Archives for category: banking & macrovolatility

It has taken me nearly six years but I have now arrived at the conclusion that this European Union (EU) and the Eurozone have proven to be real failures and that if one went down to brass tacks it would show that having this “Union” (sic) and the euro did not really make a positive difference; that the “whole shebang” should be scrapped, leaving only “pieces” (to be defined) to regroup  differently and basically  keep a “customs’ union”.

I have spent six years trying to understand and analize in as much depth as possible all this, written sinceApril 2011 – 2 000 post in my blog:“macrovolatility.com”, written in 2014 / 2015 two books in self-edition with Amazon with self-explanatory titles: “Why Obsolete Macro Governance Is Killing the World Economy” and “Growth through Structural Reforms” (With Leadership and Competence Great Opportunities Exist).

I am not agreeing anymore with what I had written many times in this blog, the last one on 06/25/2016 in my post: “Eurozone Governance Radical Change Needed to get to a “2 Speed” Area Organization“, it will not work either…(please refer to this by clicking on above link).

In fact the last drop was when reading several times these last days that Greece’s situation was still being discussed by all “the powers to be” – re The Guardian‘s 02/11 /2017 article:No crisis’ on Greece bailout deal, says eurozone chief”…!!!
All these European/Eurozone “top officials” are such great techno bureaucrats that reality has totally  escaped from their pseudo “thinking” (sic), in six years they have not been able to decide on Greece’s situation which only represents 1 to 2% of EU’s GDP!!!

In this blog I have written since at least 5 years that Greece should leave or be exited from the Eurozone for its own sake, it would now be quite rich with a low valued drachma hugely expanding tourism, the number one wealth item, instead it has cost the Eurozone a “fortune”, protected corrupt local politicians who refused to exercise the results of the June 2015 referendum where the bailout conditions were rejected by a majority of over 61% , with the “No” vote winning in all of Greece’s regions, the Greek people wanting Greece out of the hands of the totally incompetent Eurozone leaders, IMF, ECB and German Chancellor Merkel, the real Eurozone leader.Greece has 180% indebtedness vs GDP!!!

Greece is just the tip of the iceberg, add Italy (3rd Eurozone economy) with a huge debt (135% of GDP) and only 1% growth, Spain (4th Eurozone economy), probably the most competent and growing (3%!) mediterranean country, still hampered with huge unemployment, with banks not passing on ECB’s continued  flow of printed liquidity to credit facilities to the biggest employer, the SME/TPEs, its indebtedness as % of GDP having grown to be 100%.

France 2nd biggest Eurozone economy, with miserable 1.1% growth, huge unemployment, is under great political stress and  the Number one, by far, Eurozone economy, Germany (1.9% GDP growth and “only” 71% indebteness as % of GDP) continues with is parochial self-serving Eurozone policy, nobody in Brussels will interfere…

The Eurozone has been conceived as an erratic type of puzzle / potpourri of countries with totally different mentalities and ‘usus”, great differences in social-economic macrostructures, no real EU / Eurozone “Governance and with Germany having benefitted from the euro creation in 1999 onwards with a 20-30%  favorable euro/DM parity which has helped considerably to boost their economy to the detriment of the rest.

There is, finally no way all this will work (what, in reality?)

Let each country solve its own problems, they are all countries with a long history which will serve as the backbone, they need to adapt far more rapidly to all the past, present and future innovations in “technology” and its meteoric evolution, in other words the entire political class needs to change ASAP, let each nation’s government be responsible for their own situations and not anymore EU / Eurozone “Governances” (sic) which have no power and are Germany’s slaves.

I have not been writing any posts since 9th February, 2016 because it became too monotonous to write all the time the same comments with nothing happening because of the Governments’ obsolescence in general and the  total inability of the Eurozone Governance (sic) to reform macro social-economics in this supposed “common interest” area.

This may seem an arrogant statement but I have written 2000 posts from April 2011 until October 2015 and (only) three posts since October 2015 and made a great number of concrete alternative proposals not limiting myself to criticism.

I have also written – 2014 / 2015 – in self-edition – Amazon – two books whose titles are self-explanatory: “Why Obsolete Macro Governance Is Killing the World Economy” and “Growth through Structural Reforms” (With Leadership and Competence Great Opportunities Exist).

I am now quoting entirely the Express.co. UK’s 06/11/2016 article: “Eurozone heads towards its next monetary crisis” and showing it under MORE at the end of this post – you can also read it by clicking on above link.

