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It is a peculiar irony. A year ago, the the UK’s Inland Revenue began a crackdown on offshore savings. Banks operating out of the Channel Islands and the Isle of Man had to hand over details of British customers, and depositors who confessed were rewarded with an amnesty. Thousands did and many must have given up on offshore savings. Inadvertently, the taxman’s crackdown must have saved some depositors from the collapse of the offshore subsidaries of Icelandic banks.
Thousands were not so lucky and could now lose most of their savings …
Consider if you will be a sole proprietorship, partnership or corporation.
‘You’re so lucky, being able to work abroad.’ I’ve forgotten how many times I’ve heard that statement.
If you have assets, you are most likely a target. When your assets are visible, you are the bullseye.
Do you need a job? Just got a question? Pop it in here and you’ll get an answer from our Inn Team.
Tip the scales in your favour, protect your home and family with asset protection programmes for partnerships, corporations and individuals.
Greece bailout talks that were postponed on Friday to Saturday, then Saturday to Sunday, then Sunday to Monday, then Monday to Tuesday. They have been postponed again, this time for a reason that makes perfect sense “Political Suicide”.
The New Work Times reports Greece Puts Off Decision on Austerity Measures Amid a Strike Protesting Them
As thousands of Greeks walked off the job in a general strike on Tuesday to protest stringent new austerity measures, there was a growing sense that the country was reaching a critical point in its efforts to survive the debt crisis.
Greek political leaders postponed for yet another day a decision on an austerity package — including 20-percent cuts to base pay for workers in private companies and a loosening of public sector job protections — in exchange for the billions in loans Athens needs to prevent a default in March. With elections looming as soon as April, the parties fear that they are essentially being told to commit political suicide to save the country.
If that indeed is the case, analysts here say, it is not clear what will replace them, making Greece a potential laboratory for a volatile mix of austerity, populism and social unrest.
Not that the old order, widely derided as corrupt and inefficient, is likely to be deeply mourned.
For most Greek voters, the two larger parties participating in the fragile tripartite coalition of Prime Minister Lucas Papademos — the Socialist Party and the center-right New Democracy — were already drained of political capital before the debt crisis by decades of self-interest and corruption. That has now been capped by two years of unrelenting austerity that has hurt most Greeks but has ultimately failed to revive the system, or even change it in any significant way.
With unemployment at 19 percent, businesses closing, credit scarce and the proposed new wage cuts expected to further decimate the shrinking middle class, the hard left and extreme right are rising.
With Greek popular anger at the country’s foreign lenders rising — a German flag was burned in front of Parliament at a demonstration on Tuesday — the Socialists and New Democracy are treading a fine line: They want to push back against the troika enough to regain some political capital — and keep more Greeks from falling into poverty — but not push hard enough to precipitate a default.
If the Greek political leaders do not agree to accept the new austerity measures in the coming days, Greece will run out of time to complete a broader deal for the voluntary write-down of Greek debt before a bond comes due on March 20. If Greece cannot pay the bond, it will default, which could result in its leaving the euro zone, among other ill effects.
Most Greeks say they have lost what little faith they had in the political system. “None of the parties we’ve been voting for have anything to offer,” said Vassiliki Karanasou, 42, an employee in a biscuit factory north of Athens who was participating in a demonstration outside Parliament on Tuesday.
Eventually, Will Come a Time
I keep repeating Eventually, Will Come a Time When
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.
Flag-Burning Trigger
For Greece, “eventually” may be at hand. The only thing missing is a party leader willing to stand up and tell Germany to go to hell.
That is not a comment on the desirability of telling Germany to go to hell, rather a comment that is likely to happen. However, the austerity measures imposed by Germany and the Troika cannot possibly work, even though the worker reforms are badly needed.
What is causing the revolt? The sad irony of this mess is the flag-burning and latest strike is over the one thing that is needed: work rule reform.
The flag-burning incident could easily be a trigger.
