Month: July 2016

The graying of America’s workforce will come as no surprise to regular readers. Just earlier this month, we wrote that in a little noticed aspect of the “stellar” June jobs report, the vast majority – or 90% of all new jobs – went to workers 55 and older.

 

Hardly an outlier, this was the latest confirmation of a very troubling trend: all jobs created since the recession started in December 2007 have gone to workers 55 and older.

 

In fact, in the latest month, there was a record 34.5 million workers in this age group: the only one that has seen persistent growth this century (and with the concurrent surge in waiters and bartender jobs in recent years, we even have a sense of what they are doing).

 

We won’t go into the reasons for this dramatic divergence (we have covered it extensively in the past); instead we bring up these observations because according to a new NBER paper, this stunning trend is what is being used to scapegoat the accelerating collapse in US productivity. As Bloomberg reports, “population aging is expected to drag on U.S. growth, and the hit could be substantial.”

According to the National Bureau of Economic Research, the retirement of baby-boomers in the decade between 2010 and 2020 will lower GDP growth per capita by 1.2% a year from what would have been the case if the nation’s demographics had held steady, while slamming productivity.

The thinking behind the study is simple: population aging is already long underway and by looking at variations in state population aging, authors Nicole Maestas at Harvard Medical School, and Kathleen Mullen and David Powell at policy research group RAND Corporation, are able to estimate how a graying workforce affects output, participation rates and productivity.

Now America’s deteriorating productivity trend is nothing new; however for the first time it has been blamed on the demographic shift of the US workforce and specifically the vast preponderance of baby boomers stuck in the labor force, instead of – say – half the population of the US and Canada using Facebook on a daily basis. As Bloomberg adds, what’s surprising is the composition of the slowdown: one-third is driven by slowing workforce expansion and the rest by a drop in productivity gains. The productivity slump isn’t reserved to older workers: it takes place across age groups, the researchers find.

The authors suggest a few theories about why that’s the case. It could simply be that younger and older workers complement one another. Or the most productive older workers might be leaving the workforce,  while less-productive old timers stay on the job.

This is another way of saying that employers keep hiring old, experienced workers at the expense of younger Millennials who are unable to find jobs due to bottlenecking as a result of the same older workers who refuse to retire for no other reason but simply because their savings no longer generate a cash flow.

“How much of it is that relatively productive workers are the ones who are choosing to retire? It’s very hard to say,” Maestas told Bloomberg. 

Regardless of what’s behind it, the discovery that the aging workforce could be weighing on productivity comes in contrast to other guesses, is important. The Fed has long been pondering over the issue of sliding US productivity. As Bloomberg adds “it’s not clear why productivity growth has dropped off, and the change has real-world implications: it’s one factor that caused Fed officials to lower their projections for where interest rates will settle in the longer-run, based on meeting minutes from their June meeting.“

What’s worse about the new findings is the suggestion that already slumping productivity is set to get even worse. If growth over the next 20 years otherwise held near its average for the 1960-2010 period — about 1.9 percent — adjusting for the demographic shift would lower per-capita GDP gains to 0.7 percent this decade and 1.3 percent next, based on the estimates.

It also means that the natural rate of growth is likely at or below zero, which also confirms that any attempts to hike rates will be doomed to failure as the US economy simply can not sustain a rising cost of money, thus forcing the Fed to ease after every single rate hike.

But while we agree that the relentless aging of the US workforce will have dire implications for the future of the US productivity, as well as economic growth, it is clear that the study never got to the fundamental culprit, which is the Fed itself.

Because the glaringly obvious tangent is that old workers are stuck in what now seem to be “lifetime” jobs, with no hope of retirement, for one overarching reason: the interest income generated by savings is zero (and negative in real terms). This means that as an entire generation of workers has found out the hard way it will never have the planned cash flow from savings parked in the bank; it is therefore doomed to work until death. By implication, it also means that the entire younger generation, in this case the biggest one in US history, the Millennials, will be stuck unable to enter the workforce and to build critical labor skills, as a result of lack of hiring as employers retain their old, experienced, and thus much more cost-effective workers for as long as they possibly can.

Our advice to the Harvard authors of the study: in the next part of the study, the one looking at why the US finds itself in this situation, please look at the Fed’s monetary policy. Because with over $10 trillion in savings generating no income, and thus crushing the velocity of money, the real reason why the US is facing a productivity crisis of epic proportions is because the central planners in the Marriner Eccles building have destroyed an entire generation’s hopes of being able to retire.

