Breaking Data – just out from Labor…
The unemployment rate declined to 3.5 percent in September, and total nonfarm payroll employment rose by 136,000, the U.S. Bureau of Labor Statistics reported today. Employment in health care and in professional and business services continued to trend up.
Our two-bit analysis: This is a LOT stronger than it seems on the surface because this month’s CES Birth Death Model subtracted 71,000 jobs from the pre-report data. After the number, Dow futures popped up 50…and you’ll see this is precisely in line with out 1929 replay scenario which we will get to in a sec.
Main thing is unemployment is down to 3.5% and we expect the Trumpident to Tweet any second.
Labor participation rate held steady and the employment to population ration improved to 61%. (Gee, maybe I could find a real job now, lol…oh, wait, I’m retired.)
What Really Matters, Though:
Let’s hold a short course in Remedial Economics. Pay attention, because this will “beat the economy within an inch of it’s life” shortly. And after a bounce this fall, it will be “beaten down 2-inches further.” The grandkids will read about this as “The Second Depression” except it will be global and worse than the first one (1929-1941).
Why? The M2V Crisis Is Here
Later this month, we will get new GDP numbers. But we don’t “need no weatherman” for this one. Here’s why: The Velocity of Money at M2 (cash and certain time deposits) has cratered. More importantly, it has gotten into a “ Help, I’ve fallen and I can’t get up” place. Pay attention to the turnover rate of money versus the GDP and here’s what we see:
Every time the Velocity is on the way up, the national mood is optimistic. When it craters, the national mood turns ugly, hateful, and yes – even impeachable. Who needs cause when you’ve got Digital Mob Rule and fraud roaming the sold-out corporate news channels?
Now the Remedial Part
Dividend, divisor, and quotient time:
M2V (velocity or turnover of M2 money stock) = GDP / M2
Since (made-up example only, but with the real quotient) GDP = $20-trillion and M2 is about $13.7258-trillion, Velocity is (this part is real) 1.457.
What this means: If we look at M2, what would it take in the way of dividend change (GPD of $20-trilbucks) or divisor change (the M2 number) to move the quotient above 1.462 which it was in Q4 2018?
There are two possible solutions.
One is the dividend (top number, right? The GDP) could go up dramatically. However, when we look the available data, what do we see? Well, there’s a Trade War, so our exports are down the shitter. And that’s made all the worse by the Boeing Max groundings and sale collapse. (I’ve heard people aas whether that means a “bankruptcy ahead?” too… All of which would echo with carmakers and the Radio Trust collapses beginning in the fall/winter of 1929, but we’re getting ahead of the plot a bit.
The second possible solution is that the Fed could be raising rates , which would imply a smaller divisor which always (in this world, anyway) increases the quotient.
This one immediately goes into flushing device too, since a) the Fed has Donald Trump screaming for rate cuts (which would collapse Velocity further since it would increase the M2) while the Fed is trying like hell to walk the fine line between hyperinflation (the Zimbabwe outcome due to our piss-poor implementation of Modern Monetary Theory (let’s make up money) option on the one hand, and the collapse due to negative rates and the total death of consumer spending…which is the hemlock the European Union has chosen to drink.
As you can see, there are only two possible ways out of the box: More GDP (toast! thanks in part to Pelosi and Schiff and the squad because they haven’t proposed a single meaningful economic stimulus because that would take time from witch-hunting) and we can’t raise (Ben Bernanke at Brookings now is right on L4L (lower for longer) but we can’t drop under the effective lower bound (e.g. negative rates) because then the specter of a 1929-like deflation settles in. If that happens? People stop buying consumer goods because they begin think “Since prices are still coming down, I’ll just wait a while…”
Which is exactly what happened when? Fall of 1929. Except this time, instead of a market peak before collapse on 9/3/1929, ours came on 9/18/2019 and the Replay looks like this when you compare back-then with our Aggregate of the Dow, the S&P and the NASDAQ Composite, weighted for equal dollars on Jan 1, 2000:
(You will see today the market pop to the upside due to the job numbers and that is exactly what this chart says. Amazing, huh?)
As this shows, there is a decline possible in our replay that MIGHT bottom TEMPORARILY 12,7% lower than yesterday’s close. That would bring us to October…no, wait! Let’s save the details for the people who care and pay the $40-bucks a year for our Peoplenomics.com newsletter.
As a writer, it’s hard not to just blurt it all our. So one more concept: RCA -[ Reverse Control Authority. This is what happens when you set an airplane up in such a manner that pulling back on the stick doesn’t make the airplane go up as it does in normal flight. Instead, it stalls and down you go. Even with a screaming engine and, oh yeah, feels like your genitals are in your ears… When economic controls work backward and the people in charge don’t know it, a crash is the natural outcome.
Did I mention the Fed is lost? No, they’re admitting it. See: Fed’s Clarida says central bank will set policy meeting by meeting.
Meantime, you need to read up on the (Claudia) Sahm rule which will not give you much comfort. A Reuters piece here (‘Sahm Rule’ enters Fed lexicon as fast, real-time recession flag) and study the paper she wrote over here with assorted deep-thinking colleagues: “From Transactions Data to Economic Statistics: Constructing Real-time, High-frequency, Geographic Measures of Consumer Spending (PDF)” (Sahm things change, some don’t. but at least she understands the consumer spending paradox of deflationary expectations tied to spending and groks the ADHD-like behavior of consumers.
The tote board (You do know what a totalizer board is, right? If not, you need to get off your phone and gamble more…getting married doesn’t count…) says Another Fed Rate Cut Is Expected After Weak Economic Data.
