Italy Calls Europe’s Bluff, And The Euro Loses Either Way

By John Rubino – Re-Blogged From Gold Eagle

When Italy elected a bunch of rowdy populists back in March, the rest of the eurozone assumed (or at least hoped) that the weight of responsibility would bring Rome back into line. But so far the Italians appear to be serious about ending austerity and forcing the ECB to finance their spending ambitions. The just-passed Italian budget calls for a rising deficit, in direct disobedience of Continental (read German) authorities.

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How Did That Get Into My Bond Fund?

By John Rubino – Re-Blogged From Dollar Collapse

Towards the end of financial bubbles, people who previously paid little attention to things like “quality” start trying to figure out what they actually own. The result is either funny or terrifying, depending on the point of view.

This time around bonds are (finally) getting a closer look. From today’s Wall Street Journal:

Decade of Easy Cash Turns Bond Market Upside Down

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Luxembourg, Japan Team up to Explore and Mine Space Resources

By   Re-Blogged From Mining.com

Luxembourg seems to be in a rush to become Europe’s hub for space mining, as it announced Wednesday yet another deal aimed at boosting boost the exploration and the commercial utilization of resources from near earth objects, such as asteroids.

The fresh agreement, this time with Japan, is part of Luxembourg’s SpaceResources.lu initiative launched last year to promote the mining of celestial bodies for minerals.

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Technology Disrupts White Collar Workers

By David McWilliams – Re-Blogged From http://www.Gold-Eagle.com

– Every era, every century, every generation has its massive technological disruption
– Taxi drivers being “disrupted” by technology of Uber
– History shows how “middle men” frequently made redundant
– Skill set of many professionals today can be replicated by machines and technology
– Technology may make lawyers, accountants, architects and doctors redundant
– We risk “cannabalising ourselves” with internet and emerging technologies

Jean-Luc Picard “assimilated” by the Borg in Star Trek

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Business Cycles Are Credit Cycles

By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

This article gets to the heart of why central banks’ monetary policy will never succeed. The fundamental error is to regard economic cycles as originating in the private sector, when they are the consequence of fluctuations in credit. It draws on the author’s submission of evidence to the UK Parliament Treasury Committee’s enquiry into the failure of monetary policy in the wake of the 2008 crisis.

Summary

  • It is incorrectly assumed that business cycles arise out of free markets. Instead, they are the consequence of the expansion and contraction of unsound money and credit.
  • Monetary inflation transfers wealth from savers and those on fixed incomes to the banking sector’s favoured customers. It has become a major cause of increasing disparities between the wealthy and the poor.

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What Color Is Southern Europe’s Parachute?

Re-Blogged From Stratfor

Uneven Recoveries

In Spain and Portugal, unemployment figures decreased more quickly last year than anywhere else in Europe. In February, the year-to-year unemployment rate fell from 20.5 percent to 18 percent in Spain, while Portugal’s rate decreased from 12.2 percent to 10 percent. A drop in official unemployment rates can be misleading: people who have given up looking for work are not included in certain joblessness calculations. But in Spain and Portugal, the drop in unemployment was accompanied by an actual increase in the number of people working. In Spain, 16.9 million people had jobs in 2014; by 2016 that number had increased to 18.5 million. In Portugal, job numbers rose from 4.4 million to 4.6 million between 2013 and 2016.

Eurozone Unemployment Chart

Nonetheless, the improvement in both countries largely reflects an increase in non-permanent jobs. Around 90 percent of new contracts in Spain and 80 percent in Portugal are for temporary jobs. Among EU states, according to Eurostat, only Poland has more workers under temporary contracts than Spain and Portugal. In addition, the demographic profile of workers in those countries under temporary contracts is anomalous: More than half of temporary workers in countries like Germany or Sweden are younger than 29. In Spain and Portugal, on the contrary, around a third of temporary workers are 30–39 years old. According to a report by the European Parliament, only one in five workers under temporary contracts in Spain and Portugal actually transition to permanent contracts.

EU Part-Time Employment Chart

To some extent, the way Spanish and Portuguese employment markets operate account for the labor precariousness. Despite recent reforms, labor laws in both countries are still relatively rigid, and the cost of dismissing workers remains high. This makes many companies opt for temporary contracts when hiring staff. Sometimes employers offer temporary contracts to reduce costs, but the practice also gives them flexibility to downsize during times of economic uncertainty.

Economic structures also play a significant role in the type of jobs created. For example, the services and agriculture sectors rely more heavily on temporary jobs than does industry. In services and agriculture, jobs tend to be more seasonal, with particularly high rates of temporary and off-the-books positions. In Southern European countries, tourism (and associated service industries like hotels and restaurants) provides a bigger source of employment than in most of their northern peers. Tourism accounts for roughly 12 percent of all employment in Spain, the second highest proportion in the European Union after Malta. Spain and Portugal have experienced a recent tourism boom, driven partially by rising political and security concerns in competing destinations in the Mediterranean. A significant agricultural sector in both countries also adds to their temporary job totals. Agriculture represents around 7 percent of employment in Portugal and 4 percent in Spain, compared with around 2 percent in countries like Germany or Sweden. These economic structures mean that job precariousness is not an entirely new phenomenon in Spain or Portugal.

