Portuguese Bond Yield Spikes to 8% as Portugal’s Coalition Splinters on Austerity Fatigue

Action has heated up in Portugal where the Ruling Coalition Splinters on Austerity Fatigue.

Portuguese borrowing costs topped 8 percent for the first time this year after two ministers quit, signaling the government will struggle to implement further budget cuts as its bailout program enters its final 12 months.

Government Tensions

Social Security Minister Pedro Mota Soares and Agriculture Minister Assuncao Cristas will hand in their resignations to Coelho today, broadcaster TVI reported on its website last night, without saying how it obtained the information. Both ministers are from Portas’s CDS party.

The EU may consider extending the deadline for Portugal to meet its deficit targets if economic conditions worsen, Jeroen Dijsselbloem, head of the group of euro-area finance ministers, said on May 27. Dijsselbloem said the government hasn’t yet requested another change of timetables and targets.

On March 15, the government announced less ambitious targets for narrowing the budget deficit as it forecast the economy will shrink twice as much as previously estimated this year. It targets a deficit of 5.5 percent of gross domestic product in 2013, 4 percent in 2014 and below the EU’s 3 percent limit in 2015, when it aims for a 2.5 percent gap. Portugal forecasts debt will peak at 123.7 percent of GDP in 2014.

Gaspar’s resignation shows the risk of reforms faltering, Organization for Economic Cooperation and Development Chief Economist Pier Carlo Padoan said yesterday at the Lisbon Council in Brussels. “Fatigue may suddenly erupt and the temptation to go backward may be very, very strong,” he said.

Portugal’s Prime Minister Won't Step Down

The Financial Times reports Portugal’s Passos Coelho pledges to stay as prime minister

Portugal’s beleaguered prime minister has pledged to stay in office and seek to establish a stable government despite the resignation of two key ministers and the threatened break-up of his ruling coalition.

Pedro Passos Coelho said on Tuesday night he would stay at his post and work towards a “rapid return to stability” to avert a political and economic crisis that would endanger the country’s €78bn bailout.

“I will not resign or abandon my country,” Mr Passos Coelho said.

However, opposition parties called for an early general election two years ahead of schedule, saying there was no possible solution for the governing coalition.

“The country needs a new government with democratic legitimacy,” said António José Seguro, leader of the centre-left Socialists, the main opposition party.

The prime minister was speaking hours after his government was rocked by the resignation of Paulo Portas, foreign minister, less than 24 hours after Vítor Gaspar had quit his post as finance minister.

Mr Passos Coelho said he had refused to accept the resignation of Mr Portas, leader of the conservative Popular party (CDS-PP), the junior partner in the two-party government coalition.

The government of Portugal is now burnt toast. There is no way it can survive. But will any other government do what is needed (default and tell the EU where to go)?

Eventually some country will, as soon as the pain is severe enough.

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

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Military Coup Pending in Egypt; President Morsi Says His Blood is Cheap Price to Pay; Oil Spikes; Did We Learn Anything?

On Monday, the Egyptian army gave Islamist President Mohamed Morsi 48 hours to meet the demands of the citizens else the military threatened it would "announce a future roadmap and measures to oversee its implementation".

From an oil perspective, this flareup should have little bearing as Egypt is not an oil exporter. However, as we have seen in the past, any flareup of any kind in the Mideast tends to drive the price of oil higher.

This time is no different. In the past week Crude has risen from $93 to $102 and is up from $86 since mid-April. To be fair, correlation is not causation, and part of the rebound came before news of trouble in Egypt.

Brotherhood Defiant

With that backdrop, please consider the Financial Times report Egypt: Brotherhood defiant as deadline approaches

They have been jailed and tortured, hunted in the streets and blacklisted from public life. But a year after winning the presidency and reaching the pinnacle of their 80-year quest for power, Egypt’s Islamists are again facing a threat to their existence.

President Mohamed Morsi was fighting back yesterday against what his supporters have dubbed a military coup against his democratically elected government.

In a defiant late-night speech, Mr Morsi made clear he would make no concessions to his opponents and said he was prepared to shed his blood to defend “legitimacy” in Egypt. He warned repeatedly that any moves against him could lead to bloodshed – an assertion that his opponents interpreted as a threat of civil war.

But this time, the president’s Muslim Brotherhood and his millions of supporters made clear, they are not about to give up.

“If the military takes any street action, we will stand in front of the tanks,” vowed Gehad Haddad, an official in Mr Morsi’s Freedom and Justice party.

Following huge street protests on Sunday against what critics see as the president’s ever more autocratic and erratic rule, Egypt’s military leapt back into politics on Monday and demanded that the president and the opposition negotiate a compromise by today or submit to the army’s own political “road map”.

Under a draft of that road map, leaked to the to official MENA news agency yesterday, the constitution would be suspended and the Islamist-dominated legislature dissolved, if a power-sharing agreement were not reached.

One Picture Says It All



For the third consecutive day, anti-Morsi protesters packed Tahrir Square in central Cairo.

Image courtesy of Mohamed Abd El Ghany/Reuters as posted on the New York Times.

Morsi Defies Egypt Army’s Ultimatum to Bend to Protest

Also courtesy of the New York Times, please consider Morsi Defies Egypt Army’s Ultimatum to Bend to Protest

President Mohamed Morsi rejected an ultimatum in an angry speech Tuesday night as Egypt edged closer to a return to military rule.

Mr. Morsi insisted he was the legitimate leader of the country, hinted that any effort to remove him by force could plunge the nation into chaos, and seemed to disregard the record numbers of Egyptians who took to the streets demanding he resign.

But before the president’s speech, Egypt’s generals took control of the state’s flagship newspaper, Al Ahram, and used it to describe on Wednesday’s front page their plans to enforce a military ultimatum issued a day earlier: remove Mr. Morsi from office if he failed to satisfy protesters’ demands.

As both sides maneuvered, tensions rose on the streets of Cairo and other cities, where violence erupted between groups of protesters and Mr. Morsi’s defenders, primarily members of the Muslim Brotherhood. At least 11 people were killed — four shortly after Mr. Morsi’s speech — and dozens more were wounded as gunfire broke out in at least two neighborhoods of the capital. Angry Islamists gathered in the street with a sheet stained with the blood of one of their allies.

Mr. Morsi refused to back down. In an impassioned, if at times rambling, midnight address broadcast on state television, he hinted that his removal would lead only to more violence.

“If the price of protecting legitimacy is my blood, I’m willing to pay it,” he said. “And it would be a cheap price for the sake of protecting this country.”

At a demonstration in support of Mr. Morsi near Cairo University, assailants firing birdshot wounded at least 40 Islamists. A further 35 pro-Morsi demonstrators were wounded with rocks, police officials said. Groups of Islamists began seeking the attackers, beating suspects and dragging a person along the street.

In Alexandria, 33 people were wounded by pellets in clashes between Mr. Morsi’s opponents and supporters, with gunfire from both sides, police officials said.

Mr. Morsi’s government appeared to crumble around him. Foreign Minister Mohamed Kamel Amr resigned. Six ministers have now announced their resignations since the mass anti-Morsi protests began Sunday.

Did We Learn Anything?

• Please note that the US gives billions of dollars every year to Egypt.
• Recall that president Obama supported the movement that put Morsi in power.
• Recall that a US installed puppet president in Iran led to the Islamic revolution.
• Recall that US troops on sacred Mideast soil was a primary reason behind Osama Bin Laden's 911 attack on the US.

So what do we do now?

I expect more meddling with similar results. And when the negative results come home to roost, expect more government surveillance, more wiretappings, more phone eavesdropping, more loss of freedoms, and more trashing of the constitution as we become more like them, all in the name of freedom.

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

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EU officials Give Greece Three Days to Deliver Reforms or Face Consequences; The Eventual Outcome

Reuters reports Greece Has Three Days to Deliver Reforms or Face Consequences.

Greece has three days to reassure Europe and the IMF that it can deliver on conditions attached to its bailout in order to receive its next tranche of aid, four euro zone officials said on Tuesday.

The lenders are unhappy with progress Greece has made towards reforming its public sector, a senior euro zone official involved in the negotiations said, while another said they might suspend an inspection visit they resumed on Monday.

Athens, which has about 2.2 billion euros of bonds to redeem in August, needs the talks to conclude successfully.

If they fail, the International Monetary Fund might have to withdraw from the 240 billion euro ($313 billion) bailout to avoid violating its own rules, which require a borrower to be financed a year ahead.

MISSED DEADLINES

"It is a very difficult negotiation," a senior Greek official participating in the talks said. "We're moving fast to wrap up as many issues as possible as soon as possible."

Athens and the troika are at odds over an unpopular property tax and a sales tax for restaurants, while a shortfall of more than 1 billion euros has emerged at state-run health insurer EOPYY, meaning automatic spending cuts may have to be agreed to bring it back on an even keel.

The government plans to ask its creditors to lower this year's privatization target of 2.6 billion euros after failing to find a buyer for natural gas company DEPA.

The beleaguered government of Prime Minister Antonis Samaras has ruled out imposing any new austerity measures. Unemployment has hit a record 27 percent and Greeks have lost about a third of their disposable income as a result of bailout policies.

The Eventual Outcome

Given that Greece has caved in on every demand so far, it's certainly likely Greece will do so again, right now.

But if Greece does not immediately cave in, then expect the Troika to grant more time until Greece does cave in. If by some remote chance, should Greece not cave in, then expect the Troika to slightly change its demands so that Greece will meet the demands.

I actually prefer to be wrong about this. I would prefer Greece to tell the Troika "go to hell", then default. History suggests the odds that will happen "this time" are remote.

However, somewhere along the line, and totally unexpected, Greece (or Portugal, or Spain, or Ireland, or Cyprus) will indeed have had enough of the Troika, then accept the consequences and default.

I cannot predict the time, but I am quite certain of the eventual outcome.

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

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Ritholtz on Gold and on Making Predictions; How Secular Bull Markets End; Winning vs. Investing

Folly of Forecasting

Inquiring minds may be interested in this flashback from Barry Ritholtz originally written published June 2005 and republished March 27th, 2011 on The Folly of Forecasting.

It’s very easy for a confident-sounding analyst, fund manager or professor to say something on TV that can throw off the best laid plans of investors.

I wish an SEC-mandated disclosure accompanied all pundit forecasts: “The undersigned states that he has no idea what’s going to happen in the future, and hereby declares that this prediction is merely a wildly unsupported speculation.”

Don’t hold your breath waiting for that to happen.

Is Gold Overdue for a Bounce?

One Day ago Barry Ritholtz pondered the question Is Gold Overdue for a Bounce?

If you are a trader — and I no longer consider myself one — then you have to be wondering when Gold is going to bounce. It has plummeted on little inflation, a strong dollar and an improving economy. When the breathless narrative of hyper-inflation, collapsing fiat currency and end of the world failed to come about, Gold’s spectacular rise ended.

[Mish comment - depending on one's timeframe, that last sentence may easily be construed to be a prediction, the rest of the sentence is hyperbole]

Now, it has free-fallen so far that a counter-trend rally is over due.

[Mish comment - Is that a prediction or a suggestion?]

The charts below show two different ranges where gold can find a footing and rally. That is likely to present your next and perhaps last best exit.

[Mish comment - Is that a warning and a prediction, or just a suggestion?]

Barring some new developments — like all the gold in Fort Knox becoming irradiated — I do not expect to see a resumption of the 2001-11 uptrend.

[Mish comment - That is  an expectation, not quite a prediction, yet complete with preposterous hyperbole regarding all the gold in Fort Knox becoming irradiated]

Don’t Be Fooled; Sell Gold at $1,400, Then It’s All Downhill, Says Ritholtz

Today on Market Ticker Ritholtz says Sell Gold at $1,400, Then It’s All Downhill.

“I wouldn’t be surprised to see a nice bounce in gold from this level up to $1400, $1440, but I don’t know if it’s sustainable after that.” His advice to investors: “Hit the bid” once gold climbs to near $1400... $600 to $800 an ounce is certainly a possibility.”

Ritholtz was very careful to make his predictions sound like non-predictions while asserting the "gold bull market is over". Of course that assertion itself is another prediction.

Gold Monthly Trendline



Whether or not the trendline is broken depends on how you draw it, but I suspect that even Ritholtz would have to admit the above interpretation is reasonable enough. And if the above trendline is intact, then it's impossible to say whether or not the secular bull market is over.

Gold 1972-1981



Between 1972 and 1980 there were three selloffs of 30% or greater one of which was a 50% selloff. Was the gold bull market over? Certainly not the secular bull market.

