Mish's Global Economic Trend Analysis

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• Sacramento "Teacher of the Year" Laid Off; Who is to Blame?
• You Don't Need to be a Lefty to Support Krugman (You Just Need to be Economically Illiterate)
• Greeks Rail Against "Crude" German Editorial; Merkel Ally Tells Greece "Vote right or Euro's Gone"; Initial Estimates 2:30 ET Sunday
• Europe Will Splinter Regardless of Greek Election Outcome; "France Has At Most Three Months Before Markets Make Their Mark" says German Official

Sacramento "Teacher of the Year" Laid Off; Who is to Blame? Posted: 16 Jun 2012 10:44 PM PDT I have a great deal of sympathy for Michelle Apperson, the Sacramento "Teacher of the Year" who was laid off. Assuming she deserved the award, she should not have been laid off. Sixth-grade teacher Michelle Apperson passed down a simple message to her students. "My favorite teachers growing up were the ones who challenged me to go out of my comfort level a little bit, strive for the stars, and work hard," the veteran California educator wrote on her school's bio page. Despite just being named Sacramento's "Teacher of the Year," Apperson was laid off as part of a massive budget cut. "It hurts on a personal level because I really love what I do," Apperson, who taught all subjects, told KXTV-News 10. "But professionally and politically or economically, I get why it happens." Her pink slip comes just days after President Barack Obama prodded Washington lawmakers to help cash-strapped states with education funding. The Sacramento City Unified School District has suffered approximately $143 million in budget cuts in recent years. School spokesperson Gabe Ross told News 10 that who gets laid off is mandated by state law and is based on seniority, not performance. "It's an awful situation," Ross said. "It's another sign of how education's funding really needs an overhaul." According to her bio, Apperson's goal was to teach her students "how to solve problems with peers, other adults, and the world around them." Now they know firsthand how difficult that can sometimes be. Does Apperson Really "Get Why it Happens"? I like Apperson's Bio, her experience, and her message to her 6th grade class. However my sympathies end there. She says she "gets why it happens". Does she? If so why doesn't she explicitly say so? Who is to Blame? Teachers' unions are 100% to blame for this mess. Unions protect the under-performers at the expense of those like Apperson. Unions even protect repeated sexual predator teachers. From the New York Times article Give Schools the Power to Punish In one case, a male teacher in Manhattan was accused of inappropriately touching a female student in 2010, but the arbitrator imposed only a suspension without pay. And now — after more disturbing episodes — we've filed charges against this individual for a third time. As it stands, public school teachers accused of sexual misconduct enjoy protections that no other city employee has. That puts children in danger, and we cannot allow it to continue. Rest assured there are thousands of cases like that nationwide. Want some articles? The Huffington Post reports New York Teachers Paid To Do Nothing: 700 Of Them Hundreds of New York City public school teachers accused of offenses ranging from insubordination to sexual misconduct are being paid their full salaries to sit around all day playing Scrabble, surfing the Internet or just staring at the wall, if that's what they want to do. Because their union contract makes it extremely difficult to fire them, the teachers have been banished by the school system to its "rubber rooms" _ off-campus office space where they wait months, even years, for their disciplinary hearings. The 700 or so teachers can practice yoga, work on their novels, paint portraits of their colleagues _ pretty much anything but school work. They have summer vacation just like their classroom colleagues and enjoy weekends and holidays through the school year. Because the teachers collect their full salaries of $70,000 or more, the city Department of Education estimates the practice costs the taxpayers $65 million a year. The department blames union rules. Here is a Google search of Teachers Paid to Sit if you want more examples. Now factor in incompetent teachers and poor teachers. The union protects them too. Overhaul Needed Yes, indeed. An overhaul is truly needed. Teachers should be hired, fired and receive pay raises based on merit, not seniority. School spokesperson Gabe Ross told News 10 that who gets laid off is mandated by state law and is based on seniority, not performance. Ross then whines "It's another sign of how education's funding really needs an overhaul." An overhaul is indeed needed. It's time to get rid of collective bargaining of public unions, and it's time for merit pay for teachers. Enormous Sense of