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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for November, 2011

Roubini tweet

Posted by WARREN MOSLER on 20th November 2011

interesting:

chart

Posted in Greece | 16 Comments »

EU Staff Threaten Strike Action Over Belt-Tightening

Posted by WARREN MOSLER on 18th November 2011

Occupy Brussels…

EU Staff Threaten Strike Action Over Belt-Tightening

BRUSSELS (AFP)–European Union staff unions on Friday threatened strike action next week to protest belt-tightening measures as the bloc goes on an austerity diet.

A statement from an “Inter-institutional Joint Front” representing the 55,000 staff across the European institutions has called an assembly on Tuesday following a breakdown in conciliation talks with the European Commission.

European staff wages vary widely: from EUR2,650 per month before tax and social welfare payments, to EUR23,000 gross for each of the 27 national EU commissioners.

Staff are concerned by a bid to overhaul staff rules and by a letter signed by 17 of the 27 EU states that criticizes automatic wage adjustments and links the possibility of wage hikes to the economic situation.

The 17 austerity-driven nations also say an increase in retirement age from 63 to 65 isn’t sufficient.

Staff unions on the other hand criticize working conditions on their Facebook page

Posted in EU | 2 Comments »

German Foreign Ministry confirms it is considering the possibility of more eurozone “orderly defaults”

Posted by WARREN MOSLER on 18th November 2011

In this case default = EU sanctioned debt forgiveness,
which, at this point in time, only reinforces the notion that
no one with any fiduciary responsibility should be buying any euro member debt.

This shortens the time frame between now and when things get bad enough for
Germany to permit the ECB to do what it takes to get past the national govt solvency issue.

Germany confirms it is considering more eurozone “orderly defaults”

Berlin/Brussels (DPA) — The German Foreign Ministry on Friday confirmed that Germany was considering the possibility of more eurozone “orderly defaults” beyond that of Greece, as suggested by a paper leaked by the British press.

The Daily Telegraph published a six-page document, attributed to the Foreign Ministry, suggesting that partial bankruptcy must be made possible for all euro members “unable to achieve debt sustainability.”

“There must also be the option of an orderly default (of a struggling euro member) to reduce the burden on taxpayers” in other eurozone members which are paying for its bailout, the document said.

“There is nothing secret about it,” the ministry said Friday, stressing that it contained ideas on which Foreign Minister Guido Westerwelle had already publicly commented upon.

At the start of the euro debt crisis, EU leaders maintained that no country would ever fail to pay back debts. This year the taboo was broken with Greece, as private lenders were ordered to take a 21 per cent hair cut on Greek bonds. The figure was then raised to 50 per cent.

The memo proposed that “orderly default” procedures should be governed by the European Stability Mechanism, the new euro rescue fund which, under current plans, is due to enter into operation in 2013.

The paper also backed strong EU interference in the economic affairs of eurozone budget sinners, proposing that a country not meeting austerity targets could “have concrete budgetary measures imposed upon it,” such as “specific spending cuts” or new taxes.

But commenting on Dutch proposals to create an EU commissioner with direct powers of intervention in national budgetary policies, it warned that “the constitutional provisions on the budgetary autonomy of the Bundestag (German parliament) must be observed in every case.”

Recalling well-known German positions, the document called for EU treaty changes to implement the budget discipline reforms it advocated, which also include the possible freezing of EU regional aid and taking budget sinners before the EU Court of Justice.

But it also accepted that such course of action may not be possible.

“In case (an EU treaty change) is not politically feasible, an alternative treaty between the member states that is legitimate under international law ought to be considered,” it said.

Posted in EU, Germany | 2 Comments »

Goldman- worries about the inflationary impact of debt monetisation are exaggerated

Posted by WARREN MOSLER on 18th November 2011

Good to see Dirk at Goldman is pretty much spot on:

German Economic Commentary : Chancellor Merkel not keen on more a proactive ECB stance

Published November 18, 2011

Chancellor Merkel gave a speech in Berlin yesterday where her main message with respect to stabilisation measures was essentially: No! Merkel rejected the introduction of Eurobonds but also any commitment from the ECB’s side to be the lender of last resort for Euro-zone governments.

