Unemployment

It becomes ever more tempting to conclude that the timing of the Fed’s rate hike was really quite odd, even from the perspective of the planners...

This is what happens when the Fed’s academic-based nonsense collides with economic realities: perversions of capital that lead to massive bubbles and eventually even more massive crises.

"We don't gloat or feel terribly excited about the economic conditions right now. We approach every single repo and seizure as an opportunity to help respect the dignity of the debtor."

In the world of fiction, the most famous threshold may be that of 88 miles per hour. In the non-fictional world of economics and finance, however, an even more important threshold is that of 5% unemployment. At that moment everything changes. Wall Street's most prominent former converted permabull, Jim Paulsen, explains.

The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy. So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media.  When you look at the cold, hard numbers, they tell a completely different story.  The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe...

The Fed will never succeed in its attempt to manage inflation and unemployment by varying interest rates. This is because it and its economists do not accept the relationship between, on one side, the money it creates and the bank credit its commercial banks issue out of thin air, and on the other the disruption unsound money causes in the economy. This has been going on since the Fed was created, which makes the question as to whether the Fed was right to raise interest rates recently irrelevant.

The news out of Canada - and especially out of Alberta, the heart of the country's oil patch - has just gone from disturbing to downright terrifying. 

“I was really worried. Everyone who thought of going for the end of the year will have to cancel. Nobody is going to pay 2,000 reais for a holiday package to go to a place where people say the mud is."

Since our Keynesian central bankers have no clue that their prodigious money printing resulted in the drastic underpricing of credit and capital over the course of the past two decades, they are flying blind. They simply fail to see that the global economy is now swamped in more excess capacity than at any time since the 1930s, and probably even then. So they keep expecting the commodity cycle to momentarily bottom and prices to rebound, thereby reflating CapEx and household spending.

It has been a seesaw session with U.S. stock index futures following their dramatic buying burst in the last half hour of market trading yesterday by first rising, then falling, then rising again alongside European equities both driven almost tick for tick with even the smallest move in the carry trade of choice, the USDJPY, even as Asian shares trade near intraday highs after China’s leaders signaled they will take further steps to support growth.

"The trouble is that rents are running high not because house prices are booming and/or construction is sawing but because structurally new entrants to the housing market are renters not owners. This is reflected in the very low first time homebuyer rate, less than 30 percent."

"There no obvious solution. This is why we think that a second election around March 2016 is as likely as any of the alternatives. [In fact,] an early election in the short or medium term seems the most likely outcome."

Taken together with the rather steep drop in US industrial production, the risks of a full-blown and perhaps severe recession have undoubtedly grown. Unlike what the FOMC is trying to project via the federal funds rate, a rate that isn’t being fully complemented, either, at this point, visible economic risk is not just rising it is exploding.

The problem with all of this is that it’s now becoming apparent to everyone. The amount of mal-investment along with just how intertwined all the subsequent carry trades and more is becoming frightfully obvious and can no longer be hidden from view. The real problem now facing the Fed. which I believe they themselves did not fully comprehend was the extent in which all of this was: so blatantly obvious. Again: to anyone who truly wanted to look. Without the Fed’s interventionism – there is (and was) no market. And now with the raising of rates; no one will be able to miss or avoid that fact any longer. No matter how hard they try.