This article, in a nutshell, relates to the incompetence of the EU and to the current domineering subject: Brexit or no Brexit, leaning heavily on the Brexit side.

My Comments

The only reason I am writing this short post is because of my continuous (5 years) largely repeated total disagreement with Central Banking dominant positions and “policies” (sic) in  the US, the Eurozone, to “limit” myself to these two huge areas.

The below cited article touches on the disgraceful “policies” of the ECB, which is trying to be  even worse than the FED (a real challenge!…) .

Last year I tried to be published by a traditional large and well known publisher in the UK / US and since they could not use the material in my two self-edited books with Amazon I wrote 100 pages of an eventual third book which I had entitled: “Structural Reforms Impeded by Central Banking”.

This was refused and the main reason was that it was not “classroom material” and that it was “iconoclastic”. I refuted the second point by arguing that there were no idols to be destroyed but that long awaited strong (not “reformettes”) social-economic structural reforms were not being achieved because of , in general, Governments ‘ ineffectiveness and Central Banking flooding markets with printed money at even negative interest rates by ECB, which made it easier for most ineffective Governments in the Eurozone to avoid implementing social-economic structural reforms, and by the same token to increase already huge indebtedness.

Now, Dragui, one of the big culprits that the Eurozone is not really getting out of recession, wants to initiate “helicopter” money flooding (see below article) to push demand (hopefully a joke?).

It suffices to observe the situations in Greece (the total absurdity, it should have been exited long ago), Spain (contaminated by the Greek situation and the popular new “Greek type” political parties’ expansion, with no Government since months), France (continuing going down the hill because of no capacity to reform itself), etc, etc…!

Conclusion: Nothing basically changes and if so it is for the worse – relatively.

Read the rest of this entry »

 

As repeated a”thousand” times (*) in this blog Central Banks work for Markets and to Save “Big Banks Too Big to Fail”.

Central Banks are “Independent”, they do what they want!

Point in case now among many others in Europe: Italy (Big talker Dragui’s home)

Italy is in the middle of a very severe Bank crisis due to “Bad Receivables” which produce “Bad Debts”, which will remain unpaid.? But, surely the ECB (European Central Bnk) will print some more  to “save them” (ECB always “saves” somebody, until they go under…).

Mr Dragui “interrogated” (!) Italian banks as to their Bad Debts’ situation (which is a record 17.5% – Eurozone’s average seemingly (?) is around 5% – and represents 200 Billion euros!)

ECB should have “known” way  ahead all the facts of this essential economic / financial data and taken appropriate action, several “gimmicky “remedies – like “bad banks”…had been considered.

Real  economic steps are to provision realistically bad debts (and tighten banks’operations and remunerations, like is done with private corporations), but ECB (and EU / EC) do not want this, they seemingly (?) prefer to increase banks’ capitalization, which would require more “money”, which ECB would print and “save ” the banks…

These would be the “normal procedures” (sic), those which have cost the Eurozone trillions, it is called “fleeing into the future” (“la fuite en avant”) and wait for “miracles”…

One really wonders what ECB does, apart from issuing trillion QEs?

The ECB is 200% responsible for the huge increase in Eurozone Indebtedness and wanting to “solve” all matters with Trillion QE’s. Pushing Indebtedness in a non controlled banking system is “asking for it”, and the result is pushing “bad loans” and getting “bad debts”.

ECB did “not care ” to make sure that the Banking System was Operating correctly (that is not “sensational” enough for Mr. Dragui!), not that strongly increasing Bad Debts might cause another “Bubble”.

ECB has not done their job in accelerating the Eurozone Banking Union and really Controlling private banks operations!

I will not even mention Brussels’ EU or EC, they do nothing!

(*) I have written 2000 posts since April 2011 and stopped (I write an occasional post like today when matters get out of hand) my blog in October 2015 because there was no purpose to continue writing.

I have written and published 2 books: “Why Obsolete Macro Governance is Killing the World Economy” (Amazon- September 2014) and “Growth through Structural Reforms” (Amazon – April 2015). I had written over 100 pages of a third book, temporarily called: “Central Banks Impede Structural Reforms”, sent this text to 5 big publishers and was refused because it was not a “text book” and also was considered “iconoclastic !

Nobody really want to know…

 

 

European “Non Governance” and tremendous and expensive Bureaucracy has done Nothing for Decades and needs to be Removed entirely, if not like Garcia Marquez said, it is: “An Announced Death”.

I only write sporadic posts here since it is useless to try to propose meaningful and significant changes….

