Simple Man's Macro View of the World

I received an interesting email the Wednesday before Thanksgiving from Steen Jakobsen, chief economist for Saxo bank, regarding his macro picture of the world.

I purposely delayed posting it until now so more would see it than during a holiday-truncated week.

From Steen ...

Simple Man's View

• One Trading View: Fixed income will outperform all assets. US 10-Year treasury yield will drop under 1.5% by 2015 Q3
• One Economic View: Disinflation/deflation will be catalyst for asset sell-off
• One Timing View: Q2/Q3-2015 low this cycle for all indicators
• One Guaranteed View: Volatility will go up significantly

Core Trading Views

10Y Bond yields(US) will continue lower into Q2-2015.  I see acceleration to down-side and mainly in the US where 10 Y could hit 2.00% and bottom out at 1.5% by Q2 as GDP comes off relative to “lift off” consensus.

European factors:  Lower than anticipated growth in Germany (China rebalancing, lower US current account deficit and EZ overall) – Impact from Russia crisis only beginning to impact real economy and of course the deflation which ECB promised us would never happen.

US factors:  Energy sector moving towards default and closing down capacity – subtracting 0.3-0.5% from GDP plus lackluster housing market despite record low mortgage rates plus contraction in monetary aggregates.

China: Despite Reserve Requirement Ratio (RRR) cut the economy is already at 5.0% in real terms and without reform in health care(why people save money), competition (anti-corruption) and deeper capital markets, the marginal change will continue to be negative.

Emerging Market: Strong US Dollar is the last thing the EM market needs. It’s a de facto tightening of monetary policy at a time where “export markets” continue to weaken.

The world is barely surviving at an average yield of 1.5/2.0%. We have two drivers of growth: US and Emerging markets (EM). EM is under pressure as we end 2014 forced into the defensive by lack of reforms, but also a much stronger US Dollar, which means the “mean-reversion” trade is for 2015 is for a weaker US dollar to rebalance towards EM growth as the path of least resistance.

I have no doubt EM becomes major buy sometimes in Q2 when world is off the concept of ever stronger US dollar based on a growth lift-off which is never coming.

US growth has been 2% plus or minus since the financial crisis started, this year it will be 2%- next year? 2% - nowhere close to the 3-4% expected by the markets  building on “surveys” and feel good factors. Trust me, as someone who spend too much time traveling this year, the world is worse off, not better.

I meet frustration, lack of access to credit and almost desperation when the question is on asset allocation, but 2015 looks like a year of change. FOMC will definitely continue to sell the “pipe dream” of normalization, BOJ is done and toast.

Why anyone believes printing money will leave Japan better off is a mystery to me.

In closing, I have very little positions – the stock market is on a mission to kill the shorts, which will probably succeed. The FX market believes in Santa Japan, and ECB continues to do nothing but talk, but for now it’s enough to sell the product which is risk on at all costs.

The correction will be deeper and deeper as market is dislocated through zero interest rates and an investor crowd which is rewarded for throwing all conservative risk rules overboard in a year where we again have double digit gains on low interest rates.

Let’s hope ECB plays ball for the market to buy some more time, for now we play musical chairs, and when the music stops more than one chair will be missing.

Positions

• 75% of risk is long Fixed Income (mainly US)
• 10% risk in equities, mainly mining plays (Alcoa & Fortescue) – looking to add VALE and others in sector on inflation expectations hitting rock bottom in Q1.
• 5% long Silver… bought on sell-off.
• 5% Natural Gas – preparing for long and cold winter.
• 5% Upside optionality in EUR calls, USD puts

How bad are things? Well, let me give you my starting slide from the presentations done in November:



Steen

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

China's Corruption Crackdown & Selling Private Jets

Of champagne wishes and caviar dreams interruptus.

 It is generally well-known that the ongoing Party-led purge--they have these sorts of campaigns in every generation or so--has negatively affected businesses aspiring to cater to high-living mainland Chinese noveau riche. Witness, for instance, the loss of gambling revenues in Macau. Rules ostensibly designed to limit officials taking public moneies to wager in the world's largest gambling destination have more broadly slowed mainland-sourced business as limits to the money that mainlanders can transfer to Macau have had an effect.

Once more demonstrating that you need not look far for IPE-relevant material, I saw this article in Yahoo! News: it turns out that the apparatchik purge is also slowing down the previously lucrative trade of selling private jets to Chinese billionaires. As you probably know, the PRC now has the second highest number of billionaires after the United States--which is fitting since it also has the world's second-largest economy. That said, similar concerns occur over inequality since the presence of many billionaires tends to skew the distribution of wealth. If such concentration of wealth arouses controversies over the fairness of modern economic systems--witness "Occupy" and other protest movements in the West--then it should be even more of concern in an ostensibly "socialist" country that by necessity styles itself as a "worker's paradise."

So these neo-Marxist-Leninist-Maoist busybodies keep interrupting marketers seeking to cater to the ultra-high net worth category described in the Hurun Rich List. Bah! Just as I was reading the flight test of the Bombardier Learjet 75...From Agence France-Presse:

Makers of the world's private jets are looking to promote their aircraft as business tools in China rather than luxury toys for the super-rich, as a corruption crackdown slows sales in the country.

Chinese leader Xi Jinping launched a drive against graft after he came to power in late 2012, accompanied by policies to enforce austerity among officials -- hitting sectors ranging from high-end liquor to luxury watches. The market for private jets is a small, albeit fast-growing aviation segment in China, but the corruption campaign has taken some heat out of the market, according to industry officials.

Instead of packing their bags and heading home, the makers of private jets have cleverly rethought their sales pitches. In place of the "Who's Who" and "Lifestyles of the Rich and Famous" marketing ploys of the past that are almost certain to get private jet buyers in hot water with state nannies, these jets are now being sold as essential business tools in concluding deals and whatnot. In other words, they've moved from having an aspirational to a more--how do I put this--utilitarian [!] aspect:

"Business jets should not be treated as a luxury product because it's considered a business tool to improve efficiency," said Christine Yan, Bombardier's China marketing manager for business aircraft and aerospace. "As long as this benefit can be recognised... in the long run it's still a very good outlook," she told AFP on the sidelines of the airshow.

Manufacturers remain positive about the longer-term outlook for the China market, citing steady economic growth and Chinese companies heading abroad to do business. "For a long time, it's been wealthy individuals buying a jet because they needed somewhere to put their money. It was cool to have a business jet," said Greer of Honeywell. "There's starting to be a recognition that this is a tool that you can utilise to be more efficient," he said.

