Senate Approves Trump’s Tax Reform

The U. S. Senate on Saturday narrowly approved a tax reform, moving Republicans and President Donald Trump a big step closer to their goal of slashing taxes which will create an economic boom in the United States and draw-in capital from around the globe.
This will put tremendous pressure upon Europe, Canada, and even Japan which all tax their economies significantly to the suppression of economic growth. The United States will have the lowest unemployment rate if this passes compared to the lost generation in Europe of high unemployed youth.
Armstrong Economics

This post was published at Armstrong Economics on Dec 2, 2017.

Millennials Saved Thanksgiving Weekend

While online spending surged, the overall picture for Thanksgiving weekend spending was more mixed as the traditional ‘bricks and mortar’ retailers continued to struggle. Nevertheless, overall spending was about 4% higher. The National Retail Foundation (NRF) estimated that 174 million Americans shopped online or in stores over the period (Thursday to Monday), versus 164 million the previous year, although the latter excluded Cyber Monday. According to Bloomberg.
‘The big takeaway here is: Gone are the days you could measure the success of this weekend by looking at a single metric,’ NRF Chief Executive Officer Matthew Shay said on a conference call.
It’s also difficult to tell from the NRF data how e-commerce sales compared with brick-and-mortar shopping. But other surveys have indicated that physical chains saw smaller crowds this year. The research firm ShopperTrak found that shopper visits declined 1.6 percent combined on Thanksgiving and Black Friday.
Overall spending in the holiday season is expected to rise as much as 4 percent from last year, helped by low unemployment and rising home values. The purchases will amount to about $680 billion in November and December, the Washington-based NRF has estimated.

This post was published at Zero Hedge on Nov 29, 2017.

Labor Market Conundrum: Number Of Millennials Living At Home With Mom Continues To Surge

Nary a day goes by that President Trump and/or the talking heads on CNBC fail to mention the following unemployment chart as evidence that “everything is awesome” with the U. S. economy…
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…which might be true unless you’re among the 95 million-ish Americans who have been looking for a job for so long that you no longer even count as a human being to the Bureau of Labor Statistics…

This post was published at Zero Hedge on Nov 22, 2017.

Positive Feedback Loops, Financial Instability, & The Blind Spot Of Policymakers

‘Learn how to see. Realize that everything connects to everything else.’ – Leonardo da Vinci
A Dangerous Market Structure is More Worrying than Expensive Asset Valuations and Record Debt Levels
Macro-prudential regulations follow financial crises, rarely do they precede one. Even when evidence is abundant of systemic risks building up, as is today, regulators and policymakers have a marked tendency to turn an institutional blind eye, hoping for imbalances to fizzle out on their own – at least beyond the duration of their mandates. It does not work differently in economics than it does for politics, where short-termism drives the agenda, oftentimes at the expenses of either the next government, the broader population or the next generation.
It does not work differently in the business world either, where corporate actions are selected based on the immediate gratification of shareholders, which means pleasing them at the next round of earnings, often at the expenses of long-term planning and at times exposing the company itself to disruption threats from up-and-comers.
Long-term vision does not pay; it barely shows up in the incentive schemes laid out for most professions. Economics is no exception. Orthodoxy and stillness preserve the status quo, and the advantages hard earned by the few who rose from the ranks of the establishment beforehand.
Yet, when it comes to Central Banking, and more in general policymaking, financial stability should top the priority list. It honorably shows up in the utility function, together with price stability and employment, but is not pursued nearly as actively as them. Central planning and interventionism is no anathema when it comes to target the decimals of unemployment or consumer prices, yet is residual when it comes to master systemic risks, relegated to the camp of ex-post macro-prudential regulation. This is all the more surprising as we know all too well how badly a deep unsettlement of financial markets can reverberate across the real economy, possibly leading into recessions, unemployment, un-anchoring of inflation expectations and durable disruption to consumer patterns. There is no shortage of reminders for that in the history books, looking at the fallout of dee dives in markets in 1929, 2000 and 2007, amongst others.

This post was published at Zero Hedge on Nov 22, 2017.

