Archive

Posts Tagged ‘unemployment’

24 Facts About The City Of Detroit That Will Shock You

February 4th, 2013

detroit cityMichael Snyder: If you want to know what the future of America is going to be like, just look at the city of Detroit.  Once upon a time it was a symbol of everything that America was doing right, but today it has been transformed into a rotting, decaying, post-apocalyptic hellhole.  Read more…

Economy

Worst Since World War II: 50% Unemployment: Over 6 Million Teens and Young Adults Are Out of Work

December 4th, 2012

Mac Slavo: Amid a worsening fiscal crisis, a crumbling economy, and the destruction of over 40% of America’s wealth in just the last few years, it should be quite clear that this is no ordinary recession. In fact, with progressively dwindling job opportunities Read more…

Economy, Government

Economy: Hostess Adds To The Massive Tsunami of Post-Election Layoffs

November 18th, 2012

Michael Snyder: Can you hear that sound?  It is the sound of the air being let out of the economy.  Since the election, there has been a massive tsunami of layoffs and business failures.  Read more…

Economy, Government, Markets

Barack Obama And Mitt Romney Both Favor A One World Economic System That Kills American Jobs

October 21st, 2012

Either way this election turns out, American jobs are going to continue to get slaughtered by the millions.  During this campaign, Mitt Romney and Barack Obama have both attempted to portray Read more…

Economy, Government, World News

Experts Say That A Stock Market Crash Is Coming (JPM, BAC, GS)

October 10th, 2012

In the financial world, the month of October is synonymous with stock market crashes.  So will a massive stock market crash happen this year?  You never know. The truth is that our financial system is even more vulnerable than it was back in 2008, and financial experts such Read more…

Economy, Financials

77 Percent Of All Americans Live Paycheck To Paycheck At Least Part Of The Time

September 5th, 2012

If a major economic crisis hit us right now, the vast majority of Americans would be extremely vulnerable.  According to a recent CareerBuilder survey, 40 percent of all Americans live paycheck to paycheck all of the time, and 77 percent of all Americans Read more…

Economy

How To Win Against This Dangerous Government

August 29th, 2012

Kevin McElroy: I firmly believe that the U.S. dollar is a burning match. The longer I hold one in my hands, the less it’s worth. Eventually, it appears, it will be worth nothing at all, and I’ll get burned. Read more…

Government

Life in the So-Called Recovery

June 14th, 2011

“What Recovery?” Time Magazine finally got around to asking in its latest issue.

Better late than never, we suppose. The Daily Reckoning has been asking that question for months already…

“America’s recent economic ‘recovery is just a dismal version of ‘Mother May I,’” quipped Dan Amoss, editor of the Strategic Short Report in his essay “Inflation 1; Economy 0” in early March. “Almost every ‘one step forward’ will succumb to ‘two steps backward.’”

Two weeks later, we reiterated, “America’s economic recovery contains more cracks than Humpty Dumpty…after suffering his ‘great fall.’ Somehow, all of Bernanke’s horses and men managed to slather enough monetary glue onto the fractured pieces of our economy to hold them all together. But the reconstructed economy does not look very much like the original one. Humpty Dumpty is now a Picasso.

“While it’s true that a few ‘headline’ economic numbers – like GDP growth and industrial production – are flashing signs of recovery, numerous other data points are flashing red. Net-net, this recovery is suspect.”

We wanted to see the recovery that everyone else claimed to see, we really did, but we were never able to make out its image, no matter how hard we squinted. Blame us for a lack of imagination.

Most of the folks on Wall Street insist they see plentiful signs of economic growth. But then, a lot of folks insist they see aliens out their windows…or the Virgin Mary in their grilled cheese sandwiches.

Maybe the folks on Wall Street are right. Maybe a recovery is unfolding right below our noses. But to us, the “green shoots” of recovery look suspiciously like the AstroTurf of desperate governmental stimulus efforts. From a distance, the stuff looks like the real deal…or even better. But up close, you find a fake – a parody of economic vitality that will never grow into anything real or self-sustaining. Even worse, the AstroTurf also smothers the soil that could potentially yield productive enterprises.

As a result, the so-called recovery is producing a wide range of severely recessionary phenomena. For starters, according to a recent CNN poll, a whopping 48% of Americans surveyed believe that a 1930s-style depression is “very likely” or “somewhat likely.” That’s the highest reading since the beginning of the 2008 credit crisis.

Aren’t folks supposed to become more confident during recoveries? What’s the problem?

We don’t know precisely, but we can surmise imprecisely. A lot of stuff is broken. Jobs are hard to come by, debts are difficult to repay and household wealth is extremely difficult to regain.

Meanwhile, the US government’s mushrooming debt burden is scaring the bejeepers out of any American with a 5th grade aptitude for arithmetic. According to the latest figures, every American has become a kind of fiscal pack mule – saddled down with nearly half a million dollars of present and future government liabilities.

