DEBTOR NATION

RUMBLINGS FROM THE PIT

Thursday, May 23, 2013

Eurozone manufacturing and services mired in contraction, sez the Purchasing Managers Index, at 47.7 (below 50 = contraction). Germany, miracle economy that can do no wrong, shrank again, though upticks are visible. France continues to slide downhill rapidly. "The Eurozone's second recession in five years looks set to drag on into a seventh successive quarter," the report said. Accelerating decline of new orders in the service sector; job shedding picking up, companies trying to cut capacity, order backlogs shrinking further, now for almost two years.... Very ugly.

Hitting the China jobs wall: a record 7 million students will graduate from university this year, 190,000 more than last year, according to the Ministry of Education. Yet job openings are down 15%, based on a February survey of 500 companies. It's going to be tough for these educated young people finding an appropriate slot.

Japanese government bonds go crazy again, lose their footing, with yields on the 10-year JGB spiking, briefly kissing 1.0% Thursday morning, the highest in a year, over triple the 0.315% on April 5. The goal of Abenomics and the Bank of Japan's money-printing and bond-buying frenzy is to push down yields, while creating a wave of inflation, thus devaluing the debt, and causing losses for everyone who owns it. In response, investors have been dumping JGBs. The BOJ tried to put a stop to the rout by handing out ¥2 trillion ($19 billion) in the morning. Thankfully, for the BOJ, the Nikkei began to crash, and suddenly these despicable JGBs seemed like a pretty good deal; demand picked up, yields dropped to 0.84%. The BOJ has bought equities before to prop up the Nikkei, but Thursday it was busy propping up JGBs and had to let the Nikkei go. When push comes to shove, it will always support bonds, its number one priority, and let stocks swoon.

China manufacturing contracts in May, after months of fitful near-stagnation, sez the HSBC Purchasing Managers' Index which dropped to 49.6 from 50.4 in April (under 50 = contraction), a seven-month low. A harbinger: New Orders in April had dropped to a five-month low. Ominously, in May, New Orders as well as New Export Orders fell again, as did Employment, Backlog of Work, Quantity of Purchases, among others. “The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds,” said Hongbin Qu, Chief Economist of Asian Economic Research at HSBC. “A sequential slowdown is likely in the middle of 2Q, casting downside risk to China’s fragile growth recovery.” Not very pretty. Though we’ve seen the manufacturing slowdown coming, the reaction on the Asian stock markets is brutal....

Nikkei crashed over 1,460 points, a 9.2% dive peak-to-bottom from its morning high of 15,943, after having been up 300 points early on, to 14,484. For the day, it’s down 1,143 points, or 7.3%. That’s what happens when the air hisses out of a central-bank money-printing induced bubble. The hot money wants to get out.

 

Wednesday, May 22, 2013

H-P revenues plunged 10.1%, worse than expected, with PC revenues down 20%. Only uptick: lowly printing supplies, such as cartridges, paper, ink, up a measly 2%. Earning didn't "completely crater" like Dell's earnings, CEO Meg Whitman consoled her investors. But H-P had a huge write-off not long ago, and who knows what they plowed into it to make subsequent quarters look better. They always do that. Write-off accounting puts some lipstick on expenses, though it can’t do much about revenues. Props up operating income. “You can feel the turnaround taking hold at H-P,” Whitman said. Indeed, feel. Because there's no visible turnaround in the numbers. Nevertheless, stock jumped 13% after hours.

Justice Department admits: drones killed 4 Americans, in a letter sent to Congressional leaders. One of them was Anwar al-Awlaki, in September 2011 in Yemen. While widely reported, the government had never fessed up to it. The other three were Samir Khan (in the same strike); Awlaki’s son Abdulrahman al-Awlaki, also in Yemen; and Jude Mohammed, in Pakistan. Last year, Attorney General Eric Holder had outlined the government’s legal rationalizations behind knocking off Americans overseas – for example when they pose an “imminent threat of violent attack” and when capturing them is inconvenient. While the whole concept is iffy, the rubbery term "imminent" came under particular fire. But certainly, it won’t be abused; after all, there’s a Nobel Peace Prize winner in the White House.

Delta Air Lines rebels against taxpayer subsidies for Boeing because they benefit state-owned foreign airlines that compete with Delta. The US Export-Import bank is helping Boeing sell wide-body jets by helping foreign airlines buy them. CEO Richard Anderson said Delta would be “perfectly willing” to accept a “total moratorium” on financing of jets, which it also benefits from. "We are trying to do whatever we can to get a level playing field in a world where my government decides that they would rather have my competitors in the marketplace than Delta," he said. In April, Delta sued the Ex-Im Bank to put a stop to these shenanigans. It noted that 46% of the $106.6 billion in the Ex-Im Bank's activities are for aircraft loans or loan guarantees. Emirates and Korean Air were among the biggest beneficiaries, and as Anderson told Reuters, they could get funding without "the balance sheet of the US government." Ah the complex web of government handouts.

BOJ Governor Haruhiko Kuroda accepts jumpy yields on Japanese Government Bonds that nearly tripled from the April 5 low of 0.315% to today’s 0.90%, exact opposite of what money-printing and bond-buying is supposed to accomplish. Japanese investors have been fleeing JGBs; inflation, if it rises to 2% or more as per plan, will eat them up without compensation from yield. Add yen devaluation to make a nasty investment. He lost a bit of his brashness: "I am not expecting long-term interest rates to increase sharply considering the strong downward pressure being exerted on them by our quantitative and qualitative easing," he said at the press conference after the BOJ’s two-day huddle that left monetary policy unchanged, with the spigot wide open, committed to buying ¥50 trillion in JGBs a year, or 70% of all new bonds the government is issuing. "I believe it is quite possible to prevent any spikes in long-term interest rates," he said with even less certainty, then submitted to fate and accepted rising yields: "If expectations for economic recovery and inflation strengthen sharply, that could outweigh the risk-premium reducing effect and result in increases in interest rates," he said.

