Good morning

The headlines:

1. Americans are off the wagon.

   Link: the $17.5 billion leap in consumer credit.

   In a month. Not included mortgages and real estate.

   The story is that this means that Americans are struggling to make ends meet (and are therefore buying on credit).

   On the other hand, they could just be living beyond their means.

2. RIM’s customers are working on contingency plans.

   Link: while RIM sells a jet.

   It’s a pity. Blackberry will lose its main customer base if it doesn’t do something soon. RIM’s main advantage is that it’s a hack to move your corporate staff over from one type of operating system to another. It’s why most companies won’t move from Microsoft to Apple.

   It’s also why most companies would have maintained their Blackberry allegiance. But once your clients start making contingency plans – it’s a death warrant. If you’re going to go to the trouble of planning to move over – may as well move over.

   In other news, RIM is selling one of its jets in order to save costs. They sound like the business version of Greece.

3. Debt-holders are not playing Operation Twist.

   Link: we’ll just hang on to the bonds, thanks.

   The unspoken requirement of quantitative easing is that your market co-operates by selling the assets that they’re holding back to you.

   This is not so easy – especially when your market doesn’t have anywhere to put the money but back into your treasuries. And now you’re wanting to sell them short-term securities in exchange for your longer term ones… No thanks.

   Because the more long-term securities the Fed buys, the fewer there are in the market, the more expensive they become. Wouldn’t you choose to hold long-term securities if your Central Bank had a committed public policy of purchasing them? In such an uncertain time, a guaranteed buyer practically gives you a put option:

   Their demand will, at worst, keep the price at its current level, and at best, drive it higher.

   I’d take that bet and hang on.

4. Mursi tries to reconvene the Egyptian Parliament.

   Link: while the Military warns him off.

   I’m not entirely sure what is happening in Egypt – but it sounds like the military has no intention of surrendering control.

   They also have legislative powers.

   On the other hand, politicians could have legislative powers. So maybe that’s a good thing.

5. Draghi warns that he will cut ECB rates again if necessary.

   Link: to below zero?

   The deposit rate is already at zero. The lending rate is at 0.75%.

   It’s like a game of economic limbo.

   Ironic.

6. Spain’s renewed austerity.

   Link: the falling tax receipt problem.

   Austerity Round 3 in an attempt to avoid a second bailout.

   Tax income fell by 1.5% in the first five months of 2012. The increase in taxes on income, electricity and tobacco was offset by a 10% decline in VAT revenue as consumers spent less.

   Higher taxes don’t necessarily result in higher tax revenues. They can just result in evasion. Or an offset in lower spending which lowers tax revenues from another source.

   We should all prepare for a second bailout.

7. Obama wants to extend the tax cuts.

   Link: fire him.

   He wants a one-year extension of the tax cuts for families making $250,000 a year, whilst allowing it to increase for the higher earners.

   Oi vey – the need for important and unpopular economic decisions in an election year is a curse of almost biblical proportion.

   The Republicans don’t want to raise taxes for anyone. But as I wrote in last week’s post on the fiscal cliff, the problem is that real tax revenue over the last ten years has actually fallen when you take inflation into account.

   How is this different from Spain’s situation? Your scope to raise revenues through raising taxes (and/or letting taxes normalise) is limited by your ability to collect. Spain’s tax collection is historically bad. The USA, on the other hand, has quite an efficient IRS.

   It’s time to let those tax cuts end.

8. Man says Ratings Agencies are useless.

   Link: why is this disgruntled employee making headlines?

   I am not sure why.

   Probably because it makes for sparkier headlines than just “Obviously the market thinks the Ratings Agencies are useless by outright ignoring their announcements”.

   But it was fun to read anyway.