Contract is Now Expired

  • The clock runs out on Chicago's Police Department and Fire Department union contracts Saturday night, but don't expect any difference in how cops and firefighters respond to emergencies around the city if the deal remains unresolved.

    Both unions are prohibited from striking, and it's not unusual for contract talks to drag on past the "drop dead" date as the two groups haggle with the city over salaries, incentives and contract minutiae.

    If history is any indicator, it could be years before a new contract is in place. Last time around, police and fire deals that expired in 2007 weren't replaced with new ones until 2010. Cops and firefighters worked under the terms of their old deals until new ones were worked out, and the same will happen this time when agreements aren't reached by Saturday night.

Then there's this nonsense that always pops up:

  • Citing a "gentlemen's agreement" with the city not to negotiate in public, Fraternal Order of Police President Michael Shields declined to discuss the status of talks on a new deal.

"Gentlemen's Agreements" only work when one is negotiating with actual gentlemen. Persons who mail dead fish around, stab podiums and confront naked Congressmen in the shower arne't usually "gentlemen."

As in years past, Rahm will use the old Shortshanks trick of dropping friendly media types stories that can smear the cops, firefighters and teachers. He's already got a PR firm running attack ads against the teachers for even daring to hold a strike vote. And just last week, he had his tame Sun Times reporters running a story about firefighter "perks" that raised their pay - raises completely in line with other fire departments across the country and completely within the bounds of negotiated contracts.

No idea how that "28.1 story" is going to play in our negotiations though. We aren't feeling very good about it at the moment.

NY Times Notices CompStat Lies

  • An anonymous survey of nearly 2,000 retired officers found that the manipulation of crime reports — downgrading crimes to lesser offenses and discouraging victims from filing complaints to make crime statistics look better — has long been part of the culture of the New York Police Department.

    The results showed that pressure on officers to artificially reduce crime rates, while simultaneously increasing summonses and the number of people stopped and often frisked on the street, has intensified in the last decade, the two criminologists who conducted the research said in interviews this week.

    “I think our survey clearly debunks the Police Department’s rotten-apple theory,” said Eli B. Silverman, one of the criminologists, referring to arguments that very few officers manipulated crime statistics. “This really demonstrates a rotten barrel.”

So is it only a matter of time before McCompStat himself is tossed out on his ear for bringing this totally corrupt and bullshit system to Chicago? Rahm hates being lied to although he seems to have no problem if he's the one spreading the manure. But being sold a bill of goods on an entire policing system as the homicide numbers continue to climb makes it harder to stick with the lie that "crime is down across the board."

Crime isn't down - it's being "massaged" for a political end.

Less Shot, More Killed

  • ... at 12:45 p.m. Saturday, two men were on a porch in the 4900 block of West Washington in Austin when a gunman approached them and opened fire, striking both men in the chest, police said.

    Jamel Shepard, 39, who lived at the home, was dead at the scene, authorities said. Darnell Walker, 55, of the 7100 block of South Euclid, was also killed.

    Earlier Saturday, at 2:43 a.m., police found John Kouzios, 33, of the 3000 block of South Kedvale, dead and Jose Galvin, 42, critically wounded after they were shot multiple times in a vehicle that hit a tree in the 2500 block of South Kildare, authorities said.

    Galvin, of the 4200 block of West 26th Street, was taken to Mount Sinai Hospital, where he later died, the medical examiner’s office said.

    At 2:30 a.m., William Cook, 19, was shot in the chest in his home in the 6200 block of South Talman, the medical examiner’s office said.

So two more for 010 in their race to the top of the chart. 015 picks up a double, too.

Can Greece Buy Freedom From Debt For a Mere €3,000 Per Person?

Greek shipping heir Peter Nomikos has a plan wipe out Greek debt. His idea is to buy all the Greek bonds then forgive the debt.

Given that Greek bonds sell for 12 cents on the dollar, on the surface his plan may seem like a reasonable idea. First let's consider the idea, then potential problems.

Der Spiegel interviews Peter Nomikos who says 'For a Donation of 3,000 Euros, Every Greek Can Buy Freedom'
Greek shipping heir Peter Nomikos has taken matters into his own hands. While EU leaders wrangle for a solution to Greece's problems, Nomikos started a non-profit to wipe out the country's debt. If all of his countrymen do their part, he tells SPIEGEL ONLINE, they will be able to shore up the country's finances.

SPIEGEL ONLINE: Mr. Nomikos, you have just started a campaign to free Greece of debt. Your organization buys up Greek bonds and then forgives the debt. Are you serious?

Nomikos: Professionally, I deal with distressed debt. And it struck me that Greece has a historical opportunity. In the euro, the Greeks have a very strong currency, while the price of their government bonds has collapsed. That makes it possible to buy back debt at very low prices and reduce the Greek debt burden with relatively little expenditure.

SPIEGEL ONLINE: You are asking your countrymen for donations. What do you tell them?

Nomikos: If you break down the national debt, each Greek owes around €25,000 ($31,485). So I am telling my fellow citizens to make themselves debt-free. Greek government bonds with a nominal value of one euro currently trade for around 12 cents. For a donation of around €3,000, every Greek can buy his freedom.

SPIEGEL ONLINE: How many bonds has your foundation already bought?

Nomikos: We always buy those bonds that have the deepest discount. So far we have invested €273,000 ($343,816) and hold €2.2 million ($2.8 million) in Greek debt.

SPIEGEL ONLINE: And then you cancel the debt?

Nomikos: Not immediately. If we did that, we would decrease the impact of our project. When the GDP-to-debt ratio goes down, bond prices go up. If the movement becomes a great success, this could become a problem, because we cannot buy debt as cheaply on the markets. So we hold these bonds for a while and use any profits to buy more bonds. We plan to amass as many bonds as possible and then cancel the debt all at once.
Problematical Math

  1. The population of Greece is 11,316,000. At €3,000 per person, Nomikos would need to raise nearly €34 billion. That is far lower than the €283 billion in bonds (at €25,000 per person), but it is hardly inconsequential.
  2. Bond prices will not stay at 12 cents on the dollar if the program makes any reasonable headway.
  3. Greek banks and pension plans are the biggest holders of Greek debt. I highly suspect neither has marked bonds to market. They certainly have not marked the bonds to zero. In other words there are severe implications should Nomikos succeed. 
  4. Those depending on Greek pension plans have a vested interest that he not succeed.

I wish Peter Nomikos success, but point number 3 above suggests severe consequences. Points 1, 2, and 4 suggest that it will not happen in the first place, making point number 3 moot.

Mike "Mish" Shedlock
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Headline in Spain: Government 'sacrificed' Bank of Spain in Exchange for Financial Sector Bailout; ESM Agreement Raises More Questions Than Answers

In the wake of a huge market reaction on Friday, it's interesting to see how the headlines read other places, especially Spain.

Here is one such viewpoint by El Confidencial: Government 'sacrificed' Bank of Spain in Exchange for Financial Sector Bailout
The clearest conclusion to the European Agreement made by Spain and Italy is that our government has preferred to sacrifice the sovereignty of the banking supervision enjoyed by the Bank of Spain in exchange for the bailout of the sector does not compute as debt or deficit and that The European rescue fund to buy Spanish debt when things get as ugly as this week. However, many unknowns are open, including the timing of the operation. Therefore, the FROB who will initially inject capital to entities that need it in September, with funds from European loan subsequently permutarán MEDE the money.

"The government has chosen to advance the loss of competition in banking supervision, it was inevitable sooner or later if you go to a European Banking Union in exchange for breaking the feedback loop between the banking and public debt, which is very positive and not only for Spain, "says an analyst.

Officials of both Economy and the Bank of Spain claimed yesterday that has not yet been defined how will such a monitoring mechanism or what the status of the former Central Bank. Some sources believe that it is logical that national central banks are the arms of the central agency in each country and to continue in office today, but accountable to a higher power who will make the final decisions.

