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The Infallible Fed At The Verge Of (Not) Admitting Failure
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
“Labor market conditions are affected by a wide variety of factors outside a central bank’s control,” admitted Richmond Fed President Jeffrey Lacker a few hours after the employment report bounced around the world. Yet for years, the Fed has proclaimed that the heroic motivation for its selfless money-printing mania (QE) and bold zero-interest-rate policies (ZIRP) was the deep desire to improve the unemployment fiasco for average Americans.
So the employment report was mixed in the manner befitting these crazy times: 165,000 jobs were “created” in April. March was revised up from a super-lousy 88,000 to a still lousy 138,000; February was revised up from 268,000 to 332,000. The unemployment rate dropped to 7.5%, from 7.6%, the lowest since 2008 – and so we’re excited and go into the weekend celebrating.
Stock markets certainly did. The Dow and the S&P 500 hit all-time highs. Exuberance about the report skittered around the world and propelled the German DAX to an all-time high as well. There’s nothing like a “better-than expected” though very lousy headline number to amplify the power of the money-printing machines.
But there were some big fat flies in the ointment. Hours worked dropped to 34.4 from 34.6 in March, the worst so far this year. And average weekly incomes declined – the bane of economic growth. That persistent trend has hollowed out the middle class and impoverished the lower classes. Falling real incomes is a serious long-term problem in the US.
Then there is the difference between those considered “unemployed” and those who just don’t have a job. Despite the lower unemployment rate, an ever greater number of people don’t have jobs! That ugly phenomenon shows up in the Labor Force Participation Rate (people over 16 who either have a job or are looking for one, as a percent of the total labor force). It peaked in 2000 at over 67%, then drifted lower and crashed during the Financial Crisis. It continues to decline with surprising stubbornness. In March, it hit a record low of 63.3%, and in April, it remained stuck there.
“Workers are discouraged by adverse labor market conditions,” Richmond Fed President Lacker said. It was an “obvious” reason. He also saw some demographic developments at either end of the age spectrum. Young people, for example, might have “difficulty finding desirable entry-level jobs, a by-product of weak economic growth,” he said. But even the participation rate for the prime working-age population has declined sharply! Lacker attributed this to “weak economic activity” and possibly “other secular trends.”
The broadest and perhaps most accurate measure of reality that the Bureau of Labor Statistics offers is the Employment-Population ratio (working people as a percent of the total working-age population). It ticked up one micron to 58.6, still mired near the bottom of its range since the Financial Crisis – lows last seen in the early 1980s. The ratio had peaked in April 2000 at 64.7%! Those were the days of “full employment” – the days before QE and ZIRP had any meaning beyond Japan.
The Fed’s money-printing mania started in December 2008, when the Employment-Population Ratio was 61.0%. The ratio documents the enormous success of the Fed’s policies with regards to the job market! Alas, QE was never designed to create jobs, and it can’t. As Lacker admitted, the labor market is “outside a central bank’s control.” What QE and ZIRP did create were bubbles in the credit markets, stock markets, farmland, commodities, even in pockets of the housing market. Jobs? Not so much [here is the bitter graph of QE, ZIRP, and unemployment].
Both, the Labor Force Participation Rate and the Employment-Population Ratio, indicate that quite a few jobs have been created since 2009, but those jobs have barely kept up with the growth of the working-age population. Companies are hiring, but not fast enough. The economy is growing, but barely. Yet interest rates have been near zero – or below zero when inflation is taken into account – for years, and the Fed’s balance sheet has quadrupled since 2007.
“In this situation, the benefit-cost trade-off associated with further monetary stimulus does not look promising,” Lacker groused. “The Fed seems to be unable to improve real growth.”
Preemptively, the Fed has started blaming Congress. That’s more convenient for an infallible institution than admitting that its policies have failed to resolve – because they were never intended to resolve – the employment fiasco. In its minutes from the March 19-20 meeting, participants relentlessly plowed into Congress’s fiscal policy that might be “tightening,” and they pointed repeatedly at “fiscal restraint” and other deadly sins – despite the trillion dollar deficit. They’re paving the way for the moment when even officially it is clear that the pretext for handing out trillions was just a pretext.
And here is a fun one: in theory, a class-action lawsuit allows the little guy to stand up to a big corporation and seek redress. Alone, the little guy wouldn’t have the means. Justice comes down to money, and class-action lawsuits add leverage. In theory. In practice, that world-famous American product is infested with flaws. And it’s about to be imported by France! Read.... The Pleasures of Class-Action Lawsuits Slam Into France
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The masters of the universe are not the masters of the universe, obama is in and/or out of control. He has the answer to everything, just ask him. He will blame failure on the constitution for not letting him be president for life African style.
