Category: Europe

Economics Update

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H/t Calculated Risk


It appears that inventories are now in line with sales.
Downward trend is the result of increased efficiencies
H/t Calculated Risk

In the good news/bad news dichotomy, we see that retail sales rose ½% in January but consumer confidence fell:

January sales at U.S. retailers climbed more than anticipated, while consumer confidence unexpectedly fell this month from a two-year high, showing a recovery in household spending may be gradual.

Retail purchases increased 0.5 percent, the third gain in the past four months, Commerce Department figures showed today in Washington. The Reuters/University of Michigan’s consumer sentiment gauge dropped to 73.7 from 74.4 the prior month.

Not sure what this all means, to tell the truth.

Sometimes teasing meaning out of the data is like drinking from a fire hose.

On the other hand, the data from Europe, where disappointing GDP numbers from Italy and Germany have unexpectedly fallen in the 4th quarter, is pretty easy to understand, as is the fact that Bloomberg’s Professional Global Confidence Index, fell on concerns that deficit problems among some nations in the Euro zone will hinder recovery.

By some countries, I mean, of course, the PIIGS (Portugal, Italy, Ireland, Greece and Spain), who are largely hamstrung in their ability to deal with the crisis because of deficit requirements of, and the fixed exchange rate from, being in the Euro zone.

BTW, here’s a story that we may here more of in the next few months: there has been a surprising outflow of funds from “junk bond mutual funds:

High-yield, high-risk bond mutual funds last week had their biggest outflows since 2008, adding to signs that the junk debt market may be set for a “reversal.”

Investors withdrew $1.13 billion from mutual funds invested in high-yield debt, including exchange-traded funds, in the week ended Feb. 5, according to research firm EPFR Global. That’s the most since early in the third quarter of 2008 and reverses a $335.6 million inflow from the previous week, according to Cambridge, Massachusetts-based EPFR.

I do not know what is up (or more accurately down) here but someone out there knows something and is acting on it.

In any case, the problems in Europe, along with new Chinese actions to reign in lending by increasing bank reserve requirements, have raised concerns about the economy which driven crude oil down, and led to a flight to safety which has driven the dollar up.

Remember the Auschwitz Sign Theft

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In December, some Jamokes stole the sign over the gate of Auschwitz, the one that said “Arbeit Macht Frei,” basically saying (it was a lie) that work would set the inmates free.

I remember reading about it, and thinking that I would wait a couple of days until the full story played out.

I wasn’t sure if this was a stupid prank, something involving organized antisemitism, or something falling into the middle ground, where the history Polish anti-Semitism could be inferred from the incident, but there was no some grounds for doubt.

Well, 2 months later, and the story has played out, and Mithras has nailed what happened in just 28 words (+ title):

Turns Out, It Was Anti-Semites
The guy who commissioned the theft of the Auschwitz sign is a Swedish neo-Nazi. The Poles who stole the sign for him say They Were Just Following Orders.

(emphasis mine)

I Said that This Would Happen

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When GM backed out of its deal to sell Opel, so that it could suck up the promised state aid from Germany, I said that they were snatching defeat from the jaws of victory.

Well, they are now seeing blowback from this decision.

The German government is demanding that GM put significant resources into Opel, resources that it really doesn’t have, before it will make any state aid available:

Germany wants General Motors Co. to increase its contribution to the Opel unit’s reorganization before considering whether to provide state aid, according to two people familiar with the matter.

Economy Minister Rainer Bruederle is using a two-day U.S. visit, which includes a meeting with Treasury Secretary Timothy F. Geithner in Washington, to express that view, said the people, who declined to be identified because the discussions are confidential. GM has said it will provide 600 million euros ($836 million) for Opel’s restructuring and ask for as much as 2.7 billion euros from European governments.

I said that the result of the decision would be labor unrest, consumer disgust, and hostility on the part of German authorities.

You can’t go wrong betting on the managerial incompetence of GM.

Death Spiral, JSF Edition

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It appears that the UK’s order of JSF’s may be reduced by as much as 50% because of cost and schedule issues:

The Ministry of Defence may be forced to halve its order for the Joint Strike Fighter (JSF) at the next Strategic Defence Review, according to a report in the Guardian.

