miércoles, mayo 18, 2016

VACACIONES MAYO 2016

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VACACIONES MAYO 2016

Jueves 28 de Abril del 2016

Queridos amigos,



Les escribo estas líneas con motivo de mi próximo viaje, el que me tendrá ausente de la oficina y de nuestras lecturas cotidianas, desde el lunes 2 hasta el lunes 23 de Mayo próximo, que me reintegro a mis labores.


Durante estos días no tendré acceso regular al Internet ni a mis correos.
  
  
En los últimos meses la situación económica y financiera internacional se ha seguido deteriorando aun mas, con el consiguiente aumento creciente de la volatilidad de los mercados financieros, según lo ya previsto en mi carta de Octubre pasado, replicada en algunos párrafos líneas más abajo para mayor abundancia, impactando duramente a los países emergentes, las monedas, el petróleo y los precios de los "commodities", el fortalecimiento notable del dólar norteamericano, típico de las épocas de crisis, y una retracción cada vez más marcada del crecimiento del producto mundial, ahora ya reconocido por todos los bancos centrales, lo que nos coloca claramente bajo la sombra del temor de una potencial deflación y de la recesión global, cada vez más inevitable.  
 
En los últimos dos meses el anuncio de una política de aumento de intereses menos agresiva que la anunciada previamente, por parte de la FED, ha debilitado ligera
y temporalmente al dólar, e impactado transitoriamente de manera positiva a los precios de las materias primas y los mercados de acciones.
 
La pregunta es cuanto tiempo puede durar esta situación en una economía global manipulada descaradamente por los bancos centrales y en franco camino de deterioro, con el continuo crecimiento de la desigualdad de los ingresos y una clase media cada vez mas disconforme, como lo reflejan las coyunturas políticas preocupantes de los últimos tiempos, tanto en los Estados Unidos de Norteamérica, como en Europa y el resto del mundo. La enorme volatilidad de los mercados financieros, que pensamos será cada vez mayor, es un síntoma de esta situación insostenible a mediano y largo plazo. 
El artículo de hace unos meses de Doug Nolan, "The Unwind", al que pueden acceder mediante el "link" anterior, describe claramente la situación precaria de la economía global, los mercados financieros, las deudas y el crecimiento económico mundial, por lo que me abstendré de mayores comentarios.  También pueden acceder al  articulo de Doug Nolan, "New World Disorder".  
 
La reciente creciente y notable volatilidad de los mercados financieros, las dudas hamletianas de la Reserva Federal sobre las tasas de interés y la reciente volatilidad de las bolsas, son solo una pequeña muestra de la descomposición de las economías y los mercados globales.

En realidad no podía ser de otra manera, si tenemos en cuenta que no se ha hecho nada en los últimos años para reparar los profundos desequilibrios estructurales en los fundamentos de la economía global, sino que más bien, por el contrario, se ha seguido "maquillando" por parte de los bancos centrales la insostenible situación económica y financiera global, profundizando los desequilibrios y la inestabilidad vía el constante crecimiento de las deudas, aumentando las ineficiencias y dilatando el necesario ajuste. El crecimiento estructural de la economía global es cada vez más frágil, dudoso e insostenible.


Hasta la crisis del 2000 y luego de la del 2008, ahora así llamada la Gran Recesión, la demanda global había sido “subvencionada” por un sistema financiero manipulado e intervenido, creando una demanda y una economía global ficticia, una recuperación así llamada "subprime", liderada por la FED mediante un crecimiento desproporcionado de las deudas, imposible de auto-sustentarse en un crecimiento de la economía real en el largo plazo. 


Deuda, deuda y más deuda, parece ser el mantra de la FED.

Desde entonces, la FED y el resto los bancos centrales de todos los países más importantes del mundo se han negado y se siguen negando a reconocer esta realidad, aceptando el inicio de un ajuste inevitable y estructural, regresando a un nivel real de la economía global de alguna manera manejable. Aún siguen abocados al esfuerzo de una gran represión financiera, manipulando e inflando irresponsablemente los mercados financieros vía una política monetaria de emisiones inorgánicas de papel moneda sin respaldo y muy bajas tasas de interés, o hasta tasas de interés negativas en muchos países del primer mundo. Actualmente se estima que existen aproximadamente 7 trillones de dólares de inversiones en tasas de interés negativas.

Las deudas de consumidores, empresas y gobiernos, eran y son insostenibles.

Por ello creemos que los bancos centrales no aumentarán de "motu propio" las tasas de interés de manera importante a corto plazo, salvo que este aumento provenga final y sorpresivamente de una crisis generada por la desaparición de la confianza de los inversionistas globales en los mercados financieros. Mas bien los bancos centrales seguirán, en la medida de lo necesario, con su política de seguir emitiendo e inyectando moneda sin respaldo a los mercados, bajando las tasas de interés a niveles aun mas negativos e interviniendo los mercados de capitales mediante compras de bonos y de acciones, distorsionando cada vez mas los precios de los activos financieros en todo el mundo.

