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Guest Post: How Bloomberg’s Algo-Writers Serve The Cult Of Keynesian Central Banking
Submitted by David Stockman via Contra Corner blog,
If you ever needed proof that the financial press has been completely indoctrinated in the cult of Keynesian central banking consider the attached Bloomberg note on the recent tiny decline in Chinese industrial company profits. Without breaking for anything more than a comma, its hapless Hong Kong stringer, one Malcolm Scott, conjoined the fact of less profits with the imperative for moar……money.
Industrial profits in China fell the most in two years, underscoring the need for looser monetary conditions as the world’s second-largest economy slows.
Perhaps Bloomberg is no longer using carbon units to post its news stories and has gone straight to algo-writers designed to directly feed algo-readers without the bother or cost of human intercession. But regardless of whether “Malcolm Scott” is carbon or silicon based, the attached is clearly presented as a news story and the above excerpt as a declarative sentence. Accordingly, by the lights of Bloomberg and the rest of the mainstream financial press which it echoes, it is now the job of central banks to print money to ensure that at no point in time do profits—-and therefore their stock market capitalizations—-fall by even so much as 2.1% over prior year.
That’s right. In the land of red capitalism, where corporate accounting and reporting are so advanced that profit results are published on a monthly basis, the doctored number for all of China’s industrial companies in October came in at 2.1 percent less than last year’s fictional number.
Once upon a time, even journalists recognized that accounting profits are the swing residual after all fixed and variable costs have been accounted for and that in every capitalist economy known to history profits have been violently cyclical. But now, apparently, a 2% change in the bottom line results of China’s cooked corporate books is straight-away proof of the need for “looser monetary conditions”.
Well, here is the balance sheet trend for the People’s Printing Press of China. It has expanded by a stunning 9X since the year 2000, thereby fueling the greatest sustained explosion of new credit in recorded history. In fact, total credit owed by China’s household, business, financial and government sectors has risen from $1 trillion to $25 trillion over the same period. Exactly how can you get any “looser” than that?
Needless to say, this immense explosion of credit did not disappear quietly in the night. Instead, it funded the greatest construction and investment boom ever recorded. That’s why China produced 2.2 billion tons of cement in 2013, for example, or 29X more than the 77 million tons produced in the US last year. Or, even more dramatically, why it produced more cement on an average day that year than did the UK during the entire year!
Likewise, that’s why China has 1.1 billion tons of steel production capacity, but hardly 600 million tons of sustainable “sell-through” requirements for consumer durables and capital replacement. The difference represents the monumentally bloated one-time production of plate steel for ships, rails for transit lines and structural steel and rebar for a vast building binge. The latter, in turn, has bequeathed China with 70 million empty apartments, scores of ghost cities and dramatically under-utilized office towers, shopping malls and other commercial real estate facilities throughout the length and breadth of the land——but most especially in the second and third tier cities where Beijing’s approach to GDP manufacturing reached its most absurd parody.
Stated simply, China allocates GDP targets from the center and cascades them down through the party and governmental apparatus (essentially the same thing) to regional, county and city units. The latter, in turn, dutifully achieve their GDP targets by building things. Anything. Everything.
Needless to say, of the many dubious gifts that the West has supplied to the Middle Kingdom, surely Keynesian GDP accounting is among the most unfortunate. How does building pyramids increase a society’s wealth, exactly?
The least that Simon Kuznets and his merry band of Keynesian pioneers might have done 80 years ago is to measure annual economic output based on the market value of buildings, machinery and tools actually consumed during the current year—not mere spending for fixed assets that might never be used.
In any event, China and much of its EM supplier base is inundated in excess capacity for everything—cement, steel, aluminum, silicon based solar panels, refrigerators, automobiles and every manner of industrial fabrications and machinery, such as backhoe loaders and construction cranes; and also, vast excess capacity to export goodies and trinkets to the rest of the world including toasters, sneakers and socks.
This means that unless the construction and fixed asset boom is fueled with ever greater amounts of freshly minted credit, the house of cards known as red capitalism will eventually collapse. And it doesn’t matter whether the latter occurs all at once with a thud, or more gradually in the manner of a tire going flat. The result will be the greatest deflationary swoon the world has ever known.
It will manifest itself first in falling industrial prices such as currently underway for iron ore, coal and crude oil.
The deflation from this crack-up boom will inexorably move upstream, of course, to the pricing of everything made from these commodities owing to both lower materials costs; and also due to the fact that artificially cheap credit resulted in vast excess capacity in these fabrication and manufacturing sectors, as well. And, yes, the bloated wage bill of this overbuilt supply chain will also shrink.