Japan trade deficit soars 69.7% in April to ¥879.9 billion, from April a year ago, the tenth months in a row of trade deficits, the worst series since 1980, and the worst April ever. For each of the last three Aprils, the deficit was worse than in the prior one; same for March, February, and January. The trend is relentlessly awful. Abenomics is deepening the hole, but it’s digging at a faster rate. The weaker yen nudged up exports 3.8%, but imports jumped 9.4%. Don’t blame oil: imported crude oil volume dropped 2.2%. Exports to China stagnated, but imports jumped 13.3%; the deficit skyrocketed 60.2%. However, exports to the US rose 14.8% while imports stagnated; the trade surplus leaped 32.5%. Japan exports twice as much to the US as it imports. Perhaps someone in the White House will someday get Japan to open up its auto market. The trade balance with Western Europe flipped from a surplus a year ago to a deficit; exports fell 3.5% and imports rose 11.4%. Abenomics and the money-printing binge have heated up consumption of imported luxury goods and other items that can’t be produced in Japan. For the rest, Abenomics appears to be a giant miscalculation. The graph for the years 2011, 2012, and 2013 shows the worsening trend:

Despite the awful trade data that was much worse than economists had hoped for, the Nikkei jumped 246 points or 1.6%, to 15,627 – oblivious to reality for months now, drunken with money the Bank of Japan is printing.

 

Tuesday, May 21, 2013

“Apple does not use tax gimmicks,” Apple wrote without twitching an eyebrow apparently, in response to a Senate investigation that showed that it sheltered at least $74 billion in profits from US taxes between 2009 and 2012 by using a "complex web" of offshore mailbox companies. One such Irish subsidiary with no employees and no physical existence made $30 billion in profits and didn't pay a dime to a single government anywhere, not even Ireland. Legal, and proof that the US corporate tax dodge code is a scam that bestows a tax-free environment and other welfare handouts to certain companies, while raking less fortunate and often smaller companies over the coals.

Impact of cheap natural gas in the US: the construction of 97 chemical and plastics plants that use natural gas as feedstock has been announced, with investments over $71 billion, sez the American Chemistry Council (ACC). Among them, in Texas alone: Dow Chemical’s plan to plow $4 billion into ethylene crackers and Exxon Mobil’s plan for an ethylene cracker and two polyethylene plants. Others lining up: Chevron Phillips Chemical, LyondellBasell, and Mitsui & Co. Via OilPrice.com. These companies vigorously oppose the export of liquefied natural gas (LNG) as they fear it would raise prices in the US to the levels natural gas trades for on the world markets. Their pleas fell on deaf ears, a dilemma and opportunity I wrote about.... The Quiet Triumph Of Oil And Gas In Obama’s Policies

Japanese Government Bonds: "Absolutely no guarantee" that Japanese investors will continue to buy them, warned an advisory panel to Finance Minister Taro Aso. Investors who lose confidence in the JGB can easily invest their funds overseas, the report nervously pointed out. Some have already made that shift. Hence the recent spike in yields, despite the Bank of Japan, which is mopping up around 70% of the flood of new bonds that the deficit spending of Abenomics generates. Investors only have to pick up the remaining 30%, but they appear to be reluctant to do so. Why is anyone outside of a government controlled institution still buying this crap?

Finding excuses: Japan supermarket sales dropped 1.9% in April, on a comparable-store basis, from April 2012, with food sales down 0.4% and clothing down 8.8%. Blamed was the "unseasonably cold weather." When sales edged up in February and March, the credit went to Abenomics, not the weather or some other silly thing. A broader media trend: when economic data points are positive, Abenomics gets the credit; when they’re negative, the weather and other reasons are dragged into the scenery, sometimes by their hair.

Mystery pollution in China: unknown foul-smelling goo emerges from cracks in the street, becomes huge, finally gets cleaned up ... and remains unknown.

 

Monday, May 20, 2013

“Every 10 years or so, banks make some horrible mistake and it usually starts with easy money,” said Mike Pinto, vice-chairman of M&T Bank, a regional US bank. “We are worried about the competitive atmosphere. It creates the temptation to do silly things.” He was talking about the credit bubble. US banks made $1.55 trillion in business loans through April, up 10% from last year; banks are falling all over each other trying to goose their profits by making risky loans. US corporations have also sold a record amount of bonds at record low yields and with historically low protections for investors. So now banks are loading up their balance sheets with business loans that will come to haunt them. But no problem. It will just be part of the next financial crisis that will give the eager Fed another opportunity to hand trillions to TBTF bankers to bail them out.

UK wages propaganda war against Scotland, which will hold an inconvenient independence referendum in September 2014. A new report by the UK Treasury, the third in the series, claims that the Scottish banking sector – composed of two large banks, Bank of Scotland and Royal Bank of Scotland, plus smaller ones – would put an independent Scotland at risk. Its assets would be 1250% of Scottish GDP, while the Cypriot banking sector, which brought down Cyprus, was 700% of GDP, the report said ominously. For the UK overall, banking assets are 492% of GDP, also very high. But the UK has “credibility” in the markets to manage that risk, something Scotland would lack. A "feeble attempt to undermine confidence in Scotland's ability to be a successful independent country," retorted Scotland's Finance Secretary John Swinney. "The Treasury, true to form, will outline what is in its own best interests, not what is in the best economic interests of the people of Scotland." He called these assertions misleading; "In terms of share of GDP, in fact, financial services are actually smaller for Scotland at 8.3% than the UK at 9.6%. So if the argument is about risk, then the risk is with the UK," he said.

Now Germany has a real reason to exit the euro: Goldman Sachs CEO Lloyd Blankfein wants it to stay! A bad sign. In an interview with the Welt, he said Germany had profited from the euro the most – from his point of view, “Germany” is “Germany Inc.” But real wages for working Germans have declined since the introduction of the euro, and workers have had a hard time, while wages in Greece, Spain, and other countries have shot up. Though German workers now have jobs, unlike people in Spain and Greece, they earn less than they used to in real terms. For that privilege, German taxpayers (not Germany Inc.) must pay a price, he said, namely bailing out banks and speculators who hold the crappy debt of periphery countries. He predicted utter economic mayhem for Germany if it left the euro. No, German taxpayers will have to bail out weaker countries, he said. And he raved about the "political project" behind the euro, the ultimately total integration of Europe (and of course, he defended TBTF banks, which were more secure, he said, than smaller ones). My question: is Goldman now seriously long the euro?

