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nuggets of financial self-defence
Financial blog on news and global macroeconomic themes regarding the world economy. The blog's primary focus pertains to inflation, deflation, and hyperinflation, especially currencies, gold, silver, crude, oil, energy and precious metals. Other macro discussion topics include interest rates, China, commodities, the US dollar, Euro, Yuan, Yen, stagflation, emerging markets, politics, Congressional and statewide policy decisions that affect the US and global markets.
Zaktualizowano: 13 godzin 2 min. temu

When All Else Fails Blame "Free Markets"

czw., 31/07/2014 - 04:55
It's rather amazing how people blame "free markets" for things that are 180 degrees removed from "free markets".

For example, and in response to Political Greenwashing: US Exports Coal Pollution to Europe; What About China? reader Over Exposed writes "Excellent example of a complete and utter failure of the free market to deal with pollution".

I see and hear this every day. I would have hoped that people would have learned by now what a "free market" is and isn't.

  • Chinese State Owned Enterprises (SOEs) are not "free markets"
  • Chinese growth targets at any cost are not "free markets"
  • Interest rate manipulation in the US have nothing to do with "free markets"
  • Chinese and Swiss National Bank currency manipulations have nothing to do with "free markets"
  • Ben Bernanke's and Janet Yellen's 2% inflation target - horrendously applied - and ignoring asset bubbles are as far removed from "free markets" as you can get.

Complete fools blame the "free market" for problems 100% caused precisely because we do not have "free markets".

Popular Myths

Contrary to popular myth, free market libertarians do not support slavery, anarchy, or pollution. Rather, we strongly believe in property rights and human rights. No one can own anyone else.

No one can kill you, steal your goods, or damage your property. Laws and regulations that protect property rights and prevent fraud are welcome.

It is amazing how people clamor for more regulation to cure problems caused by regulation and excessive interference in free markets.

Can We Please Try "Free Markets"?

We've tried everything else, and it did not work. Can we please try "free markets" with the minimum number of regulations and laws needed to preserve property rights, preserved human rights, and prevent fraud?

Sadly, I suspect the answer is no. Neither vested interests nor jackasses who have no idea what is really going on, want "free markets".

It's a powerful combination, and we all lose because of it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Political Greenwashing: US Exports Coal Pollution to Europe; What About China?

śr., 30/07/2014 - 20:58
While president Obama brags about clean energy advances in the US (mostly hot air and subsidies to uneconomic businesses), the US quietly exports pollution to Europe. Coal is a particular good example.

Please consider US Exports Help Germany Increase Coal, Pollution
LUENEN, Germany - One of Germany’s newest coal-fired power plants rises here from the banks of a 100-year-old canal that once shipped coal mined from the Ruhr Valley to the world. Now the coal comes the other way.

The 750-megawatt Trianel Kohlekraftwerk Luenen GmbH & Co. power plant relies completely on coal imports, about half from the U.S. Soon, all of Germany’s coal-fired power plants will be dependent on imports, with the country expected to halt coal mining in 2018 when government subsidies end.

Coal mining’s demise in Germany comes as the country is experiencing a resurgence in coal-fired power, one which the U.S. increasingly has helped supply. U.S. exports of power plant-grade coal to Germany have more than doubled since 2008. In 2013, Germany ranked fifth, behind the United Kingdom, Netherlands, South Korea and Italy in imports of U.S. steam coal, the type burned in power plants.

On the American side of the pollution ledger, this fossil fuel trade helps the United States look as if it is making more progress on global warming than it actually is. That’s because it shifts some pollution — and the burden for cleaning it — onto another other country’s balance sheet.

“This is a classic case of political greenwashing,” said Dirk Jansen, a spokesman for BUND, a German environmental group. “Obama pretties up his own climate balance, but it doesn’t help the global climate at all if Obama’s carbon dioxide is coming out of chimneys in Germany.”

It’s a global shell game that threatens to undermine Obama’s strategy of reducing the gases blamed for global warming and reveals a little-discussed side effect of countries acting alone on a global problem.

The explanation for Germany’s increase is simple: Coal is cheaper than alternatives, particularly natural gas. So, too, are the prices on the carbon market in Europe. Companies can afford to buy the right to release more pollution.

In the U.S., the opposite is happening. Any new coal-fired power plants will have to capture carbon dioxide and bury it underground if the Obama administration gets its way. Few if any new coal plants are expected to be built.

But the U.S. and other countries have no problem supplying Germany and the world with coal. Global Warming Slant

The article's "global warming" slant is of course ridiculous. Yet, the article does expose the hypocrisy of the Obama administration on that subject.

I am in favor of reducing pollution, for current health reasons, not absurd global warming claims.

Pollution in China

Check out Images of Chinese Pollution.
Here's a small sampling taken from dozens of images.

Chinese Deaths Due to Pollution

In 2010, over 1.2 million Chinese deaths were attributed to pollution.

China.Org has the report.

Chinese GDP Massively Overstated

The world is in awe of Chinese growth.  But that "growth" comes at huge expense. There is a massive cleanup cost associated with this rampant pollution, and Chinese growth is overstated by the future cost of cleanup.

Chinese growth is also overstated by malinvestment - vacant cities, vacant malls, unused infrastructure, and totally unproductive State Owned Enterprise (SOE) debt Ponzi schemes.

Subtract malinvestments and pollution, and China is barely growing, if growing at all.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

M.A.D. Sanctions; Two Games at Once

śr., 30/07/2014 - 10:30
M.A.D. Sanctions

Sanctions are a lose-lose-lose game. Consumers lose, businesses lose, countries lose. And the hypocrisy alone is appalling.

The EU wants sanctions to hurt Russia "more" than the EU. Thus the EU let a French military sale to Russia go through, while blocking transactions and travel of Russians who had virtually nothing to do with this mess.

Knockout Blow?

For all their efforts will the US or EU accomplish anything with the sanctions on Russia?

Financial Times writer Christopher Granville has the answer in his take EU’s Sanctions on Russia Will Fail to be a Knockout Blow.
The main burden of the EU sanctions mooted by the commission would appear to fall on the UK. The core measure targets debt and equity capital raising by the Russian state banks and bans European intermediaries from offering associated underwriting and advisory services, and the bulk of such business is done in the City of London. Capital market funding is also a small portion of overall foreign funding of Russian banks (about 3.5 per cent as of March 2014), so an important detail about the EU sanctions package as regards both overall impact and burden sharing between the member states will be whether the prohibition on financing Russian banks will extend to ordinary lending. The international syndicated loan market for Russian borrowers is dominated by continental European banks. French banks have the largest exposure of $52.5bn.

This analysis presupposes that the EU will never go for the “nuclear” sanctions option of banning gas imports from Russia, and that the EU and US together will not try to replicate against Russia the ban on oil exports imposed on Iran. The EU cannot for now substitute its present annual gas import volumes of 150bn cubic metres from Russia, and the loss of Russia’s present level of crude oil exports – 7m barrels a day, compared to Iran’s 2.5m b/d – would trigger a sharp rise in the oil price and a global economic slump. This would be the economic equivalent of the Cold War-era concept of nuclear deterrence based on mutually assured destruction.

Short of the “MAD” options, the Russian economy will decline and Europe will suffer, but there will be no knockout blow and, as so often in Russia’s history, the Russian nation may be expected to rally around in the face of hardship caused by foreign foes.Loser Analysis

According to Granville, Europe and Russia will both suffer. On that, I agree.

Granville thinks the UK will suffer most.

From a financing standpoint, I suspect Granville is correct. But from a manufacturing and trade standpoint, I believe Germany will be the big loser.

Two Games at Once

MAD is really a game of chicken.

Granville misses the mark in one respect: The choice to go “nuclear” is not only in the hands of the EU.

Yes, the EU could ban all imports. But they won't.

Here's the MAD game at hand: The US and EU want to apply pressure on Russia but not so much pressure that Russia cuts off natural gas supplies to the rest of Europe.

Europe needs the gas, and Russia needs the hard currency. It's mutual destruction if gas is shutoff.

Fool's Mission

If things do get MAD, there will be a knockout blow to global trade, not just to Russia. Yet, if the US and EU pressure Russia too much, then Russia may feel like it has nothing to lose. Why not go down fighting?

The US/EU game of chicken all starts with the notion that Putin will react as expected and eventually blink first.

I wonder how long the expected lasts. I suggest not as long as the bureaucrats think. Regardless, the exercise is a fool's mission from the start given that everyone loses from sanctions.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Whopping 35% Have Debt in Collection! Delinquent Debt in America: By Region and Metro Area, Where Is It?

wt., 29/07/2014 - 21:21
The Urban Institute has an interesting 14-page synopsis on Delinquent Debt in America.

By percentage, the number of people in collections is largely concentrated in the South, while amount owed shows no geographic pattern. The Urban Institute uses 2013 credit bureau data from TransUnion to measure how many Americans are reported as at least 30 days late, not including late payment of mortgages. The institute also examines how many Americans have debt in collections and the amount of this debt.

In order to have credit card debt, one first must have credit. However, some without traditional credit show up as delinquent on account of late utility, medical, or other bills.

The key general finding is: Of those with credit files, an astonishing 35% have debt in collections.

Study Synopsis

  • 5.3% (Roughly 1 out of 20) of people with a credit file are at least 30 days late on a credit card or other non-mortgage account (e.g., automobile loan, student loan). In other words, they have debt that has been reported as past due to the credit bureau.
  • The share of people with debt past due ranges from 4.6% in the West, North Central, and Middle Atlantic divisions to 7.5% in the West South Central division.
  • Three states have less than 4% of the population with debt past due: Utah, Washington, and New Jersey. 
  • Three states have more than 7% of the population with debt past due: Louisiana, Texas, and Mississippi.
  • Nearly 40% of the high-concentration census tracts in the country are in Louisiana or Texas.
  • Areas with lower household incomes have more people with debt past due, but the correlation is only -0.3. So, while income matters, the concentration of delinquent debt is not simply an income story.
  • Of those with credit files, an alarming 35% have debt in collections.
  • Debt in collection ranges less than $25 to more than $125,000. The average amount owed in collections is $5,178.
  • Nevada, which was hard hit by the housing crisis, tops the list of past-due states: 47% of people with a credit file in Nevada have reported debt in collections. The District of Columbia and an additional 12 states (11 in the South) are over the 40 percent mark: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas, and West Virginia.
  • At the low end are three Midwestern states - Minnesota, North Dakota, and South Dakota, with 20%  of the people with a credit history now reported debt in collections.
  • Among the largest 100 MSAs, only six have fewer than a quarter of people with debt in collections reported i n their credit file. None are in the South: Minneapolis - St. Paul, Minnesota (20.1%), Honolulu, Hawaii (21.0%), Boston, Massachusetts (22.4%), Madison, Wisconsin (22.6%), San Jose, California (23.0%), and Bridgeport, Connecticut (24.5%).
  • At the other extreme, five MSAs have at least 45 percent of people with collections debt reported in their credit files : McAllen, Texas (51.7%), Las Vegas, Nevada (49.2%), Lakeland, Florida (47.3%), Columbia, South Carolina (45.2%), and Jacksonville, Florida (45.0%). 
  • An astonishing 70% of census tracts have at least 25% of people with reported debt in collections. In comparison, less than 1% of census tracts (40) have at least 25% of people with debt past.

Debt Past Due

Debt in Collections

Average Debt in Collections

click on any chart for sharper image

The report concludes ...
Financial distress is a daily challenge for millions of American consumers. Nearly 1 2 million adults — 5.3 percent of Americans with a credit file — have non-mortgage debt reported past due, and they need to pay $2,258 on average to become current on that debt.

