Economic Outlook

Media’s ‘primal scream’ is heard round the world

1478678963622Trumps Triumph:

No, America, that wasn’t an earthquake. That was a media scream that registered 11 on the Richter scale as Republican Donald Trump defied media demands and went on to win the presidential election in the early hours of Wednesday morning. Hillary Clinton called Donald Trump to concede.

A nearly unanimous media failed to carry the unpopular Hillary across the finish line. Once again, America rejected the liberal Democrat. Advil set the tone early with a comment: “Politics giving you a #migraine? Advil® Migraine is the best candidate for pain relief.” CNN commentator David Axelrod called it a “primal scream.” ABC’s Terry Moran called it “a rejection of the neoliberal world order that has been the consensus around the world.” CNN commentator and former Obama green jobs czar Van Jones called the election a “White-lash against a changing country.”

When it appeared that Hillary would not concede, after campaign chairman John Podesta appeared before her supporters in Manhattan and told everyone to go home and get some rest, even some in media criticized her. USA Today Washington correspondent Paul Singer was typical: “Stunned that @HillaryClinton did not concede. If @realDonaldTrump pulled that, people would go bananas.”

The election was a national rejection of both the traditional media and the Hollywood elite who piled on money, endorsements, appearances and offensive videos telling people to vote. Celebrities went full-on insane. Actor Mark Ruffalo vowed to do a nude scene if Clinton won. Madonna said she would perform oral sex on Clinton voters. It was so overboard that it might well have caused voters to just say no to all of star media.

The night went from what CNN’s Wolf Blitzer called a “real nail-biter” to one his co-anchor Jake Tapper said is, “going to put the polling industry out of business.” Left-wing Fusion referred to a “Terrifying/exciting state-by-state #ElectionNight.” The New York Times prediction tracker went from overwhelmingly predicting a Clinton win to 94 percent for Trump as the clock neared 11 p.m. Even when Hillary won Virginia, the Times was sending out downbeat emails saying she “preserved a slim path to victory.”

Trump supporter and former Arkansas Gov. Mike Huckabee joked: “Wouldn’t wanna be under that giant glass ceiling if Hillary is forced to concede. That party might end like Carrie’s prom.” Fox News contributor and commentator Richard Grenell blasted the news media. “The media is for sure losing tonight no matter who pulls this off. How wrong they were.”

What media and pollsters had predicted would be an early night turned into a long contest. Around 8:40 p.m., liberals and media staff started to panic. Huffington Post Senior Political Reporter and Politics Managing Editor Amanda Terkel showed the tension. “Office debate right now: ‘Trump might win!’ ‘Trump ain’t going to win.’”

By 9 pm ET it spread. CNN commentator Sally Kohn showed the typical liberal reaction. “IT SHOULDN’T BE THIS CLOSE!!!!!!!!!!!!!” Former CBS anchor Dan Rather summed it up. “Nearing cardiac arrest time for team Clinton.” Global Editorial Director, The Huffington Post’s Howard Fineman said what was on many lips: “This is starting — starting — to look like an American #Brexit.”

The media pointed fingers at FBI head James Comey. Pundit Michael Smerconish blamed him for the vote. “Changing my @TIME 2016 person of yr prediction (who most influenced news) to James Comey #ElectionNight.” Atlantic Senior Editor Adam Serwer put it succinctly: “Congrats to the New York FBI office.” He went further later: “Congratulations to Vladimir Putin, the Ku Klux Klan, and the Federal Bureau of Investigation.”

Atlantic Senior Editor David Frum found another villain – Russia. “We may be living through the most successful Russian intelligence operation since the Rosenbergs stole the A-bomb.”

Daily Beast columnist Jonathan Alter blamed it on masculinity. “Trump didn’t win because of Comey. He won because he’s a testosterone candidate and men weren’t ready for a woman president.” He continued to hammer out hyperbole: “America has never faced such a crisis before. World War II was 4 years but US always fairly sure we would win. This will be a new menace.”

Journalists had earlier celebrated as Hillary broke the “the glass ceiling.” ABC gave up all pretense of neutrality and had former Clinton staffer and Clinton Foundation contributor George Stephanopoulos moderate election night coverage. Comedian Emo Phillips reflected Hollywood’s agenda in one short Tweet: “I don’t get it. We had all the funny tweets.”