As for those elderly Americans stuck in menial jobs until their dying day, our condolences.

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Submitted by Nauman Sadiq is an Islamabad-based attorney, columnist and geopolitical analyst focused on the politics of Af-Pak and MENA regions, energy politics and Petroimperialism.

Since the beginning of the Syrian civil war, in August 2011, to April 2013, Islamic State and al-Nusra Front were a single organization that chose the banner of “Jabhat al Nusra.” Although, the current al-Nusra Front is led by Abu Mohammad al Jolani but he was appointed as the Emir of al-Nusra Front by Abu Bakr al Baghdadi, the leader of Islamic State, in January 2012. The current Al-Nusra Front is only a splinter group of Islamic State which split away from its parent organization in April 2013 over a dispute between the leaders of two organizations.

Abu Mohammad al Jolani

In March 2011, protests began in Syria against the government of Bashar al-Assad. In the following months violence between demonstrators and security forces led to a gradual militarization of the conflict. In August 2011, Abu Bakr al-Baghdadi began sending Syrian and Iraqi jihadists, experienced in guerilla warfare, across the border into Syria to establish an organization inside the country.
Led by a Syrian known as Abu Muhammad al-Jolani, the group began to recruit fighters and establish cells throughout the country. On 23 January 2012, the group announced its formation as Jabhat al-Nusra. Al-Nusra rapidly expanded into a capable fighting force with a level of popular support among opposition supporters in Syria.

In April 2013, Abu Bakr al-Baghdadi released an audio statement in which he announced that Al-Nusra Front had been established, financed and supported by the Islamic State of Iraq. Al-Baghdadi declared that the two groups were merging under the name "Islamic State of Iraq and Syria.” The leader of al-Nusra Front, Abu Muhammad al-Jolani, issued a statement denying the merger and complaining that neither he nor anyone else in al-Nusra's leadership had been consulted about it.

Al Qaeda Central’s leader, Ayman al Zawahiri, tried to mediate the dispute between al-Baghdadi and al-Jolani but eventually, in October 2013, he endorsed al-Nusra Front as the official franchise of al Qaeda Central in Syria. Abu Bakr al Baghdadi, however, defied the nominal authority of al Qaeda Central and declared himself as the Caliph of Islamic State of Iraq and Syria.

Keeping this background in mind, it becomes amply clear that a single organization operated in Syria and Iraq under the leadership of al-Baghdadi until April 2013, which chose the banner of al-Nusra Front. For the sake of clarity, let’s call this pre-April 2013 organization al-Nusra-I; and the subsequent breakaway faction of al-Nusra-I under the leadership of al-Jolani, post-April 2013, as al-Nusra-II. Also bear in mind that Islamic State of Iraq and Syria operated in the Syrian theater since the beginning of the Syrian civil war, in August 2011, but it chose the banner of al-Nusra-I. And it rebranded itself as “Islamic State of Iraq and Syria” only in April 2013.

Many biased political commentators of the mainstream media deliberately try to muddle the reality in order to link the emergence of Islamic State of Iraq and Syria to the ill-conceived invasion of Iraq in 2003 by the Bush Administration. Their motive behind this chicanery is to absolve the Obama Administration’s policy of supporting the Syrian opposition against the Syrian regime since the beginning of the Syrian civil war until June 2014 when Islamic State overran Mosul and Obama Administration made an about-face on its previous policy of indiscriminate support to the Syrian opposition and declared a war against a faction of Syrian opposition: that is, the Islamic State.

Moreover, such spin-doctors also try to find the roots of Islamic State in al-Qaeda in Iraq; however, the insurgency in Iraq died down after “the Iraq surge” of 2007. Al-Qaeda in Iraq became an impotent organization after the death of Abu Musab al Zarqawi and the subsequent surge of troops in Iraq. The re-eruption of insurgency in Iraq has been the spillover effect of nurturing militants in Syria against the Assad regime, when Islamic State overran Fallujah and parts of Ramadi in January 2014 and subsequently captured Mosul in June 2014.

The borders between Syria and Iraq are quite porous and it’s impossible to contain the flow of militants and arms between the two countries. The Obama Administration’s policy of providing money, arms and training to the Syrian militants in the training camps located at the border regions of Turkey and Jordan was bound to backfire sooner or later.