Further, an alarming 77 million Americans — 35 percent of adults with credit files — have debt in collections reported in their credit files, with an average debt amount of nearly $5,178. Debt reported past due, and in particular reported debt in collections, is more concentrated in the South.

In addition to creating difficulties today, delinquent debt can lower credit scores and result in serious future consequences. Credit scores are used to determine eligibility for jobs, access to rental housing and mortgages, insurance premiums, and access to (and the price of) credit in general (Federal Trade Commission 2013; Traub 2013).

High levels of delinquent debt and its associated consequences, such as limited access to traditional credit, can harm both families and the communities in which they live. This brief contributes to our understanding of financial distress in America by exploring the spatial patterns of delinquent debt in the United States. Future work will explore the drivers of financial distress and those factors influencing its spatial patterns. Interestingly, the concentration of delinquent debt to income has a negative 0.3 correlation. In a footnote the study reports "The correlation between average household income and average amount of debt past due (amount required to become current on that debt) is even lower at -0.1."

I called the Urban Institute and asked for an explanation as to how the percentage in collection can be so much bigger than the percentage past due. The answer has to do with a definition of terms and also with charge-offs.

Appendix Figure A.1 Explains

Note: Federal regulations require creditors to charge-off revolving credit accounts (e.g., credit card accounts) after 180 days of payment delinquency. Uniform Retail Credit Classification and Account Management Policy, 65 FR36903-01 (June 12, 2000).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Ukrainians Ordered to War, Women Burn the Military Writs

wt., 29/07/2014 - 10:42
The war in Ukraine is going so well that soldiers are unpaid and men are ordered to serve whether they want to or not.

Hats off to a group of women who confront a Ukrainian soldier and burn military writs right in front of the soldier's face.

Writ Burning Video

Video link: Ukrainians Burn Writs


  • Woman to Ukrainian soldier: Who are you?
  • Soldier: I am the head of the local recruiting center.
  • Woman: Why are you bringing military writs?
  • Soldier: It's an order from above. I can't explain all the details but you can read about it on the internet
  • Soldier: When did you get the writs?
  • Very disgruntled woman: Yesterday evening.
  • Another Woman: This one we got recently.
  • Soldier: Yes, we're sending those to put the potential recruits under control.
  • Yet another woman: We don't need it. We don't need any war.
  • Multiple women chime in with the same thing at once about not wanting war.
  • Very disgruntled woman: We've been told that the police will handle those who refuse to sign the writs for mobilization. What does that mean?
  • Soldier: It's an official order for total mobilization.
  • Another woman: We've been told those fairy tales many times. They told us those who refuse to go to war will go to jail for 5 years.
  • Soldier: I ask you, did we take anyone to war so far?
  • Woman: When you take someone it will be too late to worry.
  • Another woman: We've never been on Maidan. We didn't touch anyone. We don't need it.
  • Very angry man gesturing: Take your recruit list and make sure no one will be taken to war.
  • Soldier - finally admitting the truth: They will take your sons anyway.
  • Same angry Man: Who will take them?
  • Soldier: The state
  • Same angry man: We don't give a damn about your country and your war!
  • Large group gathers writs and sets them on fire.
  • Background conversation: mostly untranslated but also containing We are sickened of the authorities.
  • More background conversation: The authorities flee like rats from a sinking ship, but they come here and take our sons and send them to death. They all made the mess and now they need us to clean it up.
  • Fire takes hold
  • Another woman: Those who wanted all this, let them go to war! We never needed this nor Maidan.
  • Cars stop, many more people including more men watch on the periphery.
  • Writs go up in ashes. Many still confront the soldier


Congratulations to all those who told the soldier to go to hell. No better way than burning draft papers and refusing to serve.

Musical Tribute

Video Link: Country Joe at Woodstock


Voltaire: “It is forbidden to kill; therefore all murderers are punished unless they kill in large numbers and to the sound of trumpets.”

Tom Robbins: “There are many things worth living for, a few things worth dying for, and nothing worth killing for.”

Thought of the day: The Vietnam war would have ended years before it did if everyone would have refused to serve. A big F U was called for. Too few did it. My number never came up, but I am proud of the fact I resolved not to go.  And I assure you I wouldn't have. History has proven that point of view was the correct one.

By the way, I disagree with the second quote. Killing in self defense or defense of your family makes perfect sense.  

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Calling All Munitions and Fighter Plane Experts: Is German Pilot Claim "Air-to-Air Attack" Brought Down MH17 Credible?

wt., 29/07/2014 - 00:56
Peter Haisenko, a German aviation expert made a claim yesterday that air-to-air fire brought down MH17.

The above link is to a translated page.

As a lay person, it's easy to be persuaded by such arguments. Moreover, even if Haisenko is an aviation expert, one has to wonder about his munitions expertise.

I have some questions later, but first let's take a look at some images and a translation of Haisenko's thesis.

Haisenko provides this High-Res Image of MH17 Cockpit.

Click on chart for sharper image, or click on the preceding link for an even bigger image.

Haisenko Notes

  • Cockpit shows traces of shelling, clean round hole, about 30 mm caliber.
  • Some holes are bent inward, some outward
  • Rivets bent outward
  • Moreover, small cuts can be seen, all bent outward, which hint at the fact that fragments have penetrated the outer hull from the inside of the cockpit.

Bullet Holes in Shell

Now the Controversy

The rest of what Haisenko has to say is quite controversial. Here is my modified translation (corrections welcome).
So what can be happening? Russia has published radar recordings, that show at least one Ukrainian SU-25 in close proximity of MH17. This corresponds with the statement of the lost Spanish controller who claims to have seen two Ukrainian fighter aircraft in the immediate vicinity of MH17.

Consider the armament of the SU-25: It is equipped with a double-barreled 30-mm gun, type GSh-302 / AO-17A, capable of firing 250 rounds anti-tank fire or splinter-explosive projectiles, in a defined order. The cockpit of the MH17 has been fired from two sides: the entry and exit holes on the same page. [Mish Note: Reader John points out that a SU-27 has a service ceiling of 62,523 feet and that the Ukrainian army has that aircraft.]

Now just imagine what happens when a series of armored fire and splinter-explosive projectiles, designed so that they can destroy a tank, hit the cockpit. The shells partially escape across the cockpit from the other side, slightly deformed again.

The splinter-explosive projectiles will explode inside the cockpit, as designed.

Because the interior of a commercial aircraft is a hermetically sealed chamber, the pressure inside the aircraft in a split second will rise to extreme levels by these explosions. But the aircraft is not equipped. It will burst like a balloon.

Coherent Picture

The largely intact fragments of the rear sections are broken at the points that are based on the construction breakup most likely under extreme pressure. The image of the widely scattered debris field and the brutally damaged cockpit segment fit to do so. Furthermore, a wing segment shows traces of a grazing shot, which directly leads to extension to the cockpit.

Interestingly, I found that both the high-resolution photo of the cockpit as the segment are also now been removed from the grazing shot on the wing from Google Images. One can find virtually no other pictures of the wreckage, except smoking ruins. Accident?

Even if Haisenko is correct, the image presented does not rule out an accident.

For example, it is conceivable Ukrainian military aircraft thought they were firing on a Russian plane. Notice I did not say likely, I said conceivable.

Regardless, if plane damage rules out a Buk, then the air-to-air thesis that remains, however unlikely initially, must lead to the truth.

By the way, one of my contacts (Not Dreizin) assures me that an SU-25 can get high enough, not for prolonged periods of time, but long enough to make such an attack. I do not know if that claim is credible, but a SU-27 certainly can hit that altitude.

Six Questions

  1. Is the MH17 damage consistent with either a buk or an air-to-air attack?
  2. Does the damage assessment favor one type of attack vs. the other?
  3. Could a Buk reasonably have only hit the cockpit?
  4. Could multiple Buks be in play to cause both input and exit holes as show?
  5. If so, could multiple Buks have only hit the cockpit?
  6. Could the flechettes (dart-like or ball bearing-like projectiles) launched when the buk exploded simply have traveled completely through the cockpit leaving both entry and exit holes?

Three Scenarios

  1. If the damage is only (or primarily) consistent with an air-to-air attack, we have a new ballgame.
  2. If the damage is consistent with either a Buk or an air-to-air attack, with roughly equal probability, we have not learned much.
  3. If the answer to number 6 is yes, and the rest of the damage is also consistent with a Buk, and the damage is inconsistent with an air-to-air attack , then it is safe to rule out the latter.

For now, I would like some military fighter-plane and munitions experts to assess the damaged parts and make a yes-no-maybe type of assessment on Haisenko's analysis, not on who did it or why, but rather on an assessment of the images shown (and what type of weapon did the damage).

Meet Elena from Sloviansk

Finally, even if it was a Buk, please consider this Video of Militia Soldier - Elena, from Sloviansk with English subtitles.

Posted on June 18, 2014

Partial Transcript

Good day. My name is Elena. I am in the city of Sloviansk. I am native to this town. I have joined the military ranks. I cannot bear this anymore. We are being bombed every day by Ukrainian army, on orders from Junta, Artillery, Air Force. And they drop bombs not on check-points. They drop bombs on people's houses. People live in cellars with their children. How long are we to bear this? How is it that government sends mercenaries on their own people? The people are fighting from here, in defense of their own city. They want to live, not merely exist. Terrible things are happening. For example: An incident that happened recently. A passenger plane was flying by, and Ukrainian attack aircraft hid behind it. Then he lowered his altitude a bit and dropped bombs on the residential sector of Seminovka. They wanted to provoke the militia to shoot at the passenger plane. There would have been a global catastrophe. Civilians would have died. Then they would say the terrorists did it. There are no terrorists here. There are regular people here, that came out in defense of their own city. ... Don't you have any humanity left?


Easily. Please note that video came out one month prior to the MH17 crash. It was not a made up story afterwards to fit what happened. And it fits numerous other reports none of which appears staged. 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

IMF Warns Pound Overvalued; What About Other Currencies?

pon., 28/07/2014 - 21:26
Is the British pound overvalued? What about the Euro? The US Dollar? The Yen?

Curiously, economists make that case for all of those currencies.

And today, the IMF is pounding the drums with this proclamation "Overvalued" Pound Prevents Rebalancing.
The International Monetary Fund warned on Monday that the pound was “overvalued” and preventing the rebalancing of the economy away from a reliance on spending and imports.

In its annual assessment of the UK economy, the fund said sterling was between 5 and 10 per cent overvalued because of a “lack of competitiveness and limited export diversification”.

“Staff estimates that the current account balance is 2.6 per cent weaker than its equilibrium level, and that the real exchange rate is overvalued by about 5–10 per cent,” the IMF said. Equilibrium Level Madness

Apparently the IMF is the arbiter of the "equilibrium level" of any and every currency. A few examples will prove the point.

New Zealand Dollar Overvalued by 20%

On April 10, 2014 the IMF warned New Zealand Dollar May Be Overvalued.

Canadian Dollar Overvalued by 10%

On March 2, 2014 the IMF Warned Canadian Dollar Overvalued by 10%" despite recent depreciation, thus the Bank of Canada should wait before hiking rates..

Australian Dollar Overvalued by 10%

On November 21, 2013 the IMF Stated Australian Dollar Overvalued by 10%.

US Dollar Overvalued

This dates back a while but on October 28, 2010 the IMF said US Dollar 'Overvalued' On Currency Markets.

Swiss Franc Overvalued

Returning to this year, on March 24, 2014, IMF Suggests SNB Use Negative Rates if Franc Pressured because the "franc remains moderately overvalued."

Euro Overvalued

As shocking as this may seem, I cannot find a recent IMF opinion on the Euro, but on May 8, 2014, Mario Draghi, president of the ECB discussed the Pernicious Effects of an Overvalued Euro.

I am pretty sure the IMF would agree.

