Author: admin

Originally posted at The World Complex blog,

Then the rumour circulated that at night the Fed Governors neglected their sacrifices and prayers. A great depression seized everyone. One day the President said to the Fed Chief, "When will we celebrate the return of normal unemployment rates? I would like to make a journey and return in time for the feast. How long is it until the day of the feast?" The Fed Chief was embarrassed. It had been several days since she had looked at the moon and the stars. She had learned nothing more about their courses. The Fed Chief said, "Wait one more day and I will tell you." The President said, "Thank you. Tomorrow I will come to see you again."

The Fed Chief gathered the Fed Governors together and asked, "Which of you lately has observed the course of the stars?" None of Fed Governors answered, because they had all stayed to listen to the stories of Fiat-do-lar. The Fed Chief asked again, "Hasn't even one of you observed the course of the stars and the position of the moon?"

                                                 — modified from The Ruin of Kasch

Economics isn't a science. It is a mistake to think it would be so. Science does not have schools. Only philosophies have schools.

The difference between a science and a philosophy is the difference between seeking truth while honestly admitting you don't know it and declaring that truth is something you define.

Ideally science is described by working hypotheses, which are constantly tested, and if falsified, replaced (unless pride is involved or money). In philosophy, you begin with axioms, which are untestable statements that are defined as being true. Each school of economics has its own set of axioms. From axioms, you apply rules of inference (logic) in order to generate new statements, which are also true. These generated statements are called theorems. Thus all theorems are true (within the school of philosophy) but not necessarily applicable to the real world!

In the early days of geology, there were competing schools: the Neptunists and the Plutonists being two that come to mind immediately. The Neptunists believed that all rocks formed in the sea, either as sediments, or by crystallization as salts (this was their central axiom). The Plutonists believed that all rocks formed from magma (as their central axiom). Debates between adherents of the two schools were rowdy, fruitless affairs, because the nature of philosophy is that it cannot be overturned by mere observations.

The distinction between science and philosophy with respect to economics is important because economists have an annoying ability to set policy–policy that affects the quality of your lives. It probably doesn't matter much to you whether some geologists can't decide among themselves whether a particular rock formed in the sea or on a volcano (or even on a volcano in the sea). But it does make a difference if some Fed official acts on her belief that bankrupting the elderly eliminating interest on savings is a cure for unemployment.

Application of economic policy follows the axiomatic approach. Some high priest of an obscure caste

Recently, The World Complex presented the inverse correlation between the unemployment rate in the UK and its "confidence ratio" (dollar value of public debt divided by the dollar value of gold holdings). The idea was that a high ratio could only be supported if bondholders had high confidence that the debt would be properly serviced (forget about repayment). The flip side is that a high ratio could be interpreted as a measure of a country's ruin.

In the article I had suggested that government economists might cheer a decline in the price of gold.

So today, we look at the same relationship for the United States.
 

Once again we see a strong inverse relationship between confidence ratio and unemployment.

One of the goals set out for the Federal Reserve is to manage the unemployment rate. Looking at this chart, the answer is clear–to reduce unemployment, increase the confidence. Confidence (as defined above) can be increased in three ways: 1) raise debt, 2) sell gold, 3) lower the gold price.

Of course we all know that correlation does not imply causation. But it doesn't have to in order to impact on Fed policy. That's the beauty of politics–reality and truth don't really matter when there are elections to be won.

There was a comment that perhaps I have too much time on my hands. I'm not sure if the intent was to say that only someone with a lot of time on his hands would notice this relationship. The economists at the Fed have far more PhD's and time on their hands than does this corner of webspace. So I'm sure they have already seen this.

So the question becomes–even if no causation can be established, can it be used to set policy? And what policies will be followed?

Raising debt is the old standby–but as we see in the clarified chart below, it doesn't seem to be working anymore.
 

Since the 2001 peak (on September 10, perhaps?), the increasing debt has been more than compensated by the rising price of gold. Don't be fooled into thinking the US is sinking into solvency–it is creating debt faster than any time in history. But the price of gold has been rising faster still (although we shall see about 2013).

It appears that policy #2, the sale of gold, is politically untenable. Officially at least. Selling gold is for lesser countries.

So that leaves option #3 — hope the price of gold falls.

Perhaps they do more than hope.
 

. . . at first the story of Fiat-do-lar was like hashish when it makes wakefulness happy. Then the story was like hashish when it makes dreams delirious. Toward morning, Fiat-do-lar raised his voice. As the Nile rises in the hearts of men, so his words swelled. To some, his words brought serenity; to others,
they were as terrifying as the appearance of Azrael, the angel of death. Happiness filled the spirits of some, horror the hearts of others. The closer morning came, the mightier that voice grew and the more it resounded within the people. The hearts of men rose up against one another like clouds in the sky on a stormy night. Flashes of wrath met thunderbolts of fury. When the sun rose, the tale of Fiat-do-lar reached its end. Ineffable wonder filled the confused minds of the people. For when the living looked around, their gaze fell upon the Fed Chief and Governors. They were stretched out on the ground, dead.

                                        — modified from The Ruin of Kasch

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/9b22vF1glsg/story01.htm Tyler Durden

About a month after the last naval base shooting, here comes another distraction.

DEVELOPING: Reports of shots fired at Navy base in Millington, Tenn.

— NBC News (@NBCNews) October 24, 2013

#BREAKING: #USNavy can confirm incident near Naval Support Activity Midsouth in #Millington. Details to follow.

— U.S. Navy (@USNavy) October 24, 2013

Time to ban naval bases?

More when we see it

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4LqLcSBxjxo/story01.htm Tyler Durden

On Tuesday, the BLS engrossed in the same frenzy of openly making up data like the Dept of Labor has been with the initial claims data ever since early September when it started upgrading its California “systems” and never finished, announced that while only 140K or so jobs were created in September, nearly 700K full-time jobs were added as over 500K part-time jobs were converted into full-timers. On the surface this is great news… until one actually looks for empirical evidence that this is happening anywhere besides the data manipulating, massaging and fabricating models used by the BLS. And one certainly won’t find it at the biggest private employer in the US – Walmart, which just announced that a whopping 475,000 of its employees earn at least $25,000 a year. Great news, right? Sure, until one considers that WMT has over 1 million employees, which means that well over 50% of Wal-Mart’s employees make a tiny $25,000 year.

From Bloomberg:

Wal-Mart has provided some new and useful information: More than 475,000 of its 1 million hourly store employees earn at least $25,000 a year for full-time work. This figure comes from Bill Simon, the president and chief executive officer of Walmart U.S., who presented (PDF) it at Goldman Sachs’s (GS) Global Retailing Conference last month. The statistic, which was listed under the heading “Great job opportunities,” means as many as 525,000 full-time hourly employees earn less than $25,000 a year.

 

 

OUR Walmart, the union-backed workers’ group that’s been staging protests and asking for higher wages, pointed this out during a press conference in Washington, D.C., on Wednesday. (The company’s presentation is also on its website.) Three store associates, as well as three Democratic members of the House of Representatives, called on the retail giant to pay all of its full-time workers at least $25,000 a year.

Wal-Mart is adamant: the pay is fair.

“We have hundreds of thousands of associates who are making $25,000 a year or more,” says Kory Lundberg, a Wal-Mart spokesman. “And the opportunity exists for those who aren’t to grow into the career they want. We promote 160,000 people a year.” Lundberg also explained how to parse some of Wal-Mart’s figures. The company has 1.3 million hourly workers, which led OUR Walmart to claim at the press conference that 825,000 of them made less than $25,000 a year. Lundberg points out that Simon’s presentation was referring to the 1 million who work in the stores. (The rest work as truck drivers and at the Bentonville (Ark.) headquarters, among other places.) So about 52 percent of its associates make less than $25,000 a year—not 63 percent.

The other side disagrees. As expected, the minimum wage workers demand – what else – higher wages.

“A decent wage is their demand—a livable wage, of all things,” said Representative George Miller (D-Calif.). The problem with companies like Wal-Mart is their “unwillingness, not their inability, to pay that wage,” he said. “They hand off the difference to taxpayers.” Miller was referring to a congressional report (PDF) released in May that calculated how much Walmart workers rely on public assistance. The study found that the 300 employees at one Supercenter in Wisconsin required some $900,000 worth of public assistance a year. Catherine Ruetschlin, an analyst at Demos, the progressive policy center, noted during the press conference that raising wages can be good for the overall economy. “Putting money into workers’ wallets puts cash in the registers of retailers, and with it the need for new employees,” she said. “We estimate that a raise to $25,000 a year would lead to at least $11 billion of new GDP and generate 100,000 new jobs.”

Trite platitudes aside – and if the workers are unhappy they sure can try to get a higher paying job elsewhere: surely their skillset is worth it – the reality as we pointed out in “When Work Is Punished: The Tragedy Of America’s Welfare State“, the comp more than half of WMT’s workers get is actually in the sweet spot for “middle class” equivalent cash flow. Recall: “the single mom is better off earning gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.”

And that, incidentally, is precisely why the motivations of the lower and middle classes are so warped: because when those who think they are worse off making just below the magic cutoff level are in fact better than those who make $40,000 more in gross income, then the desire to work and be “aspirational”, upwardly mobile simply disappears, and with it the marginal productivity of the economy.

