Home » Posts tagged 'Bureau of Labor Statistics'
Tag Archives: Bureau of Labor Statistics
While everyone obsesses over the monthly payrolls report, which on a trailing 12 month basis is once indicating the creation of roughly 2 million jobs each year, or roughly where it was before the crisis (red line chart below), one aspect that is largely ignored is the amount of hiring.
Why is hiring important?
Because that is the actual process by which those without a job end up with a job. And as we just learned today after the latest JOLTS release, which showed that there were over 4 million job openings (4,001 to be precisely) for the first time since 2008, a far more important number is the update on Hires which at 4.5 million barely changed from last month, but more importantly, is barely a fraction of where it should be based on the number of job gains reported by the BLS monthly. The chart below confirms this stunning discrepancy: a surge in jobs with barely half the pre-recession hiring?
How does one explain this discrepancy in which the US economy supposedly is growing at its historic peak pace while hiring is at half the peak pace? Simple: the gains in nonfarm payrolls are due a decline in layoffs and other separations, not an increase in hirings: i.e., normal labor demand driven growth.
Which means that anyone hoping for a brisk increase in wages, i.e. worker leverage, is in for a prolonged shock.
The chart above simply shows that the leverage is and continues to be with the employers – instead of letting people go (or workers quitting at their volition) at anything close to a traditional pace, employers have a huge bargaining chip – a job. Because if a worker does not want to perform a job, tough: there are about 3 people willing to fight for every job opening. It also means that those who lose their job will find it doubly more difficult time to reenter the workforce as there simply is not enough hiring.
Which means that wage deflation, at least among prevailing jobs, will continue leading to declining real disposable income, a declining in personal savings and the continued use of “student loans” (since credit card deleveraging continues) to fund everyday lifestyles, at least until such time as the hiring trend has normalized.
The really bad news: while such a normalization will eventually happen, according to our back of the envelope calculations, it will take place some time in… 2020.
No Jobs For Americans
Paul Craig Roberts
The alleged recovery took a direct hit from Friday’s payroll jobs report. The Bureau of Labor Statistics reported that the economy created 74,000 net new jobs in December.
Wholesale and retail trade accounted for 70,700 of these jobs or 95.5%. It is likely that the December wholesale and retail hires were temporary for the Christmas shopping season, which doesn’t seem to have been very exuberant, especially in light of Macy’s decision to close five stores and lay off 2,500 employees. It is a good bet that these December hires have already been laid off.
A job gain of 74,000, even if it is real, is about half of what is needed to keep the unemployment rate even with population growth. Yet the Bureau of Labor Statistics reports that the unemployment rate fell from 7.0% to 6.7%. Clearly, this decline in unemployment was not caused by the reported 74,000 jobs gain. The unemployment rate fell, because Americans unable to find jobs ceased looking for employment and, thereby, ceased to be counted as unemployed.
In America the unemployment rate is a deception just like everything else. The rate of American unemployment fell, because people can’t find jobs. The fewer the jobs, the lower the unemployment rate.
I noticed today that the financial media presstitutes were a bit hesitant to hype the drop in the rate of unemployment when there was no jobs growth to account for it. The Wall Street and bank economists did their best to disbelieve the jobs report as did some of the bought-and-paid-for academic economists. Too many interests have a stake in the non-existent recovery declared 4.5 years ago to be able to admit that it is not really there.
I have been examining the monthly jobs reports for a decade or longer. I must say that I am struck by the December report. Normally, a mainstay of jobs gain is the category “education and health services,” with “ambulatory health care services” adding thousands of jobs. In December the net contribution of “education and health services” was zero, with “ambulatory health care services” losing 4,100 jobs and health care losing 6,000 jobs. If memory serves, this is a first. Perhaps it reflects adverse impacts of the ripoff known as Obamacare, possibly the worst piece of domestic legislation passed in decades.
I was also struck by the report that the gain in employment of waitresses and bartenders, normally a large percentage of the job gain, was down to 9,400 jobs, which were offset by declines elsewhere, such as the layoff of local school teachers.
