Any modest reduction in debt, tax revenues, consumption or new borrowing will bring the entire Status Quo crashing down. This is the bitter fruit of rampant financialization and the ascendancy of maximizing private gain by whatever means are available.
While it is hoped that the economy can continue to expand on the back of the "service" sector alone, history suggests that "manufacturing" continues to play a much more important dynamic that it is given credit for.
The Fed was out in force yesterday peddling some pretty heavy-duty malarkey about the up-coming rate liftoff at the December meeting..."If we begin to raise interest rates, that’s a good thing." That’s not a bad thing." Goldman is putting out the final mullet call for this Bubble Cycle because it knows that this bull is dying; that insiders still have massive amounts of stock winnings to unload; and that the clock is fast running out. The expiring clock is evident in the S&P 500’s one-year round trip to nowhere. Despite the fact that the Fed has ponied-up a stick save at every single meeting this year, the market’s 27 separate efforts to rally have all failed for the simple reason that the jig is up.
Having detailed the "perverted nonsense" that is the collapsing and negative US swap spreads (here, here, here, and here) and noted money manager's concerns that the big question remains whether there is "something bigger brewing under the surface that so far hasn’t been pinpointed yet," it appears Goldman Sachs feels the need to 'explain' the anomaly in what appears an effort to calm fears about the broken money markets. Of course, we don’t have to figure out what the “market” is saying about a negative spread because it isn’t saying anything other than “something” is wrong and even Goldman admits this signals funding and balance sheet strains are worsening since August.
If it looks like a recession, walks like a recession and quacks like a recession, it’s a recession.
And now, the Fed is confused.
Something odd is happening in the US labor market.
Social Security has long been sold to the public on the notion that what a worker will receive back is what he or she pays into the system. For decades, however, the government has been changing the terms of this "agreement" as part of an effort to avoid outright default, hiding it, instead, with a long, slow method of piecemeal default.
"It is a bloodbath. We’re at the highest point of fear and uncertainty now.... God only knows what’ll happen if oil doesn’t rebound. I try not to let that penetrate my mind."
The world is bankrupt after thirty years of borrowing from the future to throw a party in the present, and the authorities can’t acknowledge that. But they can provide the conditions for disguising it, especially in the statistical hall of mirrors that once-upon-a-time produced meaningful signals for the movement of capital. The Dow, the S&P, and the NASDAQ are the only signaling mechanisms that the legacy media pays attention to, and the politicos take their cues from them, in a feedback loop of false information that begets more delusional positive psychology in those same markets.
Having noted the plunge in consumer spending expectations to record lows last month, The Fed faces an even bigger problem this month. Despite the apparent wage growth in Friday's magical BLS data, The New York Fed admits "public expectations of future income took a big hit," as the index suffered its biggest one-month decline on record. But the news gets even worse, as 3-year-ahead inflation expectations plunged to record lows (confirming the record low inflation expectations from UMich's) and entirely discounting Stan Fischer's inflation excuses last week. Fianlly, as stocks have stagnated this year as wealth creator for The Fed, consumer expectations of housing price gains have tumbled to series lows. It appears a desperate-to-hike-rates fed is cornered by, as UMIch previously noted, "a disinflationary mindset is taking hold."
If the US economy were actually in economic recovery, would half of the 25-year-old population be living with parents? The real job situation is so poor that young people are unable to form households.
- Workers aged 55 and over: +378,000
- Workers aged 25-54: -35,000
We will let readers decide if the 1.3% increase in total employment, less than half what it was last October, is the answer.