I have been writing  on Football (Soccer) since October, 2015, more amusing, but only to some extent; due to all the problems related to now, Football’s “Governance”… – FIFA’ and its longstanding and huge Corruption, my blog being “footballgreatest.com”.

Photo – Prime Minister Matteo Renzi

Follows a translation made by me of Le Figaro’s Premium’s  01/22/2016 article on young and exceptionally “productive” Italian Prime Minister Mario Renzi declarations on Europe: “Fed up with Europe, Matteo Renzi denies arguing for the sake of politicking”.

I subscribe nearly completely to Renzi’s declarations, after having written 2000 posts and two books with self-explanatory titles: “Why Obsolete Macro Governance is Killing the World Economy (September 2014 -Amazon) and “Growth through Structural Reforms” (April 2015 – Amazon) on this subject since I created my blog in April 2011.

No serious and complete Structural Reforms were made (only “reformettes”), total real unemployment ( including under employment) is still huge, instead Indebtedness is astronomic thanks to totally erroneous accomodative (interest and quantitative wise) Central Banking “policies” (sic): ECB (plus FED, Bank of Japan, Bank of China, etc…), growth being far too slow and solely dependent on record low Oil prices (which are killing the oil related economy) and which will not last, the banking system is preparing is umptieth – Oil and Assets – bubble, the euro exchange rate is nearly at bottom and will not last, Migration problems are not tackled (Germany is totally wrong!), if this continues the UK will exit – “Anything Else” ? – Woody Allen‘s film.

Photo – Woody Allen in “Anything Else” – 2003

Quotes – My comments in italics – in the text

Budgetary flexibility, European investments, management of migrants, state aid, banking crises, EU funding for Turkey: the grievances accumulate between the Italian leader and Brussels.

Migration policies, review of the Dublin and Schengen agreements, state aid to banks in difficulty, flexibility of Public Accounts: the violent diatribe which set fire to the powder a week ago in the relations between Matteo Renzi and Jean-Claude Juncker has its origins in a variety of long-simmering grievances.

Paradox of a leader whose impeccable European credo gave his Democratic Party 8,000,000 votes in the elections of May 2014 in the Strasbourg Assembly, which now feels despised to the point of accusing the European Commission of “two weights, two measures”.

A reconciliation should profile his trip to Berlin on January 29, and then the arrival of Juncker in Rome. Inevitably, it will probably not be painless for Europe, nor especially for Italy.

The Italian prime minister denies being “an argumentative polemicist or politicking”: “Europe is in a crisis of identity, everything has failed. It must change. We have our proposals and our allies are not lacking. Brussels is not infallible, “he said. His Secretary of State for Europe Sandro Gozi adds: “Some in Brussels want to send the revision of institutions after 2019, with the future Commission. Such a long period is one that Europe cannot afford anymore. ”

The most heated debate concerns the € 3 billion promised by the EU (i.e. Germany – who continues to lead the Eurozone – My Comment) to Turkey for its help curb migration. Matteo Renzi threat to suspend the Italian contribution to this fund and asks that all aid to Turkey come from the regular budget of the Union.

On the pretext that Ankara would not give sufficient guarantees on its allocation to migrants. Massimo Franco, a columnist for the Corriere della Sera, “this negation by Renzi for a Turkey fund is being used to relegate Matteo Renzi in a corner and shows a European exasperation against him that he should not underestimate (in other words: “Renzi, shut up!”- my comment).

Disagreement still on the destination of the 40,000 migrants landed in Greece and Italy and that should have been distributed in the rest of Europe. The July 20915 agreements remained unfulfilled.

Italy also calls for an urgent revision of the Dublin agreement to regulate migratory flows. Dutch Prime Minister Mark Rutte, who chairs Europe for six months (who is implicitly agreeing with Germany, so far… ,my comment) the fund immediately approved the Turkish funds and request to accelerate the implementation “too slow” in its discretion, also to do so with the “registration centers” (“hotspots”) which collect the fingerprints of migrants to their landing.

Other sticking points: the public wants assurances that Italy finances its troubled banks, despite the threat of infringing Brussels procedures…. Or, the absence of the distribution of the European investment program that Matteo Renzi despairs of seeing happen.

And, above all, the ‘flexibility’ public accounts (0.2% of GDP) that Italy asks Brussels as a “due” to address the additional expenditure incurred by Italy to host 180,000 migrants the last year and probably as much this year (This is where I diverge, if all countries want subsidies for Migration problem solving, Brussels needs to create a Special “Migration”fund with Savings made in Brussels – an impossibility for “immobile” Brussels! – Needless to say – My Comment).

