Confidence among shoppers in Germany has dipped according to a survey, amid worries over Europe's largest economy.  The forward-looking GfK consumer sentiment indicator fell to 9.3 points for December from 9.4 points in the previous month.  The score is the lowest since February, but was above analysts' predictions.   Confidence in the economy among German consumers dropped for the sixth consecutive month, although the pace reduced.  Concern about the labour market led the way, according to the survey of 2,000 shoppers, with 69% of all those surveyed expecting an increase in unemployment due to the influx of asylum seekers this year.   This month's survey was conducted before the attacks in Paris on 13 November.  In contrast to general sentiment, optimism for making a big purchase improved, with the sub-index for willingness to buy climbing by three points to 48.9.

GfK analyst Rolf Buerkl said he was optimistic for this year's Christmas sales, as customers might be tempted to shop online if they are concerned for public safety.  "It is possible that a few people here and there will avoid going to the Christmas market or visiting a shopping mall," Mr Buerkl said.

"DRAGHI SAYS EU BUDGET RULES ARE THERE TO BE RESPECTED" - Draghi also realises that big countries will ignore them with impugnity - just like they did the first time around. France is already in violation and knows full well that the EU and the ECB are utterly importent in the face of that.  Just as they were when Germany - yes, Germany - lead the way in breaking the rules shortly after the euro came into being. All countries remember this, espescially the ones on the receiving end of imperious Germanic lectures about "doing their homework".  Germany has made the classic mistake of doing well when others around it are doing badly, presuming this state of affairs will persist eternally and feeling it has a free hand to treat it's neighbours as it pleases. The moment German needs demand it, the Fiscal Pact will be out of the window; Anegla Merkel would be out of office within weeks if her government were to attempt the sort of austerity it has, in essence, forced upon Greece. The Netherlands were, if anything, even more hawkish than the Germans regarding "lazy Southerners" and wanted things like automatic fines. Then their own economy began to suffer the same problems and they also breached the rules - you don't hear much from them these days. Our Scottish friends may wish to ponder the huge difference in the treatment meted out to small countries as opposed to large ones in the EU. Of course, none of this should be greeted with any Satisfaction in the UK. A recession in the eurozone is bad for us too. Though thankfuly we have at least managed to dodge the madness of dropping a hand-grenade into the economy via a Scottish separation. Now, a worsening recession means there will be less taxable income for governments to fund ever growing entitlements. Add that to a huge pile of moldering away bad debts. What I see is not a solvable problem the way the world works today.

Neither Draghi or any of the bankers even bother to talk about the real problem of not enough regional income and too much government spending. Draghi’s only solution is some form of money printing. Printing money to pay bills might work over the short term. But long term, it cannot. If money printing works in the real world why not print and give every one a billion dollars, euros or yen?

The most Draghi can do is have the ECB print money to service existing bad debts made by banks and governments. But printing money to pay interest and principle on loans is not debt service. That is called money printing, debasing the currency whatever. Yes, governments want to do whatever possible to avoid bad times for its citizens. But, as someone else once said, the road to hell is paved with good intentions.

Word on the Street is Germany will allow PIIGS to deficit spend in order to prop up German economy for a couple of years, before the EZ is finally broken up.

They want to squeeze every last dime out of the suckers' pockets before ditching them...You know I could swear that somebody once said "the worst of the eurocrisis is behind us". Now who was it again ? Oh yes, Draghi, arch Eurolooney at the ECB. Maybe his crystal ball wasn't a CE approved model so he can blame that on his duff statement. The EZ should be referred to more accurately as GZ, the German Zone. Within the GZ there are areas being sacrificed on the alter of German economic superiority. The utter economic chaos in Spain, among the other broken economies of the GZ, has no chance whatsoever of recovering. Germans failed with Tiger tanks, but they have conquered with economic weapons that have secured their growth over the last several years, whilst others languish in decline. Germany is still the European menace, and there is a growing realisation that they have masterminded a piece of economic trickery, and continue to do so. The nations who fell for German economic idealism have themselves to blame, but how this utter financial mess will develop over time has many speaking of rebellion and revolution. Frankly, whatever happens there is only deeper chaos ahead...Spot on in € being a D-Mark and look what happened when locked in trading bands with that, In effect you must have your economic needs exactly the same otherwise you fail. People signed up to €, and in Spain, and maybe Portugal, Greece, they will stick with it as it's their defence against dictatorship. Franco was in charge till when, Greece abolished became a republic when, ditto Portugal. € membership gives them a seat at the 'top table p art of Worlds no.2 currency' for that they keep willing to pay what seems a crazy price...

While the great and good of the EU financial wizards make their plans and predictions regarding the Euro and banks and stability et al, they are ignorant, deliberately or otherwise, of a simple and economically uncomplicated set of facts.

While, Prima Face, the Europe Central Bank has not indulged in quantitative easing, the reality is that the individual banks and industrial companies have done. They have achieved this by the banks extending loans to businesses which in normal times would be unable to raise finance. Those businesses though add a multiplier effect.

Where in the UK, an SME business would normally work with one bank or two where there is a specific reason, in Europe, a company will work with ten, fifteen or twenty banks or more.

The problem in Europe lies in invoice/sales order/purchase order backed finance, especially related to export sales. It is not unusual to find a company raising finance against a customer order, then raising finance to purchase goods/material to fulfill that order with a separate bank and then, when shipped, to discount the invoice with another bank and then discount it again with another or even another still. The outcome is one order/sale boosting the money supply maybe two, three, four or five times the value of the order. And they are all at it because the culture within Clubmed is that it's all OK. The banks must be aware but are turning a blind eye.

Compound this further with a general move of banking facilities from long term to short term, replacing existing borrowings with more expensive new ones and the associated transactional costs paid for by the borrowing businesses; then the whole system is awash with short term debt that is based on collateral many times less than the money borrowed, so it doesn't take a genuis to work out what will happen when the merry-go-round finally, inevitably, grinds to a halt.

All the economists will be wrong footed by this and when the crash comes it will be epic. Nobody has asked the simple question; why has it been so easy for businesses in the Eurozone to access cash when the rest of the west has been at the opposite end of the scale and why have no European banks needed rescuing? The answer is that they are simply kicking the can down the street in a dwam of general stupidity. The nettle hasn't been grasped, the bullet is unbitten and the chickens are coming home to roost.

The International Monetary Fund (IMF) has approved a $17.1bn (£10.1bn) bailout for Ukraine to help the country's beleaguered economy. The loan comes amid heightened military and political tension between Ukraine and neighbouring Russia.

The loan is dependent on strict economic reforms, including raising taxes and energy prices.

The money will be released over two years, with the first instalment of $3.2bn available immediately.

The head of the IMF, Christine Lagarde, said the IMF would check regularly to ensure the Ukrainian government followed through on its commitments.

In March Ukraine put up gas prices by 50% in an effort to secure the bailout.

The government has also agreed to freeze the minimum wage.

The bailout had to be approved by the IMF's 24-member board, which includes a Russian representative.

The IMF loan will also unlock further funds worth $15bn from other donors, including the World Bank, EU, Canada and Japan.

Russian recession

In December last year, Ukraine agreed a $15bn bailout from Russia, but this was cancelled after protests forced out pro-Russian President Viktor Yanukovych....

The IMF bailout will also make available $1bn in loan guarantees from the US, which was recently approved by Congress.

"Today's final approval for the $17bn IMF programme marks a crucial milestone for Ukraine," said US Treasury Secretary Jacob Lew in a statement.

He added that the bailout will "enable Ukraine to build on the progress already achieved to overcome deep-seated economic challenges and help the country return to a path of economic stability and growth".
Earlier on Wednesday, an international conference in London ended with a commitment to help Ukraine recover tens of billions of dollars worth of assets which were allegedly stolen by the ousted President Yanukovych and his allies.

The IMF warned that Russia was "experiencing recession" because of damage caused by the Ukraine crisis.

Angela Merkel’s policies are giving rise to extremist movements in the rest of Europe...

About The World Economy – Efforts to revive growth in the world’s most influential economies – with the exception of the eurozone – are having a beneficial effect worldwide. All of the looming problems for the global economy are political in character.

After 25 years of stagnation, Japan is attempting to reinvigorate its economy by engaging in quantitative easing on an unprecedented scale. It is a risky experiment: faster growth could drive up interest rates, making debt-servicing costs unsustainable. But Prime Minister Shinzo Abe would rather take that risk than condemn Japan to a slow death. And, judging from the public’s enthusiastic support, so would ordinary Japanese.

By contrast, the European Union is heading toward the type of long-lasting stagnation from which Japan is desperate to escape. The stakes are high: Nation-states can survive a lost decade or more; but the EU, an incomplete association of nation-states, could easily be destroyed by it.

The euro’s design – which was modeled on the Deutsche Mark – has a fatal flaw. Creating a common central bank without a common treasury means that government debts are denominated in a currency that no single member country controls, making them subject to the risk of default. As a consequence of the crash of 2008, several member countries became over indebted, and risk eurozone’s division into creditor and debtor countries permanent.

This defect could have been corrected by replacing individual countries’ bonds with Eurobonds. Unfortunately, German Chancellor Angela Merkel, reflecting the radical change that Germans’ attitudes toward European integration have undergone, ruled that out. Prior to reunification, Germany was the main motor of integration; now, weighed down by reunification’s costs, German taxpayers are determined to avoid becoming European debtors’ deep pocket.