Inmediatamente sus deudas se volverían obviamente impagables y la crisis que tanto han tratado de evitar reconocer, sobrevendría inevitable.

Solo para mencionar al país con la economía más importante, la deuda de los Estados Unidos de Norteamérica ha crecido por encima de los 18 trillones de dólares, a más del 100% de su PBI. Y si incluimos las deudas contingentes internas, como el Seguro Social y los Fondos de Pensiones, algunos analistas calculan que la deuda norteamericana podría llegar a sumar entre los 80 a 120 trillones de dólares, es decir, entre 5 a 7 veces el producto bruto anual. Y en aumento.

Para un análisis detallado del desarrollo de esta problemática y la verdadera situación actual, ver los artículos del blog, aquí, aquí y aquí.

Esta situación se ha seguido agravando en los últimos años y es insostenible en el mediano y largo plazo.  (ver articulo)

Para evitarlo, es que los bancos centrales han tenido que esforzarse en mantener ficticiamente una apariencia de normalidad en el "statu quo", inyectando cantidades innombrables de papel moneda sin respaldo a los mercados financieros y reducido las tasas de interés a niveles nunca vistos por largo tiempo, desde que la historia económica recuerda. (QE1, QE2, QE3, Q4, Abenomics, China, etc….)

Todo ello nos hace presumir que todo ello se lleva a cabo por el fundamentado temor a perder el control del esquema Ponzi mundial, que es lo que son ahora la economía global y los mercados financieros, y por ende se derrumbe el castillo de naipes enfrentando de golpe un ajuste económico enorme y hasta la posibilidad de una revolución social incontenible, guerras, etc.

El hecho es que el esfuerzo de política monetaria intervencionista llevada a cabo por la mayoría de los bancos centrales del mundo, en los últimos 15 años, más intensa y desproporcionadamente desde los últimos siete años, además, ha producido la transferencia más importante de riqueza que se recuerda en la historia, de manos de los pensionistas y los ahorristas, hacia las clases privilegiadas y los bancos. 

Mas importante todavía, se ha distorsionado y manipulado fundamentalmente las reglas de la economía del libre mercado con consecuencias funestas y aun impredecibles en el mediano y largo plazo para los consumidores e inversionistas del mundo, incrementando la locación  ineficiente de los recursos de inversión, además de multiplicar el costo de la inevitable implosión de los mercados financieros, tanto de las acciones, como de los bonos y otros instrumentos de inversión financiera.

Todo esto para no mencionar a los derivados financieros, estimados por algunos analistas en más de 1 cuatrillón de dólares (1000 trillones de dólares),  que se ciernen como una espada de Damocles, sobre todo el sistema financiero y económico internacional.

El mismo FMI ha advertido hace ya unos meses de la posibilidad que la economía global está entrando a un periodo de "stagnación" y a una probable nueva recesión, con las consecuencias que ello implicaría. (ver articulo) Y recientemente ha vuelto a reducir su estimado de crecimiento para la economía global de 3.6% a 3.2%. No nos extrañaría que estos estimados se sigan reduciendo en el futuro cercano, especialmente si tenemos noticias negativas del desarrollo de la economía China, en la que algunos analistas esta comenzando a prever un "hard landing" y de la enorme deuda interna de la economía China, influenciando negativamente de manera importante  a los mercados financieros globales.

Obviamente estos organismos no pueden decirnos toda la verdad. Ello sería propiciar ellos mismos el adelanto inevitable del descalabro global, el caos y el ajuste sin anestesia, con resultados imprevisibles. 

La pregunta de fondo es ¿hasta cuándo se podrá o podrán mantener esta realidad bizarra?
Y eso nadie lo puede responder con seguridad. La confianza de los inversionistas en los mercados financieros es la verdadera incógnita.

Por ello ahora tenemos que seguir preguntándonos seriamente, ¿Cuál de todos los potenciales "cisnes negros", conocidos o no, que hoy se ciernen sobre la economía global ,y que son muchos, económicos, sociales y geopolíticos, podrían ser el detonante de la nueva catástrofe?

Solo la historia nos responderá a esta crucial pregunta.


Por ahora, podemos especular que las próximas elecciones norteamericanas en Noviembre próximo son y serán un factor de gran importancia para el comportamiento de la FED, manipulando los mercados lo mejor posible, para influenciar de manera  positiva a la administración saliente, o dicho de otra manera, para evitar perjudicarla lo mayor posible, con un ajuste enorme y anticipado de las grandes incoherencias en la que se encuentra la economía norteamericana y la global como consecuencia de dichas intervenciones de los bancos centrales, en especial de la FED. 

Mientras tanto, en medio de este mundo bizarro, tenemos que insistir nuevamente y más que nunca, que la experiencia y la prudencia, el análisis y la inteligencia, la vigilancia y la paciencia, son los socios más importantes en las decisiones de políticas y estrategias de inversión a corto y mediano plazo.