The New York Times showed that media bias remained an issue into election night, writing that, “an intense public distrust in the media is threatening the networks’ traditional role as election night scorekeeper.” In a think piece discussion about coverage of the race, the Times controversial media columnist Jim Rutenberg said Trump, “received coverage of a billionaire reality-television star who turned politics into performance art.”

He followed that up with one of the worst media bubble comments of the election: “The press needs to explore the frustration of those many Americans who think free trade’s gone too far; that immigration threatens the national fabric; and that insiders from Washington, Wall Street and the media have rigged the system against them.”

Election Day brought out the strange in the media, as well. CBS Evening News veteran Bob Schieffer wondered if the nation were “enduring some kind of curse.” He added in nice biblical metaphor: “What should we expect next – that it will rain frogs? I wouldn’t bet against it.”

Pollster Nate Silver crowed early because he had been criticized for giving Trump a better chance to win the World Series than Trump had of becoming president. The Cubs won. “This doesn’t seem like an election in which one candidate had a 99% chance of winning tbh,” he Tweeted.

Washington Post quasi-conservative columnist Jennifer Rubin bashed the GOP in her election day screed, urging Republicans to help Clinton succeed. “Do I think all this is likely? No, but then we are among the thousands of center-right Americans who think the solution to the sclerotic GOP may very well be a new political party.”

Earlier in the day, The Washington Post described the ballot with a mountain full of understatement: “An acrimonious race reaches an endpoint.” Of course, the Post probably described WWII as an international disagreement.

The foreign press chimed in, too. German newspapers warned of a “Trumpocalypse” and called the GOP candidate a “Horror-Clown.” The Daily Mail described the vote as, “Clinton, Trump fight for soul of divided US before vote.”

Far left media grew more bizarre as the day went on. Huffington Post featured a story headlined: “I Voted With My Vagina And I’m Proud Of It.” Buzzfeed Senior editor Rachel W. Miller retweeted a Cosmo article on anal sex with this classic comment: “Pretty sure this experience is worse than any cringey butt sex, Cosmo, but ok.”

As the perfect conclusion to the night, Huffington Post decided to stop using the controversial tagline it had on Trump stories. “The Huffington Post’s editor’s note calling Donald Trump as a ‘racist’ and ‘xenophobe’ is no more, a source in the newsroom tells POLITICO.”

Multiple Jobholders Hits Record High, As Full-Time Jobs Tumble

While today’s headline jobs print was somewhat disappointing, with the Establishment Survey missing the expected print of 173K, rising by 161K, it was offset by upward revisions to previous months. But while the quantitative headline aspect is open to interpretation, the qualitative component of the October jobs print was – just like in the case of September – all too clear: it was ugly, again….continue reading HERE

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US Productivity Prints Consecutive YoY Declines For First Time In 23 Years

After a recession-signalling three straight quarters of decline, Q3 prleminary productivity data showed a huge 3.1% surge QoQ – the biggest jump since Q3 2014. However, the jump was not enough to regain annual gains as year-over-year productivity declined 0.04%. This is the first consecutive annual decline since 1993.

After the longest streak of declines since 1979, US productivity surged in Q3…

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…read more HERE

Marc Faber : The U.S. will go into Recession & The European Union will break up by 2020

Dr. Faber played a game of Long & Short, where he spelled out his view on central banks, currencies and commodities, among other items. Then, he gave probabilities on a number of possible world events and explained his reasoning.

UnknownThe U.S. will go into a recession by 2020
A: 100% probability. We are in a lengthy expansion already, far above the average expansion in the 20th century. We have a lot of imbalances, in my view a recession is inevitable. But unlike central banks, I do not regard a recession as negative. It’s like the human body, an economy also needs a resting period occasionally to adjust. A recession is not something that has to be avoided at all costs.

The European Union will break up by 2020 
A: 80%. Economically, the EU would probably will break up. But it’s also a political issue as there may be lot of political obstacles to complete a split from the EU. Some countries like Austria or France would like to split from the EU, but if they could do it in practice is not entirely clear to me.

….also: Marc Faber Rings the Alarm Bell, Predicts a 50% Near Term Correction in Stocks

University of Michigan survey results show Current Economic Conditions plunged to 103.5 – the lowest since Oct 2015. The biggest driver of this weakness is tumbling inflation expectations (with 1Y outlook dropping to 2.3% – the lowest since Sept 2010).