After the crash of 2008, Merkel insisted that each country should look after its own financial institutions and government debts should be paid in full. Without realizing it, Germany is repeating the tragic error of the French after World War I. Prime Minister Aristide Briand’s insistence on reparations led to the rise of Hitler; Angela Merkel’s policies are giving rise to extremist movements in the rest of Europe. It is unfortunate that the current arrangements governing the euro are here to stay, because Germany will always do the bare minimum to preserve the common currency and because the markets and the European authorities would punish any other country that challenged these arrangements. Nonetheless, the acute phase of the financial crisis is now over. The European financial authorities have tacitly recognized that austerity is counterproductive and have stopped imposing additional fiscal constraints. This has given the debtor countries some breathing room, and, even in the absence of any growth prospects, financial markets have stabilized. The other great unresolved problem is the absence of proper global governance. The lack of agreement among the United Nations Security Council’s five permanent members is exacerbating humanitarian catastrophes in countries like Syria – not to mention allowing global warming to proceed largely unhindered. But, in contrast to the Chinese conundrum, which will come to a head in the next few years, the absence of global governance may continue indefinitely.

In a letter to the Open Government Partnership, the inventor of the web, Sir Tim Berners-Lee, who collaborated with more than 100 free speech groups and leading activists condemns the hypocrisy of member nations of Open Government Partnership in signing up to an organisation which aims to preserve freedom while at the same time running one of the largest surveillance networks the world has ever seen. The organisations that have signed up include Oxfam, Privacy International and the Open Rights Group, and the individuals include Satbir Singh of the Commonwealth Human Rights Initiative and Indian social activist Aruna Roy. The letter calls on member governments to overhaul their privacy laws, protect whistleblowers and increase the transparency around their surveillance mechanisms.

"We join other civil society organisations, human rights groups, academics and ordinary citizens in expressing our grave concern over allegations that governments around the world, including many OGP members, have been routinely intercepting and retaining the private communications of entire populations, in secret, without particularised warrants and with little or no meaningful oversight," the letter states.

"These practices erode the checks and balances on which accountability depends, and have a deeply chilling effect on freedom of expression, information and association, without which the ideals of open government have no meaning."

The letter underscores the difficulty the UK and USA have had in maintaining that countries like China and Iran should ease restrictions on the internet in the face of revelations from the NSA files that they themselves are intercepting private communications.

"Laws to limit the state’s power to spy on its citizens are fundamental to democracy’s checks and balances. But these laws are outdated," said Anne Jellema, the chief executive of the World Wide Web Foundation, which was founded by Berners-Lee to promote a free internet.

"With digital technologies making it trivially easy to collect and store billions of pieces of data on entire populations, and with public interest whistleblowers receiving little protection, the whole system of checks and balances on state power is being pushed dangerously close to breaking point," Jellema continued. "We are calling for an urgent public debate to review and strengthen the safeguards that will keep our societies open".

The Open Government Partnership was formed in 2011 to aid reformers committed to making their governments more accountable, open and responsive to citizens. The UK and USA were two of the first countries to join, and the partnership has since grown to include 62 nations from Australia to Mongolia.

Public confidence in the European Union has fallen

Public confidence in the European Union has fallen to historically low levels in the six biggest EU countries, raising fundamental questions about its democratic legitimacy more than three years into the union's worst ever crisis, new data shows.

After financial, currency and debt crises, wrenching budget and spending cuts, rich nations' bailouts of the poor, and surrenders of sovereign powers over policymaking to international technocrats, Euroscepticism is soaring to a degree that is likely to feed populist anti-EU politics and frustrate European leaders' efforts to arrest the collapse in support for their project.

Figures from Eurobarometer, the EU's polling organisation, analysed by the European Council on Foreign Relations (ECFR), a thinktank, show a vertiginous decline in trust in the EU in countries such as Spain, Germany and Italy that are historically very pro-European.

The six countries surveyed – Germany, France, Britain, Italy, Spain, and Poland – are the EU's biggest, jointly making up more than two out of three EU citizens or around 350 million of the EU's 500 million population.

The findings, published exclusively in the Guardian in Britain and in collaboration with other leading newspapers in the other five countries, represent a nightmare for Europe's leaders, whether in the wealthy north or in the bailout-battered south, suggesting a much bigger crisis of political and democratic legitimacy.

                        

"The damage is so deep that it does not matter whether you come from a creditor, debtor country, euro would-be member or the UK: everybody is worse off," said José Ignacio Torreblanca, head of the ECFR's Madrid office. "Citizens now think that their national democracy is being subverted by the way the euro crisis is conducted."

EU leaders are aware of the problem, utterly at odds over what to do about it, and have yet to come up with any coherent policy proposals addressing the mismatch between the pooling of economic and fiscal powers and the democratic mandate deemed necessary to underpin such radical policy shifts.

José Manuel Barroso, the European commission president, said on Tuesdaythis week the European "dream" was under threat from a "resurgence of populism and nationalism" across the EU. "At a time when so many Europeans are faced with unemployment, uncertainty and growing inequality, a sort of 'European fatigue' has set in, coupled with a lack of understanding. Who does what, who decides what, who controls whom and what? And where are we heading to?"

