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Here Comes the Next Global Recession
Here Comes the Next Global Recession
It might seem peculiar to some people to talk about the ‘next’ global recession, given that it doesn’t feel like we ever really got out of the last one. Eight years on from the global financial crash we find that the global economy is still drowning in debt, and this new era of low economic growth, high unemployment and squeezed wages/conditions has somehow become normalised.
‘Secular stagnation’ is the description de jure of the global capitalist system’s inability to return to another bout of prosperity. But while our old friend Boom departed the stage some time ago, his unruly brother Bust is waiting in the wings, preparing to make an unwelcome return.
Well that’s according to some of the world’s major financial institutions which have been forecasting that 2016 will be the year of the next big global downturn. In the last fortnight the IMF reduced its global growth forecast to 3.1%, that’s a mere 0.1% over the threshold of what constitutes recession. While last month Daiwa – Japan’s second largest brokerage house – and Citibank both released reports in which they made a global financial meltdown in 2016 their baselinescenarios! Let that sink in for a minute; they’re not saying a meltdown next year is their worst case scenario, they’re saying it’s their assumed one!
So what could trigger this predicted crash? Well to echo the words of Yogi Bear, ‘It’s tough to make predictions, especially about the future’. Nevertheless there is general agreement that debt was the trigger for the crash of 2008. Considering that today the global economy is even deeper in the debt mire, it requires no great leap of faith to believe that debt will be central to the coming crisis.
…click on the above link to read the rest of the article…
Ignore the Media Bullsh*t–Retail Implosion Proves We Are In Recession
Ignore the Media Bullsh*t–Retail Implosion Proves We Are In Recession
Here we go again. The dying legacy media will continue to support the status quo, who provide their dwindling advertising revenue, by papering over the truth with platitudes, lies, and misinformation. I have been detailing the long slow death of retail in America for the last few years. The data and facts are unequivocal. Therefore, the establishment and their media mouthpieces need to suppress the truth.
They spin every terrible report in the most positive way possible. They blame lousy retail results on the weather. They blame them on calendar effects. They blame them on gasoline sales plunging. That one is funny, because we heard for months that retail spending would surge because people had more money in their pockets from the huge decline in gasoline prices.
September retail sales were grudgingly reported by the Census Bureau this morning and they were absolutely dreadful. This followed an atrocious August report. The MSM couldn’t blame it on snow, cold, flooding, drought, or even swarms of locusts. So they just buried the story in their small print headlines. The propaganda media machine had nothing. They continue to spew the drivel about a 5.1% unemployment rate as a reflection of a booming jobs market. If we really have a booming jobs market, we would have a booming retail sector. The stagnant retail market reveals the jobs data to be fraudulent. The 94 million people supposedly not in the job market can’t buy shit with their good looks.
Despite the storyline about consumer austerity being the reason for sluggish spending, the facts prove otherwise. Consumer spending accounted for 68% of GDP in 2008 at the peak. Seven years later it still represents 68% of GDP. The difference is the spending has shifted dramatically towards services since the Wall Street created financial crisis. Spending on services has grown by 31% versus 20% for goods since 2008. Guess what has caused that surge?
…click on the above link to read the rest of the article…
Brazil Faces Unemployment “Crisis”, As Retail Sales Plunge, Rousseff Blasts “Coup-Mongers”
Brazil Faces Unemployment “Crisis”, As Retail Sales Plunge, Rousseff Blasts “Coup-Mongers”
Brazilian President Dilma Rousseff got a rare bit of respite on Tuesday when a Supreme Court justice granted an injunction that delays a lower house vote which could have paved the way for impeachment proceedings.
House speaker Eduardo Cunha has remained defiant, vowing to exercise his “constitutional prerogative” to review impeachment requests.
Of course Cunha has his own set of problems. Allegations of corruption tied to the discovery of Swiss bank accounts have led to calls for his resignation and that, in turn, has Rousseff’s “aides fear[ing] the speaker could try to speed up the impeachment process.” As Reuters notes, if Cunha accepts even one of three impeachment petitions he has on his desk, “a parliamentary commission with representatives of all parties would analyze it and put it to a lower house vote.”