There are several arguments the German government/Bundesbank are putting forward against a more pro-active stance of the ECB. First, a more pro-active role would not be in accordance with the treaties. Second, it would create moral hazard as it would reduce the incentive for governments to consolidate and reform. Third, debt monetisation, sovereign debt purchases by the ECB, leads to inflation. The latter argument was echoed by the chairman of the council of economic experts Franz, who said in an interview with FAZ newspaper that debt monetisation is a “deadly sin” for a central bank.

These are valid arguments, but only up to a point. In particular the worries about the inflationary impact of debt monetisation are exaggerated. Sovereign debt purchases of a central bank do not necessarily lead to inflation (see the example of Japan, although it can, see the example of Zimbabwe). It can lead to inflation if these purchases are used to finance an expansionary fiscal policy that will lead to strong growth and demand outpacing supply such that price setters will increase their prices. Fiscal policy, however, will be quite restrictive in the Euro-zone in the coming years. Italy, for example, aims at tightening fiscal policy by almost 3% next year on our estimate (we calculate this as the change in the structural primary fiscal balance). And while it remains to be seen whether the fiscal targets will be met, it is a safe bet that fiscal policy will not be expansionary in the Euro-zone for quite some time.

It can also lead to inflation if there is an excessive debt overhang, i.e. the fiscal position of a country is clearly unsustainable. Put differently the expansion of the monetary side is, even in the long run, not backed by a similar expansion of the real side of the economy. As we have argued in the past we see this only as a remote risk.

What the ECB is currently doing under its SMP is essentially swapping one savings instrument (peripheral sovereign debt) for another (cash) as private sector investors, for various reasons, no longer want to hold peripheral debt. But this has no inflationary implications unless one assumes that investors are spending the cash thereby stimulating demand which then leads to inflation. But these investors are not holding cash because they want to increase their spending, but because they think, rightly or wrongly, that cash is more rewarding from an investment point of view.

There are no easy choices and it would have been, no doubt, better if the ECB had never got in the position it is in now. But the current situation demands a careful weighing of the risk involved with any decision taken. The inflationary risk thereby seems to be getting an unduly high weight in the consideration of German policy makers.

Dirk Schumacher

Posted in EU, Inflation | 35 Comments »

Franco-German Spat on Role of ECB Renewed

Posted by WARREN MOSLER on 18th November 2011

Not long ago France would have conducted a nuclear test to make the point.
Today, it takes a core meltdown to make the point:

Franco-German Spat on Role of ECB Renewed

By Tony Czuczka and Mark Deen

November 18 (Bloomberg) — The failure of European leaders to end the debt crisis with their broadest effort yet has revived a Franco-German dispute over theEuropean Central Bank’s role and fueled investor concerns over policy makers’ economic impotence.

ECB chief Mario Draghi today slammed governments for failing to implement policy commitments as holders of Greek debt began talks in Athens on structuring a 50 percent writeoff that was the cornerstone of a deal pieced together last month at an all-night summit. Officials in Berlin and Paris yesterday swapped barbs and European borrowing costs outside of Germany rose to euro-era records.

The discord highlighted markets’ brushoff of a package that included a scaled-up rescue fund, proposed guarantees of sovereign debt and a bid to attract more international loans. The accord, which finance ministers aim to implement next month, was at least the fourth plan billed as a comprehensive strategy to end the crisis born in Greece in 2009, none of which provided a lasting fix.

“Where is the implementation of these long-standing decisions?” Draghi said in a speech in Frankfurt today. “We should not be waiting any longer.”

Stocks slid, dragging the MSCI All Country World Index to a six-week low. The Stoxx Europe 600 Index decreased 0.7 percent. The premium France pays over Germany to borrow for 10 years jumped to a record 200 basis points yesterday, as yields on bonds of countries from Portugal to Finland, the Netherlands to Austria also rose relative to Germany.