While the rhetorical reformulation reminds me of folks selling beachfront property in Montana, you certainly can't fault them for trying anyway. Nor are the movers and shakers of Chinese capitalism dissuaded by the current crackdown as most imagine purchasing these trink--I mean, serious tools for conducting business in the near future:

In a survey this year, independent wealth publisher the Hurun Report estimated 40 percent of China's "super-rich" -- defined as those with fortunes of at least $16 million -- plan to use private jets in future. The Hurun Report's founder Rupert Hoogewerf said Chinese buyers typically pay $20 million to $80 million for a private jet, but some individuals are now renting for a one-off trip or time-sharing with others. "It's the evolution of the market," he said.

Elsewhere in the article, it is also discussed how the authorities are actually facilitating the opening of airports and landing strips to cater to private jet owners. So, smart money would say that beyond the facade of a "crackdown," seeds are being sown for the evolution of this market segment. Ultimately, nobody really buys this commie BS--least of all the Communist Party of China. 

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Podemos "Economic Manifesto" Calls for Debt Restructuring, Spain to Abandon the "Euro Trap"

The Podemos party, a far-left populist party in Spain led by Pablo Iglesias, has come from out of nowhere to lead the polls.

Podemos' economic manifesto includes debt restructuring, exiting the European Monetary Union, and a jobs program to end unemployment.

The plan was drawn up by Vincenç Navarro and Juan Torres, two Spanish economists.




Pablo Iglesias (party leader), Carolina Bescansa (party member) and economists Vincenç Navarro and Juan Torres, present Podemos' economic program.

Via translation from Libre Mercado, Podemos Admits Its Economic program Unfeasible Under Current Euro.

Globalization and National Sovereignty Incompatible

The document includes harsh criticism of globalization, stating  "democracy, national sovereignty and global economic integration are mutually incompatible."

Euro Trap

"Besides being quite integrated into the global economy, Spain is mostly integrated in the euro monetary union and this also represents a first order constraint when developing an economic program of government."

"Our membership of the single European currency means, as is well known, that do not have essential instruments of economic policy, as control over the amount of money or the external value of the currency. But not only that. It also means that other instruments which in principle could be at our disposal, such as fiscal policy and sectoral policies can only be used with great limitations and in some cases with hands completely tied."

"Spaniards should be aware that it is physically impossible that they can pursue policies that meet the national interest, within the euro as it is designed. Should know that the euro was conceived as a real trap, but nowhere is it written that people have to accept it without further."

Debt Restructuring

"Debt restructuring, especially the peripheral countries, is not a whimsical proposal but the result of a cooperative strategy which is much more favorable than that imposed so far and that can end a crisis far more serious and widespread. The only possible way out of this vicious circle is genuine restructuring of European and Spanish debt."

Job Creation Program

"Work towards full employment should be a priority of the government.  This can be achieved by stimulating the private sector, and where this is not enough, through job creation by the state to correct the huge deficit of social infrastructure including the expansion of public services of the welfare state, now clearly underfunded in Spain."

"If Spain had one person in five in public services, as did Sweden in 2010, there would be more than three million and additional jobs in our country."

Mish Comments

Other than to call for Spain to abandon the euro, Podemos' economic manifesto is economic nonsense. However, the manifesto is bound to have popular appeal.

Everyone likes to believe in the Keynesian free lunch concept. It's logical to expect some country in the eurozone is going to at some point be willing to try just that.

I keep repeating... "Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the bail out debt foisted on their country to be null and void. That person will be elected."

It's quite possible Pablo Iglesias is just that person.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

F1 & the Radically Inegalitarian Bernie Ecclestone

The puppet on the left is going to McLaren next year.

Business magazine Campaign Asia-Pacific has an illuminating interview with Formula One impresario Bernie Ecclestone in which he voices radically inegalitarian viewpoints that you cannot imagine a CEO of a large, publicly-owned enterprise making. Fortunately for him, he definitely is not running a public enterprise even if it is vast, highly visible and internationally predominant. The modern concept of F1 is embodied by Bernie Ecclestone himself, without whom the whole show grinds to a halt. If you would ask me to identify truly global sports whose impact stretches around the world, I'd indicate football (soccer) followed by F1--hence their continuous coverage in this blog.

Recently there's been much brouhaha about the financial unsustainability of the sport as two smaller teams, Caterham and Marussia, dropped out of the last few races. With all and sundry decrying the elitist, high-spending nature of the sport--including F1 insiders--Ecclestone offers the simple reply that these smaller teams haven't managed to build recognizable brands and that they aren't well-run enough to break even besides:

[Interviewer]: Is Formula One in crisis?

Bernie Ecclestone: No. Good or bad, I’ve been around Formula One a long time and I’ve seen it all. I used to own a race team and for 18 years I ran a successful team and won world championships. There are always people that haven’t managed to run their business commercially successfully. They spend more than they have for income. We’ve seen this happen before and this is what’s happened again. We’ve had, I believe, more than 60 different teams since 1950, so people come and go. Ferrari is the one team that has been there from day one. A lot of people come into Formula One and they really haven’t looked to see exactly what it means. The fact is, to be super competitive you’ve obviously got to keep up with the others so you have to spend, whether people like it or not. You’re not going to win races on the cheap. If they haven’t got the budget that allows them to spend they will eventually disappear. It’s like a poker game; if you haven’t got enough money because there are big dealers in there, don’t play the game. So, unless you can ante up with the others don’t join the game. Trouble is, they all think it’s going to be a miracle and they’re going to get a good hand. It’s the same in poker. It doesn’t happen.

[Interviewer]: Are you concerned about struggling teams and the impact this will have on F1?

Bernie Ecclestone: Not at all. Nobody will miss the two teams because they’re not front-running teams; they’ve only got a name that people would know because of the problem they’re in. If you want to get recognised you’ve got to do something. This poor guy in South Africa [Oscar Pistorius], for instance, has got more interest because of what happened with him than when he was winning gold medals. He won medals and afterwards nobody thought about him. If this case hadn’t happened he would have been forgotten, probably. Same with these two teams. You need teams like Ferrari. If you go anywhere and you say to somebody ‘Ferrari’, they’ll know what you’re talking about. If you say ‘Marussia’, they won’t. So that’s it. It’s brands again, isn’t it? Ferrari’s a brand and it’s a brand that’s particularly connected to a product and it’s known for that product.

