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Mr. President, you're a lying sack of crap.

Among other lies the douche-nozzle called "Trump" has said there has been a "boom" in investment under his Presidency.

No, there has not.


That's net investment -- all of it, residential and otherwise -- as a percentage of GDP.  Is it "improved" since 2016?  Not to any material degree, no.

IN 2017 and 2018 IT WAS 17.28% and 17.81% respectively.  It was 17.63% in 2015, the last full year of Obama's Presidency before the election.

In other words NO MATERIAL CHANGE despite the "Yuuuuge Tax Cuts" which allegedly were going to propel investment to new highs.  The truth is that net investment is approximately back to where it was during the trough of the 02/03 tech crash recession.

There has been NO boom in net investment of any sort -- it has in fact flat-lined since roughly the last full year of Obama's Presidency; that claim by Trump is a lie.

Now let's look at something else, which is far more important -- what's the REAL GDP figure?

The BEA uses what they call a "deflator."  This is just flat-out lying.  So is everyone on CommunistNoozBullCrap along with the rest of the mainslime media.  Every single one of them knows they're lying too, including that jackwad the other day who said "central banks had eliminated recessions."

The truth of this is trivially discernible.  Reduce, for a moment, the economy to just TWO items -- one a bushel of corn containing some number of ears (typically 48, give or take a few) and one hundred $1 bills.  That's all there is; a person can only trade some number of one of those items for some number of the other.  Note that the complexity of the economy is irrelevant; all transactions inevitably boil down to exactly this sort of transaction; that people get in the middle, that there are more choices, etc -- doesn't change the essential character.

What's the price of an ear of corn?

That depends on many things but in a very simple economy like this it probably boils down to two variables, assuming you're the one with the money and the other person is the one with the corn: How many ears are left and how hungry are you?

On average, however, it'll probably take about two of your dollars to buy one ear of corn.  Maybe a bit less when the bushel is full and quite-possibly all of your remaining money when there are only a couple of ears left.

Now let's assume that I invent this thing called a "printing press" and with it I can instantly double the number of dollars -- and the person with the corn cannot distinguish the ones I printed from the ones that already existed.  That is, all the dollars are "fungible"; they spend exactly the same way and are interchangeable without anyone being able to determine which came from where.

Now how much is an ear of corn?  About four dollars, right?

Does the price being four dollars mean there is more corn -- more "stuff" to buy?  No.  Does it "stimulate" more economic activity?  No.  It simply changes the price.  I did not back those dollars with anything (like another bushel of corn); I simply wished them into existence.

This is exactly what the government does when it spends in deficit; it does not "stimulate" anything.  It simply changes the price -- upward.  Government produces nothing; when it taxes it takes from someone and gives to someone else.  It thus can change the mix of things that are consumed, and thus those which are produced indirectly, but it does not stimulate anything net-on-net because for each thing that it exerts a preference for something else loses.

When you borrow money against an existing thing you already produced that thing cannot be sold until you pay the loan back.  This is not inflationary because the "thing" is withdrawn from the total asset base available for sale (that is, commerce involving that item cannot take place as it's already pledged in an equal amount of the funds out) until the loan is repaid, in whole or part.  Government issued debt is backed by nothing other than an alleged "promise" that someone will work tomorrow and pay taxes -- a bet "on the come" that the people will actually do that and further, that they'll continue to consent to the existence of said government.  Neither is an asset and neither is assured.

As such any deficit spending -- that is, new government debt -- is exactly the same as the above example where I invent a printing press and double the number of dollars, with you being unable to discern which of them existed before and which I produced without any backing whatsoever.

Therefore new unbacked debt, that is federal deficit spending -- all federal debt is in fact unbacked -- must be subtracted from nominal GDP before the percentage of gain is computed because GDP is denominated in dollars but dollars are not a constant.

In other words the formula is:

((New GDP - Old GDP) - (New Debt - Old Debt)) / Old GDP = GDP Change (in decimal)

You can't argue with this; it's math.  If you emit more dollars into the economy then nominal GDP expands by exactly that amount even if there is no actual expansion in the production of anything.  To fail to do so and to report said alleged "output" in a non-invariant denominator is fraud.


GDP IS NEGATIVE; last year in real terms it was -2.43%.   In 2017 it was +1.40%, a short-term blip as a consequence of the tax cuts which had yet to hit the deficit, as the tax year for said change had yet to close and thus not yet been reconciled yet the change in policy (and thus expansion of paychecks via said inflation) had occurred.  In 2018 said deficit spending hit the deficit exactly as expected and we're back back to negative numbers exactly as we had every single year since 2008.

The largest real GDP expansion we have seen since 2000 was 2.06% in 2006 -- just before the crash.

The nominal GDP claimed for that year was nearly 6%!

