FedUpUSA

This is just plain bad.

Nonfarm payroll employment rose by 115,000 in April, and the unemployment rate was little changed at 8.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, retail trade, and health care, but declined in transportation and warehousing.

Meh.  Let’s look at the internals and the household numbers, because that’s actual numbers instead of political crap.  Incidentally, my guess was +100k +/- 50, so 115k is pretty close.

In summary for those who don’t want to read the entire thing – this is a weak report.

The annualized improvement is curling over and the monthly number is not going anywhere good.  What’s worse is that the not-in-labor-force number continues to go the wrong way and was up nearly 600,000 last month.

The employment rate moved upward a touch, but it’s still sitting in the ditch and this is the key number for everyone to focus on, as I’ve pointed out for years – without this problem being repaired the governmentmust downsize dramatically or we will hit the wall.

And finally, in terms of being screwed, we still are.

This chart is simply the annualized (now .vs. 12 months ago) difference between employment and population.  That is, in this case, 242,784 (in thousands) less 239,146 = 3.638 million more people (according to the BLS) in the country compared to 12 months ago, but there are 141,995 – 139,661 or 2.334 million more people employed.  That is, on a working age non-institutionalized population-change-subtracted basis we have lost 1,304,000 jobs compared to the same point one year ago.

The last positive number we printed on this series, and that was only 480,000 jobs net of population growth, was in December of 2006.  There is no way to sustain the size of the government, say much less its growth given the six-year unbroken record of losses.

Some day we will stop this crap.  For now, there’s this.

Bank of America Corp., the lender that has bought back debt to strengthen its balance sheet, said credit downgrades in a hypothetical scenario may trigger demands for about $6.2 billion in collateral.

A two-level downgrade of long-term senior debt ratingswould have prompted the bank to post about $5.1 billion of collateral tied to derivatives contracts and other trading agreements as of March 31, the Charlotte, North Carolina-based firm said yesterday in a regulatory filing. It would have had to post an additional $1.1 billion of collateral if trading partners opted to tear up contracts in a two-level cut.

Moody’s Investors Service, which is reviewing banks and securities firms with global capital markets operations, has said it’s considering downgrades of lenders including Bank of America, ranked second by assets in the U.S. While ratings cuts typically raise borrowing costs and force banks to increase collateral, analysts have said the change was expected.

Give me a break.

There should be zero impact from this because you shouldn’t be able to take on a position you cannot clear, in full with cash, at any point in time.

The only way you can do that is to be able to issue credit to someone unbacked by anything.

Functionally that is identical to counterfeiting $100 bills on your office copier.

Think about it folks.  The VISA card in your pocket spends exactly the same way as does the roll of quarters.  They’re identical in commerce; indistinguishable in fact.  Yet one of them is your past production; you obtained it by performing some sort of service for someone.  The other is a naked promise, unbacked by anything, to get up tomorrow and go to work.

There is only one way you should be able to do the second – someone should have to put actual capital at risk if you fail to perform, and lock up that capital until you do perform, at which point it is released back to them.

Anything other than that is nothing more than counterfeiting the currency of the nation!

This is where the “gold bugs” get it all wrong.  A hard metallic monetary standard does exactly nothing to prevent this from happening.  Nor does “redeemability.”

There is only one way to prevent the economic dislocations that come from intentionally issuing credit unbacked by anything, and that is to prohibit the practice in the official currency of a nation. 

It’s perfectly ok (and in fact desireable) to remove legal tender laws while you’re at it, since that serves as a check and balance on the above behavior.  If I can negotiate debt in whatever I’d like (oranges of a given grade and type, if I so prefer) then I have options available to me if the policing of the monetary function is corrupted.

But the fact of the matter is that until and unless the national currency — defined as whatever taxes are denominated in — is rendered stable in economic terms, which can only be the case if nobody cancounterfeit it – there is no economic or currency stability.

This outright and outrageous fraud is the root of all economic bubbles and their ultimate collapse.  The lending of money that does not exist against nothing but hot air always is inflationary in the monetary sense,always leads to malinvestment, always leads to price appreciation unbacked by actual future prospects for business and always ends in the same way, with collapse of the bubble in question.

There is exactly one way to stop it.  I dubbed it “One Dollar of Capital” a number of years ago.  You can call it anything you want.  But the fact is that until we solve this problem there will be no economic stability and there will be no actual growth in real terms.

We spent close to a literal decade covering up outrageous debasement of purchasing power in real terms – from 2002-2009 – during which there was not one quarter where you had less than a 5% annualized loss of purchasing power against your income in real terms, with the arithemetic average close to 10%!

A 10% annualized decline in real purchasing power over eight years is enough to literally reduce the majority of the population to destitution and starvation!

Thus the housing bubble, the stock bubble of the 2000s and the government bubble on the back of Greenspan’s bubble of the 1990s.  All of the actors involved, including especially Ben Bernanke, know good and damn well that my math is right on this and that if the general population understood what they had done to them they would all be run out of town on a rail.

The worst part of it is that in their outrageously puerile attempt to obfuscate what they did and prevent its recognition in the market they continue to transfer the damage from the private sector, where people took this on and deserve to take the hit from it, to the government where the risk is not one of collapse of a business but rather the collapse of civil society.

It isn’t going to work.

A trip down memory lane folks….

How long did you have when that warning was given to you?

About 2 weeks.

And how many warnings have you had recently?

One….

Two….

Three…. (yeah, I know, that one might be “special”)

There’s plenty more that are in “slower” declines toward zero.  FSLR anyone?

Oh sure, you’re welcome to believe “that won’t happen again.”  Just like you did in 2008, when the warnings came in 2007 and early in the 08 time frame — Bear Stearns (twice!) anyone?

In 2000 the market sauntered higher for a couple of weeks, then broke.

In 2008 there were a few months before it all came apart.

But we’re seeing an increasing number of firms that either miss a little or just don’t beat like they “should”, or worse someone raises an “accounting question” and boom — down they go.

MSTR back in the day did exactly that.  It was a take-over target one day, and had an “accounting issue” the next.

Two weeks later the entire market blew up.

I remember it well — I was sitting in the Sandestin Hilton with my kid, down here in Niceville home shopping, when the roll really got started at the end of March.  And I remember well the “miraculous” recovery on April 2nd after the NDX had been down some 600 handles.

If you bought that “oh it’s ok” move you were satiated for exactly three days — until the end of the week.

The following Monday was an outside reversal and from there nine hundred NDX points came off during that week.

But don’t worry folks, that rumbling isn’t a volcano.

The smoke is nothing to worry about.