Ah, it's the good ol' "mismanagement" explanation. I would give it more credence if it weren't for the fact that many of the smaller teams still in it are also complaining. As the post title suggests, though, whoever said that having the most visible brand names was a cheap or easy feat? Brand-building takes a lot of money, and even Ecclestone can probably appreciate that not everybody can create internationally-recognized brands overnight. Rather, some lesser-known names are participating in F1 precisely because they would like to increase their international recognition.

Speaking of which, Ecclestone goes further in blasting large swathes of his worldwide audience by saying that he's not really selling to the "young aspirational" market but the "wealthy geezer" market (composed of folks like, er, Bernie Ecclestone we presume):

[Interviewer]: How can Formula One widen its reach (beyond television) to expand its audience base?

Bernie Ecclestone: I’m not interested in tweeting, Facebook and whatever this nonsense is. I tried to find out but in any case I’m too old-fashioned. I couldn’t see any value in it. And, I don’t know what the so-called ‘young generation’ of today really wants. What is it? You ask a 15 or 16-year-old kid, ‘What do you want?’ and they don’t know. The challenge is getting the audience in the first place. I say to some of these people who start this nonsense about social media, look at what tobacco companies tried to do—get people smoking their brand early on because then people continue smoking their brand forever.

[Interviewer]: Do you believe there is no value in reaching this young audience?

Bernie Ecclestone: If you have a brand that you want to put in front of a few hundred million people, I can do that easily for you on television. Now, you’re telling me I need to find a channel to get this 15-year-old to watch Formula One because somebody wants to put out a new brand in front of them? They are not going to be interested in the slightest bit. Young kids will see the Rolex brand, but are they going to go and buy one? They can’t afford it. Or our other sponsor, UBS—these kids don’t care about banking. They haven’t got enough money to put in the bloody banks anyway. That’s what I think. I don’t know why people want to get to the so-called ‘young generation’. Why do they want to do that? Is it to sell them something? Most of these kids haven’t got any money. I’d rather get to the 70-year-old guy who’s got plenty of cash. So, there’s no point trying to reach these kids because they won’t buy any of the products here and if marketers are aiming at this audience, then maybe they should advertise with Disney.

Love him or hate him, Bernie Ecclestone is a man who speaks his mind, which is something that cannot be said about most other captains of industry. He does not perform any self-censoring in a PR-driven, politically correct era.

After all, who else would tell you things straight like "teams that exit F1 are poorly managed and deserve to leave the sport"; "social media is crap"; "young people have no money so we don't care about them"; or "out target audience is composed of rich old guys"?

Sanctions on Russia Bite Europe, China the Beneficiary

European sanctions on Russia have hurt the EU far more than Russia. Moreover, Europe has lost key machinery contracts to China, and those contracts will likely stay with China even after sanctions are lifted.

Please consider Europe Feels Sting in the Tail of Russia Sanctions.

At a technology fair in Moscow last month, European executives faced the new reality of doing business in Russia since the West imposed sanctions: the number of companies at the international showcase had shrunk by half from a year ago.

"The impact on business couldn't be clearer. Fewer stands, fewer companies," said Mark Bultinck, a sales executive for Belgian digital screen maker Barco, which had a booth at the annual expo for the audiovisual industry.

The impact of the sanctions was already clear to Barco.

The company lost Russia's biggest shipbuilder as a client when the United States and the European Union blacklisted United Shipbuilding Corporation in July, meaning Barco could no longer sell screens to the company for its vessel training simulators.

Barco's experience shows how sanctions are having a broad impact not just on Russian companies but on European ones too and at a time when Europe's weak economy can ill afford it.

companies are at risk of losing contracts to competitors from China and elsewhere, according to Frank Schauff, chief executive office at the Association of European Businesses in Russia.

"Countries that have not imposed sanctions are able to jump in where the EU has left a gap," said Schauff. "The economic position that the European Union has in Russia is at risk and it is very difficult to gain that back if it is lost."

Lost Business

• EU exports to Russia fell 19 percent to 7.9 billion euros ($9.91 billion) compared to July.
• EU exports down 18 percent compared to August 2013.
• Total EU exports fell 12 percent in the first eight months of this year compared to a year ago.
• EU exports of machinery and transport equipment such as cars and tractors fell 23 percent compared to July.
• Machinery and transport exports fell 21 percent from a year ago.
• Manufactured exports fell 16 percent across the 28-nation bloc in August.
• Italy's manufactured exports tumbled by almost half.

None of this should be surprising. It's exactly what one could have and should have expected at the outset. The only beneficiary of the inane sanctions has been China.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Italy's Unemployment Rate Unexpectedly Hits Record High 13.2%

The string of unexpectedly bad news in the eurozone continues unabated as Italian Unemployment Rate Rises to Record, Above Forecasts.

The unemployment rate rose to 13.2 percent from a revised 12.9 percent the previous month, the Rome-based national statistics office Istat said in a preliminary report today. That’s the highest since the quarterly series began in 1977. The median estimate of seven economists surveyed by Bloomberg called for an unemployment rate of 12.6 percent in October.

The youth unemployment rate for those aged 15 to 24 rose to 43.3 percent last month from 42.7 percent in September, today’s report showed. 

Expectations vs. Reality

Economists expected a drop in unemployment of 0.3%. Instead unemployment rose 0.3%.

Italian Prime Minister Matteo Renzi blamed the rise on an increase in the participation rate, with more people looking for a job.

Similar to the setup in the US, those who want a job but do not look for one are not considered unemployed. Instead, they are considered "discouraged workers".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Conflicting Shopping Headlines: NY Times "Brisk Sales", Yahoo "Black Friday Shopping Crowds Thin"

Here's a pair of conflicting stories regarding Black Friday shopping.

Crowds Thin

Yahoo!Finance reports Black Friday Shopping Crowds Thin After Thanksgiving Rush.

Mall crowds were relatively thin early on Black Friday in a sign of what has become the new normal in U.S. holiday shopping: the mad rush is happening the night of Thanksgiving and more consumers are picking up deals online.

"It just looks like any other weekend," said Angela Olivera, a 32-year old housewife shopping for children's clothing at the Westfarms Mall near Hartford, Connecticut. "The kind of crowds we usually see are missing and this is one of the biggest malls here. I think people are just not spending a lot."

Brisk Sales

The New York Times reports Black Friday Sales Are Brisk, Retailers Say, Bolstered by Online Deals.

