Central Perk

marți, 27 octombrie 2015

Mish's Global Economic Trend Analysis

EU Rules Bitcoin is a Currency, US Says Bitcoin is a Commodity; Which Side is Correct? What About Gold and BitGold?
Regional Fed Reports Five for Five in Contraction; Texas Region Worsening, Richmond Negative Again
Cracks in the Economy Widen as Durable Goods Orders Sink
Keen vs. Keen: Will the Real Steve Keen Please Stand Up?

EU Rules Bitcoin is a Currency, US Says Bitcoin is a Commodity; Which Side is Correct? What About Gold and BitGold?

Posted: 27 Oct 2015 11:46 AM PDT

European Court of Justice Rules Bitcoin is a Currency

Last week, the European Court of Justice ruled Bitcoin is a Currency and Exchanges are VAT-exempt.

The European Court of Justice (ECJ) has ruled that bitcoin exchange transactions should be exempt from VAT. The ECJ ruling stated that bitcoin transactions "are exempt from VAT under the provision concerning transactions relating to currency, bank notes and coins used as legal tender."

The case involved a request regarding the tax status on exchange commissions and margins which came from a Swede called David Hedqvist who was looking to set up a one-man bitcoin exchange. He had approached Swedish tax authorities for an advanced decision on whether or not the exchange of bitcoin into Swedish Krona and vice versa should be considered as a VAT taxable or VAT exempt activity.

The tax authorities said Bitcoin trading should be subject to VAT, but Hedqvist thought the answer should be no, and he took it to court and eventually it reached the appeal court in Sweden. Since all VAT law flows from Europe, the appeal court passed the case on to the ECJ to decide.

There have been some limited decisions in the US involving criminal cases where bitcoin was viewed as money, for the purposes of money laundering offence. Meanwhile, the US Commodity Futures Trading Commission (CFTC) last month deemed bitcoin to be a commodity and closed down trading platform Coinflip in the process.

Commenting on the ruling, Sarah Buxton, a tax lawyer at the global law firm Bryan Cave LLP said: "The European Court of Justice, Europe's highest court, has ruled that exchanges of Bitcoin into fiat currency should be exempt from VAT under Article 135(1)(e) of the VAT Directive concerning transactions relating to currency, bank notes and coins used as legal tender.

Jens Bader, chief commercial officer of Secure Trading said the ruling had far reaching implications for Bitcoin and other cryptocurrencies, as all EU states will now have to comply with the VAT ruling.

Bader said: "Many with a vested interest in cryptocurrencies will be overjoyed by the ruling. It is easy to see why an un-regulated currency not subject to sovereign states taxes is an enticing prospect. However, it is a shame to see the ECJ cave in on this issue, and for Bitcoin not to be held to universal VAT standards.

"The question of whether or not Bitcoin should be subject to VAT is a simple one – if it is considered a currency it shouldn't be subject to VAT and if it is considered a product it should be. In my mind, Bitcoin is not a currency. It is an exchangeable product – but a product none-the-less – and for that reason I am surprised by the ECJ's ruling.

"The distinction lies in the fact that Bitcoin exchanges, and cryptocurrency exchanges like it, are not regulated and licensed financial services. While we call it a 'currency', in fact Bitcoin is a tradable commodity, like gold and silver.

US Says Bitcoin is a Commodity

In the US, the Commodity Futures Trading Commission (CFTC), ruled on September 17 that Bitcoin Is a Commodity.

Virtual money is officially a commodity, just like crude oil or wheat.

So says the Commodity Futures Trading Commission (CFTC), which on Thursday announced it had filed and settled charges against a Bitcoin exchange for facilitating the trading of option contracts on its platform.

"In this order, the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities," according to the press release.

By this action, the CFTC asserts its authority to provide oversight of the trading of cryptocurrency futures and options, which will now be subject to the agency's regulations. In the event of wrongdoing, such as futures manipulation, the CFTC will be able to bring charges against bad actors.

CFTC Targets Bitcoin Options Site

On the day of the ruling the CFTC Targeted Coinflip with a cease and desist letter due to its trading of option on the commodity known as bitcoin.

On Thursday, the CFTC announced that it had issued an order against and settled charges with Coinflip, operating under the name Derivabit. The company allowed Bitcoin users to engage in options and futures trading. Most of the site was disabled in July 2014, with all customer money refunded, before the CFTC contacted the site. It was fully closed in January 2015.

"For these contracts, Coinflip listed Bitcoin as the asset underlying the option and denominated the strike and delivery prices in US Dollars," the CFTC wrote in its order.

Bitcoin Money Laundering

When it suits the bureaucrat's purpose, rulings can also go the other way.

Please consider the March 30, New York Times report Inquiry of Silk Road Website Spurred Agents' Own Illegal Acts, Officials Say.

On Monday, the government charged that in the shadows of an undercover investigation of Silk Road, a notorious black-market site, two federal agents sought to enrich themselves by exploiting the very secrecy that made the site so difficult for law enforcement officials to penetrate.

The agents, Carl Mark Force IV, who worked for the Drug Enforcement Administration, and Shaun W. Bridges, who worked for the Secret Service, had resigned amid growing scrutiny, and on Monday they were charged with money laundering and wire fraud. Mr. Force was also charged with theft of government property and conflict of interest.

A criminal complaint unsealed on Monday in federal court in San Francisco outlined the allegations against the two former agents.

While investigating Silk Road, Mr. Force "stole and converted to his own personal use a sizable amount of Bitcoins," the digital currency that was used by buyers and sellers on the website and which he obtained in his undercover capacity, the complaint said.

"Rather than turning those Bitcoin over to the government, Force deposited them into his own personal accounts," it added.

Is Bitcoin Money or a Commodity?

If theft of bitcoin constitutes "money laundering", does that make bitcoin money, a currency, or a commodity?

More simply, is bitcoin money or a commodity?

The answer is yes to both. Money laundering charges have nothing to do with it.

What is Money?

To understand why bitcoin is both money and a commodity, we must first answer the question: What is Money?

To that, let's turn to Murray Rothbard's classic: What Has Government Done to Our Money?

Here are seven pertinent Rothbard quotes with thanks to Wikiquote. Pay particular attention to number 2.

The cumulative development of a medium of exchange on the free market — is the only way money can become established. … government is powerless to create money for the economy; it can only be developed by the processes of the free market.
Money is a commodity … not a useless token only good for exchanging; … It differs from other commodities in being demanded mainly as a medium of exchange.
It doesn't matter what the supply of money is.
Inflation may be defined as any increase in the economy's supply of money not consisting of an increase in the stock of the money metal.
Money … is the nerve center of the economic system. If, therefore, the state is able to gain unquestioned control over the unit of all accounts, the state will then be in a position to dominate the entire economic system, and the whole society.
Inflation, being a fraudulent invasion of property, could not take place on the free market.
Freedom can run a monetary system as superbly as it runs the rest of the economy. Contrary to many writers, there is nothing special about money that requires extensive governmental dictation.

Money is a Commodity

For those who have not done so, I highly recommend downloading and reading the Rothbard's eBook What Has Government Done to Our Money?

The key point is number two: "Money is a commodity. It differs from other commodities in being demanded mainly as a medium of exchange."

Bitcoin is clearly a commodity whose primary purpose is a medium of exchange.

Bitcoin depends on a blockchain ledger to validate all transactions. Bitcoin Wiki has a nice description of the BlockChain Technology.

What About Gold and BitGold?

BitGold has nothing to do with Bitcoin. The names just happen to be similar. Bitcoin is a digital currency, backed by nothing, whereas BitGold is 100% backed with audited, real physical gold.

BitGold does not depend on blockchain. Instead, BitGold users can tie their account to a debit card and purchase nearly anything, anywhere, as long as the merchant accepts a debit card.

Given that gold can once again easily be used to purchase nearly anything, it is difficult if not impossible to say that gold is no longer a "medium of exchange".

And if BitGold is money, there is no longer any basis for the often heard phrase "gold is not money".

