The Matrix Extends Its Reach

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Within one hour of the Paris attacks and without any evidence, the story was set in stone that the perpetrator was ISIL. This is the way propaganda works.

When the West does it, it always succeeds, because the world is accustomed to following the lead of the West. I was amazed to see, for example, Russian news services helping to spread the official story of the Paris attacks despite Russia herself having suffered so often from planted false stories.

Has the Russian media forgotten MH-17? The minute the story was reported that the Malaysian airliner was hit by a Russian missile over eastern Ukraine in the hands of separatists, the blame was ascribed to Russia. And that is where the blame remains despite the absence of evidence.

Has the Russian media also forgotten the “Russian invasion of Ukraine”? This preposterous story is accepted everywhere in the West as gospel.

Has the Russian media forgot about the book by the German newspaper editor who wrote that every European journalist of consequence was an asset of the CIA?

One would have thought that experience would have taught Russian media sources to be
careful about explanations that originate in the West.

So now we have what is likely to be another false story set in stone. Just as a few Saudis with box cutters outwitted the entire US national security state, ISIL managed to acquire unacquirable weapons and outwit French intelligence while organizing a series of attacks in Paris. Continue reading

The Gig Economy Is the New Normal

An already-confusing employment environment grew even more complicated this past week. Many readers responded to my “Crime in the Jobs Report” letter with their own stories. Some confirmed what I wrote, while others disputed it. Some of the stories I read from readers who are stuck far from where they want to be in this job market were very moving. I think everyone agrees the labor outlook is uncertain. I sense a lot of nervousness, even from those who have secure jobs that pay well. In today’s letter, I’m going to respond to some of the observations and data that came in this week on employment.

As we will see, we have a right to be nervous. Big changes in the employment world are happening, and we don’t yet know how they will affect us individually. Analysts like me can say we’ll muddle through, but we must remember that not everyone will muddle at the same pace.

We will also take a look today at a growing new phenomenon: the gig economy. (I should note that today’s letter is a little shorter. I am trying to reduce the word length of Thoughts from the Frontline.)

Employers Want Gray Hair

We talked last week about employers’ reluctance to hire older workers. Reader Steve Lange from Denver pointed me to a ZeroHedge article that questions this premise.

If you look at the BLS age breakdown for new jobs (Table A-9), you’ll see that workers aged 55 and over accounted for virtually all of October’s strong gains. That group added 378,000 jobs last month.

Meanwhile, the number of workers aged 25-54 actually declined by 35,000. That’s supposed to be “prime working age,” so any decline should ring alarm bells. And the numbers are more alarming if you are male: men aged 25-54 lost 119,000 jobs in October.

This pattern isn’t new, either. I’ve written about this ongoing anomaly in previous letters. Since December 2007, workers aged 55 and older have gained over 7.5 million jobs, while those under 55 have lost a cumulative 4.6 million jobs. Older workers are simply taking employment market share from younger workers.

What would cause this trend? Partly it’s demographic. The population is aging as the Baby Boomer bulge grows older and Millennials postpone parenthood. Nevertheless, it does look as though Baby Boomers are not exiting the labor force as fast as we thought. Continue reading

The Bubble Finance Cycle: What Our Keynesian School Marm Doesn’t Get, Part 2

In Part 1 of The Bubble Finance Cycle we demonstrated that a main street based wage and price spiral always proceeded recessions during the era of Lite Touch monetary policy (1951 to 1985). That happened because the Fed was perennially “behind the curve” and was therefore forced to hit the monetary brakes hard in order to rein in an overheated economy.

So doing, it drained reserves from the banking system, causing an abrupt interruption of household and business credit formation. The resulting sharp drop in business CapEx, household durables and especially mortgage-based spending on new housing construction caused a brief recessionary setback in aggregate economic activity.

To be sure, that discontinuity and the related unemployment and loss of output was wholly unnecessary and by no means a natural outcome on the free market.

Under a regime of free market interest rates, in fact, the pricing mechanism for credit would have operated far more smoothly and continuously, meaning that credit-fueled booms would be nipped in the bud. Flexible, continuously adjusting money market rates and yield curves would choke off unsustainable borrowing and induce an uptake in private savings due to higher rewards for the deferral of  current period spending.

Accordingly, the recessions of the Lite Touch monetary era were mainly a “payback” phenomenon that reflected the displacement of economic activity in time caused by monetary intervention. That is, the artificial “stop and go” economy lamented by proponents of sound money was a function of central bank intrusion in the pricing of money and the ebb and flow of credit.

During bank credit fueled inflationary booms, businesses tended to over-invest in fixed assets and inventory and to over-hire in anticipation that the good times would just keep rolling along. But when the central bank was forced to correct for its too heavy foot on the monetary accelerator (i.e. the provision of fiat credit reserves to the banking system) and slam on the credit expansion brakes, businesses dutifully went about reeling-in the prior excesses.