Meanwhile, the effects of the European economic crisis have led to shrinking salaries. In Spain, the average wage fell by about 3.5 percent between 2011 and 2014. (It has recovered slightly since then.) In Portugal, the average wage has been stagnant since 2012. Recent reforms in labor legislation, which had the goal of making these economies more competitive, account for a portion of the earnings decrease. As members of the eurozone, Spain and Portugal cannot use currency devaluation to regain competitiveness during crises. As a result, they chose to take measures to reduce labor costs (a process commonly known as “internal devaluation”), including reducing the role of collective bargaining in salary negotiations and making it easier and cheaper for employers to dismiss workers. In Spain, hourly labor costs increased by 28 percent between 2004 and 2011 but remained flat between 2011 and 2015. In Portugal, labor costs per hour had increased by almost 18 percent between 2004 and 2012, but dropped by 0.7 percent between 2012 and 2015.

Both countries are grappling with high rates of youth unemployment, which during the peak of the crisis in Spain exceeded 50 percent of the active young population (people under 24 who are looking for a job, excluding students) and reached about 40 percent in Portugal. To a certain extent, emigration and financial support from family members mitigated the effect of high unemployment rates among young workers.

Long-term joblessness presents perhaps a greater problem. Roughly half of those unemployed in Spain and Portugal have been out of work for more than a year. In general, the longer that people are out of the workforce, the harder it is for them to find a job. Motivation to keep looking for work also drops off. This suggests that even if the economic recovery consolidates in these countries, the pace of the decline in unemployment rates could slow in coming years.

Misleading Improvements

In another southern economy, Greece, structural factors and the economic crisis have likewise fueled high unemployment. But even before the crisis, the highest share of employment came from sectors with more temporary positions: tourism, retail and agriculture. Meanwhile, labor productivity rates in the portion of the Greek industrial sector with labor- and resource-intensive activities were often below the EU average.

EU Temporary Employment Chart

Greece’s unemployment rate has shrunk over the past five years, but so has the labor force (that is, the number of people either employed or looking for a job) — a result of multiple factors, including retirement, emigration and the fact that unemployed people who quit looking for a job are not considered part of the workforce. In the fourth quarter of 2016, according to the Hellenic Statistics Office, 3.64 million people had jobs in Greece, virtually the same as a year earlier. As in Portugal and Spain, unemployment in Greece fluctuates seasonally: employment rates rise in summer and decrease in winter. While the total number of people with jobs in Greece rose from 2015 to 2016, the figure is still below what it was in 2012. Moreover, official statistics tend to hide the fact that hundreds of thousands of Greek workers have accepted jobs that offer either low pay or only part-time or temporary status. According to Eurostat, the percentage of involuntary part-time jobs — those held by workers who would rather have full-time employment — in Greece rose from 45 percent to 72 percent over the past decade.

As in Spain and Portugal, the Greek government sought to limit wage growth during the height of the economic crisis with policies such as those replacing collective bargaining with company-based collective agreements. According to data compiled by the Organization for Economic Co-operation and Development, the average wage in Greece fell by 20 percent between 2009 and 2015. Meanwhile, labor costs per hour have dropped by 15 percent since 2008. Greece is the only eurozone country where the minimum wage is lower today than it was a decade ago. But broader and deeper reforms to make the Greek economy more competitive, including modernizing the country’s education system, moving toward deregulation in some areas, and accelerating the privatization process, have been only partially introduced. Tax hikes and spending cuts introduced during Greece’s three bailout programs have cut domestic consumption and turned a recession into a depression.

Slow Rebounds

Italy offers another interesting case: unemployment never reached the levels it did in Greece, Spain or Portugal, but joblessness has resisted the efforts by several governments to decrease it. Since 2012, the unemployment rate has consistently hovered above 11 percent. (It was 6 percent a decade ago.) Unlike Spain or Portugal, Italy did not respond to the crisis with a unified package of comprehensive labor reforms, but instead implemented a series of smaller reforms, most notably during the governments led by Mario Monti in 2012 and Matteo Renzi in 2014. These reforms sought to weaken protections against dismissal for permanent workers and to increase protection for the unemployed.