 

Weekend, May 18 - 19, 2013

Sales skid at S&P 500 companies: 458 companies of the 500 in the index have reported their Q1 results so far: earnings were up a measly 3.4% year-over-year, but sales fell 0.2%. Not exactly the foundation for the gigantic undying stock market rally that has plowed through whatever economic and corporate bad news with nary a twitch. When will this separation of reality from stock prices end? Someday, one way or the other! He who can pinpoint that day will make a lot of money.

Central bank success story: The global market for luxury goods grew 38.6% in three years. From $200 billion in 2009, luxury goods sales jumped 13% in 2010, 11% in 2011, and 10% in 2012, to end up at $275 billion. Despite the Eurozone debt crisis and austerity, despite the earthquake and tsunami in Japan in 2011... no matter what happened in those three years, luxury goods boomed, sez the the just released "Worldwide Luxury Markets Monitor," by Bain & Company for Fondazione Altagamma (PDF). “Absolute luxury items (high-end products with no logo, highest quality materials, and exquisite craftsmanship) lead the way,” the report reassured us, but there were some losers, including “watch consumption” which crashed in China. The report confirmed what we’ve seen everywhere: when central banks hand out trillions to their cronies, it doesn’t do much for the real economy as a whole, nor for employment, but it does one heck of a job at the very top of the pyramid.

"Threat of Default": US hits debt limit on Saturday, but by using a slew of shuffle maneuvers, shell games, tricks, and devices, the US won't actually run out of money until "after Labor Day," Treasury Secretary Jacob Lew told Congress in a letter. In his previous statement, the US would be "okay until Labor Day." Today, he was more frantic. He begged Congress to get its act together and do something "sooner rather than later" to “remove the threat of default.” In its infinite wisdom, Congress had suspended the debt limit till May 18, rather than dealing with it. The debt, though still over the limit, declined in April and early May; tax extractions were fattened by asset bubbles. But since May 10, the debt has once again been rising.

 

Friday, May 17, 2013

US Consumers haven’t felt this good since July 2007, just before all heck broke loose. An "encouraging sign," Reuters sez. For short sellers? The preliminary results of the Thomson Reuters/University of Michigan's consumer sentiment index jumped to 83.7 in May from 76.4 in April. Big part of the reason: households in the upper third of the income bracket felt flush from the ballooning stock market – the wealth effect. The Fed giveth.... They were able to brush off the payroll tax increase, which Wal-Mart shoppers, as we’ve seen, had a harder time brushing off. The Consumer Expectations index rose to 74.8 from 67.8. And the Current Economic Conditions index leaped to 97.5 from 89.9, the highest since October 2007, a month before the stock markets began to swoon. Impeccable timing, the hallmark of consumers.

Car sales in the EU crept up 1.7% in April, from a horrible April last year. The fact that the parade of ever worsening numbers has finally stopped, at least for a moment, was greeted with a huge sigh of relief. The details of the report aren’t that rosy: sales in the UK, now the second largest market after Germany, jumped 14.8%. Without the UK, sales for the rest of the EU actually dropped 0.46%. It wasn't exactly a smooth trend across the member states: Greece finally seems to have hit bottom, and sales increased 20.9%; in Denmark, they jumped 30.7% and in Finland 142.6%; but they crashed 26% in the Netherlands and 51.9% in Cyprus; they rose 3.8% in Germany but dropped 5.3% in France.

Deafening US media hype: Japan Core Machinery Orders jumped 14.2% in March, seasonally adjusted, from February. The eternal money-printing and fiscal-stimulus apologists dragged it out as proof that Abenomics is working massively. Alas, these are highly volatile big-ticket items, though “core” orders exclude container ships, nuclear reactors, etc., which are even more volatile. To iron out the volatility, the Cabinet Office also offers quarterly numbers. Soooo, core orders in the first quarter of 2013 were actually 4.8% lower than in the first quarter of 2012, when Noda was prime minister. Kampai!

The Japanese take care of their college grads: 93.9% of all those who graduated on March 31, the end of the academic year, had jobs by April 1, the beginning of the business year. This was the second year in a row that the percentage increased, so it’s NOT related to Abenomics, please! College recruitment, like so many things in Japan, is a highly structured process with the idea to get pretty much everyone squared away before the end of the academic year. But those who miss this entry into Japan Inc. have the greatest difficulty getting through the door later. The system is unforgiving punitive to those who don’t toe the line.

About that secret inflation in Argentina: famously, no one is allowed to accurately track or discuss inflation, but all the whisper numbers floating around peg it at over 20% annually. Now confirmation has come from official sources: wage negotiations between unions and the government of President Cristina Fernández Kirchner. Unions are her base. In fact, she personally met with the leaders of six unions that represent about 2 million workers, or 40% of all workers covered by wage negotiations, and made a deal, similar to the deals she’d made with Railway and Bus Drivers’ unions. The agreed-upon wage increases this year to keep the purchasing power of her voters intact? The closest estimate to official CPI that Argentina has? 24%!

 

Thursday, May 16, 2013

Last time French-made cars were sold is the US? 1980? Long time ago. But... French-made models of the Toyota Yaris are coming to the US, Canada, and Mexico, apparently to keep the plant in Onnaing, near Valenciennes, busy. Car sales in Europe have been catastrophic, and plant shutdowns and layoffs are hard to do, especially in France where even thinking about it causes a huge political ruckus. In 2012, 182,841 Yaris were sold in Europe, accounting for 22% of Toyota's total European sales - a highly successful model at the low end of the lineup. North America will get US versions, not EU versions. So no diesels.

Plunging price of gasoline shaves 0.4% from Consumer Price Index in April. Total energy prices dropped 4.3%, with gasoline down 8.1%. We’ll remember those days fondly because that cheap gasoline is now history; prices have been climbing in May! Food prices rose 0.2%. Core CPI, which excludes food and energy, rose 0.1%. For the 12-month period, CPI is up 1.1% and core CPI 1.7%. The Fed might complain that this is below target; but it’s still inflation, and it still whittles down the value of your and my dollars, and everything denominated in them, and it’s still higher than the interest that banks pay on most deposits and CDs, though it’s better than 4.3%, as we had some months in 2011.