The 1972-1973 boom and subsequent steep recession through early 1975 was a classic case in point. But it is essential to recall that this was a monetary boom fueled from the Eccles Building, not the consequence of some nefarious plot by the newly ascendant OPEC cartel or even an “oil shortage” driven breakdown of economic growth. Continue reading

Math Is Money Is Physical Oil

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Crude oil prices are being slammed again today, as the “dollar” continues to reek about the places where economy and finance come together. Crude oil is perhaps the most visible extension of that process, where finance helps figure out direction of prices that will eventually be necessary to physically clear (even and especially to storage) actual product. Given the position of energy in the actual economy, the centrality of it all leaves behind understatement.

Despite all protestation that has continued about the state of the “transitory” risks, the “dollar” has been dead certain about where all this was going. While economists continue to contribute to the myth about QE and “stimulus”, the “dollar” was both unimpressed and equally overwhelming. In some ways, it is a self-fulfilling mention as “dollar” characteristics become “real” in various facets of the real economy, far beyond just the domestic shores of what was once the dollar.

Even Europe, with all its 2015 QE newness, is tracing out so far exactly that financial path. The year started fairly poorly, unleashed Draghi’s long-restrained imagination, and seemed to be heading quite as intended – but only to be dashed yet again on this side of summer. While that “something” may elude the understanding of limited (and limiting) central bankers, it is nothing more than the “dollar” and its waves working in all thingssuch as crude oil.

Euro-area economic growth unexpectedly slowed in the third quarter, underscoring the vulnerability of the region’s recovery as the European Central Bank examines the need for fresh stimulus…
With a slowdown in emerging markets testing the strength of the pick up in the currency union, the data will provide ECB President Mario Draghi with more visibility heading into December’s monetary policy meeting. The central banker has signaled additional stimulus is in the pipeline, citing renewed downside risks for growth and the region’s inflation outlook, which risks becoming entrenched well below the ECB’s goal of 2 percent.

Continue reading

New Socialist Government Keeps Portuguese People Under The Whip

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

The austerity imposed on the Portuguese people by the One Percent has resulted in the election of a coalition government of socialists, communists, and a “left bloc.”  In the 20th century, socialism and the fear of communism humanized Europe, but beginning with Margaret Thatcher the achievements of decades of social reforms have been rolled back throughout Europe as bought-and-paid for governments have given all preference to the One Percent. Public assets are being privatized, and social pensions and services are being reduced in order to make interest payments to private banks.

When the recent Portuguese vote gave a majority to the anti-austerity bloc, the right-wing Portuguese president, Anibal Cavaco Silva, a creature of Washington and the big banks, announced that the leftwing would not be permitted to form a government, just as the senior British general announced that a Labour Government formed by Jeremy Corbyn would not be permitted to form.

True to her word, Anibal reappointed the austerity prime minister, Passos Coelho. However, the unity of the socialists with the communists and the left bloc swept Coelho from office and the president had to recognize a new government.

The new government means that for the first in a long time there is a government in Portugual that possibly could represent the people rather than Washington and the One Percent. However, if the new government leaves the banks in charge and remains committed to the EU, the current president, previous prime minister, and previous finance minister, Maria Luis Albuquerque, will continue to work to overthrow the people’s will as occurred in Greece.

The new Portuguese government cannot escape austerity without nationalizing the banks and leaving the EU. The failure of the Greek government to bite the bullet resulted in the Greek government’s acceptance of the austerity that it was elected to oppose.

In order to put the One Percent on the defensive, the new Portuguese government should begin investigations of Silva, Coelho, and Albuquerque. It is possible that they received payoffs for turning Portugal over to the One Percent to be looted.   The new Portuguese government should turn to the BRICS for trade and finance.  Otherwise, as in Greece, the Portuguese people will be defeated by the institutional arrangements comprising the Global World Order that the One Percent have put in place. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Credit Bust In Rich Countries Caused Credit Boom In Emerging Markets (Economist)
• Irish President: Unaccountable Forces Are Running EU (IT)
• The Global Economy Slows Down. Is It Recession Or Protectionism? (Guardian)
• Yuan’s Rise Means World Economy Takes Step To Greater Stability (Bloomberg)
• Whistleblower At HBOS Bank Attacks ‘Ludicrously Bad’ City Regulation (Guardian)
• More Tough Measures Loom As Greece Eyes Bailout Loans (Kath.)
• ECB Demands Portugal’s Novo Banco Plug $1.5 Billion Capital Hole (Reuters)
• The Streets of Paris Are as Familiar to Me as the Streets of Beirut (Joey Ayoub)
• After Paris, Europe May Never Feel As Free Again (Guardian)
• What’s Next for Migrants After Paris? (Atlantic)
• Syrian Refugees In France Say Paris Terror Is The Terror They Fled (BuzzFeed)
• There Is Only One Way to Defeat ISIS (Esquire)
• Syrian Transition Plan Reached by US, Russia in Vienna (Bloomberg)
• Poland to Shun Refugees After Paris Attack, Future Minister Says (Bloomberg)
• After Mass Extinctions, The Meek (Fish) Inherit The Earth (WaPo)
• Two Refugee Children Die In Greece In Separate Incidents (Kath.)