Those distant liabilities wouldn’t seem so troubling if they did not feel so immediate. But virtually all of America’s wealth-creation trends are moving in the wrong direction: taxes are rising, per capita incomes are slipping, inflation is rising and homeowners’ equity is collapsing.

Estimated Total Value of America's Residential Real Estate

Since the peak of the housing bubble in early 2006, homeowners’ equity has collapsed from $14.7 trillion to $6.9 trillion – a staggering loss of wealth equal to more than half of US GDP.  In fact, homeowners’ equity is even lower today than it was at the end of 1999!

Not surprisingly, a very close correlation exists between the amount of equity Americans have in their homes and the attitudes of Americans toward the economy. You could say these two data series move tick for tick.

Percentage of Americans Who Feel Good About the Economy vs. Americans' Home Equity

But real estate wealth is not the only disappearing act of the last decade. American households have also lost about $2 trillion of stock market wealth during the last five years.

These aren’t pretty numbers. Very few households are better off today than they were five years ago…or even ten years ago. Many are worse off. This bad news might not feel so bad if the US economy were producing a steady stream of good news. But it isn’t.

To the contrary, the federal government continues to spend the money that no one seems to have, while Ben Bernanke prints the dollars that fewer and fewer people seem to want. When and how this perverse merry-go-round will end no one knows, but it might be a good idea to jump off your pony as soon as possible and find a safer carnival ride…like precious metals or foreign real estate or water (as Chris Mayer explains in his essay “Blue Gold…Still Shining”) or, indeed, any other asset that isn’t a dollar bill or a promise to re-pay a dollar bill at some future date.

“There are already elements of [economic] fragility,” said New York University professor Nouriel Roubini in a weekend interview. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest… We’re still running over a trillion-dollar budget deficit [in the US] this year, next year and most likely in 2013. The risk is at some point, the bond market vigilantes are going to wake up in the US, like they did in Europe, pushing interest rates higher and crowding out the recovery.”

What recovery?

Eric Fry
for The Daily Reckoning

Life in the So-Called Recovery originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Life in the So-Called Recovery




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Real Estate, Uncategorized

How the US Could Have “467,000 More Jobs Right Now”

June 13th, 2011

With the US’ nine-plus percent unemployment rate — and when no stone should be left unturned in boosting jobs — there’s a huge, and currently untapped, potential job creation engine in tourism.

Since just last April, Brazilians have spent $1.4 billion as tourists, an 83 percent increase from that same time frame the year before. However, it turns out those dollars are largely not being spent in the US. The giant and growing BRIC tourist numbers are not making it to the US to spend their money, and create jobs in the tourism industry, even though they want to, simply because it’s too hard to get in the US.

Time Magazine explains:

“The most lucrative target is Brazil, Latin America’s largest economy. In the past, most Brazilians used to come to the United States looking for work; now they come to spend money and create jobs. The spending would help the U.S. economy tremendously. The American tourism market has recovered slowly since 9-11, but it missed out on a decade of growth, according to Roger Dow, president of the U.S. Travel Association.

“‘We call it the lost decade. If we had just stayed on pace with the rest of the world, we would have generated $606 billion more dollars and have 467,000 more jobs right now,’ Dow said recently at the Pow Wow tourism trade show in San Francisco. The good news, he says, is that the problem is still fixable, and has some inexpensive solutions. By just extending the visa-waiver program to Brazil and Chile, he says, the United States could double visits from those countries in one year and quickly generate $10.3 billion in new tourism revenue while creating 95,100 new American jobs.

“The Travel Association has also proposed a simple, four-point plan for ‘common sense entry reforms’ that Dow says would create an estimated 1.3 million new jobs and bring in $858 billion into the U.S. economy by 2020. He insists the entry reforms, visa waivers and other ‘trusted traveler’ initiatives would not compromise U.S. national security, rather streamline it and let Homeland Security ‘focus more on finding bad guys rather than harassing the good guys.’”

Only 36 nations are on the US’ visa waiver list, and not a single one is in Latin America. Perhaps it’s time to revisit a policy that was designed with the US’ best interest in mind… for the US’ best interest. You can read more details in Time’s coverage on how letting Brazilians in could help the US economy.

Best,

Rocky Vega,
The Daily Reckoning

How the US Could Have “467,000 More Jobs Right Now” originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
How the US Could Have “467,000 More Jobs Right Now”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

US Trade Deficit Takes on a Life of its Own

June 9th, 2011

The week of “non-data” here in the US continued on Wednesday, with the markets searching for a clue as to which direction to go, and the only news they had to work with was from Greece, which didn’t bode well for the currencies, yesterday.