Which becomes a really long and interesting discussion: How is it that households balance their books keeping up with the Jones (the original Jonesing?) facing deflationary evidence?
The economy has now entered a region of such “reverse control authority” that I’ve written up several times in the past when we have experienced similar “near brushes with collapse.” 2000 and 2008, specifically. Back then, however, the Fed still has some semblance of a balance sheet. Thanks to just Making Up Money (MUM) and L4L we are now about to pass the part of the Economic Box Canyon (if we’re not through it already) where we can’t turn around anymore. Even when we do, the RCA (reverse control auth. effect) will confuse all riders who want to turn left and find the horse will only do that if the wrong (right) rein is pulled. Canyon walls, here we come. Both say “Hyper” – it’s just one also says deflation while the other says inflation.
What could go wrong?
My late dad worked in a cigar store during the depression. It was a time when jobs were being shared because there wasn’t enough work to go around. Sort of like the present “gig economy” except instead of being able to find 5-gigs that can be pieced together into an apartment and rent plus food, there’s only 1-gig and that’s if you’re lucky.
That’s when the vicious cycle digs in. Absent people with rent money, down come rents and landlords begin to go broke. And banks pile up property like they did in 2009-2010. Except the piles won’t begin until first the stock market collapses senior folks defined benefit plans and pensions, which will leave whatever Social Security has left, although since seniors vote, that will be one of the last “entitlements” to be cut. It was never meant to be an entitlement – it was supposed to be pay as you go. (SS has already been swindled by the lefties putting SS money into the general fund backed only by agency IOUs, but don’t start me on that discussion. It’ll be more MUM to come…)
Which leaves us on the National Witch Hunt with open borders meaning American taxpayers are footing the bill for illegals coming in, making sure they get healthcare, food, and a place to live, while the modern analogs of Hoovervilles are popping up as Trumpvilles.
Through it all, the democrats are still lying through their teeth about “We have a plan to fix it” – which is such obvious tripe since the poverty rate is still virtually un changed since the Great Society scam of the Johnson era that simply busted up black families because of “income and job requirements” and…well, you remember who freed the slaves, right? A republican…Lincoln.
I could yammer-on all day about this being how the cold global reality works, but to no avail. When I figure the Replay path is unavoidable, we’ll buy up oodles of put options for….wait! Another one for Peoplenomics readers tomorrow. (Plus part 2 of building a time machine, by the way, just so we don’t get too seriously depressed. Morlocks that we are.., BTW:
H.G. Wells hinting Morlocks as being “…who were described and depicted in various writings as an archetype of “primitive people”, “backwardness”, “barbarism” and the like.” Synonyms for “Morlock” include “your honor,” “congressman,” and “pencil neck.” They seem to have no regard for what they break and that moves us deftly back into the morning’s propaganda flow… Nice view of planetary collapse from up here, though.
The Washington Witch Trial
Ready to “flick your Bic” next week? Here’s today’s pile of kindling:
“U.S. Diplomats Encouraged Ukrainian President to Investigate Bidens” but given the facts, sure looks like Biden’s kid was a payoff in our view.
One point of sanity: McCarthy calls on Pelosi to suspend Trump impeachment inquiry. She won’t, of course, It’s an axe Pelosi is grinding to placate Digital Mob Rule. As we have explained, the Cornered Rat Party had to impeach because their own strong-arming is going to come out. We look for this impeachment crap to end a day before 2020 elections.
Pencil Neck notwithstanding, Ukraine’s remaining honest (which will bite the dems) as their Ukraine top prosecutor says Hunter Biden, Burisma cases will be reviewed. The dems are desperate that their impropriety not become the issue at the witch trial.
A son of Texas coming home, we hope: Rick Perry to step down as energy secretary by year’s end, NYT and WaPo report. Hopefully, he’ll get here before Texas sues the FedGov for fraud, alleging the U.S. has breached its own Constitution that was sold to Texas as cast in stone (prior to the Douglas court) when Texas was an independent (and real)_ republic. If the electoral college goes (which the lefties are driving hard on) that would ice the cake.
Media Communicable Psychiatric Disorders, Part II
T’other day, I told you the media was now communicating mental disease and this would be manifesting shortly as insanity. Doubt me?
Well, here you go: ‘Get rid of the babies!’: Distraught woman at AOC town hall urges ‘eating babies’ to fight climate change. Pass the VisdeGrips, will yah? It’s fall and I’m going to be pinching myself a lot this fall.
Cattle chutes for sheep: Which fast-food chain has the fastest drive-thru?
See where Mayor resigns after pleading guilty to stealing $87,000 from a youth basketball program. Better quit than being bounced, perhaps?
No, Boeing’s not going…at least yet: India’s SpiceJet could take more of Jet Airways’ 737 MAX planes: chairman. Reminds me I gotta call my friends up at BCAC (is Roberto still there?) and suggest a MAX special. “This month only: Buy 30 MAX‘es and get a 747 free…” (Honestly though, haven’t been invovled in a 737 sale since 1984…)
More down to Earth: Hot wheels: Lincoln increasing production of $115G Continental with ‘suicide’ doors for 2020.
Wash your hands: PRO/EDR> Influenza (26): WHO global update, vaccine.
Time to chase eggs around a plate…more for Peoplenomics subscribers tomorrow…and more here, too. Been using my “light crown” every day this week and cranking out 7,000 words a day is not difficult. Even remembering to use the smell check…er… spell-chcker, too.
Write when you get rich,