Saturday, March 6, 2010

The Day of Reckoning Has Arrived

Unemployment rate unchanged as 36K jobs lost
WASHINGTON (AP) -- The unemployment rate held at 9.7 percent in February as employers shed 36,000 jobs, fewer than expected. The figures suggested the job market is slowly healing but that significant hiring has yet to occur.

The Labor Department wouldn't quantify how the snowstorms that hammered the East Coast last month affected job losses. Economists said the storms probably inflated job losses but by less than predictions of 100,000 or more. Without the storms, the economy likely would have seen a net jobs gain in February for only the second time since the recession began two years ago.

Doubts about last month's data arose because the snowstorms occurred on the same week that the government surveys businesses about their payrolls. Employees who couldn't make it to work and weren't paid weren't included on those payrolls.

And to think that earlier in the week Sweat Hog Larry Summers was urging analysts not to "read to much into" Friday's Payroll Report. I guess that "warning" only applied to a poor number in the report. Now we're being told that "without the storms the economy likely would have seen a net jobs gain in February". Sh*t, if that isn't reading TOO MUCH into the report, I don't know what is.

"The report today shows a labor market with no momentum," said Larry Mishel, president of the liberal Economic Policy Institute. "Employment is not growing. And even a generous interpretation of the snow's impact suggests that the underlying trend is insufficient to drive down unemployment in the near future."

Nearly 14.9 million Americans are unemployed -- nearly twice the total when the recession began. The Labor Department revised its estimate of job losses for January from 20,000 to 26,000.

Hiring for the 2010 Census accounted for 15,000 jobs last month, the department said. The government expects to hire 1 million temporary census workers this year.

And let us not look past the fact that the BLS Birth/Death model added 95,000 to the February numbers. Toss out the bogus B/D jobs and the even more BOGUS part-time Census jobs, and February shows a LOSS of 146,000 jobs. LOL, talk about reading TOO MUCH into the jobs report.

What's truly amusing about these "monthly" jobs reports is that they are an "estimate" based on a poll of households. They could make this report say whatever they want. In fact, this report is a joke from stem to stern.

The unemployment rate, which hasn't risen since October, may be bottoming out. But economists caution that many of the unemployed have given up on their job searches and aren't included in the jobless rate.

Many of those discouraged workers will likely resume looking as the economy improves. As hiring is likely to remain slow, the influx of jobseekers could boost the jobless rate.

When discouraged workers are included, along with those working part-time because they can't find full-time work, the so-called "underemployment" rate rose to 16.8 percent last month from 16.5 percent. That reflects a jump in the number of involuntary part-time workers. The figure is below October's all-time high of 17.4 percent.

One encouraging sign in the report: The number of long-term unemployed -- those out of work for six months or more -- fell for the first time since November 2008, to 6.1million from 6.3 million. Still, about 40 percent of the unemployed have been out of work six months or longer.

That's right, no matter what some confidence man/woman wants you to believe about the employment picture in America, the unemployment rate is going to rise substantially before it falls substantially. The Oracle of Orwell and their goons are going to use every form of word play they can unearth to convince Americans they are creating jobs because they know that if they don't by time November rolls around, there will be a bloodbath at the mid-term polls. In fact, this nonsense they put in the headlines every month regarding the "unemployment rate" is absolute pure bullsh*t. 1 in 5 Americans is either unemployed, or underemployed. This is a fact and the government knows it and even reports it every month, but the financial news media chooses to ignore it, burying the fact deep with in the story. Just open the link to this story and see how far down the FACTS about the unemployment rate are mentioned. It's in the 7th to last paragraph out of 25 total.

U.S. Labor Market Poised for Gains as Jobless Rate Stabilizes
“The weather effects were enough to transform what would’ve been a positive into a negative,” said David Resler, chief economist at Nomura Securities International Inc. in New York, referring to payrolls. “Job growth is happening as we speak. Companies are seeing a stabilization of demand.”

The Oracle Of Orwell. LOL, I think he meant a negative into a positive. You'd swear the entire continent had been covered by three feet of snow in the middle of February. Ridiculous! We have now heard everything.

National debt to be higher than White House forecast, CBO says
By Lori Montgomery, Washington Post Staff Writer
President Obama's proposed budget would add more than $9.7 trillion to the national debt over the next decade, congressional budget analysts said Friday. Proposed tax cuts for the middle class account for nearly a third of that shortfall.