Parking lots at some shopping malls filled up around the country on Friday, as shoppers kept up the tradition of scouring stores for holiday deals even though some retailers had been open on Thanksgiving and even overnight.

Big retailers, many of whom kicked off sales Thursday evening, reported brisk traffic overnight. Walmart said that 22 million shoppers streamed through stores across the country on Thanksgiving Day, more than the number of people who visit Disney’s Magic Kingdom in an entire year, the retail giant pointed out.

Still, as retailers jump-start their deals earlier and more sales move online, Black Friday itself is starting to fade in importance.

Target said its best-selling goods in store were the Element 40” TV, the Xbox One, iPads and Nikon’s L330 camera. In the first hour of stores opening, Target sold 1,800 TVs per minute and 2,000 video games per minute, the retailer said in a release. Keurig’s K40 brewer and Dyson’s DC50 vacuum were other top sellers, Target said.

Economists are closely watching whether retailers can entice shoppers to spend during what retailers consider the biggest shopping weekend of the year, especially after a year of lackluster sales so far. A brightening economic outlook, and ever-cheaper gas prices, are starting to lift consumer confidence. But there are also signs of lingering wariness among consumers, after what has been an uneven economic recovery marked by anemic wage growth, especially for low-income households.

And online, which makes up a bigger share of holiday sales each year, retailers have been offering Black Friday deals for many days now, stretching what was once a one-day shopping frenzy into a week or more of sales.

Online retailers have also driven the heavier-than-ever discounting this year. Amazon has priced out many of the country’s biggest retailers in the big-ticket holiday items, offering a Samsung 55-inch 4K flat-screen television for $899. Dealnews.com, which closely tracks Black Friday deals, declared Amazon’s deal “without a doubt” the cheapest name-brand 4K television it had ever seen.

IBM Digital Analytics, which tracks online shopping transactions in the United States, said sales rose 12 percent between midnight and 6 p.m. Eastern time Thanksgiving Day.

Is traffic up or down? Perhaps it varies by region. Two safe bets: Online shopping is up, and Black Friday is losing importance as shopping is spread out over more days.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Japan Household Spending Down 4%, CPI Drops to 0.9%; Bankruptcies Soar in Yen Collapse

In spite of the Yen falling 35% since 2011, Japan once again borders on deflation. Please consider Japan’s CPI falls to 0.9%.

Japanese core inflation last month fell below 1 per cent to a 13 month low, just weeks before prime minister Shinzo Abe heads to the polls to garner fresh support to push back a scheduled rise in sales tax.

Core consumer prices, all prices excluding fresh food, slowed to an annual pace of 2.9 per cent growth year-on-year in October, in line with forecasts. Stripped of any impact of the sales tax rise in April, core prices are up 0.9 per cent.

Highlighting the scale of the challenges facing the Abe administration, data released on Friday also showed households further tightening their purse-strings.

Household spending fell 4 per cent year-on-year, the seventh consecutive decline since the national sales tax was raised from 5 to 8 per cent in April. Retail sales dropped 1.4 per cent, reversing two months of gains.

The drop in core inflation comes not even 10 days after Haruhiko Kuroda, Bank of Japan governor, warned that a fall below 1 per cent was “possible”, in a reversal of comments made just four months ago.

Bankruptcies Soar in Yen Collapse

Here's an interesting note regarding bankruptcies that I picked up from ZeroHedge: As Japanese Bankruptcies Soar, Goldman Warns "Further Yen Depreciation Could Be A Net Burden"

According to a recent bankruptcy survey by Tokyo Shoko Research, there were 214 bankruptcies due to the weak yen in January-September 2014, which is 2.4 times the 89 seen in January-September 2013. Far more of the bankruptcies were in the nonmanufacturing sector—81 in transport, 41 in wholesale trade, 19 in services, and 11 in retail—than in the manufacturing sector (44), which is consistent with our analysis based on the input/output tables.

Surprisingly, the number of bankruptcies since 2013 due to yen depreciation far surpasses the number of bankruptcies in 2009-2011 due to yen appreciation.

Bankruptcies Caused by Falling Yen



The Japanese consumer is faced with a falling yen, much higher taxes, and counting taxes prices much higher. The only saving grace for Japan has been falling energy prices.

Yet, prime minister Shinzo Abe Wants inflation and more of it. It's madness.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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REDUCED Stripe APC Shirt

Blue and White Striped APC Shirt

Simple button-up shirt from APC. Originally retailed for $210, selling for $35 including shipping within the US. In great condition. Worn less than five times. Size Large. Fits TTS. Pit-to-pit measures about 50cm. 

REDUCED APC striped sweater

Striped sweater from APC. Not very thick but made of 100% wool so still pretty warm. In very good condition. Selling for $65 including shipping within the US.  Size L. Fits TTS.

Crude Plunges Following OPEC Decision to Not Cut Production

For five consecutive months OPEC produced over its alleged quota. Nonetheless, and in spite of falling prices and pleas from Venezuela to restrict production, OPEC decided to take no action.

In the wake of the news, West Texas Intermediate plunged nearly 7% and Brent fell over 8%.

WTI Crude Futures



Brent Crude Futures



Please consider OPEC Fails to Take Action to Ease Glut as Crude Plunges.

OPEC took no action to ease a global oil-supply glut, resisting calls from Venezuela that the group needs to stem the rout in prices. Futures slumped the most in more than three years.

The group maintained its collective production ceiling of 30 million barrels a day, Ali Al-Naimi, Saudi Arabia’s oil minister, said yesterday after the 12 nations met in Vienna. Brent crude dropped as much as 8.4 percent in London, extending this year’s decline to 34 percent.

Canada’s producers big and small will have to tighten their belts to prepare for declining profits.

“This is a pretty big shock,” said Justin Bouchard, an analyst at Desjardins Securities Inc. in Calgary. “There’s no question there’s going to be a slowdown. Even the big guys will have to look at their capital spending plans.”

Western Canada Select, the Canadian benchmark, has lost more than a third of its value since June, in step with declines for West Texas Intermediate and the international gauge Brent. WCS traded yesterday at $55.94 a barrel, the lowest in the world.

Venezuela Burns Through Currency Reserves

Bloomberg reports Venezuela Burns Through Third of New Chinese Money in a Week

Venezuela’s international reserves declined $1.3 billion in the week after President Nicolas Maduro transfered $4 billion of Chinese loans to the central bank.

