Around the Globe 11.05.2013

BOJ Gov. Kuroda Calls Easing Steps Successful –

BOJ Struggles to Convince on 2% as Abenomics Shine Fades – Bloomberg.

Japan Salaries Extend Fall as Abe Urges Companies to Raise Wages – Bloomberg.

Japanese Incomes  Japanese GDP Performance Through 2Q2013

Japanese Inflation Rate


Printapalooza throughout the world continues, but the Bank of Japan is leading the world in money creation.  Printing inflates asset prices while deflating labor costs, i.e. wages.  In the first chart, note the trend of Japanese wages since the BoJ began printing over a decade ago.  It is not surprising that the Japanese economy is weak, because consumers have been on a slow, inexorable wage reduction for almost 15 years.  The current round has proven ineffective at raising GDP growth, as illustrated in our second chart.  Indeed, Japan witnessed stronger growth in the aftermath of Lehman than it is under Abenomics, which is also the last time Japanese inflation exceeded 2%.  If you examine the third chart, you can see what happened after the last three times the mainstream financial press called an end to Japanese deflation.

In the meantime, the export and stock market gains fueled by the weak yen have probably peaked.  The USDJPY exchange rate is highly correlated to the ratio between BoJ and Fed assets.  As our last chart details, the market has already priced in the more rapid expansion of the BoJ’s balance sheet.  A reduction in Fed purchases, the dreaded taper, will allow the yen to depreciate further.

BoJ to Fed Balance Sheet Ratio vs. JPYUSD


Service Industries in U.S. Grow at Faster Pace Than Forecast – Bloomberg.

Service sector exapnds more than expected in October: ISM.

U.S. service sector growth quickens in October: ISM | Reuters.

ISM NMI 11.2013

The economic data continues to tell a tale of stagnation.  The MFP is breathlessly reporting that the services PMI beat the consensus forecast despite the “shutdown.”  Numbers above 50 signal expansion, but a 55.4 is nothing to write home about.  Expected GDP growth at this level is below 2%, which is far below the 3.5% growth required to stir the labor market.

Pressure mounts on Draghi following eurozone forecasts –

Rehn Confident Greece to Meet Targets as Troika Talks Resume – Bloomberg.

EU Forecasts Sluggish Growth as Austerity Continues –

EU cuts euro zone growth forecasts for 2014.

Uncertainty over ECB caps moves in shares, euro | Reuters.

Euro Fair Value at 1.37


Everyone is trying to predict what the ECB will do on Thursday: will it cut rates or not? Most commentators seem to believe that the ECB will cut its discount rate, because the EU just cut its Eurozone growth forecast for 2014 to 1.1%.  The EU has been relentlessly cutting growth forecasts since 2010, so there is no crisis here.  The only thing you need to know about how the ECB will conduct monetary policy is contained in the chart above.

As long as the euro remains weak enough to promote German exports, there will be no rate cut to lower the euro exchange rate.  If the euro attains and maintains the low $1.40’s for a time, then there will be a rate cut.  At the current rate of $1.35, Germany is benefiting from both low inflation and a weak currency.


Around the Globe 11.04.2013

Janet Yellen’s mission impossible—Commentary.

Could QE spur deflation, not inflation?.

There are two reasons why the Fed will keep printing. 1st:

Fed Balance Sheet vs. SP500 10.2013


US 10yr through 11.04.2013

The creation of the 401(k) years ago politicized the stock market.  The government’s policy of herding Americans into purchasing equities to fund their retirements has created an expectation that the government must do something about falling markets, so it does.  Additionally, the government must be able to finance itself.  A rise in treasury rates would result in higher deficits down the road; hence, the Fed must keep rates low and the only method currently at its disposal is the printing press, so print it does.

Ultimately, all of this printing is slowly destroying the economy, because QE is ultimately both inflationary raising assets prices and deflationary suppressing income growth.  Japan started its own money printing program in the late 90’s, and you can see for yourself how incomes are performing:

Japanese Incomes

Like the Fed, ECB expected to keep on pumping.

ECB may soon join the flight of the doves | Reuters.

