Jesse's Café Américain

Gold Daily and Silver Weekly Charts - God's Mills Grind Slowly

Gold and silver would not be denied, despite some fairly determined efforts.

Silver did the heavy lifting. The intra-day charts are included below.

"Gottes Mühlen mahlen langsam, mahlen aber trefflich klein,
Ob auß Langmuth er sich seumet, bringt mit Schärff er alles ein."

Friedrich von Logau, Göttliche Rache

Have a pleasant weekend. See you Sunday evening.

SP 500 and NDX Futures Daily Charts - Selling Freedom, Playing For Time

I picked up a little volatility insurance near the close today.

My timeframe on this is to the end of March.

It was hard to miss the big non-confirmation in the NDX today.

"The woods decay, the woods decay and fall,
The vapours weep their burthen to the ground,
Man comes and tills the field and lies beneath,
And after many a summer dies the swan."

Alfred Lord Tennyson, Tithonus

I am curious to see which black swan comes home to roost first: Europe or China.

Ed Lazear, the distinguished economist from Stanford, formerly chief economic advisor for G.W. Bush, and now a Senior Fellow at the Hoover Institution, thinks a good approach to immigration reform would be for the US to sell its citizenship on the open market to the highest bidders.

He was expounding this after the close on Bloomberg television, which is a bastion for all things of the swinish persuasion. He calls it 'importing human capital.' It sounds remarkably like indentured servitude.

As related by the Wall Street Journal:

"To ensure that not only the wealthy could gain citizenship, the sale of immigration slots could be coupled with a loan program that allows people to borrow the fee and to pay it back out of their earnings over an extended period. To minimize default, the loan payments would be automatically withheld from their paycheck, just as income and payroll taxes are today."

In a similar vein the US could reinstitute a military draft, but sell exemptions to the highest bidder. And in fairness the government could offer loans to cover the cost of course, adminstered by the Banks of course. This would have the additional benefit of opening up slots in the National Guard which have formerly been taken up by the idle sons of the wealthy.

There are similar proposals for rationing life saving medical care that are already on the table.

Personal air and water meters implanted at birth? Think of the possibilities.

There was a movie written along these lines called In Time. In it people are fixed with meters that measure out their life. They are able to buy additional time to live, at market prices. I wonder if Ed has seen it. It is the perfect market-based, technological solution for maximizing the output of human capital.

"I have always thought that all men should be free; but if any should be slaves it should be first those who desire it for themselves, and secondly those who desire it for others."

Abraham Lincoln, "Speech to One Hundred Fortieth Indiana Regiment" March 17, 1865

See you on Sunday evening.

Today's Non-Farm Payrolls Report - The Good News, Bad News - Unadjusted Unemployment at 13%

Today's Non-Farm Payrolls report was encouraging despite the downward revision from last month's headline grabbing number, which in part helped make up today's headline grabbing number.

The seasonality adjustment used in this number was out of the normal bounds from past seasonality adjustments. And as one might have anticipated, the Birth Death model added its customary large number of estimated (imaginary) jobs into the mix.

As you know I prefer to look at the trends, rather than the month to month numbers which can be used to manage perception in the market and the public.

The overall trend shows that the US is not faring as badly as if it might have, at least in the short term, under an austerity regime such as that being followed in Europe.

The most encouraging statistics are the steady although somewhat anemic jobs growth, and the upturn, finally, in average pay. I could not find current median pay numbers in a chart, and this is what is most interesting to me as you know.

The Labor Participation Rate continues its decline. It is a much more significant number than the 'headline' unemployment rate which fluctuates in whom it decides to count as employment-seeking.

According to Bloomberg if the Labor Participation Rate was maintained as steady from before the financial collapse, and 'discouraged workers were not eliminated, the current unemployment rate in the US would be a little north of 13%. But as workers get discouraged the government stops counting them as employment seeking, and the Labor Participation Rate falls.

And finally there is Real Disposable Personal Income Per Capita, which is as close to median as I could get. And just for comparison, a chart showing Total Personal Disposable Income from 1921 to 1939, including the secondary recession of 1937 which was due to a policy error in premature Fed tightening from a fear of inflation.

I think we learned in the 1930's that austerity after a credit bubble induced financial collapse is a destabilizing influence on civil governments. Or at least that was the case in much of the world back then. We seem to have forgotten quite a few lessons from history about regulation, reform, and the consequences of extremes in wealth inequality.

There is little doubt that if the nascent recovery falters, the 'sequester' will be blamed, and not the lack of reform and safeguards in the financial sector which caused the most recent financial crisis in the first place, although it was most certainly a key player in the tech bubble and collapse as well.

One can only speculate that if genuine reform, including restraints on rampant deregulation, had been enacted after the stock market excess of the Tech Bubble, would the people and the world have been spared the Financial Collapse of 2008? And what is yet to come, most likely out of Europe or China?

Elizabeth Warren: What Level of Criminality Will It Take to Shut Down a Bank, (Mr. President)?

"A court martial, under orders, has just dared to acquit a certain Esterhazy, a supreme insult to all truth and justice. And now the image of France is sullied by this filth, and history shall record that it was under your presidency that this crime against society was committed."

Émile François Zola

How far above the law can Banks and their management go before they will be brought to account, besides a fine that is considered a cost of doing business?

It's a good question asked in the most straight faced, almost naively innocent, manner by Senator Elizabeth Warren.

Apparently amongst the Washington bureaucrats, with regard to any indictments and prosecution of financial matter 'the buck stops' with Eric Holder and his Justice Department. Without that tool, the regulators can only levy civil fines, although often those fines are only wristslaps.

And the other day Mr. Attorney General Holder said that considerations other than criminality, including instances of brazen and repeated offenses, inhibit the Justice Department from doing their jobs in prosecuting financial crimes.

Those considerations are the importance of that institution to the economy and the systemic threat that a loss of confidence might provoke. In other words, size and power, and the fear of the consequences of enforcing the existing laws, much less reform, are at the heart of the Administration's policy towards prosecuting significant financial crimes at the highest levels. And that policy sets the tone for the economy, and the market's attitudes towards regulation and reform.

But since Eric Holder is Obama's personal representative, almost certainly acting in consultation on financial matters with the Treasury Secretary, the offensive corruption in the financial sector is the result of the President's policies. That is also known as moral hazard. And at this point he has no one else to blame.

And so Senator Warren might as well ask: "Mr. President, to what level of criminality must a Bank, and its management, rise before you would be willing to allow your Justice Department to indict and prosecute it? And as an aside, why are you so zealous in prosecuting whistleblowers and reformers, but so tolerant of even extreme examples of white collar financial crime that abets unrelated, non-financial felonies?"

It is doubtful that the mainstream Republicans and Democrats will ever bring anyone to account, because they are as, or even more, complicit in this web of corruption, having been given enormous amounts of money by the Banks in speaking fees and campaign contributions, with the promise of greater amounts for consulting after their terms in office.

And there it is: the credibility trap. Justice for some. However one wishes to rationalize it, but always in order to preserve it.

Senator Warren may as well have asked, like the childlike innocent, "Why is the Emperor naked?"

C'est la mode du temps, cherie, c'est la mode.

"A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.

And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.

The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious, organized hypocrisy.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery."