The new form of warfare

An interesting look on how Europe wages wars today.

Language is adopting itself to reflect the economic and political transformation (surrender?) now underway. Central bank “independence” is euphemized as the “hallmark of democracy,” not the victory of oligarchy. The task of such rhetoric is to divert attention from the fact that the financial sector aims not to “free” markets, but to centralize control in the hands of financial managers. Their logic is to subject economies to austerity and even depression, sell off public land and enterprises, and reduce living standards in the face of a sharply increasing concentration of wealth at the top of the economic pyramid. The idea is to slash government employment, lowering public-sector salaries to lead private sector wages downward, while cutting back social services.

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Third World countries from the 1960s through 1990s were told to devalue in order to reduce labor’s purchasing power and hence imports of food, fuel and other consumer goods. But Eurozone members are locked into the euro. This leaves only the option of “internal devaluation” – lowering wage rates as an alternative to scaling back payments to creditors atop Europe’s economic pyramid.

So “saving the euro” is a euphemism for governments saving the financial class – and with it a debt dynamic that is nearing its end regardless of what they do. The aim is for euro-debts to Germany, the Netherlands, France and financial institutions (now joined by vulture funds) to preserve their value. (No haircuts for them). The price is to be paid by labor and industry.

Government authority is to lose most of all. Just as the public domain is to be carved up and sold to pay creditors, economic policy is being taken out of the hands of democratically elected representatives and placed in the hands of the ECB, European Commission and IMF. The latter is playing “good cop” for the time being, to the ECB’s “bad cop.” But all financial institutions are willing to see Spain’s unemployment rate rise to 20%, much as in the Baltics, with nearly twice as high an unemployment rate among recent school graduates. As William Nassau Senior is reported to have said when told that a million Irishmen had died in the potato famine: “It is not enough!”

How much austerity is “enough” – for more than the short run? “Helping Greece remain solvent” means, in practice, helping it avoid taxing wealth (“too rich to pay” is the new corollary to “too big to fail”) and roll back wages while obliging labor to pay more in taxes while the government (“taxpayers,” a.k.a. workers) sells off public land and enterprises to bail out foreign banks and bondholders while slashing its social spending, industrial subsidies and infrastructure investment.

One Greek friend in my age bracket has said that his private pension (from a computing company) was slashed by the government. And when his son went to collect his own unemployment check, it was cut in half on the ground that his parents allegedly had the money to support them. The price of the house they bought a few years ago has plunged. They tell me that they are no more eager to remain part of the Eurozone than the Icelandic voters showed themselves last month.

The strikes continue. Anger is rising. When incoming IMF head Christine Lagarde was French trade minister, she suggested that: “France had to revamp its labor code. Labor unions and fellow ministers balked, and Ms. Lagarde backtracked, saying she had expressed a personal opinion.” This opinion is about to become official policy – from the IMF that was acting as “good cop” to the ECB’s “bad cop.”

I suppose that all that really is needed is for people to understand just what dynamics are at work that make these attempts to pay in vain. Creditors know that the game is up. All they can do is take as much as they can, as long as they can, pay themselves bonuses that are “free” from recapture by public prosecutors, and run to their offshore banking centers.

*This article is an excerpt from Prof. Hudson’s upcoming book, “Debts that Can’t be Paid, Won’t Be,” to be published later this year.
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Going green will make US dependent on China

Rare earth metals are needed for the "green" movement such as wind generators. China has essentially a monopoly on those elements. By becoming less dependent on OPEC oil the US will become more dependent on China. Which is worse? I don't know. But it is something never discussed in the green movement is it?

Discretionary spending is collapsing

We keep being told that consumer spending is increasing. Maybe, but only because the dollar is falling like a rock and gasoline, food, and other necessities are more expensive now. Discretionary spending is collapsing and is at 10-year lows. The economy is NOT recovering, it is getting worse by the day.

And it's getting worse . . .

The downside from the CMI shows that things are getting worser and worser.

The market can only go down

Difficult times ahead fot the S&P 500

William K. Black interview

William K. Black does not pull punches. Interview starts at 13:00.