The 10-year outlook released by the nonpartisan Congressional Budget Office is somewhat gloomier than White House projections, which found that Obama's budget request would produce deficits that would add about $8.5 trillion to the national debt by 2020.

The CBO and the White House are in relative agreement about the short-term budget picture, with both predicting a deficit of about $1.5 trillion this year -- a post-World War II record at 10.3 percent of the overall economy -- and $1.3 trillion in 2011. But the CBO is considerably less optimistic about future years, predicting that deficits would never fall below 4 percent of the economy under Obama's policies and would begin to grow rapidly after 2015.

Deficits of that magnitude would force the Treasury to continue borrowing at prodigious rates, sending the national debt soaring to 90 percent of the economy by 2020, the CBO said. Interest payments on the debt would also skyrocket by $800 billion over the same period.

Bumbling Ben Bernanke is right about one thing: The US Government has one helluva debt problem. One might quantify it as an "insurmountable" debt problem. You can be sure the Oracle of Orwell will begin immediately to convince us otherwise. Certainly the President's Deficit Commission will save the day. Hogwash!

"President Obama had to create an 18-member panel by executive order because Congress voted down an earlier proposal. Since it's a presidential commission, Congress can just ignore any findings. And those findings won't even be released until December 1, for purely political reasons (that's after the mid-term Congressional elections)."
-Mike Larson, Money And Markets

U.S. Credit Turns to Debt, Will The U.S. Devalue The Dollar?[MUST READ]
By: Darryl_R_Schoon
The ability to wage war on credit gave the West an insurmountable advantage over the East. The West’s credit, however, has now turned to debt and the West has lost its advantage. But the return to parity will not be easy.

The three hundred year economic expansion fueled by debt-based capital markets is coming to an end and with it, the hegemony of the West over the East. During that period, debt-based paper money propelled first England then the US to world dominion because of the ability to wage war on credit and to print money ad infinitum.

That era is now ending because the critical balance between credit-driven expansion and debt-driven contraction has now shifted significantly in favor of the latter; and in 2010, both East and West now find themselves on the edge of a growing deflationary sinkhole created by the sequential collapse of two large US bubbles, the and US real estate bubbles.

The US caused the 1930s deflationary depression and is again cause of the current contraction; and although similarities exist between the two, the differences between them insure a far more consequential outcome today than in the 1930s.

Global demand is again falling as credit contracts, a sign that debt-driven deflation is back but, today, there is an additional danger as well. Since 1971, because of the US default on its gold obligations, money no longer possesses intrinsic value and the consequences will soon become apparent. Deflationary depressions and a collapse in the value of fiat money have happened before but never simultaneously. Soon, they will.

We are in what Stephen Roach, Chairman of Morgan Stanley Asia, calls the end-game, the resolution of past monetary excesses and imbalances, excesses and imbalances that reached never-before-seen heights in the last decade. The long awaited day of reckoning has arrived.

When the Bond Market Breaks, Or the True Cause of Hyperinflation[MUST READ]
By Jordan Roy-Byrne
In his weekly letter, John Mauldin concluded that we have not experienced hyperinflation (despite massive Fed “printing”) due to the fact that the money multiplier has fallen and fallen below 1.0. This means that for each additional $1 added to the monetary base, the money supply is changing by less than $1. In other words, banks are not lending and so the velocity of money is declining.

This is correct as to why we don’t have REFLATION.

There is an important difference between REFLATION and HYPERINFLATION.

Reflation occurs when inflationary policy is successful. Examples of this include 1933-1937, 2003-2007 and to some degree, 2009. In a reflationary period, Commodities outperform everything, including Precious Metals.

Mauldin and many others make the assumption that hyperinflation can’t occur without some kind of economic demand. It is the mainstream theory that money has to make its way into the economy (via bank lending and then business investment or consumption) for price inflation to occur.

The private sector or even the Federal Reserve isn’t the root cause of hyperinflation. Hyperinflation occurs when a country’s bond market breaks. In other words, the sovereign nation is no longer able to fund itself. Its bonds fall (yields rise) to the point where the government has to print money or default. Rising interest rates cause the interest payments to consume too much of the overall budget. The government or central bank then begins to print money to fund its deficit. Then the citizens start to consume, knowing the currency is rapidly losing value. Demand has nothing to do with the cause or the onset of hyperinflation.

Economic Recession, Depression, or Systematic Breakdown[MUST READ]
By: James_Quinn
As crooked politicians, Federal Reserve hacks, and cheerleading media pundits inform you the recession is over, you probably have a sneaking suspicion they are lying.

