Unemployment's Here To Stay

There’s no particularly good news in these numbers. For every glimmer of good news, like the upward revisions to previous reports totaling 100,000 new jobs or so, there’s an offsetting piece of bad news, like the broad U6 unemployment rate jumping up to 16.5% from 16.2%.

And the number of people unemployed for more than six months is now 6.24 million — up by 208,000. The long-term unemployed — the least employable of the unemployed, and the most intractable problem in terms of getting America back to work — are now 44.6% of the total, up from 42.9% last month, and 41.8% a year ago.

Link -
http://seekingalpha.com/article/298230-unemployment-s-here-to-stay?ifp=0&source=...
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A few observations -
1) Whilst the headline Employment numbers went up by 103,000, included in that number were some 45,000 telecommunications workers who had been on strike in August, so "real hirings' were actually only 58,000.
2) US Employment needs to be around 150,000 each month, purely to keep up with Population growth. So, anything less that 150,000 per month, they are not just standing still, they are actually in decline!
3) Employment generation has averaged around 72,000 per month, for the last 6 months, which suggests the US Economy is now stuck in the wrong gear!
4) The long term Unemployed are trending towards being half of all the Unemployed and many may remain permanently Unemployed?

You don't need an economics degree to work this out.
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Think the GFC was big? You ain't seen nothing yet

Australian economist Steve Keen said the ingredients are there for another financial meltdown.

......But the points I grasped were clear enough. We're stuffed: stuffed to a degree that scarcely anyone yet appreciates.

Professor Steve Keen was one of the few economists to predict the financial crisis. While the OECD and the US Federal Reserve foresaw a "great moderation", unprecedented stability and steadily rising wealth, he warned that a crash was bound to happen. Now he warns that the same factors that caused the crash show that what we've heard so far is merely the first rumble of the storm. Without a radical change of policy, another Great Depression is all but inevitable.

The problem is spelled out at greater length in the new edition of his book Debunking Economics. Like his lecture, it is marred by some unattractive boasting and jostling. But the graphs and figures it contains provide a more persuasive account of the causes of the crash and of its likely evolution than anything that has yet emerged from Constitution Avenue or Threadneedle Street. This is complicated, but it's in your interests to understand it. So please bear with me while I do my best to explain.

The official view, as articulated by Ben Bernanke, chairman of the Federal Reserve, is that both the first Great Depression and the current crisis were caused by a lack of base money. Base money, or M0, is money that the central bank creates. It forms the reserves held by private banks, on the strength of which they issue loans to their clients. This practice is called fractional reserve banking: by issuing amounts of debt several times greater than their reserves, the private banks create money that didn't exist before. Conventional economic theory predicts that when the central bank raises M0, this triggers a "money multiplier": private banks generate more credit money (M1, M2 and M3), boosting economic growth and employment.

Bernanke, echoing claims by Milton Friedman, believed that the first Great Depression in the US was propelled by a fall in the supply of M0, which, he said, "reinforced . . . declines in the money multiplier". But, Keen shows, there is a weak association between M0 supply and depression. There were six occasions after the second world war when M0 supply fell faster than it did in 1928 and 1929. On five of these occasions there was a recession, but nothing resembling the scale of what happened at the end of the 1920s. In some cases unemployment rose when the rate of M0 growth was high and fell when it was low: results that defy Bernanke's explanation. Professor Keen argues that it's not changes in M0 that drive unemployment, but unemployment that triggers changes in M0: governments issue more cash when the economy runs into trouble.

CONT....

the final paragraphs of the article. Too interesting to leave out.
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Instead, Keen says, the key to averting or curtailing a second Great Depression is to reduce the levels of private debt, through a unilateral write-off, or jubilee. The irresponsible loans the banks made should not be honoured. This will mean taking many banks into receivership. Otherwise private debt will sort itself out by traditional means: mass bankruptcy, which will generate an even greater crisis.

These are short-term measures. I would like to see them leading to a radical reappraisal of our economic aims and moves to develop a steady-state economy, of the kind proposed by Herman Daly and Tim Jackson. Governments and central bankers now have an unprecedented opportunity to learn from the catastrophic mistakes they've made. It is an opportunity they seem determined not to take.

Read more: http://www.watoday.com.au/opinion/politics/think-the-gfc-was-big-you-aint-seen-nothing-yet-20111011-1litt.html#ixzz1aYg37UAk

Economic theory and the Real Great Contraction (Cont)

Not only are we finding it painfully expensive and difficult to produce new resources, the so-called free market no longer provides socially beneficial results. It now produces crashing global fish populations, depleted and vanishing topsoil, water in the Gulf of Mexico contaminated by blown-out oil wells and the runoff of agricultural fertilizers, hundreds of square miles of landscapes rendered lifeless in the pursuit of coal and tar sands, totally unsupportable and dysfunctional topographies of cars and roads and suburbs, and air so filthy that last week Milan banned all vehicles from its streets and Beijing’s air is rated as “hazardous” or worse nearly every day.