Another blow to US manufacturing: Philadelphia Fed's Business Outlook Survey – for manufacturing in eastern Pennsylvania, southern New Jersey, and Delaware – dropped into the negative, to -5.2 in May, from 1.3 in April (below zero = decline). The New York Fed's Empire State Manufacturing survey, reported yesterday (below), had also pointed at a contraction. Ominous: new orders dropped to -7.9, the worst since June last year, from -1 in April; the Workweek Index dropped to -12.4, and the Employment Index dropped to -8.7. Manufacturing is only a small part of the US economy, and this region is a small part of the US, so we’re not going to panic just yet...

US Housing Bubble confirmed: Heard an ad on the radio on how to get rich quick by flipping houses – and we’ll show you how. It conveniently offered an 800-number. Something or other was free.... but keep your credit card handy. These kinds of things usually appear late in a bubble.

Death penalty for financial fraud in China. A court in Wenzhou slapped a local, 39-year-old gal, former general manager of Wenzhou Xinfu Investment Consulting Co., with the maximum penalty available, death, for having illegally raised funds for investments starting in 2007. Everything worked fine until October 2011, when her scheme collapsed and she ended up defaulting on a 428 million yuan loan ($69.6 million). Leaves open the question if they’d slap the same penalty on TBTF bank CEOs every time their banks need a bailout. A bit draconian maybe, but something the US might want to consider as well, after not having prosecuted anyone responsible for the financial crisis and for the Fed’s bailouts that followed, though they did hound, as in China, small-scale crooks like Bernie Madoff.

Bad loans at Chinese commercial banks swelled by 6.8% in the first quarter, to 526.5 billion yuan ($85.6 billion), the sixth consecutive quarter of increases, raising the non-performing loan ratio to 0.96%. And NPLs are expected to rise further. One of the many elements in a boundless debt-fueled scheme that will eventually, like the micro-case above, unravel.

The Japanese Diet rubber-stamped the ¥92.6 trillion ($926 billion) budget for fiscal 2013, which started April 1. A breath-taking ¥43 trillion ($425 billion) will have to be borrowed to make ends meet - that's 46.4% of the total outlays! But no problem. Abenomics will get Japan out of its fiscal quagmire, one way or the other, by printing money. Government spending on public works – welfare spending for Japan Inc. – will rise to ¥5.3 trillion. In a show of rare fiscal discipline, welfare spending for the poor will be cut by ¥67 billion. Priorities of Abenomics are becoming clear.

Japanese GDP growth less than a year ago! The economy grew 0.9% in the first quarter 2013 from Q4 last year, or a 3.5% annual rate. Private demand was up some, with investment in housing being fairly strong, but corporate investment lackluster. Public demand – government spending and investment, including boondoggles – jumped, as promised by Abenomics. Exports rose, and so did imports, but not as much. All seasonally adjusted. Great? Give credit to Abenomics for that 0.9% growth in GDP? Because it was the fastest growth since... oops, well, since the first quarter of 2012, when the economy grew 1.3%. Abenomics can't even keep up with Noda's maligned era.

 

Wednesday, May 15, 2013

Megabanks "are NOT too big to jail," claimed Attorney General Eric Holder today in a heroic about-face at a House Judiciary hearing, after he'd explained to the Senate Judiciary Committee in early March why exactly they were indeed too big to jail. The Justice Department has not prosecuted any megabanks despite their shenanigans leading up to the Financial Crisis and continuing to this day. A debacle I wrote about.... 'Regulatory Capture' Emasculated The Regulators Of Megabanks.

French purchasing power plunges 1.5% per capita, and 0.9% for all households together in 2012 (difference due to population growth), the worst performance since 1984. Combination of: disposable income creeping up only 0.9%, and prices rising 1.9%. Ah yes, the many benefits of "moderate" or even "below-target" inflation.

Tough day for US manufacturing: industrial production dropped 0.5% in April, after increasing in February and March; year-over-year, it's up only 1.9%. Within it, manufacturing fell 0.4%; fingers point at motor vehicles and parts, down 1.3%. Capacity utilization fell 0.5% to 77.8%, and is 2.4 percentage points below long-term average. Add to that: the New York Fed's Empire State Manufacturing Survey for May dipped into the red (-1.43, from 3.05 in April). Employment sub-indices were mixed, with number of employees up slightly, but hours worked down sharply. Darkest cloud: new orders were negative. Executive optimism for the next six months declined, second month in a row. Not an exemplary picture of a growing economy.

"My question is, who is going to jail?" wondered House Speaker John Boehner about the IRS scandal. So why didn't he and other Republicans ask that question after the financial crisis, the largest scandal in the US ever?

Swooning energy prices, particularly gasoline, pushed down wholesale prices by 0.7% in April, seasonally adjusted. Food prices also dropped, a godsend for those of us who like to eat, with veggies and meat down the most. Without food and energy, which are highly volatile, the core Producer Price Index rose 0.1%. For the 12-month period, the unadjusted PPI is up a scant 0.6%. If they could just keep it that way!

Warning shot: Russian car sales plunged 8% in April. For the year, they are now 2% below the same period last year, a record year during which sales had jumped 11% from 2011. The good times appear to be over. Is the EU malaise heading east?

Europe stuck in recession: the Eurozone economy shrank 0.2% in the first quarter, from Q4, the sixth quarter of recession in a row, another glorious record. The 27-nation EU contracted 0.1%. Year over year, they’re down 1.0% and 0.7% respectively. Germany's economy inched up 0.1% in Q1, after having plunged 0.7% in Q4, thus barely avoiding the red stamp of recession. Both quarters combined, Germany is in the hole. The lousy performance in both quarters surprisingly surprised pundits. France is formally in a recession; its economy contracted 0.2% in Q1, third contraction in four quarters. Italy and Spain both shriveled 0.5%. Unperturbed, German stocks, while down a smidgen for the day so far, are still above their prior all-time intra-day high of July 2007. This will be seen as the greatest accomplishment of the central bank money-printing binge: separating (at least temporarily) stock markets from reality and allowing them to float in a dream world.

China's pile of foreign exchange grew by 294 billion yuan to 27.363 trillion yuan ($4.41 trillion) in April, according to the People's Bank of China, the fifth month in a row of increases. For the first four months of 2013, the monthly influx averaged 400 billion yuan, nine times the average in 2012. Earlier this month, the State Administration of Foreign Exchange, the top forex regulator, had threatened to crack down on foreign money flooding the country. China is where the hot money goes – on the bet that the yuan will continue to rise against the dollar which, through the arduous and heroic efforts of the Fed, will continue to lose value.