But the lack-o-data ends today, with the Weekly Initial Jobless Claims, and… The April US trade deficit… This trade deficit has taken on a life of its own, in that we had a recession (I call an ongoing depression) and a financial meltdown, which one would think would bring this trade deficit in line… But NOOOOOOO! That’s not happening, folks, and why? Ahhh grasshopper, this has been discussed so many times in the past, but the point here is that the manufacturing in this country has gone the way of the Pony Express… Sure, it still exists, and in some countries would be great! But for a country our size, it has wasted away in Margaritaville! And it’s not enough to offset the imports…

But then, if consumers weren’t given stimulus checks in the mail, and other forms of steal-like measures to get us to spend, then imports wouldn’t be so huge… But then because we import so much oil, one would think we would be foreign oil independent by now…

So… The currency and metals traders will get some direction today, and maybe take their collective minds off of Greece… We might also get a sniff of what the European Central Bank (ECB) is thinking, as they’re meeting as I type this morning. Remember on Monday, I told you that we would be looking for the use of the word “vigilance” and mention of the need to provide “price stability” from ECB President, Trichet. So… Any mention of those two things, and I would think the euro (EUR) gets a good push higher versus the dollar today. You see, by mentioning those two things, Trichet, cracks open Pandora’s Box of rate hikes… Now, I’ve gone on record as saying that I thought the ECB would hike rates again in July… If the statement following the meeting today goes the way I believe it will go, then you can almost “book ’em Danno” for that rate hike in July…

Speaking of central banks… The Reserve Bank of New Zealand (RBNZ) met last night, and left rates unchanged. (Remember, that back in March, the RBNZ cut rates to accommodate the economy after the earthquake.) The RBNZ was quite upbeat in their statement following the meeting… You know, when New Zealand suffered that earthquake, I said then that I thought the Kiwi people would bounce back quickly… And the RBNZ admitted last night that they underestimated the speed and momentum that the rebuilding has taken on… That’s key, folks… Because those words would lead me, or a trader to believe that it won’t be long until the RBNZ is back at the rate hike table… (I’m betting that free undercoat that it comes in the fourth quarter of this year.) The New Zealand dollar/kiwi (NZD), took the statement and ran! Kiwi has outperformed all currencies overnight!

Of course, RBNZ Governor Bollard, who I’m no fan of, had to take his usual shot at kiwi strength, saying that it was ahead of itself… Hmmm… But then he did say that he would not be intervening, as intervention cannot move a trend… WOW! Love to hear a central banker say those words! Are you listening, Japan? How about you, Brazil? Or Switzerland? And over in the US with all your back-door intervention to keep the dollar weak?

OK… Did you see the results of the OPEC meeting? Well, if you haven’t, just me telling you that the price of oil is up about $2 this morning would tell you it didn’t go well, right? Yes, our friends (NOT!) over at OPEC now have problems… I mean these guys all cheated with production levels before, but now you’ve got a real problem in the fact that not all these guys like each other. In fact some countries are joining the rebels to defeat another country, and now they must all sit down together and make policy? I laugh, because that just cracks me up! That’s not going to happen now, and it won’t happen probably ever again… That’s right, OPEC could be on the way out… And so… Oil is up $2 this morning…to $101.

Down in Brazil, the country continues to fight inflation, and at the same time, stem the currency’s gains… I don’t see that working out too well for them! Yesterday, the Brazilian Central Bank raised their internal rate 25 basis points (1/4%), which surprised the markets. You see the markets had fallen into the trap of thinking that since the government wanted to stem the currency’s gains, that they wouldn’t hike rates further for that would attract investors and push the real (BRL) higher… Gotcha! It’s one of those things like the entertainer that puts one hand out to signal to the audience to stop the applause, but the other hand is signaling for them to continue the applause…

The Brazilian government sees inflation rising and reacts with rate hikes… Inflation by the way rose to just above 6.5% in April, which is the ceiling target for the central bank. So… Once again, the need to fight inflation was greater than the government’s desire to have the real weaker… Which I might add is stupid… If they want to fight inflation, allow their currency to gain!

Well… Gold and silver continue to get sold this week… I don’t get it, but momma said there would be days like this, my momma said… Cheaper levels to buy, is the only thing I can think of… The demand for the metals remains strong… Did you hear that the US mint in San Francisco was told to take the dust covers off their presses? Yes, for quite a few decades now, all the minting of silver coins has been done in Annapolis, (I believe), but with demand for Silver Eagle Coins so high, it looks like another mint will begin to push out coins again…

So… With all this demand, why isn’t silver at $50 again? And gold heading toward $2,000? If you really want to do something about it, contact Bart Chilton at the CFTC, and ask him… Maybe he can shed some light on this…

The Aussie dollar (AUD) saw some selling after a weaker-than-expected jobs report, last night. The unemployment rate remained at 4.9%, but the job creation was lackluster, especially for a county that had been knocking the ball out of the park, when it came to job creation… Looks like a cheaper level to buy, this morning…

And the Polish Central Bank raised rates 25 basis points (1/4%) in a surprise move yesterday… The Polish zloty performed nicely after the rate announcement… I know that I don’t talk about the “Euro Wanna-Be’s” very often, so I thought I would mention that there was a rate hike in Poland yesterday! The “Euro Wanna-Be’s” is a named that I coined for the countries that were thought to be on the “fast track” to joining the euro (back in 2003!): Poland, Hungary, and the Czech Republic…

OK… Most of you know that I have long called for Treasuries to be the next asset bubble… Of course, that was long before the Fed Reserve bought about $2.7 trillion worth of Treasuries in their two rounds of quantitative easing (QE)! But, I still think that we’ll see this happen in the long run… You know, Bill Gross, manager of the world’s largest bond fund (PIMCO) also is not a fan of US Treasuries, and has made investments accordingly… Right now, he and I look like we have egg on our respective faces, because the 10-year Treasury yield has fallen to 2.94%… But, historically speaking, history shows that Gross’s calls often seem wrong before proving accurate.