The country’s reserves dropped to $22.2 billion today, according to central bank data. A collapse in global oil prices pushed Venezuela’s foreign currency holdings to an 11-year low earlier this month.

Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world’s highest inflation and widest budget deficit. The following day, Venezuelan bonds rose the most in six years in intraday trading.

“If the plan was to calm the bondholders, then burning through a third of that money in five working days doesn’t do it in any way,” Henkel Garcia, director of Caracas-based consultancy Econometrica, said in a telephone interview.

Hyperinflation in Venezuela

Foreign reserves are the only reason why Venezuela's currency (the Bolívar) is not completely worthless. Nonetheless, inflation already exceeds 60% annually.

In September, Venezuela's Bolívar Hit Record Low on Black Market.

The plummeting Venezuelan currency breached a new, symbolic low of 100 bolívares per dollar on the black market Friday, according to market-tracking websites, in a sign of the worsening greenback shortage faced by President Nicolás Maduro's government.

Economists say the bolívar is collapsing as Venezuelans clamor for dollars to protect themselves from an inflation rate topping 60%. But the government, which tightly restricts access to dollars, has cut the supply this year, prompting the value of the bolívar to plunge in unofficial street transactions.

The lack of dollars—evidenced by mounting debts with private companies such as airlines and importers that service the country—has sparked fears of a potential default, since the country has more than $6 billion in bond payments due over the next three months.

I suspect it will not be long before Venezuela is forced to halt bond payments. Should that happen, the Bolívar would likely collapse to zero in short order.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Can Saudi Arabia Kill Off US Shale Producers?

If OPEC members relied solely on energy revenues.

Here is a little background to the international political economy of the ongoing OPEC meeting. As you would expect for a multi-billion dollar industry, the stakes are very, very high. What's more, with oil prices sliding as a result of slowing growth in the world economy, the showdown is becoming an n=2 fight. For OPEC, Saudi Arabia represents the "swing" producer as the largest entity and therefore the one with the most sway within the cartel. The bogeyman, of course, is the United States which has become the world's largest energy producer on the back of the shale / hydraulic fracturing revolution that has made previously inaccessible energy supplies accessible...at a price.

The upshot of it all is that it's a highest-stakes game of chicken between Saudi Arabia--not really "OPEC"--and the US shale producers. The Saudi's gambit is to not restrict OPEC production in the expectation that, at current price levels, many shale operators will become uneconomic--especially if prices remain as they are now for a protracted period:

Then there’s Saudi Arabia, which is still at the wheel of OPEC as its top producer. The Saudis still enjoy some of the lowest production costs in the world, so they can sustain a much lower price and still not worry about financing themselves. That’s a luxury many OPEC members don’t have. Venezuela, Iran, Iraq, Libya, and even Russia all need oil prices higher than $100 a barrel to keep their deficits in check.

Right now the Saudis are a lot less worried about the budget deficits of their fellow oil exporters as they are about what’s happening in North Dakota and Texas. The biggest threat to the power the Saudis have wielded as the de-facto head of OPEC for the past 30 years isn’t cheap oil; it’s the 9 million barrels a day coming out of the U.S. The Saudis would much rather play a game of chicken with U.S. producers than bow to the wishes of Iran, which they’re in no hurry to accommodate given their disagreements over the Assad regime in Syria, not to mention Iran’s burgeoning alliance with Iraq.

For decades Saudi Arabia has been the preferred partner of the U.S. in the Middle East. At the heart of that partnership was America’s clear dependence on Saudi Arabia for its oil. But that dependence has diminished significantly over the past few years as U.S. refiners have substituted oil from the shale boom for imported oil.

As with the earlier blog post, the thing Saudi Arabia must do is keep OPEC members with higher breakeven costs in line as they keep haranguing Saudi Arabia for reduced output. Ironically, attempting to squeeze shale producers is more likely to put the squeeze on fellow OPEC members with higher production costs than the Americans using new technologies.

That said, nations with few other sources of revenue will likely persist for much longer than highly leveraged shale producers--or at least that's the reading of Saudi Arabia:

At $100 a barrel, the average oil company can generate net income on the order of $15 a barrel. But as prices fall, this margin evaporates quickly. A decline of $10 to $90 leaves a margin of only $5, that means profits plunge 66%. Thus, at current prices, the average oil company won’t be profitable at all, and the weaker ones, loaded up with debt, are the walking dead. A perfect example is Goodrich Petroleum GDP -6.41%, which announced some big new discoveries in the Tuscaloosa Marine Shale. While the oil may be there, “the play is not economic at current oil prices,” wrote Cowen & Co. analyst Christopher Walling yesterday, adding that “liquidity is a growing concern.”  Goodrich shares are down 70% in six months...

So who’s in the worst shape? The companies with a combination of high debt, high costs and relatively poor acreage, like Goodrich. Another early casualty could be Swift Energy, which has piled up $1.2 billion in debt in recent years to drill high-cost wells on marginal acreage. Swift’s investors are clamoring for change as shares have plunged 50% this year. Swift’s net debt has climbed to more than 3 times estimated 2014 EBITDA, or more than 80% of enterprise value.

According to data from U.S. Capital Advisors, other operators with high leverage that are living well outside their means include SandRidge, which has debt of 2.6 times EBITDA and 51% of enterprise value; EXCO Resources XCO -7.95% with debt 4.3 times EBITDA and 83% of enterprise value; and Magnum Hunter Resources MHR -4.38%, with debt 4.8 times EBITDA and 38% of enterprise value.

UPDATE 1: Reuters has estimates from various financial researchers on breakeven prices for American shale producers. As you can see, we are well below the weighted average breakeven point already with WTI crude's spot price now under $70. So, it's game on for Saudi Arabia and the US-based prospectors they wish to drive out of business:

ROBERT W. BAIRD EQUITY RESEARCH (Oct. 14)
    "We estimate $73 as the weighted average breakeven point for
U.S. supply."    
    
 SHALE FIELD              BREAKEVEN OIL
                          PRICE PER BARREL
 Eagle Ford Liquids Rich  $53
 Wolfcamp North Midland   $57
 Bakken Core              $61
 Niobrara Extension       $64
 Eagle Ford Oil           $65
 Niobrara Core            $68
 Wolfcamp South Midland   $75                         
 Bakken Non Core          $75
 Texas Panhandle          $81
 Mississippi Lime         $84
 Barnett Combo            $93

Bottom line - don't be surprised to see marginal shale producers driven out of business. Namely, those which are highly leveraged and have smaller plots whose reserves are harder to extract.

