If The Rest Are Only Half As Bad As Ireland …


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    Ireland was one of the first European countries to get hit by the financial crisis. It decided to bail out its banks at the direct cost of the taxpaye
    [See the full post at: If The Rest Are Only Half As Bad As Ireland …]


    Ireland’s population still hasn’t recovered (will it ever?)

    If the goal is to increase the population at all costs,then by all means, yes, it might recover. The rest of the world stands as a fine example that, if that’s your particular goal, you can achieve it by using a combination of traditional and industrial religion


    It’s just a matter of time until the walls come down, and of course it’s ironic that the longer reality can be kept hidden underneath the carpet, the less real it seems. But that’s simply a predictable consequence of having short attention spans. And we should be able to look beyond that.

    It may be kept hidden from those who have no money but those who have money and managing their investments sure as hell do know what is happening.


    The financial data and news company, whose computer terminals are widely used on Wall Street, had allowed journalists to see some information about terminal usage, including when customers had last logged in, and how often they used messaging or looked up data on broad categories, such as equities or bonds.
    Senior Goldman executives argued that while the information Bloomberg reporters had was limited, a trader could easily make money just by knowing what type of securities some high-profile users were looking at, or what questions a government official raised with Bloomberg’s help desk, people with direct knowledge of their views said.
    Bloomberg’s terminal has various command codes that with the click of a few buttons allow users to look up news about specific companies or topics, and data on specific securities or broader markets. Subscribers can also see information on fellow Bloomberg users, such as phone numbers, work titles, email and Bloomberg messaging addresses. Inside Bloomberg, some employees have access to much more detailed and current user data, for sales and marketing purposes.

    Ken Barrows

    in the end, no amount of liquidity can cover up for an underlying problem with solvency”.

    TPTB would disagree. Wouldn’t an elite politician or bureaucrat say that liquidity will lead to growth to pay off the debts? Of course, that’s nonsense if one looks at debt productivity (GDP/total credit market debt). I call it the Bernanke Rationale.


    Long time reader and uber bear. Haven’t posted for years though.

    I have felt for years that Australia would follow the real estate crash path of Ireland. Australia had no recession during the GFC or since. With the exception of some regional and South East Queensland markets, real estate has remained strong in Australia. This is despite the fact that Australia has the highest home loan debt to GDP ratio in the world and some of the highest debt to median household income ratios in the world.

    In the last 18 months interest rates have been falling and now that home loan rates are down to around 5.25% (RBA cash rate is 2.75%) the media is all excited about another housing boom. Go figure. I am starting to think that the media may be right, as RBA interest rates trending toward zero could stimulate one last housing bubble fling.

    The caveat on this is what happens around the globe. If the world economy falls into a deep recession/depression then Australia will not buck the trend, despite zero interest rates. It all swings on how long it takes for the real economy to give up on the fantasy of borrowing more money to paper over the endless losses on failed borrowings.

    If the Ponzi lasts two more years, Australia is headed for another housing bubble on top of the already years of bubbles. If the global Ponzi ends in 2013 Australian real estate will be in the toilet within two years.

    Again I wait and watch. Frozen like a kangaroo in the headlights.


    Quantitative Necrophilia – The 3 Month T-Bill Is Telling Us The Economy Is Dead



    Its all the rage here (not ireland) for cost-cutting businesses and government to sack their employees and swap them for unpaid inturns, sometimes people are laid off and get immediately rehired as poorly-paid inturns doing the same job, without previous labour protection. Inturnship is being marketed as an advantage to avoid long-term unemployment, often promising desirable paid positions after inturnship, positions which seem ever-receding and never materialising.

    Im thinking that saturating the labour market with barely paid inturns will tend to undercut minimum wage and collapse wage pressure, keeping some businesses solvent by eliminating wage-expediture and perchance increasing aggregate production, but lowering consumer income and spending, causing deflationary pressure on prices and destroying profit-margins elsewhere. Also, inturns are largely mortgage-ineligible, further collapsing the housing market, the popped housing bubble in turn feeding back into banking, wiping out capacity for business loans.

    There is rampant fiscal deflation here and no end in sight beyond the comprehensive reevaluation of the monetary system and political economy.



    That process – of using interns – instead of full-time employees has been around in France for decades. I am sure it is the same in some other European countries as well. It is called “travail à durée déterminée” (“fixed term employment”)


    Here is a Google translation:


    Frankly, it has become so expensive and risky for small companies to take on anyone in France that it is quite understandable. The “rights” which employees have are totally out of line. Only very large companies (quasi-monopolies) and the government can handle it. The result is self-evident:


    Nassim post=7298 wrote: Frankly, it has become so expensive and risky for small companies to take on anyone in France that it is quite understandable. The “rights” which employees have are totally out of line.

    I get that part of the equation, there’s been much talk of overprotected expensive labour, its resulted in diminished labour protection/rights in recent years. In holland they call it ‘flexibilising of labour’, shortening the duration of unemployment benefit payouts [partially paid for by employers] indexed to one’s previous wage, and making it easier for business to lay people off, allowing for less risky expansion during growth and maintaining profit margins if business contracts. In those ways where labour rights are out of control, such flexible labour should increase job availability.

    But it has a huge downside; this arrangement shifts business risk onto the employee away from the employer, banks and other lenders increasingly see flexible job arrangements as an income security risk for the employee, making them risky or ineligible for mortgages or loans. Housing sales here dropped another 20% yoy last month, in part because there are too few mortgage-eligible people with permanent jobs left.