Yen and US Dollar Overvalued

On October 12, 2012, the Wall Street Journal proclaimed If Yen Overvalued in IMF View, So May Be Dollar.
Japan's finance minister may have breathed a sigh of relief Thursday when the International Monetary Fund chief reaffirmed the yen is "moderately overvalued," a phrase traders believe is supportive of potential market intervention to weaken the currency against the dollar.

Not so well-known in the market, however, is that the 188-member international lender also sees the dollar as "moderately overvalued," a view that makes it harder to conclude the IMF would endorse future intervention by Tokyo in the dollar-yen market.Yuan "Moderately" Undervalued

On May 29, 2013, and contrary to sentiment in Washington DC that says the Yuan is massively undervalued, The IMF Seeks Flexible Chinese Yuan, Says "Moderately Undervalued".

US Dollar Index

click on chart for sharper image


Note that the US dollar is about where it has been since the beginning of 2012, but higher than it was in October of 2012 when it was judged to be "overvalued".

Is it more overvalued today? 

Apparently the British pound, New Zealand dollar, Australian Dollar, the US dollar, the euro, and the yen are all overvalued.

The yuan is the one major currency that is allegedly undervalued, but only "modestly".


IMF overvalued-undervalued judgments are generally on a basket of currencies basis.

However, it is not mathematically possible for all those currencies to be 5-20% overvalued against all the other currencies in the same basket.

Even if it was possible, based on precise timings and currency fluctuations, the idea that the IMF can fine tune currency valuations to the nth degree as it has done is absurd.

All Currencies Overvalued

Nonetheless, the IMF appears to be on target with all those "overvalued" assessments, not against  other currencies in the basket or against each other individually, but against gold, and by far greater percentages.

If you agree with my assessment, and perhaps even if you don't, please consider How Much Gold Should Someone Own? Where and How To Own It?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

No BBC Video Removal Scandal After All; Evidence of Military Planes Shadowing MH17 Mounts

pon., 28/07/2014 - 09:24
On July 23 the BBC deleted a video report from correspondent Olga Ivishina regarding the crash of MH17. This has caused quite a stir in the blogosphere because the deleted video contained eyewitness reports of military aircraft flying on the same day, shadowing MH17.

Here is the deleted video from cache: Катастрофа рейса MH17 Би би си в поисках Бука 23 07 2014, LQ 

Global Research Canada has some interesting translation clips in Deleted BBC Report. “Ukrainian Fighter Jet Shot Down MHI7″, Donetsk Eyewitnesses.

BBC's Initial Response

I found dozens of references to the removal, but to find BBC's reason for removing the video, I had to search the BBC website. It's in Russian.

Jan Leder, managing editor of Russian BBC Service explains Why Bi-bi-si Material Removed From Site.

Video Reposted

My initial reaction was that Leder's response was disingenuous.

However, the BBC has since re-posted the video.

Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian, went over the original and now re-posted videos and it appears the BBC was telling the truth all along.

From Dreizin
Although it's not entirely clear, the managing editor says that the intent from the get-go was to fix the material and put it back up as soon as possible.

I have reviewed the original version side-by-side with the new one. And I can see what she's talking about. The new video still has all the eyewitness ladies that everyone has focused on.

The new video removed a somewhat irrelevant lecture from the VItalii Naida, the Ukrainian counterintelligence chief. Instead, it has a Ukrainian official claiming that no combat flights take place over rebel areas, followed by a local resident making a mockery of that claim.

It also has a segment where a BBC aviation expert is quoted as giving his rebuttal to a rebel's claim that Ukrainian warplanes have used civilian flights as cover.

The expert says that while he can't rule it out, it seems very unlikely to him, for various technical reasons. However, I don't think he quite understands precisely what the interviewees are saying.

All in all, there's no BBC scandal here.  But if you just want to focus strictly on what the eyewitness ladies said I've improved it a bit.  Here goes...

Eyewitness #1:  There were two explosions in the air.  This is how it [the plane] tore apart. And it [the remains of the plane] flew off to the sides [gesturing with hands in two opposite directions]. 
Eyewitness #2:  And nearby there was one other airplane, a military one, everyone saw.
Eyewitness #1:  Yes, yes. It was going lower, because it could be seen. It was going below the passenger plane.
Eyewitness #3:  There were sounds of an explosion. But they were in the sky.  Then this plane turned around sharply like this [gesturing with her finger], changed trajectory, and flew in that direction [showing the direction with her hand].Mounting Evidence

  1. Credible eyewitnesses saw multiple planes.
  2. Russia claims radar picked up multiple planes
  3. Russia claims Ukrainian Buks in Eastern Ukraine
  4. Plane moved from original flight path in mysterious circumstances

Russia gave a detailed report on numbers 2 and 3 (See Russia Claims Photos of Ukraine Deploying BUK Missiles in East, Radar Proof of Warplanes in MH17 Vicinity)

Ukraine denies all of the above, and of course the rebels deny having Buks. It's quite possible, and in fact likely, that both sides are lying about multiple things.

That said, Russia has at least come out with some of its evidence. The US and Ukraine have little to offer but hype and reports that appear fake, coupled with over-reliance social media.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Ukraine's Army Advances; Unguided Rockets Kill Civilians; Demise of Rebels?

pon., 28/07/2014 - 01:23
There are lots of conflicting, even contradictory news reports regarding Ukraine in the past couple of days. Let's take a look at a few of them starting with the Bloomberg report Ukraine Army Advances as EU Plans Tougher Putin Sanctions.
Ukraine’s army advanced on a last main separatist stronghold as the U.S. said Russian President Vladimir Putin is poised to give the rebels heavy weapons and European Union leaders considered their toughest sanctions yet on Russia.

Ukrainian troops are battling insurgents in the town of Horlivka, about 20 kilometers (12 miles) northeast of the regional capital Donetsk, a city of 1 million people where rebels retreated after abandoning other positions earlier this month. Taking Horlivka would open the way to attack one of their last redoubts, Ukrainian Defense Ministry spokesman Andriy Lysenko said yesterday in Kiev.

“Fighting to take over Horlivka is going on,” he told journalists. “Donetsk will be next.” CNN reported that long lines of cars jammed roads leading south from the city yesterday as residents tried to flee.

Ukraine’s State Security Service, or SBU, posted what it said was an intercepted plea for help made by Alexander Borodai, head of the self-proclaimed Donetsk People’s Republic, to a Russian it identified as Alexei Chesnokov.

“If nothing changes in terms of military activity, the situation will not be held for more than two weeks,” a voice that the SBU said is Borodai’s says in the intercepted call it posted yesterday on its YouTube page.YouTube Page

Chesnokov cited a YouTube page in a voice that allegedly matches Borodai’s.

OK. Let's see the video. If you are going to post an allegation citing a YouTube that purportedly "sounds" like Borodai, why not link to it?

So why doesn't Bloomberg ask for it?

Civilians Flee Horlivka

In regards to Civilian fleeing Horlivka and other war zones. I don't doubt it.

Bloomberg cites CNN, but Bloomberg's link is to a totally useless Bloomberg discussion page called http://topics.bloomberg.com/cnn/, not anything useful on CNN, not even a discussion of the civilian flight.

Clearly Bloomberg is fishing for clicks. 

CNN Video of Fleeing Civilians

Here is a link to the real CNN report and video: Donetsk residents flee fighting; Russians report spike in Ukrainian refugees.
Long lines of cars jammed the roads leading south out of Donetsk in eastern Ukraine Saturday, as residents attempted to flee the city center after a night of heavy shelling on the city's northern outskirts.

Hundreds of vehicles were caught in heavy traffic, and trains are no longer running in and out of the city, which is a stronghold for the pro-Russia rebels.

There was heavy shelling and antiaircraft fire on the outskirts of the city to the north throughout the night. There has been sustained fighting in the area for weeks, but it appeared more intense overnight than in recent days.

Russian news agency Interfax reported a dramatic increase in the number of Ukrainian refugees seeking refuge over the border in Russia.

"The Ukrainian government officials were seeking to encircle the city, really squeeze the remaining pro-Russian separatist forces that had fallen back there since being driven out of other strongholds across Eastern Ukraine," said CNN's Phil Black, reporting from a congested road in Donetsk while scores of people attempted to leave.Why do Civilians Flee?

Neither CNN nor Bloomberg gave the real reason civilians are fleeing. Human Rights Watch does provide the reason: Unguided Rockets Killing Civilians.
Unguided Grad rockets launched apparently by Ukrainian government forces and pro-government militias have killed at least 16 civilians and wounded many more in insurgent-controlled areas of Donetsk and its suburbs in at least four attacks between July 12 and 21, 2014, Human Rights Watch said today.

The use of indiscriminate rockets in populated areas violates international humanitarian law, or the laws of war, and may amount to war crimes.

Grads are unguided rockets that cannot be targeted accurately, and are often fired in salvos from multi-barrel rocket launchers to saturate a wide area. Human Rights Watch called on all parties to the conflict in eastern Ukraine, particularly Ukrainian government forces, to stop using Grad rockets in or near populated areas because of the likelihood of killing and wounding civilians.

“Grad rockets are notoriously imprecise weapons that shouldn’t be used in populated areas,” said Ole Solvang, senior emergencies researcher at Human Rights Watch. “If insurgent and Ukrainian government forces are serious about limiting harm to civilians, they should both immediately stop using these weapons in populated areas.”.Unguided Rockets Kill Civilians

40 Barreled Grad

My understanding is these rockets fire sequentially, one after another, sort of like roman candles going "poof, poof, poof" louder of course.

Both sides have these weapons, but it is the Ukrainian troops who are readily willing to use them on civilians. Please don't compare this to the accidental downing of a plane, regardless of who you think did it.

Attack on Gorlovka

Here's a short, 43-second video of a grad attack on the city of Gorlovka.

The title reads On July 27 Gorlovka suffered rocket mortar attack.


While Ukraine is advancing in some areas, the above videos add a needed perspective that mainstream media does not provide.

What with all the satellites in the sky, all the tens of billions of dollars the US spends on "intelligence" every year, is it too much to expect the US to portray these aspects? 

Not All Battles Going Ukraine's Way

Contrary to mainstream media reporting, not all of these battles are going Ukraine's way. Yesterday I posted a video of Ukraine's 72'nd brigade.

Today I have a video of the demolition of part of the 79'th brigade. It was taken a few days ago.

Ukrainian forces are doing the talking. Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian provided this synopsis.
In this video, the speaker is actually on the Ukrainian side. The speaker is complaining about not getting enough support from Kiev, and recounting what types of munitions were used to destroy his camp. In the other video you posted earlier, it seemed that the people in the video were rebels who came to take a look. 

This is a different video, which shows remnants of a unit of Ukraine's 79th Airmobile Brigade, not the 72nd Mechanized Brigade.

Here's one notable part:

"We have no option but to retreat because our government doesn't do anything to pull us out of here or to give some kind of reinforcement, to save people. They are doing absolutely nothing."Regarding Ukrainian advances, the flight of civilians, and trapped Ukrainian forces, Dreizin adds ...
41 Ukrainian soldiers are reported to have escaped to Russia today, the largest one-day total so far.

Nonetheless, the rebels in Lugansk city, Donetsk city, and some other spots are very hard pressed at the moment. Lugansk city in particular is being pounded hard.

However, the Ukranians are incapable of any kind of targeted fire.  OSCE observers have been monitoring the situation and have confirmed the civilian casualties and the indiscriminate, seemingly random fire that causes them. 