The UK had ordered 140 of the aircraft for use by the RAF and on the Royal Navy’s proposed new carriers, but the newspaper reports that “a consensus has emerged” that the number of fighters ordered is unsustainable. Delays and cost increases on the JSF programme are said to mean the MoD could be looking to order just 70 of the fighters.

Harrier and Tornado squadrons may also suffer further cuts, the report says, identifying a “huge shift” in spending that is being considered for the Strategic Defence Review following the next general election.

It’s really not surprising.

Given today’s fiscal environment, and the enormous cost of the JSF, it comes down to a choice of between buying the JSF for a military that lacks the resources to do anything with them, or cutting back and allowing the funds to go to things like ground forces.

Economics Update (For the Week)

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Well, it’s “Jobless Thursday”, as Atrios is wont to say, and it ain’t a good Thursday, with initial claims up 36,000 to 482,000 and hitting a 2 month high, the 4-week moving average up 7,000 to 448,250, though continuing claims fell by 18K to 4,599,000.

Additionally, the Philadelphia Federal Reserve Bank’s business activity index fell from 22.5 to 15.2, which still indicates growth, positive numbers indicate growth, but might show that the stimulus package is running out of steam.

Also, it looks like finances may be catching up with the bank, with Citi reporting a loss for the year on a horrible 3rd quarter, and Bank of America posted a large loss, largely as a result of its eagerness to pay off the TARP so that it could go back to overpaying its incompetent executives, while Morgan Stanley misses its earning estimate, though it still turned a profit.

I had kind of figured that a lot of the obscene profits earlier in the year were the result of rearranging deck chairs, and I think that the 4th quarter results give credence to this view.

Note that these numbers were turning worse even as consumer defaults were falling.

BTW, in the UK, we are seeing journalists running around like chickens with their heads cut off over the recent spike in consumer prices, up to a 2.9% annual rate.

Kind of silly when you think about it.

US inflation seems well in check, with the
Producer Price Index for up 0.2% in December,

In real estate, home builder confidence fell in January, but the Architecture Billings Index was up slightly, though still below 50, indicating further contraction.

The jump in building applications, would seem to indicate improvements in the real estate market, but the FHA is increasing premiums and tightening loan standards, which may deflate the balloon.

The FHA really does not have a choice. Their balance sheet is a complete mess.

Nibble on Iris Robinson’s Chocolate Balls

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Seriously, I have to invoke South Park!

Remember a few days back, when I referenced Americablog’s story about how a right-wing Irish anti-gay bigot was herself sleeping with a 19 year old boy?

It’s legal, but real hypocrisy, and it just got worse:

Meanwhile, it emerged this weekend that Iris Robinson also had an affair with 19-year-old Kirk McCambley’s father, a butcher who died from cancer. She had another affair with a fellow DUP member in the 1980s which was witnessed by the security forces.

(emphasis mine)

It appears that the founder of the DUP, and fellow bigot, Rev. Ian Paisley is in full “going postal” mode over this.

Well, the story gets even weirder, because bloggers with way too much free time on their hands have uncovered her recipe for “chocolate balls, and this, in turn has uncovered the coverage of her recipe at the time in the Belfast Telegraph, which is just full of double entendre:

Iris Robinson’s chocolate balls to melt our hearts

Wednesday, 12 November 2008

Food lovers across Northern Ireland are being given the chance to nibble on Iris Robinson’s chocolate balls, included in a new charity cookbook.

……………

(emphasis mine)

No, this is not The Onion.

Reality is very odd sometimes.

H/t AMERICAblog News

George Soros Speaks for the Powerless

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In this case, he is speaking for the Roma (Gypsies) because no one else will:

Continued discrimination against Roma in Europe not only violates human dignity, but is a major social problem crippling the development of eastern European countries with large Roma populations. Spain, which has been more successful in dealing with its Roma problem than other countries, can take the lead this month as it assumes the European Union presidency.

Good for him.

Iceland Considering Dropping Icesave Bill

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It looks like they are on their way to losing the referendum, so the Icelandic government is looking at withdrawing the bill and renegotiating terms with the British and Dutch.

There are only 320 thousand people on the island, and the legislators have a pretty good idea on how the voters feel, because they know, and have talked with, a lot of them.

Fundamentally, the voters are showing a level of courage that the politicians are not, and refusing to be blackmailed.