Hayek on Good and Bad Unemployment Policies

In 1944 Professor Hayek emphasised that sustainable employment de pends on an appropriate distribution of labour among the different lines of production. This distribution must change as circumstances change. Sustain able employment thus depends on appropriate changes in relative real wage-rates. If established producers – both unions and capitalists – prevent such relative changes from becoming effective, there follows an unnecessary rise in unemployment. Sustainable employment now depends on successfully tackling these established labour and capital monopolies. – Sudha R. Shenoy
One of the obstacles to a successful employment policy is, paradoxically enough, that it is so comparatively easy quickly to reduce unemployment, or even almost to extinguish it, for the time being. There is always ready at hand a way of rapidly bringing large numbers of people back to the kind of employment they are used to, at no greater immediate cost than the printing and spending of a few extra millions. In countries with a disturbed monetary history this has long been known, but it has not made the remedy much more popular. In England the recent discovery of this drug has produced a somewhat intoxicating effect; and the present tendency to place exclusive reliance on its use is not without danger.
Though monetary expansion can afford quick relief, it can produce a lasting cure only to a limited extent. Few people will deny that monetary policy can successfully counteract the deflationary spiral into which every minor decline of activity tends to degenerate. This does not mean, however, that it is desirable that we should normally strain the instrument of monetary expansion to create the maximum amount of employment which it can produce in the short run. The trouble with such a policy is that it would be almost certain to aggravate the more fundamental or structural causes of unemployment and leave us in the end in a position worse than that from which we started.

This post was published at Ludwig von Mises Institute on 11/16/2017.

Can’t Hide From The CPI

This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
On the vital matter of missing symmetry, consumer price indices across the world keep suggesting there remains none. Recoveries were called ‘V’ shaped for a reason. Any economy knocked down would be as intense in getting back up, normal cyclical forces creating momentum for that to (only) happen.
In the context of the past three years, symmetry is still nowhere to be found. It’s confounding even central bankers who up until all this have been especially immune to contrary evidence. The unemployment rate tells them what they want, so everything else be damned.
The US CPI in October 2017 rose 2.04% above the index for October 2016. That’s a slight deceleration from 2.23% inflation in September, despite another energy price boost.

This post was published at Wall Street Examiner on November 15, 2017.

The Fed’s Bubblenomics

The Following is adapted from a preface to a new report by Murray Sabrin, featured in his November 15 presentation, “Bubblenomics” at Ramapo College.] If you Google ‘dot com bubble,’ you will get nearly 1.2 million hits, and 3.3 million hits if you Google ‘tech bubble.’ A Google search of ‘housing bubble’ will return nearly 11 million hits. (The searches were conducted on March 29, 2017). And if you search Amazon books for financial crisis 2008 you will get more than 1200 hits.
Given all the books, monographs, essays, articles, and editorials that have been written about back-to-back bubbles that occurred within two decades, one would think there would be nothing else to write about.
The purpose of this book is to present to the general public, my fellow academicians and policymakers with an brief account and review of one of the most turbulent periods in United States history without the usual jargon academics are noted for.
As the two quotes from the Federal Reserve’s website above reveal, the Fed has been given the responsibility by the Congress of the United States to essentially promote sustainable prosperity, stabilize prices and maximize employment. During the past 100 years of the Federal Reserve’s operations, the economy has grown substantially (see Figure 1 for data since 1929), but the path to higher living standards have been interrupted by depressions/ recessions, a few bouts with double-digit price inflation and occasionally widespread unemployment. Although the Congress has expected the Federal Reserve to be a wise and prescient ‘helmsman,’ navigating the economy from becoming overheated or plunging into a recession or worse, the Fed’s track record belies its mandates.

This post was published at Ludwig von Mises Institute on 11/15/2017.

Looking For Inflation In All The Wrong Places

A policeman sees a drunk man searching for something under a streetlight and asks what the drunk has lost. He says he lost his keys and they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the drunk replies, no, and that he lost them in the park. The policeman asks why he is searching here, and the drunk replies, ‘this is where the light is’. – The Streetlight Effect
The drunk in the above story is an idiot, of course. But no more so than modern economists who can’t find inflation because they’re looking only at the part of the economy covered by their government’s Consumer Price Index.
But gradually, grudgingly, a handful of mainstream economists do seem to be figuring out that the soaring value of stocks, bonds, real estate, fine art, collectibles and cryptocurrencies is a legitimate sign of a depreciating currency and future instability. Inflation, in other words. From yesterday’s Morningstar:
Lack of inflation is a global issue
(Morningstar) – The lack of inflation is a global issue. Unemployment is at cyclical lows in the US, Germany, and Japan, yet in each of these countries there is only small evidence that wages are picking up. No doubt globalisation and technology are common factors that have helped constrain wages across countries.

This post was published at DollarCollapse on NOVEMBER 14, 2017.