A few days ago, the rebels had to make an organized retreat from the Severodonetsk/Lisichansk region nothwest of Lugansk city. Their hope now is to finish off the surrounded Ukrainian forces in the south quickly in order to free up substantial forces for a counterattack in the north. These southern forces would certainly shift the balance. The question is how fast they can be freed-up.So is the war really going as mainstream media plays it?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

"Place to Avoid" - French Blogger Fined $2,000 for Writing Bad Restaurant Review

nie., 27/07/2014 - 22:12
Want to review a French restaurant? Only good reviews are allowed in France.

Caroline Doudet a blogger who runs the site “Cultur'elle,” found that out when she wrote a restaurant review that the French court said "ranked too high in a Google search" (as if any writer can know in advance how many times a blog will be read, or what its ranking will be).

Link to Cached Review of "Place to Avoid"

Doudet was ordered to change the title of her blog and pay a fine. Instead she took it down.

However, a cached version is still available, and I bet it gets even more hits now that the courts have piqued everyone's interest.

Cached English translation: The place to avoid the Cap-Ferret: Il Giardino.

Neither the headline nor the article appears unreasonably inflammatory.

Doudet's main charge is exceptionally poor service. It took numerous complaints to three sets of servers for Doudet to get drinks and an appetizer before her main course arrived.

$2,000 Fine

For her writeup, French Blogger Fined $2,000 for Restaurant Review, Too Prominent on Google.
A blogger eats in an Italian restaurant in southwestern France. She thinks the food is bad, the service even worse, and she writes up a review that is not glowing, to put it mildly.

It’s a scenario that plays out daily in the cyberworld. Hair in a dish of pasta? Many would snap a photo and share it on Twitter or Facebook. An insufferable waiter? Blog it out.

But this blogger, a French woman named Caroline Doudet who runs “Cultur'elle,” got sued for it by the restaurant Il Giardino. And a judge has ruled that she must amend the title of her piece – because with it the post appears too prominently in Google search results – and that she owes $2,000 in damages.

The judge, according to court documents reported by the BBC, said that her blog, with over 3,000 followers, came up as the fourth result any time someone searched for the restaurant in Google. Therefore, she [the judge] reasoned, the title should be changed so “place to avoid” was less prominent.

Doudet made very good point to the local newspaper Sud Ouest that if bloggers don’t have the liberty to write bad reviews, good reviews become essentially meaningless.Il Giardino a "Place to Avoid"

If for some unexplained reason you find yourself in France, you may wish to mark Il Giardino as a place to avoid.

Any restaurant that would file charges against a blogger instead of apologizing for alleged piss poor service, is not a place I would want to visit.

For its stupid lawsuit, it's highly likely Il Giardino suffers more than it would have otherwise. 

Lawyer Advises Mish "Don't Go to France"

Here's the real place to avoid: France. I have my own experience, as many of you know.

For details, please see Lawyer Advises Me "Don't Go to France"; French Pub Fined €9,000 for Using "Undeclared Labor" after Customers Returned Empties to Bar

Doudet may be out $2,000 but hopefully she makes it up with publicity. I am willing to help. Please check out her site: Cultur'elle. Here's an English Translation of Cultur'elle.

As for me, France is not going to collect a cent.

Outside of purposeful slander, yelling "fire" in a movie, etc., I can say what I want.

France should try that reasonable approach. Instead, France (like Spain) marches at a fast pace down the road to complete internet big brother supervision.

For a synopsis of Spain and Europe in general, please see Internet Free Speech Vanishes in Spain; Most Infamous Law in Internet History; Brussels and Spain Target Google

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Bad Day for Bad Teachers, Good Day for Kids

nie., 27/07/2014 - 04:24
This is a guest post courtesy of Richard Berman at the Capital Research Center, under the title A Bad Day for Bad Teachers.

Summary: In 1954, the U.S. Supreme Court issued the landmark decision Brown v. Board of Education, which struck down racially segregated schools because, the court said, they were inherently unequal and they unjustly harmed poor and minority children. Last month, a California court cited Brown v. Board as it struck down multiple state laws, passed at the behest of teachers’ unions, which the court said unjustly protected incompetent teachers and unconscionably harmed children, especially the least fortunate.

In a landmark decision that sent shock waves through the educational establishment, Los Angeles Superior Court Judge Rolf Treu ruled last month that California’s teacher tenure laws unconstitutionally deprive students of their guarantee to an education and to equal rights. “The evidence is compelling,” Judge Treu wrote. “Indeed, it shocks the conscience.”

In Vergara v. California, nine students sued the State of California, claiming that ineffective teachers were disproportionately placed in schools with large numbers of “minority” and low-income students. Judge Treu agreed and quoted the U.S. Supreme Court’s 1954 Brown v. Board of Education decision that education “is a right which must be made available to all on equal terms.”

Nine young people and their families filed suit against California’s laws on teacher retention and dismissal, which, they say, protect bad teachers and deprive students of a high-quality education.

The Vergara decision came down less than one month after the 60th anniversary of the Brown decision, in which the U.S. Supreme Court struck down state and federal laws establishing separate public schools for students classified by the government as “white” and “black.”

(In Brown, the Court consolidated cases from Kansas, Virginia, South Carolina, and Delaware, as well as the federal jurisdiction of Washington, D.C.) The Supreme Court found that the practice of segregation violated the provision in the U.S. Constitution that “No State shall make or enforce any law which shall . . . deny to any person within its jurisdiction the equal protection of the laws.”

The argument in the current case, Vergara, is that, by forcing schools to favor incompetent teachers with seniority over more capable junior teachers, the rules deprive students of the education that the state constitution guarantees them. Further, because these rules funnel bad teachers to districts with large numbers of poor and “minority” students, those students are denied the equal treatment of the law.

The Vergara lawsuit was backed by Students Matter, a nonprofit educational policy advocacy group funded by Silicon Valley entrepreneur David Welch. “The state has a responsibility of delivering an education for the betterment of the child,” said Welch. “The state needs to understand that [its] responsibility is to teach children, and teach all of them.” Welch’s organization recruited the nine students, from several school districts, to serve as the public face of the case.
Astonishingly, the teachers’ union response to the ruling was that it was actually an attack on children. “This decision today is an attack on teachers, which is a socially acceptable way to attack children,” said Alex Caputo-Pearl, the president-elect of the Los Angeles teachers union. Instead of providing for smaller classes or more counselors, the reformers “attack teacher and student rights.”
Welch answered that claim in an op-ed for the San Jose Mercury News in which he described the harm students suffer from bad teachers:

According to the testimony of Harvard economist Dr. Thomas Kane, a student assigned to the classroom of a grossly ineffective math teacher in Los Angeles loses almost an entire year of learning compared to a student assigned to a teacher of even average effectiveness. Students assigned to more than one grossly ineffective teacher are unlikely ever to catch up to their peers.
And far from wanting to attack all teachers, Welch in the same article pleaded with his fellow Californians to reward good teachers:

“Let’s offer teachers opportunities for promotions, such as to master teacher, teacher mentor, or department chair, where the skills of a truly excellent, creative educator can reach more children—as well as better pay with incentives for excellence and taking on extra responsibilities or difficult positions.”

No less a union friend than Rep. George Miller (D-Calif.), whose largest campaign support comes from unions, has bluntly admitted, “Vergara will help refocus our education system on the needs of students.” No wonder the teachers’ unions made five separate legal efforts to have the lawsuit dismissed on grounds other than the merits of the case.

California teacher union members number some 445,000. Both the California Teachers Association (CTA, an affiliate of the National Educational Association) and the California Federation of Teachers (CFT, an affiliate of the American Federation of Teachers) plan to appeal the court’s decision. Jim Finberg, a lawyer for the two teachers’ unions, said that Judge Treu’s decision “ignores overwhelming evidence the current laws are working.”

Actually, less than 0.002% of teachers in California are dismissed in any given year. Judge Treu noted that, when an effort is made to fire a teacher, “it could take anywhere from two to almost ten years and cost $50,000 to $450,000 or more to bring these cases to conclusion under the Dismissal Statute, and that given these facts, grossly ineffective teachers are being left in the classroom.”
Judge Treu concluded that “distilled to its basics,” the unions’ position requires them to defend the proposition that the state has a compelling interest in the de facto separation of students from competent teachers, and a like interest in the de facto retention of incompetent ones. The logic of this position is unfathomable and therefore constitutionally insupportable.

Seniority vs. Merit

The Vergara decision overturned a LIFO (last-in/first-out) law requiring that teacher layoffs be based on seniority, rather than individual merit. California’s Permanent Employment Law required that a teacher be tenured after two years at a school (which, because of an early notice requirement, worked out in practice to 18 months or less). California is one of only five states in which tenure may be received after such a short period. As noted by the blog Voices of San Diego:

Regardless of what we call it, here’s how it looks in San Diego Unified. Once they’re hired, rookie teachers have to make it through a two-year probationary period, during which they can be dismissed for pretty much any reason.

But because the district has to tell teachers by mid-March whether they’ll be invited back for the next school year, the trial period is actually shorter than two years. In the past, the district hasn’t been particularly aggressive in the number of probationary teachers it sends away—only about 1 percent wasn’t given tenure.

“With such little time, you don’t even have enough information to actually consider whether they’re an effective teacher,” said Nancy Waymack, a managing director for the reform-advocacy group National Council on Teacher Quality.

Compared to other states, California has some of the strongest laws in place to protect teacher employment. The effect of this case may spur action throughout the nation. “Without a doubt, this could happen in other states,” said Terry Mazany, who served as interim CEO of Chicago’s public schools in 2010-2011. A lawyer for Students Matter said they are already hoping to “engage with policymakers in New York and nationally,” and donor David Welch said the group would consider suits in other states (New Jersey, Connecticut, Maryland, Minnesota, New Mexico, and Oregon were mentioned as possible sites).

Undue Process

The term “due process” refers to a legal or quasi-legal system that protects the rights of an individual, such as by requiring a trial before a person can be executed. Unions defend the complicated procedures for firing teachers by claiming they amount to “due process” that protects those teachers from arbitrary, unfair treatment. As the Pew publication Stateline reports, “The unions argue that the rules protecting teachers are needed for school districts to attract and retain good teachers and to ensure that employees are not fired for arbitrary or unfair reasons.”

But the judge ruled in Vergara that the process has become so cumbersome—that it’s become so difficult to get rid of bad teachers—that it deprives students of their rights. He ridiculed the process as “über due process,” and observed that California state laws already provide a great deal of protection for government and private-sector employees facing dismissal. “Why,” he pleaded, “the need for the current tortuous process” that is mandated only for teachers, a process so unjust, he added, that it was even decried by witnesses called by the teachers’ unions?

James Taranto of the Wall Street Journal noted an irony at the center of the ruling: “The California Supreme Court had applied the same legal premises to hold unconstitutional funding disparities among districts and one district’s decision to end the school year six weeks early owing to a budgetary shortfall. Vergara doesn’t break new legal ground so much as apply precedent in a way that threatens the education establishment. It’s a case of judicial activism coming back to bite the left.”

A permanent job

As noted in Waiting for ‘Superman,’ a documentary promoting educational reform, one out of every 57 doctors loses his or her license to practice medicine, and one of every 97 lawyers loses his or her license to practice law. Yet, in many major cities, only one out of 1,000 teachers is fired for performance-related offenses. The reason is tenure, or as the unions call it, “permanent status.”
Tenure is the practice of guaranteeing a teacher his or her job. Originally, this was a due process guarantee, something intended to work as a check against administrators capriciously firing teachers and replacing them with friends or family members. It was also designed to protect teachers who took political stands the community might disagree with. Tenure as we understand it today was first seen at the university level, where, ideally, professors would work for years and publish many pieces of inspired academic work before being awarded what amounted to a job for life.

At the elementary and high school level, tenure has evolved from the original understanding of “due process” to the university-style “job for life.” In most states, teachers are awarded tenure after only a few years, after which time they become almost impossible to fire. The main function of these laws is to help bad teachers keep their jobs.