Debt crisis has left Germany vulnerable –

USDEUR Exchange Rate vs Fed to ECB Balance Sheet Ratio

The MFP and its assorted shills, hangers on and supplicants believe that the ECB will begin printing in earnest to match pace with the Fed, and it just might but not for the reasons it endlessly touts: unemployment, lower inflation and economic contraction and stagnation in the periphery.  Rather, the only thing you need to know is the USDEUR exchange rate.  When it rises to a level that threatens Germany’s export machine, then there will be an ECB rate cut and not one second before.

The chart above illustrates the relationship between the dollar/euro exchange rate and the Fed/ECB balance sheet ratio.  As you can see, the rate has diverged from its long-term relationship, but these divergences are only temporary.  The euro will continue it general, upward trend for the near future.  Once the euro crosses the $1.45 line, the ECB will consider a rate cut because this is the rate that curtails Germany exports.

China reform checklist: How to tell that this time it’s for real? | Reuters.

China 7 Day Repurchase Rate 11.04.2013


Chinese leaders enjoy discussing economic reforms almost as much as the mainstream financial press hyping said reforms.  Chinese leadership has linked economic growth with political stability.  In light of this fact, this is all you need to know about Chinese economic reforms: if the reforms have any negative consequences, they will quickly be rolled back.  The PBOC has been attempting to liberalize the financial system by stepping away and letting the banks fund each other rather than relying on central bank liqudity.  Unfortunately, whenever it begins backing out of the overnight lending market, interest rates spike, so it rushes right back in.

This is exactly how government reforms will proceed.  The government will attempt to reform the economy.  Once adverse consequences erupt, (i.e. higher unemployment, the wrong guy’s factory being shuttered) the government will reverse course in short order.  After conditions settle down, it will make another feeble attempt to reform and change its mind once the consequences return.  Rinse and repeat.

High unemployment? Blame high home ownership, study says – NBC

Unemployment versus Home Ownership


This is an interesting study.  High rates of home ownership lead to higher structural unemployment.  This study’s conclusion makes sense, and it survives a careful reading.  Renters are more mobile than homeowners, and this affects the unemployment rates.  In the chart excerpted from Dr. Oswald’s study, we can see two examples that tend to prove the rule.  Of course, there are other reasons why Greece has a drastically higher unemployment rate than Germany, which is why the country is so far above the trend line.  BTW, Greece’s neighbor on the chart is Spain.

Around the Globe 10.28.2013

Pending Home Sales Show Sharp Drop –

Pending Sales of Existing Homes Slump by Most in Three Years – Bloomberg.

Pending home sales drop 5.6 percent in September.

U.S. pending home sales fall by most in more than three years in September | Reuters.

NAR Pennding Home Index through 09.2013

The MFP is rightly attributing this fall in pending home sales to the precipitous rise in mortgage rates since May, though the NAR would have you believe that the shutdown beginning on October 1 somehow affected pending sales from September.  Houses have become dramatically more unaffordable since May from rising rates and housing prices against the backdrop of stagnant incomes.  The only way for the housing market to improve at this juncture would be from gains in consumer income, which is not in the cars.


Hilsenrath to Wall Street: You don’t know Fed.

QE Infinity? No end in sight for money printing.

In Fed and Out, Many Now Think Inflation Helps –

Fed Balance Sheet vs. SP500 Last Year

If you wish to know the Fed’s future money printing output, this is the only chart you need to understand.  The Fed buys bonds, and the sellers invest those proceeds into stocks raising prices.  When the Fed stops or even threatens to stop, the whole trade begins unraveling. While the Fed claims to be concerned with unemployment and inflation, the Fed is extremely apprehensive about the consequences of a falling stock market.    Going forward, the Fed will continue to use low inflation and poor labor market data to justify continued printing to support both the government bond and stock markets.

Analysis: Convalescent euro zone seeks to escape debt overhang | Reuters.

Currency Woes Batter Europe’s Industrial Giants –

EURUSD 10.28.2013

From Yahoo Finance

The Eurozone and the MFP is really counting on PIIGS exports continuing their rise in order to support the Eurocrisis Recovery Narrative.  Unfortunately, a rising euro will stop the export “boom” in its tracks.  The Euro will continue to rise as the Fed continues to print.  Moreover, Eurozone banks are still selling overseas assets to bolster capital ratios back home.  This process has created  background buying pressure on the euro that may even pick up as these backs clean up their balance sheets in advance of the commencement of the “banking union” in late 2014.

