Inflation Doesn’t Come From Seasonally Adjusted Employment

Submitted by Michael Pento – Pento Portfolio Strategies

According to the Bureau of Labor Statistics (BLS), there were 151k, 000 net new jobs created in the month of January, and the unemployment rate fell to 4.9%. The continuing increase in new job creation and removal of slack in the labor market is causing the Phillips-curve-obsessed Fed to maintain a tightening stance on monetary policy.

However, not only is Ms. Yellen and company wrong about the progenitor of inflation, the Fed is also obsessing about job growth that isn’t real. According to that same BLS, in December of 2015 thru January 2016 the economy actually lost 2,999,000 jobs, or 2.08% of the workforce. The Labor Department arrived at a positive employment number because the BLS seasonally adjusts the data—my friend David Stockman had more to say about his in his excellent blog.

On a seasonally adjusted basis the U.S. economy created 413k, 000 jobs during that timeframe. Of course, it makes sense to adjust the jobs data for hiring and firing around the Christmas season. But it makes much more sense to look at the data year over year for a more accurate assessment of the labor market. During December 2014 thru January 2015 the economy shed 2,820,000, or 1.99%.

Therefore, the economy not only lost 179,000 more jobs this year during the post-Holiday layoff season than it did the year prior, but it also suffered a greater percentage of job losses than it did during the comparative time frame. Continue reading

On Trump and Europe -Business Insider

Submitted by Yanis Varoufakis  –  The Yanis Varoufakis Blog

Donald Trump, left, and Yanis Varoufakis.

Reuters/Jonathan Ernst/Jean-Paul Pelissier/Business InsiderDonald Trump, left, and former Greek finance minister Yanis Varoufakis.

Outspoken former Greek Finance Minister Yanis Varoufakis compared the popularity of Republican Presidential candidate Donald Trump to the rise of Fascism across Europe in the 1930s.

Varoufakis, who ran Greece’s economy during crucial bailout talks and resigned last year, on Monday spent 90 minutes answering questions on Q&A website Quora, covering topics ranging from Europe’s future to Trump and even how economics is taught in University.

Trump has provoked the left with his comments on Muslims and immigration but become a darling of many right-wing voters in the US.

Here’s what Varoufakis wrote when asked ‘What do you think about Donald Trump’s political success in the US?’:

Anger is prevalent. Common folks follow a good instinct when they want to punish an establishment that has lied to them for decades, that has treated them with contempt, that considers them ‘useful idiots’ to be bought by the highest bidder.

Unfortunately, this good instinct often leads fed up conservatives to the wrong leader, camp, campaign. We saw this in the 1930s, we are seeing it today in France (the rise of Le Pen). Our duty as democrats is to offer disaffected voters, including conservatives, a way to indulge their impulsive urge to punish the establishment without becoming hostage to misanthropic narratives, like Trump’s, Le Pen’s etc.

The 1930s saw the rise of right-wing, autocratic, Fascist dictatorships in Italy, Spain, and Germany, while in France Marine Le Pen leads the far-right National Front party, which has recently enjoyed a boost in popularity.

Varoufakis and his party, Syriza, swept to power in Greece on a wave of popular support, but from the left, not the right. Varoufakis says there are “stark similarities” with his success and the current popularity of US Democratic Presidential candidate Bernie Sanders.

Here are the select highlights of Varoufakis’ other answers:

  • On the future of the EU: “I hope not but I fear we may very well be experiencing the EU’s disintegration. The Eurozone has been, for some time now, in an advanced state of deconstruction…. Beyond the Eurozone, Schengen has already been suspended and is under enormous strain as the forces of xenophobia, ultra-nationalism and plain paranoia are taking over. The EU’s inability is come to terms with what is, after all, a mild refugee crisis (as compared, for instance, with that facing Jordan or Lebanon) speaks volumes in this regard.”
  • On Greece’s economy: “Terribly, heartbreakingly badly… Greece was in a free fall before we [the Syriza party] were elected, and remains in one now because our attempts to renegotiate the world’s most failed ‘program’ were crushed by an ironclad troika determined not to ‘lose’ Spain, Portugal, Ireland etc.”
  • On Julian Assange: “Democracy is nothing without the right to free speech. And, as I said at the Volksbuhne Theatre while I wasintroducing Julian to the audience, the right to free speech counts for little without the right to know what our rulers are doing on our behalf.”
  • On his new movement, DiEM 25 (Democratise Europe): “The number one lesson many of us learned during 2015 at the level of European Union, the Eurogroup, etc., is that the old way of doing politics in Europe is obsolete – finished… Instead of starting at level of the nation-state and forging an alliance, which is flimsy and brittle, how about starting a movement throughout Europe on the basis of a very clear manifesto that binds us together? How about a movement with some very simple ideas of what we want to do as Europeans?”
  • On a potential Brexit: “I argued that British voters have every reason to be livid with a deeply anti-democratic, bureaucratic and unappetising EU. But it would be wrong to think that they can just leave the EU behind, sailing off into some other alliance with the US or China.”
  • On Democratic Presidential candidate Bernie Sanders: “The great difference between us is that Bernie is running for the Presidency of a social economy that is far more robust and autonomous than the Eurozone – and infinitely more sustainable than a bankrupt country (Greece) lacking any of the levers of policy making (e.g. monetary & fiscal policy, the right to legislate that was given away last summer with the 3rd Loan Agreement).”

You can read the full Q&A session here.



Convenient Beliefs

Submitted by William Bonner, Chairman – Bonner & Partners

“Massive Deterioration” – Worse Than 2008

BALTMORE – “Stocks still not finding bottom” warned a headline at Investor’s Business Daily. On Thursday, the Dow ended down 255 points – or 1.6%. The index is down by almost 9% since the start of the year.

“These developments, if they prove persistent, could weigh on the outlook for economic activity…” proffered a nervous-looking Janet Yellen in her testimony on Capitol Hill. She was signaling to investors.

Yellen_cartoon_02.27.2015Smoke signals…

“Don’t worry about us,” she may as well have said. “If we can get away with a big U-turn, we’re not going to raise rates anymore.”

On Tuesday, Maersk Group, the world’s largest container shipping company, said it was suffering a “massive deterioration” in its business.

“It is worse than 2008,” its CEO, Nils Andersen, told the Financial Times. But this is not even near the bottom for the world economy. Hedge fund manager Kyle Bass warns that the other shoe is a big one… and it hasn’t dropped yet.

The MV Maersk Mc-Kinney Moller, the world's biggest container ship, arrives at the harbour of Rotterdam August 16, 2013. The 55,000 tonne ship, named after the son of the founder of the oil and shipping group A.P. Moller-Maersk, has a length of 400 meters and cost $185 million. A.P. Moller-Maersk raised its annual profit forecast for the business on Friday, helped by tighter cost controls and lower fuel prices. Maersk shares jumped 6 percent to their highest in 1-1/2 years as investors welcomed a near-doubling of second-quarter earnings at container arm Maersk Line, which generates nearly half of group revenue and is helping counter weakness in the company's oil business. REUTERS/Michael Kooren (NETHERLANDS - Tags: MARITIME TRANSPORT BUSINESS) - RTX12NIUA Maersk container ship…the line is feeling the pinch – the Baltic Dry Index has collapsed to just 291 points (from approx. 11,800 at the 2008 peak) and container shipping rates have declined sharply as well.

Photo credit: Michael Kooren / Reuters

China’s economy is heavily dependent on capital investment. It puts its money into building factories, highways, offices, apartment blocks, railroads, ports, and airports. What do all these projects require? Rebar!

Concrete is reinforced with steel bars. As the pace of building slows, the price of rebar goes down. In 2008, a ton of rebar cost about 5,500 renminbi ($836). Now, it costs barely 2,000 renminbi ($304) – the lowest price in at least 15 years.