En un cambio importante de ciclos como en el que pensamos que estamos envueltos hoy día, y en el que más allá de lo circunstancial, el pasado y el futuro se bifurcan y se oponen, los riesgos para los inversionistas son profundos. (ver articulo)

Con estas  anotaciones y advertencias que espero les sean de utilidad, me despido de Uds. con un cordial abrazo hasta el regreso a mis actividades, Dios mediante, a inicios de la tercera semana de Mayo próximo, cuando estaré nuevamente a su gentil disposición.

Gonzalo

PD. Para leer los artículos pueden subscribirse directamente entrando al blog:  www.gonzaloraffoinfonews.com


Rescue Helicopters for Stranded Economies

J. Bradford DeLong
. bank of england


BERKELEY – For countries where nominal interest rates are at or near zero, fiscal stimulus should be a no-brainer. As long as the interest rate at which a government borrows is less than the sum of inflation, labor-force growth, and labor-productivity growth, the amortization cost of extra liabilities will be negative. Meanwhile, the upside of extra spending could be significant.
 
The Keynesian fiscal multiplier for large industrial economies or for coordinated expansions is believed to be roughly two – meaning that an extra dollar of fiscal expansion would boost real GDP by about two dollars.
 
Some point to the risk that, once the economy recovers and interest rates rise, governments will fail to make the appropriate adjustments to fiscal policy. But this argument is specious.
 
Governments that wish to pursue bad policies will do so no matter what decisions are made today. And to the extent that this risk exists at all, it is offset by the very tangible economic benefits of stimulus: improved labor-force skills, higher business investment, faster business-model development, and new, useful infrastructure.
 
Aversion to fiscal expansion reflects raw ideology, not pragmatic considerations. Few competent economists have failed to conclude that the United States, Germany, and the United Kingdom have large enough fiscal multipliers, strong enough spillovers of infrastructure, investment, and other demand-boosting programs, and sufficient financial space to make substantially more expansionary policies optimal.
 
The question is not whether, but how much, fiscal stimulus is appropriate. Answering that should be a simple, technocratic cost-benefit calculation. And yet, in most countries that would benefit from fiscal stimulus, nothing is being done.
 
Faced with this, my former teacher and long-time colleague Barry Eichengreen has become positively alarmed: “The world economy is visibly sinking, and the policymakers who are supposed to be its stewards are tying themselves in knots.”
 
Germany’s experience with hyperinflation in the 1920s and its subsequent embrace of “ordoliberalism,” in which the government avoids interfering in the economy, has “rendered Germans allergic to macroeconomics,” Eichengreen writes. Similarly, in the US, deep-rooted suspicion of federal government power – especially in the South, where it was used to abolish slavery and enforce civil rights – has resulted in hostility to countercyclical macroeconomic policy.
 
“Ideological and political prejudices deeply rooted in history will have to be overcome to end the current stagnation,” Eichengreen concludes. “If an extended period of depressed growth following a crisis isn’t the right moment to challenge them, then when is?”
 
Sadly, this debate is no longer an intellectual discussion – if it ever was. As a result, a flanking move might be required. It is time for central banks to assume responsibility and implement “helicopter money,” putting cash directly into the hands of people who will spend it.
 
Proponents of austerity in Germany, the US, and the UK are suspicious of central banks for the same ideological reasons they are averse to deficit-spending legislatures. But their objections to central banks are far weaker. That is because, as David Glasner, an economist at the Federal Trade Commission, has pointed out, attempts to erect an automatic monetary system – whether based on the gold standard, Milton Friedman’s k-percent rule, or the Stanford University economist John Taylor’s “rules-based monetary policy” – have all crashed and burned spectacularly.
 
History has refuted the University of Chicago economist Henry Simons’s call for “rules rather than authorities” in monetary policy. The design task in monetary policy is not to construct rules but, instead, to establish authorities with sensible objectives, values, and technocratic competence.
 
The actions of central banks have always been “fiscal policy” in a very real sense, simply because their interventions alter the present value of future government principal and interest payments. But when it comes to promoting economic recovery, central banks can certainly do more. They have immense regulatory powers to require that the banks under their supervision hold capital, lend to classes of borrowers that have historically faced discrimination, and serve the communities in which they are embedded. And they have clever lawyers.
 
Helicopter money could take many forms. Its exact shape will depend on the legal structure of a given central bank, and on the extent to which its administrators are willing to take actions that go beyond their traditional authority (with the implicit or explicit promise that the rest of the government will turn a blind eye).
 
Success in rebooting the economy will depend on ensuring that the extra cash goes into the hands of those who are constrained in their spending by low incomes and a lack of collateral assets. And, as with governments engaged in fiscal stimulus, the key to a positive outcome will be to rule out even a smidgeon of fear that repayment obligations will become onerous in any way.
 
