Archive - Apr 2015 - Story

At its core, currency manipulation is any intentional intervention that results in an undervalued currency and a substantial current-account surplus – exactly what the ECB is doing. If the ECB maintains this policy for an extended period, tension with the US is all but inevitable – tension that may obstruct the TTIP’s approval by the US Congress or hinder the treaty’s actual operation, resulting in its deterioration or termination. This runs counter to the popular view, which drove the eurozone’s creation, that Europe needs a single currency to compete with large economies like the US, China, and India.

"I think Kerry will get an enormous amount of credit for pulling it off. He will be in line for a Nobel Peace Prize... He could go down in history books as being a monumentally important character, like Jimmy Carter with Camp David..."

Or "He could go down as Neville Chamberlain at Munich. Both are possible here."

Late April Fool?

Warren Buffett is revered all over the place, but in reality, he’s the schoolbook example of everything that’s wrong with America. That whole money before and over anything else (including people’s health and well-being) mentality. It makes people stupid, and it makes for stupid people. And sick ones, too. This Tragedy of the Commons abuse is so ingrained in the economy that it’s hard to see how it can be changed. And that does not bode well for anyone except the Warren Buffetts profiteering from it.

At this point calling Japan a failed Keynesian banana republic is an insult to banana republics everywhere.

A change in liquidity, or the monetary surplus, can also take place in response to changes in economic activity and changes in prices. The effect of previously rising liquidity can continue to overshadow the effect of currently falling liquidity for some period of time. Hence the peak in the stock market emerges once declining liquidity starts to dominate the scene. Based on the peak in liquidity in June 2009 the level of the S&P500 of 2,061 reached so far in March this year could be not far from the top.

Today, every possible function of a bank, from savings to loans to money transfers, can now be done faster, cheaper, and more efficiently by new technology, courtesy of the Digital Revolution.  In 10 years’ time, the technology and adoption will have progressed to the point that today’s banks will be entirely obsolete. Thomas Jefferson once wrote that “. . . power should be taken from the banks and restored to the people, to whom it properly belongs.” It took two centuries. But now it’s actually starting to happen.

So much for yet another "above consensus" recovery, and what's worse it is, well, about to get even worse, because while the Fed keeps baning some illusory drum that slack in the economy is almost non-existent, the reality is that in March the number of people who dropped out of the labor force rose by yet another 277K, up 2.1 million in the past year, and has reached a record 93.175 million. Indicatively, this means that the labor force participation rate dropped once more, from 62.8% to 62.7%, a level seen back in February 1978, even as the BLS reported that the entire labor force actually declined for the second consecutive month, down almost 100K in March to 156,906.

In a move presaged by objections from politicians and some smaller EU financial institutions, the German lender L-Bank is suing the ECB in a bid to avoid falling under the central bank’s direct supervision. WSJ calls this "the most radical step by a European bank against ECB supervision [and] highlights the headwinds the ECB is facing from some politicians and smaller lenders in Germany, Europe’s biggest economy."

The American economic and financial landscape is vastly different than it was following World War II. The wealth gap between the rich and the poor has shifted sharply to the upper 10% of the population. For that group, the economic picture is considerably brighter than for those in the bottom 80%. For Byron, whose personal net worth is in the billions, this is truly a "Picasso economy," for the majority of everyone else it is more like a "starving artist sale."

If wage growth for over 80% of America's workers is sliding even as wage growth for all American is flat, that must mean that the wage growth for the tiny 17% of America that is its bosses and supervisors must be soaring. And sure enough, it is. In fact, as the chart below shows, wage growth of "supervisory" workers has never been higher!

Yesterday we warned that "the whisper expectation is for a NFP print that will be well below consensus, somewhere in the mid-100,000s if not worse now that the bartender hiring spree is over." As already noted, we were spot on with the abysmal jobs print, the worst since 2013. We were also correct about the end of the "bartender hiring spree" because as the following chart shows, the number of "Food Services and Drinking Places" workers, aka waiters and bartenders just saw its worst monthly increase since June of 2012.

Our current faith in central banks' ability to "make the economy all better, all the time" is horrendously misplaced.