Archive - Aug 21, 2009 - Story

The most recent BLS State unemployment data is out. State by state unemployment increased by 1.0% on average (unweighted) from June to July.

In a dramatic reversal to the moderating trend from the past several months, Mass Layoff Events surged from 256,357 in June to a whopping 336,654 in July, a 31% increase, and surprisingly the second highest reading for the year since January's 388 thousand. Actual MLE increased by 21% from 2,519 to 3,054. The primary weakness was focused in the manufacturing sector, where claims jumped from 85 thousand to 154 thousand, an 81% increase.

In essence what is going on, is that the brief pick up in German and US GDPs on the trade balance side, are being facilitated exclusively by the credit bubble in China. By dint of China being able to recognize GDP at production instead of expenditures (like normal Western countries), China is now trying to back fill into the trade void left from the collapse of Western economies by promoting the same kind of irresponsible lending (and borrowing) that lead the US economy to its current sorry state. This will eventually end very, very badly.

Last week's $300 million decline in Foreign Holdings was promptly reversed and this week saw an increase of $7.2 billion. Yet, like last week, the comparison between domestic and foreign weekly securities purchases is trivial: $7 billion versus $86 billion: the US is promptly becoming its own largest debtor... by a factor more than 10x.

• 6 S.Korean banks to take $4B worth problem loans from financial institutions' books.
• Asian stock markets were lower Friday on report China might tighten bank lending.
• Australian spot iron ore cash price to China slumps 9.3% on steel decline.
• China said to plan tightening of bank capital requirements as stocks rally.
• China's economy may grow 8.5% this quarter: State Information Center.
• Mexico’s GDP contracted 10.3% last quarter - fastest pace in more than 25 years.

• Now comes that hard part (Value Expectations)
• In new phase of crisis, securities sink banks (WSJ)
• The new dollar carry trade doing miracles for futures, European manufacturing pulls a Philly Fed ...(Bloomberg)
• Just in time for China to pull the plug on all excess manufacturing demand (Bloomberg)
• As even Morgan Stanley sees little hope for fast Euroland recovery (Morgan Stanley)
• While China's 2% inflation estimate baffles economists as prices fall (Bloomberg), with all the free credit going into the stock market, not purchasing products already accounted for in GDP
• And as Stiglitz sees risk to dollar, need for reserve system (Bloomberg)