These debates have revealed a certain isolation of Italy on the European stage. None of the major leaders has added its voice to the protests Matteo Renzi. Commissioner Pierre Moscovici (a “clown” – my comment) considers “unfair” to criticize Juncker. And (even – contaminated…, my comment…) Italian Federica Mogherini, High Representative for Foreign and Common Security Policy, “Ms CFSP” has quietly sided with the President of the Commission (Juncker).

The accused (Renzi…), however, as some in Europe to speak up for the purpose of domestic policy, to cut the grass under the feet of the M5S and populist Northern League, seems reductive. In Parliament (Italian), government reforms are all adopted one after the other with a comfortable majority.

 

 

As usual US government and FED hide Real US Unemployment situation which is not 5% of total labor force in December 2015 but 9.9% – re below BLS chart which shows only 1.2 points improvement versus December 2014 9.9% vs 11.1%, because Under Employment  where all the  Employment problems reside is still very high – 4.9% in December 2015 vs 5.7% on December 2014.

No wonder that still many voters continue to express widespread dissatisfaction with their own prospects and those of the larger economy. The main disrupting factor that has been impacting and still does latest monthly jobs reports is further evidence that wage growth for the typical worker remains sluggish. Average hourly earnings fell slightly in December 2015, leaving the overall yearly gain at a meager 2.5 percent.

This  comes close to stagnation in wages and is mainly due to the large increase of part-time jobs at, obviously, lower pay, and that in December 2015, year-over-year (yoy) growth in multiple jobholders was an 11-month high, while yoy growth in single jobholders wast a three-month low. Since May 2015 the number of multiple jobholders has increased by 752 000, while single jobholders have increased by 429 000. In other words, multiple jobholders have been responsible for 64% of the net job gains since last spring. The disproportionate importance of multiple jobholders – forced to “make a living” out of it – shows why the labor market is weaker than it seems.

NYT published a long article on 01/08/2015 entitled: “Robust Hiring in December Caps Solid Year for U.S. Jobs” (you can click on this link if you want to read the article) about 292 000 jobs created in December 2015 with not ONE word about Under Employment…

US Growth of 2.8% in 2015, whereas high comparatively to most Western countries  is still not sufficient to change significantly the Total unemployment situation in the US,

All of my posts on this critical social-economic subject since the creation of this blog in 2011 show reasons why and propose concrete approaches, but the press and the FED continue not showing the Under Employment situation and, accordingly, are falsely informing the US public.

Until the Central Banks, in this case the FED, are not restricted in their role which is to control the banking sector performances and control pricing / inflation, the REAL Unemployment situation will not improve significantly.

The US is lacking having a Minister of Economy whose role is to set social-economic policy, this NOT being the FED’s role 

 BLS – A-15 Chart – US Unemployment – December 2015

Measure
Not seasonally adjusted
Seasonally adjusted
Dec.
2014
Nov.
2015
Dec.
2015
Dec.
2014
Aug.
2015
Sept.
2015
Oct.
2015
Nov.
2015
Dec.
2015
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
2.5
2.1
2.1
2.6
2.2
2.1
2.1
2.1
2.1
U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
2.8
2.3
2.4
2.8
2.6
2.5
2.5
2.5
2.4
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)
5.4
4.8
4.8
5.6
5.1
5.1
5.0
5.0
5.0
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
5.8
5.2
5.2
6.0
5.5
5.4
5.4
5.4
5.4
U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force
6.7
5.8
5.9
6.9
6.2
6.2
6.2
6.1
6.1
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force
11.1
9.6
9.8
11.2
10.3
10.0
9.8
9.9
9.9
NOTE: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data.

 

 

These so called “top macro executives” (Dragui, Lagarde et al) are unbelievable how they contradict themselves .

Lagarde – who declared some days ago that growth was far too slow in Europe  – mainly Eurozone.

Dragui  – who is satisfied with Eurozone growth and “sells” that it is the result of “his” QE (1.14 Billion euros over 19 months – 60 billion per month average) and now wants to make a second QE issue of at least of the same amount!

All this to Re Boost markets, who are declining!

WSJ‘s 10/01/2015 short article: “ECB President Mario Draghi Says Eurozone Returning to Growth After Policy Moves”, which I quote entirely, and precede with my own comments.

My Comments

Below are the statistics which both Dragui and Lagarde seemingly “forgot”. If they are satisfied with 03 -0.4% per quarter Eurozone growth, so far, they are “wrong” (not to use another word…)

Anyhow,the last thing to do is another QE, the first one having failed miserably because Dragui put the cart before the horses – higher indebtedness does not create growth nor demand, structural reforms do, gradually, but nobody” stresses” them – actively!

