The economics behind the bull and bear case

[explod]

And from Michael Panzer's webpage today, seems a lot of people think the Wall Street numbers are skewed. Anecdotal maybe but a groundswell of opinion from the coalface building up.

How you view today’s jobs report depends on snow.

Coming into today, many economists believed that last month’s storms on the East Coast ”” which occurred right before the Labor Department conducted its monthly jobs survey ”” would temporarily reduce employment by a significant amount. Macroeconomic Advisers, a well-regarded research firm in St. Louis, thought the effect would be between 150,000 and 220,000 jobs lost. Those jobs effectively would have disappeared in February and largely returned in March.

If the storms indeed had a big effect ”” if they cut even 100,000 jobs from payrolls ”” then today’s report counts as very good news. The economy lost only 36,000 jobs last month, far fewer than forecasters expected. That number is based on the monthly survey of businesses.

The monthly survey of households, which allows the Labor Department to calculate the unemployment rate, was even more update. The unemployment rate held steady, and the overall percentage of adults with jobs ”” which does not distinguish between officially and unofficially unemployed ”” rose slightly. All this suggests that the job market may be continuing to improve and that next month’s jobs report is likely to look very good.

But that’s not the only plausible reading of the report. It’s also possible that economists vastly overestimated the snow effect. It’s even possible the snow effect was close to zero. Here is what the Labor Department said in its report today:

In order for severe weather conditions to reduce the estimate of payroll employment, employees have to be off work for an entire pay period and not be paid for the time missed. About half of all workers in the payroll survey have a 2-week, semimonthly, or monthly pay period. Workers who received pay for any part of the reference pay period, even one hour, are counted in the February payroll employment figures. While some persons may have been off payrolls during the survey reference period, some industries, such as those dealing with cleanup and repair activities, may have added workers.

 

[explod]

Thanks for the reply UF

I agree with you in that things have been more deflationary than anything else of late, hence my questions to explod about us being at risk of hyperinflation.

And now getting back to the question. As U/F pointed out and as indicated by pundits quoted here today, the real state of affairs is very difficult to determine.

Someone above spoke of the 30% increase in rice, my wife confirms that also. Saw on our local TV through the week on meat in Australia, beef up 20% in the last 3 months, lamb up 9% in the same period but due to tightening supply expected to increase a great deal more during the year.

However in clarification, when I think about inflation I am on about the losing value of paper money. The big demonstration of this is the rising price of gold against currencies. This week we again saw record gold prices against the Pound Stirling and the Euro. And an increase up against the Aussie and US$. We know that the US is printing money and via a back door buying their own bonds to keep it all propped, and their deficits continue to grow exponentially to fund basic needs. And one could go on.

This money dilution, like the issue of too many shares in a Comapny, must lead to a rampant loss of value and then to my mind lead into hyperinflation. Of course on the surface we do not appear to be there yet but a watchful eye should be cast and pointers as I see them will post up. All IMVH of course.

 

[GumbyLearner]

And now getting back to the question. As U/F pointed out and as indicated by pundits quoted here today, the real state of affairs is very difficult to determine.

Someone above spoke of the 30% increase in rice, my wife confirms that also. Saw on our local TV through the week on meat in Australia, beef up 20% in the last 3 months, lamb up 9% in the same period but due to tightening supply expected to increase a great deal more during the year.

However in clarification, when I think about inflation I am on about the losing value of paper money. The big demonstration of this is the rising price of gold against currencies. This week we again saw record gold prices against the Pound Stirling and the Euro. And an increase up against the Aussie and US$. We know that the US is printing money and via a back door buying their own bonds to keep it all propped, and their deficits continue to grow exponentially to fund basic needs. And one could go on.

This money dilution, like the issue of too many shares in a Comapny, must lead to a rampant loss of value and then to my mind lead into hyperinflation. Of course on the surface we do not appear to be there yet but a watchful eye should be cast and pointers as I see them will post up. All IMVH of course.

Great summary explod.

It would be great for deflationists/inflationists to also factor in crop failures, increased use in bio-fuels, oil scarcity, increased mining costs, tightening of credit facilities, global recalls of cars, historically extraordinary sovereign GDP debt ratios among certain states, nationalization of resources by certain states, continuing devaluation of US mortgage assets, the coming defaults in US commercial real estate loans, "quantitative easing", rising Asian consumer affluence etc...