Some believe gold to ceased to be money following President Nixon's Closing of the Gold Window (See Nixon Shock).

The only possible debate about whether or not gold is money pertains to the phrase "demanded mainly as a medium of exchange".

BitGold, GoldMoney

For those who are fed up with currencies backed by nothing, as well as those who want to avoid huge markups on gold coins and gold bullion purchased in small quantities elsewhere, I highly recommend opening up BitGold or GoldMoney accounts.

Disclosure

As I have noted before, I have a relationship with both GoldMoney and BitGold.

Storage fees at GoldMoney are the lowest in the industry. I get a tiny percent of the tiny storage fees collected. There is no difference to the account holder.

At BitGold, I get a small signup fee, and again that comes out of BitGold's pocket, not the account holder.

I do not enter relationships to collect fees. I turn down such offers all the time.

Related Articles

Want out of the competitive debasement fiat currency QE and negative interest rate trap?

Then Sign Up for your BitGold Account today if you have not already done so.

Mike "Mish" Shedlock

Regional Fed Reports Five for Five in Contraction; Texas Region Worsening, Richmond Negative Again

Posted: 27 Oct 2015 09:44 AM PDT

Dallas Regional Activity Dives Deeper Into Contraction

Yesterday the Dallas Fed general activity index slipped further into contraction to -12.7, well below the Bloomberg Consensus Estimate of -6.0, and also lower than the lowest guess of -7.0.

Look no farther than to the Dallas Fed manufacturing survey for evidence on how severely low oil prices are affecting the energy sector. Contraction for the general activity index deepened to minus 12.7 in the October report from September's minus 9.5. This is the 10th negative reading in a row. New orders are now negative for a 12th month in a row, at minus 7.6, while unfilled orders are on a similar streak, at minus 3.1. Production is positive for a second straight month, at plus 4.8 in a reading that, however, is very likely to return to the negative column given how low orders are. Hiring is flat with price readings, especially for finished goods, in contraction. This report joins those from Empire State, Philly Fed, and Kansas City which are all pointing to another month of contraction underway for the nation's factory sector.

Richmond Makes it Five for Five

Today's Richmond Fed report makes it five for five in contraction, albeit just barely, at -1. Bloomberg Econoday reports ...

The Richmond Fed makes it five for five, that is five regional Fed reports all showing negative headlines for October. The Richmond Fed index did improve, however, to minus 1 from September's minus 5. New orders came in at zero following the prior month's steep contraction of minus 12. But backlog orders, at minus 7, are down for a third month which is not a plus for future shipments or employment. Shipments in October fell to minus 4 from minus 3 which is also a third month of contraction. Hiring is still positive, unchanged at plus 3, but continued growth here is uncertain. Price data are mute with prices received showing slight contraction as they are in other reports. This morning's report on durable goods orders showed another month of broad weakness in September and this report, together with the other regional reports, point to another weak month for the factory sector in October.

Durable Goods Weaker Than Expected

Rounding out the manufacturing weakness, earlier today I reported Cracks in the Economy Widen as Durable Goods Orders Sink. Here are some additional charts.

Durable Goods New Orders

Durable Goods New Orders Excluding Transportation

Transportation, especially large aircraft orders can skew the numbers. The above chart separates out those orders, providing a different perspective.

Mike "Mish" Shedlock

Cracks in the Economy Widen as Durable Goods Orders Sink

Posted: 27 Oct 2015 08:56 AM PDT

The word of the day is "awful". That's the best description of today's durable goods report. Durable goods orders came in at -1.2% lower than the Bloomberg Consensus Estimate of 1.0%. And last month's numbers were revised lower across the board.

There is no way put lipstick on that pig.

Durable Goods Lowlights

The factory sector is showing cracks with orders contracting slightly more than expected, down 1.2 percent in September with August's contraction revised lower to minus 3.0 percent. Other readings are likewise weak with ex-transportation down 0.4 percent following a downward revised 0.9 percent decline in August and with core capital goods orders down 0.3 percent after falling a downward revised 1.6 percent in August.