Recovery? Really?

Is this what Tax Cheat Timmy was talking about in his op ed on how the recovery is going just swimmingly?

Investment in malls, office buildings, and hotels continue to crater - some at 20 year lows, and some at all-time lows. I guess that's just one more reason why the stock market continues to rocket upwards. Crazy crazy.

The real GDP chart

The real GDP chart.

Small businesses not too excited about the "recovery"

Reality is very different from the spin machine in DC and the MSM. Small business are not very thrilled with the so-called recovery.

No way to dig out of this hole . . .

Fannie and Freddie are such deep holes that there is no way for the Fed to dig out of this one. Also, GM, owned by tax payers, just bought AmeriCredit which will be the new GMAC (again). Wonderful.

Double Dip is here

Here it comes. Acutally there never really was an end to the recession. Thanks to trillions of dollars spent by the Government to prop things up and pull demand forward some more it only appeared that the recession was ending and there was a recovery. There is no recovery. Period.

ECRI continues to plunge. Someday, maybe, this will affect the stock market. Fundamentals no longer matter. Strange days.

How's the housing deleveraging going? (Not)

One graph tells it all - and why the Fed is so afraid of reality. Reinflating a popped balloon is really difficult.

And this post shows how the US has horribly overbuilt houses over the past 20 years. Housing will crash - it's a matter of when, not if. And it will crash regardless of what the Fed, Congress, and the White House does. Also, with millions of jobs lost (and many will not come back for a long time if ever) there will be even less demand for houses, especially the $500K+ mcmansions.

Whose fault was it?

Pretty much everyone in DC.

Notice the graph on how the debt to GDP has been masking the decline of the US over the past decade. Both Democrats AND Republicans blew up the country.

Small businesses are cratering

There isn't and has not been a recovery - it was all propaganda. Also, the gdp numbers were propped up solely from huge (trillions) of government spending.

Small businesses are hurting. It's just another disaster being covered up by the government.

Also, as long as small businesses are not hiring the overall unemployment situation will not improve as seen here.

Many small businesses are funding themselves with credit cards which is disasterous long-term with today's rates.

The real job numbers

Obama gave speeches this week touting the wonderful jobs numbers but reality is quite different from propaganda. Here is a great post from Slope of Hope on what the job numbers are REALLY like (just another reason NOT to listen to anything on CNBC):

In the spirit of the words of the legendary samurai swordsman, Miyamoto Musashi (Book Of Five Rings), "Think of what is right and true. Learn to see everything accurately", let us parse the number we have been given on Friday, June 4, 2010. Hat tip to John Williams of Shadowstats for methodology.

Employment increased by 431,000 jobs was the reported number. Of that 431,000 jobs, 411,000 were temporary census jobs created by the 2010 Census. These jobs disappear in a few months. The Bureau Of Labor Statistics says that 31,000 new jobs created in May were TEMPORARY service jobs. These 31,000 jobs were also included in the May figure.

Next we come to the infamous birth/death deflater. This attempts to measure the creation of new jobs due to the formation of new small business enterprises. In an economic expansion, there maybe some merit to this. In an economic contraction, it creates pure fantasy. Included in the May report was the fantasy of an increase 215,000 jobs due to this "factor."

Let us do the math here together. 431,000 jobs less the census temporary hiring leaves us with 20,000 new jobs. Subtract out the 31,000 TEMPORARY service jobs and we have a LOSS of 11,000 jobs. From this, we need to subtract out the birth/death deflater fantasy number of 215,000 jobs and we are now at a LOSS of 226,000 jobs! Now it really starts to get "fun." Though not statistically rigorous, a case can be made that in order to keep up with population growth, 150,000 new jobs must be created per month just to stay even. IF you were to add that number in, the jobs that were NOT there would be a negative 376,000.

Month of June. A month for joyous graduations. We should all have a moment of silence and send out good thoughts to the June graduates of 2010. They are coming out of our institutions of higher learning, most laden with student loan debt and will have a very difficult time finding part-time jobs at WalMart stocking shelves at a minimum wage.

