Jun 012012
 
 June 1, 2012  Posted by at 3:10 pm Finance

So the May NFP report was released today, and it was nothing short of horrendous for the U.S. economy. On expectations of 150,000 jobs created, the actual figure came in at 69,000 AFTER factoring in an addition of 204,000 jobs through the spurious Birth/Death Adjustment, and the unemployment rate rose slightly from 8.1% to 8.2%. What’s interesting here is not the fact that the U.S. jobs market is deteriorating and threatening to consume the U.S. economic “recovery” that never was or never could be – we already knew that was going to happen this year with near certainty. What’s interesting to me is the sheer scale of the deterioration.

 

 

Previously, I was of the view that the Administration and its corporate owners would goose the data and the markets every which way possible for a few more months, until elections were over and done with. In Who Killed the Money Printer?, I suggested that this manipulation would put a lot of pressure on Bernanke and the Fed to refrain from implementing further quantitative easing programs. With the new report out (you can find the gritty details here), though, it is time to re-evaluate the situation a bit. Where before there was almost no opening for the Fed to squeeze through monetary easing, now there is a much wider opening.

It is not only the NFP report which has widened the opening, but also the sharp deterioration in other domestic economic data sets, such as ISM manufacturing, Chicago PMI, ADP employment, etc., and the general down-slide in stocks over the last few weeks in the context of an especially rotten Facebook IPO. In addition, we have general deterioration in economic indicators around the world and especially in Europe, where the intensity of the Eurozone sovereign/banking crises has obviously also grown to epic proportions. All of these things lend further support for CB intervention.

 

 

 

The markets are reacting a bit counter-intuitively to all of this – the major stock indices are all down a whopping 2%, while gold is surging up by 3%. I think it is obvious that the latter is finding its rapid (yet short-lived?) momentum from the idea that the Fed will have all the justification it needs to announce a new QE program in June. That’s true – it will. But, why aren’t stocks sharing in gold’s enthusiasm about the imminent prospects for another dollar liquidity tsunami? In what form and at what scale will any of this new QE take place?

Perhaps the equity markets now realize that the Fed is not as powerful as it seemed to be last year or the year before (see Why Liquidity is No Longer Enough). If the Fed extends its Operation Twist program OR decides to proceed with “sterilized” QE, then most money managers will not feel relieved of market pressures at all (Get Ready to be Disappointed With ‘Sterilized’ QE). If, instead, the Fed brings out a QE bazooka of $1 trillion+ in asset purchases, then they may still end up feeling a bit queasy. How does that $1T or so really stack up against the tens of trillions worth of troubled debt-assets and derivatives that are deleveraging across Europe and in the U.S.?

And what will the Fed purchase – Treasuries? Can those rates even go any lower at this point? We may have finally reached the time at which QE3 is an imminent possibility (within a month), after many months of people screaming that it was perpetually around the corner, but that time may turn out be quite anti-climactic. Will QE3 actually have any bite left behind its relentless bark, or will it quickly fizzle out like a weak dose of Alka Seltzer in a tiny cup of water? It seems that, as of right now, the equity markets are leaning heavily towards the latter.

Politically, I usually shy away from pure speculations, but I will make an exception here – it seems to me that this dismal NFP report is a blatant attack on Obama’s chances for relection by those with enough power/influence within the government. After all, we are all well aware of the lengths the Bureau of Labor Statistics can go to if they want to make a report appear significantly more favorable than it really is. Perhaps this report was SO bad that no amount of massaging could save it, but perhaps there are some with control over the BLS who did not want to save it. Justification for QE3 is certainly one part of this equation, but the ousting of President Obama and the “coronation” of Don Romney may be the other part.

Home Forums NFP and QE3 Speculations

This topic contains 0 replies, has 0 voices, and was last updated by  ashvin 7 years, 3 months ago.