Both ECB and IMF “work” to Boost Markets.

The Economist’s data – Quote

After perking up a bit in late 2014 and earlier this year, the recovery in the 19-strong euro area lost momentum in the second quarter of 2015. The quarterly pace of growth slowed from 0.4% in each of the previous two quarters to 0.3%. As throughout the rather feeble recovery (which started in the spring of 2013) a poor performance by France and Italy, the euro zone’s second- and third-largest economies respectively, let the side down. French GDP stagnated while Italian output grew by just 0.2%.

Quotes

In speech at Global Citizen Awards, European Central Bank president says eurozone has returned to ‘sustained growth’

 
European Central Bank President Mario Draghi, shown on Sept. 3, said in a speech Thursday the eurozone had returned to ’sustained growth, under the impulse of our monetary policy.’

European Central Bank President Mario Draghi, shown on Sept. 3, said in a speech Thursday the eurozone had returned to ’sustained growth, under the impulse of our monetary policy.’ PHOTO: BLOOMBERG NEWS

European Central Bank President Mario Draghi said in a speech Thursday the eurozone has become more resilient and growth is picking up, the latest indication he thinks the central bank’s accommodative monetary policy is working.

In prepared remarks for an acceptance speech at the Global Citizen Awards in New York City, hosted by foreign policy think tank the Atlantic Council, Mr. Draghi said the eurozone had returned to “sustained growth, under the impulse of our monetary policy.” The results were “good news for everybody, everywhere,” he said.

Mr. Draghi’s comments, at New York’s American Museum of Natural History, come as the ECB is still easing monetary policy, while the U.S. Federal Reserve is drawing closer to raising interest rates for the first time in nearly a decade.

The ECB has been buying €60 billion ($67 billion) of bonds each month under a program set to run until at least September 2016, but Mr. Draghi has said the central bank would do more if inflation weakens further.

Christine Lagarde, managing director at the International Monetary Fund, in introducing Mr. Draghi, said he had done everything in his power to “uphold Europe,” as well as its unity and “defend the stability of its [single] currency.”

In the past, Mr. Draghi has said the ECB would do “whatever it takes” to address weakness in the eurozone. Ms. Lagarde called those words the three most successful words in central banking history.

On Wednesday, new data released by Eurostat showed annual inflation for September was running at negative 0.1%, below the ECB’s target of just under 2%, a development that may threaten the effectiveness of that bond-buying program.

Mr. Draghi said the eurozone accounts for 17% of global GDP and 16% of global trade, so the strength of the eurozone was critical to maintain at a time of uneven global growth.

“The progress achieved over the past three years to stabilize and strengthen the euro area is real,” he said. “Growth is returning. The way forward is well identified. And we will not rest until our monetary union is complete.”

He thanked those who have helped in the integration of the European Union and said, “Further integration is necessary to extract all the economies of scale and scope that our union brings.”

 

The FED continues plunging investors into uncertainty with all the declarations made –  on a practically daily basis – by various FOMC members.

The China situation, where slow (relatively speaking) growth is not entirely reported in China’s official statitics, is the source of major worries (Japan’s Nikkei just lost 4% in one day) and the FED ‘s confused declarations about eventual rates’ hikes and inflation worsen the situation.

The latest statements by officials of the FED again plunge investors into uncertainty regarding the timing of raising interest rates in the United States while Janet Yellen, FED’s president, had clearly hinted last week that tightening would occur this year.

On one hand, William Dudley, president of the New York FED, and John Williams, president of the San Francisco FED, on Monday – 09/28/2015 – went in the direction of Janet Yellen, declaring they supported monetary tightening before the end of 2015 particularly in view of the rise in inflation to the 2% target set by the FED.

On the other, Charles Evans, head of the Chicago FED, has instead estimated that inflation might not bounce back as quickly as anticipated, thereby advocating patience on rates – maintained at a level near zero since December 2008 – and a standstill until mid-2016.

The 17 members of the Monetary Policy Council of the FED have scheduled this week a total of 16 speeches or public appearances across the country, two weeks after the Fed took short market players by not raising its rates interest.

The FED had then explained hits decision particularly by concerns about the global economy and volatile financial markets, both of which have exacerbated since.

Thursday – 09/24/2015 – Janet Yellen, who has yet to speak this week (sic), had said she expected that the FED would raise interest rates this year, provided inflation remains stable and the economy of the United United still remains dynamic enough to lower the unemployment rate.

