Historical Archives

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The Daily Data Dive: Bubbly Metros Show Heightened Housing Risks

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More Indications of Labor Slowing----Yellen's Favorite Index Hits The Skids

The Federal Reserve’s Labor Market Conditions Index (LMCI) fell to contraction again in August. After rebounding in July for the first positive reading of 2016, the LMCI dropped to -0.7 in the latest update. As usual, revisions have reshaped the levels of indicated problems throughout the past two years, but overall the trend remains. From...

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Eighty Years Later---JM Keynes' Muddled Ode To Statist Economics

  The “Scientific” Fig Leaf for Statism and Interventionism To the economic and political detriment of the Western world and those economies beyond which have adopted its precepts, 2016 marks the eightieth anniversary of the publication of one of, if not, the most influential economics books ever penned, John Maynard Keynes’ The General Theory of Employment, […]

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A Convocation of Interventionists – Part 1

  Modern Economics –  It’s All About Central Planning We are hereby delivering a somewhat belated comment on the meeting of monetary central planners and their courtier economists at Jackson Hole. Luckily timing is not really an issue in this context.   Central bank headquarters: the Fed’s Eccles building, the ECB’s hideously expensive new tower […]

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A Convocation of Interventionists, Part 2

  Pleas for More Deficit Spending We continue with our Jackson Hole post mortem – including remarks that were made by economists and monetary bureaucrats shortly before and after the pow-wow and seem to be connected to the discussions there.   Assembled central planners (we’re not sure if this picture was taken at the conference, […]

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Joker Poker: Fed Governors Testify In The House, Fed’s Record On Handling Asset Bubbles

Jeffrey Lacker of the Richmond Fed and Esther George of the Kansas City Fed appeared before a subcommittee of The House Financial Services Committee today to discuss Federal Reserve “independence.” I say “independence” because The Fed governors and the Chair of the Fed are appointed by The President of the United States subject to confirmation […]

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Labor Day Summary: Wage Earners Have Taken a Beating

Gordon T. Long and I discuss the decline of wages and employment and how this dooms the status quo.
Let's honor Labor Day by reviewing what's happened to wage-earners in the eight years since central banks "saved the financial system" with free money for financiers: wage-earners have taken a beating and been dumped in a ditch. It's really very simple: wage-earners have seen their real earnings (as measured by purchasing power) stagnate or decline while those chosen few with access to near-zero interest borrowed capital have seen their net income and wealth explode higher.
Do the math, people: annual wage increases once real-world inflation is factored in (roughly 7% to 10% annually for those who rent, have significant healthcare expenses or buy higher education) are either negative or are measured in the hundreds of dollars--in other words, trivial increases for all but the very top echelon of wage earners.
Increases in wealth for those with central bank-supplied free money for financiers are measured in the millions of dollars. Even small-fry with capital invested in bubble markets have experienced gains in the hundreds of thousands of dollars--entire lifetimes of earned income for those earning $25,000 to $35,000 annually.
There are forces at work that are beyond the power of central banks: the technologies of automation, robotics and software are replacing human labor not just in low-skill sectors but increasingly in sectors that provided the bulk of middle class jobs.
One reason why automation is gaining ground is the soaring cost of healthcare (paid by the employers and employees in America, except for those on federally funded Medicaid). Healthcare expenses are labor overhead--employers don't pay labor overhead on robots or software.
While wage earners see their tiny raises wiped out by inflation, employers see their total compensation costs skyrocketing due to employee healthcare expenses.
Then there's globalization. Capital and technology are mobile, labor is not. Capital and technology can chase higher returns anywhere on the planet, but most workers cannot easily move to another country, and then move again a year later, and so on in an endlessly disruptive search for higher returns.
I have covered these longstanding trends for years.
Central bank policies that boil down to free money for financiers have stuck a poisoned knife in labor's back. And in magnifying the immense advantages of borrowed capital, the Federal Reserve has also stuck a poisoned knife in the back of the U.S. economy.
A debt-funded consumption-based economy like America's needs higher wages and employment to enable higher levels of debt, higher tax revenues and higher levels of consumption. Without increases in real earnings to support higher debt and taxes, the system stagnates and then implodes.
The economy and government both need higher wages and higher employment to keep the debt bubble expanding. If the debt stops expanding, consumption and tax revenues plummet and the system collapses under the staggering weight of existing debt.
Wage earners are being stripmined by financialization, the glorification of financial speculation, the decline of productivity and rising costs imposed by state-enforced cartels such as healthcare. Take a look at these charts:
But surely the Fed's vaunted wealth effect has trickled down to wage-earners? Not even close--wealth/income inequality has soared:
Berkeley economics professor Emmanuel Saez put out an update to his estimates of income inequality, and the headline figure has everybody outraged: 95% of income gains since 2009 have accrued to the top 1%.
Gordon T. Long and I discuss the decline of wages and employment and how this dooms the status quo:
Of related interest:
Why the Deeply Held Ideas of the Nation’s Most Elite Economists Were Direct Causes of Extreme Inequality 


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Go to my main site at www.oftwominds.com/blog.html for the full posts and archives.

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10-Year Rolling Average Earnings Per Share----The Growth Is All Gone


You know the meme: corporate sector is healthy world over and the only reason there is no investment anywhere in sight on foot of the wonderfully robust earnings is that… err… political uncertainty around the U.S. elections. Because, of course, political uncertainty is everything…

Except when you look at EPS

H/T @zerohedge 

Now, what the above is showing?
1) EPS is down in the politically ‘uncertain’ U.S.
2) EPS is even more down in the politically less ‘uncertain’ Europe (though you can read on that subject here: http://trueeconomics.blogspot.com/2016/09/4916-some-points-on-russian-european.html
3) EPS has been falling off the cliff since the ‘political uncertainty’ (apparently) set in 4Q 2012 in the U.S. One guess is the markets expected, correctly, the epic battle between The Joker and the Corporate Godzilla back then. And in Europe, since mid 2013, apparently, markets had foresight of who knows what back then.


But never mind, there is no secular stagnation anywhere, because earnings are, apparently very very healthy… very robust… very encouraging… All of which means just one thing: the markets are not overpriced or overbought. Pass de Kool-Aid, lads!

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The Greater Depression-----Donald Trump As THE ANTI-CINDERELLA MAN

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The Real Economy: What The Interest Rate Fallacy Truly Means

Just a little over a year ago, the Institute for Supply Management (ISM) released its purchasing manager index for the services sector for August 2015. Though the level was down slightly from July, coming amidst the immediate aftermath of the “shocking” financial quakes starting in China and spreading to markets all over the world, the...

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