Nikkei jumps 2.29%, to 15,096, highest since December 28, 2007. If it keeps going like this, it will be above 40,000 soon. This thing has become a joke – even more so than the US stock markets. Japanese government bonds continue their descent, pushing yields up, with the 10-year JGB hitting 0.90% but then settled down at 0.85%. The yen skidded.

 

Tuesday, May 14, 2013

Ex-leaders of consumer electronics: Sharp's huge loss is a sign of how Japanese powerhouses have lost the edge to Korean, US, and Chinese rivals. A doozy: ¥545 billion ($5.3 billion) in red ink, a record in its storied century-long history. A top exec reshuffle has been announced, but it won't fix the real issue that is bedeviling Sharp and other Japanese consumer electronics companies, once world leaders, now not even also-rans. Abenomics won't be able to cure that either. This isn't an issue of costs and exchange rates, but of innovation, products, and now increasingly brand (they squandered it).

China's white paper on human rights, helpfully issued in English so that foreigners like me can get their brains washed, starts out promisingly: "Since the arrival of the 21st century, the Chinese people have been making constant efforts in advancing human rights protection along the path of building socialism with Chinese characteristics under the leadership of the Communist Party of China (CPC) and the Chinese government." Further into it, the paper clarifies priorities: "China has a population of over 1.3 billion. For such a populous country, it would be impossible to protect the people's rights and interests without first developing the economy to feed and clothe the people." Money before rights. But it also points out how the government has become much more transparent in many ways, which few people will dispute (text in full).

Inflation hits Japan: wholesale prices rose for 5th month in a row in April, by 0.3% from March, with the index at 101.4 (2010 prices = 100). Electricity, gas, water, lumber, and wood products jumped over 3%. Some of it was due to the weakening yen that made imported fuels and raw materials more expensive. How exactly higher prices would cure Japan’s economic ills remains a mystery, though it will give a stylish haircut to all those owning Japanese Government Bonds....

Japanese Government Bonds skid once again: yields rose, for the 10-year JGB to 0.85%, from 0.79% yesterday, from 0.69% on Friday, and from 0.315% on April 5, the day they went bonkers. While yields are still ultra-low, the rise has been relentless, not at all what the BOJ wants – and now there's also volatility, rare sight in the JGB market. Japanese institutions and individuals are buying foreign bonds with higher yields to diversify out of the yen that has been doomed by Abenomics to decline. If this turns into a massive dumping of yen, if the BOJ cannot keep it under control, the selloff might turn into a rout, and the BOJ and government-controlled institutions will be the only ones left buying. In sympathy, mortgage rates are creeping up, as are bank loans. The opposite of what Abenomics wants to accomplish. Free money is suddenly becoming more expensive. 

Click for Older Rumblings....

VIDEOS

Wolf Richter on Max Keiser's "On The Edge" 
"The Pauperization of America"

Wolf Richter on the Keiser Report
"Where the Money Goes to Die"

Clarke and Dawe: European Debt Crisis
Two favorite Australian Comedians

Clarke and Dawe: Quantitative Easing
Big industrial-strength printers, all facing the window

The Fastest Drive Ever Through San Francisco
Don't try to do this yourself
 

humanERROR - by "Frying Dutchman"
Powerful, lyrical appeal to the Japanese. Slams nuke industry, MSM, bureaucrats, and politicians.

« Japan’s NO EXIT Strategy | Main | The Beef Industry’s Deadly Secret: “Blading” and “Needling” »
Saturday
Dec152012

The Price Of “Collective Trauma”: Greece At The Brink of Civil War

“I’m wondering how much this society can endure before it explodes,” said Georg Pieper, a German psychotherapist who specializes in treating post-traumatic stress disorders following catastrophes, large accidents (including the deadliest train wreck ever in Germany), acts of violence, freed hostages.... But now he was talking about Greece.

He’d spent several days in Athens to give continuing education courses in trauma therapy for psychologist, psychiatrists, and doctors—for free, this being a country in crisis. He was accompanied by Melanie Mühl, an editor at the daily paper Frankfurter Allgemeine. And in her report, she decries how “news consumers” in Germany were fed the crisis in Greece.

It was “no more than a distant threat somewhere on the horizon,” defined by barely understood terms, such as bank bailout, haircut, billion-euro holes, mismanagement, Troika, debt buyback.... “Instead of understanding the global context, we see a serious-faced Angela Merkel getting out of dark limos in Berlin, Brussels or elsewhere, on the way to the next summit where the bailout of Greece, and thus of Europe, is to be moved forward another step” [also read... The Curse Of The “Irreversible” Euro].

But what is really happening in Greece is silenced to death in the media. Pieper calls this phenomenon a “giant feat of repression.”

And so they report their findings that cannot be dressed up in the by now normal euro bailout jargon and acronyms. There were pregnant women rushing from hospital to hospital, begging to be admitted to give birth. They had no health insurance and no money, and no one wanted to help them. People who used to be middle class were picking through discarded fruit and vegetables off the street as the stands from a farmers’ market were being taken down.

[I have seen that dreary activity even in Paris; if Mühl spent some time looking, she could see it in Germany as well. It’s not just in Greece where people, demolished by joblessness or falling real wages, are deploying desperate measures to put food on the table. And the largest consumer products companies are already reacting to it: The “Pauperization of Europe”.]

Heartbreaking, the plight of the Greeks. There was an old man who’d worked over 40 years, but now his pension had been cut in half, and he couldn’t afford his heart medication any longer. To check into the hospital, he had to bring his own sheets and food. Since the cleaning staff had been let go, doctors and nurses, who hadn’t been paid in months, were cleaning the toilets themselves. The hospital was running short on basic medical supplies, such as latex gloves and catheters. And the suicide rate doubled over the last three years—two-thirds of them, men.

“Collective trauma” is how Pieper described the society whose bottom had been pulled out from under it. “Men are particularly hard hit by the crisis,” Pieper said, as their pay had been decimated, or their jobs eliminated. They’re seething with anger at the utterly corrupt system and a kleptocratic government that have done so much damage to the country; and they’re furious at the international bailout politics whose money only benefits big banks, not the people.

