Unemployment

Unleash the lawyers, um, ... soccer players.

We have a "let's pretend" economy: let's pretend the unemployment rate actually reflects the number of people with full-time jobs and the number of people seeking jobs, let's pretend the Federal government borrowing 10% of the GDP every year is sustainable without any consequences, let's pretend the stock market actually reflects the economy rather than Federal Reserve monetary intervention, and so on. We also have a "let's pretend" education/student-loan game running: let's pretend college is "worth" the investment, and let's pretend student loans are about education. There are three dirty little secrets buried under the education/student-loan complex's high-gloss sheen: 1. Student loans have little to do with education and everything to do with creating a new profit center for subprime-type lenders guaranteed by the Savior State. 2. A college diploma's value in the real world of getting a job and earning a good salary in a post-financialization economy has been grossly oversold. 3. Many people are taking out student loans just to live; the loans are essentially a form of "State funding" a.k.a. welfare that must be paid back. We've got a lot of charts that reflect reality rather than hype, so let's get started. Despite all the bleating rationalizations issued by the Education Complex, higher education costs have outstripped the rest of the economy's cost structure. Funny how nobody ever asks if there is any real competitive pressure in the Education Complex; there isn't, and why should there be when students can borrow $30,000 a year?

The traditionally C-grade, and very noisy ADP number, has printed at a 216K private payrolls added, on expectations of 215K, or precisely in line, even as the January print was revised modestly higher from 170K to 173K. Of course, since the track record of the ADP as a NFP predictor is absolutely atrocious, and when one adds that the ADP had its annual revision take place today, this number is all about seasonal adjustments as was the BLS January print. What was amusing is that not only were finance jobs added (+14k), but so were manufacturing (+14K) and construction (+16K) jobs.

• Key rate for $350 trillion market in limbo - Libor Links Deleted as U.K. Bank Group Backs Away From Rate (Bloomberg)
• Rift Grows Between Germany's Bundesbank and ECB (Spiegel)
• Athens issues threat to bond holdouts (FT)
• SNB to Reveal Board Members’ Currency Transactions After Hildebrand Furor (Bloomberg)
• Sarkozy Floats New Corporate Tax (WSJ)
• Super Tuesday Ensures a GOP War of Attrition (WSJ)
• Martin Wolf - The pain in Spain will test the euro (FT)
• Refinancing Fees Are Reduced for Some F.H.A. Borrowers (NYT)

All you need to read.

German leaders, particularly Merkel and Schäuble see the writing on the political wall: that both Greece and France are likely going to find themselves with new leadership that is pro-socialism, anti-austerity measures, and most certainly anti-taking orders from Germany. Thus, Germany must be aware (as the EU, IMF, and ECB are to some degree) that it is ultimately fighting a losing battle by participating in the bailouts. Indeed, Schäuble even went so far as to recently call Greece a “bottomless pit” where money is wasted (having just participated in Greek bailouts that exceed the entirety of Greece’s GDP, I have to admit he does have a point here). So while a “deal” may have officially been struck for Greece, there are deep underlying tensions that could bring proceedings to a crashing halt at any point.

The most profitable business of the future will be producing Space Available and For Lease signs. Betting on the intelligence of the American consumer has been a losing bet for decades. They will continue to swipe that credit card at the local 7-11 to buy those Funions, jalapeno cheese stuffed pretzels with a side of cheese dipping sauce, cartons of smokes, and 32 ounce Big Gulps of Mountain Dew until the message on the credit card machine comes back DENIED.  There will be crescendo of consequences as these stores are closed down. The rotting hulks of thousands of Sears and Kmarts will slowly decay; blighting the suburban landscape and beckoning criminals and the homeless. Retailers will be forced to lay-off hundreds of thousands of workers. Property taxes paid to local governments will dry up, resulting in worsening budget deficits. Sales taxes paid to state governments will plummet, forcing more government cutbacks and higher taxes. Mall owners and real estate developers will see their rental income dissipate. They will then proceed to default on their loans. Bankers will be stuck with billions in loan losses, at least until they are able to shift them to the American taxpayer – again.

Some of these 15 swans are blacker than others....

The Chinese population is beginning to realize that the Government is losing control. People are willing to go along with a regime as long as they can “get by” under it. But as soon as it becomes impossible to survive… then situations like Wukan happen. There will be a LOT of Wukans in the coming months and years in China. Whether it’s by inflation or an economic contraction brought about by Europe’s collapse (Europe is China’s largest trading partner), civil unrest and “mass incidents” will be on the rise in the People’s Republic as the Chinese realize that the current system and the supposed wealth it will create for them are in fact a giant fraud.

Markets are exhibiting very risk-averse behaviour ahead of the US open, with European equity markets making heavy losses across the board with flows into the safer assets. This follows Greece dominating the headlines once again, with a report from the IIF warning of dangerous ramifications for Europe should Greece default. These reports got the European session off to a bad start, with losses made throughout the morning. Market talk of a delay in the Greek debt swap deal deadline has also been circulating, however this was swiftly denied by the Greek Debt Agency chief as well as the Greek Finance Ministry, although this failed to reassure markets and they continue on a downward trend into the US open. Eurozone GDP data released earlier in the session showed a contraction in the last quarter of 2011, although expected, this has reignited concerns of a recession in Europe. The ECB have recorded yet another record level of deposits from European banks in its overnight lending facility, with institutions depositing EUR 827.5bln on Monday night.

Spain is next...

All you need to read.

Today's news focuses on UI benefits and the PVV's euro exit report

Newsflash: the Fed controls the economy. It's working on financial markets. Former Fed official and Treasury put-master Vincent Reinhart, who is now the chief U.S. economist at Morgan Stanley, says the only way QE3 doesn't happen is "if the economy surges or equity investors continue to embrace risk," in which case "the Fed would cheerfully keep its plans on the shelf." The only problem is it looks like we just had the "surge" and it didn't seem to impress the Federal Reserve, and every time they try to exit a buying program, the market tanks.

And now for some pure irony, we have a member of the Fed, granted a gold bug, but a Fed member nonetheless, one of the same people who not only enacted ZIRP, but encourage easy money every time there is a downtick in the market, complaining about, get this, Wall Street's "continued preoccupation, bordering upon fetish" with QE3. The irony continues: "Trillions of dollars are lying fallow, not being employed in the real economy. Yet financial market operators keep looking and hoping for more. Why? I think it may be because they have become hooked on the monetary morphine we provided when we performed massive reconstructive surgery, rescuing the economy from the Financial Panic of 2008–09, and then kept the medication in the financial bloodstream to ensure recovery....I believe adding to the accommodative doses we have applied rather than beginning to wean the patient might be the equivalent of medical malpractice." So let's get this straight: these academic titans, who for one reason or another, are given free rein to determine the fate of the once free world with their secret decisions every two or three months, are completely unaware of classical conditioning, discovered by Pavlov nearly 90 years ago, also known as a salivation response. The same Fed is shocked, shocked, that every time the market dips, the red light goes off, and the "balls to the wall" crowd scream for more, more, more free money. Really Fisher? Really? Oh, and let us guess what happens the next time the S&P slides into the tripple digits: will the Fed a) do nothing, thereby letting the market slide to its fair value in the 400 point range, or b) print. Our money, in the form of hard yellow metal, is on the latter, just like we predicted, correctly, back in March 2009 in " Bailoutspotting (Or The Search For The Great Financial Methadone Clinic" that nothing will ever change vis-a-vis the great market junkie until it all comes crashing down.