Preparednessdaily.com

Brief Note on the Unemployment Rate

From Mish’s Global Economic Trend Analysis

I had to rush this morning for an appointment and did not get the following point expressed properly.

Addendum to Payrolls +103,000 Jobs , 444,000 Part-Time on Household Survey

In the household survey (data repeated below for convenience) there was a gain of 398,000 employed. However, the labor force rose by 423,000 explaining the flat unemployment rate.

Of the 398,000 increase in employment, 444,000 were part-time jobs. This can be interpreted two ways. The first way is 46,000 full-time jobs were lost. The second way is 398,000 people who did not have a job, now have one.

The correct interpretation depends on the status of those workers over time. My guess now is this is unusual seasonal strength and will not be repeated.

End of Addendum

Here are the charts once again

Household Data

click on chart for sharper image

In the last year, the civilian population rose by 1,749,000. Yet the labor force dropped by 107,000. Those not in the labor force rose by 1,856,000.

Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Table A-8 Part Time Status

click on chart for sharper image

A year ago there were 8.6 million people who wanted a full-time job but could only find part-time work. Now there is 9.27 million.

In the last month, the number of people working part-time for economic reasons jumped by…

Politics, Money and OWS

From

The head of the IMF, Christine Legarde dropped a big bill on Tim Geithner’s desk after the market closed on Friday.

 

From the WSJ article:

It’s clear that Lagarde is after the ever-elusive leverage factor. In this case “creative” and “firewall” means SPV.

Really? The…

Reader Question Regarding the Role of Credit in Inflation/Deflation; US vs. Europe

From Mish’s Global Economic Trend Analysis

A reader from Germany has questions regarding the role of credit in my deflation thesis. Josef writes:

Hello Mish

I am trying to understand your reasoning in the discussion about inflation vs. deflation.

One of the things I don’t understand is the role of “credit”. You write that “the market value of credit is collapsing at an amazing rate”.

But isn’t “credit” the same as “debt”?

When the market value of debt falls, then I wouldn’t I need less “real estate” to get rid of my debt? Please, can you spend a minute to clarify this contradiction.

No Contradiction

Hello Josef

An accepted offer for credit is a loan, resulting in debt for the borrower, and an asset (the loan) on the balance sheet of the lender (typically a bank or finance company). So yes debt = credit extended (plus agreed upon interest).

When the value of assets (loans) drop significantly, banks become capital impaired and cannot lend. This is happening now even though banks are hiding losses by not marking assets to market prices.

We have heard absurd statements from the Central bank of France that there are no toxic assets on French bank balance sheets. The market price of Greek debt says otherwise.

Plunge in Mark-to-Market Prices of Bank Assets

We can infer marked-to market plunges in value of bank assets by the enormous drops in financial stocks this year. We know the value of debt on the…

The Market Ticker – So Obama Said….

From The Market Ticker

the other day that “What Wall Street did was immoral, but it wasn’t illegal” in response to a question about why nobody had gone to jail.

Really Mr. President?  None of the following is illegal?

• Laundering drug money.  Wachovia admitted to doing it in court.  They got a “deferred prosecution agreement” and not only did nobody go to jail nobody other than a few bloggers like myself raised hell about it until days before that agreement expired.  Then, magically, it got news coverage.  This is a clear black-letter felony; where are the handcuffs?

• The former chief risk officer for Citifinancial testified under oath before the FCIC that the company knowingly sold loans on to investors that did not meet their quality guidelines and published claims. In fact, he testified that by 2007 80 percent of those loans were defective. This is functionally identical to selling you a car and rolling back the odometer, peddling tainted medicine or selling melamine-laced baby formula.  There is nothing complicated about this and there is under-oath testimony establishing that it was not an accident or an “error in judgment” as it continued for more than a year after it became known and was the subject of internal memos to corporate officers.  This is not my conjecture or analysis, it is factual sworn testimony before a government body.  Where are the damned handcuffs?