Stated differently, “fiat credit” fuels the generation of “fiat wages” and especially “fiat profits” during the boom phase of over-investment and runaway construction. Consequently, when the credit tsunami finally crests—as even the leaders in Beijing are now resigned to—- fiat wages and fiat profits are also liquidated.
Indeed, what gets hit first during the bust phase is the accounting residual. That is, net profits and apparently so, even under Chinese accounting.
In short, the global economy is cooling rapidly and profits are already falling sharply in the primary sectors of mining and energy extraction. And that is only a foretaste of things to come down the industrial food chain.
Yet contrary to the Bloomberg algo-writer, this nascent profits collapse is not a result of too little money now; it is a consequence of way too much money over the past decade or two - and not only in China but in the entire central bank dominated world wide economy.
So Mises was right. “Moar” fiat credit always leads to a crack-up boom. Someone needs to reprogram the algos.
By Malcolm Scott Bloomberg News
Industrial profits in China fell the most in two years, underscoring the need for looser monetary conditions as the world’s second-largest economy slows.
Total profits of China’s industrial enterprises fell 2.1 percent from a year earlier in October, the National Bureau of Statistics said today in Beijing. That compares with September’s 0.4 percent increase and is the biggest drop since August 2012, based on previously reported data.
The People’s Bank of China, which last week cut benchmark interest rates, refrained from selling repurchase agreements in open-market operations today for the first time since July, loosening monetary policy further. Mired by a property slump, overcapacity and factory-gate deflation, China is headed for its slowest full-year economic expansion since 1990.
Data released Nov. 13 showed the economy’s slowdown deepened in October. Factory production rose 7.7 percent from a year earlier, the second weakest pace since 2009, while investment in fixed assets such as machinery expanded the least since 2001 from January through October. Retail sales gains also missed economists’ forecasts last month.
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We lied to some folks
Its not just these algo-writers, I am sure Bloomberg terminals are swarming with NSA filters that is tracking all the comments and trades that are going on between Bloomberg users.
Bring on the crash.
It is the only way....
I'm all for it.
Keynesian economics is a euphemism for circular firing squad.
I also think that they make up things to move markets and profit. For example this article was released in the middle of the trading day and led to massive moves in everything:
http://www.bloomberg.com/news/2014-09-30/russia-said-to-weigh-capital-co...
But there is no source. Just anonymous "officials close to the talks". Millions, even billions could have been made off the foreknowledge of the release of that article.
Directive 10-289, Keynesian style...
DaddyO
In my Rumsfeldian deck, Michael Bloomberg is the Jack of Spades.
Mayors for QE
"Someone needs to reprogram the algos"
Too bad the algos are self aware.
Blurry graph?
You have to laugh at the Bloomturd consumer CONfidence surveys. What exactly is the measurement system for that survey?
It jumps from 30 to 36, then back to 29ish before recovering to 33. Are these surveys based on the Langley and DC areas?
Those are huge sigma moves with a baseline of 30.
It's the prozac society
Repost an idea on stimulating US Political Though, Philosophy, and US Youth. The weak piece is the idea that shortening the expensive K-12 Model to K-10 (which also has less value & Relevance to the US Global Economy)... is thinking that Philosophical Schools would pop up in each state of the Union. But... call me a dreamer.
- an idea of leveraging the Youth in USA in a way similar to Germany school system (3 Tracks).
IF we cut the Education System from K-12 to K-10 that would force young men and women to plan their lives near the age of 13 years old. They would decide:
- End Learning to enter low skilled Labor Force
- Plan for Vocational to Tech School
- Plan for Study for Entrance to College & University Programs
This forces the boys who are passionate, learn quickly, have lot so competitive energy, who are not yet at physical peak or mental peak to "Engage" the world, perhaps consider starting a business for the first time or Dedicate themselves to "study like a man". Part of this is about sex and how a man sees himself and what kind of woman would date, fool around with, or marry a boy with no career.
- One Result would be Empty High Schools.
- Empty schools make great places for community forums
- This can lead to a Renaissance in my imagination
- We need Local Level Philosophy Established in each state, even if they are just free, open, forums in empty churches or buildings and... even if they focus on politics or religion instead of science or philosophy
"Teeth's Law of Youth, Manhood, Independence", treat young men like they have a choice and must choose early in life what they will do and what they will be. This is an alternative to the feeling that... from 6 years of age till 18 years of age you are locked into a "Broken" school system that does not prepare you for the business world, for College or for a career.
- Leverage your young, Strong, Competitive, imaginative, and you have a force multiplier in the US Economy.