Economics Update

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H/t Calculated Risk

The Federal Reserve has released its “Summary of Commentary on Current Economic Conditions”, better known as the “Beige Book”, and there has been a small improvement.

I’m not sure where the improvement is, since transportation indices continue to disappoint, with the American Association of Railroads’ report on carload traffic showing the lowest level since 1988, and if goods aren’t moving, then people aren’t buying.

Meanwhile the trend in mortgages, with refinancing increasing and mortgages for purchases falling, continued this week.

Overseas, the GDPs of Britain and Germany both suffered the largest drop since before the 2nd World War, -4.8% and -5.0% respectively, while in Japan, machinery orders fell sharply in November.

In the world of US government finance, the US budget deficit doubled year over year in December, which probably had something to do with bond prices being mixed, with the 10-year bond falling slightly, and the 30-year bond rising slightly. (Yields move in the opposite direction of prices)

In energy, oil fell below $80/bbl, on reports of increasing US fuel inventories.

In currency, the dollar was mixed, down slightly versus the Pound and Euro, but up slightly versus the Yen.

Proof that the British Banker “Supertax” is the Right Thing

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Boris Johnson, Mayor of London, and perhaps the stupidest man in England, has come out against the proposal:

Boris Johnson threw down the gauntlet to shadow chancellor George Osborne today, urging him to rule out extending the supertax on bonuses.

The Mayor is seeking reassurances that Gordon Brown’s tax would not be imposed by a Tory government. The showdown comes after Mr Johnson claimed that up to 9,000 bankers could leave London to escape paying.

Mr Osborne has said he does not oppose the tax, and the Conservatives have not ruled out imposing it again if they win the general election.

If the Tories come out against the tax, they may very well snatch defeat from the jaws of victory.

On a more utilitarian note, when a rich banker leaves for Switzerland (only Switzerland does not want them either) it means that that 2500 square foot penthouse flat in London becomes 4, or 5 more modest flats, increasing the supplies of housing, and drives down rents, making London a better place for the Londoners.

The rich bankers, and the expat tax dodgers who live in London in very large numbers, don’t make London better, they make it worse: They push out the middle class, and productive industry.

Here’s to You, Mrs. Robinson

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Hey, hey, hey…hey, hey, hey

No, really. In this case however, the Mrs. Robinson in question is Iris Robinson, wife of Peter Robinson, the head of the, “conservative Northern Ireland Unionist party.”

She has spent much of her public life campaigning against gays, implying that they will molest children and young adults.

Well, now, this 60 something paragon of morality has been caught having an affair, and, I almost forgot to mention this, she was screwing a 19-year old boy.

Lovely people, wot?

H/t Americablog and The Stranger.

Unsurprising Lesson

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When the modern version conservatives talk about anything, they define reality to fit their preconceived notions, much in the tradition of their Trotskyite progenitors, and you cannot believe a word they say.

Case in point, James Manzi, who, as Paul Krugman notes, talks about the GDP of Europe, and completely fudges the data:

But as Jonathan Chait quickly pointed out, Manzi’s definition of Europe included the Soviet bloc (!), so that he was attributing to social democracy an economic decline that was mainly about the collapse of communism. Chait also suggested that Manzi wasn’t comparing the same dates for America and Europe; and most importantly, Chait pointed out that to the extent there has been a growth divergence, it’s almost entirely because America has faster population growth; since 1980, real GDP per capita in Western Europe and the US have grown at almost the same rate.

But I went back to Manzi’s source of data, and it turns out that it’s even worse than that. If you use the broad definition of Europe, which includes the USSR, it did indeed have 40 percent of world output in the early 1970s. But that share has not fallen to 25 percent — it’s still above 30 percent.

The only thing I can think is that Manzi compared Europe including the eastern bloc in 1970 with Europe not including the east today.

It’s probably not a deliberate case of data falsification. Instead, like so many conservatives, Manzi just knew that Europe is an economic disaster, glanced at some numbers, thought he saw his assumptions confirmed, and never checked.

I think that Krugman is being too charitable. Manzi lied, and had to have knowingly lied in order to cook the books this way.

I Have Mixed Feelings about the French Burqa Ban

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The leader of the French Parliament, Jean-François Copé, has restated his intention to ban the Burqa (see pic) in France.