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Confidence was unchanged in early September from the August final and barely different from the July reading.

…continue reading HERE


We Live In Unprecedented Times

Big Policies, Bigger Failures

schiffEconomics is far simpler than most in academics or government would have you believe. To make accurate predictions all you really need is an honest appreciation of the self-interest that is at the heart of free market transactions and an ability to understand how regulations that attempt to “correct” these realities don’t work. This is certainly the case with the completely predictable slow-motion train wrecks that are the signature U.S. domestic policy experiments of the last eight years: Obamacare and Federal Reserve stimulus. From the start, I issued countless commentaries on why both would fail spectacularly. The jury has started to come back on Obamacare, and the results are a disaster. And while the verdict on the Fed’s policies has yet to arrive in similarly stark terms, I believe that its failure is just as certain.

As I explained in my July 30, 2012 commentary “Justice Roberts is Right: The Plan Won’t Work,” the central flaw (among many others) in Obamacare is that it incentivizes younger, healthier people to drop out of insurance coverage while encouraging older, sicker people to sign up. The result would be a pool of insurance participants that would guarantee losses for those providing coverage. That’s exactly what we are seeing.

After only four years of operation, there is now wholesale defection by insurance companies to abandon the Obamacare marketplace because they are hemorrhaging money faster than just about anyone predicted. To believe that any other outcome was possible would have been the equivalent of believing in the Tooth Fairy.

According to the Wall Street Journal, the four biggest U.S. health insurance companies, Anthem, Aetna, UnitedHealth and Humana are losing hundreds of millions of dollars on their Obamacare plans. And since these companies can’t be compelled to operate a business that loses money, all four have significantly scaled back their offerings. UnitedHealth has already exited 31 of the 34 states where it sells ACA policies. Humana is now offering coverage in just 156 counties of the 1,351 counties in which it was active a year ago. The latest shoe to drop came this week when Aetna said it would stop selling Obamacare plans in 11 of the 15 states where it is currently active (Bloomberg Businesweek, 8/17/16).

It’s no secret why the companies are losing so much money. Enrollees into the new plans take out far more money in benefits than they pay in premiums, despite the fact that premiums have increased substantially. That’s because the pool of insures in the Obamacare plans differ sharply from those that exist in the private marketplace. Why this has happened should have been stunningly obvious to anyone. To quote from my 2012 commentary:

“…the ACA makes it illegal for insurance providers to deny coverage to anyone for any reason. This allows healthy people to drop insurance until they actually need it without incurring any risk. It’s like allowing homeowners to buy fire insurance after their houses burn down.” Given the high cost of insurance, the law allowed millions to take a free ride.

I argued then that penalties that would hit those who remained uninsured were insufficient to compel them to make an uneconomic decision. This was the same rational that was used by Chief Justice Roberts when he ruled that the plan was constitutional. He argued that since the penalties were not high enough to compel behavior, they should be seen as constitutional “taxes,” not unconstitutional “penalties.”

Similarly, by guaranteeing that no one could be denied insurance for any reason, and that the sick would pay the same premiums as the healthy, the plans have sucked in lots of people guaranteed to take out more in benefits than they pay in premiums. Add these factors together and you get the recipe for guaranteed losses. In retrospect, it is simply incredible that supposedly smart people argued against this outcome while the law was being drafted and passed.

At this rate, there may essentially be no private companies offering insurance through the exchanges within a few years. This will mean that unless president Clinton (Trump has promised to repeal Obamacare) passes a new law requiring companies to lose money for the good of the country (not too outlandish a possibility), or if the Supreme Court allows massive increases in the penalties for not buying insurance (thereby creating the coercive force that Justice Roberts argued was absent in the original law), then the government itself will have to step in and absorb the losses that are currently hitting the private insurers. At that point, Obamacare will become just what its critics always thought it was: an enormous new unfunded and open-ended government entitlement.

While the flaws of Obamacare were incredibly easy to see, so too are the flaws in the Federal Reserve’s stimulus policy. What’s amazing to me is that more people aren’t able to see through it as easily.

