Shining a Light

Submitted by James Howard Kunstler  –

The just-released movie Spotlight is about a Boston Globe investigative reporting team circa 2001-02 that uncovered and documented a vast network of child sex abuse by priests in the Catholic Church that had been on-going for decades. More to the point, Spotlight revealed the institutional rot at the very top of the Boston Catholic Church hierarchy, led by then-Cardinal Bernard Law — which marinated church personnel in a code of secret atrocious behavior enabled by systematic lying and deception. In effect, the church gave permission to its foot-soldiers, the parish priests, to engage in whatever sexual antics they wished to, with a tacit promise to shield them from the reach of the courts. The civil authorities of Boston, heavily Catholic due to Boston’s demographics, assisted the church by throwing up every legal obstacle they could to deter the victims and their advocates in the search for justice — and to put an end to the predation of children by priests.

That was the story that Spotlight told, and it did that very economically, without grandstanding. But the movie had another message for me, as someone who has been involved in the media going back more than forty years when I was an investigative newspaper reporter myself. The message was that the institutional support for great journalism that allowed the Globe’s Spotlight reporting team to do its job is now gone-baby-gone. All the newspapers in the USA, and even the TV and radio news networks, are running these days on skeleton crews. At least that is true of the old flagship organizations such as the Boston Globe and CNN. They just don’t have the reporters out in the field. The front-page or flatscreen interface that the public sees conceals ghost organizations that barely have the reporting resources and the reach to discover what is actually going on in the world.

The dying newspapers — and they really are on life-support at this point, including the Globe andThe New York Times — can’t pay teams of reporters like the Spotlight crew to work through years-long investigations. But what the movie also ought to remind us is that the hierarchical competence at such an enterprise, the layers of editors who know what they are doing and understand the boundaries and conventions of their own society, is also disastrously AWOL in the new Wowee-Zowie era of instant cell-phone networking, Facebook, and Instagram. In a word, leadership has been made to seem dispensable. Continue reading

Are All Men Really Created Equal?

Submitted by William Bonner, Chairman – Bonner & Partners

Phony Stimulus

WATERFORD – We are sitting at a restaurant next to Waterford harbor. This is where thousands of desperate emigrants assembled for the trip to America. But during the famine in Ireland and the Highland Clearances in Scotland, passage across the Atlantic was as likely to be a ticket to a watery grave as to a better life.

Death rates were as high as 30% – earning the vessels the name “coffin ships.” If the emigrants made it to the U.S. or Canada, their prospects improved. Their children or grandchildren might grow up to be president. Or, like your editor, at least get a chance to visit Waterford again.


Jeanie_JohnstonReplica of the “good ship” Jeanie Johnston, which sailed during the Great Hunger when coffin ships were common. The “good ship” was an exception: reportedly no-one ever died on it.

Photo credit: Jnestorius


Back in the U.S., nonfarm payrolls increased by 211,000 in November… adding to the 271,000 jobs created in October. Word on The Street is that Fed chair Janet Yellen will stick to her plan to begin normalizing interest rates later this month.

Meanwhile, from Europe came news that Mario “Whatever It Takes” Draghi also disappointed investors yesterday. The president of the European Central Bank’s latest stimulus package was less stimulating that investors had hoped for.

It was as though a child had expected a new bike for Christmas. And then, looking under the tree on Christmas morning, all he finds is a sweater and a book. The poor boy is in a funk for the rest of the day.

The Dow sold off 252 points – or about 1.5%. That’s the trouble with these phony stimulus measures. You’ve got to keep stimulating… or the spoiled kids get in a bad mood. Continue reading

Viewing Payrolls As A Product of A Shrunken Economy

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The numbers all change with each month, but nothing really changes. And that includes how the economy changed in 2012 and clearly again in 2015. By raw count of the payroll figures, there were positive numbers in every location in the latest update as only full-time employment was close to zero growth (only +3k for November). The labor force grew for the second straight month which brings the total for the year since January back to just even. And the Household Survey has gained only 1.16 million in those ten months compared to the 2.11 million in the Establishment Survey.

So nothing much has rehabilitated as divergences continue to abound. In a virtual repeat of late 2012/early 2013, only the Establishment Survey appears unfazed by economic weakness spread everywhere else.

ABOOK Dec Payrolls LF

The civilian non-institutional population, those 16 years and older available for work, the potential labor pool, has grown by 2.1 million in those ten months but only a small handful have joined the continued robust jobs market? It may be that the economy is still working off the “slack”, the ongoing pool of previously unemployed, leftover from the Great Recession, but that qualifies as something other than a recovery.

As it was, by count of the BLS it took this “cycle” 95 months to close the gap with the prior cycle peak in terms of full-time jobs. In the past two recoveries, neither of which would be characterized as historically robust, the deficiency was rebounded in just 43 and 41 months. This accounts for a great deal of the confusion about the jobs market and labor interpretation.