Other experts, such as Eurointelligence, say that "it is far from clear that Germany is willing to give up their own banks to supervision by the ECB." It is also unclear what will happen to insurance, which can not be monitored by the ECB according to the EU Treaty. Or if the conditions to be imposed in order to use the European Stability Mechanism (MEDE), conditions that likely will go beyond the financial sector despite yesterday again denying Mariano Rajoy.

A major uncertainty centers on the period within which this new monitoring system will come into force, which is the condition for the MEDE to inject money directly to banks. In principle, the idea is to reach an agreement in October to put in place before year end. But "it is unrealistic to expect an agreement by October? MEDE himself was delayed. The EU has consistently been too optimistic on the timing," adds the analyst firm.

The terms do not match

And although respected, there is an inconsistency between this term and timing of the rescue plan by Spain. This includes the signing of the memorandum with the conditions for the sector on 9 July, the end of the audit work in each state on July 31 and defining the specific needs of each in September, when performing the new stress test bottom-up (bottom up). Thereafter, viable entities that need capital will have nine months to get their media, and immediately nonviable may receive the loan proceeds Europe.

Therefore, various sources claim that the FROB will perform the first injection of capital until the conditions for you to do the MEDE. So initially counted as debt itself. So then have to do a swap between the FROB and MEDE. Another option is to wait until the system is willing, but the markets probably will not have much patience, and as mentioned, is likely to be delayed.

A priori, it seems very complicated to start with the FROB and replaced by MEDE, but the text of the Declaration of the Summit opened the door this way, referring to Ireland: "The Eurogroup will review the status of the Irish financial sector with a view to further improving the sustainability of the adjustment program is working well. Similar cases are treated in the same way. " That similar case would be Spain.
ESM Agreement Raises More Questions Than Answers

The above article certainly raises a lot of questions. Gavyn Davies at the Financial Times also says More questions than answers after the summit
In the wake of yet another summit, we need to ask our usual question: is this the eurozone’s game changer?

My fear is that, as so often in the past, the devil will prove to be in the detail. The more carefully one examines the text of the statement, the more questions are raised about how the proposed measures will actually work.

In particular, it is debatable whether there are any terms for direct eurozone recapitalisation of Spanish banks which will be acceptable both to the Spanish government and to the German Bundestag. (The latter will be empowered to “monitor” the new arrangement, according to Mrs Merkel’s spokesman.) And the shortage of remaining funds in the EFSF/ESM, which I discussed here last week, has certainly not been solved.

1. Direct bank recapitalisation by the ESM

This is clearly the critical new development which potentially allows the costs of recapitalising troubled banks to fall on the eurozone as a whole, rather than on an individual sovereign country. It could therefore represent a very large step towards debt mutualisation, and it directly addresses the point which the markets so disliked in the Spanish bank deal two weeks ago. The statement says that this can only be done after the eurozone’s new bank supervisor is “established”, and that this should only be “considered” by the Council before the end of the year. ... I suspect that Germany will be quite demanding is setting these terms. Otherwise, there could be great problems with the constitutional court in Karlsruhe. ...

3. ESM support for the Spanish and Italian bond markets

The final paragraph of the statement gives the strong impression that the ESM will in future be able to stabilise these bond markets in a “flexible and efficient” manner. This appears to be a major victory for Mario Monti, but actually it does not contain anything really different from the status quo.

4. The availability of funds for the ES

German Finance Minister Schauble emphatically said yesterday to the Wall Street Journal that there would be no increase in the size of the ESM, and that position has been maintained by Germany at the summit. Furthermore, Mrs Merkel has repeatedly stated that there will be no “joint financing” of eurozone debt (ie eurobonds, or eurobills) before full fiscal union has taken effect. Again, there is no change in that position. Indeed, that is the basis for the German government’s insistence that they have not taken on any extra “joint liabilities” as a result of this summit.

In summary, the summit has given the ESM some new tasks, but no new money with which to discharge these tasks. And many details are obscure.
Mike "Mish" Shedlock
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Low Class Wysinger

We're actually thinking of changing Al's name to "Weis-inger" if he manages to get to the top spot.

In the meantime, Al demonstrated just how far he's gone down the kool-aid highway by taking a very public swipe at Gene Williams after McHighStress got called away for an important phone call:
  • McCarthy will be admitted to Jackson park soon, even Chief Treacy knew he was losing it. Funny how just when it was getting even crazier Mcwhackjob got a message on his blackberry and had to leave.
    But good ole Al maintained the madness by telling gene Williams that his head was on the "chopping block" over this time due issue. There is some feud between the two of them but Al needs to be a man and a good boss and handle that shit in private. Degrading a subordinate in front of others never accomplishes anything. I understand that's the way they do it in new york, but this isn't new York you group of morons.
This certainly isn't New York, and acting like a low-class asshole seems to be the new "in" thing at ConStat meetings. But that shit in Chicago just doesn't motivate us at all.

Profound Thoughts

From a number of comments over the past day or so. First up is a comment on the decision to destroy without testing any and all of the weapons turned in.
  • Where's the media on this?

    What if we threw out 5,000 rape kits w/o testing them? The liberals would go into a tizzy ....

Where indeed. The collective outcry would be enough to deafen the most tone-deaf politico. Nice catch.

Next is about the "Who raised you" quote by 9.5:

  • Rahm, who raised you? How were you raised?

    You're in charge, but you don't do anything to fix the problem.
    You don't hire police, you reward gang bangers.
    You don't hire police, you enrich your buddies by buying cameras.
    You don't reward and support the few police you have, you try to undermine them and make their lives more difficult at every turn.
    Buy a mirror Rahm, step up on a stool and gaze into it.
    You'll get a terrific view of the problem.
It's almost like a bunch of philosophers are reading the blog.

NATO Numbers

They go up. They go down. Sideways is next. And no two sets seem to match:
  • Policing the NATO summit last month racked up about $15 million in overtime for Chicago Police officers, Mayor Rahm Emanuel’s administration said Friday as it released documents seeking reimbursement for the costs from the federal government and the summit host committee.

    The city sent letters dated June 29 to multiple government agencies asking for the release of funds earmarked for the city’s NATO costs. That includes $7.5 million designated by Congress when the NATO summit received National Special Security Event status, as well as another nearly $4 million in federal grant funds.
This will go on for years, and Rahm will nickel and dime everyone to death.

Hey Rahm? Who Raised This Kid?

Yeah, it's Evanston. But it's a legit question:
  • A 13-year-old boy held a gun to the head of a cabdriver and stole $200 and a cellphone from him, Evanston police said Friday, announcing the boy’s arrest in that and another robbery this week.

    Wednesday about 1 a.m., the boy grabbed a cabdriver around the neck and robbed him at gunpoint in his taxi near Hovland Court and Emerson Street, said Police Cmdr. Jay Parrott. The boy stole cash and a cell phone from the driver, police said. No weapon has been recovered.

    Police said the boy also is accused of punching another juvenile in the face and stealing his headphones about 2:30 p.m. Monday near the corner of Church Street and Dodge Avenue.

    Authorities are pursuing robbery and aggravated assault citations against the boy in juvenile court, police said.

We're guessing it may be a single parent household to start....


  • A South Side man told police he “just snapped” when he killed his 62-year-old mother for being “a nag,” prosecutors alleged Friday.

    Earnest McGee, 34, told police Aletha McGee was driving him crazy when he shot her six times earlier this week while she sat in a recliner in her basement in the 9000 block of South Dobson, assistant Cook County state’s attorney Jamie Santini said.

    “I just snapped, that’s all,” Earnest McGee said, according to prosecutors.

We wonder who raised him.

Oh wait, it's the dead woman. Sorry about that.

Time-Lapse Interactive Graph Shows Stunning Rise in Anti-Euro Sentiment in Italy

The rise of the Five Star Movement in Italy is the number one happening in Europe right now and mainstream media has not even begun to cover it in any depth. The movement is led by an Italian comedian, Beppe Grillo.