Aren’t Washington’s priorities wonderful? $1,000 billion per year in Quantitative Easing, essentially subsidies for 6 banks “too big to fail,” and nothing for school teachers. It should warm every Republican’s heart.
A tiny bright spot in the payroll jobs report is 9,000 new manufacturing jobs. The US manufacturing workforce has declined so dramatically since jobs offshoring became the policy of American corporations that 9,000 jobs hardly register on the scale. Fabricated metal products, which I think is roofing metal, accounted for 56% of the manufacturing jobs. Roofing metal is not an export. Employment in the production of manufactured products that could be exported, such as “computer and electronic equipment,” and “electronic instruments” declined by 2,400 and 3,500 respectively.
Clearly, this is not a payroll jobs report that provides cover for the looting of the prospects of ordinary Americans by the financial and offshoring elites. One can wonder how the BLS civil servants who produced it can avoid retribution. It will be interesting to see what occurs in the January payroll jobs report.
The world’s biggest economies will need to refinance $7.43 trillion of sovereign debt in 2014 as bond yields begin to climb from record lows, threatening to raise borrowing costs while nations struggle to bring down elevated budget deficits.
The amount of bills, notes and bonds coming due for the Group of Seven nations plus Brazil, Russia, India and China is little changed from 2013 after dropping from $7.6 trillion in 2012, according to data compiled by Bloomberg. At $3.1 trillion, representing a 6 percent increase, the U.S. faces the largest tab. Russia, Japan and Germany will see refinancing needs drop, while those of Italy, France, Britain, China and India increase.
While budget deficits in developed nations have fallen to 4.1 percent of their economies from a peak of 7.8 percent in 2009, they remain about double the average in the decade before the credit crisis began. The cost for governments to borrow may rise further after average yields last year rose the most since 2006, as the global economy shows signs of improving and the Federal Reserve pares its unprecedented bond buying.
“Refinancing needs remain elevated in many developed nations, particularly the U.S.,” Luca Jellinek, the London-based head of European rates strategy at Credit Agricole SA, said in a Dec. 30 telephone interview. “The key here is demand rather than supply. If demand drops as growth picks up, and we expect it will, that could put pressure on borrowing costs.”
Debt as a proportion of the economies of the 34 members of the Organization for Economic Cooperation and Development will rise to 72.6 percent this year from 70.9 percent last year and 39 percent in 2007, according to the group’s forecasts.
The amount of government debt obligations contained in a benchmark Bank of America Merrill Lynch index has more than doubled to $25.8 trillion since the end of 2007 as countries from the U.S. to Japan financed increased spending to counter the worst economic crisis since the Great Depression.
After interest-rate cuts around the world and the Fed’s bond purchases pushed down average yields on government notes to an all-time low of 1.29 percent in May, borrowing costs have since jumped, according to the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index.
Yields climbed to 1.84 percent by the end of December, making the 0.41 percentage point increase in 2013 the biggest in seven years, the data show. That represents an extra $4.1 billion in annual interest on every $1 trillion borrowed.
Bond buyers are demanding more compensation as the Fed plans to scale back its own monthly debt purchases in January to $75 billion from $85 billion and the U.S.-led recovery prompts investors to seek assets with higher returns such as equities.
Government debt lost an average 0.36 percent worldwide last year, the first decline since 1999.
Based on 41 economists surveyed by Bloomberg on Dec. 19, the Fed will reduce its buying by $10 billion in each of the next seven meetings before ending its stimulus in December.
The U.S., the world’s largest economy, will expand 2.6 percent this year after 1.7 percent growth in 2013 and accelerate 3 percent in 2015, which would be the fastest in a decade, according to economists surveyed by Bloomberg. With Europe and Japan also forecast to grow, the three economies will all expand for the first time since 2010.
“With the Fed pulling back on bond purchases and growth picking up, bond investors will demand higher yields to justify investment,” Mohit Kumar, a money manager at GLG Partners, a hedge-fund unit of Man Group Plc, said by telephone from London. “We need to price in higher risk premium in an environment where rates and market volatility are likely to increase.”