But for investors, the FED’s mixed messages complicates an already “dicey” situation made by the Chinese concern economic downturn and the collapse of commodity prices.

“Many investors believe the FED is a little lost,” said Mohammed Amana, director of Beam Capital Management. “The FED is placed in a difficult position by saying it isprepared to raise rates by the end of the year when every day the economy calls for the opposite.”

Charles Evans took note of frustration among market participants, stressing that this was due in particular to the decentralized structure of the FED, where each manager makes his own analysis of the situation.

In addition to the interventions of various members of the FED, also including Stanley Fischer, Vice-President, the week will also be marked by the employment figures of September 2015, essential data for a central bank whose dual mandate is full employment and price stability.

The FED always “ignores” Under  Employment, which is as large as “officially” published unemployment – about 5% each – as a ratio of non farm civilian working population, giving a totally wrong and fallacious assessment of the job situation in the US. 

The Monetary Policy Committee of the FED will meet twice before the end of the year, on 27 and 28 October and on 15 and 16 December…

Markets are  suspended waiting for FED’s  monetary policy this week!

This shows perfectly how world governance (sic)  is “Central Bank dependant”, a “big joke”, when you consider the importance of “economic” analysis, which went down the drain…!

Billed as “historical”, the week, which will see if the FED will rise interest rates by, say, 0.25% (!), has slowed European markets.

“For the first time in years, the outcome of the FOMC meeting is not known in advance with certainty,” says the firm Oddo. “For several years after each FOMC meeting [Monetary Policy Committee of the FED] was widely known, its members guiding investor expectations through their speech several weeks before the meeting, continues the firm Aurel BGC.

But for this week, nothing is written. “First, there is no strong consensus within the committee on a monetary tightening this week. Then it does not exist, as Aurel BGC highlights of “ideal” response, particularly in terms of market reaction.

FED’s “Dilemma”…

If the FED leaves its key rates unchanged, it would implicitly validate that US growth is fragile and that fears about global growth, fueled by China, suggest caution.

Moreover, the latest indicators from China illustrate the slow landing of the economy. Investment continues to slow, posting to 10.9% yoy in August 2015, against a rise of 11.2% in July 2015 and an average of over 20% in 2012 and 2013.

Industrial production, particularly penalized by electricity, also disappointed over the month while the slight increase in retail sales (+ 10.8% in August 2015),which  does not allow for the time to talk about real trend reversal.

Conversely, by taking a monetary tightening option, the first since 2006, the FED would validate the scenario of recovery in the US economy but as  Aurel BGC warns, that decision would not be without risk: “The central bank should regain control of liquidity, very excess, money market using new tools and take the risk of an over-reaction of the dollar. “

To avoid this, Janet Yellen, FED’s boss,who is being accused by many of  not having been able to sufficiently prepare the markets, should adopt an accommodating speech and insist that rising rates, while remaining dependent on economic data, will be very slight.

On the market, traders mostly expect the status quo. Based on future contracts on federal funds, the probability of a rate hike this week is only about …%. …. In exchange, this uncertainty is reflected in the evolution of the equity markets. In Paris, the CAC 40 index yields 0.67%, to 4518.15 points in a trade volume of 2.9 billion euros. Elsewhere in Europe, the FTSE drops 0.31% in London, while the Dax in Frankfurt up 0.41%. The Dow Jones in New York fell by 0.35%. Numbers source: “Les Echos”

The wordlwide social-economic situation, now strongly impacted by to be expected China’s negative evolution, is alarming if monetary measures continue being considered as key measures to obtain a recovery worldwide instead of, finally, implementing social-economic structural reforms – wordlwide

Please refer to my two latest posts with self-explanatory titles: 09/01/2015 : “Central Banking “Policies” Fail Consistently – See Why”, 09/02/2015: “China – US – Europe – Japan et al need social-economic restructuring – Globalisation has shown its limitations”, which try to explain why world wide growth stagnation is an “option” if no structural mesures are, finally, taken, abandoning solely monetary measures which have shown their level of incompetence.

I am referring to an article published on 09/01/2015 by Le Figaro Premium on a interview with well known Nobel Prize economist Joseph Stiglitz: “How can European leaders they glorify stagnation?”, which I will quote and precede with my own short comments.

My Comments

I respectfully disagree with economist Stiglitz on the principal measures he prioritizes.