ABOOK Dec Payrolls FT Participation

By that I mean the narrow focus of economists on the slope of the return trajectory 2010 and forward against the broader focus of “Main Street” which has no luxury of deflating scale. The unemployment rate is confirmation of the slope for economists, but the participation rate is the real economy’s ongoing suffering. If there was an actual recovery, one which closed not the calculated slack of “secular stagnation” that continually writes down “potential” to whatever deficient level exists at any time, the American economy would be almost 14 million full-time jobs ahead of November 2007 rather than just barely equal to it. From that point alone, China, Brazil and even Canada would not be staring now into the yawning abyss.

But because there is some positive slope, economists have convinced themselves the Great Recession’s apparent permanent shrinking of the economy no longer matters. It cannot be characterized any other way, as the amount of labor, so far as these estimates are somewhat reliable (risky proposition, more below), and labor utilization isundoubtedly smaller. Given the passing of eight years now from the last peak, this cannot be some temporary problem.

ABOOK Dec Payrolls FT Participation2

From the prior economic trend, as revealed above, the gap is about 14 to 15 million jobs and workers. The difference between 14 or 15 million may be explained by part-time work, including the apparently permanent rise in those underemployed into part-time jobs, but overall peak-to-peak there are about 15 million people simply “missing” in this “recovery.”

ABOOK Dec Payrolls Accounting

Overall population, the pool of potential labor, has expanded by nearly 19 million since November 2007 while the official labor force has grown by just less than 3.5 million – an absolutely astounding gap that screams out just how far the US economy has shrunk. The difference, those 15.3 million, have fallen off the face of official statistics – they don’t count as employed, obviously, and never unemployed, either. The only way to suggest a recovery is to simply forget that they exist as living Americans, somehow being supported by an obviously lesser productive structure.

The real economy itself, however, cannot as economists just ignore this seizing disparity. A permanently shrinking economy is massive trouble on its own, but so much more so where financial burdens are added as if organic growth. Eventually those artificial supports will find their inevitable expiration, as financialism cannot continue to survive upon a permanently reduced base – an action that is found in eurodollar banks all over the world getting out of the eurodollar business as fast as they can. And so that places together more immediate second derivative considerations against the shrinkage of the structural condition.

Since 2012, “something” has changed in both actual economic condition (more obvious in other places around the world, but not so hidden in the US as to be too difficult to find) and even these employment statistics. The Establishment Survey has been a rock, unalterable by anything other than trend-cycle upswings as, likely, jobless claims fall in cyclical fashion. The Household Survey was once as determined, but in October 2012 found itself departing on a slower track. It was also October 2012 where the labor force also halted from its prior recovery advance.

ABOOK Dec Payrolls Divergencs

While there is some argument to be made about the interim, especially the middle of 2014 and later that year, these disparities returned in January this year. The Establishment Survey shows only a slightly slowing payroll growth, while the labor force, again, suggests more sinister interpretations.

Unfortunately it is the latter that has been confirmed elsewhere, as even the most optimistic of economists have great difficulty finding corroboration with a robust jobs market (wages, spending, trade). Instead, by count of spending, the Establishment Survey produces yet another gaping chasm.

ABOOK Dec Payrolls Retail Sales2

The amount of spending per “job” had been remarkably stable throughout almost the entire history of the modern retail sales series dating back to 1992. The housing and dot-com bubbles even make their appearance in the later 1990’s as a “supplement” to employment income showing up as greater spending growth per job. Even the first part of this recovery after the Great Recession appeared to conform to that solid correlation – until the middle of 2012.

ABOOK Dec Payrolls Retail Sales1

That was a dramatic shift, as even in recession (apart from the total collapse in late 2008 and early 2009) the relationship had remained stable. In both the dot-com recession and the first phase of the Great Recession, spending per Establishment Survey payroll was within that historic range. That makes sense since both series essentially confirm each other, as in those recessionary circumstances the reduction in payrolls was simply met by a nearly equivalent reduction in spending – common sense. The collapse in the worst of the Great Recession was equally simple, namely that even those with jobs cut back significantly on their spending.

That raises the issue about how to interpret this disparity after 2012 and then growing much, much worse in 2015. Are people with jobs cutting back yet again? Are new jobs paying only the absolute minimum (which might explain the labor force as a weak product of such financial-driven redistribution)? Or are there far less jobs and job growth than projected by BLS subjectivity? Those are the only explanations and none of them suggest anything good about the economy, and all of them would at least share a root in the structural problem of the shrunken economy. What we may find out years from now after new benchmark revisions is that there may be some of all three.

There is agreement, however, on one point; even the Establishment Survey and related CES statistics (like JOLTS hiring) show as significant slower this year as compared to last. Thus, by all these counts, “something” has changed this year. The pure Establishment Survey view is that it is nothing to be concerned over, as the economy and labor market went from ridiculous good to merely good. Everything else has transitioned from confusing (from the orthodox view) to alarming (now suddenly a manufacturing recession).