We have in fact been in a "no more than 2% economy with most years deeply negative" since 2000 and in fact it is much worse than it seems because the population expands about 1% a year and thus on a per-person -- that is, per-capita basis -- you must subtract about another 1% from all of those numbers to get to economic activity per person.

There has been no recovery since 2008.  We have been in a factual economic recession since and the "recovery" since 2000 was essentially non-existent as well.  Period.  Likewise the "employment" numbers are gamed; they do not count you as "unemployed" if you're not actively looking for work.  In 2007 there were 78 million people "not in the labor force" and thus not counted.  Last month there were nearly 96 million such people and not one of them counts as being "unemployed"; the employment:population ratio remains two full percent below 2007 levels and four percent below the levels of 2000.

So-called "economists" all know this.  So do all the bankers.  So does every member of the Fed.  So does Cramer.  So do the rest of CNBS' guests.  So does Donald Trump, Mnuchin and the rest of his lying, scheming, criminal cabal exactly as did Tim Geithner and President Obama, never mind Bush.  They are all lying and have been since 2000 -- serially, criminally and notoriously while the American public laps it up like Pavlov's dog.

So why is the stock market soaring?  Because all that emitted unbacked credit goes somewhere and where it went was into stock buybacks and the 0.1%'s pockets.  Where it did not go was into ordinary American's pockets, just as it didn't for the entire eight years of Obama's Presidency.

Ordinary people -- 99% of the population in any nation -- only gain quality of life in real terms when REAL GDP expands.  It has not done so in the United States since 2000 and that is a trivially-proved fact requiring nothing more than grade-school arithmetic.

There hasn't been any actual material GDP expansion since President Clinton left office.  It has all been a scam since with every bit of alleged "GDP growth" created out of one thing and one thing only: Federal deficit spending.  There has been exactly no real GDP expansion of material import -- that is, actual expansion in the production of goods and services -- for the last 18 years.  We have not had one year of actual GDP expansion exceeding 2.06% since 2000 and accounting for population expansion we have not had one year in which it has exceeded one percent.

This is not my data; it is directly from the BEA and the Treasury's "Debt to the Penny" series.  You can trivially go look for it yourself and using either Google Sheets or Excel replicate these charts.   These figures are from Trump's own Government agencies and it took me less than an hour to source, compile the write this Ticker.


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2019-04-30 07:00 by Karl Denninger
in Macro Factors , 340 references
[Comments enabled]  

Go screw a goat Mr. President.

Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the first quarter of 2019 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2018, real GDP increased 2.2 percent.

Suuurrreeee it did.

Math wins -- always.

$21,062.7 ($21 trillion on an annualized basis) - $20,865.1 ($20.865 trillion) last quarter = $197.60 billion increase in nominal dollars -- that is, in dollars in your wallet.

Over the same period of time the US Federal Debt went from $21,943.0 billion to $22.027.9 = $84.9 billion increase in nominal dollars.

One must subtract the number of unbacked nominal dollars from the alleged increase before computing the change.

This is an 0.54% rate of change on a quarterly basis, or 2.16% -- not 3.2%.

But it's even worse when you look annualized, which is much more accurate because Treasury commonly plays games with the debt figures on an individual month and quarter-end basis.  If you use annualized numbers you evade that game-playing because they tend to play the same game at the same time every year.  It's like Christmas -- if you use annual numbers instead of seasonally adjusted BS you evade all the game-playing from "seasonal adjustments" because Christmas comes at the same time every year.

So let's do that.

The difference in debt between March 30th 2018 and March 30th 2019 is $938 billion.

The difference in GDP between 1Q 2018 and 1Q 2019 is $1,022 billion.

The real change is not $1,022 billion it's $84 billion which is a tiny 0.418% over the space of a complete year.

In other words there is no growth whatsoever; it is all artificial and created by government deficit spending.  In point of fact the economy is in a recession right here and now and Trump is lying through his damned teeth.

He is engaged in the exact same fraud that Obama (and others before) have engaged in; the pumping of deficit spending causes asset prices to go up but real economic activity does not increase as a result.

Only valuations increase -- that is, a bubble -- results.

When said debt accumulation driven by the insanity of these government policies reaches the point that real people can't pay, which always happens because real incomes in real terms, and real production in real terms have not actually gone up at all the bubble pops with disastrous results.

It will occur the same way this time it did the last two, except this time, just like the last two, it will be bigger than the last one.

PS: The goat thinks you're purdy Mr. President.

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2018-07-05 07:00 by Karl Denninger
in Macro Factors , 288 references
[Comments enabled]  

This man is flat-out nuts.

When are America’s global corporations and Wall Street going to sit down with President Trump and explain to him that his trade war is not with China but with them? The biggest chunk of America’s trade deficit with China is the offshored production of America’s global corporations. When the corporations bring the products that they produce in China to the US consumer market, the products are classified as imports from China.