It is essentially a race against time to see if the house ethics committee will force his resignation before he can secure the lower house support to force a Senate impeachment trial.
For her part, Rousseff has accused the opposition of “coup-mongering” following last week’s ruling by the TCU that she cooked the fiscal books.
Meanwhile, as the intractable political stalemate keeps investors on edge regarding whether the government will be stable enough to enact the reforms needed to plug the budget gap, the economy continues to crumble.
We got a look at retail sales for August today and the picture was not pretty. Core retail sales fell by a larger-than-expected 0.9% month on month and July was revised lower to -1.6%. Broad retail sales fell 2.0% auto sales crashed 5.2%. Annually, core fell by 6.9% broad by 9.6% yoy. Here’s Goldman with the takeaway:
The near-term outlook for private consumption and retail sales remains negative owing to the significant deceleration of credit flows from both private and public banks, high levels of household indebtedness, declining job creation and real wage growth, higher interest rates, higher taxes (including via inflation), higher utility and transportation tariffs, heightened economic and political uncertainty and very depressed (record low) consumer confidence.
…click on the above link to read the rest of the article…
Hawking: Greedy capitalists may pocket wealth as robots replace human workers
Hawking: Greedy capitalists may pocket wealth as robots replace human workers
The scientist was commenting on so-called technological unemployment, a trend of automatization taking over the jobs that previously required humans. According to some estimates, in a matter of decades robots may become better and cheaper than humans in most tasks and make most of the human workforce unemployable.
Hawkins believes that in such a scenario we should expect not prosperity but drastic economic inequality in the future.
“If machines produce everything we need, the outcome will depend on how things are distributed,” he said in a Reddit Ask Me Anything session Thursday.
“Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality.”
Hawkins’ previous predictions of emerging threats dealt with automatic weapons controlled by artificial intelligence (AI) and the potential dangers of actively searching for alien life.
READ MORE: US & Israel inequality champions of developed world – OECD
Economic inequality is a problem growing worse in developed countries. According to the OECD, the situation is worse than 30 years now, with the US and Israel performing worst.
Why This Feels Like a Depression for Most People
Why This Feels Like a Depression for Most People
“And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.” – John Steinbeck, The Grapes of Wrath
Everyone has seen the pictures of the unemployed waiting in soup lines during the Great Depression. When you try to tell a propaganda believing, willfully ignorant, mainstream media watching, math challenged consumer we are in the midst of a Greater Depression, they act as if you’ve lost your mind. They will immediately bluster about the 5.1% unemployment rate, record corporate profits, and stock market near all-time highs. The cognitive dissonance of these people is only exceeded by their inability to understand basic mathematical concepts.
The reason you don’t see huge lines of people waiting in soup lines during this Greater Depression is because the government has figured out how to disguise suffering through modern technology. During the height of the Great Depression in 1933, there were 12.8 million Americans unemployed. These were the men pictured in the soup lines. Today, there are 46 million Americans in an electronic soup kitchen line, as their food is distributed through EBT cards (with that angel of mercy JP Morgan reaping billions in profits by processing the transactions).
These 46 million people represent 14% of the U.S. population. There are 23 million households on food stamps in a nation of 123 million households. Therefore, 19% of all households in the U.S. are so poor, they require food assistance to survive. In 1933 there were approximately 126 million Americans living in 30 million households. The government didn’t keep official unemployment records until 1940, but the Department of Labor estimated 12.8 million people were unemployed during the worst year of the Great Depression or 24.9% of the labor force. By 1937 it had fallen to 14.3% or approximately 8 million people.
…click on the above link to read the rest of the article…
One True Measure of Stagnation: Not in the Labor Force
One True Measure of Stagnation: Not in the Labor Force
This is a stark depiction of underlying stagnation: paid work is not being created as population expands.
Heroic efforts are being made to cloak the stagnation of the U.S. economy. One of these is to shift the unemployed work force from the negative-sounding joblesscategory to the benign-sounding Not in the Labor Force (NILF) category.
But re-labeling stagnation does not magically transform a stagnant economy.To get a sense of long-term stagnation, let’s look at the data going back 45 years, to 1977.