As for the angry minimum wage Wal-mart employees, we have one piece of advice – look at the chart below…

… and realize why it is in your interest to make just as much as you are making and not a dollar more.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/t1Hvx5GpBcE/story01.htm Tyler Durden

On Tuesday, the BLS engrossed in the same frenzy of openly making up data like the Dept of Labor has been with the initial claims data ever since early September when it started upgrading its California “systems” and never finished, announced that while only 140K or so jobs were created in September, nearly 700K full-time jobs were added as over 500K part-time jobs were converted into full-timers. On the surface this is great news… until one actually looks for empirical evidence that this is happening anywhere besides the data manipulating, massaging and fabricating models used by the BLS. And one certainly won’t find it at the biggest private employer in the US – Walmart, which just announced that a whopping 475,000 of its employees earn at least $25,000 a year. Great news, right? Sure, until one considers that WMT has over 1 million employees, which means that well over 50% of Wal-Mart’s employees make a tiny $25,000 year.

From Bloomberg:

Wal-Mart has provided some new and useful information: More than 475,000 of its 1 million hourly store employees earn at least $25,000 a year for full-time work. This figure comes from Bill Simon, the president and chief executive officer of Walmart U.S., who presented (PDF) it at Goldman Sachs’s (GS) Global Retailing Conference last month. The statistic, which was listed under the heading “Great job opportunities,” means as many as 525,000 full-time hourly employees earn less than $25,000 a year.

 

 

OUR Walmart, the union-backed workers’ group that’s been staging protests and asking for higher wages, pointed this out during a press conference in Washington, D.C., on Wednesday. (The company’s presentation is also on its website.) Three store associates, as well as three Democratic members of the House of Representatives, called on the retail giant to pay all of its full-time workers at least $25,000 a year.

Wal-Mart is adamant: the pay is fair.

“We have hundreds of thousands of associates who are making $25,000 a year or more,” says Kory Lundberg, a Wal-Mart spokesman. “And the opportunity exists for those who aren’t to grow into the career they want. We promote 160,000 people a year.” Lundberg also explained how to parse some of Wal-Mart’s figures. The company has 1.3 million hourly workers, which led OUR Walmart to claim at the press conference that 825,000 of them made less than $25,000 a year. Lundberg points out that Simon’s presentation was referring to the 1 million who work in the stores. (The rest work as truck drivers and at the Bentonville (Ark.) headquarters, among other places.) So about 52 percent of its associates make less than $25,000 a year—not 63 percent.

The other side disagrees. As expected, the minimum wage workers demand – what else – higher wages.

“A decent wage is their demand—a livable wage, of all things,” said Representative George Miller (D-Calif.). The problem with companies like Wal-Mart is their “unwillingness, not their inability, to pay that wage,” he said. “They hand off the difference to taxpayers.” Miller was referring to a congressional report (PDF) released in May that calculated how much Walmart workers rely on public assistance. The study found that the 300 employees at one Supercenter in Wisconsin required some $900,000 worth of public assistance a year. Catherine Ruetschlin, an analyst at Demos, the progressive policy center, noted during the press conference that raising wages can be good for the overall economy. “Putting money into workers’ wallets puts cash in the registers of retailers, and with it the need for new employees,” she said. “We estimate that a raise to $25,000 a year would lead to at least $11 billion of new GDP and generate 100,000 new jobs.”

Trite platitudes aside – and if the workers are unhappy they sure can try to get a higher paying job elsewhere: surely their skillset is worth it – the reality as we pointed out in “When Work Is Punished: The Tragedy Of America’s Welfare State“, the comp more than half of WMT’s workers get is actually in the sweet spot for “middle class” equivalent cash flow. Recall: “the single mom is better off earning gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.”

And that, incidentally, is precisely why the motivations of the lower and middle classes are so warped: because when those who think they are worse off making just below the magic cutoff level are in fact better than those who make $40,000 more in gross income, then the desire to work and be “aspirational”, upwardly mobile simply disappears, and with it the marginal productivity of the economy.

As for the angry minimum wage Wal-mart employees, we have one piece of advice – look at the chart below…

… and realize why it is in your interest to make just as much as you are making and not a dollar more.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/t1Hvx5GpBcE/story01.htm Tyler Durden

While the recent track record for Muddy Waters has been uninspiring, their “strong sell” report on NQ Mobile this morning has garnered attention since it has halved the stock’s market cap in minutes. NQ is now down 50% on the day having been halted numerous times. Still, if you feel like catching this knife, a full 5 out of 5 analysts that cover the stock have ‘buy’ recommendations with Topeka’s Fred Ziegel topping the list at $33.50 (a 200% rise from current levels). Full report below…

 

 