These men take their anger to their families, and their sons take that anger to the street. Hence the growing number of violent gangs that attack minorities. The will to survive in humans is enormous, Pieper points out, and so humans are able to overcome even incredibly difficult situations. To do that, they need a functioning society with real structures and safety nets. But in Greece, society has been hollowed out for years to the point where it is collapsing.

“In such a dramatic situation as can be observed in Greece, the human being becomes a sort of predator, only seeing himself and his own survival,” Pieper said. “Sheer necessity pushes him into irrationality, and in the worst case, this irrationality transcends into criminality.” At that stage in society, he said, “solidarity is replaced by selfishness.”

And so he wondered, “how much this society can endure before it explodes.” Greece is on the brink of civil war, he went on, and it seems only a question of time before the collective desperation of the people erupts into violence and spreads across the country. A ricocheting indictment of the euro bailout policies.

As the Eurozone flails about to keep its chin above the debt crisis that is drowning Greece and other periphery countries, and as the EU struggles to duct-tape itself together with more governance by unelected transnational eurocrats, Sweden is having second thoughts: never before has there been such hostility toward the euro. Read....  Sweden’s Euro Hostility Hits A Record.

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Reader Comments (16)

This is simply about dysfunctional government and only for a small part about austerity. Greece is simply a rich Somalia or Afghanistan.
Greece has a pro capita GDP of something like 25 000 USD. Greece also spends as a percentage still more than Germany on government (roughly half of its GDP). Therefor Greece has roughly USD 12500 per Greek to pay for government stuff. Which is several times higher than some countries with a functioning eg healthcare system have to pay for everything, food, housing, cars.
It is simply a home made problem (not have their priorities right) and a problem that if there was proper governance would not occur.
But when it is more important to keep employing your cousin as a civil servant and pay train driver more wages than Jumbo jet captains you simply end up that way. And if you look long enough away from problems the problems will at some point determine the chain of events. That is what is happening in Greece.
May be collective suicide (traumatic people are supposed to do that) is the solution at least they would not bother the rest of us anymore with their silly talk.
December 15, 2012 | Unregistered CommenterRik
I wish I could puke on Rik directly, after reading his comment, so I wouldn't have to flush my toilet and spend water for it
December 16, 2012 | Unregistered CommenterMe
Considering all the misery the euro has brought Greece and the strict demands and conditions clearly voiced by the Troika, one has to ask:

Why did the Greek majority just last summer vote for keeping the euro as their currency and the leadership of the old corrupt parties? And since they voted to keep the euro, why are they now rioting in the streets?

Thinking in terms of Fukuyama's book "Trust", societies can be characterized by the amount of trust on three societal levels: familial, private organizations, and state institutions. When there is little trust on a particular societal level, contracts on that societal level will not be kept.

So somebody, who lives in a society where there is little trust on state institution level, will expect others to betray a contract established on state institution level. And be ready to betray in return. Therefore anyone, who makes contracts with an entity on low trust societal level, should seriously consider the counter party risks.

I see Greece as a society that has high trust on familial level, but low trust on the levels of private organizations or state institutions. If I'm correct in my assessment, Greece with its current social norms and institutions, is incapable of keeping organizational or state contracts. And correspondingly, majority of Greek citizens must have low expectations about the strength of such contracts. I'm not blaming the Greeks. I'm claiming that any rational individual living in a society with low trust on organizational and state institutional levels would rationally take that into account in their expectations and decisions.

So there are a couple of alternative, but not mutually exclusive, answers to the questions above:

1) Greeks voted to stay in euro because they thought that northerners could be smooth talked into giving credit without Greece actually fulfilling the conditions. Now they protest, because they didn't expect the conditions to be actually enforced. Thus the calls against austerity as "Germanization of Europe".

2) Greeks voted to stay in euro because they wished to get rid of the corruption in their state institutions. Now they protest against austerity, because they realize that the Troika is not going to be of any help in the fight against corruption. On the contrary, Troika's activity has propped up the corrupt institutions as a way to secure the wealth transfer to the TBTF banks. The protesters are morally outraged and claim that the debt was taken against the interest of the citizens and against their consent, and is therefore odious. Odious debt should not be paid. Thus the calls for "banksters to pay the debt".

3) Greeks voted to stay in euro because they panicked. The old parties claimed to provide knowledgeable leadership, and promised committed responsibility to see the nation through the crisis. The protesters have realized the parties are not working to fulfill the promises, but are spending their time to hide Lagarde's list of wealthy Greeks with Swiss bank accounts. In the land of starvation, they view as extravaganza the 100+ euro daily allowances allotted to the Troika bureaucrats chauffeured in black cars to and from the airport. They protest because they have nothing to lose and nobody cares.
December 16, 2012 | Unregistered CommenterCool river
I am a Greek living in Greece.
I can tell you there is not a homogenous group named "the Greeks". Cool river is pretty much right in that there is a major and growing subgroup feeling traped between their still corrupted elit / government and the lack of alternative leaderships. But the majority is just naive, family-centric, uninformed, unhistorical, plain people. Cool-blood thinkers in Greece know that an attempt to throw away their corrupt political elit would pass only through a major catastrophe (current austerity being far away from anything like this). And it is their very elit (politicians including most of Opposition (!), bankers, business fat-cats, media owners and possibly 1/5 of civil servants of certain positions) that acts like Talibans; keeping in the front naive people harshly hit by their finances collapsus, knowing that an EU "bombing" would not dare to hurt them more. Of course key EU officers were always aware of this Greek elit's profile. On can assume that all those together, EU and Greek officials, comprised the -alive and kicking- gang that insisted on Greece entering Eurozone on falsified greek statistics and hidden swaps, as well as organizing the 50-plus bn Euros-Olympic Games few years before the debt explosion they knew that was coming...
December 16, 2012 | Unregistered CommenterKonstantin Kayes
Rik - I hope you were completely drunk or otherwise out of your mind when you wrote that last sentence of your comment. And even then, it's inexcusable. What a hateful thing to say! You've made lots of astute comments on my blog before, and from them I assume that you're not a hate monger, but that sentence sure makes me wonder.
December 16, 2012 | Registered CommenterWolf Richter
Rik has expressed a very strong viewpoint but as a Dutch tax payer I'm sick and tired of seeing my taxes poured into that Greek black hole.
I just wish they would go away, maybe the Chinese can buy the country, or the Turks can occupy it; clearly Greece and the Greeks are incapable of governing themselves.
December 17, 2012 | Unregistered CommenterJose
Rik has made an excellent analysis. Jose not. But both have come to the wrong conslusion.
We Greeks do suffer and most of us know we deserve it. But give us a break; the rest of the world is not at stake because of little Greece. Northen Europe tax-payers, before sending their bill to Greece, should first check if their own bankers have prioritised EU unification (aka bank union) in expense of every possible obstacle, including 1-2 lost generations of real people out there all around the most of Europe. A global austerity and the use of a scarce Euro as a nuclear weapon is part of their strategy.
If you had asked me, I would never wanted your bank to save mine. I would be glad to proudly serve you ouzo under the Greek sun, as always, and make you suspect the existence of a sunnier side of life. And keep my ancient myth and civilisation intact to keep inspiring you. What a horrible mess...
December 17, 2012 | Unregistered CommenterKonstantin Kayes
@ Konstantin Kayes