All sides handled this very poorly straight from the get-go. Greece would have been better off defaulting 2 years ago and the EMU and ECB much better off to simply let it happen. Now Greece is totally and completely trashed, having agreed to austerity measures that cannot work and resisting work rule changes that can work, but only years down the road.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
BP brought cheer to Britain’s pension funds yesterday as the oil giant hiked its quarterly dividend by 14 per cent.
As the Pentagon attempts to refocus the U.S. military strategy toward Asia, the department is facing major budget constraints. Experts disagree on how to balance the fiscal challenge with the country’s national security priorities.
In a short sale, banks forgive the difference between what is owed and the sale price of the house. Recently, however, banks have started giving cash back to the sellers. So far, the programs are a drop in the bucket. There are millions of pent-up foreclosures and JP Morgan is doing 5,000 short sales a month, hardly enough to make a dent.
Still, “short sales represented 9 percent of all U.S. residential transactions in November, the most recent month for which data is available, up from 2 percent in January 2008, according to Corelogic.”
Please consider Banks Paying Cash to Homeowners to Avoid Foreclosures
Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.
Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.
Losses for lenders are about 15 percent lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33 percent of financially distressed transactions in November, up from 24 percent a year earlier, said CoreLogic Inc., a Santa Ana, California-based real estate information company.
Karen Farley hadn’t made a mortgage payment in a year when she got what looked like a form letter from her lender.
“You could sell your home, owe nothing more on your mortgage and get $30,000,” JPMorgan Chase & Co. (JPM) said in the Aug. 17 letter obtained by Bloomberg News.
Tom Kelly, a JPMorgan spokesman, declined to comment on the company’s incentives.
“When a modification is not possible, a short sale produces a better and faster result for the homeowner, the investor and the community than a foreclosure,” he said in an e-mail.
Lenders spend an average of 348 days to foreclose in the U.S. and an additional 175 days to sell the property, according to RealtyTrac. In New York, a state that requires court approval for repossessions, it takes about four years to foreclose on a home and then resell it, the company said.
Lenders can often afford to forgive debt, offer the incentive and still make a profit because they purchased the loan from another bank at a discount, said Trent Chapman, a Realtor who trains brokers and attorneys to negotiate with banks for short sales.
What’s Really Going on Here?
If the answer is “it’s faster, quicker, cheaper” than foreclosures, then why don’t we see more of them, lots more of them?
Could it be these are the real problem loans with clouded titles, questionable practices by lenders, or huge numbers of written complaints by borrowers? Add to that a dearth of willing new borrowers and I think you have the answer.
Addendum:
Reader Bruce comments …
Hello Mish
The only solution, is as you have said, to speed up the process. Unfortunately, this begs the question, how much more insolvency can the banks sweep under the carpet?
All the best Mish! fight the good fight!
Not to mention the fact that politicians are against foreclosures and have delayed, at great cost, stepping up the foreclosure process.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Nicholas Noe argues that an internationally led reconciliation effort and subsequent peace-keeping presence in Syria would bypass the resulting destruction of a military intervention or civil war, while still keeping the diplomatic upper hand.
Elliott Abrams says the United States must take the steps to ensure the demise of the Assad regime in Syria.
Adam Liptak of the New York Times writes that the U.S. Constitution no longer acts as the model for modern states. He cites the consitution’s conservative interpretation and relatively few secured rights in making it a poor model in light of newer constitutions that reflect modern values and contexts.
I do not know enough about algorithm-driven High Frequency Trading to comment intelligently other than to say 100% without a doubt that someone is making a huge pile of cash from HFT or it would not be done.
You can watch an animated GIF that chronicles the rise of the HFT Algo Machines from January 2007 through January 2012 by clicking on the link.
The GIF starts out slow and boring, but watch the progression through the end.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Steve Coll, Robert Grenier, and Daniel Markey look at changes in U.S.-Pakistan relations over the past year and make recommendations for moving forward.
Robert M. Danin states, “Monday’s Fatah-Hamas unity agreement announced in Doha marks the latest in a series of unimplemented accords between the two Palestinian adversaries.”
CFR’s James M. Lindsay discusses Nelson Mandela’s release from prison in February 1990 and his subsequent rise to the presidency to show how individuals shape history.