The National Bureau of Economic Research is the arbiter of business cycle recessions. They define a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production.”

A depression is characterized by its length, and by abnormal increases in unemployment, a decline in the availability of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflation, financial crisis, and bank failures are also common elements of a depression. Let’s assess where the U.S. economy stands at the moment:

Economic Factor Peak to Trough So Far

Real GDP Decrease 3.7% real decline from December 2007 until June 2009 totaling $500 billion

Personal Income Personal income declined by $339 billion from mid-2008 to the 1st Qtr of 2009

Investment Fixed investment has declined by $543 billion, or 24%, since December 2007

Unemployment There are 8.1 million less people employed today than in 2007

Industrial Production Has fallen 12% since 2007

Bankruptcies National bankruptcies have risen from 800,000 in 2007 to 1.4 million in 2009, a 75% increase

Trade Exports and imports declined by 22% and 31%, respectively, between July 2008 and June 2009

Currency The USD has fallen 17% in the last year versus a basket of world currencies

Bank Failures 140 banks failed in 2009, with 700 banks in danger of failing, according to the FDIC

A few economic indicators such as GDP and Personal Income have shown minor positive blips in the most recent quarter due to the unprecedented stimulus applied by the government and Federal Reserve. These effects will be short lived as the stimulus wears off and the economy resumes its downward spiral. At this point in the crisis, real GDP has only fallen 3.7%. By contrast, between 1929 and 1930, real GDP declined by 8.6%. And by the end of 1932, real GDP had collapsed by 26.7%.

Remarkably, real GDP then surged by 43% between 1932 and 1937, to a level significantly above the 1929 level. This fact should be kept in mind as politicians crow about a 2.8% increase in GDP between 2nd and 3rd Quarter of 2009 as the end of the crisis.

To date, the Federal Reserve has printed well over a trillion dollars in an attempt to evade a deflationary collapse, including a $700 billion bank bailout and a $787 billion stimulus package. And then there was $3 billion wasted on Cash for Clunkers ($24,000 per vehicle), $28 billion squandered on the $8,500 homebuyer tax credit, and an artificial suppressing of interest rates to 0% with $300 billion of mortgage-backed securities. And all we’ve gotten is a 2.8% increase in GDP?

Based on government-reported figures, our GDP has not fallen anywhere near the amount it declined during the Great Depression. But if you believe government-reported figures, I have an indoor ski resort in Dubai I’d like to sell you.

Bernanke on a Bailout of the U.S. Treasury[MUST READ]
By: Gary_North
On February 10, Ben Bernanke testified to the House Financial Services Committee. The topic: "Federal Reserve's exit strategy." His printed testimony contained the familiar promises. The Federal Reserve System will unwind when the economy recovers. Speaking of the TAF and TALF programs, he said:

"The exit from these programs is substantially complete: Total credit outstanding under all programs, including the regular discount window, has fallen sharply from a peak of $1-1/2 trillion around year-end 2008 to about $110 billion last week."

This sounded good, but as the charts of the FED's balance sheet indicate, there has been no reduction of the monetary base.

Bernanke mentioned one tool by which the FED can force up the Federal Funds rate, the rate at which banks lend to each other overnight.

"By increasing the interest rate on reserves, the Federal Reserve will be able to put significant upward pressure on all short-term interest rates, as banks will not supply short-term funds to the money markets at rates significantly below what they can earn by holding reserves at the Federal Reserve Banks. Actual and prospective increases in short-term interest rates will be reflected in turn in longer-term interest rates and in financial conditions more generally. "

Why should long rates not decline under such a scenario? If the FED starts hiking the rate paid on reserves, the effect will be to raise short-term rates, no question about that. Banks will lend to the FED and pocket no-risk money. The effect of this will be to end the economic recovery. Why? Because banks will lend to the FED, not to the commercial loan markets.

This will send a signal to investors in long bonds: rates will fall because of recession. People will try to lock in long rates before they fall. Long rates fall in depressions.

The FED is trapped. All policies of unwinding will shrink the monetary base. The recovery is being sustained by a zero percent Federal Funds rate. It will not survive an increase in this rate, which is why Bernanke keeps repeating his mantra about a zero-percent rate for an indefinite time period.

Yet Bernanke insisted that the day of balance sheet contraction will come.

And you thought Greece had debt issues...

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