Entitlement With very few exceptions, public union members have an enormous sense of entitlement. Public union members need to put themselves in the average taxpayer's shoes. Public union members also need to realize promised benefits cannot possibly materialize. Teachers' Unions Do Not Give a Damn About Kids Here is the deal, straight up. Teachers' unions do not give a damn about the kids. Please read that carefully. I said "Teachers' unions" NOT teachers. Most teachers do care about the kids. However, those teachers are sucked into believing garbage fed by union organizers. That garbage inevitably leads to cannibalization of the lowest on the seniority totem pole, regardless of skills or talent. Union mentality is also to blame for inability of school districts to get rid of sexual predators and grossly incompetent teachers. Time For Reflection This is a time for serious reflection. We all need to think about what government owes us (or doesn't), what taxpayers owe public union workers (or don't), and what promises have been made by politicians at taxpayer expense that cannot possibly be met. The problem is not a lack of education funding. The problem is absurd expectations as to what benefits public union workers receive, coupled with inability to get rid of union workers, except on the basis of seniority, even in the face of repeated sexual predator behavior. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

You Don't Need to be a Lefty to Support Krugman (You Just Need to be Economically Illiterate) Posted: 16 Jun 2012 04:45 PM PDT Financial Times writer Samuel Brittan says You Don't Need to be a Lefty to Support Krugman.  Brittan kicks off with "The remedy for too little spending is more spending. Everything else is commentary." Who Decides? Just who gets to decide there is "too little spending?" Krugman? Brittan? How about the free market? Look at what promotion of spending got us. The mother of all housing bubbles is what. In a 2002 New York Times editorial Krugman said "To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." Krugman claims "that wasn't a piece of policy advocacy, it was just economic analysis." Yeah right. For further discussion please see Krugman's Intellectual Waterloo Look at what government spending did to Japan and its debt-to-GDP ratio of 220% and climbing. Look at what spending did to Spain and Greece. Japan proves that  things might not matter for a long time, but anyone who does not think Japan is going to pay a very hefty price for that debt is just not thinking.  Brittan asks "Why has this message been so difficult to accept?" The answer is that anyone with a 6th grade education knows that one cannot spend one's way to prosperity when the problem has been too much spending. Unfortunately, academia goes to great lengths to promote what governments inevitably want to hear (that one can spend one's way to prosperity). What did Stimulus do for the US and Japan? Trillions of dollars of fiscal stimulus has already been thrown at the problem and as soon as the spending stopped so did the rebound. Krugman and Brittan now want government to spend still more money as if the results will be any different. Nowhere does Krugman or Brittan explain how the money will be paid back, how governments can determine there is "too little spending" especially when it is crystal clear they surely did not see there was far too much spending on housing. Government Spending is the Problem Government spending, not the lack of it, is the problem. Nowhere did Brittan or Krugman suggest that public union workers are overpaid, that prevailing wage laws have crippled cities and states. Rather they just want to spend. Austrian economists have a word for useless spending: "malinvestment". Instead of spending more, how about pension reform, labor reform, getting rid of useless bureaucrats, and putting more money in the average taxpayer's pocket? How about eliminating crop subsidies? How about lowering drug costs by allowing imports from Canada and Mexico? How about ending collective bargaining for all public unions right here, right now? Scrap prevailing wage laws and end collective bargaining and there is a chance governments will not overpay when they do spend. The second benefit is the lower the costs, the more workers can be hired for the same amount of money. Those wanting to lower unemployment ought to think about that simple point. But no! Krugman and Brittan just want to spend, never stating when or how it stops, why the stimulus will not dry up as soon as spending does stop, or how the debt will ever be paid back. Details. Details. "Dark Arts" Economic Illiteracy Before throwing more money at the problem, how about some real structural reforms and attempting something that has not been tried: letting the free market handle the problem rather than government bureaucrats and economic wizards in ivory towers, most of whom have no real world experience at all. Keynesian theory is nothing more than "dark arts" economic illiteracy. I suggest Britton read and attempt to understand Modern Day Fairy Tale of 3 Economic Wizards (Except It's True) Remedy For Too Little Thinking I occasionally agree with Krugman but my general advice is if you agree with Krugman, it's best to stop and think again. To paraphrase Britton, "The remedy for too much writing and too little thinking is to think before one writes. Everything else is useless commentary." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Greeks Rail Against "Crude" German Editorial; Merkel Ally Tells Greece "Vote right or Euro's Gone"; Initial Estimates 2:30 ET Sunday Posted: 16 Jun 2012 11:34 AM PDT In the past week, as I expected, the ECB, Troika, German officials and others have all warned Greeks to not vote for Alexis Tsipras and his radical-left party Syriza. Will those tactics backfire? I suggest they already have. The pertinent question is whether they have backfired enough to matter. Please consider Greeks rail against 'crude' German editorial. Greek parties reacted with outrage on Friday after the German edition of the Financial Times made a front-page call on Greeks to vote for the New Democracy conservatives in the upcoming election. "Dear Greeks, create clear political conditions. Vote courageously for reforms instead of angrily against the necessary, painful structural changes," read the Financial Times Deutschland's editorial, published in Greek and German. "Your country will only be able to keep the euro with parties that accept the conditions of the international creditors," the daily said, adding: "Resist the demagoguery of Alexis Tsipras and his (radical-left party) Syriza." It endorsed the New Democracy party led by 61-year-old Antonis Samaras. Syriza condemned the editorial as "a crude and unprecedented intervention, which offends national dignity and tries to undermine democracy." The only thing left now is for German Chancellor Angela Merkel to "come and hand out ballots for the right," said top Syriza official Dimitris Papadimoulis. Merkel ally tells Greece: Vote right or euro's gone Also from The Local, please consider Merkel ally tells Greece: Vote right or euro's gone A leading German right-wing politician warned Saturday that if the far left wins Greece's elections this weekend, the country's exit from the eurozone "will be only a matter of time." "If the radical left carries on saying it wants the help of all the other countries in the eurozone but does not offer anything in return, then it will only be a matter of time before Greece exits" the eurozone, said Wolfgang Bosbach, chairman of the interior ministry committee in parliament and a close ally of Chancellor Angela Merkel. Even without Sunday's elections, Greece is not fit to be a member of the eurozone, the top Christian Democratic Union official said. "The country's economy lacks dynamism, competitiveness and efficient governance. And billions more aid will not change that fundamentally," he said in excerpts from an interview with Frankfurter Allgemeine Zeitung, to be published in full on Sunday. Results 2:30 ET Sunday Bloomberg reports Greek Vote Outcomes Range From Coalition to Euro Exit: Scenarios Election and polls close at 7 p.m. Athens time (5 p.m. in London, 12 p.m. in New York). Exit polls will be published immediately, and initial estimates of the result will come in around 9:30 p.m. local time.  Many expect there will be no workable coalition. I believe Syriza will be able to secure one if it wins, and I believe it will win. Should New Democracy win,  however, there is a good chance party leader Antonis Samaras will be forced to step aside as part of a coalition with Pasok. There are really no good choices for Greece. However, a Syriza win has the huge advantage of getting what needs to be done (a Greek exit) much sooner, with at least some chance of recovering in a couple years as opposed to a decade from now. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Europe Will Splinter Regardless of Greek Election Outcome; "France Has At Most Three Months Before Markets Make Their Mark" says German Official Posted: 15 Jun 2012 11:34 PM PDT All eyes are focused on the Greek election on Sunday. However, a fundamentally far more important election (for the long term) will take place in France on Saturday. If socialists take control of both houses in French parliament as expected, president François Hollande would have free rein to carry out his stated policies such as hire more public workers, raise taxes on the rich, and Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It" Tensions Between France and Germany Mount If  Hollande is serious, and I think he is, France is going down the tubes fast. Moreover, the already strained relations between