The most dramatic fall in faith in the EU has occurred in Spain, where the banking and housing market collapse, eurozone bailout and runaway unemployment have combined to produce 72% "tending not to trust" the EU, with only 20% "tending to trust".

The data compares trust and mistrust in the EU at the end of last year with levels in 2007, before the financial crisis, to reveal a precipitate fall in support for the EU of the kind that is common in Britain but is much more rarely seen on the continent.

In Spain, trust in the EU fell from 65% to 20% over the five-year period while mistrust soared to 72% from 23%.

In five of the six countries, including Britain, mistrust prevailed over trust by sizeable margins, whereas in 2007 – with the exception of the UK – the opposite was the case.

Five years ago, 56% of Germans "tended to trust" the EU, whereas 59% now "tend to mistrust". In France, mistrust has risen from 41% to 56%. In Italy, where public confidence in Europe has traditionally been higher than in the national political class, mistrust of the EU has almost doubled from 28% to 53%.

Even in Poland, which enthusiastically joined the EU less than a decade ago and is the single biggest beneficiary from the transfers of tens of billions of euros from Brussels, support has plummeted from 68% to 48%, although it remains the sole country surveyed where more people trust than mistrust the union.

In Britain, where Eurobarometer regularly finds majority Euroscepticism, the mistrust grew from 49% to 69%, the highest level with the exception of the extraordinary turnaround in Spain.

A separate, more detailed study published this week on the impact of the currency and debt crisis and the austerity policies that have followed also found steep falls across the EU in faith in democracy and national political elites.

The study for the Cabinet Office by the European Social Survey, linking university researchers across the EU, found that soaring unemployment, anxiety and insecurity had eroded faith in politics.

"Overall levels of political trust and satisfaction with democracy [declined] across much of Europe, but this varied markedly between countries. It was significant in Britain, Belgium, Denmark and Finland, particularly notable in France, Ireland, Slovenia and Spain, and reached truly alarming proportions in the case of Greece," it said.

The financial crisis "not only eroded the objective economic conditions of many citizens, but also created widespread anxiety about a country's future even among those who did not experience hardship directly".

Faced with this erosion of political support and the battering traditional politics is taking from populist newcomers such as Beppe Grillo's Five Star movement in Italy, policymakers appear at a loss.

On Monday, Barroso said the austerity policies being applied, mainly under pressure from Berlin, had reached the "limits of political and social acceptance" and were "unsustainable" in their current form. On Tuesday, though, the commission in Brussels sought to row back on his remarks.

Within the eurozone, the key response to the crisis, apart from bailouts, has been to embark on a systematic surrender of budgetary and fiscal powers from national governments and parliaments to Brussels, as well as having countries being bailed out overseen by a "troika" of technocrats and economists from the commission, the European Central Bank and the International Monetary Fund. These are "federalising" steps in a long process of eurozone integration that might see it transformed from a currency into a political union.

"The EU has hit home and is here to stay as a watchdog of budgets, labour markets, pensions etc. This is unprecedented, and risky," said Torreblanca. "Unless it is fixed, it will feed the vicious circle between anti-EU populism and technocracy which we are currently seeing operating."

Barroso argued strongly in two speeches this week that federalism was the only answer to Europe's crisis of finances and of confidence. The German chancellor, Angela Merkel, brushing off widespread fears of a new German "hegemony" in Europe and the eurozone, also said that governments had to give up much more power to Brussels.

"We still haven't found the answer to the question of whether we're actually now prepared to unite on common economic parameters inside the single currency area," she said in a Berlin debate with the Polish prime minister, Donald Tusk. "If we want to have a common currency, a common Europe, we have to be ready to give up our hard-won habits … That means we have to be prepared to accept that in the end Europe has the final word in certain things. Otherwise we can't keep on building this Europe … To an extent, we have to jump over our own shadows. I'm ready for that."

But Tusk delivered an unusually stark warning that German prescriptions could bring increasing nationalism and populism across the EU in a backlash that was already well under way.

"We can't escape this dilemma: how do you get a new model of sovereignty so that limited national sovereignty in the EU is not dominated by the biggest countries like Germany, for example," he said pointedly. "Under the surface, this fear will be everywhere: in Warsaw, in Athens, in Stockholm. It will be everywhere without exception."

Aart de Geus, head of the Bertelsmann Stiftung, a German thinktank, also warned that the drive to surrender more key national powers to Brussels would backfire. "Public support for the EU has been falling since 2007. So it is risky to go for federalism as it can cause a backlash and unleash greater populism."

The truth about Merkel's 4th. Reich

It's becoming clear how hard is going to be for Frau Merkel to form a new government. The SPD wants the Finance Ministry and will ballot its members on any deal. In the end, though, they're likely to reach an agreement, say media commentators.