In spite of the reforms, the pace of job creation has not fulfilled government promises. According to Italy’s statistics office, 22.8 million Italians had a job in the fourth quarter of 2016 — a modest increase from the 22.4 million registered four years earlier. At the same time, the proportion of the country’s working-age population with jobs grew from 56.3 percent to 57.4 percent. However, many people have been unable to find the kind of job they want. According to Eurostat, the number of Italians working part-time grew by almost 10 percent between 2002 and 2015, while the average increase for the European Union during that period was 4 percent. Of Italians working part-time, six in 10 would rather have a full-time position. That ratio in 2007 was less than 4 in 10.

Political issues certainly play a role in the trend, as Italian governments tend to be fragile and subject to pressure from multiple sources, including from trade unions and local and regional economic and political interests, making reforms difficult to introduce. Italy also remains beset with pronounced geographic contrasts, as employment rates remain considerably higher in its relatively less-developed and largely agricultural south than in its industry-heavy and more prosperous north. Italy’s weak economic growth does not support robust job creation, another factor keeping unemployment numbers high. Since Italy’s economy emerged from recession in 2014, it has not exceeded 1 percent annual growth.

A Potential Threat to Long-Term Growth

Job insecurity is not exclusive to the southern members of the eurozone: Countries in Central and Eastern Europe like Poland and Bulgaria also have high rates of temporary employment or jobs with low salaries. And a high number of jobs in wealthier countries like the United Kingdom and Austria include employment conditions that labor rights, such as “zero hour contracts” that offer no guaranteed minimum hours of work.

But unemployment rates rose faster in Southern Europe, where the crisis hit harder. High unemployment and insufficient economic growth in that region exposed the fragility of the banking sectors in several countries, raised questions about the sustainability of their public and private debts, and created a fertile ground for the emergence of anti-system political parties that could threaten the survival of the eurozone.

The creation of temporary and precarious forms of employment is a normal phenomenon during the early stages of an economic recovery. Over time, however, they could drag down an economy by limiting the room for growth in domestic demand, for example. In addition, rising income inequality feeds growing social and political tensions. While unemployment rates are dropping across the board, issues such as job insecurity, low pay, long-term unemployment, and few opportunities for training or career advancement could weigh down Southern Europe’s incipient economic recovery.

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The Dangers of Temporary Employment

Re-Blogged From Stratfor

The Dangers of Temporary Employment

About six in ten jobs in the European Union today are full-time permanent positions. But jobs offered under part-time and temporary contracts account for an increasing share of total employment. In 2003, well before Europe’s economic crisis, 15 percent of workers in the European Union were employed under part-time contracts. By 2015, that had risen to 19 percent. During the same period, temporary contracts rose from 9 percent of total employment to 11 percent. Temporary jobs offer less security than even part-time permanent ones. They often come with lower salaries and fewer training and career advancement opportunities, making it harder for workers to access credit, plan their consumption decisions or qualify for unemployment benefits.

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The Decline And Fall Of The Euro Union

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

This article identifies the headwinds faced by the EU in the wake of Brexit. Without the UK, not only does the EU lose much of its importance on the world stage, but the Commission’s budget is left with an enormous hole. That is the decline. The fall is well under way, with capital flight significantly worse than generally realised, as a proper understanding of TARGET2 imbalances shows. Not only is the ECB running out of options, but without major support from Germany, France and Italy, Brussels itself faces a financial crisis. In a highly unusual move, Jamie Dimon of JP Morgan in a letter to his shareholders this week backtracked on his earlier pre-Brexit threat to move jobs from London, declaring that the problem is Europe itself.

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French Election Could See Euro Break Up

By Mark O’Byrne – Re-Blogged From GoldCore

David McWilliams, economist, writer and journalist, has warned that the coming French election may lead to the euro breaking up and that Ireland should have a ‘plan B’ and ‘print punts’ in order to be ready for the collapse of the “single currency.”

David McWilliams at Ireland’s Banking Inquiry

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Financial Armageddon Looms On The Horizon As The EURO UNION IMPLOSION Nears

By IM Vronsky – Re-Blogged From http://www.Gold-Eagle.com

History is testament that an ill-conceived fetus is doomed to a handicapped crippled adulthood. Thusly, many rational pundits perceive the hodge-podge jumbled union of many European nations, known as the Euro Union. But just as oil and water cannot be blended nor melded into a stable liquid, it logically follows that the haphazard mixture of many radically diverse nations are likewise immiscible…and will probably collapse in the not too distant future.

Implosion of the European System

“…Europe is made up of a good number of historically distinct nations whose diversity of political cultures, even though this diversity is not necessarily marked by national chauvinism, has sufficient weight to exclude recognition of a “European People” on the model of the United States “American people.” THIS IS A MUST READ:   http://monthlyreview.org/2012/09/01/implosion-of-the-european-system/ )

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Euro Bond Crisis Returns As Germany Pushes Euro Sovereign Debt Bail-in Clause

By Mark O’Byrne – Re-Blogged From http://www.Silver-Phoenix500.com

European Banks holding European sovereign debt may have to take haircuts and be part of bail in plans should that same debt default, according to a plan being pursued by German government advisers. In another attempt to shelter German tax payers from the largess and excess of fellow European neighbouring countries’ national banks, the move could trigger a run on billions of euro of sovereign debt of said banks. In an article penned by the Telegraph’s Ambrose-Evans Pritchard, one of the council’s dissenting members describes the plan as the “fastest way to break up the Eurozone”.