U.K. Litigation Cases On Defaulted Consumer Debts Soar Beyond 2008 Levels

Last month, S&P warned that UK lenders could incur 30 billion of losses on their consumer lending portfolios consisting of credit cards, personal and auto loans if interest rates and unemployment rose sharply. Much like in the U. S., S&P warned that “loose monetary policy, cheap central bank term funding schemes and benign economic conditions” had fueled an “unsustainable” yet massive expansion of consumer credit that will inevitably end badly. Per The Guardian:
The rapid rise in UK consumer debt to 200bn from car finance, personal loans and credit cards is unsustainable at current growth rates and should raise ‘red flags’ for the major lenders, ratings agency Standard & Poor’s has warned.
In detailed analysis of the sector, S&P warned that losses from this form of lending suffered by banks and other financial institutions could be ‘sharp and very sudden’ in an economic downturn and may be exacerbated if the Bank of England increased interest rates.
It also warned that it could downgrade banks’ credit ratings if the high growth rate persisted or banks took on too much risk in this sector. But it did not fear any system-wide impact from consumer credit.
‘Loose monetary policy, cheap central bank term funding schemes and benign economic conditions have supported consumer credit supply and demand,’ S&P said.
Annual growth rates in UK consumer credit of 10% a year have outpaced household income growth, which is closer to 2%, and become a focus for the Bank which is scrutinising lenders’ approach to the sector.
‘We believe the double-digit annual growth rate in UK consumer credit would be unsustainable if it continued at the same pace,’ S&P said.

This post was published at Zero Hedge on Nov 14, 2017.

A new record yet again: 95,385,000 Americans not in labor force. The army of non-working Americans continues to grow.

We continue to live in a country with two very different stories to tell. In one of the stories, we have a country with a very low unemployment rate and a record in the stock market. In the other story we live in a place where 95,385,000 Americans are not in the labor force. This new record was reached in the latest set of data released by the Bureau of Labor and Statistics (BLS). This is a bigger issue than most would like to admit. Many older Americans are drawing substantially from the government and we now have a younger American population working in low wage positions. This is a new record that isn’t something to be proud about.
Another record of those not in the labor force
The number of Americans not in the labor force is troubling when you dig deep into the data. Part of this is being governed by Americans retiring but millions of these people are falling into this category for harder to characterize reasons.

This post was published at MyBudget360 on Nov 11, 2017.

The Ponzi scheme that’s more than 100x the size of Bernie Madoff

By January 1920, much of Europe was in total chaos following the end of the first World War.
Unemployment soared and steep inflation was setting in across Spain, Italy, Germany, etc.
But an Italian-American businessman who was living in Boston noticed a unique opportunity amid all of that devastation.
He realized that he could buy pre-paid international postage coupons in Europe at dirt-cheap prices, and then resell them in the United States at a hefty profit.
After pitching the idea to a few investors, he raised a total of $1,800 and formed a new company that month – the Securities Exchange Company.
Early investors were rewarded handsomely; within a month they had already received a large return on investment.
Word began to spread, and soon money came pouring in from dozens, then hundreds of other investors.

This post was published at Sovereign Man on November 10, 2017.

November Macro Update: Recession Risk Remains Low

Summary: The macro data from the past month continues to mostly point to positive growth. On balance, the evidence suggests the imminent onset of a recession is unlikely.
The bond market agrees with the macro data. The yield curve has ‘inverted’ (10-year yields less than 2-year yields) ahead of every recession in the past 40 years (arrows). The lag between inversion and the start of the next recession has been long: at least a year and in several instances as long as 2-3 years. On this basis, the current expansion will last well into 2018 at a minimum. Enlarge any image by clicking on it.
You may also like Bitcoin, Real Estate, and FAANG Stocks – Investment Manager Compiles List of World’s Largest Bubbles

Unemployment claims are also in a declining trend; historically, claims have started to rise at least 6 months ahead of the next recession. Note that recent hurricanes had a short-term negative impact on economic data. In the past, growth has quickly resumed. Thus, jobless claims recently spiked higher after Harvey/Irma, as it also did after Katrina and Sandy, but recent claims are already at a new 40+ year low.

This post was published at FinancialSense on 11/10/2017.

Global Labor and Capacity

Many forecasters, in and out of government, see severe limits to US economic growth in coming years and an inflation threat even sooner. A tight labor market, they claim, is the key reason.
Fed’s Forecast
The Fed is thoroughly convinced that the headline unemployment rate, now 4.2%, is so low that it will soon spawn significant wage inflation that, if left unchecked, will spread throughout the economy. The central bankers fervently believe in the theoretical Phillips Curve that holds that the lower the unemployment rate, the higher the inflation rate. They seem oblivious to the reality that both the unemployment rate and inflation have been falling in recent years.
Nevertheless, the Fed and others see the rising number of job openings while the hiring rate remains flat as clear evidence of a tight job market. In contrast, we continue to believe that employers remain cautious over new hires as they fret about not being able to pass on their additional costs in higher prices.