    As you said, at least the quasi-monopoly of government should be able to maintain expensive permanent positions, but even they are switching out civil servants for [less skilled?] inturns, for greatly diminished pay and rights.
    If I interpret correctly, That french law does prohibit permanently filling vacancies related to normal business activity with temporary positions, but just that is happening here. Not just unforseen business activity or rapid expansion is supplemented with inturns, long-existing permanent positions are suddenly substituted for inturns simply to cut wage costs.
    It does confer an advantage to such business, but it seems to damage other parts of the economy.

    The phenomenon of inturnship seems to be growing explosively here, and it will be deflationary if overscaled inturnship undercuts [minimum] wage, pressing down average wage, causing prices to drop and other business to fail by collapse in aggregate demand and lack of disposable income. In addition, insolvency of pension schemes will accelerate if inturns aren’t forced to pay into that.

    One of the results of overly high minimum wage is lagging business expansion and lack of available jobs, but it wouldn’t do to lower minimum wage during a deflationary depression, its exactly the wrong method to boost employment, only deepening a deflationary wage-spiral. The effects of overscaled inturnship could cause the equivalent.



    Part of the reason – in France and much of Europe – for the huge gap between employment for the young and the middle-aged is due to it being almost impossible to sack people with permanent jobs. Older people with “permanent” jobs (“durée indéterminée” – unlimited duration) will never leave for a better job elsewhere – since even “permanent” jobs come with a trial period where the employer can change his mind without breaking any laws. The system is entirely screwed and seemingly designed to misallocate scarce labour resources.

    The vast numbers of people employed by government, quasi-government and the monopolistic sectors (trains, planes, medicine, education, electricity, gas, water etc.) are subsidised by the wealth-creating sector. The parasites are far larger than the host. It is perfectly unstable.

    I do not subscribe to the viewpoint that there is a fixed amount of labour needed in the economy – far from it. I do believe that if small companies (fewer than 10 employees) were allowed total exemption from these labour laws and companies with fewer than 100 people given something much less onerous, the whole dynamic would change. These companies would get all the smarter young people and one could have a real renaissance. France is basically a very rich country – not like England.

    The last time I worked as an IT manager in France was almost 30 years ago. I remember well one occasion when I was looking for a secretary (the previous secretary had to leave to a secret location on the advice of the police as her ex-boyfriend had attacked her at work). I was inundated by applications from young ladies who wanted to work for me. The number of applications was astounding. I interviewed a few of the most promising. One of them – a very attractive young lady of North African origin – offered to have sex with me then and there if I would recruit her. I felt really sorry for her, but felt obliged to choose someone else.

    If you check out the ethnicity of those working in the monopolitic sectors, you will find that all the senior positions are ethnically French or assimilated North-African Jews. It is quite striking. The present arrangement is obviously to the great advantage to the incumbents who run it. Just check out how many girlfriends/mistresses/wives guys like Mitterand, Chirac, Sarkozy, Hollande have had and it all becomes crystal clear. These guys never did an honest day of work in their lives – they are parasites to the nth degree. It is precisely as it was in the Soviet Union before the breakup.


    Nassim post=7301 wrote: I do not subscribe to the viewpoint that there is a fixed amount of labour needed in the economy – far from it.

    I agree, there’s something called the https://en.wikipedia.org/wiki/Lump_of_labour_fallacy which I sometimes fall prey to, but the natural demand for labour tends to settle itself in a dynamic equilibrium relating to supply and demand factors of credit and capital goods, and there are correct and incorrect ways to change/force this equilibrium.

    Nassim post=7301 wrote:
    I do believe that if small companies (fewer than 10 employees) were allowed total exemption from these labour laws and companies with fewer than 100 people given something much less onerous, the whole dynamic would change.

    You might be right, but again, there are incorrect and damaging ways to change the labour equilibrium, which my deflationary inturnship premise pertains to. Monetary aggregates or industrial throughput might be disturbed in unforseen ways by changing labour costs in the wrong way.

    The cost of labour is too high for small business, but the general cost of living is also becoming crushingly high for employees.
    Overly expensive labour may not be exclusively caused by overprotected labour rights, costly administrative burdens are also imposed by government without directly improving employees or business’ position. There are myriad taxes levied on all stages of production and consumption, sometimes with deeply negative fiscal multipliers, actively shrinking the economy so that government spending the tax money cannot compensate for the initial damage.

    In holland there’s a minimum wage, enough to afford a decent standard of living. I’m not sure if france currently has one, but imposing a minimum wage obviously has huge influence on the labour dynamic. Lowering minimum wage right now would likely exasperate deflationary wage-price spirals, but some countries have recently increased their minimum wage, maybe to boost consumer spending, although it may also lower business’ profit margins or job availability at first.

    Its also a problem that big business consistently outcompetes small business by state-sanctioned monopolisation and structural tax evasion. Monolithic business has altogether drained past decades’ productivity gains away from the public good and treasury towards shareholders, crowding out marketspace for smaller competitors while their methods of globalised outsourcing contribute far less to domestic job availability than viable small business would.

    Any method that small business might employ to reduce the cost of labour should be allowed, only without reducing net income or basic economic security for (settled) employees, these ends ought not be contradictory.
    Its just important to realise that people in most of the west are financially so close to the edge that ‘take-home’ pay or job security/loan eligibility cannot be further reduced for the masses without completely collapsing consumer spending, home purchases and business startups.
    I still contend that this phenomenon of coerced inturnship is reducing net pay and job security for too many people at once, generating another deflationary impulse we don’t need.

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