It has been a distracted day.
Developments are limited. The Greeks may be running out the clock.
The Spanish are putting off the day they will have to deal with their banks and their borrowers bankruptcies.
Austerity and growth are mutually exclusive.
Any housing recovery I can see, Calculated Risk sees one, is dumb money buying a dip. I easily may be fooling myself. The administration has good reason to sell recovery for the next month. They are too honest to lie but they can trumpet the better numbers. There is an election to win.
Bittman is chasing sugar:
http://opinionator.blogs.nytimes.com/2012/10/09/the-domino-theory-redux/?hp
"Imagine you had a multibillion-dollar industry that was (a) enormously profitable and (b) under frequent attack from public health researchers because (c) it’s demonstrably bad for the health of your customers.
This was, of course, the story of the tobacco industry, and it is – right now – the story of the sugar-sweetened beverage industry.[1] Like the cigarette makers, the peddlers of soda cannot do much about any of this: they owe it to their shareholders to maintain those profits, and the products they sell evidently cannot, no matter how hard they try, be tinkered with to change factors (b) and (c). [2]
Even if the beverage industry were composed of the nicest people in the world, it will not stop marketing to children unless it’s made to; indeed, these marketing efforts are within the rules of the game, however deadly they may be. The outcome of those rules and the marketing they allow is pandemic obesity and all the costs associated with it, which have been detailed enough elsewhere to pass over here.
The goal of right-thinking people, then, is to change the rules and somehow make it more difficult for the marketers to do their job. This can be done by legislation, executive mandate or — in some places, like California — referendum. Legislation to impose a significant tax on soda — a penny or even two per ounce – has failed everywhere, though it’s come close, especially in Philadelphia. After failing to pass legislation for a soda tax, Mayor Michael Bloomberg proposed (and will evidently institute, five months from now) a ban on large sizes of soda in many New York City places.
Now the California cities of Richmond and El Monte have put the soda tax — which has been endorsed by the United Nations, the American Heart Association, the American Medical Association, The New England Journal of Medicine, the Institute of Medicine and many others, and which the Centers for Disease Control and Prevention commissioner, Thomas Frieden, has called “the single most effective measure to reverse the obesity epidemic” – on the Nov. 6 ballot.
Related
A Cardiologist Makes the Case
The cities must decide how to spend these small windfalls. Dr. Jeff Ritterman, a retired cardiologist serving on the Richmond City Council, says that “for $86,000 we can teach every third grader how to swim at one of our municipal pools, and for $800,000 we can put a nutrition-gardening-cooking instructor in each of our 10 elementary schools.”
The longer-term benefit, which may take a year, or three, or even five to become evident and accepted, is health. Studies have shown that reduced soda consumption results in reduced weight. How quickly and how significantly a soda tax would reduce consumption remains to be seen. But without this kind of intervention, says Ritterman, “Our adult obesity rate will go from 24 percent to 42 percent when the present fifth and seventh graders reach adulthood.”
There’s a third reason other cities will follow suit, and that’s reputation. As a local observer said to me, “You don’t think San Francisco is going to be out-done by Richmond, do you?”
For all of these reasons, the first city to institute a soda tax will gain historic relevance and begin a kind of domino effect that proponents of public health can get behind. But it’s not going to happen without a struggle; remember, the beverage industry has no choice.
And while the proponents of the tax are largely volunteers, public health proponents and well-intentioned politicians (not an oxymoron!), the beverage industry has the bucks, and is spending them at a rate of about 100 to 1, in Richmond, at least: according to Ritterman, as of last week the industry had spent $2.2 million getting out the “no” vote; supporters had raised $34,000 and spent $29,000. [6]
Though Ritterman is optimistic (“We’re going to win because truth and science are on our side”), El Monte’s mayor, Andre Quintero, is more cautious: “The industry is spending very aggressively here: they have every single possible tool you can imagine having at their disposal.” [7] El Monte, also, is a small city of less than 10 square miles, so businessmen argue that it’s easy for their customers to leave to buy soda (or to eat, and order soda with a meal) in a neighboring town. “But,” says Quintero, “even making that conscious decision — I’m going to step out of the boundary to get my sugary drinks — is going to work on the person and make them think, Is this a choice I really need to make?”