Viewing 15 posts - 1 through 15 (of 15 total)
  • Author
    Posts
  • #8510

    ashvin
    Participant

    So the May NFP report was released today, and it was nothing short of horrendous for the U.S. economy. On expectations of 150,000 jobs created, the ac
    [See the full post at: NFP and QE3 Speculations]

    #3687

    Golden Oxen
    Participant

    “Politically, I usually shy away from pure speculations, but I will make an exception here – it seems to me that this dismal NFP report is a blatant attack on Obama’s chances for relection by those with enough power/influence within the government. After all, we are all well aware of the lengths the Bureau of Labor Statistics can go to if they want to make a report appear significantly more favorable than it really is. Perhaps this report was SO bad that no amount of massaging could save it, but perhaps there are some with control over the BLS who did not want to save it. Justification for QE3 is certainly one part of this equation, but the ousting of President Obama and the “coronation” of Don Romney may be the other part.”

    I always thought anyone that worked for the government was a Democrat, and isn’t there a Democrat in charge at the White House? TAE exposes a view of a world wide credit collapse and deflation, however it is just a Republican ploy if it shows up in the numbers before the election? Rush Limbaugh would devote an entire show to this one.

    #3688

    tsouftsaf
    Member

    In a nutshell, the bankers have been handing out one loan after another, in order to substitute for the industrial capital’s flight to Asia: The West’s productive base has been shrinking for quite a while now, but the loans handed out out by the bankers have been masking this uncomfortable truth for all these decades So, the multinationals have been getting richer and richer by exploiting the -massively underpaid- Asian workforce, and the banks became bigger and bigger (they are now “too big to fail”, and Goldman Sachs’s CEO even considers himself as doing God’s work – talk about hubris).

    But the economy reached a point where the Western worker simply couldn’t pay for his mortgage (that’s a bit of an over-simplification, but you get the point). So, now the banks are in trouble as well, because if they can’t collect the money they were supposed to collect from the recipients of those loans, they are bankrupt (ALL of them). Let’s not forget Lehman’s collapse, not to mention the hundreds of other (smaller) banks that have gone bankrupt in USA over the last four years.

    But, as we all know, most banks are being rescued via your -and my- money. But the banks need a lot of money. Well, I know that they have already received huge bailouts, but that’s not enough. Banks are failing in Europe (now it’s the Spanish banks, then Greece again, etc) and in USA, stocks are going down, and it seems like everything is about to collapse.

    But guess what – no matter how much the banks need, money can be printed in today’s economic system – and they will.

    States all over the world have been printing money for quite some time now, and they continue to do so. Savings the banks is more important than preserving the value of their currencies, so…they will inflate these currencies. And as more and more people realize this, these currencies will hyper-inflate, as noone will want to trade (“loss of confidence”) in a currency that keeps losing value compared to gold, the only thing that will remain stable, as it always does.

    [By the way, did you hear about China and Japan’s deal to trade with each other in their own respective currencies, instead of using the dollar? Or maybe about China’s deal to buy oil from Iran in exchange for yuan, instead of dollars? Oh, and guess what, China and Russia are no longer buying a lot of US bonds, are they? They are however buying gold…]

    As for the workers, printing money is a great way for the ruling class to stealthily lower their wages, making them more “competitive”. After all, they do have to compete against the dirt-cheap Asian labor-force, don’t they? So, they only way to go forward, according to our rulers, is for us to become really poor, and for them to receive huge bailouts, making them even more powerful than they already are. This is the only way they will return to the West for investments – until the workers accept “modern serfdom”, the capitalists will simply let them starve. Hunger will take care of the rest. And since our rulers are already doing God’s work, they could even declare themselves to be Gods, like the Pharaohs. And why not? Their will is our command, isn’t it?

    But this process of debasing the currency has to be completed “one step at a time”. If they print everything at once, everyone will be on to them, and things will get out of hand. So, they first let the stock market almost crash, and then they “save the day”, by printing more and more money. This has already happened a lot of times, and it will probably continue to happen in the future, in both USA and in Europe (Europe is an even more complicated case, since it is a monetary union of many different States: Germany is letting everyone else crash, and only then they allow the ECB to print money (in order to save the German banks among others). But before Germany agrees to money printing, they always hold a conference, where they propose a few new treaties, that give them more and more control over their fellow eurozone members protectorates. So, it’s a bit more political in the eurozone compared to the situation in USA, but the economics of it are pretty much the same, and the ECB will also print money sooner or later, and one way or another).

    https://whataboutmarx.blogspot.com/2012/06/gold-and-jobs-report-if-you-only-knew.html

    #3692

    ashvin
    Participant

    Golden Oxen post=3306 wrote: I always thought anyone that worked for the government was a Democrat, and isn’t there a Democrat in charge at the White House?