This post was published at FinancialSense on 11/08/2017.

“Homeless Explosion”: Tech Boom, Surging Rents Creating Homeless Crisis On America’s West Coast

America’s liberal left coast states count themselves among the most adamant supporters of controversial pieces of legislation intended to support low-income families. From their stunningly high income tax rates to their $15 minimum wage mandates, states like California and Washington are leading the charge on implementing Bernie’s socialist agenda.
Of course, some of the biggest advocates of that socialist agenda are the billionaire leaders of Silicon Valley’s largest tech companies…which is precisely why it’s so ironic that it’s the “tech boom” being enjoyed by those billionaires that has resulted in surging housing prices and what SFGate described earlier today as a “homeless explosion pushing West Coast cities to the brink.”
Housing prices are soaring here thanks to the tech industry, but the boom comes with a consequence: A surge in homelessness marked by 400 unauthorized tent camps in parks, under bridges, on freeway medians and along busy sidewalks. The liberal city is trying to figure out what to do.
“I’ve got economically zero unemployment in my city, and I’ve got thousands of homeless people that actually are working and just can’t afford housing,” said Seattle City Councilman Mike O’Brien. “There’s nowhere for these folks to move to.”

This post was published at Zero Hedge on Nov 6, 2017.

7/11/17: To Fine Gael or not: Employment Stats and Labour Force

Recently, Fine Gael party PR machine promoted as a core economic policy achievement since 2011 election the dramatic reduction in Ireland’s unemployment rate. And in fact, they are correct to both, highlight the strong performance of the Irish economy in this area and take (some) credit for it. The FG-led governments of the recent years have been quite positive in terms of their policies supporting (or at least not hampering) jobs creation by the MNCs. Of course, they deserve no accolades for jobs creation by the SMEs (which were effectively turned into cash cows for local and central governments in the absence of any government power over taxing MNCs), nor do they deserve any credit for the significant help in creating MNCs’ jobs that Ireland got from abroad.
Now, to briefly explain what I mean by it: several key external factors helped stimulate MNCs-led new jobs creation in Ireland. Let me name a few.
ECB. By unleashing a massive QE campaign, Mario Draghi effectively underwritten solvency of the Irish State overnight. Which means that Dublin could continue avoiding collecting taxes due from the MNCs. And better, Mr Draghi’s policies also created a massive carry trade pipeline for MNCs converting earnings into corporate debt in Euro area markets. The combined effect of the QE has been a boom in ‘investment’ into Ireland, and with it, a boom of jobs. OECD. That’s right, by initiating the BEPS corporation tax reform process, the arch-nemesis of Irish tax optimisers turned out to be their arch blesser. OECD devised a system of taxation that at least partially, and at least in theory, assesses tax burdens due on individual corporations in relation physical tangible activities these corporations carry out in each OECD country. Tangible physical activity can involve physical capital investment (hence U. S. MNCs rapidly swallowing up new and old buildings in Ireland, that’s right – a new tax offset), an intangible Intellectual Property ‘capital’ (yep, all hail the Glorious Knowledge Development Box), and… err… employment (that is why Facebook et al are rushing to shift more young Spaniards and Portuguese, French and Dutch, Ukrainians and Italians, Poles and Swedes… into Dublin, despite the fact they have no where to live in the city).

This post was published at True Economics on Tuesday, November 7, 2017.

Nothing Really Matters, Anyone Can See

The US labor force is rapidly shrinking. Wage growth is non-existent. The vast majority of the American people have no savings and little hope for economic improvement. But none of that matters with the G-3 central banks in charge!
So today saw the latest installment of the BLSBS. If you check your “mainstream” sources, you;ll be led to believe that everything is great and getting even better!
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But look under the hood and you see that this is all bullshit. The unemployment rate that Drudge blares on behalf of Trump is only at its “lowest since 2000” because October saw an astonishing 968,000 people leave the labor force. This leaves the total number of people NOT in the labor force at a record 95,385,000. Then, as ZH notes, “this took place as the number of employed Americans declined by 484,000, however since the unemployment rate denominator dropped more, it translated into an actual decline in the unemployment rate!” Read all about it here:

This post was published at TF Metals Report on Friday, November 3, 2017.