He is still referring to monetary measures as “the solution” and does not recognize that Central Banking’s QE s and other liquidity expansion vehicles have killed the implementation of unpopular structural reforms, something that I have repeated at nauseum in my blog and written and published two books about: “Why Obsolete Macro Governance is Killing the World Economy” (Amazon – September 2014) and “Growth through Structural Reforms” (Amazon – April 2015).

Stiglitz is still referring to Greece, when the solution is easy: Exit it, it is a time and money loser and and will strengthen extremist parties in Europe due to all the mess the European Union and Commission and the Troika (EU/ECB/IMF) have (and continue), created during 8 months of sterile “negotiations”.

The EuropeanUnion and European Commission are obsolete techno bureaucratic “politicking” mammoths of 35 000 employees which decide on nothing and abide to Germany – de facto Eurozone leader

His criticism of Germany as an individual country is greatly unfounded, since this country had implemented most of the badly required  structural reforms in the early 2000s which allowed Germany to have a positive evolution.

What Germany has to be critized for is their rigidity, disciplinarian and constitutional attitudes which they want to impose on the rest of the Eurozone not wanting to understand that what  works well for Germany does not for the Southern countries and inefficient France, this being caused by the total absence of any real “governance” in Europe.

Quotes I translated this article – colored lettering is mine  

INTERVIEW – For the Nobel Prize in economics, austerity packages imposed within the EU block any return to growth.

Joseph Stiglitz, Nobel Prize in Economics in 2001 for his work on asymmetric information, published Wednesday in a French compilation of his writings about the growing inequality of American society in a book entitled “The Great Divide” (editions The links that release).

Professor at Columbia University (New York), 72 years old, the former chief economist of the World Bank and advisor to US President Bill Clinton, said that the American dream is dead and regrets that the revival orchestrated by President Barack Obama has especially favored banks, who were responsible for major wrongdoings in the subprime crisis (poisoned mortgages).

He worries about stagnation in Europe, which according to him was maintained by overly cautious leaders when they should, he said, have stopped the austerity measures that undermine the foundations of the eurozone and prime the pump of growth.

LE FIGARO. – In what state do you find the European economy?

Joseph Stiglitz. – France and Europe in general, have not had good results in recent years. Per capita income fell below its level before the crisis. Even the most successful economies, like Germany, have recorded anemic growth. If it were not for the crisis, Germany would have been rated D by everyone. And the lost half-decade could become an entire decade, given the economic situation.

Le Figaro – Which brings us to the question: why?

Joseph Stiglitz

The cause of the anemic growth throughout Europe is due to the current austerity cures. A sluggish economy results in low tax revenue, which under the Maastricht criteria, results in capital costs and tax increases, which in turn weaken the economy even more. This is mainly due to the stiffness of the corset imposed since the establishment of the eurozone. It maintains a form of permanent instability in denying States the adjustment tools to economic shocks, as once the gold standard imposed on the US Central Bank during the Great Depression. This explains why Europe has suffered from low growth in the last five years, and lets me fear that stagnation or near stagnation, will continue.

Le Figaro – What reforms should we lead?

Joseph Stiglitz
One in particular seems to me more urgent. European leaders overwhelmingly recognize the problem of the lack of Federation of banks in the European Union. Consequently, when the crisis occurred in 2008, money has fled the Spanish banks and those of other countries most at risk, to take refuge in Germany. We need to stop this hemorrhage by setting up a common supervision of the banking system within the EU, and a mechanism for resolving problems of capital flight. We must expand the mandate of the European Central Bank (ECB), so that it is more focused, not only on inflation but also on employment and growth. It is urgent to move the cursor.

Some countries like Greece can obviously no longer borrow on the markets but that is precisely where Europe can act. It was a very good move  to create solidarity funds for new entrants (note: during the recent enlargement phases). It needs to create stabilization funds for convalescent countries. Europeans should use more aggressively the European Investment Bank (EIB) to invest in countries in crisis. They must set up a loan fund recognizing that the banking system was devastated, facilitaing credit to SMEs in the countries in crisis.

“European leaders are careful not to upset the straitjacket of the eurozone”

Le Figaro – Do you see the light at the end of the tunnel?

Joseph Stiglitz
Honestly, I cannot distinguish it. The damages induced by the crisis are durable because the money that fled Spain and other countries most deeply affected and permanently damaged their banking systems. Even more than austerity in public spending, the contraction of lending to SMEs has had devastating effects on economic performance. What bothers me even more, is that European leaders seem to be satisfied with this virtual stagnation and are careful not to upset the straitjacket of the eurozone. A prime example: when the German Minister of Finance Wolfgang Schäuble came to Columbia University (last April 15), he acknowledged that he would have to get used to this new form of anemic growth as a new standard. As if one could glorify stagnation!

