Unemployment (the official unemployment number) keeps going down bit by bit because people are dropping out of the workforce not because people are newly employed.
We’ve written about this in the past. The most important industry in the USA, also the least regulated (go figure) is tech. Technology companies thrive on innovation and beating each other to market. Historically tech, based on the other side of the country from Washington DC, has been a fairly free market. There is a reason why the price of computing comes down every single month and the quality goes up. The power the average person holds in his or her hand when they glance down at their iPhone is well beyond what a computer the size of a city block could do a generation ago. This is because of a relatively free market and very limited government influence.
If the government is spying on the communications between individuals, companies, and governments to gain informational advantages in trade negotiations, general law enforcement, “homeland security,” and nearly everything else, the chilling effect on the overall economy could be profound.
China is coming to grips with economic reality increasingly. The numbers coming out of the PRC, long suspect, are now widely regarded as being very optimistic. China may be going through its first recession in 30 years, but we don’t know because the data is dung.
The recession (depression) never ended for most people. Those who have access to the financial markets, which have been inflated by the Federal Reserve have done well. The average family in the USA however now operates with 7% less than it did in 2008.
There they go again.
The Fed has signaled that it is trying to end QE and stock markets around the world are now writhing in agony (or the fear of coming agony). If the markets open tomorrow and we have an even bigger drop than today my bet is that Bernanke will come in with some form of methadone to calm things down, or try to.
“Step back from the ledge Mr. Market, I’ve got what you want.”
Overt Fed intervention has been behind the historic stock rally which started in 2009 from the beginning. This has made the big banks happy as they’ve been able to play with nearly free money.
But every time there has been any indication that the Fed wasn’t going to supply monetary drugs the markets have gone down and threatened suicide. We are seeing another round of this now.
This ain’t good. And yet nary a tremble from the market. I wonder why?
The great hope for business leaders and those of the political sort was that China would pull the world out of the greatest economic downturn in 3 generations. This has failed to happen and is failing more with each passing day. China isn’t going to save the day. China has been built on a good amount of economic magic and it needs a correction desperately. It likely has one on its hands though this still is not the official consensus.