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Bear raid on the metals intraday, with the message that piling into 'risk assets' like stocks and junk bonds was the thing to do because of the wonderful economic recovery.
Nothing has changed. The band just played a lively polka, and Josef and Magda led a cheer on the financial networks.
Keep an eye on Europe. That is where the rubber meets the road, or the truncheon meets the jaw, as they say.
Can the triple A's bring Greece and the other prodigals under control? Will they submit as meekly as the Irish? Stay tuned.
Here is a fairly simple picture of some of the major metrics during the Great Depression. Too simple yes, but it tracks most of the major indicators.
Hoover followed a policy of 'deleveraging,' that is, allowing for the economy to liquidate its prior excesses without changing much else. The Fed did respond to this crisis by expanding the monetary base fairly significantly as you can see.
The recovery began under Roosevelt, who declared a 'bank holidy' and struck at the heart of the problem, clearing the banking system. But he also followed through with a major currency devaluation, stimulus programs, and significant financial reform.
And that last point is the most important. Hoover's Fed supplied stimulus, but there was really nothing done to fix the system that had caused the Great Crash of 1929 in the first place. And I suspect that if Roosevelt had not taken strong steps to clean up the fraud in the stock market and the banking system, his own stimulus would have fluttered and failed.
Now the common knee jerk reaction to this from those who study the schoolbook given by the monied interests is twofold.
First, that Hoover simply did not go far enough, and if they had only allowed the Depression to continue to deepen, eventually it would have bottomed and things would have improved. I think the answer is clear, in the examples of Italy, Germany and Japan. When an economy is tortured to that extent, the people do not continue to endlessly suffer in silence. They react, badly, and take matters into hand one way or the other.
They say you cannot fix debt with debt. And I say that like most simplistic slogans it is intended to mislead. The real issue is reform and how the debt is used and the gains distributed.
Secondly, they say that the Roosevelt recovery did not last. And it did not continue on a steady trajectory. The Fed engaged in some policy errors and caused a secondary slump in the late 1930s. And the world economy remained troubled. Roosevelt also faced an obstructionist Congress, and a Supreme Court that overturned many of his New Deal programs.
He also faced an attempted military coup d'etat funded by a few of the monied interests who also busy doing business with Mussolini and Hitler, as testified by one of its more decorated war heroes, but the history books don't like to talk about that. Just another nut job.
Globally, the monied interests seemed to have choose amongst three options: 1. Go along grudgingly with reform and accept a smaller percentage of the overall economy (Roosevelt), 2. Fund an oligarchic takeover of the government and seek to control it (Hitler), 3. Sew your wealth into the dresses of your children, and die with them in a basement (Russia).
The US, like all other nations, has plenty of its own dirty little secrets that no one likes to talk about.
The point of this is that austerity following a financial collapse based on fraudulent imbalances does not work and almost always leads to civil disorder. And that stimulus alone does not heal the damage, although it does help to ease the pain if applied correctly.
No, the most important ingredient for a sustained recovery is to reform the abuses that allowed for such a spectacular bubble of excess to exist in the first place. It was all about the misallocation of productive capital and the negative effects of monopolies and financial frauds on the real economy.
At some point this lesson will be burned into our minds by the continuing stagnation of the unreformed economy, even if it is sold as 'the new normal' and not so bad on paper. It will be a living hell for many, and they will eventually push back, and then things will be resolved, one way or the other.
I hope that the new school of economic thought that rises out of the ashes of what we have now is more serious and mature and thoughtful, if not wise. But I have not found many economists capable of such original thinking, even among those who claim to carry the progressive banner.
And certainly not among the ideological schools, who start with an a priori set of premises and then beat reality and torture the market participants to death with them and their supporting statistical and logical fallacies. Since these schools are based on top down principles and assumptions, they are notoriously slow to change and adapt, but often most vociferous and extreme in their arguments, with adherents whose allegiance is less informed by the intellect and an actual understanding of things, and more like a belief system based on stubbornly held slogans and prejudices.