Posted in ECB, EU, Germany | 4 Comments »

DJ Fed’s Bullard: Notion Of ECB Riding To European Rescue Unlikely -CNBC

Posted by WARREN MOSLER on 17th November 2011

Posted in ECB, Fed | 12 Comments »

My big fat Greek MMT exit strategy

Posted by WARREN MOSLER on 17th November 2011

Due to popular demand, I’ve begun outlining a Greek exit strategy to exit the euro currency,
and instead use its own new currency to provision itself:

1. The Greek government would announce that it will begin taxing exclusively in the new currency.
2. The Greek government would announce that it will make all payments in the new currency.

That’s it, deed done!
The govt can now provision itself and continue to function on a sustainable basis.

Now some Q and A:

Q. How will the new currency exchange for euro?
A. The new currency will be freely floating, with exchange between willing buyers and sellers at market prices.

Q. What about the existing euro debt?
A. Announce that it will consider it on a ‘when and if’ basis with no specific payment plans.

Q. What about existing govt contracts for goods and services?
A. They will be redenominated in the new currency.

Q. What about euro bank deposits and euro bank loans?
A. They remain in place.

Q. What about foreign trade?
A. Markets forces will function to adjust the trade balance to reflect foreign desires to accumulate financial assets denominated in the new currency.

To maintain full employment and internal price stability, I would further recommend the following:

1. The govt would fund a minimum wage job for anyone willing and able to work.

2. For any given size government, taxes should be adjusted to ensure the labor force that works for that minimum wage be kept to a minimum.

3. I would recommend the govt levy only a tax on real estate for the following reasons:
   a. Compliance is maximized and compliance costs and related issues are minimized- if the
       tax isn’t paid the property can be simply sold at auction.
   b. Everyone contributes as either an owner of the property or as a renter as the owner’s costs
       are ultimately passed through to renters.
   c. Transactions taxes are eliminated, thereby removing those restrictions on transactions.
       Freedom to transact is the source of that substantial contribution to real wealth.

4. A zero rate policy where govt deficit spending remains as non interest bearing balances held by counter parties at the Bank of Greece, and no govt securities are permitted.

5. All bank deposits in the new currency will be fully insured by the govt.

6. Banks will be govt regulated and supervised, which will include a 15% capital requirement, govt guaranteed liquidity, and a prohibition from any secondary market activity.

Comments welcome with additional questions, thanks!

Posted in EU, Greece | 122 Comments »

Signs of Disinflation (Hatzius)

Posted by WARREN MOSLER on 17th November 2011

And this Fed fears deflation a lot more than inflation:

  • We see signs that the upside inflation surprises of 2011 have ended. Our new statistical summary of the price components of business surveys such as the ISM, Philly Fed, and NFIB points to decelerating inflation. In addition, our unweighted CPI diffusion index, which measures the breadth of price changes across 178 detailed price categories, fell to its lowest level since late 2010.

Inflation has been above our expectations in 2011, but we expect a substantial part of this surprise to reverse and see core inflation clearly below the Fed’s “mandate-consistent” level of 2% or a bit less by the end of 2012. The reasons are straightforward. There is still a large amount of slack in the US economy; nominal wage inflation remains very low; and much of the inflation pickup of 2011 can be traced to temporary factors such as short-term commodity price pass-through and upward pressure on motor vehicle prices in the wake of the Japanese earthquake. (We do not expect a full reversal of the core inflation pickup because the increase in rent inflation is likely to be more persistent.)

The recent inflation data have started to look more consistent with our view of moderating core inflation. The consumer price index (CPI) excluding food and energy has risen at an annualized rate of just 1.2% over the past two months, the lowest rate since December 2010 Statistically based measures of core inflation such as the Cleveland Fed’s weighted-median and 16% trimmed-mean CPI send a similar message.

Our unweighted CPI diffusion index is also starting to look a bit more benign again. It is constructed by seasonally adjusting all 178 individual CPI categories for which we have sufficient data, calculating the month-to-month change, and then reporting the percentage of categories showing price increases plus half the percentage showing no change. That is, values above 50 indicate that more categories are seeing price increases than decreases; the higher above 50, the greater the breadth of price increases relative to price decreases. (We perform our own seasonal adjustment because the Labor Department only provides seasonally adjusted CPI data for a subset of product categories.) Exhibit 1 below shows our diffusion index. While it is still clearly above the levels of 2009 and 2010, the October 2011 reading was the lowest since November 2010.