“I certainly don’t have any regrets,” Gross said.

As far as myself… I feel as though I let people down that shorted Treasuries with TBT… But, like I said the other day… I normally see things long before they happen, and in the meantime people think I’m nuts for having said what I saw… So… Patience…

Now… Before I head to the Big Finish, I have to get this off my chest… OK… I want to first say that I in no way was referring or instigating anyone to shoot Ben Bernanke yesterday when I said that no one in Atlanta had gone “John Wilkes Booth” on him during his speech… Believe or not, I actually had someone accuse me of instigating a shooting of Big Ben… Geez Louise! You know… If you want me to be bland like most newsletter writers, and not have fun with people, their statements, and policies, then… No wait! I can’t change! I guess you’ll just have to leave us…

I even had a guy tell me he was unsubscribing because of that statement… I told him, fine! I guess now you’ll have to find some other place to learn about all these things for free!

Then there was this… According to a Washington Post poll… Barely half of the people surveyed support raising the debt ceiling… WOW! Do you think that people are finally getting a clue? The problem here is that a substantial number of the respondents think the US will be seriously harmed if Congress doesn’t increase the debt limit… So, just like the many times before (and there have been 80 times before that the debt limit has been raised since 1920), nobody wants to do it, but it has to be done to keep us from going into default…

OK… I don’t know where to start with this… No wait! I do know where to start! Start at the spending… Reduce the spending and you won’t need to add to the debt or raise the debt limit! Spend, spend, spend, is what we’re all about and have been for a while…

Shoot Rudy… Once again yesterday someone accused me of being political in the letter… Apparently, a newcomer to the letter… For had they been around for a while they would recall me banging on the previous administration for their deficit spending too! I am adamant about this, folks… If I banged on the previous president for his $450 billion budget deficits, I don’t see how I can let this current president skate free with is $1.5 trillion budget deficits! So… Get your facts straight before you play that politics card with me!

To recap… The week of no-data ends today, and the markets can get some direction from the US trade deficit, and weekly jobs data. They can also see the color of the ECB’s thoughts, when ECB President Trichet speaks after leaving their rates unchanged this morning. The New Zealand dollar was the best performer overnight, after the RBNZ left the door open to re-enter the rate hike room (probably in the fourth quarter). Brazil did hike 1/4%, and gold and silver continue to weaken, even with strong demand…

Chuck Butler
for The Daily Reckoning

US Trade Deficit Takes on a Life of its Own originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
US Trade Deficit Takes on a Life of its Own




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Three Questions About Global Natural Resources

June 9th, 2011

Frank Holmes and the co-managers of the U.S. Global Investors Global Resources Fund (PSPFX), Evan Smith and Brian Hicks, participated in a special webcast for the Peak Advisor Alliance last week. Here are some candid portions of the Q&A:

Q. How are interest rates currently affecting commodity prices?

A. The magic number for real interest rates is 2 percent. That’s when you can earn more than 2 percent on a U.S. Treasury bill after discounting for inflation. Our research has shown that commodities tend to perform well when rates fall below 2 percent.

Take gold and silver, for example. You can see from this chart that gold and silver have historically appreciated when the real interest rate dips below 2 percent. Additionally, the lower real interest rates drop, the stronger the returns tend to be for gold. On the other hand, once real interest rates rise above the 2 percent mark, you start to see negative year-over-year returns for both gold and silver.

Whether you are Republican, Democrat, Independent or Agnostic, it’s important to realize that it’s not about politics, but about policies. During the 1990s when President Clinton was in office, there was a budget surplus and investors could earn more on Treasury bills (about 3 percent) than the inflationary rate (about 2). This gave investors little incentive to embrace commodities such as gold, and prices hovered around $250 an ounce. Now under President Obama, there is a large budget deficit and we have negative real interest rates, and gold is in great demand.

Interest rates in the U.S. have been near zero since 2008 and we don’t see the Federal Reserve increasing them until at least 2012. The U.S. economy remains in intensive care: Stimulus efforts have been unable to stimulate significant job growth and unemployment remains near 10 percent. In addition, the existing home sales figures released last week reminded everyone that housing is still on life support.

Even though there has been a lot of talk about reducing deficit spending and the U.S. House of Representatives voted against raising the debt ceiling this week, we don’t see any desire from the Federal Reserve to raise interest rates. The government realizes it is extremely dangerous to pull back the reins right now.