Main Rules for the Five Star Movement

  • Not be an elected politician prior to 5 Stelle
  • Commit to stay in charge for no longer than 2 terms
  • Commit to take a minimum salary and give the rest back to the community
  • Post a public platform on the internet
  • Be willing to hold a public debate on the platform

Beppe Grillo's personal position, not a mandate for the Five Star Movement is "Get out of the Euro and default on debt"

For more on the Five Star Movement please see Six Reasons Why Italy May Exit the Euro Before Spain; Ultimate Occupy Movement

Time-Lapse Interactive Polls

Following are some time lapse polls of the Five Star Movement and other political parties in Italy. Please give the graphs extra time to load.

The polls are from data gathered by data gathered by Termometro Polico (one on the best Italian poll-makers according to a friend who sent me the link.) The important poll is in tab number four.

Explanations and Comments on the graphs appear below.

For now, please click on tab number four. You may also wish to go to the link above for additional information (in Italian).

Graphs courtesy of Termometro Polico via tools from Tableau Software.

Explanations and Comments

The following comments are from Lorenzo, who lives in Italy. He is the person who sent me the link to Termometro Polico.
Hello Mish

In the first and third chart, red=centre-left (PD+Idv+Sel+others), blue= centre-right (PdL+Lega+Others), and yellow = 5 star movement. PdL = Former Prime Minister Berlusconi's party.

The third tab shows that a centre-left plus center (green) coalition could win the election, albeit with a relatively small margin. There is a catch however: (centre-left and centre-right) do not currently exist, except as theoretical coalitions rather than political parties.

Right now PDL and PD support the Monti government, while all the other parties that they commonly ally with (Lega, IDV, SEL, etc) do not. The two main parties (PD and PDL) scorn each other but are "forced to go along", while the minor parties in both "coalitions" bad-mouth them and Monti's government to attract the resentment created by Monti's taxes reforms.

This makes it pretty hard to predict the shape the two coalitions will take and how the voters' choices will change according to it. The situation is pretty fluid right now.

Italian politics is hard to make sense of for somebody used to a simple two-parties system situation.

Coalition Building

For more on the difficulty of building a coalition in Italy, please see comments from Andrea in my post Reader from Italy Explains Why Early Elections Might Lead to "Deadlock".

Andrea is a reader who is from Italy but now lives in France. The pertinent section is labeled "Explaining Italian Politics".

Five Star Movement September 2011 vs. June 2016

This simple graph below shows the stunning rise of the Five Star Movement

Implications of the rise in popularity of the Five Star Movement from 3.7% in September 2011 to 20.6% in June 2012 are both massive and obvious. Yet mainstream media in the US and Europe have essentially ignored the phenomena.

Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List

Japanese Manufacturing Output Falls for First Time in 2012

The short term effect of Japanese stimulus following the earthquake and tsunami has now worn off. All Japan has to show for that stimulus is a bigger pile of debt, proving once again the Broken Window Fallacy.

In the real world, Japan has a debt-to GDP ratio of 225% and rising. Japan's export machine has stalled. So has Japanese manufacturing in general.

Markit reports Japanese manufacturing output falls for first time in 2012 to date
June data pointed to the first month-on-month reduction in manufacturing output since December 2011, as both new business and new export orders fell. Backlogs of work decreased as a result, while employment growth eased to only a marginal rate. On the price front, factory gate charges fell further in June, in response to a first reduction of average costs in 20 months.

After adjusting for seasonal factors, the headline Markit/JMMA Purchasing Managers’ Index™ (PMI™) dipped fractionally below the neutral 50.0 threshold in June, to post its lowest reading in seven months.

Commenting on the Japanese Manufacturing PMI survey data, Alex Hamilton, economist at Markit and author of the report said:

“June data suggest that Japan’s manufacturing sector upturn is fading into mid-year, with output and new business falling simultaneously for the first time since December 2011.

Growth in the year to date has been supported by earthquake-related reconstruction projects. The latest survey findings indicate that the boost from these efforts is starting to ebb, however, with investment goods producers noting a particularly sharp fall in output during June. This bodes ill for growth heading into the second half of the year, especially given the fragility of demand in external markets – highlighted by an accelerated fall in new export business during June.”
Japan Doubles Sales Tax

The AP reports Lawmakers in Japan OK hike in sales tax
Japan's lower house voted Tuesday to double the country's sales tax to 10 percent over three years in a bid to rein in a bulging national debt as an aging population burdens the country's social security system.

The vote, however, shook Prime Minister Yoshihiko Noda's grip on power because of strong opposition from a group within the ruling party led by power broker Ichiro Ozawa that believes the tax hike will weaken the economy. Ozawa and his supporters have threatened to bolt the Democratic Party over the tax issue.

The bill passed easily by a vote of 363-96, with support coming from the two biggest opposition parties. The bill must still pass the less powerful upper house to become law, which is expected.

It calls for raising the sales tax from 5 percent to 8 percent in 2014, and then to 10 percent in 2015.

Even Noda's government projects the tax hike will take only a modest bite out of Japan's deficit. The Cabinet Office forecasts that doubling the sales tax will boost revenues by ¥13.5 trillion ($170 billion) annually by 2015. Japan currently runs a deficit of about ¥45 trillion ($563 billion) a year.

Ruling party veteran Ozawa, who has often criticized Noda and controls a bloc in the ruling party, has suggested he may leave the party and take as many lawmakers as he can with him to form a new one. If 54 or more lawmakers join Ozawa, Noda's party would lose its majority in the key lower house.
Japan is in a very tight situation. The US will find itself in a similar situation down the road if it listens to misguided economists hell-bent on getting government to waste more money.

Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List

Laughable Text of EU "Memorandum of Understanding"; ESM Not Been Ratified Yet Already Requires Changes; How Much ESM Firepower Is There?

Futures are flying over a "breakthrough" that supposedly will lower borrowing costs for Italy, Spain, and Ireland.  The "breakthrough" is a modification to the terms of the ESM to allow "the possibility" to recapitalize banks directly.

Amusingly, the existing ESM agreement has not even been ratified. The agreement is still on hold in Germany (numerous other countries have yet to ratify as well).

Yet the "Memorandum of Understanding" worked out at the summit today appears to require changes to the ESM.

Other ambiguous statement from the eurogroup committee are simply laughable. Here is the complete text. Emphasis added in places.

• We affirm that it is imperative to break the vicious circle between banks and sovereigns. The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution-specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding. The eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally.

We urge the rapid conclusion of the Memorandum of Understanding attached to the financial support to Spain for recapitalisation of its banking sector. We reaffirm that the financial assistance will be provided by the EFSF until the ESM becomes available, and that it will then be transferred to the ESM, without gaining seniority status.

• We affirm our strong commitment to do what is necessary to ensure the financial stability of the euro area, in particular by using the existing EFSF/ESM instruments in a flexible and efficient manner in order to stabilise markets for Member States respecting their Country Specific Recommendations and their other commitments including their respective timelines, under the European Semester, the Stability and Growth Pact and the Macroeconomic Imbalances Procedure. These conditions should be reflected in a Memorandum of Understanding. We welcome that the ECB has agreed to serve as an agent to EFSF/ESM in conducting market operations in an effective and efficient manner.

We task the Eurogroup to implement these decisions by 9 July 2012.
ESM Under Review by German Constitutional Court

Bear in mind that ESM ratification in Germany has already been delayed subject to Review by German Constitutional Court
Germany's highest court asked the country's president on Thursday to delay ratification of the permanent euro bailout fund, the European Stability Mechanism, and the fiscal pact into law next week. If he complies, the move could delay the implementation of the ESM by several weeks in the latest setback for Chancellor Angela Merkel.

The Constitutional Court, anticipating challenges to the legislation, wanted more time to review documents. German President Joachim Gauck, hardly three months in office, was already faced with an important decision. If he complied with the request from Karlsruhe, at least one piece of legislation proposed by Chancellor Merkel and her coalition government -- the permanent bailout fund known as the European Stability Mechanism (ESM) -- would undoubtedly be delayed. The ESM was originally scheduled to come into force on July 1, 2012.
More Challenges Coming

The proposed changes will put German taxpayers (eurozone taxpayers in general) at more risk. Thus, it's safe to say that more challenges to the ESM are coming.

However, let's assume for the moment that Finland, Austria, Germany, and the Netherlands accept more taxpayer risk. (Admittedly that's quite an assumption).