T'Pit: I think you're harshing the Fed's mellow a bit: After all, it's The Law that tells them the dual mandate, so they haveta try sumpin' I think it's been honorable of them to tell Congress that QE won't do Congress's job for them. Stupid Law, it's true, passed by Stupid Lawyers in the 70's. Meanwhile, there's money to be made in the market this week!
Release the Chechen!
The Fed will keep on stealing the country's treasury for the illuminati until labor conditions improve. That's that.
The FED members are now, predictably, attacking the Congress for being stingy. They can not buy Debt that isn't issued. If they can't, then they can't continue papering over the banksters' crimes. Another banking crisis, and bailout, dead ahead.
I found this story on the jobs report. Pure BS from Feral government.
http://confoundedinterest.wordpress.com/2013/05/05/jobs-recovery-non-farm-payrolls-leap-165k-after-bls-birthdeath-adjustment-of-193k/
Even the NY Post got the story right ... that many investors missed!!
http://www.nypost.com/p/news/business/job_surge_mirage_z8PnyGUbztFrdLpifAi1MK
Let's hope for a better week,
“Workers are discouraged by adverse labor market conditions,” Richmond Fed President Lacker said.
But who created those adverse labor market conditions? A manipulatve Federal Reserve bank, with its easy money policy.
100% of bubbles burst and deflate. Yet the FED created bubbles anyway. Greenspan pushed the cycle to 10 years by preempting a recession with a rate cut to 4.75 that blew the top off the Nasdaq and created what became known as the Clinton boom. He then jacked the rate to 6.5%, then crashed it to 1% to build a housing bubble. Distortion on top of distortion.
Booms end in busts. The FED supplied the cheap credit for the boom and thus bears responsibility for the bust, which leaves adverse labor market conditions.
Not to mention that Bernanke proclaimed himself an expert on the Great Depression, thus proclaiming himself to know how not to repeat one. 47 million people are on food stamps. Real unemployment is at least in the low double digits and U-6 is at 13+. The economy limps along at the worst recovery since the Great Depression. A D is not all that much better than an F.
www.zirpinusa.com
The Fed will not destroy the USD. They will lever down QE infinity if the USD starts to become sold , sold, sold. The co-ordinated depreciations of EUR, then JPY, will continue.
TRry to keep the USD as the cleanest dirty shirt. I do believe that they will "convince" the US public that QE must continue when they hint at de-accelarating the $85B / mth.
The Equity market should fall about 10% ande gold may follow another 20%, before they "convince" everyone that QE is the only answer. When the Fed gets the "buy in" from the US public re QE, then stocks back up, gold to $2000.
Stick market cannot just go straight up w/o a head fake from the Fed, else Fed loses "credibility" with the masses.
The FedRes is not in control. The dollar is already toast. Just waiting for the finale act where the "reserve" currency status is eliminated. hujel
Very true, but they're pointing blame at Congress, which tells me there is at least one big bank on the ropes, now. When a landslide happens, it'll be fast!
Back on topic.
Of course the FedRes is not admitting failure because they have succeeded in their goal of keeping the banks, especially the TBTF ones, going and, by hook and crook, profitable--keep that needle on the record and don't let the music stop.
Another way to look at it, as they must, is that the boat is still afloat so never mind that the boat is caught in a giant whirlpool and will soon be sucked down to the depths to be squashed like a bug. hujel
Sorry to drop this here and way off topic, but did anyone see this tonight:
Boston Marathon bombing survivor takes part in Bruins’ pre-gamehttp://prohockeytalk.nbcsports.com/2013/05/04/boston-marathon-bombing-su...
19 days after the bombing trauma, blood loss, shock to his life and without physical therapy, Jeff Bauman (Nick Vogt) is all smiles as he is wheeled out on to the Bruins ice. I'm calling double bullshit! hujel
I don't know if Thomas Jefferson said this:
"When governments fear the people, there is liberty," reads the quotation. "When the people fear the government, there is tyranny. The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government."
http://edition.cnn.com/2013/01/11/opinion/jefferson-fake-gun-quotation
(CNN is telling he didn't, but you know, you can't trust CNN)
The BIG BIG problem here is global and the US gvt has a lot to do with it.