He plans to put forward a law to impose fines of up to €750 ($1050) for anyone who appears in public with their faces covered, and there would, “Stiffer punishments would be laid down for men who ‘forced’ their wives or daughters to wear full-body veils.”

There would be exceptions for the wearing of masks on “festive occasions,” which means, I guess that Halloween has become an institution in France too.

Interestingly enough, Nicolas “President Bling Bling” Sarkosy is trying to slow this down, though one wonders, considering his statements about having a “debate on national identity” got the ball rolling, how sincere he is.

It’s clear that the politics play into some very base feelings, but there is a legitimate question about what is, or should be appropriate public behavior in any society, even a modern Western society.

While societies should be accommodating, there does have to be a line drawn.

I believe that a head scarf (Hijab) should be allowed both in public and the workplace, I do think that the Burqa, and it’s slightly less extreme cousins the Niqab and Chador are over when used outside of a religious observance.

The politics here get really weird though:

Yesterday the veteran far-right leader, Jean-Marie Le Pen, also rejected the need for new legislation against the burka, perhaps surprisingly. He said that the existing French legal code already banned masks in public places. “All they need to do is apply the law,” he said.

Le Pen opposes the Burqa ban? Le Pen?!!?!? I do not understand French politics.

I would also note that the number of people who wear the extreme coverings in France is well small, perhaps 2,000 out of a female Muslim population of 1½ million, so either it’s a problem that does not need to be addressed, or it’s one that can be nipped in the bud, depending on where you feelings lie in this matter.

As I said at the beginning, I am conflicted: I think that the Burqa is a very bad thing, but I’m still not sure if it rises to the level of a problem that requires a formal prohibition under law.

The Right to Blaspheme is the Core of Civil Rights in a Modern Democracy

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So, we now have the breaking news that a a man armed with knives and axes attempted to break into the home of Kurt Westergaard, one of the artists who created the Danish cartoons (see pic).

The response to such terrorism must be more speech that religious fundamentalists find blasphemous, hence my reposting the picture. If you allow the clergy to determine what can, or cannot, be said, you eventually create a theocracy, and history has shown that theocracies are amongst the worst forms of despotism.

Additionally, as I have said before, “If your God can’t take me calling him a pig felcher, then he ain’t much of a God.”

While I understand how backward 3rd nations, like, for example, Ireland might want to outlaw blasphemy, I think that modern nations must necessarily understand that as a condition for full access to the benefits of western economies and markets.

The free traders believe that open markets create open societies, but given the explosion of blasphemy laws, and blasphemy prosecutions, since the adoption of the GATT (Now WTO), I would argue that the opposite has occurred.

The reduction to costs involved in acceding to the demands of medieval fundamentalists, because the current model of “free trade” means that a country has full access to international markets unless their policies are nearly genocidal, has led mainstream politicians who are looking for allies and coalition partners, to sign off on demands that are contrary to modern civil rights.

FWIW, I believe that the same sanctions should be applied to laws that criminalize criticism of royalty (Thailand) or the nation (Turkey, etc.).

Visby Corvettes Delivered to the Swedish Navy

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The first two of the series, specifically the HMS Helsingborg and HMS Härnösand have been delivered to the Swedish Navy.

It’s not big news, but I think that the Visby’s are the coolest looking surface combatants out there.

I would note I am still dubious of the effectiveness of full up stealth on surface ships.

Between the ocean environment, and the fact that even the stealthiest ship leaves a visible wake, I’m not sure that it does much, except perhaps reducing jamming power required by a few watts.

Economics Update

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H/t Barry Ritholtz

New home sales, effect of tax credit h/t Barry Ritholtz basic graph h/t Calculated Risk


H/t Calculated Risk

So, we have another revision of the GDP numbers for the 3rd quarter, and the GDP number falls again, down from an initial estimate of 3.5% to the first official figures of 2.8%, and now it has been revealed that the GDP grew at just 2.2%. (top pic)

The more accurate data that comes in, the worse the news.

As an aside, the US Bureau of Economic Analysis always does this, that is to say that the numbers get worse when better data comes in, which implies a systemic problem that needs to be fixed.

On the other hand, the UK initial numbers were revised in the opposite direction, with a contraction of -0.2%, up from the initial estimate of -0.3%.