Even as faster growth helps increase tax revenue, higher refinancing costs may squeeze governments that are still contending with fiscal deficits. Spending will outstrip revenue in the world’s largest economies by 3.3 percent of their gross domestic product this year, versus an average of 1.75 percent in the 10 years through 2007, data compiled by Bloomberg show.
In the U.S., the world’s largest debtor nation with $11.8 trillion of marketable debt obligations, the amount due this year will increase by about $187 billion, data compiled by Bloomberg show. France, faced with an economy that has barely grown in two years, will see the amount of debt securities due this year rise by 15 percent to $410 billion.
China will lead emerging-market economies with the amount of maturing bonds increasing by 12 percent to $143 billion.
Japan will have $2.38 trillion of bonds and bills to refinance this year, 9 percent less than in 2013, while the amount of German debt maturing this year will decrease by about 5.3 percent to $268 billion.
Including interest payments, the amount of debt that needs to be refinanced by the G-7 countries plus the BRIC nations this year increases by about $712 billion to $8.1 trillion, according to data compiled by Bloomberg.
“There has been a shift of a significant amount of debt” into the public sector during the crisis, saidNicholas Gartside, London-based international chief investment officer for fixed-income at J.P. Morgan Asset Management, which oversees $1.5 trillion. “Despite some improvement on the debt front, there is still a lot of deleveraging to go. The process is still ongoing and will continue for many years.”
Forecasters are overestimating the likelihood government debt costs will increase because the global economic recovery remains fragile and disinflation is starting to emerge, according toSteven Major, head of global fixed-income research at HSBC Holdings Plc, Europe’s largest bank.
The world economy will to expand 2.83 percent this year, according to forecasts compiled by Bloomberg, slower than the average 3.43 percent during the five-year span between the end of the dot-com bust in 2002 and the start of the credit crisis.
Slowing inflation also preserves the purchasing power of fixed-rate interest payments, which may support demand for bonds. Consumer prices in the U.S. will rise less than 2 percent in 2014 for a second straight year, which has only happened one other time in the last half century, data compiled by Bloomberg and the Bureau of Labor Statistics show.
In the 18 nations that share the euro, the inflation rate will be 1.2 percent, the lowest in five years.
“Growth may have picked up but it’s still pretty weak compared to previous cycles,” Major said in a telephone interview on Dec. 31. “Inflation is falling in many developed countries. Central banks should be worried about disinflation rather than inflation. It’s hard for me to imagine that bond yields will rise much against this backdrop.”
Some nations are starting to rein in spending, which may help contain borrowing costs. Government bond sales in the euro area, excluding issuance used to refinance maturing debt, will decline to 215 billion euros ($293 billion), the least since 2009, Morgan Stanley predicted.
Germany said in December that it plans to curb bond and bill sales this year by 17 percent to 205 billion euros as tax revenue rises and Chancellor Angela Merkel seeks to end net new borrowing by 2015. In the U.S., the budget deficit will drop to to 3.4 percent of the economy this year, versus 10 percent five years ago, economist forecasts compiled by Bloomberg show.
Demand at U.S. government debt auctions remained stronger than before the financial crisis as investors bid for 2.87 times the amount sold last year, the fourth-highest ratio on record and surpassed only in the the prior three years.
Buying of Japanese debt was underpinned by the Bank of Japan’s commitment to buy 7 trillion yen ($71 billion) a month of bonds, a pace that would equal more than 50 percent of the 155 trillion yen in notes that Japan plans to sell this year.
“Investors should not and will not be concerned about the supply picture,” said Major, who predicts that yields on the benchmark U.S. 10-year note will decrease to 2.1 percent by year-end from 2.99 percent last week.
His estimate conflicts with the majority of forecasters in a Bloomberg survey who say U.S. borrowing costs will increase. They anticipate yields on the 10-year notes, which rose 1.27 percentage points last year to 3.03 percent, the highest since 2011, will climb to 3.38 percent on average. No one in the survey projected yields falling below 2.5 percent. The yield was at 2.98 percent as of 9:56 a.m. London time.
Borrowing costs in all the G-7 nations are all poised to increase in 2014, based on the estimates. Yields on German bunds will increase to 2.28 percent by year-end, while those for similar-maturity U.K. gilts will end the year at 3.36 percent. That would be the highest for both nations since 2011.