The election may have been held eight days ago, but Germany is no closer to forming a government. It could take until December or January, the general secretary of the opposition Social Democrats (SPD), Andrea Nahles, warned on Monday. The SPD, in a canny move to drive up its price for joining a coalition and to secure grass-roots support for a deal, decided at a party conference on Friday that it will ballot its 470,000 members on any agreement. That means they can say in talks, "we can't give in on that point because our members won't back it. That's bad news for Chancellor Angela Merkel, because it will make the talks to form a so-called grand coalition of the two main parties all the more difficult. As if that weren't enough, Bavarian governor Horst Seehofer, an important conservative ally of hers, on Sunday narrowed her negotiating position with some undiplomatic rhetoric before preliminary talks had even begun.

The 4th. Reich will continue the implementation of the Ribbentrop - Molotov Pact, Europeans are doomed !

Angela Merkel's conservatives won a resounding victory in Sunday's general election, sharply increasing their share of the vote to around 42 percent and putting her on track for a third term.

But she may have to form an alliance with the rival center-left Social Democrats because her junior coalition partner, the pro-business Free Democratic Party, saw its support slump so dramatically that it may not make the five percent threshold needed for parliamentary representation.

"We will do everything to ensure that the next four years will be successful ones for Germany," a beaming Merkel told cheering supporters. "We will now wait for the election outcome, it's too early to say how we will proceed. We will discuss all this tomorrow in our leadership meetings. But we can already celebrate today because we did great."

Her SPD rival, Peer Steinbrück, told supporters: "The ball is in Frau Merkel's court, she has to find herself a majority."

An alliance with SPD, a so-called "grand coalition" of the two biggest parties, would be a repeat of the right-left alliance with which she governed in her first term from 2005 until 2009.

Merkel's conservative Christian Democratic Union party and its Bavarian sister party, the Christian Social Union, were at 42.1 percent, up sharply from 33.8 percent in 2009, an ARD network TV projection based on actual results showed after polling stations closed at 6 p.m. CET.

A TV projection by ZDF showed a similar result with the conservatives at 42.3 percent.

"This is the FDP's bitterest defeat in decades," said Christian Lindner, a senior member of the party leadership.

The euro-zone economy plunged last quarter at its fastest pace in nearly four years, as weakening global activity and deep recessions along the currency zone's southern border gripped powerhouses such as Germany and France.

The report on gross domestic product from the European Union's statistics office highlights a key risk for the currency bloc as Europe's debt crisis enters its fourth year. Financial market conditions have improved markedly since last summer, due in large part to the European Central Bank's pledge to do "whatever it takes" to preserve the euro. But these gains haven't translated into new business activity.Without growing economies, Spain and Italy will likely see government-debt burdens increase even as they undertake austerity measures such as higher taxes and reduced spending. That could revive doubts in financial markets about the sustainability of their finances. GDP in the euro zone fell 0.6% in the fourth quarter compared with the third, according to the Eurostat report. Economists had expected a 0.4% drop. It was the third straight GDP decline and fifth straight quarter in which the currency bloc failed to expand. For 2012 as a whole, GDP fell 0.5% from the prior year.

GDP in Germany, Europe's largest economy, fell 0.6% from the previous quarter on declining exports and investment. France, the bloc's second biggest, declined 0.3%. Other large economies including Italy, Spain and the Netherlands contracted.

Italy's GDP plummeted 0.9% from the previous quarter, a much sharper rate of decline than the third quarter. Spain's downturn also deepened. Portugal's GDP slid 1.8% in the final three months of 2012, double the third quarter's rate of decline.

ECB officials expect the euro zone to embark on a gradual recovery later in 2013. But the source of that rebound remains elusive. Record-high unemployment in the euro zone has weighed on consumer spending, while fiscal austerity measures are expected to weaken state spending and employment in many euro countries this year. Borrowing costs for small businesses remain elevated in Spain and Italy. In Germany, where unemployment is much lower than other parts of the region, the economy appears to be bouncing back quickly with business surveys signaling a return to growth this quarter, aided in part by stronger exports to Asia. Weakness in late 2012 "is likely to be a springboard for a small V-shaped rebound" as soon as this quarter, said Berenberg Bank economist Christian Schulz.

But surveys of purchasing managers and other business leaders suggest France continues to contract this quarter. French industry has lost global competitiveness in recent years as its labor costs rose, economists say. A raft of tax increases imposed by President François Hollande is adding to the headwinds facing the economy.

The French government is preparing to at least halve its 0.8% GDP growth forecast for this year, officials familiar with the matter told The Wall Street Journal earlier this month. The smaller size of the economy and fall in tax receipts is also derailing government plans to cut the budget deficit to 3% of GDP this year.

"In order to maintain its position at the epicenter of the euro area in economic terms, France has a lot of work to do," said analysts at J.P. Morgan JPM -0.94%in a research note.

Ending the summit, Mr Putin said that world opinion was firmly against US-led intervention, and warned that Russia would take the Syrian side in the event of conflict.

“Will we help Syria? We will,” he said. “We are already helping, we send arms.”

He added: “We cooperate in the economics sphere, we hope to expand our cooperation in the humanitarian sphere, which includes sending humanitarian aid to support those people - the civilians - who have found themselves in a very dire situation in this country.”