►One Los Angeles union representative has said: “If I’m representing them, it’s impossible to get them out. It’s impossible. Unless they commit a lewd act.” Unfortunately for the students who have to learn from these educators, virtually every teacher who works for the Los Angeles Unified School District receives tenure. In a study of its own, the Los Angeles Times reported that fewer than two percent of teachers are denied tenure during the probationary period after being hired. And once they have tenure, there’s no getting rid of them. Between 1995 and 2005, only 112 Los Angeles tenured teachers faced termination—eleven per year—out of 43,000. And that’s in a school district where the high school graduation rate in 2003 was a pathetic 51 percent.
►One New Jersey union representative was even blunter about what his union does to keep bad teachers in the classroom: “I’ve gone in and defended teachers who shouldn’t even be pumping gas.”
In 10 years, only about 47 out of 100,000 teachers were terminated from New Jersey’s schools. Original research conducted by the Center for Union Facts (CUF) has confirmed that almost no teacher is ever fired in Newark, which is New Jersey’s largest school district, no matter how bad a job the teacher does. Over one four-year period, CUF discovered, Newark’s school district successfully fired about one out of every 3,000 tenured teachers annually. This is a city where roughly two-thirds of students never graduate from high school.
►In New York City, the New York Daily News reported that “just 88 out of some 80,000 city schoolteachers have lost their jobs for poor performance” over 2007-2010.
Then there were the so-called “rubber rooms” of New York City, which operated until 2010. Teachers who couldn’t be relieved of duty would report to these “rubber rooms,” where they would be paid to do nothing for weeks, months, even years. According to the New York Daily News, at any given time an average of 700 teachers were being paid not to teach while the district jumped through the hoops, imposed by the union contract and the law, to pursue discipline or termination. (A city teacher in New York who ended up being fired spent an average of 19 months in the disciplinary process.) The Daily News reported that the New York City school district spent more than $65 million annually just to pay the teachers who were accused of wrongdoing. Millions more tax dollars were spent to hire substitutes.

After the embarrassing Daily News story and an exposé in the New Yorker, the union agreed to end the practice of rubber rooms but refused to expedite the dismissal process. Instead of whiling the days away doing nothing, the teachers were assigned to do clerical work and perform other semi-useful tasks.

The problem isn’t limited to teachers accused of wrongdoing. The city spends more than $100 million every year paying teachers who have been excessed (i.e., whose positions have been eliminated) but have yet to find jobs.

According to the Wall Street Journal, the ironclad union contract requires that any teacher with tenure be paid full salary and benefits if he or she is sent to the “Absent Teacher Reserve pool.” The average pay of a teacher in that pool is over $80,000 a year, and some teachers have stayed in the pool for years. The Journal reports that the majority of teachers in the pool had “neither applied for another job in the system nor attended any recruitment fairs in recent months.”

►Things are no better in New York as a whole. The Albany Times Union looked at what was going on statewide outside New York City and discovered some shocking data: Of 132,000 teachers, only 32 were fired for any reason between 2006 and 2011.
►In Chicago, a school system that has by any measure failed its students—only 28.5 percent of 11th graders met or exceeded expectations on that state’s standardized tests—Newsweek reported that only 0.1 percent of teachers were dismissed for performance-related reasons between 2005 and 2008. When barely one in four students nearing graduation can read and do math, how is it possible that only one in one thousand teachers is worthy of dismissal? It may well be that most of the city’s teachers are good teachers, but can 99.9% of them be good?

Effects of tenure and related teacher “protections”

Modeled after labor arrangements in factories, the typical teachers’ union contract is loaded with provisions that do not promote education. These provisions drive away good teachers, protect bad teachers, raise costs, and tie principals’ hands.

● The Dance of the Lemons

One of the more shocking scenes in the documentary Waiting for ‘Superman’ is an animated illustration of “The Dance of the Lemons.” This is no waltz or foxtrot. Rather, it’s the systematic shuffling of incompetent teachers from school to school. These teachers can’t be fired because union contracts require that “excessed” educators, no longer needed at their original school, must be given first crack at new job openings when slots open up elsewhere in the district. Administrators at other schools don’t want to hire these bad teachers, but districts are unable to fire them.
What happens? LA Weekly documented just how this process plays out in Los Angeles in a massive 2010 investigation. “The far larger problem in L.A. is one of ‘performance cases’—the teachers who cannot teach, yet cannot be fired. Their ranks are believed to be sizable—perhaps 1,000 teachers, responsible for 30,000 children. … The Weekly has found, in a five-month investigation, that principals and school district leaders have all but given up dismissing such teachers. In the past decade, LAUSD officials spent $3.5 million trying to fire just seven of the district’s 33,000 teachers for poor classroom performance—and only four were fired, during legal struggles that wore on, on average, for five years each. Two of the three others were paid large settlements, and one was reinstated. The average cost of each battle is $500,000.”
Unintended Consequences, a study by The New Teacher Project (TNTP), documented the damage done by this union-imposed staffing policy. In an extensive survey of five major metropolitan school districts, TNTP found that “40 percent of school-level vacancies, on average, were filled by voluntary transfers or excessed teachers over whom schools had either no choice at all or limited choice.” One principal decried the process as “not about the best-qualified [teacher] but rather satisfying union rules.”

● Thinning the talent pool

One problem related to the destructive transfer system is a hiring process that takes too long and/or starts too late, thanks in part to union contracts. Would-be teachers typically cannot be hired until senior teachers have had their pick of the vacancies, and the transfer process makes principals reluctant to post vacancies at all for fear of having a bad teacher fill it instead of a promising new hire.

In the study Missed Opportunities, The New Teacher Project found that these staffing hurdles help push urban districts’ hiring timelines later to the point that “anywhere from 31 percent to almost 60 percent of applicants withdrew from the hiring process, often to accept jobs with districts that made offers earlier.”

“Of those who withdrew,” the TNTP report continues, “the majority (50 percent to 70 percent) cited the late hiring timeline as a major reason they took other jobs.” It’s the better applicants who are driven away: “Applicants who withdrew from the hiring process had significantly higher undergraduate GPAs, were 40 percent more likely to have a degree in their teaching field, and were significantly more likely to have completed educational coursework” than the teachers who ended up staying around to finally receive job offers.

● Keeping experienced teachers away from poor children

Another common problem with the union contract is a “bumping” policy that fills schools which are more needy (but less desirable to teach in) with greater numbers of inexperienced teachers. In its report Teaching Inequality, the Education Trust noted: “Children in the highest-poverty schools are assigned to novice teachers almost twice as often as children in low-poverty schools. Similarly, students in high-minority schools are assigned to novice teachers at twice the rate as students in schools without many minority students.”

● Bad apples stay

A study conducted by Public Agenda polled 1,345 schoolteachers on a variety of education issues, including the role that tenure played in their schools. When asked “does tenure mean that a teacher has worked hard and proved themselves to be very good at what they do?” 58 percent of the teachers polled answered that no, tenure “does not necessarily” mean that. In a related question, 78 percent said a few (or more) teachers in their schools “fail to do a good job and are simply going through the motions.”

When Terry Moe, the author of Special Interest: Teachers Unions and America’s Public Schools, asked teachers what they thought of tenure, they admitted that the byzantine process of firing bad apples was too time-consuming: 55 percent of teachers, and 47 percent of union members, answered yes when asked “Do you think tenure and teacher organizations make it too difficult to weed out mediocre and incompetent teachers?”

● The union tax on firing bad teachers

So why don’t districts try to terminate more of their poor performers? The sad answer is that their chance of prevailing is vanishingly small. Teachers unions have ensured that even with a victory, the process is prohibitively expensive and time-consuming. In the 2006-2007 school year, for example, New York City fired only 10 of its 55,000 tenured teachers, or 0.018%. The cost to eliminate those employees averages out to $163,142, according to Education Week. The Albany Times Union reports that the average process for firing a teacher in New York state outside of New York City proper lasts 502 days and costs more than $216,000. In Illinois, Scott Reeder of the Small Newspaper Group found it costs an average of $219,504 in legal fees alone to move a termination case past all the union-supported hurdles. In Columbus, Ohio, the teachers’ union president admitted to the Associated Press that firing a tenured teacher can cost as much as $50,000. A spokesman for Idaho school administrators told local press that districts have been known to spend “$100,000 or $200,000” in litigation costs to toss out a bad teacher.

It’s difficult even to entice the unions to give up tenure for more money. In Washington, D.C., school chancellor Michelle Rhee proposed a voluntary two-tier track for teachers. On one tier, teachers could simply do nothing: Maintain their regularly scheduled raises and keep their tenure. On the other track, teachers could give up tenure and be paid according to how well they and their students performed, with the potential to earn as much as $140,000 per year. The union wouldn’t even let that proposal come up for a vote among its members, and stubbornly blocked efforts to ratify a new contract for more than three years. When the contract finally did come up for ratification by the rank and file, the two-tier plan wasn’t even an option.

● Taking money from good teachers to give to bad teachers

During the expansion of teacher collective bargaining in the mid-twentieth century, economists from Harvard and the Australian National University found, the average, inflation-adjusted salary for U.S. teachers rose modestly—while “the range of the [pay] scale narrowed sharply.” Measuring aptitude by the quality of the college a teacher attended, the researchers found that the advent of the collectively bargained union contract for teachers meant that on average, more talented teachers were receiving less, while less talented teachers were receiving more.

The earnings of teachers in the lowest aptitude group (those from the bottom-tier colleges) rose dramatically relative to the average wage, so that teachers who in 1963 earned 73 percent of the average salary for teachers could expect to earn exactly the average by 2000. Meanwhile, the ratio of the earnings of teachers in the highest-aptitude group to earnings of average teachers fell dramatically. In states where the highest-aptitude teachers began with an earnings ratio of 157 percent, they ended with a ratio of 98 percent.

Data from the National Center for Education Statistics, as reported by Education Week, add further evidence to the compressed-pay claim. The Center’s stats indicate that the average maximum teacher pay nationwide is only 1.85 times greater than the nationwide average salary for new teachers.

● Locking up education dollars

Much of the money commanded by teachers’ union contracts is not being used well, at least from the perspective of parents or reformers. Several provisions commonly found in union contracts that cost serious money have been shown to do little to improve education quality. A report from the nonprofit Education Sector found that nearly 19 percent of all public education spending in America goes towards things like seniority-based pay increases and outsized benefits—things that don’t go unappreciated by teachers, but don’t do much to improve the quality of teaching children receive. If these provisions were done away with, the report found, $77 billion in education money would be freed up for initiatives that could actually improve learning, like paying high-performing teachers more money.

● Putting kids at risk

Teachers unions push for contracts that effectively cripple school districts’ ability to monitor teachers for dangerous behavior. In one case, school administrators in Seattle received at least 30 warnings that a fifth grade teacher was a danger to his students. However, thanks to a union contract that forces schools to destroy most personnel records after each school year, he managed to evade punishment for nearly 20 years, until he was finally sent to prison in 2005 for having molested as many as 13 girls. As an attorney for one of the victims put it, according to the Seattle Times, “You could basically have a pedophile in your midst and not know it. How are you going to get rid of somebody if you don’t know what they did in the past?”

The Bottom Line

Too many schools are failing too many children. Americans should not remain complacent about how districts staff, assign, and compensate teachers. And too many teachers’ union contracts preserve archaic employment rules that have nothing to do with serving children.

Even Al Shanker, the legendary former president of the American Federation of Teachers, admitted, “a lot of people who have been hired as teachers are basically not competent.”