Other readings include a second straight and sharp 0.6 percent decline in unfilled orders and a third straight decline in inventories, down 0.3 percent which is the sharpest decline since May 2013. The decline in unfilled orders suggests that factories, lacking new orders, are working down backlogs while the decline in inventories points to growing caution in the business outlook. But factories are keeping up shipments which is good for GDP, up 0.2 percent after August's 0.5 percent decline with core capital goods shipments up 0.5 percent after a 0.8 percent decline.

Motor vehicles are a positive in the report, showing a 1.8 percent gain in new orders and a 1.6 percent gain in shipments with both reversing similar sized declines in August. Also positive are electrical equipment and fabricated metals, with both perhaps getting a boost from construction, along with defense aircraft and defense capital goods.

Industries showing declines in new orders include primary metals, machinery, and computers & electronics. Orders for civilian aircraft fell 62 percent in September following a 23 percent decline in August.

This report falls in line with industrial production data where manufacturing in September slipped for the fourth time in five months. Weakness in exports is the balancing factor tipping the factory sector away from growth.

Durable Goods Month-Over-Month and Year-Over-Year

Year-over-year, durable goods orders are down for the eighth consecutive month, and tenth out of the last eleven. Manufacturing is clearly in recession.

Mike "Mish" Shedlock

Keen vs. Keen: Will the Real Steve Keen Please Stand Up?

Posted: 27 Oct 2015 01:31 AM PDT

Economists Prove That Capitalism Is Unnecessary

Several readers sent me a link to Economists Prove That Capitalism Is Unnecessary.

The title was hardly surprising, given that is what many economic illiterates think. However, I was startled to find out it was written by Steve Keen, one of my favorite economists.

Did Steve Keen really propose such a thing? Thankfully, he didn't.

The first sentence of his article reads "Actually they've done no such thing. But they do effectively assume that it's unnecessary all the time. ... I've read this sort of nonsense in dozens of mainstream academic papers over the years, and railed against it in an academic sort of way."

With that, I was more than a bit relieved. And in regards to central planning and ability of bureaucrats to spot bubbles, bad planning, and instability, Keen says ...

"And how would economic agents notice this instability? They would realize that a pattern of relative prices that had occurred once before in the past happened again. Hmmm. O.K.A.Y."

Getting to the heart of the matter, Keen praises Hayek ...

"The strength of a market economy was how it let people combine fragmented and incomplete knowledge in a way that no centralized system could do. Hayek's main target here were socialists who believed that a complex economy could be centrally planned—thus doing away with markets institutionally."

Keen vs. Keen

In his Debtwatch Manifesto Keen proposes three mechanisms for dealing with the debt crisis. The first is a debt jubilee. The second is a mechanism that would act to restrict share prices.

In his third proposal, Keen states "Lenders would only be able to lend up to a fixed multiple of the income-earning capacity of the property being purchased—regardless of the income of the borrower. A useful multiple would be 10, so that if a property rented for $30,000 p.a., the maximum amount of money that could be borrowed to purchase it would be $300,000."

Hmm. How can Keen, me, or anyone else discern the correct "useful multiple"? Shouldn't this be left to the free market?

Keen also discusses full reserve proposals, one by Irving Fisher, the other HR2990 a bill Proposed by Congressman Dennis Kucinich in 2011.

Keen: Technically, both these [full reserve] proposals would work. I won't go into great detail on them here, other than to note my reservation about them, which is that I don't see the banking system's capacity to create money as the causa causans of crises, so much as the uses to which that money is put. The problem comes when that money is created instead for Ponzi Finance reasons, and inflates asset prices rather than enabling the creation of new assets.

Mish: I propose, the system's capacity to create money at will is the very problem. The fact of the matter is central banks can create money but not dictate where it goes. Curiously, Keen is willing to let bureaucrats decide what constitutes Ponzi financing, even though history shows government bodies and central banks have a 100% failure rate at identifying bubbles. Keen is concerned about "where the money goes", yet is willing to trust bureaucrats more than the free market. To quote Keen directly ... "And how would economic agents notice this instability? They would realize that a pattern of relative prices that had occurred once before in the past happened again. Hmmm. O.K.A.Y."