Jagdish Bhagwati criticizes U.S. President Barack Obama for failing to close the Doha Round, decrying outsourcing, and surrending to the “manufactures fetish.”
The Merkel proposal for Greece to cede budget sovereignty to a European commissioner has finally been trashed. In its place is a Spaghetti-O loop proposal to give Greece money only if Greece earmarks the funds to immediately pay back bondholders.
Please consider Greece bail-out funds could be split
European officials are insisting any new Greek bail-out programme specifically earmark funds to pay off remaining holders of Greek debt, giving lenders the freedom to withhold aid to Athens without risking a messy default that could reignite panic in financial markets.
Under a new Franco-German plan that senior European officials said is likely to be included in a new Greek rescue, eurozone officials would create an escrow account to accept new bail-out funding instead of paying it all directly to Athens as in the past.
The new fund would then ensure bondholders are paid off, while additional cash to run the Greek government could still be withheld if Athens did not live up to tough new reform demands.
Eurozone officials said they believed the escrow account would give European Union and International Monetary Fund lenders strong control over Greece’s use of bail-out funds without stripping Athens of its budgetary sovereignty
“This is a better idea than the proposal of a debt commissar,” said the senior French official. “It is more acceptable.”
Although the idea originated in Berlin, Nicolas Sarkozy, the French president, embraced it during a news conference with his German counterpart, Angela Merkel, following a joint cabinet meeting between the two governments in Paris. Ms Merkel also signalled her support, saying it would ensure “this money will be reliably accessible”.
Mathematical Nonsense
The proposal is of course mathematical nonsense, at least in regards to the portion of money going straight back to the bondholders (most of it).
In regards to the portion that goes to Greece, I still have to wonder.
Creditors either give Greece the money or don’t. Once again, there is little reason for the middleman unless they want the IMF to be the judge as to whether or not Greece is living up to the agreements.
Essentially, the EMU is taking 130 billion out of their wallet, putting 110 billion (or whatever) right back in their wallet and calling it 130 billion in “new funding”.
The only thing that can be construed of as “new funding” is the additional amount that actually goes to Greece.
Why the Mathematical Farce?
I suspect the answer is to make it appear as if Greece is paying back debts, when it isn’t.
Weren’t dotcom and mortgage frauds based on the same methodology? In the case of dotcoms, intracompany arrangements were made to make it appear there were actual revenue flows when there weren’t. In the case of housing, such maneuvers could be used to make it appear someone was making payments on their mortgage when they really weren’t.
This setup is either mathematical ignorance or a scam to prevent triggering of credit default swaps. I lean towards the latter.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Figures for the full year to December 2011 have revealed the value of residential property in the US fell by 4.7 per cent, compared to 2010.
However, CoreLogic noted in its December House Price Index that, excluding distressed sales, the cost of buying a home in the nation only fell by 0.9 per cent.
Mark Fleming, chief economist at the firm, commented: "While overall prices declined by almost five per cent in 2011, non-distressed prices showed only a small decrease. Until distressed sales in the market recede, we will see continued downward pressure on prices."
There are some states where the value of residential real estate climbed last year, even when distressed assets were taken into account.
Montana experienced the biggest increase at 4.4 per cent, while Vermont, South Dakota, Nebraska and New York also saw property values climb by between 1.7 and four per cent.
Research published by the National Association of Realtors in January revealed pending home sales in the US fell by 3.5 per cent in December, compared to the previous month, but that they still remain 5.6 per cent higher than at the same time in 2010.
There are expected to be "attractive opportunities" for investors in the Spanish retail real estate sector over the course of 2012.
Danny Kinnoch, international investment director at Savills, commented that buyers who are not relying on finance from banks will be able to take advantage of some of the best deals on offer.
He stated: "There is scope for strong returns assuming market recovery over the medium term, which will keep international players acquisitive."
Meanwhile, debt sales of such Spanish real estate assets will provide chances for "opportunistic investors", Mr Kinnoch added.
Savills has predicted that yields in the country’s retail property sector will be steady over the course of 2012, with returns currently standing at 6.5 per cent for prime shopping centres and seven per cent for prime retail parks.