- Spread the Word that our country is dying without adequate Logic, Philosophy, History, Science, Engineering
Today there is two much binary thought. Cognitive Errors that reinforce the paradigms of only two choices or solutions: the left or the right, conservative or progressive, Liberal or Traditional, Black or White, Right or Wrong.
- Today we solve problems with false dichotomies of only two solutions or two steady states.
- Cognitive Distortions, Cognitive Errors, Bias Thinking, must be taught early and taught in the context of debates, judgements, analysis, community issues, news reporting, and professional surveys and analysis
- The US Idiocracy is now upon us
- How will we avoid War?
- How will we stop the Fraud, Waste & Abuse of Federal tax Dollars for Corporate Welfare, Corporate Subsidies, and Wall Street Banker Monopolies?
Forums, Debates, Community Town-halls, Establishing COOP Businesses, Establishing community Groups or Towns that share the same Political Thought, Communal Type Living, ... These will be places for Young Men to catch the ideas of Economics, Budgets, Accounting, Auditing, Cost of Living, Monopolies, Bank Charters for Creating Fiat out of Thin Air, and Fixed US Markets.
Not the "mainstream-media." Not the "propaganda-media." But the "complicit-media."
As in complicit in their thefts and treason.
Am American, not US subject.
ECON PROF: No Such Thing as American Dream...
- 'America has no higher rate of social mobility than medieval England'...
- PONZI: Treasury Issues $1T in New Debt in 8 Weeks -- To Pay Old Debt...
Please, sir, may I have more gruel?
It is a Race to the Bottom, Gresham's Law.
- CEOs Ready To Revolt Against Obamacare...
- PAPER: Dark days ahead...
- GALLUP: Record Number Americans Foregoing Medical Care Over Costs...
It will be interesting. Forcing the US public to own their own health is valuable, if for no other reason than removing some of the surgery first thought process and instituting some preventive maintenance like eating better, weight control and exercise.
I think what will happen is we will morph into a bimodal society with half being healthy and the other half being fat obese people driving carts around and parking their caddies and corvettes in handicapped parking.
The healthy side will have to pay for the fatties, even after they scream racism about how doctors made then fat...
I just wrote about the Journo Bots, interview with Ken Cukier from the Economist video, we're interviewing, data bases today and we don't have newspapers, we have "views papers" he says:)
Watch video #2 and see how sophisticated the Long Tail journo bot Algos are. The inventor published 10k books and put them on sale at Amazon so a little news story, no problem, but like you said, program the damn algorithms with the right parameters.
http://ducknetweb.blogspot.com/2014/11/whats-going-on-with-mediajournalism.html
Don't forget the Goldman Sachs Knesho game too..I bet they really start to monitor the questions those algos get since it's live on CNBC now:)
http://ducknetweb.blogspot.com/2014/11/goldman-sachs-big-investor-in-kensho.html
We already forgave Bloomberg once for his flawed model Big Gulp dupe and that was harmless compared to this.
"Journo Bots?"
"Propagando Bots" is more like it.
"When you can't write propaganda fast enough, try Propagando Bot. Just input the misdirection message, and let Propagando Bot do the work for you. Comes preloaded with Ebola, Syria, and Ukraine misdirection messages. Preregistered with the NSA."
An American, not US subject.
"Propagando Bot" is MINE, so if I catch you using it I'll send over the DC US' gestapo, the FBI, to treat you like Aaron Swartz.
Tomorrow sacrificed for today. Citizens worldwide are selling out their childrens' future and their grandchildrens' future because they can't be bothered to hold their governments and central bankers in check. Some citizens surely are repressed but others are just uninformed. I feel time is running out and the window is closing for those asleep to awaken. It's like a feather is drifting down toward triggering a tipping point when all hell will break lose. Then an updraft sends the feather momentarily back up. A reprieve, yet the danger remains. If the people do not awaken en mass before this metaphorical feather hits the trigger future generations will pay a heavy price. Who knows what event will shatter the calm before the storm. Something has got to give. We can't go on like this.
The most telling lie of the Central Bank Keynesian insanity is that they don't just send individuals tax free checks in the mail or put deposits into their checking accounts.
They would reply "that's crazy!", but it is no different - and more direct - than the "stimulus" they are supplying to the money houses and corporatocracy.
Things must have gotent a little distorted.
Ha! Tom Keene and Michael McKee (sp.?) are two of the BIGGEST Establishment Status Quo Propagandists! Have these automatons no Soul? Its sadly demoralizing to The Human Spirit to listen to such Corporatists Cheer Leading from 'Men' in a position of such influential outreach. If they ever reach an "Intelligent' Plane they will commit suicide to bring Justice to their profession...
Can't stand those two buffons