Steel rebar futures, weeklyShanghai steel rebar futures, weekly in RMB – click to enlarge. Continue reading

The Nearing End of ‘Stimulus’

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

As China, Japan is the definition of insanity. GDP fell 1.4% in Q4 2015, marking the fifth contraction out of the past nine quarters and yet the word “stimulus” remains attached to QQE, the Bank of Japan and Abenomics in general. At this point, how much more time and sample size is necessary before calling it a failure? In about six weeks, Kuroda’s massive “stimulus” will mark its third anniversary and the best that can be said of it is that GDP has gone nowhere. Two and three quarters years later, real GDP (SAAR) in the last three months of 2015 was the slightest bit higher than Q2 2013 when everyone was so sure “stimulus” was all so sure.

ABOOK Feb 2016 Japan GDP Real SAAR

The media provides all the evidence necessary as to why everything is so “unexpected.”

The data suggest Japan’s economy is still plagued by the weakness of domestic demand as it enters a fourth year of record monetary stimulus, with wages not rising fast enough to persuade consumers to spend.
There is no sign of a downward spiral in the economy but with the yen rising to trade at Y113.8 to the dollar in recent weeks, the figures put pressure on the Bank of Japan for even more monetary stimulus to encourage a strong round of wage rises this spring.

Wages, first of all, aren’t rising at all let alone “fast enough.” That occurred while QQE was in full force and the yen in full devaluation – in other words “stimulus.” If wages didn’t act as expected over the first nearly three years of “stimulus”, why would they suddenly going forward? The FT’s second paragraph quoted above ignores everything about the first. The mantra for all commentary now into 2016 is that “monetary policy works even though it never has.”

The overall GDP figures are actually quite charitable to QQE, however, as the effects on the actual Japanese people have been devastating. This is not hyperbole. As noted last week under separate but confirming data, the Bank of Japan expanded total bank “reserves” by an overwhelming 339%, unprecedented in every modern fashion; yet Household Income fell by 7.1% in real terms. The GDP estimates for household spending show that, unsurprisingly, households have only cut back and quite seriously.

ABOOK Feb 2016 Japan GDP Real SAAR HH less Imputed Rent

Continue reading

Gold Stabilises Above $1,200; Asia Markets Run Out Of Steam

Submitted by Mark O’Byrne  –  GoldCore

Global economic turmoil continues to rumble on as major economies seek to come to grips with a changing monetary environment, sagging growth, low inflation, pockets of deflation and uncertainty over the future of Europe post Brexit. Japanese shares sold off after their gains on Monday, falling 1.8% in today’s trading sessions. European shares rising 1.6% this morning on the back of an expectation that volatility in the markets may begin to stabilise, feels more like a dead cat bounce to be honest.

In a wonderful example of poor timing, China is ruffling global security circles by placing advanced ground-to-air missiles in the South China Sea in what many see as an antagonistic move. Russians and Saudis have decided to freeze production of oil, which smacks of desperation as oil output rates are at recent highs and economic demand is lagging so it is likely that such a move will actually suppress prices further.

One statistic we like to follow and we think is indicative of the global post debt binge slowdown is the Chinese Container Freight Export, which is showing a 28% drop since February 2015. For a large industrialised nation like China that is a akin to an economic cardiac arrest. The good news is that the index seems to be stabilising, albeit slowly.

CCFI at 2016_02_17 10_22

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Banks’ Balance Sheets Are Poor Guides To Actual Risks And Uncertainties (FT)
• Banks Are Still The Weak Links In The Economic Chain (FT)
• The Eurozone Can’t Survive Another Banking Crisis (MW)
• I’m in Awe at Just How Fast Global Trade is Unraveling (WS)
• Tilting At Windmills: The Faustian Folly Of Quantitative Easing (Steve Keen)
• If Zero Interest Rates Fixed What’s Broken, We’d Be in Paradise (CHS)
• China Turns on Taps and Loosens Screws in Bid to Support Growth (BBG)
• China Debt Binge Spurs S&P Warning (BBG)
• China Loses Control of the Economic Story Line (WSJ)
• China’s Big Bet On Latin America Is Going Bust (CNN)
• Pimco’s $12 Billion Standoff Over Austria Bad Bank (BBG)
• Things Are Coming Unglued for Canadian Investors (WS)
• Calgary Housing Market Collapses As “Three-Alarm Blaze” Burns In Vancouver (ZH)
• What Are We Smelling? (Dmitry Orlov)
• Not a game (Papachelas)
Yanis Varoufakis



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