As I have mentioned before that Islamic State of Iraq and Syria had operated in Syria since August 2011 under the label of al-Nusra-I and it subsequently changed its name to Islamic State of Iraq and Syria in April 2013; after which it overran al-Raqqa in the summer of 2013, then it captured parts of Deir el-Zor and fought battles against the alliance of Kurds and Syrian regime in Qamishli. And in January 2014 it overran Fallujah and parts of Ramadi in Iraq and reached the zenith of its power when it captured Mosul in June 2014.

Regarding the recent rebranding of al-Jolani’s Nusra Front to “Jabhat Fateh al Sham” and the supposed severing of ties with al-Qaeda Central, it’s only a nominal difference because al-Nusra Front never had any organizational and operational link with al-Qaeda Central and even their ideologies are poles apart.

Al-Qaeda Central is basically a transnational terrorist organization which targets the Western countries; while al-Nusra Front, Islamic State and many other Syrian militant organizations only have regional ambitions and their ideology is anti-Shi’a and sectarian, rather than anti-West or anti-Zionist, as such. In fact, al-Nusra Front has not only received medical aid and material support from Israel, but some of its operations against the Shi’a Assad regime in southern Syria were fully coordinated with Israel’s Air Force.

The purpose behind this rebranding of al-Nusra Front seems to be to legitimize itself and make it easier for its patrons to send money and arms. The US blacklisted al-Nusra Front in December 2012 and pressurized Saudi Arabia and Turkey to ban it too. Though, al-Nusra Front’s name has been in the list of proscribed organizations of Saudi Arabia and Turkey since 2014, but it kept receiving money and arms from Saudi Arabia.

After this rebranding, the reaction from the US has been: "We're gonna have to wait and see," State Department spokesman John Kirby said. "We judge a group by what they do, not by what they call themselves." In any case, Saudi Arabia and Turkey might not be willing to add the name of a militant organization, which only has local ambitions of fighting the Syrian regime and which has severed its nominal ties with al Qaeda Central.

It should be remembered that in a May 2015 interview with al-Jazeera, Abu Mohammad al-Jolani took a public pledge on the behest of his Gulf-based patrons that his organization only has local ambitions limited to Syria and that it does not intends to strike targets in the Western countries. Thus, this rebranding exercise has been going on for almost an year and al-Jolani finally announced the split from al-Qaeda in a video statement yesterday. Instead of al-Qaeda Central, the real affiliation of al-Jolani’s Nusra Front has always been to Saudi Arabia, which controls the flow of money and arms to al-Jolani’s organization.

In order to simplify the Syrian quagmire for the sake of readers, I would divide it into three separate and distinct zones of influence. Firstly, the northern and northwestern zone, in and around Aleppo, which is under the influence of Turkey and Qatar. Both of these countries share the ideology of Muslim Brotherhood and they provide money, training and arms to the militant organizations like al-Tawhid Brigade and Ahrar al-Sham at the training camps located in the border regions of Turkey.

Secondly, the southern zone of influence, in Daraa and Quneitra and as far away as Homs and Damascus. It is controlled by the Saudi-Jordanian camp and they provide money, weapons and training to the militant groups such as al-Nusra Front and the Southern Front of the so-called “moderate” Free Syria Army in Daraa and Quneitra, and Jaysh al-Islam in the suburbs of Damascus. Their military strategy is directed by a Military Operations Center (MOC) and training camps located in the border regions of Jordan. Here let me clarify that this distinction is quite overlapping and heuristic at best, because al-Nusra’s militants have taken part in battles as far away as Idlib and Aleppo.

And finally, the eastern and central zone of influence, in al-Raqqa and Deir al-Zor, which have been controlled by a relatively maverick Iraq-based outfit, Islamic State, and its Baathist military apparatus. According to credible reports, hundreds of ex-Baathists constitute the top and mid-tier command structure of Islamic State who plan all the operations and direct its military strategy.
Moreover, it should be remembered that Saudi Arabia was staunchly against the invasion of Iraq back in 2003, because it regarded Saddam as a bulwark against the Iranian influence in the Arab World. After the invasion, when Iraq formed a Shi’a dominated government, the Gulf Arab states have consistently supported the Sunnis of Iraq against the Shi’a government. Therefore, the possibility that Islamic State has also received Gulf’s money and arms in the past in their battles against the Syrian regime cannot be ruled out.