    Nope, most people who work for the government are either puppets of global corporatist forces or completely clueless about what they’re doing and why they’re doing it – i.e. just doing what they’re told. The textbook ideology of Democrats and Republicans as portrayed by the MSM has very little to do with it.

    TAE exposes a view of a world wide credit collapse and deflation, however it is just a Republican ploy if it shows up in the numbers before the election?

    Who said anything about a “Republican” ploy? Getting Romney in office does not only have to be the goal of Republicans. In fact, the label “Republican” is almost meaningless in this context. Instead, it could be the ploy of those who feel Romney is better suited to their own elite goals than Obama is over the next 4 years.

    Like I said in the post, though, this is just pure speculation on my part. I have no supporting evidence one way or the other. I’m just wondering… why should the BLS and other agencies stop massaging the data right now a few months before elections?

    Rush Limbaugh would devote an entire show to this one.

    Limbaugh couldn’t hit the water if he fell out of a boat, let alone cover this topic in any coherent or meaningful way.

    #3696

    Candace
    Member

    From a Dem brand long term perspective it might be more useful to lose the election. After all President Hoover started his term in 1929 and yet he is the one most strongly associated with the 1929 crash and misery AKA Hoovervilles.

    If the wheels genuinely derail in 2013 or 2014 that president and his party will be the brand name associated with that failure.

    Of course who knows…

    #3704

    AndrewP
    Member

    QE3 will definitely NOT be Treasuries. The Fed already owns a large fraction of long term bonds. Bernanke will probably buy mortgages the way he did in 2008-2009, although he could surprise us by purchasing real estate directly, or even stocks.

    #3706

    skipbreakfast
    Participant

    I can’t help wondering if there’s a stalemate between the Fed and the consumer. The Fed wants credit growth, but the credit-worthy consumer is refusing to borrow (as much as the lenders won’t lend to anyone “less”). And I just can’t help wondering if these credit-worthy consumers have dug their heels in. They are refusing to budge. Contrary to the Fed’s expectations, these consumers are shrugging off 0% returns because they are going to wait this out in cash, no matter how low the Fed’s rate goes. And so the irony is that eventually, it may become apparent that the only way to increase spending is to capitulate to the consumer and give them yield on their savings. Once they have yield on their savings, THEN they will spend something. Only then will they feel richer and use some extra interest income to buy a nice car. Because as it stands, the 0% policy just makes the wealthy consumer feel poorer and poorer and even while he loses spending power to inflation, psychologically he feels like he still needs to hang on to that money for dear life. It totally flies against conventional wisdom….but I can’t help wondering if that’s where we’re at. An interest rate boost would actually increase the wealth effect rather than decrease it. The less credit-worthy would be more broke, but they aren’t going to spend no matter what. They’re broke either way, with or without an increased interest rate. However, the cashed up consumers, even as a wealthy minority, might start to spread some wealth around if it was earning something without having to engage in ridiculous gambling risks. Just a thought, somewhat different from the typical deflationary explanation that insists the consumer waits for things to be cheaper to explain the psychology behind his refusal to spend.

    #3710

    Golden Oxen
    Participant

    Posted: 5 hours, 35 minutes ago by AndrewP #3323
    QE3 will definitely NOT be Treasuries. The Fed already owns a large fraction of long term bonds. Bernanke will probably buy mortgages the way he did in 2008-2009, although he could surprise us by purchasing real estate directly, or even stocks.

    Have the same feeling AndrewP. Think they are going to try and blow the market up to create a wealth effect, but who knows. They better do something and quickly. It may already be to late?