The plan, by The German Council Of Economic Experts, calls for banks to be bailed in should losses occur from a sovereign default before the European Stability Mechanism steps in to stabilise the situation.

Italian and Spanish banks hold vast amounts of their national government debt; in Italy’s case they are supporting the Italian treasury. Should that debt default, which is a very real possibility, then Italian banks would have to take significant losses first, only then would the ESM be allowed to step in.

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A Common Currency Is NOT A Cause Of Economic Problems!

By Steve Saville – Re-Blogged From http://www.Silver-Phoenix500.com

A popular view these days is that the euro is a failed experiment because economically and/or politically disparate countries cannot share a currency without eventually bringing on a major crisis. Another way of expressing this conventional wisdom is: a monetary union (a common currency) cannot work without a fiscal union (a common government). This is unadulterated hogwash. Many different countries in completely different parts of the world were able to successfully share the same money for centuries. The money was called gold.

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We Are All Athenians…

By Rick Ackerman – Re-Blogged From http://www.Silver-Phoenix500.com

We should watch closely to see how Greece handles its biggest problem — pensions — since the U.S. and Europe are certain to face the same problem eventually.  Try to monetize it, which is what I predict the Greek government will do, and you get hyperinflation. Try to pay for it by reducing benefits and increasing taxes, which is what Greece’s creditors are demanding, and you get: 1) instant, ruinous deflation; 2) a plunge into poverty for nearly everyone; and, 3) taxpayer riots that pit the private sector against government employees.

Whatever happens, it will be fascinating to see how Greeks vote next Sunday, when they will be asked to approve or reject creditors’ stringent demands. Leftist parties all over Europe are urging their Greek comrades to hang tough. But then, it’s not French, Irish and Italian socialists who will suffer instant economic deprivation and calamity if Greece tells Belgium to suck eggs.  Nor will they be the ones challenged to pay for life’s necessities with drachmas that are going to be spurned by the rest of the world and depreciating by the day, if not by the hour.

An op-ed piece in the Wall Street Journal said Greece’s national identity and its “European dreams” are at stake, but that’s just twaddle. Under the best of circumstances, Greece will be panhandling till the end of time. It can never pay what it owes — not to Europe, not to itself, not to its retirees. The only question is whether Greek voters can grovel sufficiently next Sunday to get Germany to pretend, at least for the time being, that the economy of a deadbeat country can somehow be salvaged. As for the French, Spanish, Portuguese and Italians, they should practice kindness as events unfold, since they will all be belly-up themselves in the not-so-distant future.

Bond Bubble Bust Won’t Cause Great Rotation Into Stocks

By Michael Pento – Re-Blogged From http://www.pentoport.com

For the first time in its country’s history, Portugal sold 6 month T-bills at a negative yield. The 300 million euros ($333 million) worth of bills due in November 2015 sold at an average yield of minus 0.002%. A negative yield means investors buying these securities will get back less money from the government than they paid when the debt matures.

To put this in perspective, the 10 year note in Portugal now yields just 2.38%, down from 18% a mere three years ago. Back in 2012, creditors grew wary of the countries referred to as PIIG’s (Portugal, Ireland, Italy and Greece) and their ability to pay back the massive amounts of outstanding debt. Consequently, creditors drove interest rates dramatically higher to reflect the added risk of potential defaults.

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Greeced Lightning!

By Bill Holter – Re-Blogged From http://www.Gold-Eagle.com

We seem to have finally arrived at some sort of moment of truth regarding Greece and their inclusion in the EU.  The speculation is they will be out of money by April 9th, this Thursday, unable to make a less than 500 million euro payment.  Please keep in mind they have already been raiding the country’s pension plans to fund day to day services.  How large of a “dent” they have already made remains to be seen but that is not the point.  The point is this, any person, corporation or government who needs to dig into retirement savings for daily operations is like buying a carton of cigarettes with a credit card at 14.99% …and then carrying the balance!

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The End of the Dollar Standard

cropped-bob-shapiro.jpg   By Bob Shapiro

The Eurozone can be thought of as a 2-tier confederation. The northern countries have stronger economies, have trade surpluses, and have lower debt to GDP. The southern countries – often referred to as the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) – have been in and out of economic crisis after crisis for many years.

A few years ago, I was in preliminary contact with the government of Portugal. I prepared a 24 page report for them outlining how they could reverse the tailspin that the country was in.

One feature of my plan was for them to build up their holdings of Gold

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