NOT IN LABOR FORCE (NILF) 1976 to 2015
I’ve selected data from three representative eras:
— The 20-year period from 1977 to 1997, as this encompasses a variety of macro-economic conditions: five years of stagflation and two back-to-back recessions (1977 – 1982), strong growth from 1983 to 1990, a mild recession in 1991, and growth from 1993 to 1997.
— The period of broad-based expansion from 1982 to 2000
— The period 2000 to 2015, an era characterized by bubbles, post-bubble crises and low-growth “recovery”
In all cases, I list the Not in Labor Force (NILF) data and the population of the U.S.
1977-01-01: 61.491 million NILF population 220 million
1997-01-01 67.968 million NILF population 272 million
Population rose 52 million 23.6%
NILF rose 6.477 million 10.5%
1982-07-01 59.838 million NILF (start of boom) population 232 million
2000-07-01 68.880 million NILF (end of boom) population 282 million
Population rose 50 million 22.4%
NILF rose 9.042 million 15.1%
2000-07-01 68.880 million NILF population 282 million
2015-09-01 94.718 million NILF (“recovery”) population 322 million
Population rose 40 million 14.2%
NILF rose 25.838 million 37.5%
Notice how population growth was 23.6% 1977-1997 while growth of NILF was a mere 10.5% As the population grew, job growth kept NILF to a low rate of expansion. While the population soared by 52 million, only 6.5 million people were added to NILF.
In the golden era of 1982 – 2000, population rose 22.4% while NILF expanded by 15%. Job growth was still strong enough to limit NILF expansion. The population grew by 50 million while NILF expanded by 9 million.
…click on the above link to read the rest of the article…
The Shocking Reality: This Chart Shows Just How Bad Unemployment Is Today Compared to The Great Depression
The Shocking Reality: This Chart Shows Just How Bad Unemployment Is Today Compared to The Great Depression
(Desperate Americans stand in soup kitchen lines and look for work. Circa 1929)
While the Obama administration and their mainstream surrogates maintain that the economy is growing at a booming pace, the reality of the situation is starkly different.
According to a report from the Bureau of Labor Statistics some 94.6 million Americans (age 16 and over) are either not working or have made no effort to find a job. With a population of 320 million, that means nearly one in three people in the United States are currently out of work.
The Bureau of Labor Statistics reports that a record 94,610,000 people (ages 16 and over) were not in the labor force in September. In other words they were neither employed nor had made specific efforts to find work in the prior four weeks.
The number of individuals out of the work force last month — due to discouragement, retirement or otherwise — represented a substantial 579,000 person increase over the most recent record, hit in August, of 94,031,000 people out of the workforce.
Curiously, the official unemployment rate remained unchanged at 5.1%, suggesting that some 95% of people actually have jobs.
But as we’ve repeatedly pointed out, that number has been completely skewed over the last two decades as it fails to account for people who have stopped looking for work (because there are no actual jobs available).
According to John Williams of Shadow Stats, if we were to calculate unemployment using the same metrics as we did during the 1930’s, or even the 1980’s, we’d already be in Great Depression territory. Williams, who utilizes a reporting methodology that accounts for “long-term discouraged workers who were defined out of official existence in 1994,” notes that the real unemployment rate is rapidly approaching 25%.
Now compare the above chart to similar measurements from the 1930’s and you’ll see just how bad things really are:
(via Casey Research)
…click on the above link to read the rest of the article…
Australia Is “Going Down Under”: “The Bubble Is About To Burst”, RBS Warns
Australia Is “Going Down Under”: “The Bubble Is About To Burst”, RBS Warns
Thanks to a variety of idiosyncratic political crises and country-specific stumbling blocks, Brazil, Turkey, Malaysia, and to a lesser extent Russia, have received the lion’s share of coverage when it comes to assessing the EM damage wrought by the comically bad combination of slumping commodities prices, depressed Chinese demand, slowing global trade, and a “surprise” yuan devaluation.
Put simply, the intractable political stalemate in Brazil, the civil war in Turkey, the 1MDB scandal in Malaysia (and the fact that the country was at the center of the 1998 meltdown), and the hit Russia has taken from depressed crude prices mean that if you want to pen a story about emerging market chaos, those four countries have plenty to offer in terms of going beyond the generic “falling commodities + a decelerating China = bad news for EM” narrative.