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With inventories once again on the rise, demand set to seasonally tumble, and production on the rise, the lagged response to the bounce in crude prices continues in the US oil rig count, rising 3 last week to 374. This is the 8th rig count rise in the last 9 weeks. The 58 rig rise (+18% off the lows) is the fastest since Jan 2010. Oil prices had melted up all day (despite record OPEC production) as the USD weakened, and extended gains despite the rig count rise.

• *U.S. GAS RIG COUNT DOWN 2 TO 86 , BAKER HUGHES SAYS
• *U.S. OIL RIG COUNT UP 3 TO 374 , BAKER HUGHES SAYS

The lagged oil price continues to lead the rig count…

 

And the response in oil prices (having bounced off the 200DMA), but the USD remains key today…

 

Charts: Bloomberg

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While Hillary Clinton's acceptance speech emphasized "I sweat the details of policy," The New York Times is forced to admit as it began its fact-checking, she delivered a speech that was remarkably without hard facts…

Much of her address was a mix of descriptions of her upbringing, assertions of her opinions and generalized attacks on Donald J. Trump. She talked about marching “toward a more perfect union” and said Mr. Trump “doesn’t like talking about his plans.” And even when she said “I love talking about mine,” she offered few concrete numbers or assertions to examine. Instead, she spoke in general terms about making “college tuition-free for the middle class” and giving “a boost” to small businesses.

There were, however, a few factual assertions that could be checked — so we did:

CLAIM: “Children like Ryan kept me going when our plan for universal health care failed, and kept me working with leaders of both parties to help create the Children’s Health Insurance Program that covers eight million kids in our country.”

FACT CHECK: This is true. Mrs. Clinton has at times claimed full credit for the program. But by saying in the speech that she “worked with leaders of both parties to help create” the program, her statement fits with the facts. And the health insurance program does currently serve 8.1 million children, according to Medicaid.

 

CLAIM: “Our economy is so much stronger than when they took office. Nearly 15 million new private-sector jobs.”

FACT CHECK: This is true. Since early 2010, when the economy stopped losing jobs every month, 14.8 million jobs have been added in the longest streak of private-sector job growth in history. Critics say job growth would have been higher if a different set of economic policies were in place, but that is impossible to prove.

 

CLAIM: There are now “20 million more Americans with health insurance.”

FACT CHECK: This is largely true. According to a recent report by the Department of Health and Human Services, about 20 million Americans have gained health coverage under the Affordable Care Act from its passage in 2010 to early 2016. However, critics argue that the law has caused premiums to rise, sometimes drastically for people who already had health insurance.

 

CLAIM: There is now “an auto industry that just had its best year ever.”

FACT CHECK: This is largely true. Auto sales in the United States reached a new high in 2015, with about 17.4 million vehicles sold. That represented a 5.8 percent increase from 2014. But the auto industry has changed significantly. Detroit’s Big Three automakers have a much lower market share than they once did. Auto manufacturing also employs fewer people than it used to, although there have been gains since the Great Recession.

 

CLAIM: “More than 90 percent of the gains have gone to the top 1 percent.”

FACT CHECK: This depends on the time frame you consider. From 2009 to 2012, the top 1 percent of families captured 91 percent of total real family income growth, according to Emmanuel Saez, an economist at the University of California, Berkeley. But over a longer period of time, the picture looks less lopsided: From 2009 to 2015, 52 percent of the income gains went to the top 1 percent, according to Mr. Saez.

 

CLAIM: “In Atlantic City, 60 miles from here, you will find contractors and small businesses who lost everything because Donald Trump refused to pay his bills.”

FACT CHECK: This is true. Several news organizations have documented many specific instances where contractors say Mr. Trump or his organization refused to pay them for work they had done, in Atlantic City and elsewhere. Mr. Trump and his representatives say that if those payments were not made, it was because the work that was done was unsatisfactory.

 

CLAIM: “Trump suits in Mexico, not Michigan. Trump furniture in Turkey, not Ohio. Trump picture frames in India, not Wisconsin.”

FACT CHECK: This is partly true, though without much context. Fact-checkers have found several examples of Trump clothing like suits, ties and shirts that have labels showing they were made in places like Mexico, Bangladesh and China. But some have labels showing they were made in the United States, and as of 2014, the clothing and footwear association reported that 97 percent of all clothing and 98 percent of all footwear was imported from overseas. Some of Mr. Trump’s furniture is made in Turkey.

