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2023-02-03 09:21 by Karl Denninger
in POTD , 33 references
 

 

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2023-02-03 09:19 by Karl Denninger
in Employment , 54 references
[Comments enabled]  

Screameth the Bureau of Lies and Scams:

Total nonfarm payroll employment rose by 517,000 in January, and the unemployment rate changed little at 3.4 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care. Employment also increased in government, partially reflecting the return of workers from a strike.

That's great, right?

Well, the internals are a bit different, but they definitely put some negative spin on the idea that the Fed is "tightening" policy in a meaningful fashion.  In that light the 25bps looks wildly insufficient.

Its not one data point either -- both hours worked and overtime expanded, as did hourly wages.  "Restrictive" policy?  Where?

There is, however, a fly in the ointment -- the population adjustment is this month, and it was a whopper, throwing cold water on the last year's progress in that the employment:population ratio erased all gains back to last February.

Oops.

Another piece of internal data -- which is confirmatory of certain other suspicions -- is that nearly a million people over the last 12 months were added to the disabled rolls.  However, the percentage of said disabled people working increased, likely due to the end of pandemic "stay home and get a check" programs over the last year.

After the ADP report it appeared the market expected that there would be confirmation of softening in the labor market and thus "justification" that the Fed's "slowdown" would be confirmed as "policy is working as intended."

If you bought that ticket you're in for a heck of a ride.

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2023-02-02 11:19 by Karl Denninger
in Federal Reserve , 294 references
[Comments enabled]  

You would be nuts to not think the markets believe The Fed has thrown in the towel on rates and inflation.

You might be half-right, but being half-right often costs you all your money in the market.

The rally yesterday and overnight was quite impressive.  But what I see in the decision yesterday is a repeat of the errors in the 1970s which led to the double-spike in both rates and inflation.

That the Fed said nothing about the Omnibus in their statement concurrently with the rate decision stands at the strongest evidence that they're foolishly believing that while there may will be a long tail to inflation as a result of the Fed allowing it to get into the wage base (which always produces said "long tail" as wages are a huge part of every firm's operating cost) the fact remains that zero of the Omnibus passed in the last days of 2022 are in the supply pipeline at this time yet all of it must and thus will flow through there.

Further, by refusing to take responsibility for not raising rates sooner and higher, along with draining all the excess liquidity they generated with "QE-like" actions the Fed runs the very real risk that their "attempts" to control inflation will by definition go nowhere at all.  The problem with cost-push inflation is that it is both very difficult to stem and it ruins people's capacity to pay due to that imbalance, and thus tends to produce a raft of credit defaults among consumers and small businesses.

It is that second set of events that resets the economic picture to something that "works" for the majority of people.

There can be no stability in the economy until rates charged across the curve are positive in real terms -- that is, the rate of interest is higher than the rate of economic expansion and price (whichever is higher), both in nominal terms. 

We're not there and balance will not be restored until we are.

No, its not "different this time" and no, the cheats of the last 20 years will not be re-established, particularly trade sequestration.

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2023-02-01 07:00 by Karl Denninger
in Editorial , 326 references
[Comments enabled]  
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Its not hard to stop events like Tyre Nichols from happening in the future.

Solution: In the event of an allegation of serious and abusive use of force by a police department against a citizen both the Chief of Police (or Sheriff) and the Mayor (or other chief executive of said jurisdiction, and yes, that could be a Governor or even President) stands accused as an accessory before the fact on a criminal basis and must defend same in open court.

This would force accountability back on the heads of the department for their hiring, training and monitoring of said officers and, if they got it wrong they'd have to defend it in court.  If they were found responsible then they go to prison for the same term as the officers who committed the offense, as an accessory before the fact carries the same liability as the principal.

These events happen not because of "racism" (really people; five black cops beat a black dude and that's racism?) but rather because we allow the hiring and retention of police officers who are unfit to have a badge.  The persons responsible for that, which are the head of the department and the head of the Executive of that specific jurisdiction, who is the "CEO" of said department when you get down to it (the Chief of Police or whatever the title is is the COO or similar) have to be held criminally responsible because as an incorporated entity anything else, such as suing, just winds up with someone else paying the bill.

You can't transfer liability for a prison sentence and no matter how rich, poor or entitled you might be it still sucks and in the case of manslaughter ten years or more is ten years and its still going to suck.

Make this change in the law and there will be no more Tyre Nichols' events.  Not one.  You can bet on it.

That's the answer folks.

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2023-01-31 07:00 by Karl Denninger
in Politics , 499 references
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If you'd like to have a one-word answer to Trump's refusal to disavow "Warp Speed" (and the outrageously false claims made for its "progress"), or for that matter January 6th, all you need is in fact one word: Ego.

Nowhere was it better on display than just recently when he attacked Ron DeSantis, for "not waiting his turn."

This is, I remind you, the very same argument Hillary Clinton made in 2016: It was her "turn" to be President.

Well, that didn't work out so well, but the ego element was clear there as well.  Email server in the bathroom anyone?  A rank violation of law too, even ignoring the classified information issue, in that executive members cannot conduct business "privately" outside of the view of oversight.

But of course Hillary did, and then there's the infamous "What difference does it make (now)" line.

What drives all this?  Ego.

Simply put Trump is incapable of admitting he was wrong.  Yet every one of us is in fact wrong at some point in time.  The best thing to do from a standpoint of progress personally is to admit failure rapidly when it becomes evident you probably are wrong, stop doing the wrong thing and do something else.  That limits losses -- and as anyone who has ever made progress at anything over time knows the key is to win more than you lose.

January 6th happened because Trump could not come to the conclusion that he, personally had to get out front as early as the second week of November and do whatever he had to in order to prove he was right.  Yes, that would have formally been "lawless" but only if he was wrong.  If he was right then the acts of lawlessness were immaterial because the greater lawless behavior had no other redress and on balance he would have still been President.  The problem with that course of action, of course, is that if he failed to prove it -- not just "show it", but prove it by irrefutable evidence -- he was going to prison forever at best and might get the federal needle.

He knew this.  But he also couldn't, as Nixon did, face his ego and admit that while he might believe he won he wasn't sure enough to bet his own freedom on it.  There was, in that context, only one correct action: Stand down.

But to do that you have shove you ego into the back seat.

He couldn't do it.

Likewise if he had listened to skeptics about "Warp Speed" and the fact that developing, but not conclusive evidence started to show up that there was a reasonable probability the jabs would not work, would cause great harm or both the only rational action was to force deferral until you can prove it up.  But doing that required shoving your ego in the back seat and accepting the possibility you were wrong.  Trump couldn't do that.

Now he's doing it again with DeSantis.

I'm no fan of DeSantis specifically because he's dangerous as he is much more-cunning and able to play for position than Trump ever was in any context.  Trump's primary "weapon" historically hasn't been innovation or even triangulation; it has been pure bluster.  If you want an analog it's the used-car salesman on steroids.

Most people full of ego to that extent eventually destroy themselves and any possibility of a comeback.

Hillary did and you're seeing it right now with Trump.

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