Among the BRIC nations, only bond yields in India and China are poised to drop, the data show.
With global growth picking up, investors such as Standard Life Investments predict government bonds will underperform this year and are holding a greater proportion of equities than their benchmarks used to measure performance.
“We are not enthusiastic about government bonds,” Frances Hudson, a strategist at Standard Life in Edinburgh, which oversees $294 billion, said in an telephone interview on Jan. 2. “It’s reasonable to expect bond yields to rise from record lows as recovery gains momentum.”
Following is a table of projected bond and bill redemptions and interest payments in dollars for 2014 for the Group of Seven countries, Brazil, China, India and Russia using data compiled by Bloomberg as of Dec. 30:
To contact the reporter on this story: Anchalee Worrachate in London email@example.com
While much has been said about the benefits of Bernanke’s wealth effect to the asset-owning “10%”, just as much has been said about the ever deteriorating plight of the remaining debt-owning 90%, who are forced to resort to labor to provide for their families, and more specifically how their living condition has deteriorated over not only the past five years, since the start of the Fed’s great experiment, but over the past several decades as well. However, in the case of America’s “servant” class, Al Jazeera finds that their plight is now worse than it has been at any time over the past century, going back all the way to 1910!
According to Al Jazeera, “at least one class of American workers is having a much harder time today than a decade ago, than during the Great Depression and than a century ago: servants. The reason for this, surprisingly enough, is outsourcing. Let me explain. Prosperous American families have adopted the same approach to wages for servants as big successful companies, hiring freelance outside contractors for all sorts of functions from child care and handyman chores to gardening and cleaning work to reduce costs. Instead of the live-in servants, who were common in the prosperous households of America before World War II, better off families now outsource the family cook, maid and nanny. It is part of a global problem in developed countries that is getting more attention worldwide than in the U.S.”
The reality is that the modern servant is also known as the minimum-wage burger flipper, whose recent weeks have been spent in valiant, if very much futile, strikes in an attempt to increase the minimum wage their are paid. Futile, because recall that in its first “national hiring day” McDonalds hired 62,000 workers…. and turned down 938,000! Such is the sad reality of the unskilled modern day worker at the bottom the labor pyramid.
Unfortunately, we anticipate many more strikes in the future of America’s disenfranchised poorest, especially once they realize that their conditions are worse even than compared to live in servants from the turn of the century.
Al Jazeera crunches the numbers:
Consider the family cook. Many family cooks now work at family restaurants and fast food joints. This means that instead of having to meet a weekly payroll, families can hire a cook only as needed.
A household cook typically earned $10 a week in 1910, century-old books on the etiquette of hiring servants show. That is $235 per week in today’s money, while the federal minimum wage for 40 hours now comes to $290 a week.
At first blush that looks like a real raise of $55 a week, or nearly a 25-percent increase in pay. But in fact, the 2013 minimum wage cook is much worse off than the 1910 cook. Here’s why:
- The 1910 cook earned tax-free pay, while 2013 cook pays 7.65 percent of his income in Social Security taxes as well as income taxes on more than a third of his pay, assuming full-time work every week of the year. For a single person, that’s about $29 of that $55 raise deducted for taxes.
- Unless he can walk to work, today’s outsourced family cook must cover commuting costs. A monthly transit pass costs $75 in Los Angeles, $95 in Atlanta and $122 in New York City, so bus fare alone runs $17 to $25 a week, eating up a third to almost half of the seeming increase in pay, making the apparent raise pretty much vanish.
- The 1910 cook got room and board, while the 2013 cook must provide his own living space and food.
More than half of fast food workers are on some form of welfare, labor economists at the University of California, Berkeley and the University of Illinois reported in October after analyzing government economic statistics.
Data on domestic workers is scant because Congress excludes them from both regular data gathering by the Bureau of Labor Statistics and laws giving workers rights to rest periods and collective bargaining.
Nevertheless, what we do know is troubling. These days 60 percent of domestic workers spend half of their income just on housing and a fifth run out of food some time each month.