Although few realized it while it was occurring, everyone now sees that the dotcom mania of the late 1990’s was a bubble that had to end badly. Most also realize now, as they didn’t realize then, that the housing bubble of the early years of the 21st Century (which took us out of the 2001 Recession) was a bubble created by the Federal Reserve’s unprecedented low interest rates in those years.

But while we have gotten better at recognizing bubbles after they have burst, we are still totally blind to the ones that are currently forming. Ever since the Recession of 2008, the Federal Reserve has held interest rates at zero and has injected trillions of dollars into the financial markets through its quantitative easing policies. These moves have clearly inflated prices in the bond, stock, and real estate markets, an outcome that was an expressed aim of the policies. There is also clear evidence that these asset prices will come under intense pressure if interest rates were allowed to rise.

Recent history confirms this. Back in January of this year, just a few weeks after the Federal Reserve delivered the first rate increase in nearly a decade, the stock market entered a free fall. We had the worst opening two weeks of the calendar year in stock market history. The bleeding stopped only when the Fed backed off significantly from its prior rate hike projections. Since then, the market action has been clear to see: stocks rally when they believe the Fed will keep rates low, and then fall when they think they will rise. And so the Fed has played a continuous game of footsy with the market…forever hinting that hikes are possible but never actually raising them.

But given how close the economy could be trending toward recession, can anyone seriously believe that the Fed will risk kicking a potential recession into high gear by actually delivering another rate increase? It should be clear that it won’t, but somehow the best and brightest on Wall Street appear convinced that it will. Perhaps this explains why hedge funds have so consistently underperformed the market thus far in 2016.

To me, the fate of the Fed’s stimulus policy is as clear as that of President Obama’s failed experiment in healthcare. It’s a disaster hiding in plain sight. The stimulus itself has so crippled the U.S. economy that it can now barely survive without it. As it limps along the crutch must grow ever larger, as the support it provides weakens the economy to the point where it becomes too small to provide adequate support. But rather than acknowledging that the Fed’s policies have failed (an admission that any honest proponent of Obamacare should make), the proponents of stimulus are doubling down.

Earlier this week, John Williams, the president of the San Francisco Fed and widely believed to be a close confidant of Chairwoman Janet Yellen, issued an economic letter on the FRBSF website that lays the foundation for much greater stimulus for years to come. The centerpiece of Williams’ suggestions is that he would like to see the Fed raise its inflation target past the current 2%, and that the government be prepared to run much larger deficits to combat persistent economic weakness. In other words, ramp up the dosage of the medicine we have been taking for years, even though that medicine hasn’t worked. This shows a stunning inability to recognize a failed policy when it is staring at them in the face.

Absent from his analysis is any understanding that the stimulus policies of the past two decades may have actually created the conditions that have locked our economy into a perpetually weakened state. By preventing needed contractions, debt reductions, investment re-allocations and rebalancing, perennial stimulus has frozen in place a listless economy dependent on monetary support just to tread water. Just as Federal tax policy and healthcare regulations raised the costs of healthcare to the point where another bold (and ultimately futile) regulatory framework was launched to solve the problem, new forms of stimulus are being conjured to fix problems created by prior stimulants. But since Williams does not realize the stimulus he and his fellow quacks at the Fed have prescribed actually acts as a sedative, he has misdiagnosed the resulting condition of slower economic and productivity growth and as being the new normal.

Proof of this circular logic is Williams expressed desire to use monetary policy to push up “nominal GDP,” which is simply the GDP figures that are not adjusted for inflation. What good will it do for the average citizen if we get a higher GDP number that results merely from rising prices rather than actual economic growth? While the stimulus crowd likes to suggest that rising prices are a required ingredient for real growth because they encourage people to go out and spend before prices rise further, their asinine theory is completely unfounded. The entire purpose of deflating nominal GDP is to separate actual growth from rising prices. Pretending the economy is growing by targeting nominal GDP will only stifle real economic growth that might actually solve the problems the Fed still has no idea it created.

It is somewhat heartening that there is a greater recognition now of the inherent flaws in Obamacare. Hopefully such realizations will soon be widely raised about our current stimulus experiments, and that these insights will arrive in time to change course. However, confidence should be extremely low on that front.

Read the original article at Euro Pacific Capital

…related: The ‘Deep State’ Is Becoming Increasingly Desperate