FedUpUSA

Archive for June 30th, 2010

By Karl Denninger

ADP’s report blew, to be blunt.  +13,000 private employment, losses in small business (duh.)

This was a surprise?  Apparently for the futures it was, as they dove by roughly 8 points in the SPX (0.8%) instantly on release.

CNBS has been running nonsense all morning trying to find a silver lining and a way to keep the party going, likely in fear of this:

And that’s just a start.

Of course we know that there will be every attempt made to void that pattern. But here’s the problem – what arrows are left in the quiver?

Policy rates are zero, QE hasn’t done much of anything if anything at all (other than creating more and new problems) and now we’re debating “what do we do about the fact that employment has refused to respond?”

I am constantly amazed how so-called “mainstream” commentators refuse to have a debate on the actual issue – that is, the fact that the government and Fed have done this:

And then after striking the lighter they’re freaking out about how to stop the combustion that results.

Uh, gentlemen.  A proper debate would center on why you were so focking stupid as to pour the gasoline on yourself!

We blow a housing bubble, then cry about the bursting of it instead of locking up those engaged in the fraudulent activities that led to it.

Just like we blew an Internet Bubble, but those who were involved in pumping companies with no possible chance of ever making an honest profit walk off into the sunset with millions in investor funds (and the investors wind up with nothing.)

Certainly individual greed had a lot to do with both problems.  But also certainly intentional and fraudulent misrepresentation, including most specifically that by government officials and regulators, was a major part of it.

Indeed the oil in the gulf has as a major cause not just private corporate greed (BP) but in addition willful and intentional malfeasance by government regulators.  Specifically, it is now clear from the record that the government’s regulators knew of the casing design changes and that legal requirements for certification of safety systems were not complied with, yet they did nothing.

If it’s against the law to rob banks but when you do so the government refuses to arrest you, then you will be incented to rob more and more banks! 

This is not hard to figure out.

We’ve spent 20+ years deluding ourselves, as I noted Monday on Blogtalk.  We’ve also spent 20+ years forgetting that the Declaration of Independence contains all of the ingredients to fix all of this crap – if we demand that it be enforced.

But we have a problem with doing that, and simply put, it means we have to stop being leaches.  We like the idea of being able to force the costs of our idiocy on other people.  We refuse to drill for oil off our coasts in the general sense, and demand that other, little people take the risk so we can drive our cars and our leaders can fly to places like Toronto for the G20 and G8.

We like the idea of “owning” houses, so we countenance and go forward with mass delusional behavior, including lying about income, claiming that we “own” a house while being forced to pay “property taxes” amounting to the entire value of the house again over the time of the mortgage, permitting the creation of fraudulent artifices called “Securitizations” where the representations and warranties in the prospectuses are routinely violated and the creation of naked shorts against these instruments with no collateral being posted at all – that is, a bet without ability to pay.

Reality is this folks: A huge percentage of what we have claimed is “economic activity” has in fact been a scam.  It has been nothing more than pulling forward demand from tomorrow.  The facts are what they are, and whether we like it or not economics tends to follow the laws of thermodynamics – that is, you can’t win and in fact you can’t break even – there is always loss. 

Mass-delusions happen because we allow them to.  We trade individualism and personal responsibility for a government tit.  We believe we can suckle on that tit while someone else will refill it. 

The facts, however, don’t care how deluded you are. 

And in fact that government tit always must get its milk from you, and by recycling it through the government, the principles of thermodynamics guarantee you will get LESS.

The end of this rope is now in sight.

One month of poor employment numbers is not a trend, but two are dangerously close to one.  One failed auction is not a trend but multiple ones are a warning.

We’re now seeing those rumblings, and the fact remains that on-balance all the screwing around we’ve done has solved exactly nothing, exactly as I and a few others said would occur back in 2007.

The medicine in the spoon is not only still there, but the spoon has turned into a gallon jug and if we keep refusing to chug it, we will eventually die of systemic poisoning from the medicine itself – and if we don’t, we’ll die from the disease.

The Market-Ticker

By Karl Denninger