A German study found that in New York City domestic workers pay ranges broadly, from an illegal $1.43 to $40 an hour, with a quarter of workers earning less than the legal minimum wage. The U.S. median pay for domestic servants was estimated at $10 an hour.
We are falling backwards in America, back to the Gilded Age conditions a century and more ago when a few fortunate souls grew fabulously rich while a quarter of families had to take in paying boarders to make ends meet. Only back then, elites gave their servants a better deal.
Thorstein Veblen, in his classic 1899 book “The Theory of the Leisure Class,” observed that “the need of vicarious leisure, or conspicuous consumption of service, is a dominant incentive to the keeping of servants.” Nowadays, servants are just as important to elites, except that they are conspicuous in their competition to avoid paying servants decent wages.
But… but… how is that possible if the stock market is at all time highs and the wealth is US households just rose by $1.9 trillion in one short quarter. Oh wait, what they meant is “some” households.
And, of course if all else fails, America’s “free” servants, stuck in miserable lives working minimum wage jobs for corporations where the only focus in on shareholder returns and cutting overhead, can volunteer to return to a state of “semi-slavery” (while keeping the iPhones and apps of course, both paid on credit) and become live-in servants for America’s financial oligarchy and the like. We hear the numerous apartments of Wall Street’s CEOs have quite spacious servants’ quarters.
On Friday October 5, 2012, the BLS released what was arguably the most important report of Obama’s first term: the final jobs number, and unemployment rate before the November 2012 presidential election. As so many predicted, it “plunged” from 8.1% to 7.8% allowing the president to conduct countless teleprompted speeches praising the success of his economic recovery. It also served as the basis for the infamous Jack Welch tweet: “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers” and prompted the pro-Obama media to quickly brand all those who questioned it as conspiracy theorists. The Atlantic did perhaps the most exemplary job in its task to discredit the “random anonymous cranks” who challenged the bullshit spewed by the administration’s manipulative economic data reporting apparatus. From The Atlantic’s Unemployment Plummets To 7.8%.
The unemployment rate plunged to 7.8 percent in September, its lowest level since Barack Obama took office in 2009. In addition, the Bureau of Labor Statistics made big revisions to data from previous months, showing huge increases in the number of jobs being created over the last three months. Total employment from the “household survey” also showed an increase of 873,000 jobs last month, the biggest one-month jump since June of1983.
Not only has the unemployment rate gone down, but the report also undercut one of the key criticisms of previous drops in the number—that it was because the “participation rate” went down. That rate has actually gone back up, which means unemployment is down because people are actually getting work, not because they’ve stopped looking. Public sector jobs also went up, as did the average number of hours worked per week.
This report looks so good for President Obama that conspiracy theorists are already alleging that the fix is in. And not just random anonymous cranks, but supposedly serious business people, like former General Electric CEO Jack Welch.
Rick Santelli of CNBC, noting that the rate has dropped below the magical number of 8 percent, said, “You can let America decide how they got there.” When one side is convinced that something smells rotten, you know it’s good news for the other guy.
As we noted his comment at the time…
“the current trend of these [jobs] numbers is so different from the current trend of any other numbers. If you were looking for conspiracies (and I’m not), you only need to change a certain number.”
Of course, who cares if the “conspiracy theories” were substantiated by actual data. Such as the following from the same day:
An Odd Arima-X-12 Statistical Aberration?
Here’s a peculiar statistical aberration:
- Household Survey people employed: +873,000 (source)
- Part-time jobs for economic reasons: +582,000 (source)
-> 582,000 divided by 873,000 = 0.666666666666*
Aka: precisely two thirds. Whatever are the odds… Goalseeking much Arima-X-12?
Or this also from the same day:
Reason For Today’s Unemployment Rate Plunge: Part-Time Jobs For Economic Reasons Surge Most Since QE1 Announcement
We already noted the absolutely stunning surge in reported Household Survey jobs which “added” 873,000 jobs, or the most since 2003and the second most in the past decade, which was just a little bit off the Household Survey used in the monthly NFP jobs changes, which came at 114,000, or about 8 times less. But what was the reason for this epic jump in Household survey jobs? Simple, and those who have read our series on America’s transition to a part-time worker society know the answer. The reason is that the number of part-time people employed for economic reasons soared by 582,000 to 8,613,000, the most since October 2011, and the largest one month jump since February 2009, when “restoring” confidence in the economy was all the rage… and just before the Fed announced the full blown QE1 in March of 2009. Odd symmetry.