But just because other vulnerable countries aren’t beset with ethnic violence and/or street protests doesn’t mean they too aren’t facing crises due to falling commodity prices and the slowdown of the Chinese growth machine.
One such country is Australia, which in some respects is an emerging market dressed up like a developed economy, and which of course has suffered mightily from the commodities carnage and China’s transition away from an investment-led growth model.
Out with a fresh look at the risks facing Australia is RBS’ Alberto Gallo. Notable excerpts are presented below.
* * *
From RBS
Australia has become a commodity focused economy, with an increasing exposure to China. For the past decades, Australia has been buoyed by the rapid Chinese expansion, which outpaced the rest of the world. Australia benefited from China’s strong demand for commodities given its investment-led growth model. China is Australia’s top export destination and 59% of those exports are in iron-ore. But as China struggles to manage its ongoing credit crunch and continues its shift to consumption-led growth Australia’s economy is likely to be hurt by lower demand for commodities.
…click on the above link to read the rest of the article…
The Endless Emergency—–Why It’s Always ZIRP Time In The Casino
The Endless Emergency—–Why It’s Always ZIRP Time In The Casino
Based on the headline from the latest Jobs Friday report you wouldn’t know that we are still mired in an economic emergency—–one apparently so extreme that it might entail moving to the 81st straight month of zero interest rates at next week’s FOMC meeting. After all, the unemployment rate came in smack-dab on the Fed’s full-employment target at 5.1%.
But that’s not the half of it. The August unemployment rate was also in the lowest quintile of modern history.
That’s right. There have been 535 monthly jobs reports since 1970, yet in only 98 months or 18% of the time did the unemployment rate post at 5.1% or lower.
In a word, the official unemployment rate is now in what has been the macroeconomic end zone for the past 45 years. Might this suggest that the emergency is over and done?
Not at all. The talking heads have been out in force insisting on yet another deferral of “lift-off” on the grounds that the economy is allegedly still fragile and that the establishment survey number at 173,000 jobs came in on the light side. Even the so-called centrists on the Fed—–Stanley Fischer and John Williams—–have gone to full-bore, open-mouth, two-armed economist mode, jabbering incoherently while they await more “in-coming” economic data.
Self-evidently, the only “incoming” information that can matter between now and next Wednesday is the stock market averages. To wit, if last October’s Bullard Rip low on the S&P 500 holds at 1867, the FOMC will declare “one and done”, at least for the year; and if the market succumbs to another spot of vertigo, the Fed will concoct yet another lame excuse for delay.
Indeed, the Fed’s true Humphrey-Hawkins target is transparent. Namely, avoidance of a “risk-off” hissy fit at all hazards.
…click on the above link to read the rest of the article…
If You Want To Know The Truth About The Unemployment Rate Read This Article
If You Want To Know The Truth About The Unemployment Rate Read This Article
The Obama administration is telling us that the unemployment rate in the United States has fallen to 5.1 percent, but does that number actually bear any resemblance to reality? On Friday, news outlets all over America celebrated the fact that the U.S. economy added 173,000 jobs in August. We were told that the unemployment rate has fallen to a seven year low and that wages are going up. So everything must be getting better for the middle class, right? After all, isn’t that what the official numbers are telling us?
The financial markets are buzzing over this news because the unemployment rate has fallen into a range that the Federal Reserve has typically considered to be “full employment”, so there is an expectation that the Fed may raise interest rates shortly. The following comes from Business Insider…
The unemployment rate fell to 5.1% in August, the lowest since April 2008. This was lower than forecast, and put the measure in the middle of the 5.2% – 5.0% range the Federal Reserve considers to be “full employment.” The economy added 173,000 jobs, below the expectation for 217,000, although August payrolls are usually revised higher. We also saw some wage growth, with average hourly earnings rising 0.3% month-on-month, and 2.5% year-over-year. The payrolls gain for July was revised up to 245,000 from 215,000.
But do we actually have anything close to “full employment” in this country?
Of course not.
