France Considers Ban on Free Shipping by Amazon, a "Destroyer of Bookshops"; Prepare for Economic Collapse in France

The amount of economic illiteracy in France is simply staggering. Please consider French minister hits at Amazon ‘dumping’.

France’s culture minister has attacked Amazon, the online retailer, for deliberately undercutting traditional rivals to create a “quasi-monopoly”, in the latest assault by the socialist government on internet companies.

“Today, everyone has had enough of Amazon which, through dumping practices, smashes prices to penetrate markets to then raise prices again once they are in a situation of quasi-monopoly,” said Aurélie Filippetti, the culture minister.

Calling Amazon a “destroyer of bookshops”, she added that she was considering a ban on free postage offers and ending the current regime of allowable 5 per cent discounts on books.

Ms Filippetti was speaking in Bordeaux where the government announced a €9m joint plan with French publishers to support independent booksellers. “This is an unprecedented effort in favour of the book and reading because without independent bookshops there will be fewer publishers and authors, less choice for the reader and fewer social networks in towns,” she said.

What's the Goal?

If the goal is to get people to read books, logic would dictate the cheaper the price the better. Kindle, Nook, and other eBook readers come to mind.

What good would banning free shipping do? Amazon could easily up shipping charges and lower the price of the book and get the same result. Of course, France would then want to dictate the price of books as well, all in the name of "preserving culture."

It's easy to spot the problem. France does not need and cannot afford a culture minister whose obvious goal is to stop the spread of technology and preserve culture as she sees fit.

But France is France. So when does this fool announce a tax on Kindle or campaign to bring back the horse and buggy?

Prepare for Economic Collapse in France

Government spending is already 56% of GDP. Hollande has threatened to take over steel, auto makers, and other industries to preserve jobs. Every month, France becomes less and less competitive. It is no wonder French unemployment soared. And unemployment will continue to rise.

Economic idiocy in France has even led to an open feud between French President Francois Hollande and German Chancellor Angela Merkel. For details, please see Simmering Feud Between France and Germany Erupts Into Verbal Warfare; France Tells Brussels to Shove It

Prepare for an economic collapse in France, because it is on the way. And Germany cannot possibly carry the European economy on its own. That is yet another reason IMF Growth Estimate for Germany is Still Too Optimistic.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Oregon Governor Demands Tax Hikes and Emergency Powers or Will Call on National Guard to Police Troubled Counties

Looking for amazing arrogance coupled with economic stupidity at the state government level?

You can find it in Oregon where Governor Kitzhaber Demands Tax Hikes and Emergency Powers and Warns he Might Turn to National Guard, if the legislature does not see things his way.

Gov. John Kitzhaber warned Monday that he could be forced to mobilize the National Guard to police financially troubled timber counties if legislators and local officials can't agree on a rescue plan to provide basic law enforcement.

Kitzhaber urged lawmakers to pass an unprecedented measure that would allow him -- with the approval of legislative leaders and local county commissioners -- to impose a temporary local income tax in counties that have slashed patrol, jail and prosecutorial services. Under House Bill 3453, those local taxes would be matched with an equal amount of money from state taxpayers.

Kitzhaber and several key legislative leaders are pressing ahead with the bill after Josephine and Curry counties rejected public safety property-tax levies last month. The two counties, which have lost the federal timber payments that once paid for most of their local operations, have largely halted their sheriff's patrols and cut the number of jail beds in use.

Under questioning, Kitzhaber said that he would first look at another option --asking legislators for more money for state police patrols in troubled counties.

"If I was unable to get that, I'd have about no other resources than the National Guard," he said, adding that the state has a "moral obligation" to preserve the public safety in those counties.

The governor said an income tax would be a better option than a property tax because it would affect those who have more ability to pay.

However, HB 3453 ran into strong opposition from several officials from Josephine County, which has a charter provision prohibiting a local income tax.

Rather than raising taxes how about cutting expenses, instituting right-to-work laws, ending prevailing wage laws, outsourcing police contracts to sheriff's associations, and most importantly letting counties govern themselves.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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IMF Halves Germany 2013 Growth Estimate; Still Too Optimistic

With most of Europe in a nasty recession, and significant parts of it (Spain, Greece, Cyprus, Italy) in an outright economic depression, I wonder why it took so long for the IMF to Reduce Germany GDP Forecast.

