Bill Holter ~
October 6, 2014
Friday was Non-farm payroll day with an announced 248,000 new jobs created in September, the unemployment rate dropped to 5.9%. This is the lowest unemployment rate since 2008 so it "looks" like we have recovered and the financial crisis should only be a bad memory. I am going to tell you we are living in a financial mirage.
In September, if you look under the hood you will also see 315,000 are no longer included in the labor force bringing the total up to 92.6 million people. Looking back to 2008, there were 78 million "not in the labor force" so we can see a nearly 15 million person increase in this category since then. We also had an "adjustment" of a negative 26,000 jobs subtracted to arrive at the 248,000 figure, so if believable the real job growth was 274,000. "Believable"? Not by me, here is Paul Craig Roberts take. My point is this, there are 15 million more people "not working" since 2008 but for "appearance sake" are categorized as "not in the workforce" or not looking for a job. Doing some very simple math, what do these 15 million represent? Somewhere between 4% and 5% of the entire U.S. population, that's what!
So we have the "lowest" unemployment since 2008 at 5.9% and this headline will be splashed all over the headlines that say "happy times are here again!" Before doing the very difficult math of "how much does 5.9 + four or five equal?" I would like to point something out. We are now about 30 days away from the national midterm elections, could the unemployment rate have been "engineered" downward to paint a rosy picture so the balance of power in the Senate remains Democrat? This was the very last employment number the public will see before they "vote early and vote often." OK, I know you were dying to do the math, 5.9% plus either four or five percent equals either 9.9% or 10.9% ... Of course, if unemployment was calculated the way it was back in the 1980's we would have a figure approaching 20% but that would be totally unacceptable for the financial mirage we are living.
Before moving on I do want to point out what Michelle Obama has been telling you herself. She has recently been heard saying the upcoming elections for the Senate are very important ones. She says if the "evil Republicans" take power, her husband will be impeached and all of the wonderful plans he rammed through may possibly be reversed. I agree with her, the upcoming elections are very important and probably the last ones before martial law descend the landscape.
Another "mirage" or should I say "Houdini trick" is how the elephant in the room has disappeared. Have you ever seen old black and white photos or even movie footage of the bread lines back in the 1930's? Do you remember thinking to yourself how bad it must have been to have lived back then? For me personally, those images were always scary because of the despair it portrayed. Fast forward 80 years or so to the present and we have bread lines all over again ...only you can't see them.
There are now almost 47 million people on the SNAP program, this is about 14% of the population alone without counting food banks and charities that feed the homeless. Can you imagine seeing 1 million people in your state lining up two or three times a day for a meal? Can you imagine watching it on the news? Or worse, can you imagine seeing people fighting for places in line, freezing in the winter or sweltering in the summer while waiting for their turn? There are massive bread lines, you just don't see them. You don't see them because this too is part of the financial mirage (miracle?) called the United States.
Not to worry though, the stock market is up. This too is mirage like. You have to first ask yourself, is the stock market "up" because of all the liquidity provided by the various QE's? And since QE is now ending because the economy is "so strong" and unemployment "so low," can the stock market stay up without the extra trillions of $ floating around? First let me point out how "up" the market is internally. The NASDAQ now has nearly 50% of its stocks in a bear market (down 20% or more). The Russell 2000 sports 40% of their stocks down over 20% and the average itself is now negative year over year for the first time since 2012. New highs versus new lows on the NYSE have almost turned upside down, on a daily basis there are less new highs and more new lows than any time since August 2013. Globally the advance/decline ratio has also broken down badly ...and all this at a time when the Fed has promised to completely shut off the excess liquidity flow of QE. Can stocks go up further from all time high valuation levels while "free liquidity" is ended? I can only say this, stock market crashes have always come with the internals of the market weakening while the "façade" of high prices "looks" good and the fear of a crash nowhere to be found. We are there now in my opinion.
This past week began with assurances Ebola could never reach the U.S., by the end of the week we knew differently. So far Dallas and Washington DC have confirmed cases and hospitals across the country have over 100 cases where Ebola is suspected. We also heard JP Morgan was "hacked" and 76 million customer's information was compromised, this of course was blamed on the Russians. An epidemic would surely change the way business and commerce is conducted. Waking up one day to see your financial institution's database and balances in shambles would also affect business and commerce. I point at these two examples because I believe the entire financial system is a mirage yet something will need to be blamed as the "cause" for its coming down.
Nothing financial is as it seems or is being portrayed. I believe the Fed will by necessity have to reverse course and begin a new and even bigger round of QE in a desperate attempt to save the financial system again. QE has never worked in the first place, the public "reports" have been rigged so as to paint the picture that it has. The Fed will again use the only tool (QE) they have left. QE only provides liquidity, not solvency and insolvency is the problem. This can be equated to trying to build a house using only a hammer when shovels, screwdrivers, saws, etc. are also needed.
The "financial mirage" started out during the Reagan years as Social Security taxes were used as general funds to hide a bigger deficit than was being reported, it went downhill from there. So here we are, living a daily lie because the truth is too horrible to face and our leaders believe "we can't handle the truth."