This is what the union wants: To keep teachers on the payroll regardless of whether or not they are doing any work or are needed by the school district. Why? As long as they are on the payroll, they keep paying union dues. The union doesn’t care about the children who will be hurt by this misallocation of tax dollars. All union leaders care about is protecting their members and, by extension, their own coffers.

Most teachers absolutely deserve to keep their jobs, and some have begun to speak out about the absurdity of teacher tenure, but it’s impossible to pretend that the number of firings actually reflects the number of bad teachers protected by tenure. As long as union leaders possess the legal ability to drag out termination proceedings for months or even years—during which time districts must continue paying teachers, and substitute teachers to replace them, and lawyers to arbitrate the proceedings—the situation for students will not improve.

The Vergara case offers hope, but supporters of better education cannot rely on judges to fix America’s schools. Parents and teachers must join together to eliminate teacher tenure systems that protect bad teachers and that divert our best teachers away from many of the students who could benefit most from their skills and experience.
*   *   *About the Author:  Richard Berman is executive director of the Center for Union Facts. Some of this material appeared previously on the website TeachersUnionExposed.com, a project of the Center for Union Facts. This article originally appeared on the website Labor Watch, and is republished here with permission.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Japan Exports and Trade Balance vs. the Yen; Abenomics in Review

sob., 26/07/2014 - 22:59
Despite the widely touted success of Abenomics, a few charts will prove success is all hype and no reality. Let's start with a chart of the Yen.

$XJY Yen Monthly

click on any chart for sharper image

The Yen went on a tear from mid-2007 to mid-2011, rising from 80.55 to 132.18. Since then, the Yen declined to and 94.83 and is currently at 98.26. The Yen was in this general area, at times, in 2004, 2005, 2008, 2009, and 2014.

One intent of Abenomics was to devalue the Yen to aid exports. How did that work out?

Japan Left Behind

Bloomberg reports Japan’s Export-Champ Days Are Left Behind.
The CHART OF THE DAY shows the value of Japan’s exports is 23 percent below a March 2008 peak, even as those of South Korea, the U.S. and Germany have grown. The yen has lost 16 percent in value against the dollar since Prime Minister Shinzo Abe took office in December 2012. That hasn’t been enough to spur growth in outbound shipments.

Japan’s government and central bank have blamed weak overseas demand, especially in emerging markets, for export sluggishness. This weakness is negative for an economy that suffered a blow to domestic demand from an April sales-tax increase.

“Japan is being left behind in the export recovery mainly because Japanese companies accelerated the shift of production abroad when the yen appreciated after the Lehman shock,” said Toru Suehiro, a market economist at Mizuho Securities Co. in Tokyo. “The loss of global market presence by Japan’s companies, especially electronic appliance makers, is also a factor.”

The impact of the move overseas by Japanese companies is striking in the U.S. automobile market, said Suehiro. U.S. sales for Japanese automakers in the six months through June rose 6.2 percent from a year earlier to 3.04 million, according to researcher Autodata Corp. Auto exports from Japan to the U.S. for the same period were down 8.5 percent, according to finance ministry data.No Export Recovery for Japan (Chart of the Day)

Abenomics Flame-Out

What about exports vs. imports, a measure of trade deficits or surplus? Wolf Richter provides the answer in The Flame-Out Of Abenomics, In One Crucial Chart. Richter reports ...
Abenomics, the new economic religion of Japan, has kept some of its promises: It created inflation while wages stagnated, thus whittling down real incomes, further squeezed by the broad consumption tax hike. It devalued the yen by 25%, thus vaporizing a quarter of the wealth of the Japanese without having to tell them directly. And to make up for the tax increase on consumers, Abenomics elegantly cut taxes for Japan Inc. Grudging respect is due Prime Minister Shinzo Abe for these noble accomplishments.

In other areas, his record is spotty. One of the goals of his policies was to fire up exports by making them cheaper overseas and reduce imports by making them more expensive to consumers and businesses at home. It would crank up Japan's manufacturing sector and lead to a trade surplus that would inflate GDP, make Abe a hero, and save Japan.

Exports and trade surpluses have been vital to the Japanese economy. And reconstituting them has been a cornerstone of Abenomics. But that plan has gone to heck.

Not step by step, gradually over time, but in monthly leaps, whose size surprised even Abenomics-cynics like me. And the Ministry of Finance rubbed it in today when it published the trade statistics for June.

Exports, instead of soaring due to the watered-down yen, dropped 2.0% from a year ago to ¥5.94 trillion. Imports, instead of dropping due to consumers being squeezed by higher prices and stagnating incomes, soared 8.4% to ¥6.761 trillion. The resulting goods trade deficit jumped to ¥822.2 billion.

It was the worst trade deficit for any June ever. It was over four times as bad as last year's "worst June deficit ever." In June 2012, Japan still had a surplus. Historically, June is one of the better months for Japanese trade. But that surplus in June 2012 was Japan's last. What followed were 24 months of relentlessly deteriorating trade deficits. The worst series in Japan's recorded history (far ahead of the second-worst, the 14-month period in 1979-1980).

For the first six months this year, compared to the same period last year, the trade deficit soared 57%!

Here is what the flaming success of Abenomics looks like, boiled down to one chart:

The debacle was spread across the board, starting with its largest trading partner, both in terms of exports and imports, China. Since about one-third of Japan's exports to China get transshipped through Hong Kong, I combine them. So exports to China and Hong Kong edged up 1.6%. But imports from them jumped 10.6%. And the trade surplus in 2013 of ¥57 billion turned into a trade deficit of ¥63 billion. That's a deterioration of ¥120 billion. Even exports to the US, its second largest trade partner, declined 2.7%, while imports from the US rose 6.8%.

The export declines were spread across the largest categories: transportation equipment (cars, trucks, etc., which account for nearly a quarter of all exports) dropped -0.6%; machinery (about a fifth of all exports) -0.4%; electrical machinery (semiconductors, audio-video equipment, batteries, etc.) -5.1%; manufactured goods (steel products, etc.) -0.2%.

And imports rose across the largest categories. Mineral fuels (petroleum, LNG, coal, etc.), which make up nearly one-third of all imports, rose 8.3%.Spotlight on Energy and Food

In the wake of Japan's nuclear disaster at Fukushima that closed multiple reactors, Japan has been very reliant on energy imports.

A falling yen certainly does not help.

Spotlight on Food

According to the USDA, Japan imports about 60% of its food.

And some of what Japan does produce is contaminated, and will be for thousands of years. See the July 15, 2014 report: TEPCO Failed To Disclose Crops Over 20KM From Fukushima Were Contaminated

Richter notes "[Japanese consumer] purchasing power is down by 3.6% year over year, for all items, including services; Purchasing power is down 5.6% for goods.

Abe wanted higher prices and got them, but not where he wanted them. Abenomics was supposed to help exports (but didn't), job creation (but didn't), manufacturing output (but didn't), real wages (but didn't).

Simply put, Abenomics has been a huge failure from every angle. Yet, economists are in near-universal praise because prices are rising. That's Keynesian idiocy at its finest.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Who's Winning the War in Ukraine? Answer May Shock You!

sob., 26/07/2014 - 09:58
Here's the question, not of the day, but of the month: Who's Winning the War in Ukraine?

That may sound like a simple question, but it isn't.

That question leads to a second question "In whose eyes?" It also depends on the definition of "war". And it also depends on the definition of "win". And finally it depends on which media source you believe.

Military Aspect

From a military aspect, I have seen reports from both sides. The Western media portrays Ukraine on the march with the rebels surrounded, and losing ground. Is that accurate reporting?

I will let you be the judge. Please consider this video released on Friday.

The caption reads "Всё что осталось от 72-й бригады ВСУ 25.07.2014".

Diving into the details here is my rough translation (interpretation from the video) : "Ukraine's 72nd brigade is now an additional battalion short."

Where the bodies are, I don't know . But that is highly unlikely to be a fake video.

And contrary to Western media reports, my sources have said for a week "various Ukraine forces are trapped, looking for a way to escape to Russia".

Clearly, one of them failed to make it.

Are the Rebels Winning?

In whose Eyes? And what does "winning" mean?

In the eyes of the media, Ukraine is winning. The front page news everywhere you look says Ukraine is winning.

More importantly, the media has lined up behind Ukraine and now 22 US senators are willing to blame Putin and do everything they can to stop Russia.

Senator McCain, as always, is leading the pack.

Pat Buchanan exposed McCain the other day for the war-mongering hypocrite that he is. David Stockman has the details in My thoughts On Pat Buchanan’s Brilliant And Incisive Take On Washington’s Ukrainian Fiasco.

Senator John McCain’s call to arm the ruffians, opportunists, oligarchs and neo-fascists who took power in a street level coup in Kiev is downright lunatic. It causes Buchanan to ask, “Who is the real problem here?”

Propaganda War

When it comes to the propaganda war, McCain and his primary war-mongering ally (none other than president Obama) are clearly winning! The only difference between the two is McCain is a far bigger war-monger than Obama.

Obama is likely to catch up. He usually does.


Yet, one must step back and ask "What the hell is this war really about?"

Is it NATO? Or is it energy?

I happen to believe both. Starting from that scorecard, please consider my post on Thursday Ukraine Government Breaks Up: Prime Minister Resigns Over "Vital Laws on Energy and Army Financing"; Follow the Money

Synopsis: The Ukrainian Prime Minister Arseniy Yatseniuk resigned and that will lead to early elections in which pro-Russian MPs will be removed from parliament.

In essence, Ukraine will be more pro-NATO. But that's not all.

Biden's Son, Kerry Family Friend Join Ukrainian Gas Producer's Board

Please consider this resignation statement as noted by RIA: "Yatsenyuk also expressed disappointment with Ukrainian parliament’s decision to reject a bill that allows the government to hand over up to 49 percent of the country’s gas transport system to investors from the European Union and the United States."

In response I said "Follow the Money"

I neglected to report precisely where the money flowed.

The Wall Street Journal has all you need to know with this May headline regarding Biden, Kerry, and Ukraine: Biden's Son, Kerry Family Friend Join Ukrainian Gas Producer's Board.

Who's Winning?

You tell me. Before you do, please define "win".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

SBU Cleans Website of Bogus "Proof"; Mystery of 312 Grows

sob., 26/07/2014 - 02:59
An image from the Security Service of Ukraine ("SBU") that purportedly showed a Buk heading back to Russia at nighttime, has now been removed from the site.

I made a screenshot of the image and posted it in Ukraine Caught in Third Major Lie? Magic Number 312.

The image once was at the bottom of this SBU page: Russia is trying to hide the evidence of his involvement in a terrorist attack in the skies over Ukraine.

Here is the image I posted, now removed.

CNN Complicit as Well?

Shortly after the crash, CNN's Kyung Lah conducted an interview with Vitaly Nayda, Ukraine's Director of Informational Security.

Nayda made serious, unfounded charges, pointed straight at Russia. He also showed Lah the evidence, including those bogus photos.
There are now two versions of the CNN video, both still available, if you know how to find them. One has the bogus photos and associated comments stripped, the other doesn't.

The only timestamps that I can see mark them from the same day. Perhaps both were edited.

Both are highly inflammatory. Play either one and it's crystal clear Lah plays straight into hands of Nayda. 

Here is CNN Video 1

Here is CNN Video 2

The first video is 3 minutes 11 second long; The second video is 1 minute 33 seconds long.

Bear in mind, I do not know the precise order in which these were released, but reader Sergey who notified me of the SBU editing claims to know.

Sergey copied me on an email he sent to CNN (slightly edited for typos, spellings, and ease in reading).
Dear Sirs,

On July 20, CNN reporter Kyung Lah interviewed Ukrainian security Chiev Mr. Vitaly Nayda. I saw the interview. The full version includes Mr. Nayda's comments on photos of "Buk" missile "moved from Ukraine to Russia by terrorists after the MH17 crash. But the images Nayda presented turned out to be fake.