Exhibit 1: CPI Diffusion Index Has Started to Slow

chart


To gain more insight into future inflation trends, we have constructed a new measure that summarizes the inflation signal from various business surveys. Specifically, we calculated the first principal components of the price-related questions in the monthly ISM, Chicago PMI, Philly Fed, NFIB, Kansas City Fed, and Richmond Fed business surveys. These questions refer to prices paid, prices received, or wages and salaries and are generally reported as the difference between the percentage of respondents saying that prices rose in the survey month and the percentage saying that prices fell. (Focusing only on prices paid or prices received indexes does not make a significant difference to the results.)

The results are shown in Exhibit 2 below. In general, our business survey indicator of inflation tracks the ups and downs of the core PCE index–the Fed’s favorite measure of underlying inflation–reasonably well. After a significant acceleration in early 2011, the indicator has declined notably in recent months and is now consistent with a deceleration in core PCE inflation from the recent 2%+ level to somewhere closer to 1.5%. This is also consistent with our forecast that inflation will slow over the next year.

Exhibit 2: Business Survey Inflation Shows Recent Deceleration
chart

Posted in Fed, Inflation | 19 Comments »

(RNC) Chairman Reince Priebus on the deficit

Posted by WARREN MOSLER on 17th November 2011

With the Republicans now willing to hike taxes out of fear of becoming the next Greece, the odds of the super committee going super big are increasing.

“America has crossed an unthinkable threshold: our national debt now exceeds $15 trillion dollars. That’s more than $48,000 per citizen,” Republican National Committee (RNC) Chairman Reince Priebus said. “In 2009, President Obama promised to cut the deficit in half by the end of his first term. Instead, he further accelerated its growth, producing three years of record deficits.”

Posted in Deficit, Government Spending | No Comments »

Singapore exports weak – following downward revision to Korea’s export numbers

Posted by WARREN MOSLER on 16th November 2011

SINGAPORE OCT NON-OIL DOMESTIC EXPORTS -5.9 PCT S/ADJ MONTH-ON-MONTH; REUTERS POLL +1.6 PCT

SINGAPORE OCT NON-OIL DOMESTIC EXPORTS TO US FALL 50.6 PCT Y/Y; NON-OIL DOMESTIC EXPORTS TO EU FALLS 30.9 PCT Y/Y

SINGAPORE OCT NON-OIL DOMESTIC EXPORTS -16.2 PCT FROM YEAR AGO; REUTERS POLL -8.0 PCT

Posted in trade | No Comments »

It must be impossible for the Fed to create inflation now on Huffington Post

Posted by WARREN MOSLER on 16th November 2011

Now on Huffington Post:

It must be impossible for the Fed to create inflation

Posted in Fed, Inflation | 8 Comments »

Peter Schiff Show

Posted by WARREN MOSLER on 16th November 2011

Warren will be on the Peter Schiff Show tomorrow, 11/17/2011, at 10:33 am EST.

Find your local station here, to listen live.

Or stream here.

Otherwise this loop will play for 24 hours after the conclusion of the show.

Topic:

>   
>   As for topics, I thought we could talk about your piece on inflation failing to manifest
>   despite the dire warnings.
>   

Posted in Inflation, Radio | 101 Comments »

Japan’s Hidden Jobless Hits 4.69mn, Worse Than After Lehman Shock

Posted by WARREN MOSLER on 16th November 2011

Japan’s Hidden Jobless Hits 4.69mn, Worse Than After Lehman Shock

November 16 (Nikkei) —The number of Japanese that want to work but are not actively seeking employment has surpassed levels from after the global financial crisis erupted, according to government data released on Tuesday.

Some people have given up searching for work because they believe that the jobs they desire are not available. Known as hidden unemployment, such individuals are not reflected in official unemployment statistics, which cover those actively hunting for jobs by going to employment centers, for example.

The hidden jobless in Japan jumped by 190,000 from a year earlier to 4.69 million in the July-September quarter, excluding the three prefectures hit hardest by the March 11 disaster, the Internal Affairs Ministry said.

