Thursday, June 23, 2011

Karl Denninger, "There Is No Joy In Jobville"

"There Is No Joy In Jobville"
 by Karl Denninger

“Mighty claims numbers sucked - again: In the week ending June 18, the advance figure for seasonally adjusted initial claims was 429,000, an increase of 9,000 from the previous week's revised figure of 420,000. The 4-week moving average was 426,250, unchanged from the previous week's revised average of 426,250. We still have that "4" handle and it's NOT going away.

There's no "positive spin" you can put on this; the facts are what they are, and they suck. Here's the unfortunate reality: The policies pursued since the 2007 market dislocation  have not worked.  They have not worked because they mathematically cannot work, not because we "didn't do enough" or "didn't do it right" in some nuanced fashion.

Neither "more tax cuts" or "more public spending" can fix the problem with employment and the economy in general.  Neither can work because taking more debt is not (and does not, historically) generate more GDP (output) than the debt itself provides.  Low interest rates encourage the taking on of debt to consume (instead of building things like factories and such) which in turn promotes the exact ponzi scheme our economy has attempted to operate on since 1980.

It didn't "work" then in any true sense and it won't now.  We've hit the limit on pulling forward demand and these tonics do nothing positive for the economic climate.  Pretending that the ponzi can be restarted has been a very nice illusion for the last two years and prodded people into speculation in the stock and commodity prices but the realization that this was a sham and a fraud is slowly seeping into the consciousness of both the markets and the people generally.

Our nation's government made a terrible mistake in 2007.  I wrote about it at the time and have been doing so since.  We have compounded more than four and a half trillion dollars of error onto the mess that we previously had, and received nothing of value for it. Be prepared folks; the "bag of tricks" is running empty in Washington DC and, especially, at The Fed.”

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