Q. How do the financial troubles of European countries such as Greece and Portugal affect gold prices?

A. The market has definitely been more volatile as some of the financial problems started to pop up again in Europe. The re-emergence of these issues is just another example of how many developed economies around the world are overleveraged and heavily burdened by their debt.

Some of the weaker countries, particularly Greece, could end up ditching the euro as their main currency. This would obviously be a destabilizing event for the euro and would result in some short-term strength for the U.S. dollar, thus providing a headwind for commodities. However, the U.S. dollar is plagued by the same problems as the eurozone; i.e., a weak economy and higher unemployment.

Meanwhile, central bankers in emerging markets have excess reserves and are looking for ways to diversify away from these paper currencies. To protect themselves from paper currency devaluation many of them have turned to gold. Last year was the first net positive year for central banks’ buying of gold since 1985. They’ve chosen to own gold over trying to guess whether Portugal or Greece’s debt is the best investment.

This isn’t a completely new phenomenon. Russia announced that it was going to diversify roughly 5 percent of its reserves into gold back in 2005 when gold prices were at $500 an ounce. The tipping point came in 2009 when India purchased 200 tons of gold from the International Monetary Fund (IMF), which effectively set a floor under gold prices at $1,000.

Since then, we’ve seen countries such as Thailand, Bangladesh, Vietnam, Venezuela and the Philippines add to their official gold reserves. Earlier this year, Mexico purchased 100 tons of gold to boost its reserve holdings.

This trend should continue.

Q. With oil prices hovering around $100 per barrel, what is the outlook for oil prices for the next two to five years?

A. We remain bullish on crude oil for one simple, fundamental reason: Demand is greater than supply. We don’t see that changing in the foreseeable future.

One big driver is a rapidly growing demand for cars and automobiles in emerging markets. There’s also rising demand for oil due to urbanization and rising per capita incomes in emerging economies. As their economies grow and their populations become more prosperous, they want and can afford to upgrade infrastructure and other construction projects which require oil to be produced.

However, it is important to manage expectations. As the price of gasoline rises and inflation fears grow, countries such as India have been forced to lower government fuel subsidies. This will cause some demand destruction as consumers adjust to paying more at the pump, a situation not very different from what we’ve seen recently in the U.S. Though it has the potential to spread if inflation gets out of control, we think this dip in demand will only be temporary.

On the supply side, it’s getting more difficult to find new supply and even when large reserves are discovered, they lie deep beneath the ocean floor or in parts of the world where it’s dangerous to operate.

We think these trends appear to be firmly intact and are why we remain constructive on crude oil prices over the next several years.

Regards,

Evan Smith and Brian Hicks,
for The Daily Reckoning

Three Questions About Global Natural Resources originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Three Questions About Global Natural Resources




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

How to Stimuluate Inflation and a Weak Dollar

June 7th, 2011

The Dow Jones Industrial Average slumped another 61 points yesterday, giving the US stock market a jumpstart on a sixth consecutive losing week. Bad economic news is, apparently, bad news after all.

“US equities halted their longest streak of gains in a month,” Bloomberg News reported last Wednesday, “after companies added 38,000 workers to payrolls in May, according to figures from ADP Employer Services, less than one quarter of the median growth forecast by economists.”

Two days later, US equities continued halting their streak of gains, as the Labor Department’s monthly employment report also fell way short of expectations – about one quarter of the median forecast by economists.

The economy, in general seems to be running at quarter-speed.

Just in the last few days we learned:

  • Factory orders slumped 1.2% in April, compared to a gain of 3.8% in March.
  • Car sales tumbled 10% in May – the lowest level in seven months.
  • The ISM’s manufacturing index dropped to 53.5 in May from 60.4 the prior month – the slowest pace since September 2009.
  • The Consumer Confidence reading for May slipped to 60.8 from 66 in April – the lowest level of the year.
  • The Median home price fell to a new low for this cycle – the lowest since 2003.

As anticipated by your skeptical editors here at The Daily Reckoning, Ben Bernanke’s quantitative easing has failed to stimulate enduring economic growth, but it has done a masterful job of simulating inflation and dollar weakness. We expect these trends to continue.

To be fair, the Fed Chairman did as much as he could, armed with only a printing press and a few moronic economic theories. He’s a modern-day Davey Crockett, trying to repel overwhelming hostile forces with the financial equivalent of a Bowie knife.

A printing press was never meant to nurture the economic growth of an entire nation. It is good for mass-producing Bibles, and putting monks out of the illuminated manuscript business. But a printing press is not so good for inspiring an entrepreneur to take a chance.

In fact, an active printing press undermines capitalistic enterprise because it creates the inflationary episodes that disrupt pricing throughout the supply chain, while also raising the cost of credit.

But Bernanke’s efforts have yielded some measurable results, even if they are the wrong results to be measuring. Government employment is soaring.

Federal Employment Growth vs. Privat Sector Employment

“The structure of the US economy was changed by the two bubbles and reflations over the past ten years, as private and public debt levels have ratcheted up,” observes Eric Janszen, of iTulip.com. “Consider the fact that total employment fell by 2.6 million jobs since the year 2000 while local, state, and federal employment grew by 1.8 million… In 2001, 14 million were employed in local government and 17 million in manufacturing. Ten years later, 15 million are employed in local government and 12 million in manufacturing.”