Modern economic theory has no plan to address these very real problems. Indeed, it is utterly blind to them. It has no ambition to achieve a sustainable result. It does not capture the time value of use; it only serves to bring supply to market as quickly as demand warrants, which is particularly unfortunate when our most rational strategy now would be to make the last half of our oil endowment last as long as possible, not to use it as quickly as possible.

The reason we like laissez-faire capitalism is not because it’s intrinsically correct and comprehensive, but because it only asks us to do what we want to do, and confers a mantle of legitimacy upon self-interest. But if you look closely at the data on fossil fuels, agricultural inputs, arable land, water, and all the rest of the resources necessary for human life and economic growth, it’s clear that the situation has changed. We have reached the end of growth, no matter how much faith we have to the contrary.

The Great Contraction
The question we now must ask is: What comes after the end of growth? The answer should be obvious.

While crude remains on its current production plateau, OECD economies may expect growthless stagnation. Oil has become a zero-sum market, where the OECD’s loss in demand owing to high prices, staggering debt, and anemic growth will be the gain of emerging economies as they work their way up the economic ladder.

When crude begins its inevitable, terminal decline somewhere around 2014 or 2015, depriving the world of about two percent of its primary energy supply every year, it will slowly strangle economic output, under a scenario I call the Real Great Contraction.

After oil begins its decline, gas and coal will too. By roughly 2030, 78 percent of our current global primary energy supply will be in decline. There is no way that renewables can make up that loss in time to prevent economic decline.

The world would need to build the equivalent of all existing renewable energy capacity every year just to make up for the decline of oil, let alone coal and gas. Since that is unlikely, the only remaining option is to reduce demand through efficiency gains. Given that the world is nowhere near on a trajectory to make enough efficiency gains to maintain even a flat economy, it must contract.

The modern interpretation of Smith’s invisible hand — that the market can always call forth adequate resources at an acceptable price — is self-evidently not true. It is merely a misreading of Smith’s theory, an artifact of developing economic theory in an age of energy surplus. Take that surplus away, and it doesn’t work anymore. High prices can still ration demand, but they cannot call forth adequate supply.

The connection between abundant, cheap energy and economic growth, and the phase transition from an age of surplus to an age of less, continues to confound and elude mainstream economists.

Rather than admitting that the fiction of wealth (money) is overextended far past its basis in real wealth (hard assets), we demand that our economic oracles perform rituals to appease the gods, dropping paper money from helicopters like some sort of cargo cult.

The Physiocrats of the late 18th century believed mankind would eventually overshoot its resources, since land is finite. (The emerging contemporary field of biophysical economics follows in that tradition.) That they could not have imagined the wealth of fossil fuels yet to be exploited does not disprove their thesis; it merely delayed it, and ensured that when human demands finally do overwhelm the capacity of a finite planet to satisfy them, the overshoot and crash will be spectacular.

Lacking energy alternatives that can be scaled and substituted for fossil fuels within two or three decades, true believers in free market theory must now hang their hopes on science fiction saviors like fusion reactors. In my view, none of these things are likely.

If we do not muster the political will and the mechanisms needed to execute a rapid deployment of efficiency gains and a massive transition to renewables while we still have fossil fuels with which to do it, this century will see humanity slide back down the ladder of energy consumption and credit expansion in a long and volatile reversion to the mean of human history, to a much lower equilibrium of complexity and consumption.

The Real Great Contraction is here.

That's my opinion!

LONDON: Australia can expect more frequent devastating floods like those in Queensland this year, and the world is facing decades of unprecedented hardship as a result of climate change, according to the chief scientific adviser to the British government.

''We are facing what I believe will be unprecedented difficult times over the next 20 to 40 years,'' Professor Sir John Beddington warned.

The report predicts that migration will increase markedly; that millions will move into, rather than away from, environmentally vulnerable areas; and millions more will be affected but not be able to move.

According to the head of the school of geography and the environment at Oxford University, Professor David Thomas, the cities most affected would include Singapore, Shanghai, Calcutta, Dhaka in Bangladesh, and the towns and villages of the Vietnamese delta.

Australia would experience rising sea levels too but ''it will respond differently because of its different economy'', he said.

The report says that by 2060, up to 179 million people will be trapped in low-lying coastal floodplains subject to extreme weather events such as floods, storm surges, landslides and rising sea levels, unable to migrate because they are too poor or ill-equipped, or because they are restricted by political or geographic boundaries.

Two-thirds of the world's cities with populations of more than 5 million are at least partially located in coastal zones, including rapidly growing urban centres in Asian and African ''mega-deltas'', the report said.

Other large cities would suffer water shortages, with 150 million people already living in cities where water is limited.