Russia Today.Tv published a video dated March, 2014 where from this "Buk" night photo was taken.

Since then, the Ukrainian secret service deleted the photos from their webpage.

What was surprised me, and made me sad, is that you did the same! It is disappointing, that the original version of the interview was censored.  Only half of it is still there on your webpage.

Mrs Kyung Lah and CNN in general are not responsible for what Mr. Nayda said to your correspondent. But deleting the fake evidence he presented on behalf of the Ukrainian state makes you complicit in fraud.

Why you did it?

Best regards,
Russia The mystery of 312 grows.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

France Unemployment New High, Output Down 15th Month; Prices Drop 27th Month; Activity Up in Peripheral Europe; Outlook for Germany

pt., 25/07/2014 - 21:19
The grim economic news from France keeps piling up. Today, Europe Online reports Number of Unemployed in France Hits New High.
The number of unemployed people in France has hit a new high as the country grapples with the fallout of the financial crisis and a sluggish eurozone recovery, the Labour Department reported Friday.

At the end of June, there were 3.398 million people who were registered as being without a job in the eurozone‘s second-largest economy - 0.3 per cent more than in the previous month.

Compared to June of last year, the number of jobless was up 4 per cent.

In a glimmer of positive news, the number of unemployed youth was down compared to last year: those under 25 without a job decreased by 3.1 per cent to 535,000.

France‘s 10.1-per-cent unemployment rate is nearly twice as high as in neighbouring Germany, which registers a 5.1-per-cent rate.
French Private Sector Employment Contracts 9th Month

According to the Markit Flash France PMI, French private sector output contracts again, albeit at slower pace.
The latest flash PMI data signalled that France’s private sector remained in contraction at the start of the third quarter. Output was down for the third month in succession, although the rate of decline eased to a marginal pace that was the weakest in that sequence.

Driving the headline index higher was an improvement in the performance of the French service sector. Activity there increased for the first time in three months, albeit marginally.

On the other hand, the manufacturing sector sank further into contraction, with output falling at the sharpest rate in 15 months. New business received by French private sector firms decreased for a fourth consecutive month in July. Although moderate, the rate of decline was quicker than in June. Lower new work was signalled in both the services and manufacturing sectors, with the latter reporting the sharper fall.

Anecdotal evidence suggested that client budgets were under pressure, leading to a squeeze on new orders despite further reductions in prices charged by French private sector firms. Indeed, output prices fell for a twenty - seventh successive month in July , with the rate of decline accelerating since June. A number of panellists indicated that they had been forced to pare their margins in order to stem the loss of new business , with competitive pressures generally reported to be strong. Both service providers and manufacturers reported lower charges. In contrast, firms’ input prices continued to rise at a solid pace in July, with companies in both services and manufacturing signalling increases. There were reports from the survey panel of increased costs for labour and raw materials. Employment in the French private sector decreased for the ninth month running in July. That said, the rate of decline was marginal and the weakest since Marc h. Both service providers and manufacturers cut staffing levelsFrance Synopsis

  • Manufacturing down at sharpest rate in 15 months
  • New business down 4th month
  • Budgets under pressure
  • Input costs rising sharply
  • Output prices down 27th month and accelerating
  • Private sector employment down 9th month
  • Service sector activity improved slightly

Activity Picks up in Peripheral Europe

Meanwhile, things improve elsewhere in Europe. The Markit European Composite report makes this headline claim: Flash PMI signals rebound in Eurozone growth but French woes persist.
Eurozone economic growth rebounded in July, according to the „flash‟ estimate of Markit‟s Purchasing Managers‟ Index. The headline PMI, covering business activity across both manufacturing and services, rose from a six - month low of 52.8 in June to 54.0 in July. The latest reading matched the near - three year high seen back in April and exceeded the averages seen in the first two quarters of the year. Many companies reported that business had picked up again in July after an unusually high number of holidays and a knock - on effect of mild winter weather had depressed activity in prior months. However, growth of new orders slowed slightly in July amid signs that expansion , especially in manufacturing, is being subdued by geopolitical concerns, in particular the escalating crisis in Ukraine.

A lack of clarity on the economic outlook, as well as ongoing pressure to cut costs and boost competitiveness, meant employment rose only marginally once again in both sectors in July.

Output prices meanwhile continued to fall, with the rate of decline accelerating slightly on June. Average selling prices have now fallen continually since April 2012, although the rate of decline remains only modest and far weaker than that seen at the height of the financial crisis. A marginal rise in manufacturing factory gate prices was offset by a drop in charge s levied for services. Some rising cost pressures were evident. Average input prices in manufacturing rose for a second successive month, growing at the steepest rate for seven months, while service sector input costs also rose, albeit to a slightly lesser extent than June. Looking at the data by country, strong national divergences persisted, with France contracting while growth accelerated elsewhere.

Firms in France reported that output fell for a third month running after the brief return to growth seen in the spring. Although French service providers saw a marginal return to growth, output in the manufacturing sector fell at the steepest rate since April 2013.

Firms in Germany, in contrast, reported the strongest increase in business activity since April, with growth picking up sharply from the lull seen in June. Service sector activity picked up especially markedly, growing at the fast est rate for over three years.

Manufacturing output growth also revived in Germany, but remained much weaker than earlier in the year. Outside of France and Germany, the rest of the region recorded the largest monthly increase in business activity since August 2007. New orders also grew at the sharpest rate for seven years. Although manufacturers outside of France and Germany saw output growth moderate slightly, the pace of expansion in services hit a seven-year high. Party is Over

The party is over (not that there was much of one outside the stock and bond markets) once German growth slows. And while the Markit report looks one way for Germany, other indicators don't.

Outlook for Germany

I side with Steen Jakobsen, chief economist for Saxo bank on the path for Germany, and it's not a pretty one.

Europe is not prepared for a German slowdown, but it is coming. France is obviously hopeless.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Obama Shenanigans on 'Factoryless' Exports, Taxes, Employment, Jobs

pt., 25/07/2014 - 08:09
Corporate Deserters

President Obama was beating the drums on Thursday in Los Angeles regarding corporate tax deserters, companies that move headquarters or tax shields to another country in order to escape high US tax rates.

The LA Times provides the details in President Obama Hits 'Corporate Deserters' in Populist L.A. Speech.
Tearing into companies he dubbed “corporate deserters,” President Obama on Thursday launched an election-year push to make it harder for U.S. companies to avoid paying taxes.

Under a bright sun at a trade and technical college in Los Angeles, Obama issued a damning assessment of a “small but growing” group of companies taking advantage of a “loophole” in corporate tax law by reorganizing overseas, often in low-tax countries.

Obama accused the companies of “renouncing their U.S. citizenship” and “fleeing the country” while sticking U.S. taxpayers “with the tab.”

“You shouldn’t get to call yourself an American company only when you want a handout from the American taxpayer,” Obama told a crowd gathered at the Los Angeles Trade-Technical College. The speech capped a three-day West Coast trip primarily focused on raising money for Democrats ahead of the midterm elections.

Obama’s target on Thursday was so-called inversion transactions, a practice that allows U.S. companies to reincorporate overseas, either through a merger or purchase of a foreign entity, and thus avoid paying U.S. taxes on its foreign earnings.Who Cares About Legalities?

The president acknowledged the practice is legal, but added “my attitude is, ‘I don’t care if it’s legal -- it’s wrong.’”

Well, who gives a damn about legalities anymore? Certainly not president Obama, as he has proven many times over.

Besides, as we all learned from President Nixon "When the president does it, it's not illegal".

No president has been a finer student of Nixon philosophy than Obama.

People Freaking Out

Business Insider's "eye-popping" chart of the day on Why People Are Freaking Out About 'Tax Inversions' adds a big megaphone to Obama's tune.

'Factoryless' Exports

In addition to seeking higher taxes, Obama simultaneously proposes a rule change to classify "factoryless goods producers" as domestic manufacturers, even if the manufacturing jobs associated with those producers are offshore.

The IB Times reports Obama's jobs proposal was  Slammed by Unions.
A decade ago, as the United States hemorrhaged manufacturing jobs, the federal government considered reclassifying fast food as a manufacturing industry. Sound ludicrous? Today, with the manufacturing sector still ailing, the federal government wants to take something called "factoryless goods" and categorize the firms that make them as manufacturers. As part of the plan, the government could also classify some foreign-manufactured goods as U.S. exports.

Now, as the White House seeks to portray its domestic manufacturing initiatives as successful, the administration has proposed a rule change to classify "factoryless goods producers" as domestic manufacturers, even if the manufacturing jobs associated with those producers are offshore. A 2013 Study by Dartmouth Business School researchers found that had that rule been in place, it would have officially increased U.S. manufacturing employment figures by 595,000 jobs in 2002 and 431,000 jobs in 2007.

In response, labor unions and consumer groups this week announced they organized more than 26,000 public comments against the proposed change. They charge that the reclassification could undermine the Buy America Act, which requires government purchasers to give preference to U.S.-made goods.  They also argue that such a reclassification would artificially and inaccurately inflate the number of domestic manufacturing jobs reported by the government and would hide the true economic cost of trade proposals, such as the pending Trans Pacific Partnership.

Though the proposed change could be politically useful for lawmakers and is a hot issue for labor advocates, some economists support the initiative on the grounds that it provides more precise data. As the Dartmouth researchers argue, such reclassification may be necessary because "factoryless goods" are "a new type of production function in the global economy." Ultimate in "Factoryless Goods"

Do US dollars qualify as "factoryless" goods? If not, why not? Dollars can be manufactured at will, electronically, without a factory, and China gladly takes all of them we print.

China wants dollars and we want junk. That should make everyone happy.

The only problem is classification. All Obama has to do is count US dollars as a "new type of production" and the trade deficit magically goes away.

On a more serious note ...

I propose elimination of corporate income taxes entirely. 

I recently discussed a zero percent corporate tax rate  in response to a proposal by Barry Ritholtz regarding a "Fair Tax" structure.

For a detailed discussion, please see Reader Emails and Other Reflections On the "U.S. Corporate Tax Dodge".

The article covers numerous points. For those who want a quick synopsis, here goes:

"Ritholtz wants uniformity and fairness. I agree. Taxation at 0% would not only provide it, businesses would come to the US, instead of escape from the US. How bad would that be?"

To address the trade deficit completely and easily, also see Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

The Piece Fits; Debunking Revisited

pt., 25/07/2014 - 02:31
It Fits 

Reader Eric comments "It is amazing what internet, twitter, etc. has done for the pursuit of truth.  Here is an individual who shows where the piece fits on the plane."

From @ErzaBraam

The Piece

For a report on the piece, please see Photo of MH17 Wreckage Proves Missile Attack

Contrary to popular belief this does not prove MH17 was brought down by a Buk. Rather, the image is consistent with a missile explosion from outside the plane, not a crash, and not a bomb exploding inside.

The damage could be from a Buk, and is likely a Buk, but my understanding is that it could also be an air-to-air missile of a similar nature. If a military expert can state 100% otherwise, I would be happy to reconsider.

Debunking the Debunk of the Debunk

Several people sent me an email that allegedly debunks my debunk of a Reuters story regarding rebel admission of Buk possession. For background, please see Reuters Debunked: Khodakovsky Denies Interview Aspects.

The alleged debunk of my debunk is a Radio Free Europe Clip.

The audio clip is not embeddable,  so click on the preceding link to play.

Reader Ilya commented "Show this to your Russian speaking propaganda zombie." That ridiculous comment was in regards to Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian, and whose analysis I sometimes use.

I did show it to Dreizin and we both laughed out loud. This is my response ...