Don't wait to buy gold but buy gold and wait. IMO

 

[ducati916]

explod

This money dilution, like the issue of too many shares in a Comapny, must lead to a rampant loss of value and then to my mind lead into hyperinflation. Of course on the surface we do not appear to be there yet but a watchful eye should be cast and pointers as I see them will post up. All IMVH of course.

The devaluation of the dollar, via money creation through the Federal Reserve, would, in normal circumstances, if pursued far enough, result in a hyperinflation.

This is unlikely to happen for the following reason. The US liabilities, predominantly Social Security, currently standing at circa $55 Trillion, are Index linked. This means that the liability grows proportionately with the inflation, thus, the liability cannot be inflated away.

On that basis, there can be no hyperinflation, in that the money supply becomes essentially worthless in the home country. However, the cost of imports becomes prohibitive, oil being the prime example.

Therefore the crisis is much closer than many realise. The crisis will be when debt cannot be rolled over to foreign investors, and printing becomes the only course of action. Then, again, imports become prohibitively expensive.

What to do?

Ok, we have the world's most powerful military machine, that we've spent all our wealth on, where should we use it? History is full of examples, Napoleon being one that springs to mind, Rome, being the common analogy.

jog on
duc

 

[GumbyLearner]

explod


What to do?

Ok, we have the world's most powerful military machine, that we've spent all our wealth on, where should we use it? History is full of examples, Napoleon being one that springs to mind, Rome, being the common analogy.

jog on
duc

Take a brief intermission from the jog duc IMHO.

Buy some precious metals and keep jogging till your hearts content. JMO

Oh shucks, I'm an Index fund fan myself all the way back to the 1997 Asian Financial Crisis Days.
As long as all the participants report honestly then of course Index Funds are what we should all be looking at. Cheers for the advice duc.

don't pause to read the full story
keep running, the banana lounge awaits
Gumby

 

[ducati916]

Take a brief intermission from the jog duc IMHO.

Buy some precious metals and keep jogging till your hearts content. JMO

Oh shucks, I'm an Index fund fan myself all the way back to the 1997 Asian Financial Crisis Days.

As long as all the participants report honestly then of course Index Funds are what we should all be looking at. Cheers for the advice duc.

I think you missed the point here. Social Security payments are index linked: viz. if inflation rises, the liabilities [payments] rise in a specified proportion. Hence, the liabilities of Social Security, TIP's and other financial liabilities, simply cannot be inflated away.

jog on
duc

 

[Trembling Hand]

Someone above spoke of the 30% increase in rice, my wife confirms that also. Saw on our local TV through the week on meat in Australia, beef up 20% in the last 3 months, lamb up 9% in the same period but due to tightening supply expected to increase a great deal more during the year.

Jeesus!! So now Today Tonight journalism is being used for the Bears case. Classic!! Classic Explod. Classic BS.

Food inflation is running around CPI has been since I entered the food industry in 92 and to my great surprise things like flour, butter and eggs have remained on course since I left it in 2001 up to today.

However in clarification, when I think about inflation I am on about the losing value of paper money. The big demonstration of this is the rising price of gold against currencies. This week we again saw record gold prices against the Pound Stirling and the Euro. And an increase up against the Aussie and US$.

Just on that hyperinflation story Explod. Since the bears case is mostly based around the US/UK/EUR/JPY losing value how you see that effecting the value of the Skippy? After all I don't buy my bread & butter in USD. And in fact I don't buy my gold in USD but rather AUD. And thats been a crap trade since March 08, really crap when you take it against "other" assets.

To link in with your food inflation have a look at wheat. This is in USD. In AUD its lower than what it was in 2001. LOWER.

Rice pretty much steady in AUD terms for 10 years!!!!

 

[professor_frink]

Anyone worth their salt will have looked at where some of those jobs lost came from and that they will become hirings next month.

(No i won't state what they were as you should know).

As someone who has no idea, it would be great if you could enlighten me a little

 

[explod]

Jeesus!! So now Today Tonight journalism is being used for the Bears case. Classic!! Classic Explod. Classic BS.