    #3711

    jal
    Participant

    What Canada has, to knit all the provinces together, is called “equalization payments”.

    https://en.wikipedia.org/wiki/Equalization_payments_in_Canada

    What the EU needs is “equalization payments”. It might not be possible to implement such a program in time to save the EU.

    https://www.zerohedge.com/news/why-grexit-would-make-lehman-look-childs-play

    “I still think we should have had more Lehman moments.  In fact, not letting the AIG moment occur was probably a bigger mistake, but most politicians have taken the lesson never to let a “Lehman” happen again, so once they see that Greece is Lehman on steroids, they will back down and figure out enough to give Europe and the markets a solid kick.”

    As far as the US, the bankrupt states are already getting “equalization payments” by the back door.
    I expect QE3 to come up with programs aimed at saving state and local gov. and with the banks benefitting from the admin of those programs .

    #3712

    Anonymous

    Ash, would appreciate a simple list what you think the Fed QE actions might be, including “same old same olds” (buy Treasuries, buy Mortgages, …?) as well as “and now for something new and different”.

    Also, what if they did nothing at this time? Isn’t the situation spiraling out of control something significant elements of the “powers that be” want to happen? Deflation will make those that survive potentially many times richer and more “powerful” (as in “power over others”)…

    #3713

    AndrewP post=3323 wrote: QE3 will definitely NOT be Treasuries. The Fed already owns a large fraction of long term bonds. Bernanke will probably buy mortgages the way he did in 2008-2009, although he could surprise us by purchasing real estate directly, or even stocks.

    For any QE to work, Helicopter Ben would have to buy Greece, Spain and Italy for a start. So forget it, unless he bails out all of Europe a QE is SOL as a fix.

    RE

    #3718

    TheTrivium4TW
    Participant

    Reverse Engineer post=3332 wrote: [quote=AndrewP post=3323]QE3 will definitely NOT be Treasuries. The Fed already owns a large fraction of long term bonds. Bernanke will probably buy mortgages the way he did in 2008-2009, although he could surprise us by purchasing real estate directly, or even stocks.

    For any QE to work, Helicopter Ben would have to buy Greece, Spain and Italy for a start. So forget it, unless he bails out all of Europe a QE is SOL as a fix.

    RE

    RE, please define “work.”

    QE is working fantastic to transfer bad debts from private bankers to the public treasury.

    It is exactly 100% wrong at keeping rates low as rates always spike up when QE is implemented…

    https://market-ticker.org/akcs-www?post=206723

    QE is not designed to restart what can’t be restarted.

    The [D]elites are bankrupting us by design. You don’t “restart” bankruptcy in defiance of basic arithmetic.

    I think you know this, but fell back into the Matrix for a moment.

    If the banksters want to steal more cash and offload more assets and they think the cost of doing so will be less than they gain, they will QE3.

    If they want to begin the depression operation in earnest (a necessary step to bust debtors and asset strip them), they will not usher in QE3.

    It really is that simple.

    #3719

    TheTrivium4TW
    Participant

    Candace post=3315 wrote: From a Dem brand long term perspective it might be more useful to lose the election. After all President Hoover started his term in 1929 and yet he is the one most strongly associated with the 1929 crash and misery AKA Hoovervilles.

    If the wheels genuinely derail in 2013 or 2014 that president and his party will be the brand name associated with that failure.

    Of course who knows…

    Hi Candace,

    Please consider that both political parties report to the same Big Finance Capital interests.

    Perhaps Woody Harrelson narrating Ethos will drive this point home…

    https://www.youtube.com/watch?v=bjeFLPGWO5c

    As long as people are duped into voting for Bankster Puppet on the Left or Bankster Puppet on the right, we are DOOOOOMED.