 
 


How Referenda Threaten the EU


Forecast

In the coming years, national governments, opposition groups and civil society organizations will increasingly turn to popular votes to decide a broad range of EU-related debates.

◾National governments will probably use referenda (or, more likely, the threat of them) to demand concessions from the European Union, to justify domestic decisions or to increase their own popularity.

◾Votes will take place against a backdrop of growing nationalism and fear of globalization, and the results will likely freeze or reverse the process of EU integration.

Analysis


Europe seems to be in a referendum frenzy these days. In early May, the Hungarian government confirmed its decision to hold a referendum on the European Commission's plan to distribute asylum seekers among member states. In April, Dutch citizens voted against the European Union Association Agreement with Ukraine in a referendum organized by a Euroskeptic organization. In June, the United Kingdom will hold a crucial vote on whether to leave the European Union altogether. The three votes have a common denominator: EU citizens are essentially being asked to decide on issues connected to the process of Continental integration.

Considering the European Union's political and economic predicament, referenda are a very attractive tool to win the loyalty of voters. The democratic legitimacy of the European Union is being questioned, and moderate governments and their Euroskeptic opposition alike are turning to the voters for their own political gain. In the coming years, referenda will be proposed by three main sources — national governments, opposition groups and civil society organizations — and they will touch upon a broad range of EU-related questions.

An Interesting Paradox


The European Union has a tempestuous history with referenda. European governments have made many crucial decisions affecting national sovereignty without consulting the populace. The founding members of the European Economic Community (the European Union's predecessor) did not hold referenda when the supranational organization was created in 1957. Four decades later, the initial members of the eurozone did not ask voters their opinion before creating the currency union. Only Denmark and Sweden held referenda on whether to enter the eurozone, and people voted not to join it. The United Kingdom, in turn, negotiated an opt-out with its EU peers.


When nations have consulted their citizens, the results have many times tended against European integration. The Irish initially voted against the treaties of Nice (2001) and Lisbon (2008), which transferred more power from the national government to EU institutions. In both cases, Dublin negotiated concessions from the European Union before holding second referenda, which resulted in favorable votes for the treaties. In Denmark the treaty of Maastricht, which created the European Union, required a second referendum to pass in 1993 after people voted against it a year earlier. Perhaps the most notorious EU referenda were held in France and the Netherlands in 2005, when people voted against a plan to establish an EU constitution. Such strong popular rejection in two founding EU members caused the bloc to abort the project.


Whether the European Union is democratically legitimate has been a matter of debate for decades. Aware that transferring national sovereignty to unelected technocrats in Brussels could alienate voters, national governments decided to enhance the role of the EU Parliament, the only international organization whose members are elected by universal suffrage. The idea was that, by giving the European Parliament a greater participation in the Continent's decision-making process, the European Union would become more democratic.


But Europe's economic and political crises have exacerbated the debate over the bloc's democratic legitimacy, and governments are becoming increasingly nationalistic in response. With its impending referendum on whether to stay in the union, the United Kingdom is the most extreme example of this trend. But other countries are likely to make similar demands in the future. The referendum issue poses an interesting paradox: Asking voters to weigh in on European issues seems to be the most democratic way to reform the European Union — an arguably undemocratic institution. But as is usually the case, things are not as simple as they initially seem, and the practice could in fact weaken the bloc beyond repair.

Layers of Complexity

On the surface, referenda are the most formidable tool of democracy, giving voters a direct say on political, economic and social issues. They allow people to re-engage with the political process and give governments a popular mandate for major decisions that require a broad consensus. This explains why referenda are often used to reform constitutions or to make decisions on socially and politically sensitive issues (such as abortion or the death penalty).

But critics of referenda argue that they force voters to make decisions on complex issues about which they may not have complete knowledge. Referenda tend to create the illusion that complex issues can be presented in simple terms; the vote is often reduced to a binary "yes" or "no" answer. Referenda are also intimately linked to domestic political situations. Many citizens and political parties tend to see referenda as a vote on the government rather than on the issue under discussion, and the outcome is often determined by the economic situation or the popularity of the government at the time.


The European supranational government creates an additional layer of complexity. EU-related issues tend to be harder for voters to understand than national issues, and voters tend to more closely identify with and care about national rather than supranational issues. This means that voters often decide on EU referenda according to domestic political and economic conditions. Many of the French votes against the European Constitution, for example, were actually a vote against former President Jacques Chirac. The same happens with elections for the EU parliament; most political parties tend to campaign on domestic issues rather than on European issues. Thus, European Parliament election results are widely perceived as a barometer of the popularity of national governments.


EU-related referenda are also complex because of their impact on decision-making in Europe. Treaties need to be ratified by all member states before they become take effect, which means that in those countries where referenda are needed to ratify a treaty (such as in Ireland and Denmark), the entire process could be stalled because of the decision of voters in a single country. This creates enormous uncertainty about the feasibility of passing treaties, but it also gives countries temporary albeit notable leverage to negotiate concessions when voters vote no. Denmark, for example, received several exemptions from EU requirements after people initially voted against the Maastricht Treaty.