The news from down under is not grand either, with the New Zealand economy’s GDP missing forecasts.

Still, the Philadelphia Bank of the Federal Reserve’s State Coincident Index looks better (bottom pic), with at least marginal levels of growth in 1/3 of the states.

On the other hand, we had some good news in real estate, where the National Association of Realtors has reported existing home sales rose 7.4%, to the highest level since February 2007:, though even the NAR admits that this is largely due to people rushing to buy houses before the home buyer tax credit expires.

As both CR and Barry Ritholtz note (2nd pic), this a function of changes and/or perceived changes in tax policy, so December will give a real picture of where the housing market is.

It should be noted that a remarkably unpleasant milestone was passed though with, the number of mortgages in national banks, which report to the OCC, reporting that for the first time ever, over one million mortgages were in foreclosure in the 3rd quarter.

Additionally, we are seeing signs of problems among small banks and businesses, with more small bank TARP recipients not paying dividends [on edit: a clarification, they are not paying dividents on their RARP money, so they are technically in default], and small business bankruptcies are up 81% YoY in California.

In energy, OPEC kept oil production levels flat, but has promised to more rigorously enforce the current limits, which is a de facto (but rather small) cut in production, which drove oil higher, even though the dollar rose on the surprisingly strong home sale report.

Saab Not Dead Yet.

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Rule 1 of this blog:
Never miss a chance to invoke Monty Python

Well, it looks like the Saab automobile manufacturer may be back from the dead, with Spyker reentering negotiations, and there are nibbles from other firms. (also here)

There are two paragraphs of note in the story:

Spyker said Sunday it has submitted a renewed offer including an 11-point proposal addressing issues that arose during the due diligence process.

……

GM—which had previously entered talks with Spyker after a deal with Swedish luxury car builder Koenigsegg collapsed last month—had set an original deadline of Dec. 31 to seal a deal.

My guess as to what this means is that GM is spend a lot of time dicking with potential bidders, either in terms of an unwillingness to allow the transfer technical rights and data to the prospective bidders, or in terms of financial issues, particularly in terms of the dealers and access to GMAC financing for those dealers.

Unlike Pontiac or Saturn,* Saab, small though its sales are, has the advantage that it actually has a devoted and nigh-fanatic following who are willing to pay a premium for the product, and so there are companies, particularly in the very end super car field, who are interested in purchasing it, because it gives them a way to go mass market with some of their more esoteric technology.

If there is a mass market car company that will implement things like friction stir welding on its models to go with an all aluminum body at a reasonable price, it would be Saab, and I can see how a supercar manufacturer like Spyder, or Koenigsegg, might use the interplay between the low-volume hand made autos and the (relatively) high volume Saab to create a sort of “technical echo chamber” to move the implementation of this technology along.

*Actually, Saturn did too in the mid 1990s, with people literally going on vacation to their manufacturing facility in Spring Hill, Tennessee, but once GM realized that people loved their cars, they spent the next 10 years doing their level best to piss off employees and customers, because if Saturn could make cars that people liked, it would put too much pressure on the rest of GM.

Bankers Offer to Overpay on UK Bonus Tax

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No, really, I am completely serious:

Some of the most senior bankers in Britain are planning to convince the Treasury to drop the new 50% tax on bonuses by dangling the prospect of a combined contribution to the exchequer of £2bn. The promise of the boost to Britain’s depleted coffers has been made in recent days and is almost four times the £550m Alistair Darling has said he intends to raise through his payroll tax on bonuses. The Chancellor has been met with anger in the City since he announced the one-off tax in his pre-budget report last week and been warned of a mass exodus of high-flying bankers to countries with a less punitive tax regime.

(emphasis mine)

I don’t know what is going on here, but when Britain’s own little vampire squids wrapped around the face of humanity,* decide that it’s time to overpay their taxes by a factor of 4, something very hinky going on.

Somewhere in these bonus pools that Chancellor Darling wants to tax is something bad….Something Really, Really, Really, Really bad.

We are talking something murder-for-hire and laundering drug money through child prostitutes bad. Something is rotten in the Street City,† and they, whoever exactly they are, very badly want it covered up.

*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm Goldman Sachs, The Great American Bubble Machine.
†The UK equivalent of Wall Street. Corrected my error on edit.