem, and we see it with pilots and doctors, is when the computer fails, when either the technology breaks down, or the computer comes up against some situation that it hasn't been programmed to handle, then the human being has to jump back in take control, and too often we have allowed the human expert skills to get rusty and their situational awareness to fade away and so they make mistakes. At the practical level, we can be smarter and wiser about how we go about automating and make sure that we keep the human engaged.

Then we have the philosophical side, what are human beings for? What gives meaning to our lives and fulfills us? And it turns out that it is usually doing hard work in the real world, grappling with hard challenges, overcoming them, expanding our talents, engaging with difficult situations. Unfortunately, that is the kind of effort that software programmers, for good reasons of their own, seek to alleviate today.

CW: Gartner recently came out with a prediction that in approximately 10 years about one third of all the jobs that exist today will be replaced by some form of automation. That could be an over-the-top prediction or not. But when you think about the job market going forward, what kind of impact do you see automation having?

Carr: I think that prediction is probably over aggressive. It's very easy to come up with these scenarios that show massive job losses. I think what we're facing is probably a more modest, but still ongoing destruction or loss of white collar professional jobs as computers become more capable of undertaking analyses and making judgments. A very good example is in the legal field, where you have seen, and very, very quickly, language processing software take over the work of evidence discovery. You used to have lots of bright people reading through various documents to find evidence and to figure out relationships among people, and now computers can basically do all that work, so lots of paralegals, lots of junior lawyers, lose their jobs because computers can do them. I think we will continue to see that kind of replacement of professional labor with analytical software. The job market is very complex, so it's easy to become alarmist, but I do think the big challenge is probably less the total number of jobs in the economy then the distribution of those jobs. Because as soon as you are able to automate what used to be very skilled task, then you also de-skill them and, hence, you don't have to pay the people who do them as much. We will probably see a continued pressure for the polarization of the workforce and the erosion of good quality, good paying middle class jobs.

CW: What do you want people to take away from this work?

Carr: I think we're naturally very enthusiastic about technological advances, and particularly enthusiastic about the ways that engineers and programmers and other inventors can program inanimate machines and computers to do hard things that human beings used to do. That's amazing, and I think we're right to be amazed and enthusiastic about that. But I think often our enthusiasm leads us to make assumptions that aren't in our best interest, assumptions that we should seek convenience and speed and efficiency without regard to the fact that our sense of satisfaction in life often comes from mastering hard challenges, mastering hard skills. My goal is simply to warn people.

I think we have a choice about whether we do this wisely and humanistically, or we take the road that I think we're on right now, which is to take a misanthropic view of technological progress and just say 'give computers everything they can possibly do and give human beings whatever is left over.' I think that's a recipe for diminishing the quality of life and ultimately short-circuiting progress.

Is Carr a Luddite?

Thibodeau claims "Carr's book is not a defense of Luddites".

Let's look up the term Luddite.

According to Merriam-Webster a Luddite is "one of a group of early 19th century English workmen destroying laborsaving machinery as a protest; broadly: one who is opposed to especially technological change"

Carr is not an extreme Luddite to the extent he wants to destroy machinery in protest. However, in the broader sense, it's easy enough to make a case that he is indeed a Luddite.

Loss of Skills

Computers ended the need for a slide rule. The skill simply vanished. Should anyone care? As a side note, I can still use a slide rule. Many today have never heard of one. I have a totally useless skill.
Robots replaced human welders. Who does a better job? The robot or the human welder? I suggest the robot. Yet, welding did not and will not go away. No skills vanished. For quick repairs and specialized jobs, human welders will not cease to exist. If I am wrong and human welders do vanish completely, and as with slide rules, human welding skills will no longer be useful.
Cars replaced horses. Horse riding is still a skill, but it has far fewer practical uses. Should anyone be concerned?

Computers, Robots, and the Quality of Life

The most curious position of Carr is his conclusion: Computer technology is "a recipe for diminishing the quality of life".

Ring the eject buzzer on that one. With the possible exception of warfare and nuclear accidents, there has never been any technological advance in history that was a "recipe for diminished quality of life".

Yes, disruption is unwelcome to many. But Carr's worries are no different than those who worried about cars replacing horses, the cotton gin replacing seed separators, or the telephone replacing the telegraph.

Does anyone pity the widespread loss of Morse Code skills?

Curiously, although the slide rule vanished, Morse Code did not go away completely as the link above shows. It still has some limited use applications, and yes, I could do an SOS in Morse Code (but no one would pay me a dime for that skill).

Will 1 in 3 Jobs Vanish by 2025?

Is Gartner right that One in three jobs will be taken by software or robots by 2025?

If so, should there be a concern?

Real Concern

The real concern should not be the loss of jobs, but rather the Fed's response and governmental responses to price-deflation aspects.

Technology is inherently price deflationary. It's also wage deflationary except for those at the top-end of needed skills.

Central bank efforts to achieve 2% inflation in a hugely deflationary technological boom with a simultaneous and equally deflationary demographic shift is a huge problem.

In addition, liberal efforts to raise the minimum wage exacerbates the trend to move to robots.

If there is a "premature" move to robots, blame the Fed and governments, not the technology, and not businesses making the shift.

Question on Wealth Distribution

Reader Michael asks ...

"As more and more wealth is produced using less and less labor, society will be faced with the question of how to distribute this wealth. Does only a tiny fraction of the world's population get to enjoy the wealth or, do we realize that technology is enabling humans to enjoy more leisure and still have a share of the wealth?"

To answer Michael's question ...

We should embrace technology and the increased standard of living that comes with it. Yes, those at the top-end have amazing lifestyles that most can only imagine. But, it's also true that the average US citizen today lives like a king (and much longer) than someone 200 or even 100 years ago.

Every technological advance to date has been shared: computers, cell phones, television, sewing machines, radio, everything. It is inconceivable (actually impossible short of mass human extinction) for that trend to stop.

Everyone shares sooner or later. Competition ensures that outcome. Yet, it's also inevitable that the need for certain skills dies along the way.

In the short run, disruption is scary, especially to those immediately impacted. In the long run, the only fear should be of the central planner's (governments and central banks) response to such shifts.

Those who fear technology have precisely the wrong concern.

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

Damn Cool Pics

This Is How You Know You Have An Awesome Girlfriend
Survive The Apocalypse By Moving Into One Of These Condos
This Swedish House Has A Special Surprise Inside

This Is How You Know You Have An Awesome Girlfriend

Posted: 14 Nov 2014 12:10 PM PST

If your girlfriend does any of these things, she's awesome.

Survive The Apocalypse By Moving Into One Of These Condos

Posted: 14 Nov 2014 10:55 AM PST

If you're worried about surviving the apocalypse, one of these underground condos might just be the place for you.

Via online.wsj

This Swedish House Has A Special Surprise Inside

Posted: 13 Nov 2014 08:31 PM PST

The owner of this house in Sweden is trying to sell it for $320,000 dollars. It might not look all that cool from the outside but the inside is a totally different story.