Keen: Though I am a proponent of government counter-cyclical spending, I am skeptical about the capacity of government agencies to get the creation of money right at all times.

Mish: Keen is a proponent of government counter-cyclical spending, but what government? A socialist one? A communist one? Republican? Democrat? Keenian? Mishian? Who decides what is cyclical and what is counter-cyclical? Keen? Bernanke? Hillary? Me?

Given central banks and government bodies have a 0% success of spotting bubbles, Keen's statement about inability of government agencies to get the creation of money right at all times is more than a bit curious.

The simple fact of the matter is that no one needs to sit back and declare what is money and what isn't. No one needs to decide the correct money supply.

Free Market is the Solution

The free market, left on its own accord will decide nicely. The problem is not lack of regulation, the problem is regulation.

The Fed is part of the problem. Bureaucrats wasting money is part of the problem. Corporate cronyism is part of the problem. Free markets, not bureaucratic intervention is the solution.

Those who believe differently need to explain debt bubble boom and busts of ever increasing amplitude.

One either has faith in free markets, or one doesn't!

So, why should government, any government decide what is money and what isn't? Why should any government or any bureaucratic body like the Fed have such powers?

Will the Real Steve Keen Please Stand Up?

In his Forbes article, Keen mostly argues in favor of capitalism and free markets. In his Debt Manifesto, Keen argues for central planning and controls.

I am a big fan of Steve Keen. He has taught me much about debt deflation. Our differences primarily lay in what to do about things.

Free markets are often criticized for causing problems, but can someone, anyone, tell me when they have ever been tried?

In his latest Forbes article Keen nearly gets things correct. He is wrong about the "system's capacity to create money at will" not being the essential problem, yet he hints at it.

That is a start. Now, Keen needs to go through his Debt Manifesto one more time to figure out what is and what is not "central planning" and eliminate everything that isn't.

Steve, what's left?

Mike "Mish" Shedlock

Damn Cool Pics

The Secret Behind The Disappearing Milk Magic Trick

Posted: 27 Oct 2015 01:22 PM PDT

Have you ever seen that trick where someone pours milk into a rolled up newspaper and it magically disappears? Have you ever wondered how it's done? Fear not because the secret behind this common magic trick is about to be revealed.

Don't Be Fooled, This Is Not An iPhone

Posted: 27 Oct 2015 01:14 PM PDT

It might look like an iPhone at first but don't be fooled. This device is something much more powerful.

Seth's Blog : Bravery is for other people

Bravery is for other people

Bravery is for the people who have no choice, people like Chesley Sullenberger and Audie Murphy.

Bravery is for the people who are gifted, people like Ralph Abernathy, Sarah Kay and Miles Davis.

Bravery is for the people who are called, people like Abraham Lincoln, Rosa Parks and Mother Theresa.

Bravery is for other people.

When you see it that way, it's so clearly and patently absurd that it's pretty clear that bravery is merely a choice.

At least once in your life (maybe this week, maybe today) you did something that was brave and generous and important. The only question is one of degree... when will we care enough to be brave again?

• Email to a friend •

luni, 26 octombrie 2015

Mish's Global Economic Trend Analysis

Winter Scramble; Refugees Will Freeze to Death Warns Juncker; Tony Blair Apologizes for Creation of ISIS
Sales, Earning Estimates Contract First Time Since 2009; US Back in Recession?
Warning Shot: Poland Elects Rightwing Eurosceptic, Anti-Immigration Government

Winter Scramble; Refugees Will Freeze to Death Warns Juncker; Tony Blair Apologizes for Creation of ISIS

Posted: 26 Oct 2015 07:30 PM PDT

Scramble is On

November is less than a week away and nighttime temperatures are dropping rapidly.

What is Europe supposed to do with hundreds of thousands of migrants in need of shelter?

This is one of those things German chancellor Angela Merkel, Swedish prime minister Stefan Löfven, and EU head Jean-Claude Juncker should have thought about before welcoming economic migrants with open arms, essentially begging for this very crisis.