That’s the spirit: changing the rules to give people a reason to think, to consider, should change their behavior. The New York experiment may be effective, but most experts believe a tax is the way to go. Whether it’s Richmond, El Monte, both, or someplace else, the first city to institute a soda tax will be the first domino to fall and eventually gain the gratitude of the rest of the country."
Krugman has run off to Korea. He left a column showing that money at the bottom is good and austerity is very bad.
http://krugman.blogs.nytimes.com/2012/10/09/deleveraging-shocks-and-the-multiplier-sort-of-wonkish/
Deleveraging Shocks and the Multiplier (Sort of Wonkish)
"Jonathan Portes — who will be my teammate in a debate on fiscal policy in London next week — weighs in on the IMF’s multiplier mea culpa.
He confirms that policy makers in many places were working with the
assumption of a multiplier on fiscal contraction much less than 1,
whereas experience now suggests that it’s actually more than 1.
What I thought might be worth pointing out is that the logic for a biggish multiplier and the logic of the crisis itself are very closely linked: times like these, the aftermath of a credit bubble, are precisely when you expect fiscal multipliers to be large. And that in turn says, once again, that fatalism — or worse yet, demands for fiscal retrenchment — in the aftermath of such a bubble are deeply destructive.
So, the simple but surely broadly correct story of the mess we’re in is that we had a period of excessive complacency about leverage, which came to a sudden end. Household debt in particular surged, then was suddenly perceived as excessive:
The
crucial thing from a macroeconomic point of view is that leveraging and
deleveraging are not symmetric in their effects. Leveraging up, other
things equal, leads to high aggregate demand — but this can be and is in
practice offset by the central bank, which can always raise rates.
Deleveraging, on the other hand, can’t be offset equally easily; the
central bank can cut rates, but only to zero, and unconventional
monetary policy is both controversial and an iffy proposition (which
doesn’t mean that it shouldn’t be tried).
So a large leveraging/deleveraging cycle is likely to be followed by a persistent shortfall in aggregate demand that can’t be cured using ordinary monetary policy; what I consider depression economics.
Now, the same thing that makes deleveraging so hard to handle also makes the fiscal multiplier larger than it is in normal times. Normally, expansionary fiscal policy is offset by monetary tightening, contractionary policy by monetary loosening. Hence the lowish multiplier estimates based on recent history. But if deleveraging has pushed you into a liquidity trap, there are no offsets.
So how big would you expect the multiplier to be under these conditions? Bigger than one.
Start by provisionally assuming a frictionless world in which consumers have perfect foresight and perfect access to capital markets. In that case the multiplier should be exactly 1, with consumer demand neither rising nor falling in the face of a change in government purchases (so that the change in purchases translates one-for-one into a change in GDP). Why? Well, a rise in government spending does mean higher expected future taxes — but it also means higher incomes right now, and those two effects should exactly cancel each other.
Now add in realistic frictions, notably households that are liquidity-constrained and/or use rules of thumb based on current income to make spending decisions. (By the way, as Gauti Eggertsson and I have pointed out, once you’re using a debt/deleveraging model you are already in effect assuming that many households face liquidity constraints). These frictions will mean that a rise or fall in current income due to fiscal policy will lead to at least some movement of consumption in the same direction. So we get a multiplier bigger than 1.
But, you say, confidence! OK, if people believe that a movement in government spending now presages even bigger moves in the future, you could reverse this conclusion. But there is no reason at all to believe this when it comes to fiscal stimulus, which has proved completely temporary; and it’s a highly dubious proposition for austerity imposed in response to a fiscal panic, too.
So there really was no good reason to be surprised by large fiscal multipliers. They were a predictable consequence of the kind of crisis we’re in; and the unjustified assumption of small multipliers has helped make the crisis worse."
What I thought might be worth pointing out is that the logic for a biggish multiplier and the logic of the crisis itself are very closely linked: times like these, the aftermath of a credit bubble, are precisely when you expect fiscal multipliers to be large. And that in turn says, once again, that fatalism — or worse yet, demands for fiscal retrenchment — in the aftermath of such a bubble are deeply destructive.
So, the simple but surely broadly correct story of the mess we’re in is that we had a period of excessive complacency about leverage, which came to a sudden end. Household debt in particular surged, then was suddenly perceived as excessive:
So a large leveraging/deleveraging cycle is likely to be followed by a persistent shortfall in aggregate demand that can’t be cured using ordinary monetary policy; what I consider depression economics.