So putting it all together, what does this mean for the true state of the US economy? Recall back in September one of our Charts of the Daywas the number of Unemployed and Underemployed for the month of August, which was 25.8 million. Readers may be surprised to learn that when putting it all together, in September this number increased to 26.2 million.
Or this also from the same day:
The Strangest Number In Today’s Jobs Number
While we already presented the explanation for the dramatic drop in today’s unemployment report (almost entirely driven by the surge in part-time jobs for economic reasons, hardly a thing to be proud of as more and more full time jobs, especially those on Wall Street, are a thing of the past, while the transition to a part-time worker society has been documented extensively in the past here), there is another number that is by far the most perplexing in today’s NFP dataset: that showing the employment of workers in the 20-24 year age category (both seasonally adjusted andunadjusted). See if you can spot the outlier in the chart below.
And many more other such reports posted on this site on the same day, alleging fabrication which as it turns out courtesy of the just released stunning disclosure by the Post, were absolutely spot on since the number was, you guessed it, manipulated.
The Post’s John Crudele reveals the details on a data manipulation scandal, which we exposed back in October 2012, but this time with the actual “dirty details” that has the potential to be so big, Obama will need to start another YouTube-fabricated, false flag war just to distract from this latest scandal.
In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.
The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.
And the Census Bureau, which does the unemployment survey, knew it.
Just two years before the presidential election, the Census Bureau had caught an employee fabricating data that went into the unemployment report, which is one of the most closely watched measures of the economy.
And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.
“He’s not the only one,” said the source, who asked to remain anonymous for now but is willing to talk with the Labor Department and Congress if asked.
The Census employee caught faking the results is Julius Buckmon, according to confidential Census documents obtained by The Post. Buckmon told me in an interview this past weekend that he was told to make up information by higher-ups at Census.
Ironically, it was Labor’s demanding standards that left the door open to manipulation.
Labor requires Census to achieve a 90 percent success rate on its interviews — meaning it needed to reach 9 out of 10 households targeted and report back on their jobs status.
Census currently has six regions from which surveys are conducted. The New York and Philadelphia regions, I’m told, had been coming up short of the 90 percent.
Philadelphia filled the gap with fake interviews.
“It was a phone conversation — I forget the exact words — but it was, ‘Go ahead and fabricate it’ to make it what it was,” Buckmon told me.
Census, under contract from the Labor Department, conducts the household survey used to tabulate the unemployment rate.
Interviews with some 60,000 household go into each month’s jobless number, which currently stands at 7.3 percent. Since this is considered a scientific poll, each one of the households interviewed represents 5,000 homes in the US.
Buckmon, it turns out, was a very ambitious employee. He conducted three times as many household interviews as his peers, my source said.
By making up survey results — and, essentially, creating people out of thin air and giving them jobs — Buckmon’s actions could have lowered the jobless rate.
Buckmon said he filled out surveys for people he couldn’t reach by phone or who didn’t answer their doors.
But, Buckmon says, he was never told how to answer the questions about whether these nonexistent people were employed or not, looking for work, or have given up.
But people who know how the survey works say that simply by creating people and filling out surveys in their name would boost the number of folks reported as employed.
Census never publicly disclosed the falsification. Nor did it inform Labor that its data was tainted.
“Yes, absolutely they should have told us,” said a Labor spokesman. “It would be normal procedure to notify us if there is a problem with data collection.”
* * *
During the 2010 Census report — an enormous and costly survey of the entire country that goes on for a full year — I suspected (and wrote in a number of columns) that Census was inexplicably hiring and firing temporary workers.
I suspected that this turnover of employees was being done purposely to boost the number of new jobs being report each month. (The Labor Department does not use the Census Bureau for its other monthly survey of new jobs — commonly referred to as the Establishment Survey.)