Those bureaucrats don't admit their own foolish policies helped create this crisis. Instead, the EU Scrambles to Shelter Migrants as Winter Looms.

Europe is scrambling for ideas on how to detain and process the hundreds of thousands of migrants winding through the continent, yet after months of effort officials are still struggling to make headway before the onset of winter.

Heads of government agreed to come up with 100,000 places in shelters along the so-called western Balkans route after European Commission president Jean-Claude Juncker warned that refugee families could "perish miserably" during the journey from Greece through former Yugoslavia and into Austria and Germany without help.

At the moment, officials are suffering from a dearth of information on the ground as Greece and countries in former Yugoslavia — which often have strained diplomatic relations — either do not collect or fail to pass on information.

"I cannot tell you how many are on the move as we speak," said one EU official.

Berlin has heaped pressure on its neighbours to deal with incoming asylum seekers before they reach German borders, as chancellor Angela Merkel attempts to quell a domestic backlash — among both voters and her own party — against the influx of refugees.

Under the proposals agreed on Sunday, Greece will become a temporary de facto refugee camp for the rest of the EU, with 30,000 places set up by the end of the year — despite vociferous opposition from Greek officials in the past.

Domestic Backlash

The domestic backlash is of primarily of Merkel's making. But blame also goes to Jean-Claude Juncker, Swedish prime minister Stefan Löfven, and anyone else who thought welcoming millions of migrants with open arms and free money was a good idea.

This past weekend, Poland elected a eurosceptic government and domestic backlash contributed to the blowout.

For details, please see Warning Shot: Poland Elects Rightwing Eurosceptic, Anti-Immigration Government.

Refugees will Freeze to Death Warns Juncker

Without assigning any blame to himself for the predicament, Juncker warns Refugees Will Freeze to Death.

Migrants crossing the Balkans will begin freezing to death as winter approaches, the head of European Union has said, as leaders warned the continent was "falling apart" trying to deal with the biggest refugee crisis since the Second World War.

As leaders of eastern European countries turned on each other at a foul-tempered emergency summit in Brussels, they said the Schengen visa-free zone and even the European Union itself could be pulled apart as states threw up borders to halt the influx.

Jean-Claude Juncker, the president of the European Commission, said a solution was urgently needed or thousands of refugee families facing winter temperature on the hillsides and freezing river-banks of Eastern Europe, would die.

"Every day counts," he said. "Otherwise we will soon see families in cold rivers in the Balkans perish miserably."

Miro Cerar, the Slovenian prime minister, said the EU was days from collapse as his country buckled under an "unbearable" influx of migrants.

"If we do not deliver some immediate and concrete actions on the ground in the next few days and weeks I believe the EU and Europe as a whole will start falling apart," he said.

In the worst refugee crisis since the second world war, more than 670,000 people have crossed into Europe this year. Some 56,000 people landed on Greek islands in just six days last week, a record influx as those fleeing Syria race to avoid spending another winter in the refugee camps along the country's border.

But poorly dressed and under-fed, there are mounting fears they will fall victim to rougher seas and the Balkan winter that can reach minus 15C as they attempt to reach Germany and Sweden.

Stupidity of the Day

The very best thing for the migrants and the EU would be if the civil war in Syria stopped.

However, as the Telegraph reports "The US and Saudi Arabia dramatically responded to Russian air-strikes in support of the Assad regime by agreeing to boost their own military and diplomatic support for the Syrian rebels, threatening an ever worsening downward spiral."

Hey, let's ensure the civil war continues and the migrant problem worsens. US policy has not changed under Obama. Here's the general idea: If it's good for war, it's good for the world.

Tony Blair Admits US, UK Policy Created ISIS

When looking to place blame for this mess, don't just look at Europe. President Bush and president Obama have their hands in this mess.

In a wishy-washy admission of guilt, former UK prime minister Tony Blair admitted that US and UK Mistakes Led to Formation of ISIS.

Blair acknowledged that there are "elements of truth" in the view that the 2003 invasion of Iraq was the principal cause of the rise of ISIS.

