Around the Globe Weekend Edition October 5-6

Saturday:

Ireland Votes to Keep Senate Open – WSJ.com.

Irish Unemployment Rate Through September 2013

The government lost its referendum to dissolve the Irish Senate.  No matter how  bad the  employment situation is, the Irish can rest easy knowing that 60 fellow Irishmen are not losing their jobs after all.  Perhaps the government can create a few more legislative bodies to put some more of the 296,300 unemployed back to work.  Since the onset of the Irish banking crisis, the unemployment rate has skyrocketed about 10 points and has remained stuck at this level.

From Friday’s Edition:

Netherlands in Budget Stalemate – WSJ.com.

Italy and Netherlands Budget Comparison

During the last four years, Italy has posted a smaller deficit than the Netherlands three times with one statistical dead heat.  While this may seem surprising, it is not.  The Netherlands is suffering the aftereffects of its own property bubble and the ongoing competitive disadvantage imposed by its euro membership.  It seems that the ECB’s Teutonic monetary policy does not sit well with the Dutch.  As you can see for yourself, there is an excellent argument for the Netherlands to revert to the Guilder:

Euro Fair Value Netherlands

The euro for the Netherlands is overvalued by over 10% at today’s current rate.

From Thursday’s Edition:

U.S. jobless claims show job market healing but service sector slows | Reuters.

U.S. Jobless Claims Tick Up – WSJ.com.

Four Week Average Initial Claims through 09.27.2013

While there was a slight spike upward in initial jobless claims, the four week moving average has dropped to its typical post-recession low of about 300,000.  Unfortunately, the unemployment rate remains well above what it should be at this point in the recovery:

Unemployment Rate September 2013

This is problematic because this recovery is running its course.  Examine the initial claims chart and see for yourself.  The bottoming out of claims, indicated by the red ellipses, typically indicates a turn in the business cycle.  Perhaps the low claim number indicates “strength” as the article tells us, but when you place this number in context with the other data it becomes apparent that the economy is close to peak recovery.

From Wednesday’s Edition:

Gross Says Market Mispricing Eventual Fed Target Rate Increase – Bloomberg.

Pimco’s Gross says low interest rates may persist for decades | Reuters.

Japanese Benchmark Interest Rate From 1981

Japanese GDP Performance From 1981

Bill Gross is correct.  Rates will stay low for years.  If you do not believe that this is possible without stoking inflation, I present Japan.  The BoJ has maintained a near zero rate interest policy for seventeen years without any inflation.  While inflation may be avoided, there are other negative consequences.  To see for yourself, examine the charts above.  Compare Japan’s GDP performance on the left and right sides of the red line and consider what this will mean for the stock market for the next decade.

From Tuesday’s Edition:

Euro zone manufacturing output falls in September.

Eurozone Markit PMI 10.2013

The Eurozone remains in a stagnant state.  The Manufacturing PMI is barely within expansionary territory with a 51.1.  This number represents a small decline from August.  Commentators seem concerned that the Eurozone “expansion” is running out of gas only two months after it began.  This information merely conforms to the actual situation on the ground rather than the recovery narrative.  Growth is not accelerating, which is what used to happen prior to the New Normal, and this change is confusing to the mainstream media.  The story is not the monthly fluctuations of the PMI but rather the overall trend.  What is making this recovery weaker than previous iterations?

From Monday’s Edition:

Japan Economic Recovery Remains Uneven as Production Declines – WSJ.com.

Japan Industrial Production Through September 2013

No matter where the money printing occurs, the results are the same.  The Bank of Japan’s latest foray into the world of QE has predictably made banksters, speculators and corporations more money while the rest of the country fares poorly.  Of course, there are economic”bright spots” caused by asset price inflation, but they will be unable to spread sustainable growth throughout the Japanese economy.  After witnessing two other QE programs courtesy of the Fed and the BoE, it is safe to conclude that these are the effects of money printing:

  1. Record high bank profits
  2. High corporate profits from financial engineering and cost cutting.
  3. Bull markets for both stocks and bonds
  4. Rising real estate prices
  5. Falling employment levels:

Labor Force Participation through August 2013

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