UPDATE 2: Tim Mullaney of MarketWatch argues that while there are marginal US shale producers, the production costs of larger firms are rather low, making Saudi Arabia's gambit a dubious one. 

"Neutrality" Gone Mad: Should GM Have to Promote Toyota?

The EU's attempt to breakup Google gets more absurd by the day. I wrote about this just yesterday in Google vs. Sun vs. France: Too Big, Too Powerful, Too Free.

I have a few more EU proposals regarding Google worth discussing, but first I have a few questions:

In the name of neutrality...

• Should GM have to promote Toyota?
• Should Target have to promote WalMart?
• Should Pepsi have to promote Coke?

The idea sounds blatantly absurd, because it is.

Yet EU nannycrats Demand Neutrality From Google.

Google was under fire on two fronts in Europe on Wednesday as privacy watchdogs told it to apply the “right to be forgotten” globally and German ministers pushed for laws to make its search engine a “neutral platform”.

The developments crown a difficult week for the US technology group, which has already seen Capitol Hill hit out at a European parliament resolution advocating Google’s possible break-up. The non-binding motion is expected to be passed on Thursday

The 11-page paper, whose lead signatory is the German economics minister Sigmar Gabriel, argues it may be necessary to introduce “platform neutrality” to tackle abuses of dominance, either through tough antitrust enforcement or new legislation.

There is mounting unease in Washington that Google is being targeted for political reasons, in part to protect Germany’s corporate champions in media and telecoms. A host of senior politicians – including the chairs of two House and one Senate committee – spoke out on Tuesday against the European parliament resolution and warned of negative consequences for trade and investment.

The broad-ranging German position paper – dated November 13 and co-signed by interior minister Thomas de Maizière, justice minister Heiko Maas and the minister for digital infrastructure, Alexander Dobrindt – underlines the extent to which Germany is driving Europe’s efforts to constrain Google’s power.

The German ministers urge Brussels to use the lure of Europe’s domestic market and its political power to “stand up to global actors”. The ministers write that a joint Franco-German working group has developed proposals aimed at regulating digital platforms that dominate the market.

These measures include a requirement to display commercial offers from competitors without charge, and a guarantee of access to content without discrimination.

Rotation Mechanism

Also consider this nonsensical Google Breakup Proposal from Spanish and German MPs.

German MEP Andreas Schwab and Spanish MEP Ramon Tremosa called for "a rotation mechanism, which displays Google’s commercial services and their competitors in the same location and with the same prominence on the search results page. This move, its proponents say, would be close to the choice of browsers offered to consumers following the Microsoft investigation."

This is the kind of nonsense we expect from France and Spain. But Germany?

Why Stop There?

Why stop with internet services?

In the name of "neutrality", why shouldn't Mercedes be forced to offer free advertising to Fiat and GM. On a "rotation mechanism", why shouldn't Tiger Woods have to change his hat from Nike to Callaway?

By the way, I have already been impacted by such nonsense. I wrote about it in 2012, in Country Specific Blog Censorship by Google; Twitter Employs Censorship as Well; Echo Comments Not Working on Redirects

I do not have just one blog. I have many mirror copies. In the US my blog is globaleconomicanalysis.blogspot.com. In New Zealand it's http://globaleconomicanalysis.blogspot.co.nz. Occasionally I get asked why comments do not always display in other countries. It has to do with weird suffixes. Readers in other countries can try surfing my original blog URL by appending /ncr (No Country Redirect) as follows: http://globaleconomicanalysis.blogspot.com/ncr

That Google has to do this is of course silly, but it has to do with country specific censorship. Hmm... are all my criticisms of France filtered out?

Neutrality Solution

The EU nannycrats have gone mad and I have just the solution.

The EU is too big, too powerful, and too unwieldy. Instead of breaking up Google, let's unbundle the EU.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

FINAL OFFER, won hundred Elle crop dark grey, size 26

super flattering Elle jeans by Won Hundred in washed dark charcoal color. 
purchased from Steven Alan in NYC for $250.
worn once, in perfect like new condition.
sold out!

size 26, fits true to size.

92.5% cotton, 5% polyester, 2.5% elastane

measurements laying flat:
inseam: 27.5"
waist: 14"

asking $100 NOW $50+shipping.

comments/questions must include your email (otherwise i have no way to contact you) listing ends one week from today.

FINAL OFFER wood wood bergen blazer, rust, XS/S/M

incredible slightly furry cotton/wool jacket with navy blue cotton blend lining by Wood Wood.
i bought this in both brown and grey and have worn the grey one almost every day when it's cold but the brown has only been worn to try on in the house, it's really close to my hair color and i can't quite pull it off....

pretty sure it's completely sold out in this color/size.
hoping someone else will enjoy it!

side pockets. 
composition: shell: 60% cotton, 24% virgin wool, 8% polyester, 6% alpaca, 2% nylon.
lining: 65% polyester, 35% cotton.

measurements: bust 44"/waist 40"/hips 38"/ length 30"

size: XS, fits oversized, i usually wear a S and found this to have ample room for a thick sweater underneath :) the smart tailoring and proportions make it look intentional though, not like you are wearing your boyfriends coat!

paid: over $500.
asking: $250  $175 including shipping to the US. 

 

comments/questions must include your email (otherwise i have no way to contact you) listing ends one week from today.

FINAL OFFER< Vince navy pant with side detail, size 4

great classic trouser/chino style pants by Vince. tonal strip on the side which is very slimming and adds a bit of detail. slight stretch due to materials, 98% cotton, 2% spandex. made in the USA.

size 4, fit is true to size in my opinion/standard for Vince pants.

in excellent condition, worn a few times
waist measures 14.5" across, rise is 8.5"

paid: $195

asking $75 NOW $40 or best offer including shipping in the US.

comments/questions must include your email (otherwise i have no way to contact you) listing ends one week from today.

LOOKING FOR: Used Tan Filson Carry-On Bag

looking for a used filson carry-on bag in the tan color.  interested in the travel bag or medium duffle bag (open to other similar styles or brands like ernest alexander's bedford bag, as well, if anyone is looking to sell).    

anyone who has a bag in good condition they are willing to part with, please contact me at themchenryoutdoor at gmail.  a filson travel bag sold on loge last spring for $135 so looking to pay that amount if in good condition.  also, open to doing a swap with one of my other items listed (see all here) if that works better.

thanks!!!! 