MW_NQ_10242013.pdf by zerohedge

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jqVacj8Ts90/story01.htm Tyler Durden

While the recent track record for Muddy Waters has been uninspiring, their “strong sell” report on NQ Mobile this morning has garnered attention since it has halved the stock’s market cap in minutes. NQ is now down 50% on the day having been halted numerous times. Still, if you feel like catching this knife, a full 5 out of 5 analysts that cover the stock have ‘buy’ recommendations with Topeka’s Fred Ziegel topping the list at $33.50 (a 200% rise from current levels). Full report below…

 

 

MW_NQ_10242013.pdf by zerohedge

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jqVacj8Ts90/story01.htm Tyler Durden

Today’s AM fix was USD 1,336.25, EUR 968.79 and GBP 825.76 per ounce.
Yesterday’s AM fix was USD 1,333.00, EUR 968.68 and GBP 825.13 per ounce.

Gold fell $6.90 or 0.51% yesterday, closing at $1,333.30/oz. Silver slipped $0.12 or 0.53% closing at $22.56. Platinum rose $2.94 or 0.21% to $1,433.24/oz, while palladium fell $1.50 or 0.20% to $742.50/oz.

Gold inched up in London as the dollar fell to a two year low against the euro. The yellow metal is on track for a four week high, as investors buy precious metals on increased safe haven demand. Gold Krugerrands (1 oz) are trading at $1,403.75 or premiums between 4.75% and 5.5%  and Gold Kilo Bars (1 kilo) are trading at $44,354.53 or premiums between 3% and 3.5%. Premiums are holding steady.

The poor economic data published recently in the U.S. is signalling that the economic recovery is on shaky ground, and this has increased the allure of bullion.

Koos Jansen’s blog, “In Gold We Trust” explores the recent surge of bullion exports from Switzerland.

In it he notes that Switzerland holds four of the largest gold refineries on the planet – Metalor, Pamp, Argor-Heraeus and Valcambi. These refineries are estimated to be responsible for 70% of the world’s refining nestled in the Swiss Alps, and therefore a major amount of the world’s gold is distributed there.

If you look at 3Q, Switzerland has imported 808 tons of gold in 2013, and exported 680 tons.  Year to date the country has imported 2,420 tons and exported 2,184 tons.

Courtesy of Koos Jansen’s – “In Gold We Trust”

Jansen notes that this is a new record for exports for the small country with a yearly estimate of 2,912 tons for exports.  It is surmised that 1,100 tons of the gold bullion is set to flow East to China or Hong Kong.

In 2013 from January to August published figures list Hong Kong as having imported 598 tons from Switzerland. Jansen writes that although most of this is sent forward to Shanghai, however the Chinese are also importing directly from the Swiss.

This is verified from Shanghai Gold Exchange (SGE) physical deliveries and from Alex Stanzcyk, Chief Market Strategist at Anglo Far-East Bullion, who Jansen spoke with directly. Stanzcyk said, “China imports a lot that’s not going through Hong Kong (or through the SGE!)”. 

In the interview Stanczyk explained how one of their partners had lunch recently with the head of the largest global operations company in security transport. He said there is a lot of gold that they’re moving into China that’s not going through exchanges. If the gold is for the government they don’t have to declare where it’s going. They don’t have to declare where it’s going in, or where it’s heading. If you look at the way the Chinese do things, why would they tell?  

The People’s Republic Bank of China (The Chinese Central Bank), tend to shy away from routine reporting of their outright gold purchases to the IMF. A sensible strategy given their implied policy of reducing dollar reserve risk.

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/keMhELywDoo/story01.htm GoldCore

“Inherent in the nature of government itself is the fact that it is incapable of effectively providing services,” Biderman blasts, noting that “by ‘effective’, he means dollars and hours.” The TrimTabs CEO is breathless in his beration of “the biggest of the big lies,” that continues to be believed by most of America (“given their re-election of Barack Obama” he adds), that government can effectively provide services. The reality is “governments are not capable of getting anything done cost-effectively,” and Biderman, focused on Obamacare as a recent example, concludes “its all FUBAR.”

 

Some uncomfortable truths…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ICKh39otGUs/story01.htm Tyler Durden

“Inherent in the nature of government itself is the fact that it is incapable of effectively providing services,” Biderman blasts, noting that “by ‘effective’, he means dollars and hours.” The TrimTabs CEO is breathless in his beration of “the biggest of the big lies,” that continues to be believed by most of America (“given their re-election of Barack Obama” he adds), that government can effectively provide services. The reality is “governments are not capable of getting anything done cost-effectively,” and Biderman, focused on Obamacare as a recent example, concludes “its all FUBAR.”

 

Some uncomfortable truths…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ICKh39otGUs/story01.htm Tyler Durden