The truth is that the only way they have been able to get the official “unemployment rate” to steadily go down over the past few years is to eliminate hundreds of thousands of Americans that are chronically unemployed from the official labor force numbers every month. Jim Quinn elaborated on this very eloquently in one of his recent articles…
…click on the above link to read the rest of the article…
The US Economy Continues Its Collapse
The US Economy Continues Its Collapse
Do you remember when real reporters existed? Those were the days before the Clinton regime concentrated the media into a few hands and turned the media into a Ministry of Propaganda, a tool of Big Brother. The false reality in which Americans live extends into economic life. Last Friday’s employment report was a continuation of a long string of bad news spun into good news. The media repeats two numbers as if they mean something—the monthly payroll jobs gains and the unemployment rate—and ignores the numbers that show the continuing multi-year decline in employment opportunities while the economy is allegedly recovering.
The so-called recovery is based on the U.3 measure of the unemployment rate. This measure does not include any unemployed person who has become discouraged from the inability to find a job and has not looked for a job in four weeks. The U.3 measure of unemployment only includes the still hopeful who think they will find a job.
The government has a second official measure of unemployment, U.6. This measure, seldom reported, includes among the unemployed those who have been discouraged for less than one year. This official measure is double the 5.3% U.3 measure. What does it mean that the unemployment rate is over 10% after six years of alleged economic recovery?
In 1994 the Clinton regime stopped counting long-term discouraged workers as unemployed. Clinton wanted his economy to look better than Reagan’s, so he ceased counting the long-term discouraged workers that were part of Reagan’s unemployment rate. John Williams (shadowstats.com) continues to measure the long-term discouraged with the official methodology of that time, and when these unemployed are included, the US rate of unemployment as of July 2015 is 23%, several times higher than during the recession with which Fed chairman Paul Volcker greeted the Reagan presidency.
…click on the above link to read the rest of the article…
Italy Youth Unemployment Hits Record High 44.2%, Concerns Rising “Recession Exit May Be Unsustainable”
Italy Youth Unemployment Hits Record High 44.2%, Concerns Rising “Recession Exit May Be Unsustainable”
Earlier today, Eurostat released the two most important data points for Europe: inflation and unemployment. On the former, there was no surprise at the headline level which remained at 0.2% for the another month, in line with expectations, but core CPI excluding energy, food, alcohol and tobacco, rose to 1.0%, the highest print in 2015 and one which pushed Bund prices well lower.
But it was the unemployment number which showed something unexpected. While the overall unemployment rate for the Eurozone also stayed unchanged at 11.1%, fractionally worse then the consensus estimate of a decline to 11.0%…
… it was renewed concern about what is going on in Italy, where unemployment rose from 12.5% to 12.7%, proving consensus expectations about a strong improvement to 12.3% dead wrong…
… and posing a question just what is going on in the country with the biggest debt load in Europe, and more importantly how is it that Rome is still unable to benefit from the ECB’s QE which has pushed Italian yields far below those of the US despite an economy which is suddenly taking on water.
And nowhere was this more visible than in Italy’s youth unemployment rate, which surprisingly jumped by nearly 2% to 44.2%, a record level, and one which is starting to rival some of Europe’s most troubled nations, such as Spain and of course Greece.
As Bloomberg put it, “Italy’s jobless rate unexpectedly rose in June as businesses continue to dismiss workers amid concerns that the country’s exit from recession may not be sustainable. Youth unemployment jumped to a record-high 44.2 percent.
Unemployment increased to 12.7 percent from a revised 12.5 percent in May, statistics agency Istat said in a preliminary report in Rome on Friday. The median estimate in a survey of nine analysts called for a rate of 12.3 percent.Youth unemployment in June rose to the highest rate since the series began in 2004, from 42.4 percent in May. Employment dropped for a second month in a row, with about 22,000 jobs lost in June alone, according to the report.
…click on the above link to read the rest of the article…
The Big Bad Bear Case
The Big Bad Bear Case
My aim with this article is to outline, with facts, large global structural issues that I believe everyone, bulls and bears alike, should be fully aware of. While some of this discussion may rattle the cage a bit you will hopefully find this article well researched and informative.
Recently I’ve outlined why we switched our trading stance from buy mode (Door Shut) to sell mode (Inversion) on stocks. This week I’ve also outlined the aggregate technical factors that have us very cautious on stocks in general (Totality) while not precluding the possibility of new highs.