• Ponzi Schemes generally.  Those are all illegal.  They

…

Sol Sanders | Follow the money No. 87 — Hello? Something in the water?

From

Latest from Uncle Sol.  A version of this column is scheduled to be published on Monday, Oct. 10, 2011, in The Washington Times.  My question for Sol is this: Is Barack Obama trying to throw the election? — Chris
 

Follow the money No. 87 |  Hello? Something in the water?

By Sol Sanders

Could more conspiratorial environmentalistas’ interpretations of our times be correct, that is, someone has been putting something in the water and we are all being lobotomized, even without major brain surgery?

You could make the case this week. Much of the world’s leadership, even though presumably suckling their bottled water, exhibits all the manifestations of imbibing something adversely affecting the normal cognitive processes:

·        Pres. Barack Obama gets on television to boost his proposal for creating jobs by massive government expenditures and tax increases at a time when most Americans think the main problem – after disappeared jobs — is a runaway federal deficit. Never mind he sent a $ 447 billion spend and tax bill up to the Congress without a co-sponsor in either of the houses, that his own Party’s Senate leadership initially refused to look at it, then introduced something radically different as a Millionaires’ Tax. All that even though the President has repeatedly endorsed his Republican opposition’s claim any tax increase during a recession is job-killer. Of course, neither bill has a – woops! we can’t say that any more – chance of getting through…

Fitch Downgrades Spain, Italy on “Intensification of Euro Zone Crisis”; Outlook Negative; Greek 1-Year Bond Yield Hits 144%

From Mish’s Global Economic Trend Analysis

Bloomberg reports Spain, Italy Credit Ratings Lowered by Fitch as Europe Debt Crisis Worsens

Spain and Italy, the euro region’s fourth- and third-largest economies, were downgraded by Fitch Ratings on concern they will struggle to improve their finances as Europe’s debt crisis intensifies.

Spain had its foreign and local currency long-term issuer default ratings cut to AA- from AA+, while Italy had the same set of ratings to A+ from AA-, the company said in statements today. The outlook for both countries is negative. Fitch also maintained Portugal’s rating at BBB-, saying it would complete a review of that ranking in the fourth quarter.

The downgrades reflect “the intensification of the euro zone crisis,” which “constitutes a significant financial and economic shock,” Fitch said, citing risks to Spain’s “fiscal- consolidation” efforts. “A credible and comprehensive solution to the crisis is politically and technically complex and will take time to put in place and to earn the trust of investors.”

Fitch’s cut of Italy was its first since October 2006. It follows downgrades of Italy by Moody’s Investors Service on Oct. 4 and Standard & Poor’s on Sept. 19, which both cited concerns that the country’s weak economic growth means it will struggle to reduce Europe’s second-largest debt, at about 120 percent of gross domestic product.

Spain’s rating, which was AAA until 2010, has now been lowered twice by Fitch as the deepest austerity measures in three decades fail to convince…

And Spain… Fitch Downgrades Spain To Aa- From Aa+, Two Notch Cut, Outlook Negative

From

Really close to France now…

FITCH DOWNGRADES SPAIN TO ‘AA-’; OUTLOOK NEGATIVE
 
Fitch Ratings-London-07 October 2011: Fitch Ratings has downgraded Spain’s Long-term foreign and local currency Issuer Default Ratings (IDRs) to ‘AA-’ from ‘AA+’. The rating Outlook is Negative. Fitch has simultaneously affirmed Spain’s Short-term rating at ‘F1+’ and the Country Ceiling at ‘AAA’.
 
The downgrade primarily reflects two factors: the intensification of the euro area crisis and secondly, risks to the fiscal consolidation effort arising from the budgetary performance of some regions and downward revision by Fitch of Spain’s medium-term growth prospects.
 