Last week I offered to give all the information I have, including names, dates and charges to Labor’s inspector general.
I’m waiting to hear back from Labor.
I hope the next stop will be Congress, since manipulation of data like this not only gives voters the wrong impression of the economy but also leads lawmakers, the Federal Reserve and companies to make uninformed decisions.
Don’t hold your breath: the reason is that this particular instance manipulation is merely the tip of the iceberg – since virtually all data out of the BLS is manipulated and fabricated, as we report each and every month, the last thing the legislative and certainly the executive want is to offer the general public a glimpse of just how deep the rabbit hole goes. Because it goes very, very deep.
One can only hope this forces at least some more people to wake up about the sad farce this once great nation has devolved to in its quest to destroy the middle class.
The only real good news, as noted above, is that yet another conspiracy theory is forever cast into the void, and going forward the only thing the random, but manipulated, number generator out of the Bureau Of Lies And Subterfuge will be good for, is to prod the just as pathetic HFT algos into a buying frenzy when month after month the economy is painted with rosy brushes, even as millions forever drop out of the labor force, never to return
The boom and bust cycle | Zero Hedge. (source)
As is clear to all with half a brain the production of un-backed fiat money distorts the economic system. Simply told, when an entity in society is given monopoly to manufacture medium of exchange at its own discretion they will harness this power. Slowly at first, unsure about its effects, but always testing the limits of the privilege bestowed upon them.
As always, they will overexploit the power. They will manufacture money and give it to the masters that coercively secure the continuation of the power. The masters will obviously spend the money, creating a transaction in whichnothing is payment for something. These transactions are by definition unsustainable because they violates Say`s law. We call them “bubbles”
In a free market supply is used to create its own demand. When people spend fiat money they exercise demand without providing supply. Said in other words, spending fiat money is tantamount to capital consumption and makes society poorer.
While the boom that follows money spending feels good, it must inevitably come to an end because the economic system cannot maintain the constellation that was induced by the money printing in the first place. Within the boom lays the seed for the necessary bust.
We have made a metric that sums up fiat money in its purest sense and compared that to the underlying trend growth of nominal GDC.
Our hypothesis is simple: if money growth exceeds the GDC metric a deflationary busts will inevitably come. If authorities refuse to accept reality and print more fiat money at the first sign of bust, they may “save the day” but they will “ruin tomorrow”!
For every action taken there will be an equal and opposite reaction! When the fiat masters go too far they create the set-up for an imminent deflation.
We looked at this relationship and as the chart below show, a boom-bust cycle based on monetary expansion is clearly visible..
Source: Federal Reserve of St. Louis (FRED), own calculations
Our main concern is obviously what happens when the equal, but opposite reaction comes as a consequence to the monetary experiment dubbed the “Bernanke-put”.
A secondary concern is indirectly derived from this. Money printing tears the social fabric apart and people react by taking up massive amounts of debt; debt that will never be repaid in currency units of equal purchasing power.
Now, if the equal reaction comes, that will raise the real burden of outstanding debt, which consequently will bankrupt all debtors.
The next chart looks at various sovereigns’ roll-over risk for 2014. The exceptionally large amount of debt taken on since the financial bust in 2008 will forever constitute a massive risk for the issuing country as debt is never repaid, only rolled-over, that is old debt is paid with new debt.
Source: Bloomberg, International Monetary Fund (IMF – WEO), own calculations
By this it is obvious to us that deflation simply cannot be allowed to happen! Our monetary masters will lose everything if they even flirt with the mere idea! Witness the taper scare this summer!
And since we are getting close to the next cycle low, why even bother try
Source: National Bureau of Economic Research (NBER), Bureau of Labor Statistics (BLS), own calculations
We leave the last word to the real Maestro
“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”
– Ludwig von Mises
- Curtis Ellis: April Jobs Report Bad News for College Grads (huffingtonpost.com)
- Number of the Week: College Grads in Minimum Wage Jobs (blogs.wsj.com)
- Only 65% of College Presidents Say It’s ‘Very Important’ That Grads Get Good Jobs (businessinsider.com)