The market did not believe the numbers on Friday either. It seems that the managers of the perception manipulation machinery are running out of tricks. MOPE (Management Of Perspective Economics) is beginning to fail.

I will leave you with the wise observation of Herr Doctor Joseph Goebbels, Reich Minister for The Ministry of Public Enlightenment and Propaganda.

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

The first sentence is often quoted. Once you read the complete quote, you will understand WHY the rest is usually omitted.

http://slopeofhope.com/2010/06/a-dissection-of-the-may-employment-report-market-sniper.html

Are we there yet?

http://jessescrossroadscafe.blogspot.com/2010/05/guest-post-slouching-towards-despotism.html

Raising taxes will not raise tax revenues

Karl Denninger buried a very important stat in a post about Germany here:

http://market-ticker.org/archives/2347-I-Know!-Lets-Vilify-Germany!.html

Here is the stat:

Historically, no matter the tax rate, governments seem to be unable to collect more than about 20% of GDP in taxes.

The human nature in people seem to have a built in monitor for what is fair in paying taxes. Once that threshold is reached people will start to find ways to avoid the increase in taxes such as saving more instead of spending, using cash transactions, bartering, paying people in perks, finding other ways to hide income/assets, starting businesses so that they can write off expenses and losses, move to other cities/states/countries that have lower tax rates , selling investments at a loss, setting up trusts, donating to charity, etc. Also, increased taxes will hurt GDP on the other side of the ratio.

We are going to see countless articles about "unexpected" shortfalls in tax revenues for cities, states, and countries over the next few years. Rasing tax rates DOES NOT mean that there will be a equal increase in tax revenues. Unfortunately, politicians are ignorant of math and the human nature in regard to paying "fair" amounts of taxes. They are going to continue to increase taxes and fees on everything they can think of but will, over and over, be shocked at how the tax revenue streams just aren't increasing accordingly. The MSM will be equally shocked.

The day the market almost died

http://www.zerohedge.com/article/day-market-almost-died-courtesy-high-frequency-trading

The last dance

Now that Germany has capitulated and has decided to bail out Greece (and Italy, Spain, Portugal, and every other EU country that's lining up at the trough) the die is cast. Rome is burning. This is the last dance.

http://www.zerohedge.com/article/michael-krieger-last-dance

Europe is on fire. The EU is dead. It's over.

http://www.zerohedge.com/article/john-taylor-dead-man-walkingthe-euro-finished

Cutting back not enough for PIIGS

The paragraph below is excellent at describing the real problem with Greece and the PIIGS - it's competitiveness, not just spending and debt. The same could be said of the US today. Without a competitive engine no deficit reduction measures will bring the country back to health by itself - one can't starve themselves back to health. And the only ways to create wealth is to build something, grow something, or mine something. The only free lunch comes from the energy of the sun. If companies and consumers are willing to use slave labor, no pollution controls, poor working conditions with no recourse, etc., by outsourcing to China, India, and others, then the competitiveness of the West will continue to decline in competitiveness. Collapse is coming for the PIIGS, Europe, Japan, and the US.

If you're really good at making a pigs ear of things, why not join the EU? Of course, this is not meant as a piece of solid advice, rather it is a cry of frustration at being impotently forced to watch so many things done so badly, each in turn, and one after the other. Southern Europe's problem is essentially a competitiveness problem, and not a fiscal one, and if many states have been having growing difficulty with their negative fiscal balances, this is a symptom of the problem, and not its cause. Even in the worst of cases - countries like Greece and Portugal - the rising recourse to fiscal outlays has been a response to lack of "healthy" growth, and the root cause of this continuing difficulty in generating real growth has been the underlying lack of competitiveness, and the inability to export your way out of trouble once the burden of debt starts to rise, so simply pruning the fiscal side isn't going to cure the problem, and by now that simple point should be obvious, I would have thought.

http://globaleconomydoesmatter.blogspot.com/2010/03/why-not-unravel-imf-too-while-were-at.html