Now, the same thing that makes deleveraging so hard to handle also makes the fiscal multiplier larger than it is in normal times. Normally, expansionary fiscal policy is offset by monetary tightening, contractionary policy by monetary loosening. Hence the lowish multiplier estimates based on recent history. But if deleveraging has pushed you into a liquidity trap, there are no offsets.
So how big would you expect the multiplier to be under these conditions? Bigger than one.
Start by provisionally assuming a frictionless world in which consumers have perfect foresight and perfect access to capital markets. In that case the multiplier should be exactly 1, with consumer demand neither rising nor falling in the face of a change in government purchases (so that the change in purchases translates one-for-one into a change in GDP). Why? Well, a rise in government spending does mean higher expected future taxes — but it also means higher incomes right now, and those two effects should exactly cancel each other.
Now add in realistic frictions, notably households that are liquidity-constrained and/or use rules of thumb based on current income to make spending decisions. (By the way, as Gauti Eggertsson and I have pointed out, once you’re using a debt/deleveraging model you are already in effect assuming that many households face liquidity constraints). These frictions will mean that a rise or fall in current income due to fiscal policy will lead to at least some movement of consumption in the same direction. So we get a multiplier bigger than 1.
But, you say, confidence! OK, if people believe that a movement in government spending now presages even bigger moves in the future, you could reverse this conclusion. But there is no reason at all to believe this when it comes to fiscal stimulus, which has proved completely temporary; and it’s a highly dubious proposition for austerity imposed in response to a fiscal panic, too.
So there really was no good reason to be surprised by large fiscal multipliers. They were a predictable consequence of the kind of crisis we’re in; and the unjustified assumption of small multipliers has helped make the crisis worse."
The Telegraph is excited as usual.
Why the IMF has got it so hopelessly wrong on the euro crisis
10 Oct 2012
| 23 Comments
IMF fears 'credit shock' in Spain if Rajoy blocks rescue
10 Oct 2012
| 24 Comments
Debt crisis: as it happened - October 10, 2012
10 Oct 2012
| 179 Comments
Angela Merkel's visit to Greece: what the papers say
10 Oct 2012
| 421 Comments
Italian church to be stripped of tax exemption from 2013
The Italian Catholic Church will be stripped of an historic tax exemption from 2013 after the government upheld a divisive decree under close scrutiny from EU watchdogs.
"9:50AM BST 10 Oct 2012
The Church currently pays tax on several properties it owns that are
commercial enterprises but is exempt if at least some of the activities on
the property are "non-commercial" - for example a chapel in a hotel.
"The regulatory framework will be definite by January 1, 2013 - the start of
the fiscal year - and will fully respect the (European) Community law,"
Prime Minister Mario Monti's government said in a statement late Tuesday.
In February, the government had amended Italy's property tax law to end the
Church's privileges amid rising calls for the Vatican to share in debt
crisis sacrifices and in the face of intense scrutiny from the European
Commission.
On Monday the Council of State, Italy's highest ranking court for
administrative litigation, rejected the decree. But the government insisted
everyone would pay property tax, Church included.
In 2010 the EU opened an investigation into whether tax breaks enjoyed by some
Church properties in Italy could be classed as illegal state aid."Not enough of a hit.
The Guardian is guarded:
Downgrade raises pressure on Madrid to accept bailout
10 Oct 2012:
S&P says it has lowered the rating on Spain's debts two notches – to BBB- – following slump in country's fortunes
-
Picture, 10 Oct 2012: Photographs from the Guardian Eyewitness series
-
10 Oct 2012: Report warns that Britain's safe haven status for global investors will not last and that non-euro countries are being complacent
Wolf Richter www.testosteronepit.com
"A Greek economist’s terse sarcasm: “GDP has decreased by €47 billion in the last five years. Economy is expected to contract by 3.8% in 2013, the 6th straight year of recession! Unemployment has reached 24.7%. Youth unemployment... 55.4%! No worries though—we have the sun, the sea, our cultural background.” And they have something else: GOLD.