Russia has been a long-time supplier of weapons to Syria, including a state-of-the-art air-defense system that would threaten even US warplanes attempting to attack. The Russian president said his country would stand with the Assad regime in Syria if the US launches airstrikes.

The apparent threat came as the G20 summit ended with a public split, 11 of its members issuing a statement hinting at the need for US action against the Assad regime of its alleged use of chemical weapons. Russia already supplies military aid to Syria, but the hint of more Russian backing in the event of a confrontation with the US sent jitters through financial markets worldwide.

Mr Putin also mocked Western leaders like US President Barack Obama considering intervening in Syria, suggesting that the majority of their electorates opposed any military action - including Prime Minister David Cameron for failing to persuade the Commons to back British involvement.

Mr Obama, meanwhile, compared the Syrian crisis to World War II, likening his country’s debate over intervention to the eventual American decision to support Britain against Nazi Germany.
 

When a politician is planning a campaign lie, he has to be able to rely on one thing: No one in his own party must come out with the truth prematurely. The Social Democrats adhered to this rule in the 1976 election, when then Chancellor Helmut Schmidt promised higher pensions and then announced sharp cuts after the election. And the center-right Christian Democratic Union (CDU) also closed ranks in 1990, the year of German reunification, when then Chancellor Helmut Kohl appeared on market squares throughout the country to announce that taxes would not be raised. It was a promise that, as we now know, was followed by the strongest postwar increase in taxes and other charges. Current Chancellor Angela Merkel was still an up-and-coming member of the eastern German CDU and Kohl's eager pupil, so it came as no surprise that she urged her party's executive committee to stay the course on Greece at all costs last week. "There is too much talk in Europe about debt haircuts," the chancellor told her party's executive committee at a meeting last Monday.  But after SPIEGEL had reported two weeks ago that the Bundesbank, Germany's central bank, had new doubts about Greece's bailout program, the debate over additional aid packages or debt forgiveness was reignited. This would be extremely dangerous, the chancellor told CDU MPs, as it would create "uncertainty in the markets." In other words, she was saying, it was critical to maintain discipline in the debate.

Less than 24 hours later, Finance Minister Wolfgang Schäuble appeared on a campaign stage in Ahrensburg, a town in the northern state of Schleswig-Holstein, and said: "There will have to be another (bailout) program in Greece."...So there it was.

Economics seems to have the same problem as weather simulation - the data sets are massive, they're global, they're subject to incredibly complex vortices ... and every year a new "major influence" is discovered.  Weather guys have had to contend with El Nino, ozone holes, Sun Spots ( and maybe the new Grand Solar Minimum) Van Allen, melting Arctic ice.... volcanoes...fires

I took a read of the "error" and juvenile arguments over R&R's work. But, I have to say - elements of a spreadsheet missing ... rows over Mean and Median !!! I thought my just marginally graduate-level maths would be useless in even a basic Economics office.....but...maybe.... If only economics had the same problem as weather simulation. The reason we have such a huge problem is that mainstream economists choose not to analyze the economy as a chaotic system at all. The fact is there's just no way to reconcile viewing the economy as a self-correcting equilibrium with viewing the economy as a non-linear chaotic system. You pick which one you believe the economy to be, and all subsequent analysis and modeling must fit within that paradigm. While you and I, and everyone else in the world who's not a mainstream economist, will look at the economy and see how it fits all the criteria of a chaotic system (sensitive to initial conditions, topological mixing, density of periodic orbits - or more basically, unpredictability), mainstream economists start with the assumption that the economy tends to equilibrium. In system terms this is the opposite of a chaotic system (one that will become increasingly unpredictable over time) as it represents a belief that the system will trend towards a predictable state over time. So I have a problem with mainstream economists because I subscribe to the 'chaotic' paradigm and not the 'equilibrium' paradigm, so everything that they hold to - the theory, the tools and models, the mathematics - is an absurdity to me. There's better and more sophisticated mathematics put to use by an engineer building a dishwasher and modeling the water flow than there is in the whole of the economic mainstream.

The day we get to the point where we can genuinely say economists face the same kind of problems as weather simulation we'll be starting to get somewhere at last. Unfortunately we're probably in for a long wait. As Max Planck said of scientific theory...