    “In the technotronic society the trend would seem to be towards the aggregation of the individual support of millions of uncoordinated citizens, easily within the reach of magnetic and attractive personalities exploiting the latest communications techniques to manipulate emotions and control reason.”
    ― Zbigniew Brzezinski, Between Two Ages: America’s Role in the Technetronic Era

    “The argument that the two parties should represent opposed ideals and policies, one, perhaps, of the Right and the other of the Left, is a foolish idea acceptable only to the doctrinaire and academic thinkers. Instead, the two parties should be almost identical, so that the American people can “throw the rascals out” at any election without leading to any profound or extreme shifts in policy.”
    – Carrol Quigley, Tragedy and Hope

    “The history of the last century shows, as we shall see later, that the advice given to governments by bankers, like the advice they gave to industrialists, was consistently good for bankers, but was often disastrous for governments, businessmen, and the people generally.”
    Carroll Quigley

    “In addition to their power over government based on government financing and personal influence, bankers could steer governments in ways they wished them to go by other pressures.”
    Carroll Quigley

    Please consider that Left vs Right is a false narrative designed to keep you on the bankster reservation – where the banksters win regardless of whether you pick Bankster Puppet #1 or Bankster Puppet #2.

    #3722

    Candace
    Member

    Hi Triv,

    I understand that they are all dancing to the same tune, but I see them like corporation like P3psi and C@ke. Ashvin was speculating as to why the BLS came out with a negative ad for the “Dem” brand. I’m speculating that the Dem brand maybe positioning itself for a collapse in the economy. Just because they are puppets doesn’t mean that the various puppets don’t have preferences about the parts they plat in the theatrical production. The policies implemented by either side will ultimately be the same, how the policies are marketed will be different depending on which brand is in the leadership position.

    In that sense I’m speculating on what narrative the various groups, alliances and subgroups among the elite are trying to market.

    Obama was a useful pitchman for pacifying certain groups in our society. If the more powerful of the power brokers, are moving behind Romney rather than Obama, why? He’s been a rather faithful servant to their interests. I see it as sets of elites jockeying for various points of leverage.

    I think being successful as an elite means trying to generate some trends, but it is also necessaryfor them to navigate or surf some trends that were not something they wished to have come about.

    The question I see in Ashvin’s piece is whether the report was a “black swan” that they were inadequately prepared for, if there is a faction in the BLS that is “revolting” and just wanting to throw some sh:t around because they are upset about something, or is it a marketing ploy, if so what is thenarrative they are trying to sell.

    The most useful plan in both cases is not to believe any of the marketing, for beverages or politicians. But analyzing why certain choices are being made in a marketing strategy can tell you a lot about the market research they are using to develop their strategy. That is what I was trying to get at – is the Dem brand so certain that there is going to be a train wreck that they would rather lose some of the perks of being the brand in power so that the negative associations of deep economic failure are associated with the other brand. The brands are competitors and individual players get more goodies for having the more successful brand, they are just selling the same product.

    My take anyway.

    #3723

    ashvin
    Participant

    MayAllBWell post=3331 wrote: Ash, would appreciate a simple list what you think the Fed QE actions might be, including “same old same olds” (buy Treasuries, buy Mortgages, …?) as well as “and now for something new and different”.

    The potential actions I see are extending the termination date of operation twist (selling short and buying long treasuries in equal amounts), “sterilized” QE3 (see diagram below), unsterilized asset purchases of treasuries, MBS, muni bonds, or… Eurozone peripheral bonds (Spanish or Italian). Like RE, I think only the last one would quell market fears for awhile, but I also think it’s very unlikely to occur for political reasons.

    Also, what if they did nothing at this time? Isn’t the situation spiraling out of control something significant elements of the “powers that be” want to happen? Deflation will make those that survive potentially many times richer and more “powerful” (as in “power over others”)…

    Yes, that’s a possibility that I have mentioned a few times. I was quite a lonely voice all of last year when I was saying QE3 wouldn’t occur in 2011 and this year when I said it may not go down until elections. Politically, it would still be difficult to sell before elections, but it gets much easier as the markets fall and the economic data gets much worse, such as Friday’s NFP. Financially, the benefits to the banks are only slightly better than they were before, but it would have to be a big bazooka (more than $1T) and, IMO, it would have to target MBS, munis or EZ bonds.

Viewing 15 posts - 1 through 15 (of 15 total)

You must be logged in to reply to this topic.