Research published by Jones Lang LaSalle last month revealed the volume of investment in Europe’s retail sector was expected to break the €28 billion (£23 billion) mark in 2011, a significant increase over the €20.7 billion recorded in 2010.
There was a rise in the number of enquiries about property in Cape Verde during January.
According to TheMoveChannel, searches for real estate in the island nation jumped by 2.8 per cent at the start of 2012, compared to the final month of 2011.
Director of the firm Dan Johnson explained some investors are looking for alternatives to the more popular markets of Spain and the US.
"With its building tourist numbers and relatively un-crowded real estate market, Cape Verde’s imbalance between supply and demand is seeing these buyers turn to somewhere smaller in the hope of bigger returns," he stated.
Last month, The Heritage Foundation 2012 Index of Economic Freedom highlighted Cape Verde’s strengths as a place to do business, noting it is ranked fourth in Sub-Saharan Africa based on its economic credentials.
The organisation commented private property is "fairly well protected" and revealed the investment climate in the nation has become more favourable over the past year.
Ed Husain argues that it is impossible to tell whether Bashar al-Assad’s time is running out, but containing–not fanning–the current conflict in Syria is in everybody’s interests.
Ed Husain argues that it is impossible to tell whether Bashar al-Assad’s time is running out, but containing–not fanning–the current conflict in Syria is in everybody’s interests.
Along with many others, I am pondering the latest employment numbers. Strong opinions are the norm.
Many are steadfast in their interpretations, some critically so, especially Bondad who blasted Zero Hedge in a scathing attack “No Rick Santelli and Zero Hedge, One Million People Did Not Drop Out of the Labor Force Last Month“
Does Bondad Have a Point?
The short answer is yes. I wonder if I escaped attack because of a statement in my post Nonfarm Payroll +243,000 ; Unemployment Rate 8.3%; Those Not in Labor Force Rose an Amazing 1,177,000 as follows:
Some of those labor force numbers are due to annual revisions. However, the point remains: People are dropping out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low.
Emphasis in red as written, not added.
I could have, and should have expounded on the first sentence, even though I stick with what I said in the second sentence.
Bondad is generally a good guy and he also has the coolest dog in blogosphere, even though we fundamentally differ on politics.
Meet Bondad’s Dog “Weimar”
Zero Hedge replied in Explaining Yesterday’s Seasonally Adjusted Nonfarm Payroll “Beat”
Does Zero Hedge have a point?
Yes, even though he is scrambling hard to make it.
Been there. Done that. It happens. No one is perfect, certainly not me.
Trim Tabs has Firm Opinion Too
BLS Data Skewed?
Based on federal income tax receipts Trim Tabs asks Is BLS Data Skewed?
Our estimate of a slowly growing economy is based primarily upon daily income tax collections. Either there is something massively changed in the income tax collection world, or there is something very suspicious about today’s Bureau of Labor Statistics hugely positive number. We continue to check and recheck our analysis of income tax collections. We are aware that another service believes that incomes are growing faster than we do. So far we have not found any errors or discrepancies in our work, but if we do, we will let you know.
I keep repeating that the BLS refuses to use the data embedded in income tax collections to be able to report real time jobs and wages. Why does it refuse? Could the reason it refuses to use real time data on jobs and incomes be because perhaps this jobs number is politically motivated? The entire world is looking at US job creation as a proxy on how well Obama is doing? Could the Obama administration be pressuring its economist employees to create the best possible new jobs number?
Obamanomics?
Readers should know by now that I discount most conspiracy theories. It’s not that I believe conspiracies don’t happen, but rather those that do are quickly exposed. Paulson used a bazooka right out in the open to force Bank of America to merge with Merrill Lynch. Geithner and others are guilty as well. It was all very visible and quickly reported.
Is the BLS purposely manipulating numbers to benefit Obama? I rather doubt it. Someone would know and yap.
Yet, I have no explanation for payroll tax data. Some things do not add up, and it’s best to look at things from more than one angle.
So let’s take a closer scrutiny of the data to see what’s happening.
The Case for Headline Payroll +243,000
Let’s start off with the absolute best case anyone can make for the bullish jobs case.