Germany's 2013 growth prospects have been cut in half by the International Monetary Fund, as it warned that the outlook for Europe's strongest economy could worsen if a eurozone recovery fails to materialise.

 The IMF said falling business investment and the eurozone's ongoing recession, which have hampered German growth, meant the economy would grow by just 0.3pc this year, compared with an April estimate of 0.6pc.

"The uncertainty, mainly surrounding prospects for the euro area and the ongoing recession in the region, have led to declining German exports to the region as well as a sharp pull back in business investment," the IMF said in a report on Monday.

Ridiculous Talk of Uncertainty

Note the ridiculous talk about "uncertainty". What is certain is the IMF is in la-la land, attempting to paint a picture that does not exist.

It is all but 100% certain that a eurozone recovery is not coming, so warning that the outlook for growth "could worsen if a eurozone recovery fails to materialise" is like warning that it might hurt if you are punched in the nose by a professional boxer with full force.

Note too that Germany Q1 GDP Grew At 0.1%, missing expectations. That report came out on May 15, and the IMF just now figured out that German growth is slowing.

Given that Germany is headed for contraction, the IMF is still too optimistic.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Huge Miss in May ISM; Manufacturing Now in Contraction; What the Numbers Mean

US Manufacturing as measured by the May 2013 Manufacturing ISM Report On Business® is treading water barely above contraction.

Economic activity in the manufacturing sector contracted in May for the first time since November 2012, and the overall economy grew for the 48th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

ISM at a Glance

Series Data	Apr Index	Mar Index	Percentage Point Change	Direction	Rate of Change	Trend (Months)
PMI™	49.0	50.1	-1.7	Contracting	From Growing	1
New Orders	48.8	52.3	-3.5	Contracting	From Growing	1
Production	53.5	52.2	+1.3	Contracting	From Growing	1
Employment	50.1	50.2	-0.1	Growing	Slower	44
Supplier Deliveries	48.7	50.9	-2.2	Faster	From Slowing	1
Inventories	49.0	46.5	+2.5	Contracting	Slower	3
Customers' Inventories	46.0	44.5	+1.5	Too Low	Slower	18
Prices	49.5	50.0	-0.5	Decreasing	From Unchanged	1
Backlog of Orders	48.0	53.0	-5.0	Contracting	From Growing	1
Exports	51.0	54.0	-3.0	Growing	Slower	6
Imports	54.5	55.0	-0.5	Growing	Slower	4

Synopsis

Last month I stated "Manufacturing employment has grown for 43 months. I expect that trend to break next month. Production was up but inventories were way lower. The drop in inventories, in conjunction with a big slowdown in employment, is likely a leading indicator of future production. The positive surprise that does not fit into the above assessment is that new orders grew at a faster rate. Next month may be telling. I expect the new order divergence to resolve to the downside as the global economy and the US economy are both slowing."

The consensus estimate was for slower growth, but here we are. Manufacturing is in contraction and the economy continues to weaken. Given the plunge in new orders and backlog of orders, jobs and the overall economy will likely weaken as well. Expect that trend of 48 months of economic growth to break next month.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Reader from Finland Chimes in on Sweden Housing Bubble

In response to Sweden Housing Crash Coming Up; Average Swede to Repay Mortgage in 140 Years; Swedish Central Bank Ponders New Rules I received an interesting email from reader Antti who writes ....

Hi Mish,

An interesting factor, which is potentially going to amplify the pain (a lot) in Sweden is how their law is written regarding apartment buildings and ownership. Unlike my native Finland, where most apartment buildings have their special type of incorporation where each stockholder has mortgages as a personal liability, Sweden has what amounts to collective mortgages - meaning that in an apartment building, the remaining stakeholders are largely responsible for nonperforming stakeholders and their mortgage. This structure makes a cascading failure a very real possibility with regards to the Swedish bubble, and can take down even debt-free people (if they get swamped with other people's loans). As you know, most city folk live in apartments here in Europe, true for Sweden as well.