This article, however, will focus on much larger structural issues that have been building for years, decades indeed. And no this article is not so much about central banks, debt issues, Greece, China, deficits, etc. While all these are important as part of the overall picture, they are mere current symptoms of a much larger issue that is at the core of all that is already in play and will only deepen in our societies in the decades to come: Institutionalized poverty with an ever widening divide between the haves and the have nots which will result in an eventual drastic revaluation of asset classes across the board.
And before you think I’m off on a hyperbolic rant let me assure you my reasoning will be very much fact based and I have reason to believe the US Fed and Janet Yellen are very much aware of it all, but have no solution to prevent it from happening. In fact it is mathematically unavoidable.
A few weeks ago in The Greek Butterfly I discussed the concept of a global math construct that needs to maintain its integrity to make global debt serviceable. To that end I concluded that they would not let Greece default.
…click on the above link to read the rest of the article…
Citi Predicts Greek Hyperinflation Breaks Out In Two Years
Citi Predicts Greek Hyperinflation Breaks Out In Two Years
Earlier, we showed that according to Citigroup (among many) for Greece to have any hope of surviving, it needs a masive debt haircut: the bigger, the better, with Citi tossing out numbers as high as €130 billion. Still, even if Greece does get debt relief, as long as it remains in the Eurozone, its economy has nothing but hell to look forward to.
Here is how Citi previews the next few years:
From an economic and financial sector angle, the success or failure of a third programme will depend on i) the strength of a possible economic recovery in coming quarters, following an overhaul of the Greek banking system, and on ii) whether debt re-profiling discussions look likely and take place as envisaged. On the first item, the degree of fiscal austerity and outright reforms to be implemented in a short period of time is likely to result in a prolongation of economic recession in coming quarters. And we need to factor in the economic costs from the (very likely) persistence of stringent capital controls and the lack of liquidity in the economy. We recently updated our real GDP growth forecasts and now expect the Greek economy to contract by at least 2.4% YY in 2015 (compared with -0.2% YY projected in June), with the economy likely to remain in recession at least until Q1 2016. Such a poor performance in terms of economic activity would mean a higher risk that Greek economic and fiscal performance would undershoot its programme targets, which could likely challenge its membership in the Eurozone. In addition, debt re-profiling is likely to be deferred, conditional and tranched, and is unlikely to boost the government’s fiscal space for public spending increases or tax cuts. Failure by the Greek authorities to lift capital controls in a meaningful way and a further increase in unemployment (we forecast that the jobless rate will rise from 27% in 2015 to 29% in 2016) could also increase social tensions, in our view.
…click on the above link to read the rest of the article…
Canada’s technical recession ‘contained,’ says former PBO Kevin Page
Ex-parliamentary budget officer says there is ‘still lots of growth in the service sector’
Although Canada is in a likely technical recession — defined as two consecutive quarters of negative growth — it’s a recession that is contained, says former budget watchdog Kevin Page.
“In the current context, if you look at the growth numbers, the recession is effectively in the goods sector, it’s in the oil industry, it’s weak growth in manufacturing, weak growth in construction,” said Page in an interview on CBC Radio’s The House.
“It’s quite contained. There’s still lots of growth in the service sector.”
But Page, who served as Canada’s first parliamentary budget officer from 2008-2013, cautioned against reading too much optimism into the numbers.
The Canadian economy lost 6,400 jobs in June as gains in full-time work were offset by losses of part-time jobs, according to Statistics Canada.
The jobless rate stayed steady at 6.8 per cent, the same level it has been at since February. It was a better showing than what a consensus of economists were expecting, which was a loss of about 10,000 positions, but Page said the pattern remains one of shrinking growth.
“For the second quarter we had net job creation of more than 30,000, but if you look at the trend in June we actually declined,” he said.
“So if you look at the job picture, it’s gotten progressively weaker through the summer. I think that would be a concern for the government and a concern for the overall strength of our economy.”
“The economy’s weak, you can’t deny that. It will be pretty hard for Minister [of Finance Joe] Oliver to keep that line that we’re not in a technical recession,” Page added.
…click on the above link to read the rest of the article…