A Powerful Negotiating Tool


To a large extent, the current spate of referenda in Europe is a result of the upcoming British vote. London proved that referenda can be used to extract concessions from Brussels, but it also that the process of Continental integration can be frozen or even reversed with a popular vote. In the coming years, governments will probably use referenda (or, more likely, the threat of referenda) to demand concessions from the European Union, to justify domestic decisions, or to increase their own popularity. The net result of this situation will be to further distance EU member states from the centralized core in Brussels.


Naturally, not every country is in the same position to make demands. In 2015 the Greek government used a referendum against austerity to pressure its lenders to soften the terms of its bailout agreement with little success. In Hungary's case, the government will use popular opposition to the relocation scheme to justify its rejection of the plan in Brussels and to improve its popularity at home. But Hungary's position will be stronger if it coordinates its actions with other like-minded countries in the region. Larger EU members may feel more tempted than their smaller peers to threaten referenda, since they can inflict more damage on the European Union.


Euroskeptic political parties will also use referenda as a part of their electoral campaigns. The leader of the nationalist Freedom Party of Austria recently said Austria should be "governed via referenda" as Switzerland is. France's National Front has promised to hold a vote on the country's EU membership if it wins the presidential election in 2017. Italy's Five Star Movement has said it would hold a referendum on the country's membership in the eurozone if elected. Considering that France and Italy are the second- and third-largest economies in the eurozone, respectively, such referenda could finally doom the European Union. Promising to put EU-related issues to a vote helps these parties to soften their image, because a referendum looks less threatening (and more democratic) than the promise of unilateral action. Finally, interest groups or nongovernmental organizations may try to push their agendas in a similar way. But their options are more limited; only a handful of EU members have mechanisms that allow for citizens to organize referenda.


In Italy, referenda organized by citizens are binding, but only if voter turnout is above 50 percent. Most of the citizen-backed referenda in the past two decades were declared void because of low voter turnout. In the Netherlands, the threshold for voter turnout is much lower (30 percent), but the referenda organized by the public are not binding. However, even non-binding votes can put governments in awkward situations. The Dutch government is currently looking for ways to honor its promise to respect the result of a referendum in which people asked The Hague not to sign an association agreement between the European Union and Ukraine. Countries such as Croatia, Lithuania and Hungary also have mechanisms that enable citizens to propose a referendum.


Some countries have other mechanisms of direct democracy. In Austria and Finland, for example, people can force their parliaments to discuss a certain topic if they collect enough signatures. In late April, the Finnish parliament held a debate on the country's membership in the eurozone after a group of citizens collected signatures to force the topic. While the debate was not binding, citizens sent their government a clear signal that they are worried about the effect of the common currency on the Finnish economy. These discussions can be particularly awkward when, like in Finland, a Euroskeptic party is actually a member of the government and has to find a balance between its political manifesto and its coalition commitments.

The Upcoming Votes


There are plenty of issues in Europe that could be decided by a referendum in the coming years. Though a new EU treaty is very unlikely in the current political environment, any attempts to modify the bloc's legal framework would trigger an avalanche of referenda across the Continent. Euroskeptic political parties and organizations in Southern Europe, as well as more moderate governments, could threaten to put their membership in the European Union or the eurozone to a vote so as to demand concessions from Brussels on varied topics, including fiscal targets and debt restructuring. Euroskeptic forces in Northern Europe could push for referenda to resist measures that undermine their national wealth.


Separatist movements in places such as Catalonia, Scotland and Flanders will continue to push for referenda for more autonomy or for outright independence. Regional or municipal governments can resist EU plans to allocate asylum seekers in their territories by putting the issue to a vote. Cyprus' Greek south and its Turkish north are once again negotiating to reunify the island, but any agreement will have to be ratified by both sides in a referendum. (In 2004, Greek Cypriots rejected a U.N.-backed plan in a referendum.)


Referenda can also affect international affairs beyond the European Union. Popular pressure could force governments in several EU nations to hold a referendum on trade agreements such as the Trans-Atlantic Trade and Investment Partnership. Countries like Finland and Sweden are unlikely to join NATO without a referendum, and Austria and Ireland are not planning to join the military alliance any time soon, but if they did, a referendum would be difficult to avoid.


These votes will probably be held against the backdrop of growing nationalism and fear of globalization. They will almost certainly be influenced by the political and economic situation at the time of the vote and will be subject to populist manipulation from both the organizers and their opponents (something true of most elections). The alleged attempts to solve the European Union's crisis of representation could therefore contribute to the bloc's weakening.



Welcome to Walmart and the BS 5% Unemployment Rate

Tony Sagami


“The United States of America right now has the strongest, most durable economy in the world.”