Is the secular bull market over now?

I doubt it, but I suppose it's possible.

Why do I doubt it? Because secular bull markets tend to end with public participation in a massive way and prices going parabolic.

Here are some examples: Gold and silver in the 1980s, tech stocks in 2000, housing in 2005, the stock market in general in 2007 and arguably again (this time on the misguided belief the Fed has the markets back and nothing can go wrong).

How Secular Bull Markets End

Anyone recall Time Magazine going "gaga" over housing, using exactly that word on the cover? A Summer 2005 cover marked the secular peak in housing.

What follows next is a repeat of my April 10, 2010 post US vs. Japan Land Prices Pictorial Update

In Spring of 2005 I announced It's a Totally New Paradigm



In June I announced It's time to shift the arrow on the basis of Time Magazine going gaga over real estate.

In December I wrote that It's Too Late.

When you see stuff like this, not only is it too late, it's way too late.



I am pleased to announce that we have moved the arrow once again.
The current picture looks something like this.

Grave Dancing

Ritholtz claims to be agnostic regarding gold. I suggest his current hyperbole proves otherwise, even though he once liked the metal.

For the record, Ritholtz is a good guy, we just happen to disagree regarding gold. 

And I certainly side with Ritholtz regarding the folly of $10,000 or even $3,000 gold predictions by hyperinflationists, especially when people put timeframes on them.

But not every gold fan is a hyperinflationist or an inflationist of any kind. As a staunch deflationist, as well as someone who is definitely not agnostic regarding gold, I am proof enough.

And who is it now that is coming out of the woodwork to dance on the grave of gold? It's a Plague of Gold Bears Now Say "Gold Unsafe at Any Price".

What's the Real Long-Term Driver for Gold? Click on the preceding "Plague of Gold Bears" link to find out.

Gold - The Despised Asset Class



In Gold We Trust

The above chart is from the report In Gold We Trust by Incrementum AG

Incrementum concludes (and I agree) ...

We are firmly convinced that the fundamental argument in favor of gold remains intact. There exists no back-test for the current era of finance. Never before have such enormous monetary policy experiments taken place on a global basis. If there was ever a time when monetary insurance was needed, it is today.

Gold is the only liquid investment asset that neither involves a liability nor a creditor relationship. It is the only international means of payment independent of governments, and has survived every war and national bankruptcy. Its monetary importance, which has established and manifested itself in the course of the past several centuries, is in the process of being rediscovered.

Contrary to 1979/1980, the current gold bull market will unlikely end due to a sudden strong rise in interest rates, as the balance sheets of governments, households and corporations are tainted by huge debt. In the current environment, this would lead to a deflationary depression. According to the BIS, the combined debt burden of governments, households and non-financial corporations in the 18 OECD core countries has risen from 160% of GDP in 1980 to 340% of GDP in 2012.

In order to counter the current problems in the financial sector, but also in the real economy, the Fed, the Bank of Japan, the Bank of England and the ECB are going to continue to hold interest rates at a low level. There has always been a strong link between negative real interest rates and the gold price.

Is It Different This Time?

Did the bull market end with bears coming out of the woodwork and gold's share of financial assets a mere 0.5%?

Price Targets

People keep asking, but I have no price targets for either gold or silver. Within a couple years, neither $1,000 nor $2,500 would shock me for the price of gold.

However, history suggests the secular bull will not end without the public going gaga over the stuff.

Winning vs. Investing

Ritholtz says he no longer considers himself a trader. I am in the same camp. I consider myself an investor (with all the problems that entails, including the ups and downs of positioning for long-term trends).

Cyclical bear markets make things tough, especially when a parade of bulls thinks the Fed can keep other asset classes levitated forever.

Sometimes long-term positioning makes one look silly in the intermediate timeframe, and sometimes not. But I like my chances here with gold, whether or not "all the gold in Fort Knox is irradiated".

I don't recall who first said this, but "If investing was easy, it would be called winning, not investing."

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

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Credit Contraction Exceeds 6% in Spain, Highest Ever in Crisis

According to prime minister Mariano Rajoy, Spain has been on the verge of recovery for two years. Rajoy has also promised to bring Spain's budget deficit to 3% of GDP for two straight years. And EU has extended the timeline for Spain to hit that goal from 2012 to 2013 to 2014 to 2015 and now to 2016.