The growing legions of federal employees are doing their best to jumpstart the economy, as the nearby chart illustrates.

The Number of Limousines Owned by the Federal Government

The number of limousines owned and operated by the federal government has doubled over the last three years. The booming federal limousine trade is good for the limo industry, which is also good for related industries like limo driver uniform vending, sun-roof installing and crystal whiskey decanter manufacturing.

Two hundred new limos in three years isn’t going to turn the economy around overnight, but at least it’s a start, right?

Eric Fry
for The Daily Reckoning

How to Stimuluate Inflation and a Weak Dollar originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
How to Stimuluate Inflation and a Weak Dollar




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Playing Old Maid

June 6th, 2011

When my youngest sister was four-years-old, we taught her how to play Old Maid. She learned quickly but played the game like – a four-year-old. When she was dealt the Old Maid, her little thumb would push it a couple of inches above the others in her hand. She did this with a giggle since her maneuver was tricking us (in her 4-year-old mind) into taking the Old Maid. She succeeded; someone would remove it from her hand so that she could say: “Ha, Ha, you have the Old Maid!”

Today, the Bureau of Labor Statistics (BLS) has a four-year-old mind. On the morning of June 3, 2011, it released its monthly Employment Situation Report. The very first words were: “Non-farm employment changed little (+54,000) in May…” Nowhere in the 38-page report does the BLS state that the addition of 54,000 jobs was actually a loss of 152,000 jobs.

The BLS invented 206,000 jobs. The Bureau has constructed an equation called the “Net Birth/Death Model.” Its purpose is to count “Business births.” That is, new jobs in new businesses net the number of lost jobs in “Business deaths”: companies that went out of business.

This figure plays a large role in how Americans are told to think about the economy. CNBC did not look beyond the first sentence that morning when it announced The Number: +54,000. It did not mention the 206,000 net birth-death jobs. The Wall Street talking heads who were then interviewed were also ignorant. Last month, on May 6, 2011, the BLS April Employment Situation Report opened: “Non-farm payroll employment rose by 244,000 in April…” The +175,000 net birth/death jobs were not mentioned by Bubble TV and maybe not by any other major media outlet.

There are those who say the net birth/death (NBD) figure is a sophisticated calculation. No doubt it is; but is it accurate? If it is, why does the BLS never mention that NBD jobs were added when it manufactured The Number? Why does it so diligently hide it?

The initiative for the NBD calculation addressed a real problem. The BLS is not equipped to include “business births” in its monthly Employment Situation Report. It makes sense to adjust The Number, but the BLS, like most of Washington, is detached from the economy.

In June 2011, it is ridiculous to conclude the US economy is adding more jobs than it is losing. On June 2, 2011, the National Federation of Independent Business (NFIB), a trade group of smaller businesses, released its latest survey results. (I have found the direction of the trend in the monthly NFIB survey offers a good indication of the direction of the economy.)

Some of the highlights from the June 2, 2011, NFIB release:

“Chief economist for the National Federation of Independent Business (NFIB) William C. Dunkelberg, issued the following statement on May job numbers, based on NFIB’s monthly economic survey: “After solid job gains early in the year, progress has slowed to a trickle. The two NFIB indicators – job openings and hiring plans – that predict the unemployment rate both fell, suggesting that the rate itself will rise. “Meaningful job creation on Main Street has collapsed.” With one in four owners still reporting ‘weak sales’ as their  No. 1 business problem, there is little need to add employees, especially with the uncertainty about future labor costs arising from new regulation and legislation.”

The Bureau of Labor Statistics pushes the Old Maid above the other cards in its hand each month. It takes five seconds to type “net birth death” into the BLS website’s search engine and read this month’s NBD number. Yet, it is not mentioned by the media or by Wall Street talking heads. The Bureau of Labor Statistics has every reason to look at America and proclaim: “Ha, Ha, you have the Old Maid!”

Regards,

Frederick J. Sheehan,
for The Daily Reckoning

Playing Old Maid originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Playing Old Maid




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

US Jobs Report: More than Just a “Bump in the Road”

June 6th, 2011

Last week I was talking about how the euro (EUR) would move past 1.45 if the Jobs Jamboree was disappointing… I guess it was disappointing, because the euro is well into the 1.46 handle this morning! So… For more on the Jobs data from last Friday, here are some thoughts I had right after the number was announced…

The Jobs Jamboree last Friday was very disappointing, not just “disappointing” as I had called for ahead of time. It was so bad that without the McDonald’s hiring of 60,000 workers announced in April, the number would have been negative… But I’ve got an even larger mark against the number of jobs created in May reported by the BLS of 54,000… The BLS added 206,000 jobs in their birth/death model! Oh… But you didn’t hear about any of this on the cable news, did you? Of course not! They wouldn’t know how to investigate a government report if it was right in front of their eyes!