Not happy at work? Wait until you’re 50 or older….

This article is typical of the drivel spewing from the mouth of the MSM.  People report increasing job satisfaction after 50 because of some rather obvious selection bias.  People switch jobs several times over the course of their careers.  If your job sucks, you quit it in the hopes that the next job will be better.  This process will continue until you find a job that you enjoy.  Then, you will stay with it as long as you can.  It is not surprising that people settle into a comfort zone with their employment when they reach the last stages of their careers.  So the article’s advice to sit around and “just wait” until you’re 50 is poor advice.  It takes a lot of work to obtain satisfying work, so get to work already!

Around the Globe 10.22.2013

Foreigners Sold U.S. Assets as China Reduces Treasuries – Bloomberg.

China Exports Last 24 Months



China has reduced its US T-bill purchases in two of the last three months, but the country remains the largest international holder of US debt.  Commentators sometimes worry about what would happen if China ceased purchasing US debt; however, this is much ado about nothing.  China maintains an low exchange rate for the yuan to promote export related jobs in manufacturing over consumption.  As a result of this policy, China runs a persistently high trade surplus with the US.  Spending that money would lower the price of the dollar and raise the price of the yuan as the supply of dollars increased while demand remained level, so it is stashed in T-bills.

As a consequence, interest rates in the US remain low spurring more consumption and higher trade deficits, and so on.  One day, this system will break down, just not today.  In the meantime, Chinese T-bill purchases will fluctuate based on a variety of factors including the gross amount of exports in a given month.

Wealthy could lose big if Fed stops money flow.

Collectibles Market 1H2013




The rich are different from you and me.  When you or I come into some money, we may splurge on a nice dinner, new electronics or a weekend getaway.  The rich are already consuming their maximum in these areas, so additional cash will flow to more esoteric sectors of the economy, like the collectibles market.  The reason  the world’s central banks claim to have inflation under control is due to where they look for it.

Energy and food prices have been generally stable here in the U.S., but check out the charts above.  (For reference, the CPI and S&P 500 grew about 1% and 10% during the first half of the year.)  Each collectible sector is growing at well above the rate of inflation save for art and antiques with the classic auto market possibly within bubble territory.

This data raises an interesting question.  Will inflation remain segregated to the 1%, or will it eventually spill over to the 99? Intriguingly, housing inflation is already striking the 99% with higher median home prices and rising rents.

Murky jobs picture likely to keep Fed on hold.

Employers Add 148,000 Jobs; Unemployment Falls to 7.2% –

Payrolls in U.S. Rise Less Than Forecast – Bloomberg.

Tepid job growth supports Fed’s cautious stance | Reuters.

Nonfarm Payrolls Through Sept 2013

Job creation ran at about 1/3 the number necessary to absorb all the new entrants into the labor market during the month, but unemployment dropped anyway indicating the continuing decimation of the American workforce.  This is actually good news for the stock market, because investors will expect more money printing and higher share prices bidding them up thus.

Supposedly, the Fed exercises monetary policy under a dual mandate of low inflation and low unemployment; yet, inflation remains high as we explained in the post above, and job creation has disappointed throughout the “recovery.”  This money printing has been quite ineffective at spurring employment, but it continues.  While the policy does little for the majority,  very rich minority has paid lots of money in campaign contributions to ensure they become even richer:

Fed Balance Sheet vs. SP500 10.2013

Moreover, the Fed had lost control of rates since taper talk began in May.  Informing markets  that the Fed will be buying billions in T-bills almost every day has bid the yield back down with U.S. debt maintenance costs.

US 10yr 10.22.2013


U.S. existing home sales fall, price appreciation slows | Reuters.

Here’s Why Existing Home Sales Slowed Down In September And Will Continue To Do So – Business Insider.

Home Sales Fell 1.9% in September –

Existing Home Sales Through Sept 2013


Existing home sales fell during September as higher financing rates and stagnant incomes have created significant headwinds for prospective purchasers.  Well, at least we managed to reattain 2003’s sales pace.  Look for more bad news in this space as the consequences of the government shutdown reveal themselves in October’s data.