Last year Spain's budget deficit was 7.1% and the unemployment rate is nearly 27% with a youth unemployment rate over 56%. 

Spain's Misery Index

Today we can add another piece to Spain's misery index. Via Google Translate, please consider Credit Contraction Exceeds 6% for First Time.

Despite the efforts, or the good wishes of the Government, the day of the reopening of the credit tap still seems distant. According to the Bank of Spain, loans to the private sector residents, families and businesses have registered a fall of 6.1% in the month of May, the highest percentage in the entire crisis.

The evolution of the total loan portfolio shows that quarter to quarter, month to month, continues to reduce credit volume in rapid steps.

Spain Lending Stats

• February Down 5.5%
• March Down 5.7%
• April Down 5.8%
• May Down 6.1%
• House Purchases Down 3.7% first quarter
• House Purchases Down 4.5% in May
• New Loans Down 26% January-April 2013 vs. January-April 2012
• Small to Medium (SME) business loans Down 15.1% from same period last year

And we are supposed to believe conditions are improving, recovery is just around the corner, and Spain will reduce its budget deficit to 3%.

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

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Manufacturing ISM Rebounds Slightly but Employment Drops; ISM at a Glance

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

Economic activity in the manufacturing sector expanded in June following one month of contraction, and the overall economy grew for the 49th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 50.9 percent, an increase of 1.9 percentage points from May's reading of 49 percent, indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013. The New Orders Index increased in June by 3.1 percentage points to 51.9 percent, and the Production Index increased by 4.8 percentage points to 53.4 percent. The Employment Index registered 48.7 percent, a decrease of 1.4 percentage points compared to May's reading of 50.1 percent.

Manufacturing employment contracted for the first time since September 2009, when the index registered 47.8 percent. The Prices Index registered 52.5 percent, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month. Comments from the panel generally indicate slow growth and improving business conditions."

ISM at a Glance

Series Data	Apr Index	Mar Index	Percentage Point Change	Direction	Rate of Change	Trend (Months)
PMI™	50.9	49.0	+1.9	Growing	From Contracting	1
New Orders	51.9	48.8	+3.1	Growing	From Contracting	1
Production	53.4	48.6	+4.8	Growing	From Contracting	1
Employment	48.7	50.1	-1.4	Contracting	From Growing	1
Supplier Deliveries	50.0	48.7	+1.3	Unchanged	From Faster	1
Inventories	50.5	49.0	+1.5	Growing	From Contracting	1
Customers' Inventories	45.0	46.0	-1.0	Too Low	Faster	19
Prices	52.5	49.5	+3.0	Increasing	From Decreasing	1
Backlog of Orders	46.5	48.0	-1.5	Contracting	Faster	2
Exports	54.5	51.0	+3.5	Growing	Faster	7
Imports	56.0	54.5	+1.5	Growing	Faster	5

Synopsis

In my June 3 Manufacturing PMI Synopsis I stated "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."

The trend of overall economic growth did not break as the economy purportedly grew for the 49th month (confusing as the PMI was in contraction last month but the ISM's estimate of growth was not).

However, the 44 month history of manufacturing employment growth is now history. Expect the rest of the economy to soon follow.

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

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Rand Paul Walks Fine Line to Prove He is Not His Dad; Reflections on Pragmatic Pandering

To win the 2016 election, Rand Paul has to prove he is not his dad, that he is still a libertarian, and most importantly that he is not "weak on defense", a phrase that has different meanings to different people.

It's a tough line to follow but Paul is handling himself very well as noted by the Daily Beast in Rand Paul: I'm Not My Dad.

With 2016 in his sights, Rand Paul is distancing himself from some of his father's more extreme views. David Catanese on why the apple must fall just far enough from the tree.

Standing in front of more than 100 South Carolina GOP activists in West Columbia Friday night, the Kentucky senator largely steered clear of the week's two dominant, divisive issues that are tying his party in knots: Gay rights and immigration reform.

Instead, he diverted from his early presidential-primary-state speech script and went for the jugular on a topic that, while not necessarily timely, would surely please a military-friendly crowd: A full-throated defense of profiling.