Yellen’s Poor Legacy – and Powell’s Challenges

The appointment of Jerome Powell as the new chair of the Federal Reserve must be interpreted by the markets as a sign of continuity. He is not the hawk that many market participants feared and neither holds a dovish and dangerous stance.
Yellen’s mandate has been widely criticized by many investors and economists. She inherited an economy where unemployment was at the Fed’s target levels, inflation was picking up and growth was strengthening, and yet she unnecessarily delayed raising rates and reducing the balance sheet for too long. The president’s confidence, despite nice words, was broken for months. The Trump team criticized the Federal Reserve for delaying the announced rate hikes ahead of the elections, but criticism intensified when Yellen raised cautionary messages about the economy after the nomination. Considered an ‘acknowledged dove’, she was criticized for delaying much-needed rate hikes, despite markets at all-time highs, yields at multi-decade lows, inflation rising and unemployment at 5%, and some hinted this was an ‘order’ from the Obama administration. Now that we see that the latest figures show a growth of 3% of the US economy, the critical voices have increased, accusing the now ex-president of the Federal Reserve of being unnecessarily dovish, ignoring the mounting risks in financial markets and not getting the diagnosis right.

This post was published at Ludwig von Mises Institute on Nov 3, 2017.

Employment: The Cooked Books of SCAmerica

The Bureau of Lies and Scams vomited forth:
Total nonfarm payroll employment rose by 261,000 in October, and the unemployment rate edged down to 4.1 percent, the U. S. Bureau of Labor Statistics reported today. Employment in food services and drinking places increased sharply, mostly offsetting a decline in September that largely reflected the impact of Hurricanes Irma and Harvey. In October, job gains also occurred in professional and business services, manufacturing, and health care.
Suuuure it did.
From the household survey (which is reported from an actual survey of real people) the employment:population ratio declined three ticks to 60.2%. This put us back to approximately April or, if you prefer, last July (2016, not 2017, which was 60.1%.)

This post was published at Market-Ticker on 2017-11-03.

Goldman’s Clients Are Becoming Increasingly Schizophrenic

Last weekend, Goldman’s clients were nervous: after 16 months without a 5% pullback in stocks, they were afraid that a steep correction could take place at any moment.
Today, they are just as afraid, but have no choice other than to remain invested and buy every dip, or as Goldman’s credit analyst Charles Himmelberg writes, “they characterize themselves as ‘reluctant bulls’, a view for which we have a lot of sympathy. While valuations are stretched, growth is strong and none of the major sectors in the US economy show much sign of critical imbalances that might lead to recession.”
Rereading that sentence, “reluctant bulls” is probably not the best designation because when it comes to trading decisions Goldman clients are becoming “schizophrenic”, and with reason: as Himmelberg explains there are reason to be both bullish and bearish. First, the generic reasons behind the endless “risk on”:
In favor of continued ‘risk on’ positioning, none of the major sectors in the US economy show much sign of critical imbalances. Indeed, the balance sheets of US households have been de-levering, and the stance of fiscal policy appears more likely to ease than to tighten from here. Corporate balance sheets have deteriorated, but interest coverage ratios remain comfortable and highly sustainable assuming the economy avoids recession. Even in the labor market, where the unemployment rate of 4.2% has arguably already fallen below its long-run sustainable level, wage growth is still well below an obviously unsustainable level.

This post was published at Zero Hedge on Nov 2, 2017.

Greece Is Planning a EU30 Billion Debt-Swap Exercise As Greek 10Y Yield Hits Lowest Level Since 2009 (Unemployment Still Over 20%)

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
Now that the drama over The Fed Chair selection is over, we can focus of other earthly matters, like Greece sovereign debt restructuring.
(Bloomberg) – The Greek government is planning an unprecedented debt swap worth 29.7 billion euros ($34.5 billion) aimed at boosting the liquidity of its paper and easing the sale of new bonds in the future.
Under a project that could be launched in mid November, the government plans to swap 20 bonds issued after a restructuring of Greek debt held by private investors in 2012 with as many as five new fixed-coupon bonds, according to two senior bankers with knowledge of the swap plan. The bank officials requested anonymity as the plan has yet to be made public. The maturities of the new bonds may be the same as for the existing notes, which range from 2023 to 2042.
‘The move aims to address the current illiquidity of the Greek bond market,’ according to analysts at Pantelakis Securities SA in Athens. It will also ‘establish a decent yield curve, thus facilitating the country’s return to public debt markets.’

This post was published at Wall Street Examiner on November 2, 2017.