Speaking after the launch, Sir John told the Herald that Australia should not expect the La Nina phenomenon that triggered the Queensland floods to be a once-in-a-generation event. The next one could not be predicted but it would return much more frequently than in the past.

''We know that climate change is happening,'' he said. ''We know that the greenhouse gases already in the upper atmosphere will determine the climate over the next 30 years [and there will be] more droughts, floods and extreme weather.

''Since 2008, on average, 25 million people a year have been displaced by extreme weather events, and that's in a world of relatively benign climate change.''

Professor Adger warned, ''extreme events threaten livelihoods and survival.''

Link -
http://www.smh.com.au/environment/climate-change/flooding-rains-plain-truth-of-c...
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Queensland should be planning to shift housing away from flood prone areas!

Perth is one of those cities that will be affected, because of a lack of fresh water!

In addition, these more frequent weather events will have a marked effect on Global Food Production and the future movement of displaced persons, by boat, will be a lot higher than is currently being experienced.

France and Germany have reached agreement to boost the eurozone's rescue fund to €2tn (£1.75tn) as part of a "comprehensive plan" to resolve the sovereign debt crisis, which this weekend's summit should endorse, EU diplomats said.

The growing confidence that a deal can be struck at this Sunday's crisis summit came amid signs of market pressure on France following the warning by the ratings agency Moody's that it might review the country's coveted AAA rating because of the cost of bailing out its banks and other members of the eurozone. The leaders of France and Germany hope to agree a deal that will assuage market uncertainties or, worse, volatility, in the run-up to the G20 summit in Cannes early next month.

France would now have to pay more than a percentage point – 114 basis points – over the price paid by Germany to borrow for 10 years as the gap between the two country's bond yields widened to their highest level since 1992.

The news cheered US investors. All the major stock markets surged, with the Dow Jones Industrial Average rising 250 points, or 2.2%, to 11,651, after earlier falling by 101 points earlier in the day.

Berlin had dampened down prospects of a full-scale deal, although EU diplomats close to the talks say the Franco-German agreement covers boosting the financial firewalls for eurozone members to withstand the threat of a "credit event" or sovereign debt default in weaker countries.

This takes two forms. First, the main bailout fund, the European financial stability facility, will be given additional levers enabling it to offer first-loss guarantees for bondholders, be they private or public. Senior diplomats say this will deliver a fivefold increase in the fund's firepower – giving it more than €2tn compared with the current €440bn lending capability. The EFSF will in effect become an insurer, thereby overcoming European Central Bank resistance to the idea of turning into a bank.

Second, Berlin and Paris have agreed that Europe's banks should be recapitalised to meet the 9% capital ratio that the European Banking Authority is demanding after its re-examination of the exposure levels of 60 to 70 "systemic" banks. The EBA has marked these exposures much closer to current market values.

Berlin and Paris are also said by those close to the negotiations to be edging nearer to agreeing on the increased scale of private sector involvement in the second rescue package (€109bn) for Greece. This was set at a voluntary 21% "haircut" in the July package but, under worsening overall economic conditions and a likely restructuring of Greek debt, Germany has been pushing for losses of up to 50%. France, backed by the ECB, has resisted the idea, while EU officials have clearly indicated that a range of 30 to 50% is being considered.

http://www.guardian.co.uk/business/2011/oct/18/france-and-germany-move-towards-2...
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This story reminds me of a scene from one of the Superman movies.

Lois Lane falls off a building and Superman, on seeing this, flies up & catches Lois, then says, "don't worry Lois, I've got you"!
Lois then looks down and says, "You've got me, BUT WHO'S GOT YOU?

American credit rating to be downgraded again

Dr Sarra also made a veiled criticism of Noel Pearson and his approach to education in Cape York, describing a teaching method championed by Mr Pearson as "a pedagogy for the poor" that would not be tolerated in affluent schools for non-indigenous students.

This news comes from a report out of one of the biggest names in the banking industry, Bank of America Merrill Lynch, issued on Friday.

"The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan" to cut the deficit, Merrill's North American economist Ethan Harris writes in a report from last week.

"Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes," adds Harris

The 12-member bipartisan super committee has until November 23 to find a solution to America’s ongoing deficit dilemma, which played a large role in triggering S&P to issue their downgrade back in August. At the time, it was the first time America’s sovereign debt had been devalued by any of the top-three. With the super committee’s deadline less than a month away now, Harris’ report considers another downgrade likely if the congressional leaders involved in finding a solution cannot come up with a plan.

Should a plan not materialize in time, $1.2 trillion in automatic spending cuts will be instated starting in 2013, which will largely pull from discretionary spending. That isn’t to say, however, that it won’t impact the faltering American economy any further. If a plan is not put together and a downgrade is in fact issued, economic woes for Americans are almost certain to worsen.

read the entire story at:

http://rt.com/usa/news/credit-rating-downgrade-committee-601/