“After 9-11 we had a special program for student visas . . . Why?" Paul asked. "Because 16 of the 19 hijackers were overstaying their students visas. Was it targeting? Was it profiling? Yes. Because only certain people are attacking us. Why don’t we use some brain sense to go after the people who are attacking us?"

The guests ate it up, rewarding Paul with sustained thunderclaps. It was one of his biggest applause lines of the night. But it was also a curious statement from a likely 2016 White House contender who built his brand on a libertarian approach to government. This, from the same guy who stood on the Senate floor for 14 hours to protest the potential use of drones to target Americans?

The address was almost exclusively devoted to foreign affairs and tactics employed in the country’s struggle against terrorism -- a marked change from his previous early state primary speeches and a subtle acknowledgment that he must prove he’s no softy when it comes to national security.

It's not that Paul walked away from his core libertarian philosophy. He stood by his belief that even those charged with the most heinous, evil crimes --- like the Boston bombing -- deserve a day in court.

“You may not all agree on this but it’s worth thinking about,” Paul cautioned before explaining his rationale to halt indefinite detentions of possible terrorists.

When he bravely posited his idea of a full audit of the Pentagon, he was met with complete silence. But he strived to emphasize that greater oversight of the military isn’t incongruent with support for troops on the ground.

Hogan Gidley, a former state party official who advised Rick Santorum’s 2012 presidential bid, said it was evident Rand’s mission was to wipe away any perception that he was weak on defense.

“His father, rightly or wrongly, was saddled with being anti-military. I think he wanted to say, ‘I’m a little tougher’ from the foreign policy standpoint. South Carolinians love that stance. He wanted to get out front of being outflanked on the right on military issues,” Gidley said.

It’s a thin line to walk for a candidate-in-the-making whose libertarian streak helped define his identity, but could ultimately limit his ambitions. He is astute enough to address his vulnerabilities with large sections of the party. But with every speech or position that’s calibrated to win converts and broaden his appeal, there’s the risk that he could end up losing part of the fervent base built for him by his father.

Rep. Mick Mulvaney, a close friend of Rand’s who jogs and plays baseball with him, said he believes what most significantly separates the senator from his father is his ability to crisply articulate his ideas in a marketable fashion.

“Rand knows how to deliver the libertarian-leaning conservative message better than anybody, at least as well as anybody,” praised Mulvaney. “Some folks might’ve looked at Ron Paul and dismiss him out of hand because he was far too extreme to them. They’ll not be able to do the same thing with Rand after they meet him. If you sit and talk to Rand, he comes across as extremely bright, extremely articulate and the farthest thing from crazy or extreme.”

The speech in South Carolina offers an acute example of Paul’s crafty approach to winning over a room -- with some instant evidence of success. But ironically, it simultaneously exposes the outline of a potential attack that could be used against him by a 2016 rival: That Paul has morphed into a panderer, all too willing to tweak his positioning in the pursuit of politics.

Reflections on Pandering

Any candidate, from either political party, must pander to some extent to win the nomination. Then to win the presidency, the nominees must pander in different directions to prove they are not who they said they were during the nomination process.

Unfortunately, that's the nature of the game.

The winning approach is to pander as little as possible in both phases of the campaign. So far, Rand Paul is doing and saying the right things, while still maintaining his overall libertarian stance.

Paul is doing  enough to maintain his and his father's core (and very fervent) libertarian constituency. Unless he strays too far from that line, and he hasn't, where else is the libertarian core going?

Cautious Libertarian

Philosophically, I would rather Paul not have to give in at all on some of these issues, especially defense spending. Pragmatically speaking, however, I would rather he bend a little and win the nomination, than not bend at all and lose it.

Kowtowing to the extreme right-wing, as Mitt Romney did with his "teach Iran a lesson" war-mongering talk, then attempting to back out of it in the general election was a losing approach in 2012 and will be a losing approach in 2016. 

And Kowtowing to the extreme right-wing is wrong on any issue, not just defense. After all, the extreme right is never going to vote Democratic. It's the independents and moderates that hold the key to winning the election. So upsetting moderates to appease the fervent far-right core is simply bad politics.

Rand Paul is what the country needs, and I like his cautious libertarian approach.

And if Paul wins the nomination, I think he can deliver the right platform that will win over the independents and the Reagan Democrats (and thus the election).

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

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