I'm intrigued to know your opinion about how bad a crisis, and what kind of crisis would it take for Greeks to get organized into a "revolution" against their elite?

I totally agree with you on the point that the other EU countries should not have bailed out the Greek sovereign. It would have been healthier to let it go bankrupt (as far as sovereigns can go bankrupt) so that the Greek citizens would have had an opportunity to challenge/change their elite.

But since the EU started with the bailouts and continues on that path, the sanest thing to do at this point would be to abandon the euro experiment. We will all still be Europeans, with or without the eurocrats.
December 17, 2012 | Unregistered CommenterCool river
We are all in this together, or so I thought. The elite love it when there are battles going on around them. That is how they win, through division. Is that what life is suppose to be about? I think not. Everyone deserves the right for a real standard of living. The world has so much wealth, and the elite are stealing it from the people. But yet we still put on the blame game, stating it's the peoples fault. Wow, what a way to live.
It's not like the money just vanished... the wealth was shifted from one place to another... and where did it go? Right in the bankers hands. What good will that money be when its worth nothing? The bankers had their fun, and the people had their misery.
The only thing we are guilty of is expecting our politicians to look out for us. Yeah, they sure did. They love to be loved by their elite friends. The people don't matter....
It's so sad... and yet, we still blame the people who put their trust in government which was unsustainable due to greed and power.
December 17, 2012 | Unregistered Commenterconfused
@confused
The problem of democracy every idiot has a vote (which often buys him/her all sorts of entitlements) but subsequently they are as responsible for who is in power as anybody else.

@Konstantin
There is a difference between North and South. All are uptil their necks in a crisis, but the North has basically an economy that can be used to start things up again or even get through the crisis without your GDP tanking.

@Wolf
Best way to write that most people think you actually mean it.
December 17, 2012 | Unregistered CommenterRik
@Cool river, thanks for asking.
A lot of propagandistic work has already been done in order to assure that any possible Greek revolution will be the wrong one. Our politicians, almost universally, aggree with Troika whenever there is a matter of money (they imply a genuinelly benign purpose of humanistic western nations), but totally disagree with them whenever long-term institutional or structural reforms are suggested (the purpose here is presented as malivolent aiming to dominate our nation through neo-liberal misery). And yes, there is a lot of neoliberal misery out there, but neofeudalism is just what we have alternatively been left with!
Alas, Greeks are just far away from realising that exactly the reverse is true. Bailouts have devastated our sovereignity for the next decades - reforms would leave a chance. What is being going on is actuallly coming out of rather insincere purposes (different between Greek governors and EU bureaucrats, but with common intermediate targets so far) while greek people would benefit a lot if reforms had been the non-negotiable "prior action" of a well-intentioned Troika. But the chance for any radical change has been actively forbidden so far, as long as TINAs and no-time-for-this practices are implemented.
So, if you ask me if a real armageddon for Greece is near under 1) the present living conditions and 2) self-awareness and political orientation of the average civilian, I evaluate it as possible. Increasingly too many have nothing to lose and increasingly too many are in holly rage. But if we are looking for a really avandageous revolution for Greek people, we will have to wait.
December 17, 2012 | Unregistered CommenterKonstantin Kayes
I read the above comments with a great deal of admiration. I think @Cool river and @Konstantin Kayes make powerful analyses. Then it struck me that the "elephant in the room" was being overlooked. Let me put it this way: The entire structure within which this debate takes place, I mean the power structure, the political structure, the economic/financial structure, the whole international globalised THING is a corrupt, criminal enterprise that cares nothing for the welfare of people. It feeds on them. If we imagine a nation, like Greece, say, is like a family that is facing threats from the Mafia, then the Mafia are saying to them that they are not being successful enough criminals to pay to the Mafia protection money. "Structural reform", in this context is just a way of saying "be a better thief". If you deal with criminals EVERYTHING is corrupted. Do you see what I am driving at? So the question is this: are the Goldmans, the rating agencies, the politicians, the media, the EU bureaucrats the arms and oil interests a criminal structure or not? That is the first question. If the answer is yes, which I think it plainly is, then the second question becomes "how do we deal with it?" It may be better for our families to go along with the Mafia rather than seeing their children killed. Families in criminal neighbourhoods will often do that. But don't let us delude ourselves. Greece is being asked to do without hospital drugs to pay a criminal syndicate. In the UK where I am we are doing better (so far) because we ARE the Mafia.....I was born not so far from the City of London and now live in Bristol, an arms manufacturing and financial services city. The Greeks are keeping the price of my food down. I know responses to this will be "we have to face reality and pay our way". Yes, of course, pay your way and pay to maintain a criminal cartel that controls everything. It is called appeasement. The Mafia makes a reasonable argument too. They tell us that it is either the Mafia you know or a far worse Mafia. Can we live with rule of law?
December 18, 2012 | Unregistered CommenterRoger Yates
Could we perhaps look at what Greece could do, for which what is being done to itwould seem good reason to look for something better.

Greece deserves something better than the Eurozone's catalogue of 18th Century remedies from the dismal science. If medicine was as ideologically constipated as economic fundamentalism we’d still be using bleeding and leeches.