Around the Globe Weekend Edition October 19-20


Euro Zone May Not Have Emerged from Recession, CEPR Says –

Eurozone Total Employed Persons US Labor Force Participation

The mainstream media is beholden to the standard definition of a recession, which is two consecutive quarters of GDP contraction.  If it chose to feature another data series as its bellwether of economic health, then it would be forced to alter the recovery narrative that it has been touting for the last few years.

As it happens to be,  the labor market reveals more about the experiences of the vast majority of taxpayers.  Both the Eurozone and the United States remain in labor market recessions, even though GDP is growing modestly.  Total jobs have decreased in the Eurozone, and there is no end in sight to the contraction.  In the U.S., job creation is positive but is not maintaining pace with the number of new labor market entrants; hence, the employment participation rate continues to decline.

If you own stocks, bonds or real estate, then this is the economy for you.  If you derive most of your wealth from the fruits of your labors, then the recession never ended.

From Friday’s Edition:

Heard on the Street: China Rebound Fails to Reassure –

Infrastructure drive powers China’s growth prospects –

China GDP

What goes up, must come down.  Recessions are normal.  These down periods give the economy time to reallocate resources so that productivity increases ultimately lead to rising GDP and employment levels.

Once politicians figured out that they will be blamed for the twists and turns of the business cycle, they began trying to prevent contractions.  The two methods for accomplishing this objective are government spending and money printing.  This has been occurring for years, but credit growth is reaching an important juncture.  The diminishing marginal returns of stimulus are fast approaching zero.  The U.S. has printed almost $3tr extra dollars and has added over $6tr to the government debt since Lehman, and this has only added $1.4tr to GDP.  That’s over a six to one ratio.

China is nowhere near that poor ratio, yet, but it is well on its way.  Chinese officials wish to maintain power, and they will create as much yuan as is necessary to accomplish their goal.

China Credit Growth


From Wednesday’s Edition:

Shutdown is having ‘notable impact’ on mortgages.

Home Builders Cite Waning Confidence –

New Purchase Mortgage Apps
Source: MBA/Zerohedge

New mortgage apps are plummeting, which does not bode well for home sales.  Even though the budget “impasse” will end with a deal before too much long-term damage to the nation’s standing is done, the consequences of this political theater will drag on for months.  Home sales will drop through October, but a November rebound will be touted by the mainstream media as a resurgence in the housing “recovery,” not the pent up demand from prior weeks.


From Tuesday’s Edition:

Fed’s Dudley: Large Balance Sheet Increases Inflation-Fighting Discipline – Real Time Economics – WSJ.

Exclusive: Fed’s Fisher, outspoken hawk, sees no QE reduction this month | Reuters.

Fed Balance Sheet vs. SP500 10.2013

The printfest will continue because it cannot stop.  Once the Fed stops creating dollars by monetizing federal and mortgage debt, the market will cease its rise shortly thereafter.  Eventually, the policy of printing money to increase asset prices will lose its efficacy.  First, additional QE will stop inflating market prices, but it will still be able to maintain some sort of stability.  Next, well, no one knows what happens next.


From Monday’s Edition:

Asmussen rules out ECB rollover of Greek bonds | Reuters.

Greek Government Budget Deficit Ratio

Asmussen must say things like this for two reasons.  First, Germany needs to keep up the austerity pressure, or else the Greeks will stop “reforming” the economy.  Second, Germany has not yet formed a government.  With sensitive coalition negotiations, it is an inconvenient time to admit that Greece needs a 4th bailout even though this is inevitable.  In order to preserve its export currency, the German government and the voters will continue denying that Greece needs more money until it does.  Then, it will gladly do whatever is necessary to bail Greece out.

Around the Globe 10.16.2013

Shutdown is having ‘notable impact’ on mortgages.

Home Builders Cite Waning Confidence –

New Purchase Mortgage Apps

Source: MBA/Zerohedge

New mortgage apps are plummeting, which does not bode well for home sales.  Even though the budget “impasse” will end with a deal before too much long-term damage to the nation’s standing is done, the consequences of this political theater will drag on for months.  Home sales will drop through October, but a November rebound will be touted by the mainstream media as a resurgence in the housing “recovery,” not the pent up demand from prior weeks.

Draghi Turns Judge on EU Banks as ECB Studies Accounts – Bloomberg.

Euro zone inflation drops to 3.5-year low in September as expected | Reuters.