World Cup, Olympics & Brazilian Corruption

Flying national colors is always a risk.

In normal circumstances, winning the rights to host either the World Cup or the Olympics would be cause for celebration in any country. Imagine, then, the plight of Brazil which is regretting having won both the 2014 World Cup and the 2016 Olympics! The winner's curse, indeed. The global situation has not exactly been helpful: the cooling of global growth--especially that of China and demand for commodities--hit Brazil hard as a major commodity exporter. There's now even talk of Brazil losing its investment-grade sovereign rating. You can probably say that matters have not been helped by the home team receiving a drubbing at home at the hands of the eventual World Cup champions Germany.

And speaking of the World Cup, this event famously elicited concerns about outsized expenditures on construction projects with limited use outside of sporting events. Ditto for the 2016 Olympics. At a time when Brazil is in recession or barely moving out of it, how can you justify such frivolity? This is always the challenge for developing countries hosting these sorts of "showcase" sporting events to make it known to the rest of the world that they've arrived. Now, though, the construction firms that have done well with all these mega sporting events have managed to embroil themselves into a national corruption scandal as if things weren't challenging enough.

Brazil's news media is all agog over the so-called "Operation Car Wash" [in English] scandal that involves the country's largest construction firms colluding to drive up bids during the awarding of construction-related projects for Petrobras, the state-owned energy giant. In turn, money is allegedly being kicked back by these construction companies to Petrobras executives and Brazilian politicians in the ruling Workers' Party [PT]:

A corruption probe in Brazil is raising questions about the need for closer oversight of projects being built for the 2016 Olympic Games, as the allegations are aimed at some of the nation’s largest construction firms. Authorities are investigating allegations that the companies formed a cartel to drive up the value of contracts with state-controlled energy giant Petróleo Brasileiro SA and paid bribes to the Petrobras executives and Brazilian politicians.

The prosecutors’ targets include Brazilian-based multinational construction companies Odebrecht, Queiroz Galvão and OAS, who together are partners in billions of dollars of contracts for the Games in Rio de Janeiro. In the past week, the three companies had executives arrested, their headquarters raided by Federal Police, or both. No executive from the three companies has been charged.

Now, "corruption" and "Latin America" are no strangers to each other. What is especially galling though with these accusations is that they come at a time when Brazil wishes to improve its international image but has been brought back to this Banana Republic-ish state of affairs in which businesspeople and politicians wallow in their own filth. The upshot, however, as far as the upcoming Olympics are concerned, is this: Since all of the implicated construction companies are essentially building those 2016 event sites and their supporting infrastructure, is it realistic that the Brazilian government can discipline them? Strictly speaking, new anti-corruption laws would bar these construction firms, if found guilty, of receiving government contracts for two years. Meanwhile, many are saying "I told you so..."

The evidence that has emerged in the Petrobras investigation has reinforced what many in Brazil have long suspected about how builders do business. “I’ve been saying for years that the World Cup and Olympics together could become the biggest financial scandal in Brazilian history if they aren’t properly monitored,” said Alberto Murray Neto, a lawyer and former member-turned-critic of the Brazilian Olympic Committee. “Now, considering everything that has happened, I think these companies should be scrutinized all the more closely.”

Brazil’s construction companies, which are major donors to political campaigns, are frequently criticized for having cozy ties to the government. Their executives regularly appear alongside top politicians to inaugurate public works. “Brazil has a construction-industrial complex in the same way that the United States has a military-industrial complex,” said Christopher Gaffney, a professor at the Universidade Federal Fluminense, who has an academic focus on mega-events. He says the construction firms wield an outsize influence on public policy in Brazil. 

Brazil's "construction-industrial complex"! It's pretty hard to beat that pun, but it's instructive. Actually, my analogy from a developed world case would be that of systemically important money center American banks. Remember they were deemed "too big to fail" because of the damage they would incur on the US economy if closed down by financial regulators. In Brazil's case of a fast-growing nation with vast infrastructure needs, how do you discipline construction firms? It's a similar problem to that of confronting Americans banks since construction lies at the heart of this developing country's immediate concerns just as banks do in the highly financialized US economy.

Ultimately, I believe the Brazilian government--whose current leadership may be implicated anyway given President Dilma Rouseff's close ties with Petrobras as its board's chairwoman prior to becoming president--will eventually cut a deal with these construction companies to minimize the damage to (a) the time schedule of the upcoming Olympics, (b) the reputation of all parties concerned, and (c) the performance of Petrobras and these construction firms that are highly reliant on the state-owned giant.

At any rate, I do believe that foreign construction firms should be welcomed into bidding processes in Brazil as suggested to limit opportunities for...questionable dealings.

Thanksgiving Travel Nightmare: Over 700 Flights Canceled, Major Storms; Black Friday Ice; Please Drive Safely

If you are traveling tonight or tomorrow, please take extra time.

If you are traveling by plane, please check your flight schedule. Hundreds of flights have been cancelled, thousands of other flights delayed.

Thanksgiving Travel Nightmare

Accuweather reports Snowstorm Creates Thanksgiving Travel Nightmare in East

A snowstorm pummeling the East has produced lengthy flight delays and treacherous travel on roadways Wednesday. As snow rapidly exits the Northeast into Thanksgiving Day, there will still be some travel trouble spots in the wake of the storm.

Aircraft displaced and delayed by the storm in the East may lead to additional flight delays and cancellations on Thanksgiving Day across the nation. Passengers may have to schedule a different flight on an alternate route to get to their destination.

In anticipation of delays or cancellations, several airlines, including US Airways, American and Delta, have announced they will waive change fees for passengers scheduled to fly into airports in the line of the storm.

Snowfall Wednesday-Thursday



Accuweather's Live Blog reports Accidents in Eastern Snowstorm Create a Maze for Thanksgiving Travelers

Over 700 Flights Cancelled

Flight Aware shows over 700 flights cancelled into or within the United States. There have been over 7,000 delays.

Flight Aware Misery Map



For an interactive map, click on Misery Map then click on a city to see the accompanying misery.

Black Ice on Black Friday

Finally Accweather predicts Patchy Ice, Snow May Slow Early-Morning Surge of Shoppers.

Please drive safely!
Have a safe and happy Thanksgiving.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Google vs. Sun vs. France: Too Big, Too Powerful, Too Free

I happen to like the sun. By definition, the earth would not even be a planet without the sun. No one on earth would be alive without free sunshine.

