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Happy Turkey Day, campers! Here were yesterday’s big economic stories: Ireland continues down its insane path to economic doom by unveiling its newest and bestest budget plan yet: The key announcements include: * Corporation tax rate unchanged at 12.5%. * 10bn euros (£2.5bn) of spending cuts between 2011-2014, and 5bn euros in tax rises. * Minimum wage to be cut by one euro to 7.65 euros per hour. * 3bn euros of cuts in public investment by 2014. * 2.8bn euros of welfare cuts by 2014, returning spending to 2007 levels. * Reduction of public sector pay bill by 1.2bn euros by 2014. * Reform public sector pensions for new entrants and cut their pay by 10%. * 24,750 cut in public sector jobs, back to 2005 level. * VAT up from 21% to 22% in 2013, then 23% in 2014. * Raise an extra 1.9bn euros from income tax. This is quite a laundry list of awesome. Raise the VAT and the income tax, cut the minimum wage, cut welfare. But wait! We haven’t even got to the best part — their GDP growth projections: Real GDP to grow by an average of 2.75% from 2011 to 2014. The ” O RLY ?” Owl just had a heart attack after laughing his feathers silly. Cutting services, cutting minimum wage and raising taxes to pay for the services that aren’t being cut… where the hell is the aggregate demand going to come from, guys?! And it’s not like this loan you’re receiving from the IMF is going to pay for anything useful — rather, it’s going into the black hole of what used to be your banking system. And this is even before we get to the negative externalities created by persistent rioting and looting that will surely follow these measures! Amazingly, the Irish are relieved — yes, relieved — that the IMF is coming to set things “right”: On the streets of Dublin, anger over the foreign paternalism appears to be limited. Passers-by in the city’s main shopping streets seem relieved that someone is finally keeping a close eye on the conservative-Green coalition government. “I am very pleased that the IMF is here,” said dentist Margaret Shannon.”The government is incompetent and corrupt.” “The people are delighted that experts are now in charge,” said Brian Lucey, a finance professor at Dublin’s presitigious Trinity College. Indeed, there are few signs of major protest in the Irish capital. A lone poster from the Socialist Party hangs on a lantern post in front of parliament, inviting people to an “public meeting” to oppose any drastic remedy the IMF might propose. But the people’s anger is largely directed at Prime Minister Cowen’s government, which is to present its four-year plan on Wednesday afternoon. The conservative politician has frittered away any remaining trust. After his party’s junior coalition partner, the Greens withdrew their support for Cowen on Monday, the prime minister was forced to announce that new elections would be held in the beginning of 2011. Now it appears to be just a matter of time before he steps down. Well they do have every right to be angry at their government, just as Americans have every right to be angry at our government (both the Bushies and our current regime). But dudes, the IMF is not like Santa Claus — when it comes to town, it ain’t bringing toys for all the little girls and boys. ICAP’s Nic Lenoir sensibly sees that this arrangement is untenable and it won’t prevent the bond vigilantes from swarming around Portugal, Spain and Italy next. He lays out the European Central Bank’s options: I/ Bail-out countries individually as has been the case so far: the market rejected Ireland’s bail-out so it is extremely unlikely as failure is quite obvious and Germany is opposed to it II/ Outright monetization by the ECB: so far intervention has been sterilized which has not proven too helpful. Germany is again highly opposed to this type of resolution. III/ Create a mechanism that involves the private sector and the EFSF: Germany has been pushing for this solution from day one but obviously no solution has been found, and if you start restructuring Irish debt you run the risk of a flight out of other PIIGS’s bonds IV/ Let the PIIGS out of the Euro, or the PIIGS show themselves out / the Euro is disbanded He’s placing his bets on outcome #4: The end of the Euro. The bailouts of Eurozone countries are coming to an end one way or the other, since Spain will be the straw that breaks the camel’s back : The cost of providing an Irish-style bailout for Spain would almost empty the emergency fund that was set up by the European Union and the International Monetary Fund to deal with the crisis affecting weak members of monetary union, a leading team of analysts warned tonight. Amid growing fears that pressure on Portugal will be followed by financial trouble for its Iberian neighbour, Capital Economics said the price tag for a rescue providing the equivalent funding security offered to Greece and Ireland would be a “whopping €420bn” (£356bn). Jennifer McKeown, Capital’s senior European economist, said there was a total of €660bn available from the EU and the IMF, of which Ireland was due to get €80-90bn. “If we knock off the similar amount that might be required to meet Portugal’s needs, we are left with just €490bn. That suggests that Spain’s needs could barely be met by current arrangements.” McKeown said the risk of a Spanish bailout was still fairly low, even though the country’s borrowing costs rose yesterday to their highest level since the creation of the single currency more than a decade ago. But should Spain require help, the cost would be “devastatingly high”. Wheeeeeeeeeee! Home sales are still in the crapper : Don’t look to the new home market for glad economic tidings: Home builders had another dismal sales month in October, falling to just one-fifth of the sales rate during the boom five years ago. New home sales dropped to an annual pace of just 283,000, according to the Commerce Department. That was down 8.1% from a slow September and 28.5% from 12 months ago when the annualized sales rate was at 430,000. Housing experts from Briefing.com had forecast a sales pace of 314,000. Gee, I wonder why people are reluctant to buy homes? Oh right, that whole forging key foreclosure documents thingee. How could I forget that? It will surprise you to learn that Glenn Beck has no idea what he’s talking about with regards to inflation : And inflation isn’t even computed like it used to be computed. The government figured it out. The government realized that people could recognize how bad things actually were, so they changed how we calculated it. So, in other words, the TV could say, “There’s no inflation,” and you’d be going, “I’m broke. How’s that happening?” Now, they calculate inflation without adding in the price of food and energy. Oh, well, other than those going up, we’re set. It’s true that the core Consumer Price Index does not contain food and energy prices. However, that doesn’t mean the Bureau of Labor Statistics doesn’t keep track of those prices. In fact, it does! If you compare core CPI to CPI with food and energy prices incorporated, you get a graph like thees one: enlarge So when your Beck-loving uncle starts ranting about Zimbabwe and the Weimar Republic at Thanksgiving today, kindly point him to this graph. Now for some happy news: It looks like the FBI’s insider trading probe has snagged its first fly : Federal law enforcement officials arrested an employee of an “expert-networking” firm Wednesday for allegedly conspiring to provide inside information to hedge funds. Don Chin Trang Chu, known as Don Chu, has been charged with arranging for insiders at publicly traded companies to provide nonpublic information to the firm’s hedge fund clients under the guise of a consulting service, according to a federal complaint unsealed in a Manhattan court. I’m no expert on this, but it seems like what’s being alleged is that Mr. Chu and his compatriots are in the business of bribing former company execs for insider secrets and then selling those secrets to hedge funds. I’m sure that the firms involved will claim that they provide an invaluable service by keeping our largest financial institutions solvent by giving them a head’s up on important blah, blah, blah, etc. Anyway, this is definitely something to monitor. More sorta happy news: Jobless claims were down to a two-month low last month. And finally, Yves Smith has a depressing-but-likely-accurate description of why the government will fail to hold anyone at all accountable for the massive fraud going on in the housing market. This one sentence about sums it up for me: The regulators appear not know what they are doing. This seems to be a running theme in American government. In fact, I’m beginning to think that my libertarian “gold standard today, gold standard 4-eva!” friends just might be onto something. And with that, have a great Thanksgiving peeps!