Back in Stalinist Russia, they had whole departments of people that were responsible for rewriting history and documents in order to support the latest Party lines.
When a particular person fell out of favor, for example, they not only altered the documents, but even went so far as to air brush them out of important historical photographs.
Today the US reported a remarkably high Non-Farm Payrolls number, well in excess of even the most optimistic estimates. 243,000 jobs added, and unemployment has dropped to only 8.3 percent. Isn't that good news indeed.
If one tracks the data closely, and keeps their own copies of the records, what we see instead are revisions, sometimes going back as far as ten years, that most greatly affect the 'seasonally adjusted' numbers, but also affect the raw numbers as well.
The Obama Administration, as well as the previous Administration, have been going back and tinkering with history, rewriting the numbers here and there, in most cases 'rolling jobs forward' to the current months to make the current headlines look better.
The BLS keeps the digital copies of this and they are duly adjusted of course. But what was surprising in this latest round is that for the first time in my memory they went back and adjusted the Birth-Deal Model, which are imaginary jobs in the first place! And on the web site that I usually check they have stopped providing all the historical data, limiting it to what looks like a year or two of data.
What can one do when the statistics are questionable like this? One common touchstone for those who rely on data is to compare one set of numbers with another, or even with 'real things.' If the sales numbers look great, but unsold inventory is piling up, chances are pretty good that somewhere those sales reports might be disconnected from reality.
One real check I prefer is the Labor Participation Rate. The Census is pretty good about counting the number of people and estimating their growth within some reasonable statistical error. And people do not tend to disappear in large numbers, at least not yet.
Labor Participation is simply the number of people who are working or are unemployed as a percentage of the civilian non-institutionalized population over the age of 16, or simply number of people of working age who are not in prison, etc.
So if the number of people working is increasing and the number of unemployed are decreasing the participation rate *should be increasing* one would think, given the relatively stable growth of the population.
But we instead see that the Labor Participation Rate continues to decline. I am sure the spokesmodels will find some way to try to gloss over this.
Note: The spokemodels and the uninformed parrots quite predictably are tut-tutting this using misdirection by saying that the most recent drop for January alone is attributable to a revision in the Labor Force, the denominator in this case, by the Census Bureau. And I accept that. No problem. But my point again is not to look at a single month, but at the trend, even for this. And from a technical standpoint, the trend here undeniably 'blows.'
If the Fed can target a Nominal GDP, that is, economic growth targets that do not care how much is real and how much is paper manipulation, then I am sure it is only fair for the government to target a Nominal Work Force.
As you know, I do not like to look at these monthly numbers in the first, place, but they are integral to the Wall Street shell game, and the politicians love to play it for the headlines as well.
A more rational approach is to watch the trending average over some reasonable period of time, and to look at multiple sources of data, given the propensity for politicians to stick their fingers in the process.
The problem I have with painting the tape, accounting fraud, and the statistical manipulation of the numbers is that these numbers are the foundation for serious policy decisions. Making January 'look good' is going to make it all the more difficult to take the appropriate political steps to reform the economy and get it working again.
But the Yanks are notoriously short term oriented in their thinking. And this is an election year, and emotions are running high.
I cannot help but think that if the government is finally able to fully digitize money and other assets, all this airbrushing can become so much more simple. Just ask the customers of MF Global. One day you own Treasuries, and even solid bars of gold and silver in your own name, and the next day, poof, they're vaporized. Sorry don't know where they went. Go stand over there in line by the Lost and Found and see what happens.
And so I think we are not in Kansas anymore, Toto. It is looking more like Moscow on the Potomac every day.
Here is a comparison of the Seasonally Adjusted Jobs Numbers before and after the Revisions. Keep in mind that each square represents 100,000 jobs, so even slight changes make a big difference in the headline number which just shows the month over month change.
Again, the point is not that there is some conspiracy, which is how many easily dismiss this, especially the uninformed who want to appear to be 'sophisticates.' Rather it is mean to show that one months data is relatively useless and often misleading, and subject to significant revisions sometimes much later. It is the TREND that matters.