Through time and since Kennedy's assassination, US govts have accomplished so many atrocities... And on 9/11 they've cross all the lines. Nobody trusts the US gvt, even many US citizens. A government capable of doing what they did on 9/11 and after that, a System that works that way, looses ALL CREDIBILITY. The World DOESN'T trust the US gvt. Some may FEAR it, but NOBODY BELIEVES A WORD THEY SAY.
So things are shifting. A new paradigm. And I don't believe it's the NWO. The NWO may be some ulterior, last resource to try to handle things, but other actors are going elsewhere. There's nothing to be wonder about the BRICS building relations WITHOUT the US. Many are building relations WITHOUT the US. Even US partners, european ones.
The only way to fix this for the US would be to acknowledge what everybody knows, take responsability, prosecute those who were responsible, help to reconstruct the countries the US military have destroyed, start the future on the basis of truth and justice and you will see how economics improve. Fact is, with the lost of trust in US gvts comes also the lost of trust in everybody standing behind their lies. The whole "First World" is falling apart.
What are US citizens going to teach their childrens about 9/11? About Sandy Hook, Boston? About Afghanistan, Irak, Lybia, etc.? Lies? It would be dramaticaly wrong for them, cognitive dissonance; a nightmare. The truth? Yes, but if the governments keep in denial, these kids would never trust their governments anymore and there's no need to say how things go that way. In fact, US, Europe allies have been setting up security forces to go AGAINST their citizens (in the UE, Eurogendfor).
What it has to do with Economics? Everything, as you know it's all connected.
The entire "First World" System and sorroundings are corrupted to the core. Acknowledge that and we can all work together.
Otherwise things are gonna get worse and worse and at some point either the US and NATO allies bomb the rest of the World or the rest of the World is gonna go ahead, sort of without the US and NATO allies.
US/NATO would never be able to dominate the whole World, fighting against their own citizens and all the rest.
That's what I believe, summarized in few words with my poor English. As some ZH's readers know, I'm an optimist.
Wouldn't you like to be a Big Time Bankster? You own and control the White House, the Treasury, The Fed (you own it) , The SEC, etc., the Congress ( without you they can't run their pork machine deficits), and the currency (you print it at will as Congress sleeps). So you take the depositors' money and gamble it away in your gigantic Congress made fraud machine, screwing cities and states all over the world. Then you go over and see Uncle Hank of Goldilocks and say, "I've shit my pants big-time, Uncle. Please bail me out along w my foreign banker buds." " No frigging problem. Lets knock down a couple of your competitors we don't like, then we'll print and give you all the friggin' money you need and more for your gambling habit and bonuses. " But Uncle, what about Congress? "We'll just show'em your books and tell the world is over if they don't approve the checks. Easy."
Yeah, but there is always a guillotine just around the corner. hujel
Pretty much what happened---VERBATIM...!!
ps. you have a right to be a "whiner"
“The Fed seems to be unable to improve real growth.”
Of course not.
How could buying Mortgage Backed Securities and rewarding the mis-allocation of capital and resources do anything other than enrich bankers and gamblers on Wall Street?
This is some sort of planned mea culpa so when nothing they do works and the shit hits the fan they can say "we thought it would work".
Otherwise intelligent people being one of two things - complete delusional fools, or intentional destroyers of the future.
The Fed 'blaming' Congress is simply asinine. Were it not for Fed policy how could the Congress finance those trillion dollar deficits that keep millions in useless employment. How could we have an army of 6000 Homeland Security Investigations agents , Head Start employees, Trayvon Martin's mom making $65k with the Miami Public Housing Authority and on and on?
If we had actual journalists in this country they would be on Bernanke like flies on shit.
How dare a dictator, who has never done an honest day's work, hijack the entire American economy?
Where is the outrage in the Lame Steam Media?
"It's Busch's fault"
The media is controlled by a few NYC corp's who benefit greatly from cheap money. The whole city would be cut in half with 'sound' money. Do I need to mention what tribe they're from?
kaiserhoff - i like that. bernake has our entire country at ransom. and nobody knows about it and nobody cares. people here posting at zh are in the top x%.
thanks bennie! i have 15k in a savings account at the jpm chase bank. guess what. i $1 interest this month. wow! thanks, jamie dimond. seriously, really, seriously, why bother? i really, really, really rather they just give it to jamie or blythe. they are so much smarter than me, they deserve it. or maybe best - donate it to the bennie bernake library. in dillion south carolina. where apparently he is from.
they know what to do with bennie, if they ever figure out who, what, when, where, why and how it all happened.