Le Figaro – You called to rush to the aid of Athens, by erasing the 312 billion euros of Greek debt. Has the Greek crisis been mismanaged?

Joseph Stiglitz
I’m not privy to but it seems that the German authorities have played a role in maintaining the status quo. But things are very clear: forecasts made by the experts for the “Greek model” have been calamitous. They said that austerity will cause some decline but restore confidence so quickly that there would be a return to growth. Normally, their  predictions invariably failing, year after year, you could have expected thta they would be conduct a review of this model. But no! Nothing of the sort happened and the Troika is held in hits certainty that the benefits would eventually end up manifesting it in English called “double down.”

Yet I observed some consensus on the fact that the Greek debt must be cleared. Just because the Greeks could never pay. The austerity program imposed on Greece is such that the GDP will continue to decline, the economic depression increase, which will require restructuring of their debt even more. The German position is frankly inconsistent. They want the IMF to be an integral part of the solution but the IMF will not wet himself without a prior restructuring of debt of any unsustainably. We will have what Berlin allows. Schäuble is not an economist. I hope someone in his entourage will eventually explain all this, but it would seem, alas, that it is not for tomorrow.

FED’s President, Mrs. Yellen, declared on 06/17/2015, as expected in this blog, that conditions for a rate increase are not met.

Reuters reports: The economic conditions of the first increase since 2006 rates are not yet in place, the FED’s Committee on Monetary Policy (FOMC) wanting first to be certain that the evolution of economic data – and in particular the Labor market, whose situation had yet to improve – continues to evolve favorably and  that Inflation is well aligned to a rebound trajectory towards the target of 2%, said its president Janet Yellen on Wednesday – 06/17/2015, after a two-days’ meeting.

The projections of the FOMC continue predicting a FED funds rate of about 0.625% by year end 2015 and 1.625% in late 2016, below its previous projection that was 1.875%.

For this year, this would imply two increases of a quarter point by the end of the year, the first in September 2015, following the opinion of many analysts.

The FED left its funds rate in the range of 0% -0.25% on Wednesday.

Mrs. Yellen  commented that Inflation remains low but is expected to rise gradually toward the goal of medium-term 2% (?)

As to the Labor market evolution, Mrs. Yellen knows that the “Official” Unemployment rate at 5.5% is meaningless, she so declared shortly after taking her job early 2014, adding that Under Employment’s rate at a similar ratio brought “total and real” US Unemployment to a high 11% of working population in the US, the situation not having changed since then, but the FED has never again refered to this FACT, because the FED works to Boost Markets…

Mrs. Yellen said she wanted “more tangible evidence” that the US economy was capable of Growth to continue, fueled especially by wage increases, which, according to her, go well beyond what is currently practiced (?).

She added: The weakness of cyclic order persist in the labor market”.

The FED lowered its 2015 growth forecast to 1.8% – 2.0% – 2.7% against 2.3% previously, to reflect the setback earlier this year (1rst Qtr. 2015 – with negative growth).

This is the second time since December 2015 that the FED revises down its growth projection for 2015.

Mrs. Yellen said: “While the committee considers that the disappointing economic performance in the first quarter is mainly punctual, my colleagues and I would like to have under the eyes of the most tangible evidence of economic growth at a moderate pace that is sustainable.”

The FED did not change its funds rate, which remains in the range of 0-0.25%, which did not move since December 2008, saying in a statement that growth in the US was strong enough to support a rate hike by the end of the year.

The rate cycle will probably remain accommodative for a while yet, continued Mrs. Yellen, insisting that markets were not to focus on the eventual FE’s first rate hike –  but on the ascent trajectory of the price of money. 

Mrs. Yellen said:”I want to emphasize: We must not exaggerate the importance of the first increase is likely that monetary policy will remain highly accommodative for a while after the first increase in the Fed funds rate to continue to move towards our maximum employment targets and inflation of 2%. “

Markets showed practically no reaction to news from the FED: Wall Street ended slightly higher, while it was in the red in the morning, while Treasuries rose and the dollar was weakening facing a basket of currencies.

Some analysts commented that any FED’s rate increase in 2015 could  be premature and stall the recovery.

IMF recently requested the FED to wait until 2016.

Some members of  FOMC have also were cautious, voicing that optimistic growth predictions were underestimating the negative investment implications from the oil price variations and the higher dollar implications to US growth potential.