Net Bank Assets as a Percentage of Host Country GDP

The ECB is not set to judge Eurozone banks.  This is political theater to satisfy voters that the EU is not throwing away more of their hard-earned money on politically connected bank bailouts.  Bank stress tests have already been conducted by the ECB with kid gloves, and this treatment is expected to continue.  The Eurozone’s banking system is a disaster waiting to happen.  Bad loans in the periphery are being hidden by policies such as slow markdowns of nonperforming debt and playing extend and pretend to prevent loans being categorized as “nonperforming.”

Take a look at our chart and prepared to be surprised by the host countries of the most dangerous banks.  Germany and the rich countries do not wish to be on the hook for periphery banks, not just because they are being selfish but also because they can’t.  They need to keep their powder dry in the case of a systemic collapse, still not out of the question at this juncture in the eurocrisis.

China Intervened Aggressively in Currency Markets in Latest Quarter –

Chinese T-Bill Holdings

The Chinese mainstream media was recently bitching about the amount of US treasuries held by the country.  No matter the country, the mainstream media fails when it refuses to depart from its narrative on a topic.  The narrative for China’s position as the largest foreign holder of US debt is that the virtuous Chinese lend their savings to the stupid, fat spendthrifts across the Pacific to save them.  Actually, the Chinese are saving themselves.

China actively discourages personal consumption by it citizens with an array of methods.  Hence, China sells to but does not buy from the US, so surplus dollars must be invested somewhere, i.e. the US treasury market.  In addition to not buying much from the US, the country purchases dollars on the open market to maintain the yuan’s weakness and its trade surplus.  Like all Nash equilibriums, this system will continue until it cannot.  Then, it will stop.  Good luck guessing when.

Full post with charts, images and links:

Around the Globe 10.15.2013

Fewer US homes entered foreclosure track in third quarter.

Foreclosure starts vs sales


The mainstream media loves its housing recovery narrative and fervently guards it against the data.  This is the lede from the article above:

The number of U.S. homes set on the path to foreclosure slid to a seven-year low in the third quarter, reflecting a gradually improving housing market and fewer homeowners falling behind on mortgage payments.

That statement is false.  Foreclosures are sliding because banks are keeping delinquent properties out of the foreclosure, whether by design to maintain higher prices or because they simply cannot work their way through the backlog.  I believe the latter explanation is more likely as incompetence trumps malevolence.  If the housing market were really on its way back to health, the number of delinquencies would have plummeted in lockstep with the foreclosures.  It hasn’t:

Mortgage Delinquency Rate

This second chart shows that defaulted mortgages have remained near recession peaks and historic highs. What is really happening here is that the zombie inventory of homes continues to grow keeping supply out of the hands of the 99% who pay inflated prices for homes and rents for apartments.

Citigroup results hit by bond trading slowdown.

Citigroup Results Hit by Weak Fixed Income Trading –

Citigroup results hit by bond trading slowdown | Reuters.

Citigroup 10.15.2013


All of the TBTF banks are enduring lower profits due to smaller bond volumes and a decrease in mortgage applications.  This news has not mattered one iota to share prices as our chart of C shows.  A mild 50¢ sell-off at the open followed by a rally back to just about the pre-earnings level.  Corporate profits have ceased improving, so the current rally is exclusively beholden to additional multiple expansion.  The financial commentariat generally believes that this expansion is unlikely, but in light of the new Printmaster General’s dovish bonafides, I am not so sure.  The market is still far below record P/E levels, and the magic money machine isn’t finished yet:

S&P500 PE Ratio

Fed’s Dudley: Large Balance Sheet Increases Inflation-Fighting Discipline – Real Time Economics – WSJ.

Exclusive: Fed’s Fisher, outspoken hawk, sees no QE reduction this month | Reuters.

Fed Balance Sheet vs. SP500 10.2013

The printfest will continue because it cannot stop.  Once the Fed stops creating dollars by monetizing federal and mortgage debt, the market will cease its rise shortly thereafter.  Eventually, the policy of printing money to increase asset prices will lose its efficacy.  First, additional QE will stop inflating market prices, but it will still be able to maintain some sort of stability.  Next, well, no one knows what happens next.

Germany digs in heels as Europe moves towards banking union | Reuters.