The above chart is condensed from the January 2012 Non-Manufacturing ISM Report On Business®
ISM Questions and Answers
There are still questions about seasonal adjustments, confirming data, etc. but those are relatively good ISM numbers.
Let’s turn our attention to the unemployment rate.
Civilian Labor Force
The BLS labor force numbers seem suspect. The labor force is less now than when the recession ended 2.5 years ago.
Current Labor Force: 154,395,000.
June 2009 Labor Force: 154,730,000.
Based on trends, the labor force ought to be close to 160,000,000.
Boomer demographics can explain part of the “trendline failure”, but not all of it. The US is adding work-aged population every year, just at a decreasing rate. In other words, the labor force should be rising, even if at a reduced rate (at least in theory).
What Rate?
In 2000, it took about 150,000 jobs a month to keep up with birthrate and immigration, Recently Bernanke stated the number is 125,000 jobs. Could it be lower? Certainly, but the number is not zero.
Total Nonfarm Employees
There are currently 132,409,000 nonfarm employees. In December of 2000 there were 132,481,000 employees. How’s that for job growth?
Civilian Employment
Civilian employment is currently 141,637,000.
In May of 2005 civilian employment was 141,609,000.
Civilian Unemployment Rate
The recession ended in June of 2009. The labor force was 154,730,000. The Labor force is now 154,395,000. Is this credible? If it’s not credible, then neither is the unemployment rate!
Unemployment Rate What If?
Labor Force 155,000,000 8.6%
Labor Force 156,000,000 9.2%
Labor Force 157,000,000 9.8%
Labor Force 158,000,000 10.4%
Labor Force 159,000,000 10.9%
Labor Force 160,000,000 11.5%
At a very modest labor force growth to 157 million (a mere 90,800 a month since the recession ended), the unemployment rate would be 9.8%.
Using Bernanke’s estimate of 125,000 jobs a month, the labor force would be 158,480,000 and the unemployment rate would be 10.6%. Growing at the trend, the unemployment rate would be 11.5%.
Has Time Rewritten Every Lie?
To paraphrase Barbara Streisand) “Can it be all so simple then, or has time rewritten every lie?”
Are You “Really” Unemployed?
Link if video does not play: The Unemployment Game Show: Are You “Really” Unemployed?
Please play the video. It’s hilarious.
In regards to the wild jump in “those not in the labor force” in relation to growth in overall population, the BLS notes “the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population.”
Forced Retirement
The BLS argument may sound plausible but I do not buy it. Persons 55-62 will still generally be looking for a job. Even many older than 65 will still be looking for a job because they cannot afford to retire.
Instead, I propose a combination of three factors.
Gallup Chimes In
Gallup reports that unemployment is 8.6% not seasonally-adjusted. That is close to the BLS number, but Gallup is based on those 18 and older while the BLS is 16 and older.
Otherwise, the sampling metrics are similar. The biggest difference appears in the actual count of underemployment (unemployed + those wanting a full-time job but only finding part-time work).
Please consider a pair of charts from the Gallup report U.S. Unemployment Up, to 8.6% in January
Percentage of US Workers in Part-Time Jobs, Wanting Full-Time Employment
Underemployment, a measure that combines the percentage of workers who are unemployed with the percentage working part time but wanting full-time work, surged to 18.7% in January. This is a worsening from the 18.3% of December but is still below the 19.0% of a year ago.
Total Underemployment
BLS Alternative Measures
click on chart for sharper image
The BLS “alternative” measure of underemployment is 16.2% (not seasonally adjusted) compared with 18.7% as surveyed by Gallup. As noted above, Gallup does not include results of those aged 16 and 17 while the BLS does (otherwise Gallup’s numbers would be higher still).
Which set of numbers tells the better story? Here’s a hint “It’s not the BLS”.
I will stick with what I have said on many occasions “People are dropping out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low.”
The reason is not a recount based on the 2010 census, nor is it purely demographics, nor is it Obamanomics. The reason is severe and sustained fundamental economic weakness, coupled with existing purposely-distorted definitions of what constitutes “unemployment”.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
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