"Truth never triumphs — its opponents just die out. Science advances one funeral at a time"

The IMF has wound up its latest inspection of the US economy - the so-called Article IV consultation - and has messages for the Fed and the government. The International Monetary Fund's executive board says deficit reduction has been "excessively rapid" and at the same time stresses that in order to minimise financial market volatility, the Federal Reserve must be clear about when and how it will exit its loose monetary policy stance. The assessment is available here. Highlights (with our own bolding up of key phrases, not the IMF's) from the Executive Board Assessment: Executive Directors welcomed the improvement in the underlying conditions of the U.S. economy, which bodes well for a gradual acceleration of growth, while noting that the balance of risks to the outlook remains tilted to the downside. Directors generally concurred that the fiscal deficit reduction in 2013 is excessively rapid, and that the automatic spending cuts (“the sequester”) not only reduce growth in the short term but could also lower medium-term potential growth. They stressed the importance of adopting a comprehensive and back-loaded medium-term plan entailing lower growth in entitlement spending and higher revenues. Together with a slower pace of deficit reduction in the short run, this fiscal strategy would help sustain global growth, place the U.S. fiscal position on a sustainable path over the medium term, and support the reduction of global imbalances... Directors broadly agreed that accommodative monetary policy continues to provide essential support to the recovery, but cautioned that its financial stability implications should be carefully assessed... Directors noted that the Federal Reserve has a range of tools to manage the normalization of monetary policy, but that there are significant challenges involved in unwinding accommodation, including risks of market reactions leading to excessive interest rate volatility that could have adverse global implications. They stressed that effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing these risks.

In Spain ...a real tragedy..

As Spain mourned the 80 dead in Europe's worst rail crash this century, questions were being asked about how the train had been able to hit a tight curve at such a speed that it spun off into a concrete security wall.  Analysis of video of the accident in the northern city of Santiago de Compostela suggested the train was going faster than 85mph on a bend where drivers are supposed to slow down after a straight stretch that allows them to reach up to 125mph.  "We were going strongly when we got into the curve," one driver was reported to have admitted shortly after surviving the accident on Wednesday, which killed more than a third of the passengers and left 168 injured.  A spokeswoman for the Galicia supreme court said the driver, who was only slightly injured, was under investigation.  The man, who has been named, is not believed to be under arrest but is expected to face questions from a judge with access to the train's data recording black box.

While trapped in the cab, the driver was reported to have given an account over the radio to officials at Santiago station. He was quoted saying, "I hope there are no dead because they would fall on my conscience" and having repeated over and over: "We're human. We're human."  Rail safety experts said such accidents are usually the result of more than one failure, and questions will inevitably be asked about how warning signals about the train's speed were not picked up and acted on.  On Thursday evening the death count looked set to creep up, with 36 of the 95 victims in hospital said to be in a critical condition.  One of the survivors, Sergio Prego, told Cadena Ser radio station that the train "travelled very fast" just before it derailed and the cars flipped upside down, on their sides and into the air.  "I've been very lucky because I'm one of the few able to walk out," he said.

Forensic scientists were last night still trying to identify the most mutilated corpses. Groups of families and friends gathered at the city's Cersia hospital waiting for news of loved ones – though there was little chance they were alive as all survivors had been identified and their families informed.

"It's a major challenge to identify the people who have died," Rajoy said. "Unfortunately, in many cases, this isn't easy, but we are very conscious that the families cannot live in a state of uncertainty."  The Alvia 730 series train started from Madrid and was scheduled to end its journey at Ferrol, about 60 miles north of  Santiago.  Alvias do not go as fast as Spain's AVE bullet trains, but still reach 155mph on AVE tracks and travel at a maximum 137mph on normal gauge rails.  The accident came a day before a public holiday in Galicia: the feast of St James, after whom the region's capital Santiago is named.  "24 July will no longer be the eve of a day of celebration but rather one commemorating one of the saddest days in the history of Galicia," said Alberto Núñez Feijóo, the region's president.  Residents of the semi-rural neighbourhood by the accident site struggled to help victims out of the toppled cars on Wednesday night. Some passengers were pulled out of broken windows as rescuers used rocks to try to free survivors from the wreckage.

And news from Germany is that Deutsche Bank intends to shrink its balance sheet by a fifth. Another sign that financial deleverage is still in full deflationary force.  And at time virtually every country in the Eurozone is in recession or flirting with it, what is the ECB doing. Mopping up 'excess' liquidity by letting LTRO mature. Shrinking the base money supply. Theoretically the ECB is committed to an 'expansionary' monetary policy. Asmussen has stated rates will stay low and the ECB is 'technically ready' to let the deposit rate go negative. But what impact are very low interest rates going to have if banks are committed to shrinking their balance sheets so their equity gearing rises above 3%. In the US they realizes that low interest rates wouldn't work as long as the banks were under capitalized. The 'broken string'. But it still doesn't seem to have seeped in to the minds of Europe's central bankers. May be all that excess liquidity isn't doing much good but may be they should have considered an 'operation twist' and provide a lot more longer term lending.

Money by itself has little value : it is a government permit allowing you to make transaction. It's like a building permit. And, even a thousand building permits do not make a single building if nobody wants them. In the desert a hundred dollar bill is useless if there is no water and nobody around to sell it to you.
The rich put their money in banks, buy assets, invest in companies, and get money income from it. But their (eternal) problem with that is that they are rich already. Lucky for them ,these assets and companies give them "control" and now the game has no end. And of course becomes more and more unreal all the time (not even Napoleon Bonaparte, with all his brothers and his marshals managed to control Europe} In the end the rich do no longer control those assets, but only the (tax free) foundation that does it. Such control usually ends up (in the long run) in watered down control and spin off in monetary assets i.e. money again and little control. Only the poor guy, who picks up a dollar bill in the street ,gets full value ,as well as control at full value, until he finishes his beer.