I happen to like Google. I could survive without Google, but like the sun, much of what Google provides is free.

Free Google Things

• Free internet services including the best search engine in the world
• Free Gmail
• Free research on self-driving cars
• Free research on other robotics
• Free blog software
• Free hosting and storage for blogs
• Free ads on my blog (and those ads make me money)

For a discussion of the implications of a self-driving car, please see Google Unveils Self-Driving Car, No Steering Wheel, No Accelerator, No Brake Pedal; Self-Driving Taxi Has Arrived. Who, other than city bureaucrats with their taxi licensing scheme will not want lower taxi fares?

For a discussion of other Google robotic research, please see More Robots: Google's "Atlas" Robot Mimics "Karate Kid"; Flying Defibrillator "Ambulance Drone" Unveiled; Fed Has No Answer.

Green Energy Handouts vs. Google

Unlike "green energy" parasites that could not exist without government subsidies (taxpayer dollars), Google, like the sun does what it does for free. Google does not ask for money from the government to promote autonomous cars, robots, or anything else.

Instead, Google research has created thousands of very high-paying jobs. Those job-holders pay taxes.

What's not to like?

Enter the French

France does not like Google. Yesterday, Yahoo! reported on France's Desperate Battle to Erase Google, Netflix and Uber from Existence.

Ever since Minitel bit dust, the continental power has been hopping mad about American domination of Internet services. And over the past weeks, attacks on U.S. giants have escalated from Paris to Lille.

Netflix is right now in the middle of an ambitious European expansion drive that started in Scandinavia and is fanning out south. Sure enough, France’s Association for the Protection of Consumers and Users has now sued Netflix for “malicious and illegal clauses.”

Uber’s French launch has been, if anything, more controversial than the Netflix debut. Infuriated taxi drivers in Lille have attacked a student for trying to enter an Uber car, first attempting to block her from opening the car door, then allegedly throwing a bottle at her head. The UberPOP service is about 20% cheaper than French taxis.

The French legal attacks on Google are too numerous to list here but the latest one actually has an entirely novel twist. France is now threatening Google with a hefty, €1,000 penalty for every defamatory link the company fails to remove from its global network of Google subsidiaries.

Google’s Tax Setup Faces French Challenge

Yahoo! noted numerous French attacks on Google.

Here is a key one as described by the Wall Street Journal: Google’s Tax Setup Faces French Challenge.

I have a simple remedy for this tax avoidance madness. Abolish corporate income taxes.

No country would have any tax advantage over any other country and all of the waste in time and effort and legal costs to maneuver taxes can be spent on research and more productive activities!

Right to Be Forgotten

Now the EU is in on the Google Attack. Please consider the New York Times article ‘Right to Be Forgotten’ Should Apply Worldwide, E.U. Panel Says.

Privacy watchdogs in the European Union issued guidelines on Wednesday calling on the company to apply the recent ruling on the so-called right to be forgotten to all Google search results.

The new guidelines, issued by a panel composed of privacy regulators from the bloc’s 28 member states, would require Google and other search engines in certain cases to take down links at the request of individuals in the companies’ search domains in Europe as well as outside the region.

The guidelines also raised questions about whether Europe’s data protection rules — which are some of the most stringent in the world — could be enforced beyond the 28-member bloc, and if American tech companies like Google and Microsoft would have to comply with the privacy ruling in their American operations.

“This is a line that U.S. companies will be very reluctant to cross,” said Ian Brown, a professor of information security and privacy at the University of Oxford, in discussing the potential global use of Europe’s privacy ruling. “It will come down to who blinks first. The companies or the privacy regulators.”

Guidelines Optional

Guidelines are not rules. It will be up to European Union member countries to decide how to apply them. Enter France once again.

France insists whatever it decides applies to the entire world.

For example, the Guardian reports Google’s French arm faces daily €1,000 fines over links to defamatory article.

Google’s French subsidiary has been ordered to pay daily fines of €1,000 unless links to a defamatory article are removed from the parent company’s entire global network.

The punitive judgment by the Paris Tribunal de Grande Instance, based on the controversial right to be forgotten online established by the European Court of Justice, breaks new ground in making the subsidiary liable for the activities of its parent company – in this case Google Inc.

The court handed down the ruling in September but it has barely been reported on outside France. At one level, the decision represents a pioneering attempt by a European court to enforce its order of justice on the internet worldwide.

Google has said it is considering its options and that it already removes links to defamatory online articles, fulfiling its legal obligations to French citizens. The French decision follows the May ruling by the European Court of Justice (ECJ) in the case of Mario Costeja González, a Spanish man who succeeded in ordering Google to remove links to an old article saying that his home was being repossessed to pay off debts.

His lawyers argued that it was a matter of his privacy and that Google had to delete “inadequate, irrelevant or no longer relevant” data from its search results – what has become known as the right to be forgotten.

Too Big, Too Powerful, Too Free

This is what it all boils down to. Google is too big, too, powerful, and above all, too free for the French.

France does not like anything cheaper, or better. Thus the attacks not only on Google, but on Amazon (for free shipping of books), on Facebook, on Netflix, on the Uber taxi service, on anything and everything cheaper.

Save the Bookstores

July 10, 2014: Amazon Charges Penny for Shipping Following France Ruling Shipping Cannot Be Free; "No Competition" Laws

October 03, 2013: France Vows to "Save the Bookstores", Fixes Price of Books

What's the Goal?

France's Cultural Minister called Amazon a “destroyer of bookshops”. But what's the goal? Is it to save the bookstores or to get people to read?

If the goal is to get people to read books, logic would dictate the cheaper the price the better. Kindle, Nook, and other eBook readers come to mind.

Petition of the Candle Makers

Ironically, French economist Frederic Bastiat lampooned protectionism back in 1845 when he penned 'Petition of the Candle Makers', mocking the sun's "unfair trade advantage" over candle-makers.

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.”

"No Competition" Laws

"Unfair competition" laws should be called what they really are: "No competition" laws, complete with higher prices, poor service, and higher unemployment.

France Cannot Compete

Government spending is already 56% of GDP. Hollande has threatened to take over steel, auto makers, and other industries to preserve jobs. Every month, France becomes less and less competitive.

People flee France because of excess taxes. French corporations are reluctant to expand because of preposterous work rules.

France forced inane agricultural tariffs on the rest of Europe to save inefficient French farms from "unfair competition".

The economic fools in France would tax the sun if they could. They can't, so they do the next closest thing: attack Google.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com