Is this a euro-saving breakthrough?

Van Rumpoy Calls Summit a "Breakthrough"

Please consider EU Leaders Ease Debt-Crisis Rules on Spain in Merkel Retreat
After 13 1/2 hours of talks ending at 4:30 a.m. in Brussels today, leaders of the 17 euro countries dropped the requirement that governments get preferred creditor status on crisis loans to Spain’s blighted banks, European Union President Herman Van Rompuy said. Banks can also be recapitalized directly with European bailout funds rather than being channeled through governments, he said.

Merkel left the summit, which continues at 10 a.m., without addressing specifics of the agreements. She said there were decisions on “future measures within the framework of our methods that we will have through” Europe’s two rescue funds. “I think we will have a successful conclusion.”

The euro rose to as high as $1.2628, the strongest since June 21. Euro-area finance ministers will enact today’s deal at a meeting on July 9, Van Rompuy said, calling the accord a “breakthrough.”
Breakthrough? Really? How Much Firepower is Needed?

Bloomberg reports ...

  1. The EU’s two rescue funds may only amount to about 20 percent of the outstanding debt of Italy and Spain, limiting its ability to lower the nations’ borrowing costs.
  2. The EU’s two rescue mechanisms, the European Financial Stability Facility and the yet-to-start ESM, may have 500 billion euros ($621 billion) available for purchases.
  3. Italy and Spain have about 2.4 trillion euros combined of outstanding bonds, bills and loans.

For now, the market is pleased with this non-breakthrough. Let's see how long it lasts. I suspect not long.

Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List

Fuck You Wysinger

First up, thanks to SCC for letting us run the site today as they were en route to the hidden bunker.

Secondly, can anyone reach over and slap Wysinger for us? Talk about forgetting where you came from. We got this after the CompStat meeting today:
  • CompStat is out of control today SCC. McCarthy raked ol' Carrothers over the coals again for some low performing Area teams. One team that produced only 1 arrest and 105 Contact Cards in a month was recommended for immediate dumping. Wysinger concurred stating, "Maybe they should go back to a slow district where they don't have to do anything." While I understand teams are a good spot if you produce for the boss, why be so deliberately negative toward traditionally slow districts? Are they looking to cut manpower ever more in the slow parts of town?

    Then it got real bad.

    McCarthy and others kept harping on manpower considerations. McCarthy actually asked if Time Due should be removed from the Watch/District control and given to the Areas for granting/denying time off. Then Wysinger, in a kool-aid induced fit, actually stated to the assembled gold stars and other attendees of all ranks that "There should be NO TIME DUE GRANTED FOR THE FORESEEABLE FUTURE." I didn't get to write down the exact quote, but Wysinger told everyone that the city had given the Department the "4 on - 2 off" schedule, so Time Due shouldn't even be an issue. After all, you get 15 extra days off a year. No need to take off Saturdays, Sundays or plan for family days, ball games, whatever.

    This place is truly circling the drain.

OK, so no more Time Due for anyone? All summer? All year? Fuck you Wysinger. You were a worthless cop when we knew you, a multiple-time promoted merit hack, a thief of awards that better cops than you have paid for in blood and you've only gotten worse with age. Now you're drinking the Rahm/McCarthy koolaid by the barrel full and we're pretty sure that isn't a sugar glaze on your face. You disgust us and we're damn glad all we see of this Department is in our rearview mirror.

Anyone who was at this meeting ought to be calling FOP and asking if the Department, specifically Al Wysinger, can deny you time off that you've earned. Time Due means that it's "DUE" to the men and women who have it. Stop fucking with the troops.

What Can You Say?

Leaving aside the time of day, no 7-year-old should catch a stray round:
  • Late Wednesday night, Banks' 7-year-old daughter Heaven was sitting next to Banks as she sold snacks and snow cones when someone opened fire down the street around 10:45 p.m. A stray bullet hit the little girl as she ran back to her house in the 1700 block of North Luna Avenue, police and family say.

    Heaven was shot in the back and died half an hour later.

This, however, is completely asinine:

  • Mayor Rahm Emanuel on Thursday lashed out at the gang thugs who shot and killed a 7-year-old selling lemonade under her mother’s watch in the latest example of the gang violence that’s driving a 38 percent spike in Chicago homicides.

    Emanuel clearly seems to be running out of things to say when innocent kids are caught in the gang crossfire or when bodies and shooting victims pile up after each summer weekend.

    So he took a new tact after the Wednesday night murder of Heaven Sutton, a 7-year-old Austin girl who had begged her mother to move after several recent shootings in their West Side neighborhood.

    Instead of defending gang strategies that don’t appear to be working, the mayor went on the offensive against the cold-hearted gang members engaged in a shootout around a kid selling lemonade on a summer night and a mom who was right there watching.

    “This is not about crime. This is about values. Take your gang conflict away from a 7-year-old. Who raised you? You have a 7-year-old selling lemonade. You’re a member of a gang coming to get lemonade and another gang member is driving by. Where were you raised and who raised you? Stay away from the kids,” the mayor said, his voice rising.

Who raised them? No one did Rahm. This is what half-a-century of LBJ's "Great Society" has left us with - dead 7-year-old kids.

Ex-Politicians Arrested

  • Former Cook County Commissioner Joseph Mario Moreno and ex-Chicago Ald. Ambrosio Medrano have been charged with bribery, federal officials said today.

    Moreno, who was first elected to the County Board in 1994 but lost re-election in 2010, was charged with allegedly taking a $5,000 payoff in connection with a waste transfer station in Cicero. He was also linked to a bribe scheme involving the sale of bandages to Stroger Hospital and other public hospitals, authorities alleged.

    Medrano, who was convicted of bribery as an alderman in the 1990s, was charged with offering a bribe to an undercover informant while working as a staff member for Moreno.
So do we get to count Medrano twice in the "convicted aldercreatures" column?

Germany Blinks After All-Night Fight; Italy and Spain Still Not Happy; For Now, Futures Are

It's a love-fest in Asia futures once again, but will it hold on Friday or through the weekend?

One thing's for sure, sentiment was so sour about this 19th summit, that any bit of good news stood a decent chance of temporarily igniting the market.

You can actually credit German chancellor Angela Merkel for that sour sentiment because she repeatedly stated Germany would not give in. The latest reports suggest Germany did blink, but not enough to please Italy, Spain, and France.

The fact remains that Italy, Spain, and France all want something that is virtually impossible. They demand actions that are against the German constitution. Simply put, it's not going to happen.

Meanwhile, let's tune in to what has the futures all excited.

All Night Fight

Please consider the Financial Times report Eurozone officials in all-night aid fight
German officials gave their clearest indication to date that they were prepared to intervene to shore up Italian and Spanish borrowing costs, saying eurozone leaders should use existing powers with their €440bn rescue fund for short-term help.

After weeks of insisting they would not budge on short-term measures, the sudden German acquiescence led to a flurry of activity in Brussels, where EU leaders gathered for the latest in a series of high-stakes summits intended to solve the crisis.

Unexpectedly, senior officials from all 17 eurozone finance ministries met on the sidelines of the summit to weigh emergency plans for Rome and Madrid which focused on using the rescue fund to buy Italian and Spanish bonds to reverse the recent spike in yields.
That certainly isn't much.
Indeed this next snip seems far more meaningful in a negative sense.
The political stakes for Mr Monti also rose on Thursday. Giorgio Napolitano, the Italian president and a strong Monti backer, said that political support for his technocratic government was slipping – an implicit warning to European leaders that Mr Monti needed to return from Brussels with assistance.

“Conflicts and political polemics among the forces that support this government are increasing,” Mr Napolitano said a written statement.
Euro Surges After EU Leaders Renounce Seniority

Since the Financial Times does not have the rest of the story, let's look elsewhere.

In a move that will put still more risk on German taxpayers, and also what likely has the futures market excited (until the next problem hits), Euro Rises After EU Leaders Renounce Spain Loan Seniority reports Bloomberg.
The euro surged the most this year after European leaders agreed to drop the condition that emergency loans to Spanish banks give their governments preferred creditor status.
No Problems Solved

In isolation, renouncing seniority is certainly net positive for bond yields in Spain and Italy. However, it does not solve a single structural problem. Moreover, that move it is certain to raise ire of some in Germany and Finland who will have to bear the risk.