ABOOK Dec Payrolls Est Survey AvgsABOOK Dec Payrolls JOLTS

What we are faced with, then, is the prospect of a permanently withered (ing) economy slowing in 2015 for more than just a few ignorable months of aberration. A permanently smaller economy beset by significant deceleration is a serious problem, which, unlike the unshakable optimism in the mainstream, actually goes a long way to explaining everything from China, Canada and Brazil to these manufacturing, profit and revenue recessions that were supposed to be impossible this year. That was, after all, the entire point of last year’s “best jobs market in decades”; it meant, in that context, there couldbe nothing but clear sailing and inarguable booming from that point forward.

Of course, that view could only have been established where the enormous, gaping hole left behind by the Great Recession was discarded as past trivia. The instability in GDP as well as the “unexpected” events of 2015 all simply derive from that starting point; economic and financial.

BIS Warns of ‘Uneasy Calm’ in Markets Before Possible Debt Storm

Submitted by Mark O’Byrne  –  GoldCore

The Bank for International Settlements (BIS) has warned in its latest quarterly review that the current ‘uneasy calm’ in financial markets might be short lived, threatened by the Fed’s widely expected interest rate hike – the first rate increase in a decade.

GoldCore: BIS Quarterly Review

Source: BIS Quarterly Review

This latest warning comes after BIS – the central bank of central banks  – had previously cautioned that recent economic turmoil in the global stock markets  “showed how developed and emerging markets were exposed to the unwinding of financial vulnerabilities built up since the 2008 crisis.” See: “BIS Warns of ‘Major Faultlines’ In Global Debt Bubble”.

“The short-lived market response might suggest that EMEs (emerging market economies) could ride out the prospect of US monetary tightening. However, less favourable financial market conditions, combined with a weaker macroeconomic outlook and increased sensitivity to US interest rates, heighten the risk of negative spillovers to EMEs once US rates do start to rise in the United States”. BIS Quarterly report December 6th

Again, BIS warns that investors remain “hooked on every word and deed” of central banks and that recent turmoil in markets was not caused by isolated incidents but rather “the release of pressure that has gradually accumulated over the years along major fault lines”.

According to the the Telegraph today, “The central bank watchdog said emerging market households and businesses reliant on cheap debt faced a credit crunch that could trigger panic in a world of evaporating liquidity and fewer market makers.”

Public and private debt in the developed world has risen 36% since the crisis and is now 265% of GDP and the post-crisis problems have been dealt with with the same ineffectual policies that caused the crisis – prolonged ultra low interest rates and easy monetary policy.

GoldCore: BIS Quarterly Review
Source: BIS Quarterly Review

Quoting Claudio Borio, head of the economic department at the BIS, the Telegraph report, ‘“Expectations of further ECB easing had led traders to place bets on the euro that caused huge market swings when the central bank was perceived as failing to deliver. “Against this backdrop, it is hard to imagine how the calm could be anything but uneasy. There is a clear tension between the markets’ behaviour and underlying economic conditions.’ ‘”At some point, it will have to be resolved”, said Mr Borio’.

Read more from The Telegraph: “Uneasy’ market calm masks debt timebomb, BIS warns

Other Sources:
BIS Quarterly Review, December 2015
BIS Warns of ‘Major Faultlines’ In Global Debt Bubble

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Emerging Market Debt Sales Are Down 98% (BBG)
• BIS Warns “Uneasy Calm” In Global Markets May Be Shattered By Fed Hike (ZH)
• BIS Argues For Tighter Monetary Policy In Spite Of ‘Uneasy Calm’ (FT)
• Corporate Bond Market Hit By Rates Fears (FT)
• Junk Bonds Set For First Annual Loss Since Credit Crisis (WSJ)
• Japan’s Current Recession To Prove An Illusion (FT)
• Last Gasps of a Dying Bull Market – And Economy (Hickey)
• As Oil Keeps Falling, Nobody Is Blinking (WSJ)
• Gradual Erosion Of The EU Will Leave A Glorified Free-Trade Zone (Münchau)
• China’s Iron Ore, Steel Demand To Fall Further In 2016 (AFR)
• China’s Biggest Broker CITIC Can’t Locate Two Of Its Top Execs (Reuters)
• Falling Cattle Prices Put The Hurt On Kansas Ranchers, Feedlots (WE)
• Prison Labor In USA Borders On Slavery (AHT)
• German States Slam New Refugee Boss For ‘Slow Work’ (DPA)
• US Alliance-Supported Groups In Syria Turn Guns On Each Other (Reuters)
• Iraq Could Ask Russia for Help After ‘Invasion’ by Turkish Forces (Sputnik)