"Of course, you can't say that those of us who removed Saddam in 2003 bear no responsibility for the situation in 2015," he said.

Guilty as Charged

That is as big of a "We f*d up!" admission from a high ranking bureaucrat as you will ever see.

Don't expect the same admission from president Bush, even though Bush is the single person most responsible for that inane war and this mess.

Don't expect any apologies from president Obama either for his role in the mess. While we're at it, don't expect any apologies from warmonger Hillary Clinton either.

If I failed to offend you, then hopefully it's because you correctly understood from the beginning how stupid that rush to war really was.

Mike "Mish" Shedlock

Sales, Earning Estimates Contract First Time Since 2009; US Back in Recession?

Posted: 26 Oct 2015 12:59 PM PDT

US Back in Recession?

Large US corporations posted their first decline in both earnings and sales since the great recession. Are we back in recession?

That depends on who you ask. Let's kick off the debate with the Wall Street Journal article U.S. Companies Warn of Slowing Economy.

Quarterly profits and revenue at big American companies are poised to decline for the first time since the recession, as some industrial firms warn of a pullback in spending.

From railroads to manufacturers to energy producers, businesses say they are facing a protracted slowdown in production, sales and employment that will spill into next year. Some of them say they are already experiencing a downturn.

"The industrial environment's in a recession. I don't care what anybody says," Daniel Florness, chief financial officer of Fastenal Co. , told investors and analysts earlier this month. A third of the top 100 customers for Fastenal's nuts, bolts and other factory and construction supplies have cut their spending by more than 10% and nearly a fifth by more than 25%, Mr. Florness said.

Caterpillar Inc. last week reduced its profit forecast, citing weak demand for its heavy equipment, and 3M Co. , whose products range from kitchen sponges to adhesives used in automobiles, said it would lay off 1,500 employees, or 1.7% of its total, as sales growth sagged for a wide range of wares.

The weakness is overshadowing pockets of growth in sectors such as aerospace and technology.

Profit and revenue are falling in tandem for the first time in six years, with a third of S&P 500 companies reporting so far. Analysts expect the index's companies to book a 2.8% decline in per-share earnings from last year's third quarter, according to Thomson Reuters.

Sales are on pace to fall 4%—the third straight quarterly decline. The last time sales and profits fell in the same quarter was in the third period of 2009.

Wal-Mart recently warned its sales this year are likely to be flat, down from projection of as much as 2% growth, and cut its earnings forecast for next year as it raises wages. The retailer blamed the strong dollar for the weakening sales growth.

And truckload carriers have warned that they aren't witnessing the usual uptick in retailer demand as the holiday season approaches, thanks to stubbornly high inventories, said Alex Vecchio, a transportation analyst at Morgan Stanley. "Transportation companies are typically a leading indicator, and our data is not good," Mr. Vecchio said.

Sales, Earning Estimates Contract First Time Since 2009

Small to Medium Businesses Struggling

The above report ties in nicely with my Sunday morning post Gardner Business Index Shows Small to Medium Sized Businesses Struggling Most

Gardner Business Index by Company Size

Gardner Metalworking vs. ISM

Gardner Durable Goods vs. ISM

For a description of Gardner Business Media, please see Alternative ISM for Metalworking, Plastics, Composites Suggests Economic Contraction.

Even Large Corporations Suffering

The Gardner Business Index sank deeper into contraction, led by small to medium-sized companies. But as the Journal reports, only select companies are doing well, not all large corporations in general.

Caterpillar turned in miserable earnings. One can brush that off, blaming the slowdown in China and the commodity producing countries.

One can brush off WalMart as wage-related.

But what is one to do with a slowdown in transportation companies?

US Recession Still In Play

My 2015 US recession call is still in play.

Is it possible to have a sales' recession, an earnings' recession, a manufacturing recession, and a transportation recession, but no official recession?

Given the lagging nature of recession calls, it may be a while before we find out.

For an amusing perspective on inaccurate recession forecasts, please see Herman Stekler Award for Bold, Inaccurate Recession Forecasting: 2015 Lakshman Achuthan of ECRI; Mish 2016?