The figure is nearly 70% larger than the number of officially unemployed people. It is also higher than the 4.61 million in the July-September quarter of 2009, when the employment market deteriorated sharply after the financial crisis.

Of the hidden jobless, the number of women grew by 60,000 while men surged by 130,000. Asked why they are not seeking work, more people replied that there are no jobs that match their skills or their desired conditions such as pay and work hours. The strong yen and concerns over power shortages are seen as factors resulting in a dearth of openings for good jobs.

The number of unemployed people fell 430,000 on the year to 2.77 million for the July-September quarter, excluding the three disaster-hit prefectures. Of this figure, those that have been out of work for at least a year declined by 190,000 to 1.03 million, down for the second straight quarter. While this suggests that fewer people are without work over the long term, some may have exited the employment market by giving up on the job search.

Posted in Employment, Japan | 2 Comments »

Republicans, fearing Greece, agreeing to tax hikes

Posted by WARREN MOSLER on 15th November 2011

Shows the Republicans truly do fear the US becoming the next Greece,
as they begin to lean towards tax hikes.

Meanwhile, they continue keeping us on the road to Japan.
Or worse.
A lot worse.

Republicans Consider Breaking No-Tax Vow as Deadline Looms

By Brian Faler

November 15 (Bloomberg) — For Senator John Cornyn, it was the situation in Greece.

The Texas Republican said he is willing to back tax increases as part of a major deficit-reduction deal because he fears the European debt crisis could spread to the U.S.

“We’ve never been in this spot before,” said Cornyn, who also leads his party’s effort to elect more Republicans to the Senate. “We’re looking over at Europe and what’s happening in Greece and Italy — we risk having another huge financial crisis in this country, and we’ve got to try to solve the problem.”

He is one of a growing number of Republicans, many with otherwise impeccable anti-tax credentials, who say they are willing to raise taxes to reach a big deficit-reduction deal with Democrats.

That may help insulate them from charges of stubbornness if Congress’s bipartisan supercommittee doesn’t meet its Nov. 23 deadline to find a way to cut $1.5 trillion. For now, it’s helped shift Washington’s debate to how much, rather than whether, to raise taxes.

Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said he is encouraged by the shift even as Democrats scoff at a specific Republican proposal.

“It’s a step in the right direction for them to just rhetorically cross that line,” said Conrad.

‘Real Trouble’

Asked if Republicans were trying to set up a blame game should the supercommittee fail, Conrad said, “I hope not” because “if we aren’t beyond that, we are in real trouble.”

Democrats say the Republican deficit plan relies too heavily on spending cuts and would give the wealthy too much of a tax break. Some question whether its numbers add up.

At issue is a proposal by the supercommittee’s Republicans to trade permanent cuts in income tax rates, with the top rate dropping to as little as 28 percent, for new limits on deductions, exclusions and other tax breaks. They estimate that it would produce $300 billion to reduce the deficit.

The plan’s principal author is Senator Pat Toomey, a Pennsylvania Republican who previously led the Club for Growth, a Washington anti-tax group. House Speaker John Boehner, an Ohio Republican, today endorsed the proposal, calling it a “fair offer.”

Some conservative organizations are accusing Republicans of trying to hide tax increases through the Toomey plan.

Norquist Reaction

“Closing tax loopholes is all well and good,” said Americans for Tax Reform president Grover Norquist in an opinion article in Politico. “But doing so to raise revenues is just as much a tax hike as raising tax rates.” He added, “Any congressman who wants to keep his promise to voters to oppose tax increases” must oppose the plan.

Many Republican lawmakers are also unhappy with the proposal. “We don’t have a tax problem — we have a spending problem,” said Senator Jim DeMint, a South Carolina Republican. “For us to get lulled into ‘how much to raise taxes’ in this thing is foolish.”

Senator Orrin Hatch, the top Republican on the tax-writing Finance Committee, said, “Some of these loopholes really aren’t loopholes.” He called them “important policy provisions, like the home interest mortgage deduction.”