No worse than Bloomberg. probably "better than expected".

Just on that hyperinflation story Explod. Since the bears case is mostly based around the US/UK/EUR/JPY losing value how you see that effecting the value of the Skippy? After all I don't buy my bread & butter in USD. And in fact I don't buy my gold in USD but rather AUD. And thats been a crap trade since March 08, really crap when you take it against "other" assets.

The Aussie, Canadian and many others may well rise but this is going to effect our trade ballance big time if it goes bananas. And exports are very important to our economy.

To link in with your food inflation have a look at wheat. This is in USD. In AUD its lower than what it was in 2001. LOWER.

Rice pretty much steady in AUD terms for 10 years!!!!

Yep, need to get off the BS and look deeper. Interesting times and oh my bullion has now doubled in value but admit been a bit slow in Auz.

 

[explod]

Uh Oooow, poor ole Chucky, just has to plod away at those better than expected job numbers (from Everbanks "Daily Pfenning" overnight):-

Well... Welcome back to those that skipped ahead! Friday's Jobs Jamboree turned out to be very interesting, after looking under the hood... According to the Bureau of Labor Statistics (BLS) the U.S. lost 36,000 jobs in February, much less than what was expected (-68K), and the unemployment rate remained at 9.7%... Of course we all know that the "real unemployment rate" is 21%, it all comes back to the games people play now, every night and every day now... The most important piece of the Jobs Jamboree is the Avg. Hourly Earnings, which printed at 1.9% gain... So, those that are working are seeing some increases... Marginal increases, but still!

And... The BLS did add 97,000 jobs out of thin air, so the job losses were really -133,000... I also found it suspicious that the BLS waited some time on Friday, before posting that +97,000 adjustment... Before they did, the markets were led to believe that job losses were dwindling... Again... The games people play... It sure looks like they tried to pull a fast one on the markets... But, I'm sure it was just a technical thing... Right?

 

[GumbyLearner]

Yep, need to get off the BS and look deeper. Interesting times and oh my bullion has now doubled in value but admit been a bit slow in Auz.

Wish I had been reading your posts earlier on ASF explod. My physical Au holdings have only increased 63% in value in the last 2 years. Not bad but having them double would be nice.

 

[Unnamed User]

Anyone worth their salt will have looked at where some of those jobs lost came from and that they will become hirings next month.

(No i won't state what they were as you should know).

Prepared to put my conclusion under scrutiny, rather than just cast conspiracy theories or quote end of the world theorists, next months report will have minimum 30,000 jobs growth and i believe it will be closer to 100,000.

Seems i was a bit too conservative.

Payrolls rise 162,000, best gain in three years
Excluding Census workers, U.S. payrolls rise by 114,000 in March

http://www.marketwatch.com/story/payrolls-rise-162000-best-gain-in-three-years-2010-04-02-83000

 

[MR.]

Anyone worth their salt will have looked at where some of those jobs lost came from and that they will become hirings next month.

(No i won't state what they were as you should know).

As someone who has no idea, it would be great if you could enlighten me a little

Seems i was a bit too conservative.

"Construction employment rose by 15,000, likely a rebound from unseasonably bad weather in February."

That's 15,000! Where did the rest come from and why?

 

[Unnamed User]

"Construction employment rose by 15,000, likely a rebound from unseasonably bad weather in February."

That's 15,000! Where did the rest come from and why?

Not interested in doing peoples research for them but am happy to provide a link that might help and contains more useful links.

http://www.bls.gov/news.release/empsit.nr0.htm

 

[explod]

Hard to nail the following into a thread, it fits a number of catogories, but here goes.

It touches on what is called "Financial Warfare". For some time the US were critical of China for not allowing their currency to appreciate, it is currently pegged to the US dollar. However when pushed it became evident to the US that China may stop supporting T/bills if they persisted and it was soon after that we saw Moodies nail Greece. This would have been breakneck doom for the US so desperate measures ensued. Of course this is not unnoticed by other big players so what is spreading is the "every many for himself" at the international level; we appear to be nearing some criseas by the look. That's probably an understatement.

Anyway the above just my own musings and the following from Jim Rickards is not right on that track but got me thinking on it;-

http://www.zerohedge.com/article/jim-rickards-discusses-financial-warfare