Best Regards,

Antti

Suffice to say Riksbank head Stefan Ingves who supports new rules that would require Swedes to pay down the principal on their mortgages has even more to worry about than I expected.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Sweden Housing Crash Coming Up; Average Swede to Repay Mortgage in 140 Years; Swedish Central Bank Ponders New Rules

Average Swede to Repay Mortgage in 140 Years

Swedish repay their mortgages so slowly that it will take 140 years on average, according to the IMF.

The International Monetary Fund lamented Friday that Swedish households pay their mortgages so slowly that they are planning to do an average of 140 years.

"Financial stability is [...] reinforced by a steady reduction in repayment schedules - that exceed an average of 140 years," the IMF said in a statement after a mission in Sweden.

This statistic was revealed in March by a government agency, the inspection of the financial sector. It covers loans considered relatively safe, those where the real estate buyer had an initial contribution equal to or greater than 25% of the value of the property and pay the higher monthly interest alone.

According to the Washington-based institution, the Swedish real estate market is a major risk to the economy, along with the eurozone crisis.

"With household debt rising beyond 1.7 times disposable income, a sudden and significant drop in property prices could have an effect on consumption and banks, raising unemployment and further reduce the inflation, and increased the number of non-performing loans and financing costs for banks, "said the IMF.

Why bother paying anything at all? Yet think of the consequences of underwater mortgages on the banking system when an estate does not have enough money to repay loans. A housing bust will have enormous consequences in such a setup.

Swedish Central Bank Ponders New Rules

Sweden is in the midst of a property bubble and a debt bubble, so much so that the risk mentioned above was noticed by the Swedish central bank.

And central banks are always at the tail end of noticing risks of the policies they sponsor.

Please consider Swedes' high debts spark housing bubble fears.

Martin Andersson, the head of Sweden's Financial Supervisory Authority (Finansinspektionen), expressed his concern about Swedes' mounting debts. “Swedish households today are among the most indebted in Europe and we cannot have household lending that spirals out of control,” Andersson said.

One tool already in place to dampen the growth of Swedish household debt is a mortgage lending ceiling introduced in 2010 which caps the amount home buyers can borrow at 85 percent of the value of the property.

Riksbank head Stefan Ingves has also suggested new rules that would require Swedes to pay down the principal on their mortgages, although Andersson refused to say whether his agency would consider such a rule.

Last year, Swedes' household debt hit a record 173 percent of disposable income, well above the 135 percent level during the height of Sweden's banking crisis in the early 1990s.

Sweden Housing Crash Coming Up

By the time central banks notice bubbles and begin to discuss ways to alleviate them, it is far, far too late to do anything about them. A housing crash with huge consequences is 100% certain.

The longer it takes before the crash begins, the worse the crash.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Lowest Core PCE in History; "Flation" Perspective

Doug Short at Advisor Perspectives has a pair of interesting reports on price inflation as measured by the PCE and PCI.

Please consider PCE Price Index Update: Sorry Fed, The Disinflationary Trend Continues.

The latest Headline PCE price index year-over-year (YoY) rate of 0.74% is a decrease from last month's adjusted 1.01%. The Core PCE index of 1.05% is decrease from the previous month's adjusted 1.17%. It is the lowest Core PCE ever recorded; the previous all-time low was 1.06% in March 1963, fifty years ago.

The continuing disinflationary trend in core PCE (the blue line in the charts below) must be troubling to the Fed. After years of ZIRP and waves of QE, this closely watched indicator has been consistently moving in the wrong direction for over a year. It has contracted month-over-month for ten of the last 13 months since its interim high of 1.96% in March of 2012 and is now approaching half that YoY rate.

The first chart shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. I've also included an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. I've highlighted 2 to 2.5 percent range. Two percent had generally been understood to be the Fed's target for core inflation. However, the December 12 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place.



click on chart for sharper image

For a long-term perspective, here are the same two metrics spanning five decades.



click on chart for sharper image

Inquiring minds may also wish to consider Two Measures of Inflation: Core PCE at Its All-Time Low

"Flation" Perspective

Inflation, deflation, and disinflation are all in the eyes of the beholder, and all depend on the definition. Still I expect another round of deflation possibly with prices but more importantly with credit, my preferred measure of "flation".

Regardless of how one measures "flation", the hyperinflationists missed the boat by a mile.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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