Republican supporters of the plan say they are trying to lock in lower income-tax rates that will otherwise jump if, as is currently scheduled, the tax cuts enacted in President George W. Bush’s administration expire at the end of next year. President Barack Obama opposes extending the Bush-era cuts for those earning more than $250,000, and Republicans are unlikely in the 2012 elections to win the Senate votes they would need to keep the tax cuts in effect.

‘Biggest Tax Increase’

“What we’re trying to do is avoid the biggest tax increase in the history of the country,” Senator Charles Grassley, an Iowa Republican, said of Toomey’s plan.

Toomey declined to comment other than to point to a Nov. 10 Wall Street Journal editorial quoting him as calling his proposal a “bitter pill” that is “justified to prevent the tax increase that’s coming.”

A number of Republicans are playing down anti-tax pledges they signed with Norquist’s group. “We take an oath to uphold the Constitution” and “that trumps any and every consideration,” said Cornyn.

“I didn’t know I was signing a marriage vow,” said Representative Mike Simpson of Idaho, one of 40 House Republicans who recently signed a letter signaling willingness to raise taxes as part of a major deficit-cutting deal.

Shifting Opinion

Senator Lamar Alexander of Tennessee, the chamber’s third- ranking Republican, said he saw a sign of shifting opinion when three of the supercommittee Republican members — Toomey, Rob Portman of Ohio and Arizona’s Jon Kyl — briefed Senate colleagues on their plan and no one complained.

“For Pat Toomey and Portman and Kyl to come in and tell a whole roomful of Republicans that ‘we’ve put $250 billion of tax increases on the table’ and not get a murmur of dissent is remarkable,” said Alexander.

Senator Saxby Chambliss, a Georgia Republican, said his party’s lawmakers should consider bigger tax increases if it would lead to a larger debt-reduction deal, because the political price they would pay will essentially be the same.

“You’re going to be criticized by the same people irrespective of what the number is,” said Chambliss.

Posted in Deficit, Government Spending, Greece, Political | 43 Comments »

Retail Sales/Empire/PPI/Evans- GDP remains firm

Posted by WARREN MOSLER on 15th November 2011

As previously discussed, GDP looks to be growing sequentially, and should do fine next year if fiscal policy doesn’t tighten.

But still not so good for people working for a living, pretty good for corporate earnings.

And risks remain- Europe, China, Super Committee, etc. etc.

And look for a relief rally if Europe all agrees the ECB writes the check,
followed by a sell off due to the austerity that accompanies it.


Karim writes:

Data confirms Q4 GDP growth tracking 3.25%.; slight boost to Q1 estimate; more like 2.75% vs 2.5% previously.

RETAIL SALES

  • Up 0.5% headline and 0.6% control group
  • Iphone 4s definitely helped as electronics sales rise 3.7% for the month, largest gain since 11/09

EMPIRE

  • Rises to 6mth high of 0.6 from -8.48 in October; but 0.6 still weak historically.
  • Also, new orders and employment component both soften in the month.

PPI

  • Pipeline pressures receding as -0.3% headline, -0.4% on consumer goods, -1.1% intermediate stage, and -2.5% crude stage

EVANS AND BULLARD

  • Evans advocating 3% inflation target and linking policy guidance to unemployment/inflation objective
  • Also acknowledges he is ‘sufficiently outside’ consensus at the Fed
  • Bullard rejects linking policy to numerical objectives and states would need to see evidence of deterioration in U.S. economy to support additional easing

Posted in Deficit, Fed, GDP, Government Spending, Inflation | 3 Comments »

A note from S&P’s John Chambers

Posted by WARREN MOSLER on 15th November 2011

This makes me sleep a lot better…

November 15, 2011

Dear Warren,

On Nov. 11-12, I spoke at the Caixin Summit 2011 in Beijing on the subject of who will solve the debt crisis. My comments pertained to the euro area and to the rest of the world, and I stated that, in Standard & Poor’s view:

  • External imbalances are as much at the root of the current crisis as fiscal imbalances;
  • Better coordination among international policymakers can help to attenuate these external imbalances;
  • Prior domestic economic reforms will facilitate coordination;
  • Generally, a high level of financial claims is more of a symptom of past failures to reform than the disease itself;
  • If international cooperation and economic reform come up short (which is not our base case), global growth could sputter, public and private sector indebtedness could remain high, and some speculative-grade sovereigns could resolve their fiscal difficulties through default.