Source: New York Times

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Submitted by Simon Black via SovereignMan.com,

According to Jacques Necker, everything was just fine.

The year was 1781, and Necker, France’s finance minister, had just published a report called Compte Rendu au Roi, an accounting of French public finances.

Necker’s report showed that, despite extraordinary public services and military spending, France had a net credit position of +10 million livres.

In other words, the country was in perfect fiscal health.

It turns out that Necker had cooked the books.

Rather than being 10 million on the positive side, France had racked up 520 million livres worth of debt and could no longer afford to pay interest.

France had spent decades accumulating prodigious debts. They built monuments, parks, and splendid cities that still inspire awe today.

They explored the world and expanded their empire. They engaged in almost constant military conquest in far-away lands.

This all came at great cost. But it never seemed to matter.

The French government knew they were the world’s dominant superpower, and they overspent their national income as if it were their divine privilege to do so.

As William Olphus describes in his book Immoderate Greatness: Why Civilizations Fail, the French “tended to see the natural world as cornucopian– that is, as a banquet on which they were free to gorge without limit.”

Nearly all superpowers see the world in this way. ‘We’re #1 therefore we no longer have to be fiscally prudent.’

Sir John Glubb, having seen his own British Empire fade as the world’s superpower throughout the 20th century, wrote The Fate of Empires in 1978.

Glubb argues that great civilizations start with an Age of Pioneers– those who work hard and build wealth.

It then progress rapidly through an Age of Commercial Expansion, Affluence, and Intellect, before decaying in an Age of Decadence in which the entire society feels entitled to a level of wealth that they neither earned nor can longer afford.

Even when faced with obvious fiscal realities, they make no changes.

Only when a crisis erupts does the society demand action. And of course, at that point, it’s too late.

Such was the case of France in the late 1700s– a situation so desperate that the finance minister resorted to all-out lies in order to conceal their true condition.

Most of the West is in this position today– summed up by Jean-Claude Junker’s (former President of the European Council) explanation of the Greek debt crisis in 2011: “When it gets serious, you have to lie.”

Over in the United States, the Congressional Budget Office (CBO) recently published its own projections for America’s grim public finances.

Bear in mind that US debt is already $19+ trillion and climbing. The CBO sees at least another $10 trillion in debt in the coming years, and projects that the US budget deficit will increase every single year.

The evidence is already so clear.

Military retirement spending rose by 8.7% last year. Medicare costs were up 10%. Certain government employee benefit programs rose by 17%.

Overall mandatory outlays rose on average by 6.6%, three times faster than US GDP.

So essentially the US government’s spending growth is far outpacing US economic growth.

It doesn’t take a rocket scientist to see how dangerous this is.

Yet like nearly every major superpower before, the US government is completely oblivious to its own insolvency.

With each passing year as they ignore the problem, they only make things worse, and more unfixable.

This is no small matter. The terminal fiscal decline of the world’s most dominant superpower is one of the biggest trends of our time.

And it’s coming. Soon.

You see, this isn’t some wild conspiracy theory, or an opaque idea that could take decades to play out.

The CBO is telling us how deep the fiscal consequences are just over the next several years.

This comes on the heels of the recently-published Social Security annual report, which shows that the entire program is rapidly running out of money.

And, of course, there are the US Treasury’s annual financial statements, which already state that the US government is bankrupt… today.

Somewhere Nero is fiddling.

There are basically two ways to look at this–

First, is what most people are going to do. Nothing.

They’ll kick the can down the road like everyone else and cling to the phony belief that everything will be OK because ‘Merica is the #1 country in the world and the government will fix it.

The second way of looking at this is to consider that, maybe just maybe, this time is not so different. Maybe WE are not so different.

Maybe it’s not such a wonderful idea for a government to be completely bankrupt, and to become even more bankrupt with each passing year.

And that maybe there might be some consequences on the day that reality catches up, whether that day is tomorrow or years in the future.

We can already see many of these consequences today.

Civil Asset Forfeiture (government confiscation of private property at gunpoint without due process) is at alarming levels.

Capital controls are rising around the world. There’s strong talk of banning physical cash, and even wealth taxes.

These aren’t things that fiscally strong, solvent governments do. And they tend to get worse as their conditions deteriorate.

In light of so much obvious data, are you really willing to bet everything that your politicians can fix the unfixable?

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