So… Only 54,000 new jobs created in May (and that’s not even really correct!) and at first the currencies didn’t react the way they had recently, with a disappointing jobs jamboree number… But, then the dollar was sent for a ride on the slippery slope, and the currencies got to the business at hand of taking liberties against the dollar… Did you see that guy, Goolsby (the White House Chief Economist, or something like that)? This guy continues to be the flag waver for the economy, when stuff like this gets up and smacks him in the face… Anyway… The guy I’m talking about, said that the Jobs report was a “fluke”…and a measly little bump in the road…

That’s sad, folks… Very sad, because when the government is in denial about an economy, we’re in for a bad run… Growth is slowing… The ISM said so… The leading indicators have said so… The Housing data said so, and the jobs data has said so… I guess it will be “big surprise” to the government officials when Big Ben Bernanke says this fall, that the economy needs more stimulus… They’ll still be in denial, folks… But you don’t have to be!

The thing that you normally see when a country begins to show signs of a double dip (or just a general slowing), is that interest rates will go nowhere for some time… And that’s what we have going on here in the US. Interest rates are not going higher…not now, not tomorrow, next month, or even next quarter. And if I’m right, and in the fourth quarter we see QE3, (although I’m sure the Fed will not call it that) then rates aren’t going higher the rest of this year! That gives the currencies from countries that already enjoy a rate differential to the positive, in their favor, a good bit of attractiveness. Yes… Dress them all up in their red dresses, cause we’re going out on the town!

So, that would be a currency like the Australian dollar (AUD)… that already enjoys a nice wide differential of yields (rates), and is one of the main reasons the Aussie dollar is $1.0750… Like I said the other day, though, I really feel that until the Reserve Bank of Australia (RBA) hikes rates in August, and the Fed implements whatever form of stimulus/QE this fall, the Aussie dollar will probably range trade… But that’s not so bad! Think about it… You have a currency that pays you 300 basis points (3%) more than the dollar or yen (JPY) in deposit rates, and in bond yields, you get more than 200 basis points more in a 10-year Aussie government bond versus a US Treasury 10-year bond… So… For just having funds on deposit, you’re rewarded with greater interest than you can get in the US or Japan…or even in Europe! OK… Where do I sign up? HA!

OK… I’m watching the euro actually lose some ground as I type away with my fat fingers… Seems that a German Finance Minister took it upon himself to make sure that everyone knew that the a second bailout for Greece was not certain, and that right now it’s only “suggestions”…

This guy is simply trying to throw the markets off the scent of a much stronger euro, based on a Greek bailout. I still believe that this will all be put to bed, and the can sufficiently kicked further down the road by the end of this month. The Germans don’t want to see the euro get “ahead of itself” here…

I saw this news this past weekend, while everyone was sleeping… The German newspaper, Die Welt, reported that the plan the Germans have come up with for Greek debt maturing 2012-14, is to have them volunteer to exchange this debt for new 7-year bonds… With all sorts of bells and whistles attached to the bonds to make them attractive…

You all may recall that I made this same suggestion a couple of months ago… To simply exchange present maturing bonds for longer term bonds… The only thing the holder would be out was the interest, but there could be some makeup applied to smooth out the wrinkles here… So, it’s nice to see that these guys took my suggestion!

And then later this week, in the Eurozone, the European Central Bank (ECB) will meet to discuss rates, among other things… The markets will want ECB President, Trichet, to throw them a bone, and I think that this is the meeting that Trichet puts down the tracks for a rate hike next month… Look for the words that usually signal such things from Trichet, like “vigilance” and “maintaining price stability”… If you see those, then the fix is in for a rate hike next month… Of course, ECB officials will do their best to downplay this pending rate hike, for once again they don’t want the euro getting “ahead of itself”…

Talk about a bare data cupboard! That’s what we have here in the US, this week… So, for a week, the markets are going to have to chew on the Jobs Jamboree… YUCH! … That doesn’t taste good! Not until Thursday will we see April’s trade deficit probably widen further… So, any further direction in the currencies this week will have to come from Greek Developments…

The Swiss franc (CHF) just has to be one big pain in the neck for the boys and girls over at the Swiss National Bank (SNB)… The franc is like the Energizer Bunny, and just keeps going on and on, and on, and… Well, you get the picture. The currency has no yield… But it has that “perceived title” of safe haven, which people flock to when there are geopolitical problems… Well, we’ve had more geopolitical problems in the past six months than you can shake a stick at, and the franc goes on, and on, and on…

Speaking of having a pain in the neck from a currency that just won’t behave… The boys and girls in the Brazilian government have thrown everything but the kitchen sink at the Brazilian real (BRL) to keep it from getting stronger, but to no avail… The real is back on the rally tracks and feeling stronger every day!