As Fitch has previously cautioned, a credible and comprehensive solution to the crisis is politically and technically complex and will take time to put in place and to earn the trust of investors. In the meantime, the crisis has adversely impacted financial stability and growth prospects across the region. However, the still sizeable structural budget deficit, high level of net (although not
gross) external debt and the fragility of the economic recovery as the process of deleveraging and rebalancing continues render Spain especially vulnerable to such an external shock.
 
While gross external debt (169% of GDP in 2010) is not high by euro area comparison, the net external debt of the economy (91% of GDP in 2010) is one of the highest in the world, reflecting a relative lack of Spanish foreign financial assets. This leaves the Spanish external finances sensitive to interest rate increases. While the current account adjustment has…

“Your Alpha Is Burning” – Fighting Greek Fire with Fire: Volatility, Correlation, and Truth

From

From the mind that brought you the Great Vega Short comes the next masterpiece on liquidity, volatility, contagion and everything else.

The world economy is fighting a fearsome wildfire as the European sovereign debt crisis burns its way closer toward the tinderbox of a second global recession. The insolvency inferno has no prejudice and will fuse to the flesh of any asset class fueling a blistering spiral of correlation and volatility. The third quarter of 2011 was characterized by explosive movements in equity markets as the S&P 500 index declined -14% in the worst performance since the crash of 2008. Global indices officially entered bear market territory with the MSCI All-Country World Index down more than -20% since peaking in May. The 10-year US Treasury yield reached the lowest level on record in September as credit markets braced for an economic slowdown. Over the quarter implied volatility increased +96% as the VIX index climbed to 42.96. If you heeded the omens of variance markets earlier this year you were richly rewarded by this increase in volatility.

 

A wildfire is blind and cruel in violently transforming the essence of any material to ash. In this sense the end-effect of fire is always correlation and volatility. The common method to extinguish a wildfire is by dousing it with water but what if this is not enough? Is it possible for fire to resist or spread through

…

The Top 100 Statistics About The Collapse Of The Economy That Every American Voter Should Know

From The Economic Collapse

The U.S. economy is dying and most American voters have no idea why it is happening.  Unfortunately, the mainstream media and most of our politicians are not telling the truth about the collapse of the economy.  This generation was handed the keys to the greatest economic machine that the world has ever seen, and we have completely wrecked it.  Decades of incredibly foolish decisions have left us drowning in an ocean of corruption, greed and bad debt.  Thousands of businesses and millions of jobs have left the country and poverty is exploding from coast to coast.  We are literally becoming a joke to the rest of the world.  It is absolutely imperative that we educate America about what is happening.  Until the American people truly understand the problems that we are facing, they will not be willing to implement the solutions that are necessary.

The following are the top 100 statistics about the collapse of the economy that every American voter should know….

#100 A staggering 48.5% of all Americans live in a household that receives some form of government benefits.  Back in 1983, that number was below 30 percent.

#99 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

#98 Since Barack Obama was sworn…

Restructuring Plans Underway for Another 21 Banks Says Vice President of the European Commission; What’s the Real Number?

From Mish’s Global Economic Trend Analysis

Inquiring minds are reading details of a Speech by Joaquín Almunia Vice President of the European Commission responsible for Competition Policy on October 4, 2011.

Since 2008, people throughout the EU have been asked to accept the huge government bailout of the financial sector and to endure the austerity measures required to bring public finances under control.

These measures touch directly the lives of citizens; this is why I believe that we need to be as transparent as possible with them. And – of course – we need to do our utmost to make the most efficient use of public money.

It is crucial that we explain to our citizens why this aid was necessary to avert the collapse of the financial system. …

We are all aware of the seriousness of the situation and of what is at stake.

Of course, the control of the State aid given to the banks under restructuring is not the only task to overcome the consequences of the financial crisis.

The financial sector must be oriented – first and foremost – towards its core function of meeting the financing needs of firms and households.

To this end, the Commission is in the process of changing the regulatory landscape for the financial industry.

Recent steps include, among others, the proposals on capital requirements – the so-called CRD IV – and the European Market Infrastructure Regulation, or EMIR.

President Barroso also announced a proposal…