You have 15k in Jamie's bank? Maybe it is time to have your IQ tested!
Don't leave that shit in there over the weekend!
Use 'full employment' to inflate bubble then use 'dollar stability' to deflate bubble. Trim sheeples' hair in between.
The market partied up knowing full-well how bad that report was....because the Fed has backed itself into a corner - note Ben's promise to "increase" stimulus, if necessary - insuring (in the market mentality) that the QE pipeline will continue to flow and asset inflation will continue--for now.
Even the talking heads were astonished at the records being set on relatively bad news. After selling out MainStreet and widening the gap between rich and poor, there is no amount of suffering too great for Bernanke.
The kindest thing I can say about Mr. bernanke is that here is another human, like Mr. Lysenko, that refuses to accept that his thesis is flawed. However, politically, it panders well with the chattering classes.
"Preemptively, the Fed has started blaming Congress"
It wasn't congress that had an easy credit policy. It was the FED. It was Bernanke that said he would drop money from helicopters, not congress.
What HASN'T the Obowel Movement lied about?
In fiat systems, debt and money are the same. If Congress refuses to issue more debt, the FED can't buy it. That's deflationary and endangers the banksters.
“Labor market conditions are affected by a wide variety of factors outside a central bank’s control,” admitted Richmond Fed President Jeffrey Lacker
That is in part because the FED does not drop money from helicopters.
Someone has to borrow the money the FED creates. Imagine how many jobs would have been created if the FED sent money, not loans, directly to consumers.
I was going to write a bit of a screed on what is out of their control, but I realized that I could sum it all up in one phrase, a phrase that an educated and nonKool-Aid swilling person could understand.
So here goes: the Second Law of Thermodynamics. hujel
Hold on ...
I'm still working on "maganjatois".
And imagine the inflation if the FED sent every tom dick and harry a big fat gubmint check.......
my God, the stupidity.....
I agree, it would have been very bad to send everyone a check, however, that they did print the money anyways but chose to give it to the banksters and streeters shows you where their priorities lie and who is really running the show.
If you save the mortgagees you also save the banks but if you save the banks you also allow the banks to take title to foreclosed properties at the same time--it's a maganjatois with the mortgagees and US citizens as the involuntary "bitch" in the middle. hujel
Imagine the inflation that has already occured. A dollar is worth what, 3 cents compared to what it was worth 100 years ago?
Home prices are back up to $600,000 again in Los Angeles, without sending out checks to every Tom, Dick and Harry.
By the way, the FED is not a government agency, so it would not be sending out any government checks.
P.S., the FED is controlled by the OBowel Movement, I'm feel sorry for you if you can't see that.
Who needs to imagine something they already have seen, known and lived through?
To write everyone a check is even more idiotic (in an inflationary sense) than the stupidity that the Obowel Movement is now engaged in via their sock puppet Bernanke.
P.S., when an idiot down arrows me, it's the same as an up arrow!
"Falling real incomes is a serious long-term problem in the US."
or, as we central planners like to point out, falling real income is the *long-term solution* in the US, allowing our exports to be priced competitively in the global market
that, plus cutting the value of the dollar against other currencies
prosperity -- it's not for everyone
Good stuff.
May 5, 1013
Paul Craig Roberts on KWN discusses the Government’s latest Employment (Non Farm Payroll) Report, published last Friday. Explains the Federal Reserve’s purpose for orchestrating the big selloff in Paper Gold in the Futures Market two weeks ago and the unintended consequences of that act. He talks about the European Union’s decision to deal with insolvent banks in Cyprus by forcing the Cypriot Government to steal Depositors’ Funds from their bank accounts (the so-called ‘Bail-In’ Option – a form of legalized theft that has already been passed into law in USA, Canada, New Zealand and a few other G-20 countries).
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/5/5_Dr._Paul_Craig_Roberts_files/Dr.%20Paul%20Craig%20Roberts%205%3A5%3A2013.mp3
Roberts didn't take into account one thing on the jobs report. Retail is adding jobs, thanks to ObamaCare, but not in a good way. They are hiring more people to keep their current staff below 30 hours a week, so they don't have to buy health insurance. This means they're hiring more people to fill the same exact position. I'm guessing other businesses are doing the same thing. Reminds me of the 40 hr. work week created, under FDR, to drive down unemployment numbers in the 30's.
This is what is coming next, maybe?
http://clashdaily.com/2013/05/will-american-soldiers-fire-on-u-s-citizens/
Fed funded full functioning of folks feels frightfully foolish and feasibly foretelling of failure