If this is all the summit produces (other then the expected fluff to agree to agree to do something five years from now), expect whatever gains  (if any) that come from this maneuver to be fleeting. 

Mike "Mish" Shedlock
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Monti Threatens to Halt the Game of Marbles Unless he Gets the Big Green One; Hollande Threatens to Remove Marbles as Well; EU Summit Deadlocked

Conditions at the EU summit are breaking down more than expected thanks to a position taken by Italian Prime Minister Mario Monti. Acting like a spoiled brat in a game of marbles, Monti refuses to let anyone else play unless he gets the big green marble he wants.

In less colorful terms, Bloomberg explains Monti Withholds EU Growth Pact Approval Unless He Gets Interest Rate Relief.
Italian Prime Minister Mario Monti may block the 120 billion-euro ($149 billion) growth initiative announced by European Union President Herman Van Rompuy without an effort to reduce its borrowing costs, two Italian officials said.

Italy is withholding its official endorsement as it pushes for collective action at an EU summit in Brussels to push down its bond yields, said the officials who spoke on the condition that they not be named.
EU Summit Gridlocked

Euroskeptics will be pleased to note the summit is gridlocked, at least for the moment. How do we know this? Easy. EU President Herman Van Rompuy said "talks weren’t gridlocked" and will continue through the night and later today.

Moreover, Hollande threatened to temporarily remove his marbles from the game as well.

Please consider this snip from Demands for Bond-Buying Agreement Roil European Summit
French President Francois Hollande said Italy and Spain ought to receive support from the euro area’s firewall funds and that their yields are still too high after the efforts they’ve made to reform their economies. Spain’s 10-year yields breached 7 percent and Italy auctioned 10-year securities at the highest yields since December yesterday.

Hollande said the growth remarks “aren’t enough” and that he’ll withhold endorsement of an EU fiscal pact, which was endorsed by his predecessor, Nicolas Sarkozy in December, at least until the end of the two-day summit.

“The euro zone cannot stay in the current circumstance, without a budgetary union and even more without a banking union,” Hollande told reporters.
Since German chancellor Angela Merkel will not agree to a banking union or a budgetary union, the EU summit is for sure deadlocked. It will remain deadlocked until Monti and Hollande change their opinions, effectively putting their marbles back in the game.

Mike "Mish" Shedlock
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Eurozone Retail Sales Drop 8th Month; Italy, France are Down; Germany Retail Sales Up, Outlook Down

German retail sales bounced back for the second month, but not enough to prevent the aggregate eurozone sales from falling for the eighth consecutive month.
Summary of June findings:

The Eurozone retail sector remained in contraction mid-way through 2012, according to PMI® data from Markit. Sales fell on a month-on-month basis for the eighth successive month – the third-longest sequence in the survey history – and purchases of new goods by retailers declined at the second-fastest pace on record. That said, the rate of decline in sales slowed sharply during the month.

Germany, France, Italy Sales

The key sentence is "purchases of new goods by retailers declined at the second-fastest pace on record."

Will inventory liquidation continue or will retail sales rebound? Liquidation can only go so far, but that does not mean sales will rebound in a meaningful way. There is certainly no reason to expect a rebound in sales, but data seldom runs in a straight line.

Much depends on Germany. Yet, in spite of a two month rebound in sales, Germany alone could not pull aggregate sales up to even.

Italy Remains a Disaster Zone

Individually, Italy Retail Sales remain a disaster zone.
June sales were down sharply on levels seen in the corresponding month one year ago, which firms linked to lower consumer purchasing power and greater uncertainty over the economic outlook. The annual rate of contraction was, however, slower than May’s series record.

Targets set for June were missed by the majority of firms, with a lack of confidence among clients and unfavourable weather conditions among the reasons cited by those that registered lower-thanexpected sales. Although the narrowest for three months, the gap between actual and planned sales remained considerable.

As was the case in each of the previous two survey periods, retailers were downbeat with regards to the prospects of achieving July targets. In fact, the overall degree of sentiment in June was one of the most negative in the series history, matching that recorded last December.
Markets turn on extreme sentiment, yet sentiment can remain extreme for long periods of time. Here is an accurate assessment by Markit economist Phil Smith.
“Retail PMI data for June continue to underline the effects that decreasing real wages, rising tax burdens and greater job insecurity are each having on Italian households’ willingness and ability to spend. High street sales were again down markedly on the month, leading to further reductions in profitability and employment in the sector. Rates of decline were slower in June, though, given that this came on the back of some of the worst months trading in the series history, this was by no means a cause for celebration.”
Retailer Purchasing Falls at Record Rate in France

Inventory reduction is underway in France as Purchasing Falls at Record Rate
French retailers reported a slower decrease in sales during June. The latest drop was only modest and much weaker than in the preceding two months. However, the performance over Q2 as a whole has been the worst since the inception of the survey in 2004, as trading has suffered in the face of difficult economic conditions. With retailers attempting to prevent an unwanted build-up of inventories, the value of goods purchased for resale fell at a series-record rate. Meanwhile, intense competitive pressures led to another marked drop in gross margins, while retail sector employment decreased at an accelerated pace.

Jack Kennedy, Senior Economist at Markit and author of the France Retail PMI, said: “The French retail sector continued to struggle in June, as the tough economic climate led to another drop in sales. The failure to rebound from May’s severe weakness, when trading was impacted by a run of public holidays and the presidential election, underlines the strong headwinds facing retailers amid depressed consumer purchasing power and high unemployment. The overall sales performance over the second quarter has been the weakest since the survey began in 2004, and it was therefore no surprise to see accelerated falls in both purchasing and employment during June as retailers went into retrenchment mode.”
Germany Retail Sales Up, Outlook Down

Markit reports Stronger increase in German retail sales, but outlook is reported as weakest for 2½ years
German retailers indicated a further rebound in monthly sales in June, with the pace of expansion reaching a three-month high. At 52.4, up from 50.7 in May, the seasonally adjusted Germany Retail PMI was above the neutral 50.0 value for the second month running. The latest reading pointed was above the long-run survey average (49.9) and indicated to a moderate increase in month-on-month retail sales in Germany. Some firms linked the improvement to better weather conditions and higher consumer spending as a result of the European Football Championship in June.

First drop in goods ordered for resale in nine months

Retailers in Germany responded to worries about the outlook for sales by reducing the value of goods ordered for resale at their stores in June. This was the first reduction since September 2011 and in turn contributed to the slowest accumulation of stocks of goods for resale so far in 2012.
In spite of highly unusual reports of higher sales due to "better weather" as well as higher sales because of football (soccer) championships, Markit reports ...
Actual sales in June were generally lower than expected, as has been the case in each of the past three months. Moreover, German retailers signalled a marked degree of pessimism about the outlook for their sales in one month’s time. The balance of firms expecting to reach their targets in July is the lowest for two-and-a-half years. Anecdotal evidence widely cited concerns about the impact of weakening domestic economic conditions, alongside uncertainty related to the euro area crisis, as the main factors leading to downbeat sentiment in the retail sector.
Mike "Mish" Shedlock
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Obamacare Upheld; What Should Romney, Republicans Do?

Today the Supreme Court ruled in favor of Obamacare by a 5-4 margin. Here is the Full Text of the Supreme Court Ruling.

Romney has promised to overturn the ruling, saying "ObamaCare was bad policy yesterday, it’s bad policy today."

That statement makes Romney a hypocrite as the Financial Times notes.

“Obamacare places the government between you and your doctor,” said Mr Romney, who championed a similar plan while governor of Massachusetts but says he opposes its expansion at a federal level.

Why wasn't it bad policy in Massachusetts?

Obama Chimes In

Here are some quotes from a press conference of President Obama as reported by The Guardian.