Standard & Poor’s believes that what is taking place in the euro area, in several respects, is a microcosm of what is happening globally.

To read my full comments, please click here to access the article.

Please contact me with any comments or questions.
Sincerely,

John Chambers
Chairman of the Sovereign Ratings Committee

Posted in GDP, trade | 10 Comments »

Trading Desk reports “mayhem” in the AAA Eurozone markets

Posted by WARREN MOSLER on 15th November 2011

I just received this.
Seems money managers with fiduciary responsibility are holding off on buying any euro member securities since the 50% Greek haircuts were announced.

Our Trading Desk reports “mayhem” in the AAA Eurozone markets
- France 11bps wider
- Netherlands 6bps wider
France now 178bps over Germany
Increasing talk/fear of Eurozone break up and capitulation trades in AAA markets are widespread.
We are seeing no real demand for anything – even Germany.
Tomorrow’s Shatz auction looks a big ask with a yield of 30bps and no risk appetite out there.

Posted in Uncategorized | 8 Comments »

Korea Exports decline

Posted by WARREN MOSLER on 15th November 2011

Not wrong to think ‘falling off a cliff’ after reading this.

Global demand is softening as public sector deficit spending remains insufficient to offset the relatively low levels of private sector ‘borrowing to spend’:

S.KOREA REVISED OCT EXPORTS +8.0 PCT YR/YR VS PROVISIONAL +9.3 PCT REPORTED EARLIER
S.KOREA SAYS OCT EXPORTS TO EU FALL 20.3 PCT YR/YR, SHARPEST DROP SINCE SEPT 2009
S.KOREA SAYS OCT EXPORTS TO U.S. FALL 3.6 PCT YR/YR, SHARPEST DROP SINCE DEC 2009
S.KOREA SAYS OCT EXPORTS TO CHINA RISE 14.6 PCT YR/YR, SLOWEST GROWTH SINCE APRIL

Posted in trade | 2 Comments »

Comment From Reader

Posted by WARREN MOSLER on 14th November 2011

Neil says:

In 1847 Ignaz Semmelweis showed that the washing of hands in a chlorinated lime solution reduced the incidences of death in surgery.

It conflicted with the established orthodoxy at the time and he was ridiculed for it. It took over 25 years before Surgeons started to wash their hands before Surgery. In the meantime countless unlamented people died at the hands of dirty Surgeons who thought they knew better.

It led rise to a term – the ‘Semmelweis reflex’ – a metaphor for a certain type of human behaviour characterized by reflex-like rejection of new knowledge because it contradicts entrenched norms, beliefs or paradigms.

How many unlamented individuals are to die due to the Semmelweis Reflex in economics?

Posted in Email | 77 Comments »

China News

Posted by WARREN MOSLER on 14th November 2011

Reads to me like policy is moving back towards growth and ‘inflation?’

I don’t expect runaway inflation but enough to continue to fundamentally continue to weaken the currency.

China’s currency has been fundamentally weakened for the last couple of years, while being supported vs the dollar by foreign investment, speculation, and what looks to me like the indirect expenditure of dollar reserves. Should the currency starts falling against the dollar it will tell me those factors have run their course.

Hu Pledges More China Imports as IMF’s Zhu Sees ‘Soft Landing’
China’s Stocks Rise Most in 3 Weeks on Bank Loans, CPI Outlook
China’s Hu pushes for larger global role
Obama warns Hu of U.S. frustrations on trade
Major yuan rise no cure for U.S. economic ills-China’s Hu
China’s Imports Rise Sharply, While Export Growth Slows
China New Loans Rise More Than Expected in Loosening Signal
Former China Banking Regulator Says China 2011 Growth Above 9%
China’s economy on right track: IMF
IMF See Little Decrease in Incentives for Saving in China
Former PBOC Adviser: China’s Economy May Grow 8%-8.5% Annually Over Next 10 Years – Report
China’s Property Market Experiencing ‘Soft Landing’, Fan Says

Posted in China | 3 Comments »