—President Obama, 2016 State of the Union

 
Washington, DC is pretty proud of the 5% unemployment rate, but there are millions of Americans who think the job market stinks. Come on! It’s not the number of jobs that matters… it’s what kind of jobs there are and how much they pay. And that’s why I’m calling BS on all the self-congratulations coming out of Washington, DC. Take a look at this:

The freshly released April nonfarm payroll report showed that the unemployment rate held steady at 5%. Yippie, right? Not really.


  • The labor force declined by 362,000, which means that 362,000 people decided to stop looking for work. There are a lot of reasons why someone would leave the labor force, but I think the #1 reason is the inability to find a decent-paying job.
     
  • The Bureau of Labor Statistics defines people not in the labor force (or NILF) as those people ages 16 and older who are neither employed nor have “made specific efforts to find employment sometime during the 4-week period ending with the reference week.” The NILF number increased by 562,000 in the last month to 94 million, the highest number EVER. Yes, out of 319 million Americans who are able to work, 94 million are not part of the labor force.
     
  • The labor force participation rate declined by 0.2% to 62.8%. Since 2008, this rate has dropped from a high of 67.3% to the current 62.6%... a 38-year low.
     
  • The employee population ratio for prime workers (ages 25 to 54) dropped to 77.7%. We’re talking about the prime age of your working life here, and this ratio has dropped from 80.3% 10 years ago, down to 77.7% today.
     
  • The job numbers for February were revised down by 12,000 to 233,000; March was revised down by 7,000 to 208,000.

The politicians are proud to point out that our economy created 160,000 new jobs in April… but that’s the fewest in seven months and less than the expected 200,000.

Moreover, most of those 160,000 new jobs were of the “Would you like fries with that, sir” variety.

  1. 38,200 were Healthcare/Social Assistance (aka Obamacare administrators)
     
  2. 22,000 were Leisure/Hospitality
     
  3. 9,300 were temporary jobs

And certain to raise the ire of Donald Trump supporters, non-US-born workers—both legal and illegal—are enjoying stronger job gains than native-born Americans, according to the Bureau of Labor Statistics. Here are the numbers:

The number of native-born Americans with a job is 125,615,000, and the number of non-native-born US residents (those residing in the United States but who were not US citizens at birth) hit 25,460,000. The BLS doesn’t break out the number of illegal versus legal residents, but I would bet my left arm that the number is significant.

Okay, here is the alarming part: since Obama became president, our economy has created 6.5 million new jobs for native-born Americans and 4.1 million new jobs for non-native Americans.

And I think it is very safe to assume that non-US-born workers—legal or illegal—generally don’t have extensive education and command of the English language and therefore have a disproportionate share of low-wage, low-skill jobs. My take is that this is just more proof that the jobs our economy is creating are crummy, low-paying jobs.

And even people that do have jobs are losing them. Outplacement firm Challenger, Gray & Christmas reported that US companies announced plans to lay off 65,141 workers in April, a 35% increase from March and the highest level since 2009!


In the first four months of 2016, total layoff announcements hit 250,061… the highest January-to-April total since 2009.

There are lots of reasons for the sluggish job growth, but I want to suggest that the Affordable Care Act (or Obamacare) is one of the prime culprits because the cost of providing health care is skyrocketing.


Worse yet, those already-expensive healthcare costs are about to get even more expensive. Oregon and Virginia are the first two states to disclose Obamacare premium proposals for 2017:

Ouch, That Hurts #1: Providence Health Plan, the largest Obamacare insurer in the Oregon Health Insurance Exchange, is seeking an average increase of 29.6%.

Ouch, That Hurts #2: Moda Health Plan wants to increase premiums by an average of 32.3% in Oregon. (Note: Rates went up 25% in 2015.)

Ouch, That Hurts #3: Kaiser Foundation Health Plan of the Northwest asked for an increase of 14.5%.

Ouch, That Hurts #4: Anthem Inc. is asking for an average increase of 15.8% in Virginia.

Ouch, That Hurts #5: CareFirst BlueCross BlueShield of Virginia is seeking a 25% increase.

Ouch, That Hurts #6: Aetna is going to raise premiums by a modest 6% in Virginia.

And don’t forget about UnitedHealth Group, which announced last month that it’s withdrawing from all but a handful of the 34 states where it was offering Obamacare plans because it’s experiencing huge losses.

To be fair, I should note that some parts of the job market are improving. For example, Walmart announced that it is increasing the number of greeters. These greeters will welcome arriving customers and answer questions.


Little noticed by the media, however, was the disclosure that these new Walmart greeters will also be checking the receipts of departing shoppers to cut down on shoplifting.

According to Fortune magazine, Walmart lost an estimated $3 billion to shoplifting in 2015 and has made reducing theft a key priority for 2016.

Yeah… the job market is great. NOT!

Last of all, GoBankingRates, a national website that tracks interest rates, reported that 28% of Americans have ZERO money in their savings account, 13% had less than $1,000, and 21% don’t even have a savings account.