The German government has expressed the growing public anger of its citizens over Britain's mass programme of monitoring global phone and internet traffic and directly challenged UK ministers over the whole basis of GCHQ's Project Tempora surveillance operation. The German justice minister, who has described the secret operation by Britain's eavesdropping agency as a catastrophe that sounded "like a Hollywood nightmare", warned UK ministers that free and democratic societies could not flourish when states shielded their actions in "a veil of secrecy".

Sabine Leutheusser-Schnarrenberger sent two letters on Tuesday to the British justice secretary, Chris Grayling, and the home secretary, Theresa May, stressing the widespread concern the disclosures have triggered in Germany and demanding to know the extent to which German citizens have been targeted.

It is the first major challenge to David Cameron's government to publicly justify its mass data-trawling operation, which was revealed in documents leaked by the former US intelligence contractor Edward Snowden.

Germany's chancellor, Angela Merkel, has made clear her frustration that many of the questions raised by the disclosures made by the whistleblower have gone unanswered by the Obama administration.

William Hague, the British foreign secretary, again dismissed concerns on Tuesday in a speech at the Ronald Reagan Library in California, saying Britain should have nothing but pride in its "indispensable" intelligence-sharing relationship with the US.

"Let us be clear about it: in both our countries intelligence work takes place within a strong legal framework. We operate under the rule of law and are accountable for it. In some countries secret intelligence work is used to control their people – in ours it only exists to protect their freedoms."

But writing in the Guardian, the former Conservative leadership contender David Davis disputes that view, saying Britain's intelligence agencies are only subject to law in theory. He accuses GCHQ of circumventing "inconvenient laws" by handing over personal data to the US and raises the prospect of "extremely serious violation" of the rights of British citizens over the use of their personal data.

Fiat money ...and than some...

The global economy cannot operate without fiat money  - it is too big. To be successful a thriving economy needs an expanding money supply. Unfortunately our expanding money supply has been achieved by commercial banks creating new money as a debt to them. Their greed ensured it got out of hand and now they are destroying money as quickly as they can "shrink their balance sheets" as they call it. It should never have been allowed to happen. The new money needed by thriving economies should have come in as debt free money created by the BOE/Treasury to pay government expenditure on normal outlays or on new infrastructure - or, of course as lower taxes. Just as with money created by the banks as debt, too much will cause inflation and too little will result in recession, deflation and ongoing depression - which is where we are now. But at least money created as cash does not have that debt to service. It is the creation of money as debt that has got us into the mess we are in. Ironically it is also the creation of money as debt that has prevented the excess that has been created causing hyper inflation. I'm afraid the banks are not fit for purpose; they are self programmed to cause Boom and Bust...  Well, the current experiment with fiat money has certainly demonstrated that central banks cannot be trusted to run the system.  That aside, the principle of fiat money only has peripheral connection with the size of the money supply - and will always tend towards fraud. There is no reason not to have an asset-correlated money supply assuring that money supply only increases in line with productivity.  Anyway, it appears that Stein's law applied to consumer leveraging has finally kicked in so the necessary correction may well happen on its own and the central bankster-induced super-bubble burst. Let's see what the Keynesians have to say as the consumer deleveraging gains pace...

Click links ...very interesting ...

The most remarkable story of the day comes from Ireland. Secret tapes released this morning give the clearest signal yet that senior bankers at Anglo Irish Bank deliberately tricked the Irish government into a rescue deal on 2008.

The recordings, released by the Irish Independent today, show John Bowe and Peter Fitzgerald discussing their request for €7bn of emergency funding to keep Anglo Irish running, once the financial crisis struck. The final bill was €30bn, helping to precipitate Ireland's own bailout. There have long been suspicions that Anglo's management knew the full scale of the crisis and hid it from the Dublin government, who fatefully decided to pick up the bill on the taxpayers' behalf. Our correspondent in Ireland, Henry McDonald, explains: On tape Fitzgerald asks Bowe how did he arrive at the figure of €7bn to which the latter replies: "Just as Drummer [the then Anglo Irish Bank CEO David Drumm now in exile and disgrace in Boston] would say, 'picked it out my arse.'" The conversation also tends to back up the view that Anglo Irish bankers knew that €7bn would never be enough to save the bank but once they had hoodwinked the Dublin government the taxpayer would keep picking up the tab. In their exchange Bowe says: "Yeah, and that number is seven, but the reality is that actually we need more than that. But you know the strategy here is you pull them in, you get them to write a big cheque and they have to keep, they have to have support their money, you know."

Here's Henry's full story: Irish bankers 'hoodwinked' government over bailout, secret recordings show

And you can listen to the recordings on the Irish Independent's site (the third recording, 'strategy', is the real humdinger).