The Canadian dollar/loonie (CAD) continues to get dragged down by government claims that interest rates aren’t going higher… I find this to be strange, because oil is still around $100, gold is still above $1,500, and commodities, while getting whacked by claims that China would slow down, are still on the rally tracks… I think the markets are growing tired of the babble that the Bank of Canada (BOC) isn’t going to hike rates… We all know that to be a non-truth, that the BOC will hike rates again, probably when the kids go back to school!

Then there was this… Talk about geopolitical problems… This week, our friends (NOT!) over at OPEC will meet… That should be quite interesting! OPEC oil ministers brace for a stormy meeting…

Libya’s conflict likely will produce a fiery and highly politicized meeting when oil ministers of the Organization of Petroleum Exporting Countries gather Wednesday in Vienna, industry sources said. Qatar has openly sided with Libyan rebels, but other OPEC members are reluctant to follow suit because the EU hasn’t granted diplomatic recognition to the opposition government. Oil ministers are divided on whether to comply with requests from Western countries to increase production.

To recap… The Jobs Jamboree was not just disappointing, it was very disappointing, and that was even after some “adjustments” to the numbers… The weak jobs data put further question marks on the economy, and what I’ve said would happen – a call for further stimulus – comes along… That sent the dollar on a ride on the slippery slope, and the euro has traded all the way up to 1.46 this morning.

Chuck Butler
for The Daily Reckoning

US Jobs Report: More than Just a “Bump in the Road” originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
US Jobs Report: More than Just a “Bump in the Road”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Economic Growth Still a Long Way Off

June 3rd, 2011

On Wednesday, the US stock market took its biggest drop of the year. Thursday, the Dow shed another 41 points.

Treasury yields – on 10-year notes – fell below 3%.

US financial stocks took their worst beating in 10 months.

Even gold gave up ground yesterday, with a $10 drop.

What spooked investors?

Maybe they’re catching on. There’s already a ‘double-dip’ in the housing sector. Now analysts are talking about a double-dip in the entire economy. They don’t know it, but the economy has probably already dipped. Properly adjusted for inflation, growth is negative. Further adjusted per capita, it is even worse.

The ISM manufacturing index dipped in May.

“Horror for US economy as data falls off cliff” says a CNBC headline.

CNBC seems to be hiring writers from the London tabloids. The story continues:

“It seems that almost every bit of data about the health of the US economy has disappointed expectations recently,” said Mark Riddell, in a note sent to CNBC on Wednesday.

“US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing.

“And that’s just in the last week and a bit,” said Riddell.

“And right now, the economic data is suggesting that however measly you may think a 3 percent yield is on a 10-year Treasury, the yield should probably be a fair bit lower given what’s going on in the US economy,” said Riddell.

“You’ve also got to wonder at what point the markets for risky assets start noticing, too.”

“QE3 anybody?” asks Riddell.

Riddell is right. Almost all the news is bad. The press talks about a ‘soft patch’ for the recovery. But there is no recovery.

The latest jobs report puts the number of jobs created last month about 140,000 short of expectations. There were 177,000 new jobs created in April – barely enough to keep up with population growth. But in May the number of new jobs, according to ADP, dropped to 38,000.

And here’s the report from AP:

WASHINGTON (AP) – Hiring may be slowing after months of healthy job gains that helped drive economic growth.

The government’s May jobs report, to be released Friday, is expected to cement evidence that the economy has weakened in the face of high energy prices, scant pay raises and a depressed housing market. Analysts have been rushing to scale back their forecasts for job creation.

Persistent economic weakness could also imperil President Barack Obama’s prospects in the 2012 election. Pressure to focus on debt reduction was heightened Thursday by a warning from Moody’s Investors Service. The credit rating agency said it might downgrade the nation’s credit rating if the government failed to make progress in raising the debt limit in coming weeks. Republicans say they will agree to raise the limit only if Democrats back deep spending cuts.

Higher gas prices have left less money for consumers to spend on other purchases, like furniture, appliances and vacations. And average wages aren’t even keeping up with inflation. As a result, consumer spending, which fuels about 70 percent of the economy, is growing sluggishly.

In recent days, economists have sharply reduced their expectations for hiring in May. Nomura Securities now projects a gain of 85,000, down from 175,000 earlier this week. The consulting firm High Frequency Economics cut its estimate to only 50,000, from an earlier target of 200,000.

And don’t talk to us about housing!

Want to know what else sucks?

Associated Press adds a few things:

– The number of people applying for unemployment benefits remains stuck at a level that signals weak job growth.

– Factories received fewer orders for computers, autos, industrial machinery and other goods in April.

– Small businesses are hiring less. May marked a second month of weakness after solid gains in February and March.

And we’ll add some things of our own. Australia, for example. Its economy is shrinking at a 4% annualized rate. And car sales…especially sales of small cars – GM’s sales went down 1% in May, just when people should be preparing for their summer motoring vacations. And China. No one knows what is going on there, but we’re sure something sucks.

Always looking on the bright side, we ask: so where is the light at the end of this tunnel?

Answer: a long way off.

Bill Bonner

for The Daily Reckoning

Economic Growth Still a Long Way Off originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Economic Growth Still a Long Way Off




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

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