Believe a short clip by Radio Free Europe, a US propaganda site? When some of  the clip is barely audible,  and sounds like it was spliced together out of context?

Please be serious.

But hey, I am a fair guy. If Reuters wants to publish the entire interview, so we can hear the pauses, the context, and all other aspects, I would be happy to reconsider.

Meanwhile, let me repeat: In the original interview, Reuters author Anton Zverev posted quotes that are not consistent with the headline story. No amount of tampering, editing or innuendo can change that simple fact.

Once again, I quote - directly from Reuters  (who directly quoted Khodakovsky as follows) ... "What resources our partners have, we cannot be entirely certain. Was there (a BUK)? Wasn’t there? If there was proof that there was, then there can be no question."

In 100% certain terms, and clearly in context, Khodakovsky stated he did not know if other rebel units had Buks, while a previous quote shows his unit did not.

There is absolutely no reasonable way for the Reuters headline to read (as it did) "Exclusive: Ukraine rebel commander acknowledges fighters had BUK missile."

Blame whoever you want: Blame the editor, blame the author, or blame Reuters, but you cannot reasonably blame anyone who points out such an obvious discrepancy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Junk Bond Indigestion; Musical Chairs; Take Chips Off the Table?

czw., 24/07/2014 - 22:41
The first half of 2014 sported record junk bond purchases by investors thirsty for yield, no matter how absurd the bond covenants or how risky the investment.

Things may have changed in July as the following chart shows, using JNK (the Barclays High Yield ETF) as a proxy for junk bonds.

JNK Daily

click on either chart for sharper image

On a weekly chart, however, the dip doesn't even register.

JNK Weekly

So while this could be the start of a decline, it might also be nothing.

With that backdrop, please consider Bloomberg's report Junk-Bond Indigestion Burns Buyers Gorged on Record Sales.
Junk-bond buyers are showing signs of indigestion after snapping up a record $361 billion of the debt at the lowest yields on record.

Speculative-grade bonds from the U.S. to Europe and Asia are set to post losses this month for the first time since last August after high-yield debt funds suffered the biggest weekly withdrawal of 2014. Winoa SA, the French producer of abrasives for metalworking, scrapped a bond offering in Europe yesterday amid the turmoil.

“People who were complacent before are going to have their finger on the sell button pretty quickly if some of these situations escalate,” Marc Gross, a money manager at RS Investments in New York, which oversees $5.8 billion in fixed-income assets, said in a telephone interview.

There is “a whiff of ‘flight-to-quality’ in the market, though we are far short of panic,” analysts led by Michael Contopoulos at Bank of America wrote in a report yesterday. The $2.7 billion of withdrawals from junk debt was led by U.S. funds that reported outflows of $1.8 billion, with exchange-traded funds accounting for more than 60 percent of that, according to the report.

“There has been a noticeable shift in sentiment as investors evaluate whether flows are a short-term blip or the beginning of a broader trend,” Michael Sohr, a New York-based money manager at AllianceBernstein, said in a telephone interview. “We’ve got increased geopolitical risks. Perhaps some investors believe it is a good time to take some chips off the table.”  Take Chips Off the Table?

The preceding three paragraphs from Bloomberg are rather amusing. Specifically I am referring to these phrases:

  • Flight-to-Quality
  • Finger on the sell button
  • Good time to take some chips off the table

While it's certainly possible for an individual investor to have a "finger on the sell button" or to "take chips off the table" it is impossible for investors in aggregate to take any chips off the table.

Someone must own every bond ever sold, 100% of the time, until the bonds mature or they are called. Mathematically, 100% of the chips must be on the table 100% of the time.

Secondly, there is no such thing as a "flight-to-quality".

Rather, what happens is a major repricing event: Investors demand more yield from junk bonds as perceived risk increases. Investors demand less interest from treasuries in times of turmoil.

In a repricing event of that nature, one asset price rises, the other sinks. It's important to understand this can happen even if no shares trade!

Here's an easy-to-understand example of a no-trade repricing: Suppose the city approves a landfill at the end of your block. Without any homes being sold, the value of every home on the block would immediately decline.

Sentiment can and does change overnight (and pricing along with it) whether shares of stocks, bonds, homes, or other assets trade or not.

Every Friday the market closes for the weekend. Prices can be very different at the open on Monday, and dramatically different in a week's time. Individual issues can change even faster than indices.

Musical Chairs ThreePeat

Just like Chuck Prince, former Citigroup CEO in 2007, everyone believes they can dance while the music plays, and safely head for the door when the music stops. For an amusing recount, please see Music Stops for Chuck Prince.

Investors are fooling themselves, for the third time. It's impossible now, just as it was in 2007 and 2000, for investors to exit at the right time.

All that remains is the answer to the question: "How much more insane does it get before the junk bond bubble bursts?"  When it does burst, it's near-certain equities will go along for the ride.

And It's Gone

A reader reminded me of this South Park clip that explains everything you need to know about risky investments.

Link if video does not play: And It's Gone

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Ukraine Government Breaks Up: Prime Minister Resigns Over "Vital Laws on Energy and Army Financing"; Follow the Money

czw., 24/07/2014 - 20:54
Some interesting happenings in Ukraine today, in Kiev rather than the war zone. Issues concern unpaid soldiers, pro-Russian MPs, and various oil schemes to finance the war.

Let's take a look starting with Kiev Government Breaks Up as EU Mulls Fresh Russia SanctionsUkraine’s premier Arseniy Yatseniuk tendered his resignation on Thursday, clearing the way for early elections aimed at producing a more reform-minded parliament in Kiev but also risking a short-term political vacuum.

Two parties quit the country’s governing coalition earlier in the day and President Petro Poroshenko backed the idea of an early parliamentary poll. New elections would be likely to reduce the number of pro-Russian MPs and supporters of ousted president Viktor Yanukovich.

Mr Yatseniuk rebuked the existing parliament for putting Ukraine’s future at risk and betraying the ideals of the protests that toppled Mr Yanukovich in February, by failing to pass vital laws on energy and army financing.

The Ukrainian government break-up came as EU ambassadors in Brussels met behind closed doors for more than eight hours debating whether to take the first step towards sweeping sanctions against the Kremlin over its support for pro-Russian separatists in Ukraine. These would target entire sectors of the Russian economy.

“History will not forgive us,” Mr Yatseniuk told the parliament, after it failed to pass a law to liberalise control of Ukraine’s natural gas pipelines system. “Millions of people made this revolution,” he said, referring to the winter protests in Kiev.Soldiers Not Paid

Also from the Financial Times, here are a few snips from Ukraine’s Prime Minister Quits. Arseniy Yatseniuk, Ukraine’s prime minister, resigned on Thursday after two parties quit the ruling coalition government in a move designed to trigger early elections.

The fact that the coalition has fallen apart, that laws haven’t been voted on, that soldiers can’t be paid, that there is no money to buy rifles, that there is no possibility to fill gas storages. What options do we have now?” Mr Yatseniuk said in address to parliament.Vital Laws on Energy and Army Financing

Inquiring minds may be asking "What Might Those Vital Laws Be?"

That's a very good question that the Financial Times does not properly explain. RIA does explain its take Ukrainian Prime Minister Yatsenyuk Announces Resignation. “If no new coalition is formed and the existing coalition in a parliamentary-presidential republic had collapsed, the government and the prime minister have to resign. I announce my resignation because of the coalition’s collapse,” he said.

Yatsenyuk also expressed disappointment with Ukrainian parliament’s decision to reject a bill that allows the government to hand over up to 49 percent of the country’s gas transport system to investors from the European Union and the United States.Follow the Money Step by Step

  1. Prime minister Yatseniuk resigned
  2. This will lead to early elections in which pro-Russian members will be ousted from Parliament
  3. Parliament will pass a law selling 49% of Ukraine's gas and transportation systems to US and European investors.
  4. Ukraine needs the money to pay soldiers to fight an inane war.

Far be it from me to propose state ownership of energy pipelines. Yet, here's the vital question: Think Kiev is going to get full value, in the midst of a war, when it desperately needs money to pay unpaid soldiers?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Internet Free Speech Vanishes in Spain; Most Infamous Law in Internet History; Brussels and Spain Target Google

czw., 24/07/2014 - 20:05
90% Customer Satisfaction Too Much for Brussels

Brussels and Spain both stepped up attacks on Google over the past few days. Let's dive into the insanity with a Mish-translated report from Les Echos: Brussels Ready to Revive Showdown with Google
Pressure from Brussels increases on Google. The European Commission demands further concessions and seeks to end anti-competitive practices of which Google is accused. This could happen as soon as September.

Google is accused of enjoying ultra-dominant (market share of over 90% in research) in so-called "specialized research" - to purchase a product or for travel, a map search, for example.

Currently, a user who wants to buy coffee through Google is systematically given Google Shopping links in addition to "natural link results" at the expense of competitors such as Kelkoo Twenga. This constitutes "preferential treatment".

In response, Google has proposed that Google Shopping services of its competitors - chosen after auctioning three places available - would be placed side by side at the top, with pictures. These proposals were considered insufficient by Google competitors.Mercy

Heaven forbid 90% of consumers be satisfied with the way something works.

If consumers weren't satisfied or if they thought some other search mechanism was better, they would use it. But Brussels steps in and demands Google change its ways.

Google offered to do so, but was turned down. Competitors want more free money at the expense of Google.

Satisfied customers be damned.

Most Infamous Law in Internet History

As ridiculous as that sounds, Spain went a huge step forward. Huky Guru explains in his post The Most Infamous Law in Internet History
Today, July 22, the Committee on Culture of Congress passed with 22 votes in favor and 20 against the draft text to amend the Copyright Act, probably the most infamous law of history of the Internet in Spain.

Congress today approved the so-called AEDE canon (Association of Spanish Newspaper Publishers) also known as the Google rate: A rate at which an inalienable right to periodically update any website automatically generates a right to collect on any other website is created that link collection right to be raised by a body which SGAE and distributed among its members. [short description: If you link to someone, you have to pay a  pay a fee].

As provided for by law, Google News, Meneame, Zite, Flipboad, Facebook, RSS readers, and Twitter will have to pay fees for any web link to a Spanish newspaper.

Moreover, in theory, if any website links to us or uses any other blog they are also likely to be assessed  a fee, but we have put our content under Creative Commons licensing.Internet Free Speech Vanishes in Spain

In Spain, the right to quote or comment on an article, an essence of free speech, just vanished out the door.

Reader Bran, who lives in Spain, offers these thoughts:

  • The law penalizes, almost criminalizes internet links. 
  • AEDE reckons it will raise 80 million from the tax. 
  • Huky says the 80 million figure is imaginary because the only site that is truly taxable for profit is Google news. Yet, Google news is profitless in Spain so Google could simply close it down. 

Guru hits the nail squarely on the head in several of the points he makes, paraphrased as follows:
Google, Twitter, Meneame, Facebook and other social networks are today the biggest source of traffic to the websites of newspapers. People are not on the website of El Pais, El Mundo, in La Razon, or Gurusblog. People on the internet are in social networks or search engines that provide the news content or links to news content they seek. Killing links puts a huge barrier on entry. Links allows you to discover things, new pages, new media.

What now?

Well frankly right now I'm not optimistic. The consequences will be devastating and will come back strongly against those who promoted the idea unless the EU kills the setup. Avoidance

Guru proposed incorporating in a foreign country such as Belize to escape the fees.

As a US citizen, living in the US, I can easily say "F* the EU" let them try and collect, just as I did with an absurd fine from France that I refuse to pay. (For details, please see Lawyer Advises Me "Don't Go to France")

Could the same absurd thing happen here?

Before answering, here's a thought that just popped into my head: "Stupidity propagates far faster than common sense."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy


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