Mike "Mish" Shedlock

Warning Shot: Poland Elects Rightwing Eurosceptic, Anti-Immigration Government

Posted: 26 Oct 2015 10:10 AM PDT

A direct consequence of rising anti-immigration sentiment, Poland Elects Rightwing Eurosceptic, Anti-Immigration Government by an outright, albeit slim majority according to exit polls.

Final results are due tomorrow. Outright majority or not, this election will complicate matters for Brussels on immigration, clean energy, climate control, and relations with Russia.

A spontaneous chorus of the national anthem rang out around the headquarters of Poland's eurosceptic ultraconservative opposition as it learnt of its victory in a watershed election.

Mistrustful of Brussels, suspicious of foreign capital and espousing a social agenda rooted in conservative Catholicism, the Law and Justice party (PiS) won back control of the EU's sixth-largest economy after eight years of centrist rule.

"We have begun a new time, a time of work," said Jaroslaw Kaczynski, the veteran PiS leader, addressing party officials who chanted his name in a rallying cry that will reverberate across the EU.

The return of Mr Kaczynski's party, which ran Poland between 2005 and 2007, poses a number of difficulties for Brussels, already struggling to handle nationalist governments in Hungary and Slovakia over how to tackle the continent's migrant crisis.

Mr Kaczynski, who has condemned Warsaw's decision to accept refugees and said that they could bring diseases to Europe, is an outspoken admirer of Viktor Orban, Hungary's antagonistic prime minister. He has a chequered history with German chancellor Angela Merkel, and is a fierce critic of Donald Tusk, European Council president and a former Polish prime minister.

"[PiS] wants Poland to be more sovereign in Europe, more independent in its politics, but also more effective, more successful" said Michał Szułdrzyński, political editor of Rzeczpospolita, a leading Polish daily. "PiS will like to appear more hawkish towards Brussels, and is keen on an early and spectacular victory, such as a strong No to a common EU climate policy, for example."

Official results are due on Tuesday. But exit polls forecast PiS will win 38 per cent of the vote, enough for a slim majority, which would be the first for any party in democratic Poland. It can also rely on a number of smaller rightwing parties to help it push through legislation, and possibly make mooted changes to the constitution. Andrzej Duda, Poland's president, was also a member of the party before his election in May.

Mr Tusk will have a tough task keeping Poland onside in debates over the migrant crisis, climate change and energy policy, while Warsaw's previously warm relations with Berlin and Paris are likely to experience a chill. While committed to remaining in the EU, PiS has said it wants to repatriate powers from Brussels.

A fierce critic of Moscow, he has said that in power his party would oppose any proposals for Poland to accept more refugees, which could derail EU plans for an expansion of its migrant-sharing scheme. Poland, a key eastern European swing state that has previously helped drag its neighbours into line during EU votes, finally agreed to accept 7,000 migrants this autumn after tense negotiations.

Poland's lurch to the right also poses significant problems for the EU's climate change policies.

The most immediate battle ground will relate to Warsaw's plans for its lossmaking coal mines, where powerful unions are traditional allies of PiS. Brussels says that the country can only pump government money into these as part of a closure programme.

If the new government uses subsidies to keep them open, it will face a tough battle with the European Commission, which would view such a policy as illegal state aid.

More broadly, Mr Kaczynski has also said he is against any new rules that would drastically curb carbon emissions, with the EU facing tough negotiations next year over how the member states will share the burden of slashing back their greenhouse gas emissions by 2030.

Warning Shot

This is a clear warning shot to the nannycrats in Brussels regarding wide-ranging policies on immigration, energy, Russia, and even the euro itself.

I suspect anti-immigration is what kicked PiS over the top to an outright majority. Regardless of the reasons, Polish voters have clearly had enough.

More importantly, what happened in Poland can happen elsewhere.

Will the nannycrats heed the warning? Of course not. Nannycrats cannot and will not listen to anyone who opposes their version of a United States of Europe ruled by nannycrats.

Mike "Mish" Shedlock