  • "Whatever the politics, today's decision was a victory for people all over this country"
  • "It should be pretty clear by now that I didn't do this because it would be good politics."
  • "Today I am as confidence as ever, that when we look back five years from now, or 10 years from now, or 20 years from now, we will be better off because we had the courage to pass this law and keep moving forward."

Clearly, Obamacare was not good politics.

The president took no questions to which the Guardian commented "What was interesting is that Obama – for the first time in a while – offered an unapologetic defense of the healthcare reforms. That's going to make for a different approach in the presidential campaign."

Small Likelihood of Overturning Obamacare

Even if Romney were to win, he would be extremely challenged to overturn Obamacare outright.

Senate filibuster rules are such that Democrats will easily be able to block it. Besides, Democrats have a majority in the Senate and do not even need a Filibuster move to block changes.

Given the Supreme Court ruled Obamacare is a tax, there would be some scope for Republicans to trash it in the once a year Reconciliation Process that limits Congressional debate. After all, that is how the bill passed in the first place.

Still, to use reconciliation, Republicans will have to elect Romney, hold the House and take control of the Senate. Is that likely?

Justice Robert's Opinion
Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.
Pragmatically Speaking

We can debate all day whether or not the Supreme Court made the correct ruling. However, such debate is useless. It will not change a thing.

Like it or not, the Supreme Court ruled that we are stuck with Obamacare unless Congress changes it.

Pragmatically speaking, it would be more beneficial to have discussions on how to improve healthcare rather than howling at the moon against it.

However, I suspect Romney will keep howling at the moon even though he was in favor of essentially the same moon when he was governor of Massachusetts.

Mike "Mish" Shedlock
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Bankia Valued at EUR -13.635 Billion; Spain Becomes Sole Owner, Shareholders Totally Wiped Out; Entire Bankia Board Resigns

Five days ago we heard from the Bank of Spain that Spanish banks only need between €16bn and €62bn in new capital.

For details, see Laugh of the Day: Stress Tests Show Spanish Banks Only Need Between €16bn and €62bn in New Capital; ECB to Accept BBB- Rated Debt (One Step Above Junk) as Collateral

In the same report we also heard that the three largest bank groups do not need any capital at all. Bear in mind that was allegedly in a "stress" scenario.

Today we learned that Bankia is Valued at EUR -13.635 Billion
The seven banks that founded Bankia be left out of the shareholders of the entity and the State will be made with one hundred percent of the group's parent, Bank Savings Financial (BFA), the latter having a negative value of 13.635 million euros According to the assessment commissioned by the state.

After the assessment, the FROB becomes the sole owner of BFA.

Thus, the seven savings banks that created the group, Caja Madrid, Bancaja, La Caja de Canarias, Caja de Avila, Laietana Caixa, Caja Segovia and Caja Rioja, stay out of the shareholders.

Finally, BFA proceed to recapitalize its subsidiary, Bankia, with an injection of 12,000 million euros. He will do through a capital increase in which existing shareholders will have preferential subscription rights. It is expected that the capital increase in Bankia be completed during October.

The European Commission today gave its approval temporary nationalization and recapitalization of the matrix BFA waiting for Spain to send to Brussels a restructuring plan of the institution in the next six months.
I strongly suspect that a valuation of -13.635 billion euros is on the wildly optimistic side.

Entire Bankia Board Resigns

Here is an amusing picture from the El Pais article The assessment shows a group of Bankia 13.635 billion hole

El Pais reports ...
The group Bankia worthless. Worse, his assessment is negative, -13.635 billion euros. That is the appraisal on the face of nationalization has been presented today to the board of the entity, sources of such advice. That means that the conversion of the 4.465 million of preferred shares of Bank Savings Financial (BFA) results in 100% nationalization of the matrix and, indirectly, 45% of Bankia, but the assessment does not directly affect the bank quoted. The BFA board of directors resigned en bloc.

The seven savings banks that are BPA was created without any equity in the state, leaving them no future dividends to be used for social work . The entities concerned are Caja Madrid, Bancaja, La Caja de Canarias, Caja de Avila, Laietana Caixa, Caja Segovia and Caja Rioja. The seven contributed to its financial business BFA and are now nothing more than the assets of the work were marginalized social integration.
Did they all retire with full pensions?

Looking back, Bankia has provided more laughs than I remembered.

May 7, 2012: Spain to Spend €7bn-€10bn (It Doesn't Have), Bailing Out Bankia, the Nation's 3rd Largest Bank; Liar, Liar Pants on Fire

May 9, 2012: Audit Shows Spain's Bankia Short 3.5 Billion Euros; PP says "We Must Help Bankia, It Has Deposits for 10% of GDP"

May 10, 2012: Spain Nationalizes BFA and 45% of Bankia; No Bid for CatalunyaCaixa, Bank Worth Less Than Zero; Der Spiegel: Germany Fears "Bottomless Pit"
The implosion in Spanish banks continues. On Wednesday, Spain nationalized BFA, the 8th nationalization since the start of the crisis.

After sinking 3 billion into CatalunyaCaixa, Spain tried to privatize the mess but there were no offers at zero euros. Clearly CatalunyaCaixa bank is worth less than zero.

Meanwhile Der Spiegel reports "Bundesbank has no idea of what is happening in Spanish banks". Mish readers do. The Spanish banking system is without a doubt bankrupt.
Emphasis added.
Today we see that Bankia and the entire group is worth less than zero.

Mike "Mish" Shedlock
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Alder-Asshole Said What?

  • The Chicago City Council overwhelmingly voted today to decriminalize small amounts of marijuana possession.

    Mayor Rahm Emanuel’s proposal passed 44-3, allowing Chicago police to issue pot-possession tickets starting Aug. 4. The move makes Chicago among a growing wave of states and several of the largest U.S. cities to adopt reduced penalties.

    The ordinance gives Chicago police the discretion to issue citations between $250 to $500 for someone with 15 grams or less of pot.

  • Several of aldermen spoke about how the black and Hispanic communities are disproportionately affected by the city’s current policy to arrest people who possess small amounts of marijuana.

    “If you had been white and privileged, marijuana has already been decriminalized,” said Ald. Howard Brookins, 21st,who spoke in favor of the measure. “The only people arrested for these crimes have been black and brown individuals. . .This is a way to potentially level the playing field.”

Level the playing field for what? Fixing the damage done by years of pandering politicos, free ghetto giveaways, lack of parental responsibility, no pride of ownership and a complete inability to provide even the most basic standard of living for themselves and their spawn?

Oh, you just mean the over-prevalence of dope smoking slum dwellers with an entitlement attitude while contributing nothing to a functioning society. That kind of "level playing field?"

Brookings is about the biggest racist out there as evidenced by his claim.

Suspend It All!

Crime will be documented, but it will not be solved:
  • The Ivory Tower had decreed that Detectives will have a report on all handouts within 5 days!!
    OK let see how fast you can say suspend.
    Thw word is that in NYC all cases are suspended and only the victims who demand follow up get some

Tie this into the upcoming list of jobs we won't even be responding to and we foresee a tremendous drop off in crime numbers. We also see a massive drop in the Clearance rates, though "massive" is a relative term if you look at the actual numbers right now.

Bad Timing

  • Sneed hears a monumental seizure of marijuana — 16,000 pounds — was intercepted Tuesday evening by a Chicago Police Department/DEA strike force in the Chicago area.

    Sneed has learned the huge pot shipment, shipped via Mexico through Texas, was seized the night before the Chicago City Council passed a controversial city ordinance decriminalizing small amounts of pot.

    Sneed is told the cache of pot was part of an ongoing strike force investigation “and was designated to be taken to a warehouse in the greater metropolitan area when seized,” according to a police source.

    No arrests were made. A press conference by the Police Superintendent Garry McCarthy and DEA officials is scheduled for Thursday morning.

No arrests - but about 1,000 tickets were issued.

