One of the more tedious drivellers of popular economic thought is former Treasury Secretary Larry Summers. He’s smarter than you and he’ll make sure you know it. There’s hardly a questions he doesn’t know the answer to. So, too, there’s hardly an answer he doesn’t know the question to.
Given what the Japanese have been subjected to in the past two and a half years of QQE, it is nearly criminal to suggest they need only more of it. None of it has worked as promised and stated, so what might have changed? Absolutely nothing except the arrangement of qualifiers and excuses that litter the same shared central bank speech delivered over and over of late. Kuroda says “robust”, Yellen proclaims “strong”, and both only confirm they live not of this world’s economy.
Having hit new 42-year lows last week, initial jobless claims once again beat expectations but rose very modestly from a revised 256k to 259k this week. This continues to diverge drastically from Challenger job cuts data, from weakening payrolls data, and from collapsing ISM survey employment indicators... so who is lying?
Update: DRAGHI SAYS ECB DISCUSSED A FURTHER LOWERING OF DEPOSIT RATE
Draghi hints at December QE expansion, noting that "the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting."
As long as politicians and media keep talking about disinflation and central bank inflation targets, and all they talk actually about is consumer prices, we will all fail to acknowledge what’s happening right before our very eyes. That is, the system is imploding. Deflating. Deleveraging. And before that is done, there can and will be no recovery. Indeed, this current trend has a very long way to go down. So far down that you will have a very hard time recognizing the world, and its economic system, on the other side of the process. But then again, you have a hard time recognizing the world for what it is on this side as well.
"The United States is in decline. While not all major shocks to the system will be devastating, when the right one comes along, the outcome may be dramatic." Once upon a time America fought a great war to rid the world of the Nazis, but now we have become just like them.
Global Capitalism is trapped in its own Prisoner’s Dilemma; fourty four years after the end of the Bretton Woods System global central banks have manipulated the cost of risk in a competition of devaluation leading to a dangerous build up in debt and leverage, lower risk premiums, income disparity, and greater probability of tail events on both sides of the return distribution. Truth is being suppressed by the tools of money. Market behavior has now fully adapted to the expectation of pre-emptive central bank action to crisis creating a dangerous self-reflexivity and moral hazard. Volatility markets are warped in this new reality routinely exhibiting schizophrenic behavior. The tremendous growth of the short volatility complex across all assets, combined with self-reflexive investment strategies, are creating a dangerous ‘shadow convexity’ that will fuel the next hyper-crash.
Currently, wage growth is the middle of its 5 year range - the last reading was just 1.63%. Positive wage growth is a good thing. Still, it is not accelerating the way it would if we were at full employment. The US labor markets are not weak but they are not as strong as some of the headline data suggests they are. If we look beneath the surface then it is clear that there are multiple explanations for the lack of growth in wage inflation...
Remember that September jobs report when the US supposedly only added 142,000 jobs, which was so bad it sent stocks soaring the most in years? As it turns out the sum was far greater than the parts, because according to today's BLS breakdown of jobs by state, not only did more than half, or 28, states lose jobs in September, but the total number of jobs losses, at 120,000, was about 20% more than the cumulative job gains of 99,000.
The current detachment between the financial markets and the real economy continues. The Federal Reserve's continued accommodative stance continues to support asset prices despite a decline in profit margins, an increase in deflationary pressures and a weak economic backdrop. So, while jobless claims and job openings may be touted as signs of an improving job market, the data suggests that we have likely seen the peak for this current economic cycle.
Investors are too complacent (the Minsky-Moment). Too many are still trying to profit from the Fed subsidy of past stimulus. Investors remain loaded in risk assets, incentivized by the need to beat peers and benchmarks and comforted into complacency by the Fed ‘put’. The true level of risk is being ignored. The pervasive mentality of seeking maximum risk has become a terrible risk/reward trade for two main reasons...
In its attempt to evade the shackles of conventional fixed and variable costs, Rio Tinto has decided to begin eliminating humans from its "workforce" altogether. According to the Chinese state media, Rio Tinto has started using automated, driverless trucks to move iron ore in its Pilbara mines, controlled from an operations center 1,200 kilometers away in Perth.
Socialism violates the Ten Commandments which prohibits anyone from coveting what their neighbor has. Well, God must have had a bad day for he does not understand what is fair. If someone is smarter than others are, that is OK and God’s Will, but he should not have more material things. God obviously cannot be all knowing since Marx must be right. God clearly can’t understand what is fair.
Free trade, as a matter of practicality, can only exist where all trade partners exist on a perfectly “level playing field”
AsiaPac stocks were generally lower heading into the all-important Chinese macro data (S&P -6pts, Japan -0.7%, China -0.2%) as JPY erased Friday's ramp and crude dropped back below $47. The PBOC left the Onshore Yuan fix practically unchanged (following Friday's significant devaluation). Then the data hit... China GDP beat expectations (printing 6.9% YoY vs 6.8% exp) but is still the lowest growth since Q1 2009. Industrial Production missed (printing 5.7% YoY vs 6.0% exp). Retail Sales beat (10.9% YoY vs 10.8% exp). The initial reaction was kneejerk buying in USDJPY and stocks but that is fading as "good news" will relieve The Fed's angst over growth...