 
“It’s worrisome that such a large percentage of Americans have so little set aside in a savings account. It suggests that they likely do not have cash reserves to cover an emergency and will have to rely on credit, friends and family, or even their retirement accounts to cover unexpected expenses,” said GoBankingRates.


Consensus Forming: China Heading Back Into Financial Crisis

By: John Rubino


China's historic post-2009 debt binge flew largely under the radar -- fooling most observers into thinking the global economy was recovering rather than just re-leveraging.

Now Beijing is back at it, borrowing over $1 trillion in this year's first quarter, buying up commodities and creating the illusion of global growth. But this time the scam hasn't gone unnoticed. Reporters, editors and money managers seem, at last, to be catching on. Some representative headlines:

Doug Noland, meanwhile, goes to the heart of the problem in last night's Credit Bubble Bulletin:
I recall an early-1998 Financial Times article highlighting the explosive growth in Russian ruble and bond derivatives. Not only had the "insurance" market for risk protection grown phenomenally, Russian banks had become major operators in what had evolved into a huge speculative Bubble in Russian debt exposures. That was never going to end well. 
There was ample evidence suggesting Russia was a house of cards. Yet underpinning this Bubble was the market perception that the West would not allow a Russian collapse. With such faith and the accompanying explosion in speculative trading, leverage and a resulting massive derivatives overhang, any break in confidence would lead to illiquidity, panic and a devastating bust. Just such an outcome unfolded in August/September 1998. 
From a recent Financial Times article: "The [Chinese] market for pledge-style repos -- short-term, bond-backed loans -- is currently bigger than the stock of outstanding debt". Within this undramatic sentence exists the potential for a rather dramatic global financial crisis. And, to be sure, seemingly the entire world has operated under the assumption that Chinese officials (and global policymakers in general) have zero tolerance for crisis - let alone a collapse. So Credit, speculation and leverage have been accommodated - and they combined to run absolute roughshod. 
The Financial Times article includes a chart worthy of color printing and thumbtacking to the wall: "China's Use of Bonds as Loan Collateral Rises Sharply". The pink line shows "Onshore Market Bonds" having almost doubled since mid-2011 to about 40 TN rmb ($6.17 TN). The Red Line - "Pledge-Style Repos" - has ballooned four-fold since just early 2014 to surpass 40 TN rmb. So basically, in this popular market for inter-bank borrowings, borrowing banks have pledged bond positions larger than the entire market as collateral for their (perceived safe) short-term borrowing needs. 
China's use of bonds as loan collatoral rises sharply
 
China has an historic Credit problem. It as well suffers from an unfolding "money" fiasco of epic proportions. My analytical framework attempts to differentiate the two, as each comes with its own set of (related) issues. A Credit Bubble is a self-reinforcing but inevitably unsustainable expansion of debt. Money (the contemporary variety) is a financial claim perceived as a safe and liquid "store of nominal value." Importantly, systemic risk expands exponentially when risky borrowings are financed by an expansion of "money-like" instruments/financial claims. This typically occurs late ("terminal phase") in the Credit Bubble Cycle.
If the critics of China's recent let-it-all-hang-out financial excess are right, a crisis of some sort is coming to a market near you. For instance, a fair bit of that Q1 $1 trillion went to boosting Chinese stockpiles -- and therefore the price of -- oil...

CLM16 Crude Oil WTI

...and other commodities like iron ore. From More iron ore price madness as China's mom-and-pops pile in:
On Friday the Northern China benchmark iron ore price jumped to $65.20 per dry metric tonne (62% Fe CFR Tianjin port) bringing gains since Wednesday to 7.8% as commodity investment fever grips Chinese investors. Last week iron ore hit a 16-month high following an 11% jump over just two trading days according to data supplied by The Steel Index. 
The steelmaking raw material has enjoyed a 52% rise in 2016 and a 76%-plus recovery from nine-year lows reached mid-December. On the Dalian Commodities Exchange the price swings are much wilder.

The wild west east
 
Despite a clampdown on rogue traders, higher margin requirements and trading fees, circuit breakers on Dalian iron ore futures to curb excessive price movement were triggered for the umpteenth time on Friday. That's despite the exchange in northeast China "temporarily" upping the daily price change limit to 6%. The most traded contract ended Friday at its highs, exchanging hands for 462 yuan or $71.40 a tonne, duly up 5.97% on the day.

Based on supply/demand fundamentals, oil and iron ore remain in massive gluts. So when China's stockpiling ends -- as it mathematically must -- these markets will lose a lot of their exuberance. The question then becomes, how many speculators will default on their loans, and what kind of banking trouble will ensue? That's unknowable, but it's safe to assume, given the numbers involved, that the rest of the world will find it distressing.

So think of today's relative calm as the eye of yet another storm, and what's coming as a return to the hyper-leveraged new normal.


Trump’s Dangerous America First Campaign

Yuriko Koike


TOKYO – Donald Trump’s loutish campaign for the US presidency has left most of the world – excluding, perhaps, Russian President Vladimir Putin and his European populist allies, like France’s Marine Le Pen – confused and aghast. Indeed, it is difficult for anyone to assess not only what Trump would do as President, but also which racial or religious minority, or foreign country, he holds in greatest contempt.
 