Thanks for the $$$ Rahm

This has been going on for a few years now and every year it makes us smile, sometimes even laughing out loud at the stupidity of Chicago democrats:
  • On Saturday, June 23, three of Guns Save Life’s intrepid members, Chris Betley, John Sutter and Steve Fuller drove to Chicago to participate in the city’s annual gun “turn in” event titled, “Don’t Kill A Dream Save A Life.” In short, the sum real-world value of the guns we took up to the Windy City would have been calculated by most people – ourselves included – solely on their scrap metal value. To the gun-hating do-gooders up there, though, they were worth big dollars; $100 for each firearm and $10 for BB-guns and replicas. No questions asked. So, to take advantage of this artificial market for accumulated rust and machined parts, we sent our three members up north with sixty “guns” and four pellet pistols . . .

    This was a larger and more organized endeavor than our 2007 trip where Guns Save Life sold $2300 worth of rusty scrap metal to these same do-gooders who live by the lake. In more recent years, Mayor Daley was only offering $50 for guns, so GSL sat those events out.

    But we didn’t take those years off. We’ve been busy collecting non-firing junk donated by our GSL members almost non-stop, earmarking the rusty, broken-down clunkers for the self-defense eschewing gun-haters in Chicago. And it’s all for a good cause: the children.

Ah yes, the children. The children will be the beneficiaries of a nice little NRA summer camp where they learn gun safety and ::gasp!!:: actually fire guns in a supervised environment. Paid for in part by $6140.00 from Rahm Emanuel and other misguided souls.


Forbes Magazine

Everyone seems to have a Chicago angle lately. This one was pointed out by Forbes Magazine:
  • Here in Chicago we are fretting about crime. Philadelphia is hosting a jump in violence, with an 86 percent rise in homicides in June alone. But, otherwise, we are mostly alone. Other major cities are continuing the decades-long decline in crime rates, while Chicago has seen a nearly 40 percent spike this year. (You can see a nicely visualized breakdown of the city’s crime, by ward, with this newly released interactive tool.)

    The spike recently spread to the Magnificent Mile, the squeaky clean shopping district downtown. It led one Alderman, granted anonymity perhaps to escape the wrath of Mayor Emanuel, to suggest that these shootings in safe areas mark “when we start becoming Detroit.” That taps into a huge fear here—turning into the gutted city up north. Lines like that, though, are usually associated with simple, sensationalized ideas about urban violence.

    One person who has spent much of his career dispelling these easy notions of crime is Jens Ludwig, a researcher at the University of Chicago. He has an op-ed in Crain’s this morning laying out three reasons why Chicagoans should be concerned with crime.
Good reads about the current unpleasantness.


How come Sneed didn't catch this one? She has spies everywhere:
  • Durbin the turbin was with tiny dancer at yolk in the south loop. I wonder what they were plotting. No body guards. Hhhhhmmm

Well, maybe that's one she wants to keep secret for some reason.

Merle Hazard Song - US Racing Towards Fiscal Cliff; Submit Lyrics For Merle's Next Song For Fame (Certainly Not Fortune)

I received an email this morning from "Merle Hazard" about his latest song. It's one of his best.

US Racing Towards Fiscal Cliff

If the video does not play, or if you wish to submit lyrics or ideas for his next song, please click on A Q-and-A, Plus a Ditty and Contest as U.S. Races Toward the 'Fiscal Cliff'

Merle Explains ...
Though I'm a country singer, I also love surf-style music. The only thing wrong with the genre is that these songs are always -- of course -- about surfing, as well as teenage romance and drag races. There should be more on macro-economic topics and political economy. So I'd like to do another one like 'Fiscal Cliff,' but I'm out of ideas. I'm hoping NewsHour audience might help. I have in mind a song contest. Submit a topic, a key phrase, or a whole lyric. Whatever you like. The Making Sen$e team and I will jointly select the winner. Assuming we get a good idea or two, I will turn it into an original song. There is no money involved, as the market for econ surf songs is somewhere between inactive and inconceivable. But the winner will garner Internet fame on Making Sen$e, perhaps even go viral, and will in any case earn a heart-felt thank-you from me. At the very least, you should have fun and a story to tell.
This is clearly a way to get free publicity for Making Sen$se as well as free ideas for a new song, but hey, I don't mind as long as a good song comes out of it.

I asked for a song about the pension crisis, pointing Merle to my post Stockton CA Bankrupt; Unions (Not Housing Bust) Primarily to Blame; Pension Death Trap for Cities; What's the Solution?

I did not provide any lyrics or a background melody, so have at it, if you like my topic.

There is a form on the above link to submit ideas. May the best pension song win!

Mike "Mish" Shedlock
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Obama Out as Grand Marshal

Evidently, someone in the Obama "choom gang" stopped taking hits off their primo weed stash and realized that Illinois is already in the bag for Obama and he doesn't really have to waste valuable campaigning time catering to the Billiken crowd.

WBBM NewsRadio 780 just reported that the president is not coming to Bud Billiken and won't be the Grand Marshal of anything this August.

An invitation extended to the president doesn't automatically mean the president accepts it - especially after a Secret Service review of the situation on the ground.

Stockton CA Bankrupt; Unions (Not Housing Bust) Primarily to Blame; Pension Death Trap for Cities; What's the Solution?

The city of Stockton, California, is Bankrupt. It has stopped making bond payments and will become the largest city in the US to seek protection via US bankruptcy law.

The bankruptcy was inevitable.

California law requires blame to be assessed. To be sure there is plenty of blame to go around.

Here are a few paragraphs from the LA Times that explain the setup.
How Stockton found itself so mired in debt can be seen everywhere in the city's core. There is a sparkling marina, high-rise hotel and promenade financed by credit in the mid-2000s, mere blocks from where mothers won't let their children play in the yard because of violence.

During the economic boom, this working-class city with pockets of entrenched poverty tried to reinvent itself as a draw to Bay Area refugees and a popular site for conventions. It offered generous city employee pension plans and benefits.

When the bust came, few places fell as hard as Stockton. The city has the second-highest rate of foreclosures in the country and the second-highest rate of violent crime in the state.

The city made $90 million in drastic cuts from the general fund in the last three years, including reducing the Police Department by 25%, the Fire Department by 30%, and cutting pay and benefits to all employees. There is a state investigation into whether Stockton's financial devastation was entirely due to shortsighted optimism or if there was corruption. The state mediation law requires assigning blame.
Public Union Pensions, a Death Trap for Cities

I added emphasis to the two sentences that explain what really happened and where the blame will be placed. Sure, Stockton politicians made gross errors in its budget. Yet, that is not what did Stockton in.

The thing Stockton could not  correct over time is ever-escalating pension promises and public union salaries. Union pensions wrecked Stockton. The only way to escape the death-grip of inane pension promises is bankruptcy.

Things like parks and marinas are one-time foolishness that can be corrected over time.

Ever-escalating public union wages and pension costs cannot be corrected over time (Indeed they are 100% guaranteed to get worse). Prevailing wage laws that force cities to overpay for every city project cannot be undone over time either.

Both have to be fixed big-bang. The former by bankruptcy, the latter by brute political force, preferably at the national level.

Scapegoating Short-Sighted Optimism

Blame will not be placed where it most belongs. Here is the key sentence: "There is a state investigation into whether Stockton's financial devastation was entirely due to shortsighted optimism or if there was corruption."

Note the two choices.

Political pandering by politicians to unions is not on the list. Nor are pension plans. Nor are public unions salaries.

$51.71-an-Hour Summer Job Program

Let's turn our focus to New York for a second, but the problem described by the New York Post applies to California, New York, and every prevailing wage state. If federal funds are involved, it applies to every state.

Please consider NY’s $51.71-an-Hour Summer Job Program
The small Hudson Valley city of Poughkeepsie is now home to some of the best-paying summer jobs ever: $51.71 an hour.

That’s right: $51.71 an hour.

The project started off as perfectly sensible. The work involves restoring Fallkill Creek, damaged in last summer’s post-Hurricane Irene flooding. To get the job done and put up to 150 unemployed young people to work, the state Labor Department tapped a federal storm-cleanup grant.

Clearing debris and lifting heavy objects isn’t easy, but why pay temporary manual laborers the same hourly rate as a skilled employee in a $100,000-a-year full-time job?

The ultimate source of funding for the Fallkill cleanup is a federal National Emergency Grant, whose terms require paying wages at the highest of the federal, state or local minimum wage or at the comparable rates of pay for individuals employed in similar occupations by the same employer.