Globally, there is universal denial that both equality and recovery will benefit from much more interventionist industry policy, government business enterprises, socialism, and strategies to develop productive and new industries. It means ending middle- and upper-class welfare, suppressing local and global corruption, a prominent role for statutory authorities and government business enterprises, creating a culture of efficiency, and improving tax collection.

A socialist Hellenic Bank (not run by a gangster, sorry, bankster) would provide capital to:
(1) fund enterprises whenever the profit-seeking banks withhold capital,
(2) ease the pain of leaving the Eurozone, and
(3) build Greek industry in its own right through selective and monitored lending to promising GBE and profit-seeking enterprises. An example of a weakness that is a potential strength is that Greece has long lacked substantial foreign investment, which combined with the comparatively small-scale of enterprises contributed to a €19 billion trade deficit in 2010.
Obviously a culture of efficiency within business and government, and political support, is as important as any such plan. Many good schemes are destroyed by mal-administration, or administrative and political sabotage.

Other options include:
-- ending the tax exemption of the Church (which given Greece's situation a Church with integrity would accept) and shipping,
-- taxing large capital transfers.
-- enforcing tax collection, which would collect €15-20 billion – very greatly reducing the budget deficit. There'll be plenty of hollow logs out there with a stash of loot in the far end.
-- providing better and cheaper public services and strategic GBEs by selective nationalisations (e.g. transport, housing and health).
-- firm enforcement of fair wages and comparative wage justice is an extremely important but much underrated public policy. Income from employment will generally dictate a household's present and future situation.
-- Reducing unemployment and the consequent poverty by reducing Greeks' above-average working time while increasing the participation rate is likely to share income less unequally while reducing overwork stress. In 2007, for example, Greece's GDP per capita was lagging behind the EU-15 and the US by 15% and 35% respectively due primarily to lower productivity and lower labour participation rates.

Public provision of a wide range of social and economic services - assuming sober and responsible management - will also mean the difference between modest comfort and poverty. Similarly, public investment to repair and improve public assets will be much more beneficial than further subsidies (invariably pocketed by profit-seeker greed). Debt thus incurred is productive debt - it yields a real, proportionate and sustainable socio/economic return.

Though standard denialist practice is to blame the victim (Greeks, in this case) so as to avoid focussing on the real causes, some of the real issues are political inertia, and corruption and the associated issue of poor standards of tax collection.

Last but not least a real issue is denial of the cost to a small, open economy of not having an effective and vigorous national socio-economic strategy. A failing Greece's ruling class shares with many others.

Greece needs unreconstructed 20th Century socialism, not criticism. Note the utter refusal of Eastern European countries to learn from this situation and abandon moves for entry - even though joining NATO/EU will worsen their own desperate financial situation in due course (once the bribes end), they are besotted and obsessed with laying hands on the pot of gold they delude themselves is at the foot of the Euro rainbow.
December 28, 2012 | Unregistered CommenterR.Ambrose Raven
What is happening in Greece is all part of the master plan to transfer wealth from the ninety-nine percent to the one percent. It has spread to Portugal and Spain and will eventually spread to all countries in Europe.
January 5, 2013 | Unregistered CommenterMichael Haymar
Greece is simply, or it has become a simple geographical turf in the EU condominium. The Greeks have no say at ll , at all in their affairs, contrary to conventional wisdom. The political class is a self centered , self perpetuating elite , paid and supported by the Eurocrats. Greece is a protectorate, a fiefdom, an " economic zone", but not a sovereign state anymore . The question asked is why did Greeks to stay in the Euro ? Well the average Greek is well informed on matters of football, basket, and other insipid activities; but ill informed or totally a blank slate when it comes to national issues of politics, social issues, labor and other. The Elite and its legions of the controlled press and media bombarded the Greeks with the message of " the Euro or disaster" ; no one was smart enough to discern that the disaster they were living is with the Euro, and that there can be no more disaster than staying inside the Euro. Greece's production effort has reached zero levels. They have to import almost everything because of EU ordinances. They export very little. How then it is possible to recover within a straitjacket, asfixiating and constricted Euro frame ? They have no control over the currency, it is not theirs to devalue or realign it with reality. The Greeks have to rid themselves of the current generation of the poitical class./ or political elite--- the satraps of the EU--- and replace it with a new generation of elites outside of the political system ring. These class of malingerers ,corrupt and negligent politcos has brought the country to the border of the abyss, neigh into the abyss; it woud be naive and ingenuous to expect the same malingerers, corrupt and negligent class to lift them out of their current disastrous predicament. But don't hold your high hope in achieving such a transformation through electioneering circusses and the ballot box. Electioneering perpetuates the existing miasma, it is the main weapon of the system to maintain and perpetuate itself. I feel terribly pained by the misfortunes of the Greeks, the Greek people have been blinfolded and cornered into a corral. The political class, thriving and enriching itself even in present conditions, bear the entire blame, solely and only /
January 16, 2013 | Unregistered Commenterbelluccio
I think that a lot of countries, not just Greece, are having troubles, these days. The goal is to keep the lights on, and keep the people fed, and hopefully, employed, but neither government nor riverboats loaded with educated financiers are 'gods', per se, there is always some degree to which people, individual people, no matter what country they live in, must intelligently act to some degree to be the instrument of their own salvation. There is a problem, a trap, if you will, called 'learned dependency'. Much as America's major current economic problem is learned dependency on imported petroleum, so the problems in some countries devolve to learned dependency on government services. Government has always done thus-and-so for the public, and thus will continue always to do thus-and-so for the public. Well...up until they can't afford to do that, anymore. Then comes the Big Ugly, and recriminations, and hate and discontent, and, well, people need to learn to 'deal', and remember that part of the problem is that people are fighting the 'mirror', kind of like a bird will attack the mirror, and getting all upset and outraged over...not much, come right down to it. Bring the common sense, both feet rooted to the ground, don't get caught up in a bunch of anger, and 'work the problem'. Rome wasn't built in a day, and it probably took a lot longer to rebuild it after it burnt to the ground, so....patience, reason, common sense, refer back to the Bedsheet Boys...Greece is traditional historical home to math and science, there's nothing the Greek people can't do, accomplish, or deal with, once they put their minds to the task. Non illegitimati carborundum...
January 22, 2013 | Unregistered CommenterBert

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