Name virtually any group or country, and you can bet Trump has insulted it. He has called Mexican immigrants to the US “criminals” and “rapists.” He has proposed banning all Muslims from entering the US. He has flung sexist invective at professional women, such as the political pundit Megyn Kelly, who have the temerity to stand up to him, and has called others “dogs” and “fat slobs.” He has sneered at America’s European and Asian allies, and blamed China for many of America’s economic woes.
 
But it seems that the people whom Trump holds in the greatest contempt are his own supporters. Instead of giving anything like a straight answer about the policies he would pursue were he actually elected, he has stoked and manipulated their inchoate rage, rooted in frustration with stagnant wages and fear of the unknown.
 
Japan has particular reason to be unsettled by “The Donald’s” incendiary rhetoric, which has the potential to do lasting damage. At one moment, he treats Japan as a freeloader, unnerving Japan’s citizens about the state of our core security alliance with the US. At the next, he says that he would not think twice about Japan (and South Korea) becoming a nuclear-weapon state, feeding fears that today’s arms race in Asia might escalate beyond conventional weapons.
 
Then he backpedals, claiming the words were fabricated by the media.
 
Under ordinary circumstances, the world could dismiss the ignorant rabble-rousing of a populist like Trump, whose campaign would remain a fringe affair. Yet Trump has so far captured the largest share of Republican Party primary voters. And, at this late date in the campaign, it seems highly improbable that the party will find its way back to sanity and produce a reasonable candidate for the election in November. In other words, Japan and the rest of the world ignore Trump at their own peril.
 
Republicans – indeed, all Americans – must understand the risks to global stability, and even peace, that could accompany a presidential campaign that becomes a Trump-produced spectacle of incendiary demagogy. And that could happen. Trump’s campaign is now managed by one of the most cynical – and most effective – operatives in the business: Paul Manafort, whose repackaging efforts in 2010 duped Ukrainians into thinking that Viktor Yanukovych, whom they eventually overthrew in a bloody revolution, was a democrat.
 
The impact in Japan, and across Asia, of Trump’s vision of a nuclear-armed Japan is a striking example of how his muddled jingoism can unsettle political discourse. Prime Minister Shinzo Abe has lately been undertaking modest reforms to Japan’s defense posture, aimed at ensuring that in the event of some regional crisis, Japan’s Self-Defense Forces could come to the aid of our allies – in particular, the US. Some Japanese, however, view the reforms with concern, fearing that the peaceful Japan of the last seven decades will suddenly revert to the militaristic Japan of the 1930s.
 
Trump’s inflammatory rhetoric has helped to take these fears to the next level, with some opponents of Abe’s defense reforms detecting, they believe, the germ of some secret conspiracy with the US to turn Japan into a nuclear-weapon state. Of course, such fear mongering will attract only the most gullible. But given the need to reassure the Japanese public that Abe’s reforms are truly what he says they are – that is, modest changes that will allow Japan to deepen its alliance ties – Trump’s intervention is the height of irresponsibility.
 
Beyond undermining core political alliances, Trump seems prepared to undo much of the progress that has been made in deepening America’s economic relationships, not only with Japan, but also with the rest of the world. Abe has taken enormous political risks at home in embracing the Trans-Pacific Partnership, aimed at building a rules-based order for trade and investment among a dozen countries on both sides of the Pacific. Other leaders, including US President Barack Obama, have done the same. Yet Trump seems willing to oppose that stance, in order to stoke voters’ anger and maintain their support.
 
Of course, the real question is how deeply held Trump’s ideas are among ordinary Americans.
 
Is it possible that a substantial bloc of Americans today really wants to pull up the drawbridges and embrace isolationism?
 
For Japan and other US allies, an isolationist America remains a distant prospect. But as we watch the United Kingdom prepare for its referendum on European Union membership, doubts begin to creep in. In Britain, a small-minded sector of the Conservative Party has played on almost the same sentiments as Trump to stoke political rage and turn “Brexit” into a real possibility. And, just as Trump has done to the Republicans, they have torn apart their own party – the party of Winston Churchill and Margaret Thatcher – in the process. With this in mind, it may be time to admit that America really could return to the "America First" isolationism of the 1930s, which Trump has just proclaimed as his goal.
 
America’s friends and allies around the world need to declare clearly, as Obama has done to the British people, that an isolationist policy characterized by contempt for others will only make peace and prosperity harder to achieve. In the US, Republicans like Senators John McCain and Lindsey Graham, who care deeply about America’s standing in the world, will have to put aside party loyalty in favor of love of country and refuse to back Trump (and perhaps the equally incendiary Ted Cruz) in a presidential race. If a Trump presidency does emerge, it will be a loss for the Republican Party, the US as a whole, and its allies.