The state Labor Department decided that this meant the prevailing wage for public-works projects. But “prevailing wage” is a term of art that actually means a pay rate based on collective-bargaining agreements between labor unions and private employers.

For the Mid-Hudson region, the prevailing hourly rate for laborers comes to $51.71 — $30.71 in wages plus $21 in benefits. But the temporary workers on the Fallkill won’t be union members, so they’ll get the entire amount as a wage, the Labor Department ruled.

If not for the prevailing wage, the Fallkill grant could’ve provided seasonal employment for 1,000 young people at the minimum-wage rate of $7.25 an hour — which might have gotten the job done sooner, to boot.

Or the state might have employed the same number of people, paid them $10 an hour and saved taxpayers $219,000 a week.

The project illustrates how government all too often works — that is, as wastefully as possible. It also stands as a testament to the power of unions in dictating government wage rates.
Who Benefits From This?

Bear in mind that government spending (even deficit spending, no matter how ill-advised), adds to GDP by definition. It does not matter how little product is actually produced, or even if the results are negative.

In terms of deficit spending, spending power is stolen from consumers and investors because government never allocates resources wisely.

Fixing 1 bridge instead of 10 adds as much GDP if the amount spent is the same.

Want to create 1,000 jobs for the summer or 140? If you are one of the politically well-connected the answer is 140.

Want to bet who got those jobs? My bet is sons and daughters of the politically well-connected. I would like to see a report.

Let's return our focus to California.

University of California Faces Mounting Pension Costs

Here is an interesting article that came my way a few days ago: University of California faces mounting pension costs.
The cost of pensions and retiree health benefits are soaring at the University of California, increasing pressure to raise tuition and cut academic programs at one of the nation's leading public college systems.

The 10-campus system is confronting mounting bills for employee retirement benefits even as it grapples with unprecedented cuts in state funding that have led to sharp tuition hikes, staff reductions and angry student protests.

The UC system, including medical centers and national laboratories, is scrambling to shore up its pension fund as it prepares for a wave of retirements and tackles a roughly $10 billion unfunded liability.

"The regents made a serious error and the Legislature made a serious error by not putting money aside for 19 years while accumulating this obligation," said Robert Anderson, a UC Berkeley economist who chairs the system's Academic Senate. "Now we have to pay for it."
Notice the self-serving attitude and blame-placing by Robert Anderson, essentially whining that taxpayers did not dole out enough money to give him his expected benefits.

What benefits are we discussing? The article explains.
The UC system faces spiraling pension costs for 56,000 current retirees and another 116,000 employees nearing retirement.

As of May, there were 2,129 UC retirees drawing annual pensions of more than $100,000, 57 with pensions exceeding $200,000 and three with pensions greater than $300,000, according to data obtained by The Associated Press through a state Public Records Act request.

The number of UC retirees collecting six-figure pensions has increased by 30 percent over the past two years, according to Californians for Fiscal Responsibility, an advocacy group that has analyzed UC pension data.

Topping the list is Marcus Marvin, a retired professor of dentistry and public health at UCLA, who receives an annual pension of $337,000.

If UC President Mark Yudof, 67, serves for seven years, he would receive an annual pension of $350,000 — in addition to regular benefits he accrues through the UC Retirement Plan, according to university documents.

The university caps employee pensions at the IRS limit of $250,000, but that ceiling does not apply to the "supplemental retirement benefits" promised to Yudof.
With inane pension benefits like that, is it any wonder the system went unfunded?

Those benefits cannot and will not be paid. The system is bankrupt. Sadly, young kids graduating from college tens or hundreds of thousands of dollars in debt are bankrupt as well. However, student loans cannot be discharged in bankruptcy.

Students are the one who have paid the highest price for our corrupt education system. Nothing is done "for the kids". It is all done for grossly overpaid administrators and public union employees.

School tuition has to be ridiculously high to support $350,000 a year pension plans for life.

What's the Solution?

  1. The immediate solution is bankruptcy. Expect to see more cities file. However, longer-term structural problems must also be addressed.
  2. Untenable pension contracts need to be tossed out by the courts and benefits reduced. Every taxpayer not on the public dole should cheer bankruptcy, not resist it.
  3. End defined benefit pension plans for public union workers.
  4. End collective bargaining for public union workers. Governor Scott Walker in Wisconsin has proven that can be done.
  5. Scrap Davis-Bacon and all state prevailing wage laws.
  6. Institute national right-to-work laws. 
  7. Merit pay for teachers
  8. More competition from accredited online schools to drive education costs way down
  9. Scrap student loan programs that only benefit administrators and educators, not the kids.

It's time to stop overpaying for all government-sponsored services including but not limited to police, fire, prison-workers, and education. The vicious, self-serving grip that unions and their political supporters have on this nation has to end. Governor Walker partially paved the way in Wisconsin. Other states must follow through. At the national level, we desperately need right-to-work laws while ending prevailing wages.

Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List

Laugh of the Day: "No Risk of Housing Bust" says Australia Central Banker

"No Risk of Housing Bust"

In case you need some humor today, please consider No risk of housing bust: RBA
Australia is not at danger of a collapse in the housing market, a top central banker says, again playing down concerns that Australia could suffer price falls like those seen in the United States or parts of Europe.

Speaking at a mortgage conference, Reserve Bank assistant governor Guy Debelle said he was more concerned about the outlook for the European Union and the uncertainty that was causing globally.

Asked about fears of a housing collapse in Australia, Mr Debelle said there was no oversupply of housing in the country, households were well able to manage their debt levels and mortgage arrears remained very low.

"This (housing risk) is not something that keeps me awake at night," he added.
No Oversupply?

For years I have had people emailing me that a housing bust was impossible because there was a critical shortage of houses in Australia.

I calmly point out we heard the same story in the US for years as well. Of course, in the midst of a bubble, no one wants to hear any rational explanations.

Thus, a few days ago I had to laugh at this Bloomberg headline: Vanishing Households Undercut Claim of Australia Shortage
Australia has almost 1 million fewer households than assumed in government forecasts of a housing shortage, raising doubts about a supply shortfall cited as the main reason the nation will avoid a U.S.-style crash.

The Pacific nation had 7.8 million households, data released yesterday from the 2011 Census showed. That compared with estimates of 8.7 million as of June 2010, according to the latest figures used by the National Housing Supply Council, a group created by the government in May 2008 to monitor housing demand, supply and affordability. Australia’s population also grew by 300,000 less than previously estimated, to 21.5 million.

“There’s been a bit of a disconnect between the estimates between the census points and the actual census data,” said David Cannington, Melbourne-based economist at Australia & New Zealand Banking Group Ltd. (ANZ) “My feeling is that some of the underlying housing demand numbers will be revised down.”

Home prices across Australia have seen quarterly declines since the beginning of 2011 as global economic uncertainty and fears of overpaying for properties in the English-speaking world’s most unaffordable housing market kept buyers sidelined.

Dwellings in Australia cost 6.7 times the average annual income as of the third quarter of 2011, Illinois-based consulting company Demographia said in a report in January.

The increase in the number of people living in group households and in apartments and townhouses backs this up, said David Collyer, campaign manager at tax reform advocacy group Prosper Australia.

“Young adults have gone back home with mum and dad, or are sharing houses,” said Collyer, who argues that Australia has an oversupply of housing based on statistics showing water usage and new building data. “Household sizes have gone up even more than people think, and the oversupply of housing will be revealed to be even worse than we thought.”

As more Australians live with friends or parents to combat falling affordability, the number of vacant dwellings rose to 934,471 in the 2011 census from 830,376 in 2006.
Housing Shortage With 934,471 Vacant Homes

Allegedly there is a housing shortage with close to a million vacant homes.

At the peak of every bubble there always appears to be a shortage. There appeared to be a shortage of Florida condos in 2005 as well.

The nutcases really believed Florida needed more condos. The nutcases at the RBA now believe "no risk of housing bust" in Australia, right in the midst of what I believe will be a decade-long implosion. What a hoot.

Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List


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