Six years ago when I was writing The Failure of Laissez Faire Capitalism, I concluded on the evidence that half of US imports from China consist of the offshored production of US corporations. Offshoring is a substantial benefit to US corporations because of much lower labor and compliance costs. Profits, executive bonuses, and shareholders’ capital gains receive a large boost from offshoring. The costs of these benefits for a few fall on the many—the former American employees who formerly had a middle class income and expectations for their children.

He goes on to argue that it's not China's fault -- it is the fault of our corporations, and thus we have to deal with "our" corporations.

Uh huh.

A business exists to make a profit.

Laws define what is legitimate to do in the pursuit of said profit, and what is not.

Millions of Americans lost their jobs because the law allowed their jobs to be offshored to literal slave-labor encampments without consequence.

And it is not just China.  In fact, China is just one of many offenders.

The results are plain. In Kuala Lumpur cranes stretch outward among the gleaming towers in a perpetual construction boom powered by foreign investment. The streets are spotless and well policed, the water is clean, and the politics are relatively stable. Consumers around the world benefit from products like mobile devices, circuit boards, and LED screens.

At the heart of this economic success are migrant workers. From Bangladesh, Nepal, the Philippines, Indonesia, and India, they arrive at Kuala Lumpur International Airport by the scoreful, papers in hand, hoping for a better life. Estimates of the number of foreign workers in Malaysia vary widely, from the government’s count of almost 1.8 million to perhaps twice as many, which would amount to a quarter of the country’s workforce. Migrant-worker advocates estimate one-third of those workers are undocumented.

Malaysia allows and prospers through what amounts to slave labor; in other words, modern-day human trafficking to obtain labor for pennies an hour.

This is nothing new; in fact it's as old as people.  Mexico was once one of the worst in this regard; they didn't give a crap about the health of their slaves or even their longevity; they had access to so many of them that there was no economic incentive to even feed their slaves.  In other words it was cheaper to buy a new slave than feed the one you have.  America's slavery, for all its warts, didn't devolve into that but it wasn't from the "caring" of the slave-owners -- it came from the economics.

Has it really changed?  Nope, nor will it ever except where the law forces it to.

This is why in my book Leverage I pointed out that the only way to deal with this crap and stop it is to apply Wage and Environmental parity tariffs without exception and to ensconce those in law for any firm that wants to do business in the United States, without exception.

PCR says this is the fault of the Fed.  Of course he does -- he doesn't want to deal with the fact that he, personally egged on the offshoring and "free trade" bull****, never mind his time in advocacy with the Hoover Institution, Georgetown, George Mason University, an associate editor for the Wall Street Journal (which has an unabashed record of promoting so-called "free trade") and, of course, Reagan's "supply side" economics which were little more than a sop to offshoring and exploitation of slavery.  Oh, and let's not forget his advisory role to J.P. Morgan!

It's not like the big banks had anything to do with this, right? smiley

Reagan had the distinction of running enormous deficits during his Presidency, which inflated GDP.  Everyone cheers for GDP increases but nobody in the media, nor Roberts himself, points out that mathematically GDP will always increase by the exact amount all branches of government combined spend in deficit, whether they allegedly issue "bonds" to "fund" that or not.

Nobody issues bonds or takes down a deficit for money they do not immediately use.  If your local district issues a $20 million bond for a school improvement it immediately spends the $20 million.  If they taxed the money from you first the net GDP impact would be zero -- you forfeit the $20 million to the school (which means you don't spend it) and then the school spends it.  $20 million minus $20 million is zero.

But if they can spend it first then they take nothing from you initially and GDP goes up by $20 million.

The problem is that theoretically they must take the $20 million later to pay off the bond but history says they never do. Instead the bond is rolled over and only the interest is paid, so the $20 million appears to be "free" in economic terms and thus GDP continues to go up when they issue the next one too.

It's not true in fact and what's worse is that the "extra money" flying around makes the price of everything go up.  Now if there was no turd-world slave labor there would be a check and balance on this that would come in the form of rapidly-rising wage demands (when you get to the point of being unable to feed yourself why go to work?) and that cuts off the game.

To prevent a replay of this after it happened during Nixon's administration (and interest rates were forced higher in response) PCR and the rest of the "free market" screamers passed law and policy to make it both legal and trivially easy to find a source of slaves to replace those pesky people in America who would otherwise demand more money to keep making both cars and computers.  They are also the same people who insist that illegal Mexicans be allowed to flood the nation to pick oranges, strawberries and roof houses.

It's not that Americans can't do those jobs it's that you can't ask Americans to do so them for $3/hour and expect them to be able to survive.  The price of a house or strawberry package would skyrocket immediately and cut off the unbacked credit issuance.

In other words it's all fraud and PCR knows it.

But this is what passes for "economic wisdom" these days, never mind "reporting."

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