Hollande and German chancellor Angela Merkel mount as Merkel attacks French economy. Deepening splits between Angela Merkel and François Hollande erupted into the open on Friday as the German chancellor attacked Paris for allowing the French economy to stall. Mrs Merkel warned the policies of the new Socialist president could destroy the eurozone by bringing the sovereign debt crisis to France itself. Tensions are running so high that Jean-Marc Ayrault, the French prime minister, was forced to deny that Paris had broken off the Franco-German partnership, following Berlin anger at a Franco-Italian summit in Rome on Thursday. There was a growing sense of crisis in European capitals after David Cameron, the Prime Minister, took part in a tense conference call with Mrs Merkel, Mr Hollande and Mario Monti, the Italian prime minister. As tensions within the eurozone deepened on Friday, the German chancellor dismissed "quick fixes" and refused to consider any discussion on pooling debt for eurobonds or Germany underwriting bank deposits in other eurozone countries. She hit out at Mr Hollande for blocking EU supervision of national spending and supporting eurobonds, which she warned would "mask" divergences between Germany and "mediocre" or declining eurozone economies, such as that of France. "If you look at the development of unit labour costs between Germany and France, differences have now been growing a lot more strongly, a topic that must be discussed," Mrs Merkel said. Merkel and former French President Nicolas Sarkozy did not see eye-to-eye on many important issues, but they did not openly feud like Hollande and Merkel. The differences between the latter pair are major in every way. Major Differences Hollande wants Eurobonds, Merkel says no Merkel wants a tighter political union, Hollande says no Hollande wants bank recapitalizations by the ECB and Merkel says no Hollande wants more stimulus, more government workers, increased difficulty to fire workers and Merkel disagrees on all counts Hollande is more willing than Merkel to make concessions to Greece  Hollande wants bigger "firewalls", Merkel does not. Do they agree on anything other than the desire to keep the eurozone intact? Franco-Italian Pact Against Germany? The Financial Times chimes in on the feud with its take:Merkel warns on French economy Jean-Marc Ayrault, French prime minister, said on Friday that he saw the need for a public assurance that Mr Hollande's visit to Rome the day before was "absolutely not" part of an attempt to form a Franco-Italian pact against German fiscal rigour. "That would be a serious political error which would not lead to any solution," Mr Ayrault said. Wolfgang Schäuble, German finance minister and a conservative like Ms Merkel, raised eyebrows in Paris when in an interview this week with Italian newspaper La Stampa he criticised Mr Hollande's decision to restore the right of some workers to retire at 60 at a time when most European countries were extending the retirement age. "France has at most three months before the markets make their mark," said one German official. France Has At Most Three Months If Hollande carries out his stated programs, it won't take three months. Step back for a moment and look at that enormous fundamental rift between France and Germany. Regardless of the outcome of the Greek election, that rift is not going away. Hollande already threatened to renegotiate the so-called Merkozy treaty (which by the way France has not yet ratified). Also note that last Thursday, the Bundesbank (Germany's central bank) came flat out and stated Policymakers Should Refrain From "Wild Goose Chase" of Higher Firewalls and Merkel Warned "Limited German Resources" Assume France does ratify the treaty. Major revisions down the road are virtually impossible. Dead Before Arrival Thus, I was highly amused when a group of eurozone Nannycrats agreed to meet later this month to devise a master plan for a eurozone fiscal and banking union. (see Details of the Secret "Nannyplan" Emerge; Proposed Nannygroup Uniforms) My response was "Dead Before Arrival": Bundesbank Shoots Down EU Banking-Union Proposal; Eight Lessons the EU Needs to Learn Greek Election Analysis If Syriza party leader Alexis Tsipras wins the Greek election on Sunday, it may speed up the shattering of the eurozone, but it certainly will not cause it. Nor will a Syriza  win cause "contagion" as frequently cited by mainstream media (and nearly everywhere else too). Alternatively, if New Democracy wins the election on Sunday, the market may throw a 3-day party (or not). However, there will be no lasting effect. There are simply too many cultural and philosophical differences between countries in the eurozone to make the euro work. What can't last won't. The eurozone cannot last as we know it today. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.