Total Banking Sector Balance Sheet to GDP


The Eurozone has created a faux banking union, which should be sufficient to keep the bond vigilantes at bay for the moment.  There are several requirements for a real banking union as currently exists in the U.S. under the auspices of the FDIC, which you can read about in more detail here:

Cosmetic, Can-Kicking Banking Union Agreement in Play | DARECONOMICS

The sticking point is the money.  The rich countries refuse to become joint and severally liable for depository insurance and resolution costs with their poorer brethren.  What this means is that a euro in Germany is much safer than a euro in Spain, because the Germans have more money to bailout its banking sector.  Hence, the current agreement does not break the pernicious bank and sovereign link.  German banks will have money to lend to businesses, and the periphery won’t, so it will remain mired in stagnation.  This Nash equilibrium will remain until one of these countries decides to gamble on a euro exit.

Around the Globe 10.10.2013

U.S. retailers’ sales rise in September, but shoppers stay cautious | Reuters.

September Retail Sales Were Tepid –

US Retail Sales YoY


US retail sales grew at a sluggish pace in September.  Considering the health of the labor market, these results are unsurprising and do not bode well for the future.  Retail sales have seemingly turned over and are growing at the slowest pace since the beginning of the recovery.  You can see for yourself what happened the last two times the retail sales pace slowed on the chart above.

Jobless claims rise to 374,000 vs. 311,000 estimate.

California, government shutdown lift U.S. jobless claims to 6-month high | Reuters.

Jobless Claims Surge on California, U.S. Federal Shutdown – Bloomberg.

Initial Unemployment Claims Through 10.05.2013

Jobless claims have spiked in response to the shutdown “crisis.”  A great deal of the spike can be attributed to survey technical problems, but the shutdown has generated at least 15,000 new claims.  Even temporary unemployment will subtract a bit from growth as consumer spending is lost that is never made up.  The shutdown combined with other headwinds will reduce economic growth in both the 3rd and 4th quarters.  As to initial claims, once the shutdown is resolved the number will drop back down to around 300,000 or so.

Euro Zone Sees House Prices Rise –

Eurozone Housing Index

The mainstream media loves housing recoveries, because the high number of homeowners guarantees positive housing market articles a lot of clicks, and now Europe has it very own American-style “housing recovery.”  Spain, Ireland and the Netherlands have endured the bursting of property bubbles.  Prices have begun rising again in these countries due to the effects of cheap money, banks keeping distressed properties off the market and speculative activity.  Incomes are either stagnant or falling, so these gains are not sustainable and will not lead to a second, European postwar miracle.


Around the Globe 10.08.2013

Economic Confidence Posts Fastest Drop Since 2008 Crisis – Real Time Economics – WSJ.

Gallup Economic Confidence

Everyone is focused on the ramifications of the latest Washington-manufactured crisis.  This drama will surely be resolved within a day or two of the country running out of money, after which the country can begin surveying the economic road ahead.  It’s an increasingly bumpy ride.  The latest drop is confidence is being overhyped by the mainstream media to detriment of the real story: The index peaked over four months ago and has been steadily declining since.  A weak job market and rising interest rates are the main culprits, and these two factors will remain headwinds indefinitely.

Japan Current-Account Surplus Plunges to Record August Low – Bloomberg.

Japan has suffered from the effects of a strong yen for over a decade.  This strength has spurred Japan, Inc. to offshore more factories over the years.  The truth is that there is not a large Japanese export sector anymore.  Exports have been range bound since the end of the Great Recession:

Japanese Exports

Meanwhile, lower export levels together with decreasing income from foreign investments have pushed the Japanese current account to historical lows.  Note the downward trend:

Japanese Current Account Balance

Japan is set to join the ranks of debtor nations in 2014.  Good luck selling 10 year bonds with sub-1% yields when that happens.

German Exports Increased in August on Euro-Area Recovery – Bloomberg.

Germany Exports

The article’s lede is merely half-true:

German exports (GRBTEXMM) rose in August amid signs the economic recovery is continuing in the euro area, the country’s biggest trading partner.