Last year, the Canadian company Eldorado Gold Corp. shelled out $2.4 billion to acquire European Goldfields, which had been struggling for years to develop its Skouries and Olympias gold mines in Greece. Eldorado also owns the Perama Hill project. The three mines are expected to produce 345,000 ounces a year. The Australian company Glory Resources Ltd. is developing its Sapes mine with an expected production of 80,000 ounces a year. The four mines together would produce 425,000 ounces of gold by 2016, or about $750 million at today’s price—making Greece the largest gold producer in Europe.
Alas, development has been blocked for a decade by bureaucratic impossibilities, environmental groups, leftist political parties, and local residents—despite the manna of tax revenues, royalties, and jobs. Well, 1,700 jobs for 1.17 million unemployed.
But they’re just scratching the surface, so to speak. “We think Greece has the potential to be a major gold producer,” said Glory Chairman Jeremy Wrathall. He found it “bizarre” that the country was “virtually unexplored,” and he was full of hope that it had “woken up to the potential of the mining industry.”
Eduardo Moure, Eldorado’s general manager for Greece, had similar visions. “I think people realize we are part of the solution,” he said, convinced that they would “come to realize that mining can be a positive force for change.”
Operations are most advanced at Eldorado’s Olympias and Skouries mines in Halkidiki, a peninsula in Northern Greece marked by its three “fingers”—including Athos, whose Mount Athos is a world heritage site. Tourism is by far the largest industry and employer. And in July 2011, the Environment Ministry awarded the licenses to mine gold.
Tensions flared up in late March when protesters occupied the road leading to the Skouries quarry on Mount Kakkavos and scuffled with workers who were trying to get through. Then, in the nearby village of Ierissos, a municipal council meeting that had convened to discuss the project was broken up by protesters who overturned cars and fought street battles with riot police that had been brought in to keep things under control. A member of the protesting committee later told the paper Kathimerini, “A complete cessation of mining is the only action we are prepared to accept from the state.”
Local residence associations, cooperatives, and professional groups filed six appeals with the Council of State, Greece’s highest court, to stop further mining activity, arguing that it would destroy local forests and the ecosystem. On July 24, the court threw out the first appeal on the grounds that the investment would be “very beneficial for the economy.”
On August 6, riot police that had once again been brought in fired rubber bullets and teargas at protesters who marched from the village of Ierissos towards the Skouries mine, where workers had begun chopping down trees. On September 9, events took a nasty turn when protesters—some local, some bused in from Thessaloniki—tried to reach the mine. Police fired teargas. Protestors threw flares and Molotov cocktails. A number of fires broke out. People were injured. Police arrested several protestors and confiscated more than 50 firebombs.
The issue has split the community in two. Both sides brandish reports in support of their points of view. There are those who fear that mining will degrade the environment, ruin tourism and their livelihood, and leave behind, after the gold is depleted, untold damage. They’re worried that sodium cyanide will be used to extract the gold from the ore, which could contaminate the drinking water and the air. They’re backed by the left-wing SYRIZA, the Alternative Ecologists, the Green Ecologists, and other leftist groups.
And there are those, including many local minors, who see the economic benefits of the mines and believe that the environmental concerns are overblown. They say that new technologies won’t require cyanide to extract the gold. And Eldorado continues to emphasize that it adheres to all environmental and other regulations.
The whole debacle has laid bare one of the fundamental problems of Greece: utter lack of trust in its institutions. Nick Malkoutzis lamented “the murky way that public sector contracts have been handed out and the impunity enjoyed by companies that have violated all kinds of regulations. While the wealth and influence of this minority has grown, people’s confidence has withered.” And now, “every scheme tendered by the government” is greeted “with suspicion.” He called it “a social affliction brought on by years of graft.”
So, when an acquaintance of mine in Greece had dinner with an official at the Bank of Greece, the discussion inevitably came around to the Troika—and how Greece should send them packing. “Of course,” the central banker said, “it would help considerably if we actually had a functioning government these past 182 years.” Read.... Merkel Hides Behind The Troika Report, The Greeks Seethe, And The Drachma Beckons.
And here is SILVER: In July, Japan decided that utilities would be paid three times more for electricity from solar sources than from conventional sources. That premium will ignite the installation of solar panels—which use a lot of silver! Read.... The Solar Silver Thrust."
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http://2012.talkingpointsmemo.com/2012/10/colbert-obsessive-obama-supporters.php
Fidelity life No waiting. Mutual.
Sooner is better. As soon as you can is best.
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