While there are positive signs in the Eurozone economy, they are overwhelmed by the bad news.  The writer hypes an unemployment rate that fell a mere 10 bps to 12% and one positive retail sales report while refusing the place this information into context.  The reason the unemployment rate fell is because the workforce shrank, not unlike the current situation here in the United States:

Historical Data Chart

The Eurozone’s employed workforce is the smallest it has been since 2006 and has continued shrinking despite the”recovery.” Furthermore, retail sales are awful.  Despite the blip upward from July to August, sales were still below August 2012 levels and remain about where they were at the end of the GFC:

Eurozone Retail Sales YoY Performance


And how about those German export numbers? They are a mixed bag:

Germany Exports

They seemingly peaked in early 2012, but that won’t stop the mainstream media from claiming that the Eurozone “recovery” will spur the periphery to drive German export growth. Please show me that import growth because two of Germany’s largest customers are still cutting back:

French Imports Spanish Imports

IMF Cuts Global Growth Outlook –

IMF cuts global growth forecast, warns of prolonged stupor | Reuters.

IMF Forecast GDP Performance World 07.2013


No one should act surprised that the IMF has cut its world growth forecasts for this year and next, because it has been doing so since 2011.  Old economic models do not work in the New Normal and must be adjusted.  Until this happens, these numbers will continue missing to the downside.  At the present time, overstating economic growth is working out well for the IMF as it makes unsustainable sovereign debt loads seem reasonable so that it can continue wasting money on various Eurozone bailouts.  Now let’s have a little fun.  If anyone finds the last time the IMF succeeded in predicting a worldwide recession, please post the link in the comments.  I won’t hold my breath.

Concerns for America’s housing market.

The mainstream media is severally months behind the blogosphere in breaking news.  While bloggers have been discussing housing market concerns since May, the msm seemed blithely unaware of the problems until the last week or two.  These are the only two charts you need to ascertain the future state of the U.S. housing market:

From ZeroHedge

From ZeroHedge

Real Wage Growth Since 2009

Rate increases raise the real price of buying a home and people’s incomes are not keeping up.

Around the Globe 10.07.2013

Greek budget sees end to six-year recession next year | Reuters.

Bad IMF Predictions 2

The mainstream media has presented the latest doublespeak emanating from Greece as positive news.  While it is surely nice that the budget sees an end to the recession, it is more important that the data foretells this end.  So far, it doesn’t.  GDP and unemployment show no signs of rebounding.

Furthermore, those predicting the reawakening of the Aegean tiger after it’s four year torpor have poor track records.  The troika’s unemployment and GDP predictions have missed to the upside every single time since 2009.  John Paulson, also believes in Greece, and he has been wrong about every economic trend since predicting the subprime crisis.

On the plus side, Greece seems to have its neo-Nazis under control.

Mortgage Rates Dive For 4th Week In A Row |

30 year fixed rate mortgage – 3 month trend

The good news is that plunging mortgage rates should lead to higher real estate sales.  The bad news is that the government shutdown makes it very difficult to underwrite loans.  The government is not their to guarantee the mortgages or allow its databases to be used to verify borrower backgrounds.  Ultimately, October sales will suffer, but these will be made up in the months after the debt crisis is resolved.

Workers Stay Put, Curbing Jobs Engine –

The writer has created a false argument here.  Basically, he is telling the reader that the labor market is sending out mixed signals.  Jobless claims are hitting post-recession lows amid stable job creation in the economy, but people are not leaving their present jobs for better opportunities.

Actually, the data is quite consistent and points to a weak jobs that will remain so indefinitely.  Let’s examine the data.  First, note that low unemployment claims merely indicate that people have stopped being fired.  This is an important indicator foretelling the end of a recession, but not as useful once it does.  Also, check for yourself what happens after unemployment claims bottom out as highlighted in red:

Four Week Average Initial Claims through 09.27.2013

Next, the United States must create 200,000 jobs a month just to employ all of the new workers joining the workforce every month.  As you can see, post-recession job creation performance has been abysmal with the red line on top indicating healthy growth and the red line on the bottom showing where we really are:

Nonfarm Payrolls Through August 2013

Not enough jobs are being created and those that are are of very low quality:

2103 Full vs. Part Time Jobs

The fact that workers are not moving around is consistent with all of other labor market data:

Historical Data Chart

Job vacancies are about a fifth to a third lower than the last two recoveries.  There is simply less opportunity available in the new normal.